##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

|   |  |                                                                                   
|-- |  | ----------------------------------------------------------------------------------
|x  |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|   |  |                                                                                   
|   |  | For the quarterly period ended November 30, 2002                                  
|   |  |                                                                                   
|OR
|   |  |                                                                                   
|o  |  | TRANSITION REPORT UNDER 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 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)

(404) 266-8333
(Registrants telephone number, including area code)

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

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 38,634,424 shares of Common
Stock, par value $.01 per share, were outstanding as of December 31, 2002.





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##### 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BULL RUN CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands)

|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------- | ------------ | ------- | ---------- | ------- | ------- | ------- | 
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         | November 30, |         | August 31,
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         | 2002         |         | 2002      
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |           
|ASSETS                                                                                                                                                          |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |        
|Current assets:                                                                                                                                                 |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |        
|                                                                                                                                                                | Cash and cash equivalents                                                                                                                                                                                                                                    |                            | $       | 302          |         |            | $       | 397     |        
|                                                                                                                                                                | Accounts receivable, net of allowance of $512 and $514 as of
November 30, 2002 and August 31, 2002, respectively                                                                                                                                             |                            |         | 20,526       |         |            |         | 13,502  |        
|                                                                                                                                                                | Inventories                                                                                                                                                                                                                                                  |                            |         | 693          |         |            |         | 1,005   |        
|                                                                                                                                                                | Prepaid costs and expenses                                                                                                                                                                                                                                   |                            |         | 1,511        |         |            |         | 1,559   |        
|                                                                                                                                                                | Net current assets of discontinued segment                                                                                                                                                                                                                   |                            |         |              |         |            |         | 106     |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              | Total current assets       |         |              | 23,032  |            |         |         | 16,569  | 
|Property and equipment, net                                                                                                                                     |                                                                                                                                                                                                                                                              |                            | 4,921   |              |         |            | 5,171   |        
|Investment in affiliated companies                                                                                                                              |                                                                                                                                                                                                                                                              |                            | 24,600  |              |         |            | 25,013  |        
|Goodwill                                                                                                                                                        |                                                                                                                                                                                                                                                              |                            | 57,862  |              |         |            | 57,862  |        
|Customer base and trademarks                                                                                                                                    |                                                                                                                                                                                                                                                              |                            | 16,695  |              |         |            | 16,999  |        
|Deferred income taxes                                                                                                                                           |                                                                                                                                                                                                                                                              |                            | 20,531  |              |         |            | 21,381  |        
|Other assets                                                                                                                                                    |                                                                                                                                                                                                                                                              |                            | 7,506   |              |         |            | 8,818   |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              | $                          | 155,147 |              |         | $          | 151,813 |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                            |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |        
|Current liabilities:                                                                                                                                            |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |        
|                                                                                                                                                                | Current portion of long-term debt                                                                                                                                                                                                                            |                            | $       | 93,932       |         |            | $       | 19,850  |        
|                                                                                                                                                                | Accounts payable                                                                                                                                                                                                                                             |                            |         | 4,322        |         |            |         | 6,558   |        
|                                                                                                                                                                | Deferred revenue                                                                                                                                                                                                                                             |                            |         | 7,322        |         |            |         | 13,616  |        
|                                                                                                                                                                | Accrued and other liabilities                                                                                                                                                                                                                                |                            |         | 17,438       |         |            |         | 8,797   |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              | Total current liabilities  |         |              | 123,014 |            |         |         | 48,821  | 
|Long-term debt                                                                                                                                                  |                                                                                                                                                                                                                                                              |                            | 19,184  |              |         |            | 93,091  |        
|Other liabilities                                                                                                                                               |                                                                                                                                                                                                                                                              |                            | 664     |              |         |            | 1,284   |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              | Total liabilities          |         |              | 142,862 |            |         |         | 143,196 | 
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|Commitments and contingencies                                                                                                                                   |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |        
|Redeemable Series B convertible preferred stock, $.01 par value,
(authorized 100 shares; issued and outstanding 5.4 shares; $5,400
aggregate liquidation value) |                                                                                                                                                                                                                                                              |                            | 5,400   |              |         |            | 5,400   |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|Stockholders equity:                                                                                                                                           |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |        
|                                                                                                                                                                | Series C convertible preferred stock, $.01 par value (authorized
100 shares;
issued and outstanding 7.1 shares with $7,097 aggregate
liquidation value
as of November 30, 2002 and 4.1 shares with $4,097
aggregate liquidation
value as of August 31, 2002) |                            |         | 7,097        |         |            |         | 4,097   |        
|                                                                                                                                                                | Common stock, $.01 par value (authorized 100,000 shares;
issued 39,129
and 38,548 shares as of November 30, 2002 and August 31, 2002,
respectively)                                                                                                          |                            |         | 391          |         |            |         | 385     |        
|                                                                                                                                                                | Additional paid-in capital                                                                                                                                                                                                                                   |                            |         | 79,582       |         |            |         | 79,101  |        
|                                                                                                                                                                | Treasury stock, at cost (542 shares)                                                                                                                                                                                                                         |                            |         | (1,393       | )       |            |         | (1,393  | )      
|                                                                                                                                                                | Other comprehensive accumulated loss                                                                                                                                                                                                                         |                            |         | (366         | )       |            |         | (2,050  | )      
|                                                                                                                                                                | Retained earnings (accumulated deficit)                                                                                                                                                                                                                      |                            |         | (78,426      | )       |            |         | (76,923 | )      
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              | Total stockholders equity |         |              | 6,885   |            |         |         | 3,217   | 
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              | $                          | 155,147 |              |         | $          | 151,813 |        
|                                                                                                                                                                |                                                                                                                                                                                                                                                              |                            |         |              |         |            |         |         |        

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

2



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##### 



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

|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |        |        |       |        |  
|------------------------------------------------------------------- | --------------------------------------------------------------------------- | ----------------- | --------------------------------------------------------------- | ----------------------------------------------- | ------ | ------------------ | ------ | ------ | ------ | ----- | ------ | -
|                                                                    |                                                                             |                   |                                                                 |                                                 |        | Three Months Ended
|                                                                    |                                                                             |                   |                                                                 |                                                 |        | November 30,      
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                   
|                                                                    |                                                                             |                   |                                                                 |                                                 |        | 2002               |        | 2001  
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|Revenue from services rendered                                      |                                                                             | $                 | 31,109                                                          |                                                 |        | $                  | 35,718 |       
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|Operating costs and expenses:                                       |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    | Direct operating costs for services rendered                                |                   |                                                                 | 18,066                                          |        |                    |        | 27,229 |       
|                                                                    | Selling, general and administrative                                         |                   |                                                                 | 6,431                                           |        |                    |        | 8,387  |       
|                                                                    | Amortization of acquisition intangibles                                     |                   |                                                                 | 304                                             |        |                    |        | 204    |       
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 | Total operating costs and expenses              |        |                    | 24,801 |        |        |       | 35,820 |  
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 | Income (loss) from operations                   |        |                    | 6,308  |        |        |       | (102   | )
|Other income (expense):                                             |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    | Equity in earnings (losses) of affiliated companies                         |                   |                                                                 | 579                                             |        |                    |        | (208   | )     
|                                                                    | Net change in value of certain derivative instruments                       |                   |                                                                 | (1,674                                          | )      |                    |        | (1,512 | )     
|                                                                    | Loss on issuance of shares by affiliate                                     |                   |                                                                 | (2,339                                          | )      |                    |        |        |       
|                                                                    | Gain (loss) on investment dispositions and investment
valuation adjustments |                   |                                                                 | (977                                            | )      |                    |        | 3,064  |       
|                                                                    | Interest expense                                                            |                   |                                                                 | (2,193                                          | )      |                    |        | (2,712 | )     
|                                                                    | Debt issue cost amortization                                                |                   |                                                                 | (544                                            | )      |                    |        | (822   | )     
|                                                                    | Other income (expense), net                                                 |                   |                                                                 | 2                                               |        |                    |        | 191    |       
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 | Loss before income taxes and extraordinary item |        |                    | (838   | )      |        |       | (2,101 | )
|Income tax benefit                                                  |                                                                             |                   |                                                                 |                                                 |        |                    | 736    |       
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 | Loss before extraordinary item                  |        |                    | (838   | )      |        |       | (1,365 | )
|Proportionate share of affiliates extraordinary loss               |                                                                             |                   | (406                                                            | )                                               |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 | Net loss                                        |        |                    | (1,244 | )      |        |       | (1,365 | )
|Preferred dividends                                                 |                                                                             |                   | (259                                                            | )                                               |        |                    | (67    | )     
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   |                                                                 | Net loss available to common stockholders       |        | $                  | (1,503 | )      |        | $     | (1,432 | )
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|Loss per share available to common stockholders,
basic and diluted: |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   | Loss available to common stockholders before
extraordinary item |                                                 | $      | (0.03              | )      |        | $      | (0.04 | )     
|                                                                    |                                                                             |                   | Extraordinary loss                                              |                                                 |        | (0.01              | )      |        |        |       |       
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             |                   | Net loss available to common stockholders                       |                                                 | $      | (0.04              | )      |        | $      | (0.04 | )     
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|Weighted average number of common shares outstanding:               |                                                                             |                   |                                                                 |                                                 |        |                    |        |       
|                                                                    |                                                                             | Basic and diluted |                                                                 |                                                 | 38,312 |                    |        |        | 36,024 |      
|                                                                    |                                                                             |                   |                                                                 |                                                 |        |                    |        |       

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

3



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##### 



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

|                                     |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   |        |  
|------------------------------------ |  | ---------- | ------ | ------------- |  | ------------ | ------ | ------ |  | ------------- | ------- | ------- |  | ---------- | --- |  |  | - | ------ | -
|                                     |  | Redeemable |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |  
|                                     |  | Series B   |        | Series C      |  |              |        |        |  |               |         |         |  | Additional
|                                     |  | Preferred  |        | Preferred     |  |              |        |        |  | Common Stock  |         | Paid-In
|                                     |  | Stock      |        | Stock         |  | Shares       |        | Amount |  | Capital      
|                                     |  |            |        |               |  |              |        |        |  |              
|As of September 1, 2002              |  | $          | 5,400  |               |  | $            | 4,097  |        |  |               | 38,548  |         |  | $          | 385 |  |  | $ | 79,101 |  
|Issuance of Series C preferred stock |  |            |        |               |  |              | 3,000  |        |  |               |         |         |  |            |     |  |  |   |        |  
|Issuance of common stock             |  |            |        |               |  |              |        |        |  |               | 581     |         |  |            | 6   |  |  |   | 481    |  
|                                     |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   |        |  
|As of November 30, 2002              |  | $          | 5,400  |               |  | $            | 7,097  |        |  |               | 39,129  |         |  | $          | 391 |  |  | $ | 79,582 |  
|                                     |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   |        |  
|                                    
|                                     |  |            |        | Other         |  | Retained     |        |        |  |              
|                                     |  |            |        | Comprehensive |  | Earnings     |        |        |  | Total        
|                                     |  | Treasury   |        | Accumulated   |  | (Accumulated |        |        |  | Stockholders
|                                     |  | Stock      |        | Loss          |  | Deficit)     |        |        |  | Equity       
|                                     |  |            |        |               |  |              |        |        |  |              
|As of September 1, 2002              |  | $          | (1,393 | )             |  | $            | (2,050 | )      |  | $             | (76,923 | )       |  |            |     |  |  | $ | 3,217  |  
|Issuance of Series C preferred stock |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   | 3,000  |  
|Issuance of common stock             |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   | 487    |  
|Other comprehensive income (loss)    |  |            |        |               |  |              | 1,684  |        |  |               |         |         |  |            |     |  |  |   | 1,684  |  
|Preferred dividends                  |  |            |        |               |  |              |        |        |  |               | (259    | )       |  |            |     |  |  |   | (259   | )
|Net loss                             |  |            |        |               |  |              |        |        |  |               | (1,244  | )       |  |            |     |  |  |   | (1,244 | )
|                                     |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   |        |  
|As of November 30, 2002              |  | $          | (1,393 | )             |  | $            | (366   | )      |  | $             | (78,426 | )       |  |            |     |  |  | $ | 6,885  |  
|                                     |  |            |        |               |  |              |        |        |  |               |         |         |  |            |     |  |  |   |        |  

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

4



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##### 



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

|                                                                           |                                                                      |                                       |        |                    |        |      |         |        |        |  
|-------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------- | ------ | ------------------ | ------ | ---- | ------- | ------ | ------ | -
|                                                                           |                                                                      |                                       |        | Three Months Ended
|                                                                           |                                                                      |                                       |        | November 30,      
|                                                                           |                                                                      |                                       |        |                   
|                                                                           |                                                                      |                                       |        | 2002               |        | 2001
|                                                                           |                                                                      |                                       |        |                    |        |     
|Cash flows from operating activities:                                      |                                                                      |                                       |        |                    |        |      |         |       
|Net loss                                                                   |                                                                      | $                                     | (1,244 | )                  |        | $    | (1,365  | )     
|Adjustments to reconcile net loss to net cash used in operations:          |                                                                      |                                       |        |                    |        |      |         |       
|                                                                           | Extraordinary loss                                                   |                                       |        | 406                |        |      |         |        |       
|                                                                           | Provision for bad debts                                              |                                       |        | 54                 |        |      |         | 91     |       
|                                                                           | Depreciation and amortization                                        |                                       |        | 1,166              |        |      |         | 1,422  |       
|                                                                           | Equity in (earnings) losses of affiliated companies                  |                                       |        | (579               | )      |      |         | 208    |       
|                                                                           | Dividends received from affiliated company                           |                                       |        | 41                 |        |      |         | 41     |       
|                                                                           | Gain (loss) on dispositions of investments and valuation adjustments |                                       |        | 1,032              |        |      |         | (3,064 | )     
|                                                                           | Net change in value of certain derivative instruments                |                                       |        | 1,674              |        |      |         | 1,512  |       
|                                                                           | Loss on issuance of shares by affiliate                              |                                       |        | 2,339              |        |      |         |        |       
|                                                                           | Deferred income taxes                                                |                                       |        |                    |        |      |         | (736   | )     
|                                                                           | Change in operating assets and liabilities:                          |                                       |        |                    |        |      |         |        |       
|                                                                           |                                                                      | Accounts receivable                   |        |                    | (7,078 | )    |         |        | 271    |  
|                                                                           |                                                                      | Inventories                           |        |                    | 312    |      |         |        | (14    | )
|                                                                           |                                                                      | Prepaid costs and expenses            |        |                    | 48     |      |         |        | (1,354 | )
|                                                                           |                                                                      | Accounts payable and accrued expenses |        |                    | (480   | )    |         |        | 1,092  |  
|                                                                           |                                                                      | Other long-term liabilities           |        |                    | (534   | )    |         |        | (61    | )
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Net cash used in continuing operations                                     |                                                                      |                                       | (2,843 | )                  |        |      | (1,957  | )     
|Net cash provided by (used in) discontinued operations                     |                                                                      |                                       | 106    |                    |        |      | (147    | )     
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Net cash used in operating activities                                      |                                                                      |                                       | (2,737 | )                  |        |      | (2,104  | )     
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Cash flows from investing activities:                                      |                                                                      |                                       |        |                    |        |      |         |       
|Capital expenditures                                                       |                                                                      |                                       | (67    | )                  |        |      | (226    | )     
|Proceeds on sale of investments                                            |                                                                      |                                       |        |                    |        |      | 6,803   |       
|Investment in affiliated companies                                         |                                                                      |                                       |        |                    |        |      | (455    | )     
|Increase in other assets                                                   |                                                                      |                                       | 487    |                    |        |      | (29     | )     
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Net cash used in continuing operation investing activities                 |                                                                      |                                       | 420    |                    |        |      | 6,093   |       
|Net cash provided by (used in) discontinued operation investing activities |                                                                      |                                       |        |                    |        |      | (62     | )     
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Net cash provided by (used in) investing activities                        |                                                                      |                                       | 420    |                    |        |      | 6,031   |       
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Cash flows from financing activities:                                      |                                                                      |                                       |        |                    |        |      |         |       
|Borrowings from revolving lines of credit                                  |                                                                      |                                       | 175    |                    |        |      | 12,300  |       
|Repayments on revolving lines of credit                                    |                                                                      |                                       |        |                    |        |      | (4,100  | )     
|Repayments on long-term debt                                               |                                                                      |                                       |        |                    |        |      | (12,293 | )     
|Debt issue costs                                                           |                                                                      |                                       | (953   | )                  |        |      |         |       
|Issuance of preferred stock                                                |                                                                      |                                       | 3,000  |                    |        |      | 2,400   |       
|Issuance of common stock                                                   |                                                                      |                                       |        |                    |        |      | 350     |       
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Net cash provided by (used in) financing activities                        |                                                                      |                                       | 2,222  |                    |        |      | (1,343  | )     
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Net decrease in cash and cash equivalents                                  |                                                                      |                                       | (95    | )                  |        |      | 2,584   |       
|Cash and cash equivalents, beginning of period                             |                                                                      |                                       | 397    |                    |        |      | (1,051  | )     
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       
|Cash and cash equivalents, end of period                                   |                                                                      | $                                     | 302    |                    |        | $    | 1,533   |       
|                                                                           |                                                                      |                                       |        |                    |        |      |         |       

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

5



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##### 



BULL RUN CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)

1. BASIS OF PRESENTATION

In managements opinion, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting solely of normal,
recurring adjustments) necessary to present fairly the financial position and
results of operations for the transition and comparative period reported.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements contained in the Annual Report on
Form 10-K of Bull Run Corporation for the fiscal year ended June 30, 2002.

On December 17, 1999, Bull Run Corporation (Bull Run) acquired the stock of
Host Communications, Inc. (Host or Host Communications), Universal Sports
America, Inc. and Capital Sports Properties, Inc. not previously owned,
directly or indirectly, by Bull Run (the Host-USA Acquisition). All
operations of the acquired entities are now combined under Host.

The accompanying condensed consolidated financial statements include the
accounts of Bull Run and its wholly owned subsidiaries (collectively, unless
the context otherwise requires, the Company), after elimination of
intercompany accounts and transactions.

In 2002, the Company changed its fiscal year end from June 30 to August 31, and
filed with the U.S. Securities and Exchange Commission a Form 10-Q for the
transition period July 1, 2002 to August 31, 2002. Condensed consolidated
operating results and cash flows for the quarterly period ended November 30,
2001 are presented herein for comparative purposes.

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

2. DISCONTINUED OPERATION

On September 29, 2000, the Company consummated the sale of the inventories,
property and equipment and intangible assets of Datasouth Computer Corporation
(Datasouth), a wholly owned subsidiary, for cash and an installment note
payable. 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. To the
extent actual proceeds ultimately received on the sale differ from estimates
that are reported as of August 31, 2002, such differences will be reported as
discontinued operations in future periods.

3. SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow information follows:

|                                          |                                                                           |   |                    |     |      |   |       |   | 
|----------------------------------------- | ------------------------------------------------------------------------- | - | ------------------ | --- | ---- | - | ----- | - | 
|                                          |                                                                           |   | Three Months Ended
|                                          |                                                                           |   | November 30,      
|                                          |                                                                           |   |                   
|                                          |                                                                           |   | 2002               |     | 2001
|                                          |                                                                           |   |                    |     |     
|Interest paid                             |                                                                           | $ | 2,433              |     |      | $ | 2,858 |  
|Income taxes paid (recovered)             |                                                                           |   | 9                  |     |      |   | (333  | )
|Noncash investing and financing activity: |                                                                           |   |                    |     |      |   |       |  
|                                          | Issuance of common stock primarily in
connection with debt issuance costs |   | $                  | 487 |      |   |       |   | 

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4. INVESTMENT IN AFFILIATED COMPANIES

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

|                                      |  |                   |        |                 |  |        |      |          |  |   |        |  |  |  |      |  
|------------------------------------- |  | ----------------- | ------ | --------------- |  | ------ | ---- | -------- |  | - | ------ |  |  |  | ---- | -
|                                      |  | November 30, 2002 |        | August 31, 2002
|                                      |  |                   |        |                
|                                      |  | Amount            |        | Voting %        |  | Amount |      | Voting %
|                                      |  |                   |        |                 |  |        |      |         
|Gray Television, Inc.                 |  | $                 | 17,125 |                 |  |        | 18.0 | %        |  | $ | 19,102 |  |  |  | 26.1 | %
|Rawlings Sporting Goods
Company, Inc. |  |                   | 6,170  |                 |  |        | 10.1 | %        |  |   | 4,377  |  |  |  | 10.1 | %
|iHigh, Inc.                           |  |                   | 1,305  |                 |  |        | 35.1 | %        |  |   | 1,534  |  |  |  | 35.1 | %
|                                      |  |                   |        |                 |  |        |      |          |  |   |        |  |  |  |      |  
|                                      |  | $                 | 24,600 |                 |  |        |      |          |  | $ | 25,013 |  |  |  |      |  
|                                      |  |                   |        |                 |  |        |      |          |  |   |        |  |  |  |      |  

The Company accounts for its investments in Gray Television, Inc. (Gray), and
iHigh, Inc. (iHigh) using the equity method. Grays two classes of common
stock are publicly traded on the New York Stock Exchange under the symbols
GTN.A and GTN. The Company accounts for its investment in Rawlings
Sporting Goods Company, Inc. (Rawlings) as an available-for-sale marketable
security. 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 included as a component of Investment in
affiliated companies. Subsequent to November 30, 2002, the Companys
investment in Rawlings was sold in the open market for cash of $6,764, which
was immediately used to reduce the Companys bank debt. In the three months
ended November 30, 2002, $1,032 of the unrealized loss on the Rawlings
investment that had been previously reported as other comprehensive
accumulated loss (a component of the Companys stockholders equity) was
expensed, and reported as an investment valuation adjustment in the Companys
results of operations. This impairment charge was realized in consideration of
the terms of the Companys subsequent sale of its investment in Rawlings in
December 2002.

In October 2002, Gray completed a public offering of 30,000 shares of its
common stock for net proceeds of approximately $231,200, and in November 2002,
Gray issued an additional 4,500 shares for additional proceeds of approximately
$34,900. Such cumulative proceeds were used in part by Gray to finance an
October 2002 acquisition of a company that owns television stations, and
finance an acquisition of an additional television station in December 2002.
As a result of these transactions by Gray, the Companys ownership of Grays
outstanding common stock was reduced from 12.9% to 4.0%, representing a decline
in the Companys voting power in Gray from 26.1% to 18.0%. Since Grays net
proceeds per share of issued common stock was an amount which was less than the
Companys carrying value per share of Gray common stock owned prior to such
transactions, a loss of $2,339 on the issuance of shares by Gray was reported
by the Company for the three months ended November 30, 2002. Certain executive
officers of Gray and certain directors of Gray are also executive officers and
directors of the Company; therefore the Company will continue to account for
its investment in Gray under the equity method subsequent to the issuance of
shares by Gray, despite the dilution of the Companys voting power to less than
20%, since the Company continues to have significant influence in Gray.

The aggregate operating results of Gray and iHigh, affiliated companies in
which the Companys investments are accounted for using the equity method, were
as follows:

|                       |  |                    |        |      |  |   |        |  
|---------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                       |  | Three Months Ended
|                       |  | November 30,      
|                       |  |                   
|                       |  | 2002               |        | 2001
|                       |  |                    |        |     
|Net revenue            |  | $                  | 66,650 |      |  | $ | 41,766 |  
|Income from operations |  |                    | 26,084 |      |  |   | 5,503  |  
|Net income (loss)      |  |                    | 7,171  |      |  |   | (2,378 | )

7



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5. LONG-TERM DEBT

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 borrowings of up to $20,000 until maturity
on September 30, 2003, bearing interest at either the banks prime rate plus
     .75% or LIBOR plus 3.75%. In December 2002, the Company made principal
payments totaling $6,764, thereby meeting the $5,000 principal payment
requirement due by January 15, 2003, and reducing the principal payment
obligation due by April 15, 2003 from $5,000 to $3,236. In order to facilitate
funding the remaining scheduled principal payment obligations totaling $8,236,
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 to make such scheduled
payments, 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. The Companys
debt to the banks is collateralized by a lien on all of the Companys assets.
The Company expects to negotiate the terms of a long-term refinancing of the
credit facility for execution prior to the current facilitys maturity date of
September 30, 2003. Although the Company believes that it will be successful
in negotiating a long-term refinancing of the credit facility, there is no
assurance that it will be able to do so.

Interest on amount outstanding to the banks 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 November 30, 2002 and
August 31, 2002, borrowings of $73,932 were outstanding under the Term Loans,
borrowings of $20,000 and $19,825, respectively, were outstanding under the
Revolver. Since all amounts outstanding under the bank credit agreement are
due and payable on the September 30, 2003 maturity date, all such amounts are
classified as a current liability as of November 30, 2002. As of November 30,
2002, all borrowings under the bank credit agreement were subject to an
interest rate of 4.5%.

The bank credit agreement, as amended, contains certain financial covenants,
including the maintenance of a minimum amount of net worth at all times, and
maintenance of minimum profitability thresholds determined quarterly beginning
November 30, 2002. The Company complied with all such financial covenants
during the period ended November 30, 2002. All debt outstanding under the bank
credit agreement is collateralized by all of the Companys assets, including
all of its investments in affiliated companies.

In connection with the Companys bank credit facilities, the Companys Chairman
entered into a guarantee agreement in favor of the banks, for which he receives
compensation from the Company from time to time in the form of restricted
shares of the Companys common stock. The agreement provides for the
Chairmans personal guarantee of up to approximately $91,500 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. During the three months ended November 30, 2002, the Company issued
491 restricted shares of its common stock then valued at approximately $442 to
the Companys Chairman as compensation for his guarantee.

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; however, as of
November 30, 2002, substantially all holders of these subordinated notes agreed
to amend the maturity date of

8



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their note, in substantially all cases, to
January 17, 2006. The Company also has 9% subordinated notes having an
aggregate outstanding balance of $590 due in March 2004. Payment of interest and principal on all subordinated notes is
subordinate to the Companys bank credit agreement.

The Company is a party to two interest rate swap agreements. The first
agreement, which terminated on December 31, 2002, involved the exchange of
interest at a fixed rate of 6.08% for interest at a variable rate, determined
quarterly, equal to the 90-day LIBOR rate, without an exchange of the $20,000
notional amount upon which the payments are based. The second agreement,
terminating on December 31, 2004, 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.

6. INCOME TAXES

The principal differences between the federal statutory tax rate of 34% and the
effective tax rates are nondeductible amortization of acquisition intangible
assets and state income taxes, and for the three months ended November 30,
2002, an increase in the valuation allowance for potentially non-realizable
deferred tax assets by $325.

7. PREFERRED STOCK ISSUANCE

In September 2002, the Companys Chairman invested $3,000 for 3 shares of the
Companys Series C convertible preferred stock (Series C Preferred Stock)
having an aggregate face amount of $3,000, which was used by the Company for
working capital purposes. Each share of the Series C Preferred Stock is
convertible at the holders option into 1,000 shares of the Companys common
stock beginning two years after the date of issuance. The holder of Series C
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 of
the preferred stock, the Company may, at its option, pay such dividends in cash
or in shares of the Companys common stock. The Company has an option to
redeem shares of Series C Preferred Stock at any time, but does not currently
have the intent or ability to do so. The liquidation and redemption price of
the preferred stock is $1,000 per share.

8. OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is as follows:

|                            |                                                                                |   |                    |       |      |   |        |   | 
|--------------------------- | ------------------------------------------------------------------------------ | - | ------------------ | ----- | ---- | - | ------ | - | 
|                            |                                                                                |   | Three Months Ended
|                            |                                                                                |   | November 30,      
|                            |                                                                                |   |                   
|                            |                                                                                |   | 2002               |       | 2001
|                            |                                                                                |   |                    |       |     
|Net loss                    |                                                                                | $ | (1,245             | )     |      | $ | (1,365 | )
|Other comprehensive loss:   |                                                                                |   |                    |       |      |   |        |  
|                            | Change in the valuation of available-for-sale
investments, net of deferred tax |   |                    | 1,684 |      |   |        |   | 
|                            |                                                                                |   |                    |       |      |   |        |  
|Comprehensive income (loss) |                                                                                | $ | 439                |       |      | $ | (1,365 | )
|                            |                                                                                |   |                    |       |      |   |        |  

The change in the valuation of available-for-sale investments results from the
accounting for the Companys investment in Rawlings as an available-for-sale
marketable security. Changes in the market value of the Companys investment
in Rawlings common stock, as determined by the closing price per share of
Rawlings common stock quoted on the Nasdaq Stock Market as of the beginning and
end of

9



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each fiscal period, results in comprehensive income or loss until
December 2002, when the investment was sold. As of November 30, 2002, $1,032
of the unrealized loss on the Rawlings investment that had been previously reported as other comprehensive accumulated loss was
expensed, and included as a component of the net loss for the three months
ended November 30, 2002.

9. EARNINGS (LOSS) PER SHARE

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

|                                                                                                                |                                                                 |   |                    |        |      |   |        |        |  
|--------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                                                                                                |                                                                 |   | Three Months Ended
|                                                                                                                |                                                                 |   | November 30,      
|                                                                                                                |                                                                 |   |                   
|                                                                                                                |                                                                 |   | 2002               |        | 2001
|                                                                                                                |                                                                 |   |                    |        |     
|Loss before extraordinary item                                                                                  |                                                                 | $ | (838               | )      |      | $ | (1,365 | )     
|Preferred dividends                                                                                             |                                                                 |   | (259               | )      |      |   | (67    | )     
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       
|                                                                                                                | Loss available to common stockholders before extraordinary item |   |                    | (1,097 | )    |   |        | (1,432 | )
|Extraordinary loss                                                                                              |                                                                 |   | (406               | )      |      |   |        |       
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       
|                                                                                                                | Net loss available to common stockholders                       |   | $                  | (1,503 | )    |   | $      | (1,432 | )
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       
|Weighted average number of common shares outstanding for
basic earnings (loss) per share                        |                                                                 |   | 38,312             |        |      |   | 36,024 |       
|Effect of dilutive employee stock options                                                                       |                                                                 |   |                    |        |      |   |        |       
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       
|Adjusted weighted average number of common shares and
assumed conversions for diluted earnings (loss) per share |                                                                 |   | 38,312             |        |      |   | 36,024 |       
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       
|Loss per share (basic and diluted):                                                                             |                                                                 |   |                    |        |      |   |        |       
|                                                                                                                | Loss available to common stockholders before extraordinary item |   | $                  | (0.03  | )    |   | $      | (0.04  | )
|                                                                                                                | Extraordinary loss                                              |   |                    | (0.01  | )    |   |        |        |  
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       
|                                                                                                                | Net loss available to common stockholders                       |   | $                  | (0.04  | )    |   | $      | (0.04  | )
|                                                                                                                |                                                                 |   |                    |        |      |   |        |       

10. SEGMENT INFORMATION

The Company has four business segments associated with its continuing
operations that provide different products or services: (a) marketing and
production services, which primarily include 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).

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Information for each of the Companys segments is presented below:

|                         |                                              |   |                    |        |      |   |        |        |  
|------------------------ | -------------------------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                         |                                              |   | Three Months Ended
|                         |                                              |   | November 30,      
|                         |                                              |   |                   
|                         |                                              |   | 2002               |        | 2001
|                         |                                              |   |                    |        |     
|Net revenues:            |                                              |   |                    |        |      |   |        |       
|                         | Collegiate Marketing and Production Services |   | $                  | 21,780 |      |   | $      | 26,685 |  
|                         | Affinity Events                              |   |                    | 1,784  |      |   |        | 3,122  |  
|                         | Affinity Management Services                 |   |                    | 2,278  |      |   |        | 5,906  |  
|                         | Consulting                                   |   |                    | 5,267  |      |   |        | 5      |  
|                         |                                              |   |                    |        |      |   |        |        |  
|                         |                                              | $ | 31,109             |        |      | $ | 35,718 |       
|                         |                                              |   |                    |        |      |   |        |        |  
|Operating income (loss): |                                              |   |                    |        |      |   |        |       
|                         | Collegiate Marketing and Production Services |   | $                  | 2,546  |      |   | $      | 2,018  |  
|                         | Affinity Events                              |   |                    | (1,236 | )    |   |        | (1,835 | )
|                         | Affinity Management Services                 |   |                    | 396    |      |   |        | 630    |  
|                         | Consulting                                   |   |                    | 5,267  |      |   |        | 5      |  
|                         | Amortization of acquisition intangibles      |   |                    | (304   | )    |   |        | (204   | )
|                         | Unallocated general and administrative costs |   |                    | (361   | )    |   |        | (716   | )
|                         |                                              |   |                    |        |      |   |        |        |  
|                         |                                              | $ | 6,308              |        |      | $ | (102   | )     
|                         |                                              |   |                    |        |      |   |        |        |  

In the three months ended November 30, 2002, the Company realized $4,810 of
previously deferred consulting fee income in connection with services provided
to Gray in connection with Grays acquisition of a company that owns television
stations. The Company also defers the recognition of consulting income on a
portion of fees received from Gray, due to the Companys ownership interest in
Gray. When the Companys percentage ownership on Gray decreases, a
proportionate amount of the previously deferred income becomes realizable. As a
result of the dilution in the Companys investment in Gray resulting from
Grays issuance of its common stock during the same period, previously deferred
consulting fee income of $457 was realized.

As further discussed in Managements Discussion and Analysis of Financial
Condition and Results of Operations, certain of the Companys contractual
relationships changed effective September 1, 2002, which resulted in a
significant decrease of revenues and direct operating costs in the Collegiate
Marketing and Production Services segment subsequent to that date. These
changes also had a favorable impact on the operating results of the segment for
the three months ended November 30, 2002.

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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Bull Run Corporation (Bull Run or the Company), based in Atlanta, Georgia,
is a sports and affinity marketing and management company through its primary
operating business, Host Communications, Inc. (Host). 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 (a 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), the owner and
operator of 29 television stations, four newspapers and other media and
communications businesses; iHigh, Inc. (iHigh), an Internet and marketing
company focused on high school students; and until December 2002, Rawlings
Sporting Goods Company, Inc. (Rawlings), a supplier of team sports equipment.
The Company sold its investment in Rawlings in December 2002. The Company has
provided consulting services to Gray in connection with certain of Grays
acquisitions and dispositions.

The Company sold the inventories, property and equipment and intangible assets
of Datasouth Computer Corporation (Datasouth), a wholly owned subsidiary, in
September 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 condensed consolidated financial
statements.

In September 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 are, subsequent to this 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.

CERTAIN RELATIONSHIPS

J. Mack Robinson, Chairman of the Board of the Company, is Chief Executive
Officer, Chairman and a director of Gray, and the beneficial owner of Gray
common stock representing approximately 40.0% of the combined voting power of
Grays two classes of common stock as of November 30, 2002. Robert S. Prather,
Jr., President, Chief Executive Officer and a director of the Company, is
President, Chief Operating Officer and a director of Gray, and the beneficial
owner of Gray common stock representing approximately 27.5% of the combined
voting power of Grays two classes of common stock as of November 30, 2002.
Hilton H. Howell, Jr., the Companys Vice President and Secretary, is Vice
Chairman and a director of Gray, and the beneficial owner of Gray common stock
representing approximately 31.0% of the combined voting power of Grays two
classes of common stock as of November 30, 2002. Each of Messrs. Robinson,
Prather and Howells beneficial ownership percentages includes the Companys
beneficial ownership of approximately 25.5% of the combined voting power of
Grays two classes of common stock as of November 30, 2002. Beneficial
ownership percentages noted above include warrants and options to acquire
shares of Gray common stock that were exercisable on, or within 60 days after,
November 30, 2002.

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

12



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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 
Effective July 1, 2001, the Company adopted Financial Accounting Standards
Board Statement No. 142, Accounting for Goodwill and Other Intangible Assets,
(FAS 142) which prescribes the Companys accounting for goodwill and certain
other intangible assets acquired in the Host-USA Acquisition. In accordance
with FAS 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 impairment
in value has occurred. As of June 30, 2002, the Company accelerated
amortization of $6,582,000 of its customer base intangible asset, due to a
significant change in a certain underlying customer relationship. The
remaining carrying value assigned to this specific customer relationship is
being amortized on a straight-line basis through August 31, 2004, resulting in
amortization expense during that period of approximately $536,000 per year.
Other customer relationships are being amortized over a 16-year average life,
at a rate of approximately $680,000 per year. The use of a 16-year average
life of customer relationships amortized on a straight-line method is not
materially different than using the estimated life of each individual
relationship using a systematic allocation method. Goodwill and intangible
assets, net of accumulated amortization, were $74,557,000 as of November 30,
2002 and $74,861,000 as of August 31, 2002, of which, goodwill was $57,862,000
as of both dates.

The carrying value of the Companys investment in Gray of $17,125,000 as of
November 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 all of these
deferred tax assets will not be realized. As of November 30, 2002 the Company
has a net deferred tax asset of $20,531,000, primarily due to a net operating
loss carryforward for federal tax purposes that expires beginning in 2017, net
of a valuation allowance of approximately $3,450,000. 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 
The Company reports the value of certain 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 pursuant to Financial Accounting
Standards Boards Statement No. 133, Accounting for Derivative Investments and
Hedging Activities(FAS 133). The fair value of derivative instruments of
$2,777,000 and $4,451,000 as of November 30, 2002 and August 31, 2002,
respectively, is included in the Companys balance sheet as a component of
Other assets. 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. If management determines that the
carrying value of 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. Management has made such permanent
impairment determinations in prior years, 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. Effective
December 31, 2001, the Company began accounting for its investment in Rawlings
as an available-for-sale marketable security.

13



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##### 



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 November 30, 2002, the Company
adjusted the unrealized loss in its investment in Rawlings, previously reported
as Other comprehensive accumulated loss, by $1,032,000, thereby reducing the
remaining unrealized loss, net of deferred tax, to $(366,000). This remaining
unrealized loss was further reduced to zero subsequent to November 30, 2002, as
a result of appreciation in the quoted market value of the Rawlings common
stock from November 30, 2002 through the date the investment was sold in
December 2002.

LIQUIDITY AND CAPITAL RESOURCES

Credit Arrangements 
As of November 30, 2002, the Companys indebtedness to its bank lenders was
$93,932,000. Under an amended and restated credit agreement dated October 11,
2002, the Company and its bank lenders amended the Companys bank credit
agreement to modify 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, beginning
November 30, 2002. In December 2002, the Company sold its investment in
Rawlings and used the proceeds to make principal payments of $6,764,000. As a
result, the Company has met the requirement to make a principal payment of at
least $5,000,000 by January 15, 2003, and has reduced the principal payment due
by April 15, 2003 from $5,000,000 to $3,236,000. In order to facilitate
funding the remaining scheduled principal payment obligations totaling
$8,236,000, 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 to make such
scheduled payments, 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. The
Companys debt to the banks is collateralized by a lien on all of the Companys
assets. The Company expects to negotiate the terms of a long-term refinancing
of the credit facility for execution prior to the current facilitys maturity
date of September 30, 2003. Although the Company believes that it will be
successful in negotiating a long-term refinancing of the credit facility, there
is no assurance that it will be able to do so.

The Companys credit agreement currently 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 as previously described, with
all amounts outstanding under the term loans due on September 30, 2003; and (b)
a revolving loan commitment (the Revolver) for borrowings of up to
$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 November 30, 2002, the $20,000,000
borrowing capacity under the Revolver was fully utilized, and no additional
borrowing capacity was available. The Company believes that it is in its best
interests to maintain the $20,000,000 outstanding balance under the Revolver at
all times, due to certain terms of the credit agreement that potentially limit
future borrowings under the Revolver. 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 September 2002, the Companys Chairman invested $3,000,000 for 3,000 shares
of Series C convertible preferred stock, which was used by the Company for
working capital purposes. Under the terms of the amended credit agreement, up
to $12,500,000 in funding for working capital purposes, if necessary, may be
provided by the issuance of equity securities, including shares of the
Companys redeemable preferred

14



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stock, or by the issuance of subordinated debt. Through November 30, 2002, the
Company had received a total of $7,097,000 in cash for working capital purposes
from the previously discussed issuances 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 to use for working capital purposes from the
issuance of equity or debt securities during the remaining term of the credit
facility.

The Companys Chairman 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 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.
Principally all holders of these subordinated notes each agreed to amend the
maturity date of their note, in substantially all cases, to January 17, 2006.
Payment of interest and principal on all subordinated notes is subordinate to
the Companys bank credit agreement.

The Companys capital expenditures are not expected to exceed $600,000 for the
fiscal year ending August 31, 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.
Although there is no borrowing capacity currently available under its revolving
credit facility, the Company believes that the cash flow anticipated from
operations 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.

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

|                                                     |                                             |   |                    |        |      |   |        |        |  
|---------------------------------------------------- | ------------------------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                                     |                                             |   | Three Months Ended
|                                                     |                                             |   | November 30,      
|                                                     |                                             |   |                   
|                                                     |                                             |   | 2002               |        | 2001
|                                                     |                                             |   |                    |        |     
|Cash flows from operating activities:                |                                             |   |                    |        |      |   |        |       
|                                                     | Continuing operations                       |   | $                  | (2,843 | )    |   | $      | (1,957 | )
|                                                     | Discontinued operations                     |   |                    | 106    |      |   |        | (147   | )
|Cash flows from investing activities:                |                                             |   |                    |        |      |   |        |       
|                                                     | Continuing operation investing activities   |   |                    | 420    |      |   |        | 6,093  |  
|                                                     | Discontinued operation investing activities |   |                    |        |      |   |        | (62    | )
|Cash flows from financing activities                 |                                             |   | 2,222              |        |      |   | (1,343 | )     
|                                                     |                                             |   |                    |        |      |   |        |        |  
|Net increase (decrease) in cash and cash equivalents |                                             | $ | (95                | )      |      | $ | 2,584  |       
|                                                     |                                             |   |                    |        |      |   |        |        |  

15



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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):

|                                                      |  |                    |        |      |  |   |        |  
|----------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                      |  | Three Months Ended
|                                                      |  | November 30,      
|                                                      |  |                   
|                                                      |  | 2002               |        | 2001
|                                                      |  |                    |        |     
|Operating income (loss)                               |  | $                  | 6,308  |      |  | $ | (102   | )
|Depreciation and amortization included in operations  |  |                    | 622    |      |  |   | 593    |  
|Interest expense, net of interest and dividend income |  |                    | (2,186 | )    |  |   | (2,673 | )
|Net change in operating assets and liabilities        |  |                    | (7,677 | )    |  |   | 25     |  
|Other changes in operating cash flows                 |  |                    | 90     |      |  |   | 200    |  
|                                                      |  |                    |        |      |  |   |        |  
|Total cash flows from continuing operations           |  |                    | (2,843 | )    |  |   | (1,957 | )
|Cash flows from discontinued operating activities     |  |                    | 106    |      |  |   | (147   | )
|                                                      |  |                    |        |      |  |   |        |  
|Total cash flows from operating activities            |  | $                  | (2,737 | )    |  | $ | (2,104 | )
|                                                      |  |                    |        |      |  |   |        |  

The Collegiate Marketing and Production Services segment primarily generates
revenues during the collegiate football and basketball seasons. In the three
months ended November 30, the segment primarily derives revenues from projects
and services associated with the college football. The Affinity Events segment
consists primarily of participatory sports tours that generally begin in March
and end in September each year. Therefore, this segment generates a
proportionately low amount of revenues during the three months ended November
30. In comparison with the same period last year, revenues and direct costs
associated with the Collegiate Marketing and Production Services segment are
significantly lower due to the termination of Hosts contract with the NCAA on
August 31, 2002 (the Host-NCAA Contract). In the prior year periods, as a
result of the Host-NCAA Contract, the Company generated a significant amount of
revenue from NCAA corporate licensing and sponsorship rights and incurred a
significant amount of guaranteed rights fee expense.

Operating income of $5,267,000 for the three months ended November 30, 2002
resulted from consulting fees, which were received as cash in a prior period
and then reported as deferred revenues. As a result, an increase in accounts
receivable of $7,024,000 during this period was not offset by what would
otherwise have been a similarly significant increase in accounts payable and
accrued expenses. Therefore, the total cash flow from operating activities for
the three months ended November 30, 2002, was significantly affected by the net
change in operating assets and liabilities of $(7,677,000), which exceeded
operating income before non-cash depreciation and amortization expense. The
Companys total cash flows from continuing operations for the three months
ended November 30, 2001 was unfavorably affected by interest expense, which
exceeded the Companys operating income before depreciation and amortization
expense. Operating income provided by Host Communications, Bull Runs
wholly-owned operating company, improved by over $800,000 for the three months
ended November 30, 2002 compared to the same period in the prior year, on total
revenues of $25,842,000 compared to $35,713,000, respectively.

Other changes in operating cash flows include the income on Grays option to
purchase the Companys investment in Tarzian of $174,000 in the three months
ended November 30, 2001. The option was exercised in December 2001 and no
additional option income was recognized subsequent to exercise.

16



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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):

|                                                                |  |                    |     |      |  |   |       |  
|--------------------------------------------------------------- |  | ------------------ | --- | ---- |  | - | ----- | -
|                                                                |  | Three Months Ended
|                                                                |  | November 30,      
|                                                                |  |                   
|                                                                |  | 2002               |     | 2001
|                                                                |  |                    |     |     
|Capital expenditures                                            |  | $                  | (67 | )    |  | $ | (226  | )
|Proceeds from sale of investments, net                          |  |                    |     |      |  |   | 6,348 |  
|Increase in other assets                                        |  |                    | 487 |      |  |   | (29   | )
|                                                                |  |                    |     |      |  |   |       |  
|Total cash flows from continuing operation investing activities |  |                    | 420 |      |  |   | 6,093 |  
|Cash flows from discontinued operation investing activities     |  |                    |     |      |  |   | (62   | )
|                                                                |  |                    |     |      |  |   |       |  
|Total cash flows from investing activities                      |  | $                  | 420 |      |  | $ | 6,031 |  
|                                                                |  |                    |     |      |  |   |       |  

In the three months ended November 30, 2001, the Company sold all of its
remaining shares of Gray preferred stock to a company affiliated with the
Companys Chairman for cash of $6,803,000.

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):

|                                                        |  |                    |       |      |  |   |         |  
|------------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ------- | -
|                                                        |  | Three Months Ended
|                                                        |  | November 30,      
|                                                        |  |                   
|                                                        |  | 2002               |       | 2001
|                                                        |  |                    |       |     
|Net borrowings (repayments) on revolving line of credit |  | $                  | 175   |      |  | $ | 8,200   |  
|Net proceeds (repayments) on long-term debt             |  |                    |       |      |  |   | (12,293 | )
|Proceeds on issuance of preferred stock                 |  |                    | 3,000 |      |  |   | 2,400   |  
|Other financing cash flows                              |  |                    | (953  | )    |  |   | 350     |  
|                                                        |  |                    |       |      |  |   |         |  
|Total cash flows from financing activities              |  | $                  | 2,222 |      |  | $ | (1,343  | )
|                                                        |  |                    |       |      |  |   |         |  

In the three months ended November 30, 2001, the Company reduced its long-term
debt by $12,293,000 in part with the proceeds from the sale of Gray preferred
stock and proceeds received on the issuance of the Companys preferred stock.

RESULTS OF CONTINUING OPERATIONS  THREE MONTHS ENDED NOVEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED NOVEMBER 30, 2001

Results Derived from Operating Businesses 
Total revenues for the three months ended November 30, 2002 and 2001 are
summarized as follows (amounts in $000s):

|                                             |  |                    |        |      |  |   |        | 
|-------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                             |  | Three Months Ended
|                                             |  | November 30,      
|                                             |  |                   
|                                             |  | 2002               |        | 2001
|                                             |  |                    |        |     
|Collegiate Marketing and Production Services |  | $                  | 21,780 |      |  | $ | 26,685 | 
|Affinity Events                              |  |                    | 1,784  |      |  |   | 3,122  | 
|Affinity Management Services                 |  |                    | 2,278  |      |  |   | 5,906  | 
|Consulting                                   |  |                    | 5,267  |      |  |   | 5      | 
|                                             |  |                    |        |      |  |   |        | 
|                                             |  | $                  | 31,109 |      |  | $ | 35,718 | 
|                                             |  |                    |        |      |  |   |        | 

Total revenues and operating results for the Collegiate Marketing and
Production Services segment were impacted in the three months ended November
30, 2002 by the termination of most of the Companys contracts with NCAA
corporate sponsors as of or prior to June 30, 2002. In the three
months ended November 30, 2001, the Company recognized revenues of approximately $5,544,000
in connection with NCAA corporate sponsorships. No such revenue was recognized
in the three months ended November 30, 2002.

17



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Total revenues in the Affinity Events segment declined due to the elimination
of certain non-profitable tours and events prior to the current fiscal year.
The tours and events currently operated within the Affinity Events segment
generally take place during the months of March through September; therefore,
the three month period ended November 30 is expected to reflect proportionately
low revenue and a loss from operations. The segments loss from operations for
the three months ended November 30, 2002 is less than the same period in the
prior year due to the elimination of the certain events and tours, and an
overall reduction in selling, general and administrative costs of the segment.

Total revenues for the Affinity Management Services segment declined due to the
termination of certain contracts prior to the current fiscal year, which also
caused a similar decline in the Companys direct operating costs.

The Company believes that its revenues and operating results for the fiscal
periods prior to August 31, 2002 were significantly impacted by general
market conditions, i.e., the significant decline in corporate advertising and
sponsorship spending during Hosts peak selling period from September 2001
through February 2002, and the expiration of the Host-NCAA Contract on
August 31, 2002. The Company believes that NCAA corporate sponsors strongly
preferred multi-year renewable commitments to 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, in the final year of the Host-NCAA Contract, to
attract and sign new NCAA corporate sponsors or replace NCAA corporate sponsors
whose contracts had expired. The Company expects that total revenues derived
by the Collegiate Marketing and Production Services segment subsequent to June
30, 2002 will be significantly less than total revenues derived in comparable
prior year periods, 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.

Prior to September 1, 2002, the Company received a $5,000,000 consulting fee
from Gray for services performed in connection with Grays acquisition of
Stations Holding Company, Inc. (Stations), which was consummated in October
2002. Also in October 2002, Gray completed a public offering of its common
stock, and in November 2002, Gray issued additional shares of its common stock.
These issuances of common stock by Gray resulted in a reduction of the
Companys equity investment in Grays outstanding common stock from 12.9% to
4.0% (representing 18.0% of the voting rights). As a result of these
transactions by Gray, the Company recognized deferred consulting fee income of
$4,810,000 in the three months ended November 30, 2002 attributable to Grays
acquisition of Stations, plus an additional $457,000 of previously deferred
consulting fee income as a result of the reduction in the Companys
proportionate ownership of Gray following Grays issuances of common stock.
The Company does not anticipate receiving any additional consulting fees from
Gray in the future. As a result of the Companys 4.0% equity investment in
Gray as of November 30, 2002, approximately 4.0% of consulting fee income on
fees charged to Gray in prior years is deferred and will be recognized as
income by the Company when Gray chooses to amortize or otherwise reduce the
book value of its goodwill, or when the Companys proportionate ownership of
Gray common stock decreases.

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

|                                            |  |                    |        |      |  |   |        | 
|------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                            |  | Three Months Ended
|                                            |  | November 30,      
|                                            |  |                   
|                                            |  | 2002               |        | 2001
|                                            |  |                    |        |     
|Direct operating costs of services rendered |  | $                  | 18,066 |      |  | $ | 27,229 | 
|Selling, general and administrative         |  |                    | 6,431  |      |  |   | 8,387  | 
|Amortization of acquisition intangibles     |  |                    | 304    |      |  |   | 204    | 
|                                            |  |                    |        |      |  |   |        | 
|                                            |  | $                  | 24,801 |      |  | $ | 35,820 | 
|                                            |  |                    |        |      |  |   |        | 

Direct operating costs of services rendered decreased for the three months
ended November 30, 2002 from the same period in the prior year due to (a) the
elimination of guaranteed rights fee expense associated with the Host-NCAA
Contract, which amounted to $3,053,000 for the three months ended November 30,
2001, plus (b) a decrease in events management costs of $1,432,000, plus (c)
decreases in other rights fees and

18



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##### 



profit split expenses of $3,834,000. As
noted above, the Company anticipates that direct operating costs will be
significantly less subsequent to June 30, 2002 than in the previous year due to
the termination of the Host-NCAA Contract and the elimination of non-profitable
tours and events.

Selling, general and administrative costs declined for the three months ended
November 30, 2002 from the prior fiscal year due to a reduction in the
Companys workforce and a decrease in travel costs. During the prior fiscal
year, 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 $3,953,000 for the three months ended November 30, 2002 compared
to $5,110,000 for the same period in the prior year. Travel costs were
substantially reduced through efforts to operate more efficiently and control
travel spending. As a result, total travel expense included in selling,
general and administrative expense declined to $196,000 for the three months
ended November 30, 2002 compared to $374,000 for the same period in the prior
year.

Operating income (loss) for the three months ended November 30, 2002 and 2001
is summarized as follows (amounts in 000s):

|                                             |  |                    |        |      |  |   |        |  
|-------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                             |  | Three Months Ended
|                                             |  | November 30,      
|                                             |  |                   
|                                             |  | 2002               |        | 2001
|                                             |  |                    |        |     
|Collegiate Marketing and Production Services |  | $                  | 2,546  |      |  | $ | 2,018  |  
|Affinity Events                              |  |                    | (1,236 | )    |  |   | (1,835 | )
|Affinity Management Services                 |  |                    | 396    |      |  |   | 630    |  
|Consulting                                   |  |                    | 5,267  |      |  |   | 5      |  
|Amortization of acquisition intangibles      |  |                    | (304   | )    |  |   | (204   | )
|Unallocated general and administrative costs |  |                    | (361   | )    |  |   | (716   | )
|                                             |  |                    |        |      |  |   |        |  
|                                             |  | $                  | 6,308  |      |  | $ | (102   | )
|                                             |  |                    |        |      |  |   |        |  

Results Derived from Investments and Derivative Instruments 
Equity in earnings (losses) of affiliated companies, totaling $579,000 for the
three months ended November 30, 2002 and $(208,000) for the three months
ended November 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. Subsequent to December 31, 2001, and until its disposal in December
2002, the Company accounts for its investment in Rawlings as an
available-for-sale marketable security (see Note 8 to the Condensed
Consolidated Financial Statements). In the three months ended November 30,
2002, a portion of the unrealized loss on the Rawlings investment that had been
previously reported as other comprehensive accumulated loss (a component of
stockholders equity) was expensed, resulting in an investment valuation
charge of $1,032,000.

As a result of Grays issuance of common stock in October and November 2002 for
average net proceeds to Gray of approximately $7.72 per share, and since the
Companys carrying value of its investment in Gray common stock prior to
Grays issuance exceeded $7.72 per share, the Company
reported a non-cash loss on Grays issuance of shares in the three months
ending November 30, 2002 of $(2,339,000).

In the three months ended November 30, 2001, the Company sold the remainder of
its investment in Gray preferred stocks, resulting in a gain of $3,064,000.

The net change in the value of certain derivative instruments, consisting of
warrants to purchase Gray common stock and interest rate swap agreements, was
$(1,674,000) for the three months ended November 30, 2002 due to a decline
in the value of warrants, less an increase in the value of the interest rate
swap agreements; and $(1,512,000) for the three months ended November 30, 2001,
due to a decline in the value of the interest rate swap agreements and a
decrease in the value of the warrants.

19



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Interest Expense and Debt Related Costs 
Interest expense decreased to $2,193,000 for the three months ended November
30, 2002 from $2,712,000 for the same period in the prior year, as a result of
a reduction in long-term debt and declines in variable interest rates to which
a significant amount of the debt is subject.

Debt issue cost amortization was $544,000 and $822,000 for the three months
ended November 30, 2002 and 2001, respectively. Debt issue costs consist of
(a) amounts paid in connection with obtaining bank financing amortized over the
remaining term of the bank credit facility; and (b) the value of shares of the
Companys common stock issued to the Companys Chairman to compensate him for
his personal guarantee of the Companys debt under its bank credit agreement.
The value of the shares issued is amortized over the period for which the
shares provide compensation, and approximately $365,000 and $406,000 of such
amortization is included in debt issue cost amortization for the three months
ended November 30, 2002 and 2001, respectively.

Income Taxes 
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 three months ended November 30, 2002, a change in the
amount of a valuation allowance for potentially non-realizable deferred tax
assets.

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 Note 5 to the Condensed Consolidated
Financial Statements) 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 August 31, 2002 and 2001, 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 $121,000 and $145,000 for the three
months ended November 30, 2002 and 2001, 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 and warrants to purchase
common stock, and previously held investments in Gray preferred stock. The
Company is exposed to changes in market values of these investments, some of
which are publicly traded common stocks. In the case of the
Companys investment in Grays two classes of common stock, where there exists a quoted
market price for the publicly-traded securities 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 managements estimates of the
aggregate fair value of the Companys investments in affiliated companies (as
described in Note 4 to the Condensed Consolidated Financial Statements), a 10%
change in the aggregate market value of such investments would increase or
decrease such aggregate market value by approximately $4,300,000 as of November
30, 2002 and $4,500,000 as of August 31, 2002.

20



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##### 



FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 4. Controls and Procedures

Based on the evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures performed pursuant to Rule 13a-15
under the Securities Exchange Act of 1934 as amended, the Companys Chief
Executive Officer and its Chief Financial Officer have concluded that there
were no material weakness in such controls as of November 30, 2002.

There were no significant changes to the Companys internal controls or in
other factors that could significantly affect these controls during the
quarterly period ended November 30, 2002.

21



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##### 



PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------



| | 3.1  |  | Certificate of Amendment to Articles of Incorporation
filed November 8, 2002
| | ---- |  | ----------------------------------------------------------------------------
|
| | 99.1 |  | Certifications Pursuant to U.S.C. Section 1350                              



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| | Form 8-K dated September 25, 2002 related to a change in the
Companys fiscal year
| | ----------------------------------------------------------------------------------

SIGNATURES

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

|                       |  |     |  |                                                                               
|---------------------- |  | --- |  | ------------------------------------------------------------------------------
|                       |  |     |  | BULL RUN CORPORATION                                                          
|                      
|Date: January 10, 2003 |  | By: |  | /s/ FREDERICK J. ERICKSON                                                     
|                       |  |     |  |                                                                               
|                       |  |     |  | Frederick J. Erickson
Vice President-Finance, Treasurer andAssistant Secretary

22



---



##### 



CERTIFICATION

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



|1. |  | I have reviewed this quarterly report on Form 10-Q of Bull Run
Corporation (Registrant);                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                   
|  
|4. |  | The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the Registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The Registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrants auditors and the audit
committee of the Registrants board of directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrants ability to
record, process, summarize and report financial data and have
identified for the Registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrants
internal controls; and                                                                                                                                        



|6. |  | The Registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |                                                              | 
|------- |  | ------------------------------------------------------------ | 
|Date:   |  | January 10, 2003                                            
|       
|Signed: |  | /s/ ROBERT S. PRATHER, JR.                                  
|        |  |                                                             
|        |  | Robert S. Prather, Jr.
President and Chief Executive Officer

23



---



##### 



CERTIFICATION

I, Frederick J. Erickson, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Bull Run
Corporation (Registrant);                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                   
|  
|4. |  | The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the Registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The Registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrants auditors and the audit
committee of the Registrants board of directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrants ability to
record, process, summarize and report financial data and have
identified for the Registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrants
internal controls; and                                                                                                                                        



|6. |  | The Registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |                                                                            | 
|------- |  | -------------------------------------------------------------------------- | 
|Date:   |  | January 10, 2003                                                          
|       
|Signed: |  | /s/ FREDERICK J. ERICKSON                                                 
|        |  |                                                                           
|        |  | Frederick J. Erickson
Vice President  Finance and Chief Financial Officer

24