##### 



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 May 31, 2003                                       
|   |  |                                                                                   
|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
(State of incorporation
or organization) |  | 58-2458679
(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: 4,025,429 shares of Common
Stock, par value $.01 per share, were outstanding as of June 30, 2003.





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##### 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BULL RUN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands)

|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------- | ------- | ---------- | ------- | ------- | ------- | 
|                                                                                                                                                 |                                                                                                                                                                              |                            |         | May 31, |         | August 31,
|                                                                                                                                                 |                                                                                                                                                                              |                            |         | 2003    |         | 2002      
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |           
|ASSETS                                                                                                                                           |                                                                                                                                                                              |                            |         |         |         |            |         |        
|Current assets:                                                                                                                                  |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 | Cash and cash equivalents                                                                                                                                                    |                            | $       | 387     |         |            | $       | 397     |        
|                                                                                                                                                 | Accounts receivable, net of allowance of $810 and $514 as of
May 31, 2003 and August 31, 2002, respectively                                                                  |                            |         | 9,750   |         |            |         | 13,502  |        
|                                                                                                                                                 | Inventories                                                                                                                                                                  |                            |         | 494     |         |            |         | 1,005   |        
|                                                                                                                                                 | Prepaid costs and expenses                                                                                                                                                   |                            |         | 2,198   |         |            |         | 1,559   |        
|                                                                                                                                                 | Net current assets of discontinued segment                                                                                                                                   |                            |         |         |         |            |         | 106     |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 |                                                                                                                                                                              | Total current assets       |         |         | 12,829  |            |         |         | 16,569  | 
|Property and equipment, net                                                                                                                      |                                                                                                                                                                              |                            | 4,476   |         |         |            | 5,171   |        
|Investment in affiliated companies                                                                                                               |                                                                                                                                                                              |                            | 18,024  |         |         |            | 25,013  |        
|Goodwill                                                                                                                                         |                                                                                                                                                                              |                            | 57,862  |         |         |            | 57,862  |        
|Customer base and trademarks                                                                                                                     |                                                                                                                                                                              |                            | 16,362  |         |         |            | 16,999  |        
|Deferred income taxes                                                                                                                            |                                                                                                                                                                              |                            | 20,302  |         |         |            | 21,381  |        
|Other assets                                                                                                                                     |                                                                                                                                                                              |                            | 3,535   |         |         |            | 8,818   |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 |                                                                                                                                                                              | $                          | 133,390 |         |         | $          | 151,813 |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                             |                                                                                                                                                                              |                            |         |         |         |            |         |        
|Current liabilities:                                                                                                                             |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 | Current portion of long-term debt                                                                                                                                            |                            | $       | 84,522  |         |            | $       | 19,850  |        
|                                                                                                                                                 | Accounts payable                                                                                                                                                             |                            |         | 6,764   |         |            |         | 6,558   |        
|                                                                                                                                                 | Deferred revenue                                                                                                                                                             |                            |         | 6,174   |         |            |         | 13,616  |        
|                                                                                                                                                 | Accrued and other liabilities                                                                                                                                                |                            |         | 13,496  |         |            |         | 8,797   |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 |                                                                                                                                                                              | Total current liabilities  |         |         | 110,956 |            |         |         | 48,821  | 
|Long-term debt                                                                                                                                   |                                                                                                                                                                              |                            | 16,709  |         |         |            | 93,091  |        
|Deferred income                                                                                                                                  |                                                                                                                                                                              |                            | 627     |         |         |            | 1,284   |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 |                                                                                                                                                                              | Total liabilities          |         |         | 128,292 |            |         |         | 143,196 | 
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|Commitments and contingencies                                                                                                                    |                                                                                                                                                                              |                            |         |         |         |            |         |        
|Redeemable Series B convertible preferred stock, $.01 par value (authorized
100 shares; issued and outstanding 5.4 shares as of August 31, 2002) |                                                                                                                                                                              |                            |         |         |         |            | 5,400   |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|Stockholders equity:                                                                                                                            |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 | Series C convertible preferred stock, $.01 par value (authorized 100 shares;
issued and outstanding 4.1 shares as of August 31, 2002)                                        |                            |         |         |         |            |         | 4,097   |        
|                                                                                                                                                 | Series D convertible preferred stock, $.01 par value (authorized 100 shares;
issued and outstanding 14.3 shares with $14,280 aggregate liquidation
value as of May 31, 2003) |                            |         | 14,280  |         |            |         |         |        
|                                                                                                                                                 | Common stock, $.01 par value (authorized 25,000 shares; issued
4,018 and 3,855 shares as of May 31, 2003 and August 31, 2002,
respectively)                                  |                            |         | 40      |         |            |         | 39      |        
|                                                                                                                                                 | Additional paid-in capital                                                                                                                                                   |                            |         | 79,474  |         |            |         | 79,447  |        
|                                                                                                                                                 | Treasury stock, at cost (54 shares as of August 31, 2002)                                                                                                                    |                            |         |         |         |            |         | (1,393  | )      
|                                                                                                                                                 | Other comprehensive accumulated loss                                                                                                                                         |                            |         |         |         |            |         | (2,050  | )      
|                                                                                                                                                 | Retained earnings (accumulated deficit)                                                                                                                                      |                            |         | (88,696 | )       |            |         | (76,923 | )      
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 |                                                                                                                                                                              | Total stockholders equity |         |         | 5,098   |            |         |         | 3,217   | 
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        
|                                                                                                                                                 |                                                                                                                                                                              | $                          | 133,390 |         |         | $          | 151,813 |        
|                                                                                                                                                 |                                                                                                                                                                              |                            |         |         |         |            |         |        

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

2



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##### 



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

|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |        |       |         |  
|------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------- | --------------------------------------------------------- | ------ | ------------------ | ------ | ----------------- | ------ | ----- | ------- | ------ | ------ | ----- | ------- | ------ | ------ | ----- | ------- | -
|                                                                          |                                                                             |                                                                           |                                                           |        | Three Months Ended |        | Nine Months Ended
|                                                                          |                                                                             |                                                                           |                                                           |        | May 31,            |        | May 31,          
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                  
|                                                                          |                                                                             |                                                                           |                                                           |        | 2003               |        | 2002              |        | 2003  |         | 2002  
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |       
|Revenue from services rendered                                            |                                                                             | $                                                                         | 18,154                                                    |        |                    | $      | 32,416            |        |       | $       | 66,889 |        |       | $       | 92,163 |       
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|Operating costs and expenses:                                             |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          | Direct operating costs for services rendered                                |                                                                           |                                                           | 11,873 |                    |        |                   | 29,404 |       |         |        | 42,718 |       |         |        | 75,954 |      
|                                                                          | Selling, general and administrative                                         |                                                                           |                                                           | 6,715  |                    |        |                   | 7,770  |       |         |        | 19,449 |       |         |        | 23,392 |      
|                                                                          | Amortization of acquisition intangibles                                     |                                                                           |                                                           | 304    |                    |        |                   | 311    |       |         |        | 912    |       |         |        | 968    |      
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             |                                                                           | Total operating costs and expenses                        |        |                    | 18,892 |                   |        |       | 37,485  |        |        |       | 63,079  |        |        |       | 100,314 |  
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             |                                                                           | Income (loss) from operations                             |        |                    | (738   | )                 |        |       | (5,069  | )      |        |       | 3,810   |        |        |       | (8,151  | )
|Other income (expense):                                                   |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          | Equity in earnings (losses) of affiliated companies                         |                                                                           |                                                           | 40     |                    |        |                   | (200   | )     |         |        | (153   | )     |         |        | (2,034 | )    
|                                                                          | Net change in value of certain derivative instruments                       |                                                                           |                                                           | 155    |                    |        |                   | (446   | )     |         |        | (1,708 | )     |         |        | (3,305 | )    
|                                                                          | Loss on issuance of shares by affiliate                                     |                                                                           |                                                           |        |                    |        |                   |        |       |         |        | (2,339 | )     |         |        |        |      
|                                                                          | Gain (loss) on investment dispositions and
investment valuation adjustments |                                                                           |                                                           | (1,650 | )                  |        |                   | (2,572 | )     |         |        | (2,627 | )     |         |        | 492    |      
|                                                                          | Interest expense                                                            |                                                                           |                                                           | (1,882 | )                  |        |                   | (2,267 | )     |         |        | (6,213 | )     |         |        | (6,963 | )    
|                                                                          | Debt issue cost amortization                                                |                                                                           |                                                           | (585   | )                  |        |                   | (648   | )     |         |        | (1,739 | )     |         |        | (2,190 | )    
|                                                                          | Other income, net                                                           |                                                                           |                                                           | 1      |                    |        |                   | 51     |       |         |        | 24     |       |         |        | 258    |      
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             |                                                                           | Loss before income taxes and cumulative
effect adjustment |        |                    | (4,659 | )                 |        |       | (11,151 | )      |        |       | (10,945 | )      |        |       | (21,893 | )
|Income tax benefit                                                        |                                                                             |                                                                           |                                                           |        |                    |        | 3,755             |        |       |         |        |        |       |         | 7,749  |       
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             |                                                                           | Loss before cumulative effect adjustment                  |        |                    | (4,659 | )                 |        |       | (7,396  | )      |        |       | (10,945 | )      |        |       | (14,144 | )
|Proportionate share of affiliates cumulative effect
of accounting change |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         | (2,620 | )     
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             |                                                                           | Net loss                                                  |        |                    | (4,659 | )                 |        |       | (7,396  | )      |        |       | (10,945 | )      |        |       | (16,764 | )
|Preferred dividends                                                       |                                                                             |                                                                           | (288                                                      | )      |                    |        | (121              | )      |       |         | (828   | )      |       |         | (309   | )     
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             |                                                                           | Net loss available to common stockholders                 |        | $                  | (4,947 | )                 |        | $     | (7,517  | )      |        | $     | (11,773 | )      |        | $     | (17,073 | )
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|Loss per share available to common stockholders,
basic and diluted:       |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             | Loss available to common stockholders before
cumulative effect adjustment |                                                           | $      | (1.25              | )      |                   | $      | (2.03 | )       |        | $      | (3.03 | )       |        | $      | (3.96 | )      
|                                                                          |                                                                             | Cumulative effect of accounting change                                    |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |        | (0.72 | )      
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|                                                                          |                                                                             | Net loss available to common stockholders                                 |                                                           | $      | (1.25              | )      |                   | $      | (2.03 | )       |        | $      | (3.03 | )       |        | $      | (4.68 | )      
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       
|Weighted average number of common shares
outstanding, basic and diluted   |                                                                             |                                                                           | 3,971                                                     |        |                    |        | 3,697             |        |       |         | 3,890  |        |       |         | 3,648  |       
|                                                                          |                                                                             |                                                                           |                                                           |        |                    |        |                   |        |       |         |        |        |       |         |        |       

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

3



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##### 



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

|                                                                                         |  |            |        |           |  |           |        |              |  |        |        |  |  |   |       |   |  |   |    |  
|---------------------------------------------------------------------------------------- |  | ---------- | ------ | --------- |  | --------- | ------ | ------------ |  | ------ | ------ |  |  | - | ----- | - |  | - | -- | -
|                                                                                         |  | Redeemable |        |           |  |           |        |              |  |        |        |  |  |   |       |   |  |  
|                                                                                         |  | Series B   |        | Series C  |  | Series D  |        | Common Stock
|                                                                                         |  | Preferred  |        | Preferred |  | Preferred |        |             
|                                                                                         |  | Stock      |        | Stock     |  | Stock     |        | Shares       |  | Amount
|                                                                                         |  |            |        |           |  |           |        |              |  |       
|As of September 1, 2002                                                                  |  | $          | 5,400  |           |  | $         | 4,097  |              |  |        |        |  |  | $ | 3,855 |   |  | $ | 39 |  
|Issuance of Series C preferred stock                                                     |  |            |        |           |  |           | 3,000  |              |  |        |        |  |  |   |       |   |  |   |    |  
|Conversion of Series B and Series C preferred
stock and debt to Series D preferred stock |  |            | (5,400 | )         |  |           | (7,097 | )            |  |        | 14,280 |  |  |   |       |   |  |   |    |  
|Issuance of common stock                                                                 |  |            |        |           |  |           |        |              |  |        |        |  |  |   | 217   |   |  |   | 2  |  
|Cancellation of treasury stock                                                           |  |            |        |           |  |           |        |              |  |        |        |  |  |   | (54   | ) |  |   | (1 | )
|                                                                                         |  |            |        |           |  |           |        |              |  |        |        |  |  |   |       |   |  |   |    |  
|As of May 31, 2003                                                                       |  | $          |       |           |  | $         |       |              |  | $      | 14,280 |  |  |   | 4,018 |   |  | $ | 40 |  
|                                                                                         |  |            |        |           |  |           |        |              |  |        |        |  |  |   |       |   |  |   |    |  

|                                                                                         |  |            |        |          |  |             |        |               |  |               |        |          |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ---------- | ------ | -------- |  | ----------- | ------ | ------------- |  | ------------- | ------ | -------- |  | - | ------- | - |  | - | ------- | -
|                                                                                         |  |            |        |          |  |             |        |               |  | Other         |        | Retained |  |   |         |  
|                                                                                         |  | Additional |        |          |  |             |        | Comprehensive |  | Earnings      |        | Total   
|                                                                                         |  | Paid-In    |        | Treasury |  | Accumulated |        | (Accumulated  |  | Stockholders'
|                                                                                         |  | Capital    |        | Stock    |  | Loss        |        | Deficit)      |  | Equity       
|                                                                                         |  |            |        |          |  |             |        |               |  |              
|As of September 1, 2002                                                                  |  | $          | 79,447 |          |  | $           | (1,393 | )             |  | $             | (2,050 | )        |  | $ | (76,923 | ) |  | $ | 3,217   |  
|Issuance of Series C preferred stock                                                     |  |            |        |          |  |             |        |               |  |               |        |          |  |   |         |   |  |   | 3,000   |  
|Conversion of Series B and Series C preferred
stock and debt to Series D preferred stock |  |            |        |          |  |             |        |               |  |               |        |          |  |   |         |   |  |   | 7,183   |  
|Issuance of common stock                                                                 |  |            | 1,419  |          |  |             |        |               |  |               |        |          |  |   |         |   |  |   | 1,421   |  
|Other comprehensive income (loss)                                                        |  |            |        |          |  |             |        |               |  |               | 2,050  |          |  |   |         |   |  |   | 2,050   |  
|Preferred dividends                                                                      |  |            |        |          |  |             |        |               |  |               |        |          |  |   | (828    | ) |  |   | (828    | )
|Cancellation of treasury stock                                                           |  |            | (1,392 | )        |  |             | 1,393  |               |  |               |        |          |  |   |         |   |  |   |        |  
|Net loss                                                                                 |  |            |        |          |  |             |        |               |  |               |        |          |  |   | (10,945 | ) |  |   | (10,945 | )
|                                                                                         |  |            |        |          |  |             |        |               |  |               |        |          |  |   |         |   |  |   |         |  
|As of May 31, 2003                                                                       |  | $          | 79,474 |          |  | $           |       |               |  | $             |       |          |  | $ | (88,696 | ) |  | $ | 5,098   |  
|                                                                                         |  |            |        |          |  |             |        |               |  |               |        |          |  |   |         |   |  |   |         |  

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

4



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##### 



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

|                                                                  |                                                                      |                                       |         |                   |        |      |         |        |        |  
|----------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------- | ------- | ----------------- | ------ | ---- | ------- | ------ | ------ | -
|                                                                  |                                                                      |                                       |         | Nine Months Ended
|                                                                  |                                                                      |                                       |         | May 31,          
|                                                                  |                                                                      |                                       |         |                  
|                                                                  |                                                                      |                                       |         | 2003              |        | 2002
|                                                                  |                                                                      |                                       |         |                   |        |     
|Cash flows from operating activities:                             |                                                                      |                                       |         |                   |        |      |         |       
|Net loss                                                          |                                                                      | $                                     | (10,945 | )                 |        | $    | (16,765 | )     
|Adjustments to reconcile net loss to net cash used in operations: |                                                                      |                                       |         |                   |        |      |         |       
|                                                                  | Cumulative effect of accounting change                               |                                       |         |                   |        |      |         | 2,620  |       
|                                                                  | Provision for bad debts                                              |                                       |         | 416               |        |      |         | 248    |       
|                                                                  | Depreciation and amortization                                        |                                       |         | 3,563             |        |      |         | 4,337  |       
|                                                                  | Equity in (earnings) losses of affiliated companies                  |                                       |         | 153               |        |      |         | 2,034  |       
|                                                                  | Dividends received from affiliated company                           |                                       |         | 122               |        |      |         | 122    |       
|                                                                  | Gain (loss) on dispositions of investments and valuation adjustments |                                       |         | 2,682             |        |      |         | (492   | )     
|                                                                  | Net change in value of certain derivative instruments                |                                       |         | 1,708             |        |      |         | 3,305  |       
|                                                                  | Loss on issuance of shares by affiliate                              |                                       |         | 2,339             |        |      |         |        |       
|                                                                  | Deferred income taxes                                                |                                       |         |                   |        |      |         | (7,749 | )     
|                                                                  | Change in operating assets and liabilities:                          |                                       |         |                   |        |      |         |        |       
|                                                                  |                                                                      | Accounts receivable                   |         |                   | 800    |      |         |        | 14,901 |  
|                                                                  |                                                                      | Inventories                           |         |                   | 511    |      |         |        | (12    | )
|                                                                  |                                                                      | Prepaid costs and expenses            |         |                   | (482   | )    |         |        | 1,335  |  
|                                                                  |                                                                      | Accounts payable and accrued expenses |         |                   | (3,707 | )    |         |        | (5,727 | )
|                                                                  |                                                                      | Other long-term liabilities           |         |                   | (572   | )    |         |        | (1,159 | )
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Net cash used in continuing operations                            |                                                                      |                                       | (3,412  | )                 |        |      | (3,002  | )     
|Net cash provided by (used in) discontinued operations            |                                                                      |                                       | 106     |                   |        |      | (168    | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Net cash used in operating activities                             |                                                                      |                                       | (3,306  | )                 |        |      | (3,170  | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Cash flows from investing activities:                             |                                                                      |                                       |         |                   |        |      |         |       
|Capital expenditures                                              |                                                                      |                                       | (216    | )                 |        |      | (342    | )     
|Proceeds on sale of investments                                   |                                                                      |                                       | 11,885  |                   |        |      | 16,803  |       
|Investment in affiliated companies                                |                                                                      |                                       |         |                   |        |      | (455    | )     
|Decrease (increase) in other assets                               |                                                                      |                                       | (551    | )                 |        |      | (106    | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Net cash provided by continuing operation investing activities    |                                                                      |                                       | 11,118  |                   |        |      | 15,900  |       
|Net cash used in discontinued operation investing activities      |                                                                      |                                       | (5      | )                 |        |      | (153    | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Net cash provided by investing activities                         |                                                                      |                                       | 11,113  |                   |        |      | 15,747  |       
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Cash flows from financing activities:                             |                                                                      |                                       |         |                   |        |      |         |       
|Borrowings from revolving lines of credit                         |                                                                      |                                       | 175     |                   |        |      | 20,750  |       
|Repayments on revolving lines of credit                           |                                                                      |                                       |         |                   |        |      | (15,350 | )     
|Repayments on long-term debt                                      |                                                                      |                                       | (10,000 | )                 |        |      | (19,743 | )     
|Debt issue costs                                                  |                                                                      |                                       | (992    | )                 |        |      | (220    | )     
|Issuance of preferred stock                                       |                                                                      |                                       | 3,000   |                   |        |      | 2,400   |       
|Issuance of common stock                                          |                                                                      |                                       |         |                   |        |      | 350     |       
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Net cash used in financing activities                             |                                                                      |                                       | (7,817  | )                 |        |      | (11,813 | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Net increase (decrease) in cash and cash equivalents              |                                                                      |                                       | (10     | )                 |        |      | 764     |       
|Cash and cash equivalents, beginning of period                    |                                                                      |                                       | 397     |                   |        |      | (1,051  | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       
|Cash and cash equivalents, end of period                          |                                                                      | $                                     | 387     |                   |        | $    | (287    | )     
|                                                                  |                                                                      |                                       |         |                   |        |      |         |       

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

5



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BULL RUN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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. (USA) 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.

Change in Fiscal Year 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 and nine-month period ended May 31, 2002 are presented herein for
comparative purposes.

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

Stock-Based Compensation In December 2002, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation, Transition and Disclosure (SFAS No.
148). SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 also requires that disclosures of the pro forma
effect of using the fair value method of accounting for stock-based employee
compensation be displayed more prominently and in a tabular format.
Additionally, SFAS No. 148 requires disclosure of the pro forma effect in
interim financial statements. The adoption of the provisions of SFAS No. 148
did not have a material impact on the Companys consolidated financial
statements. However, the Company has modified its disclosures as required.

6



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For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period. The Companys pro
forma information follows (dollar amounts in 000s, except per share amounts):

|                                                                                                                                            |                                |   |                    |       |                   |   |        |       |      |   |         |       |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | - | ------------------ | ----- | ----------------- | - | ------ | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                                                                                            |                                |   | Three Months Ended |       | Nine Months Ended
|                                                                                                                                            |                                |   | May 31,            |       | May 31,          
|                                                                                                                                            |                                |   |                    |       |                  
|                                                                                                                                            |                                |   | 2003               |       | 2002              |   | 2003   |       | 2002
|                                                                                                                                            |                                |   |                    |       |                   |   |        |       |     
|Net loss available to common stockholders,
as reported                                                                                      |                                | $ | (4,947             | )     |                   | $ | (7,517 | )     |      | $ | (11,773 | )     |   | $ | (17,073 | )    
|Add: Stock-based employee compensation
expense included in net loss, net of related
tax effects                                             |                                |   |                   |       |                   |   |       |       |      |   |        |       |   |   |        |      
|Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards, net
of related tax effects |                                |   | (157               | )     |                   |   | (109   | )     |      |   | (470    | )     |   |   | (327    | )    
|                                                                                                                                            |                                |   |                    |       |                   |   |        |       |      |   |         |       |   |   |         |      
|Net loss available to common stockholders,
pro forma                                                                                        |                                | $ | (5,104             | )     |                   | $ | (7,626 | )     |      | $ | (12,243 | )     |   | $ | (17,400 | )    
|                                                                                                                                            |                                |   |                    |       |                   |   |        |       |      |   |         |       |   |   |         |      
|Net loss per common share:                                                                                                                  |                                |   |                    |       |                   |   |        |       |      |   |         |       |   |   |         |      
|                                                                                                                                            | Basic and diluted, as reported |   | $                  | (1.25 | )                 |   | $      | (2.03 | )    |   | $       | (3.03 | ) |   | $       | (4.68 | )
|                                                                                                                                            |                                |   |                    |       |                   |   |        |       |      |   |         |       |   |   |         |      
|                                                                                                                                            | Basic and diluted, pro forma   |   | $                  | (1.29 | )                 |   | $      | (2.06 | )    |   | $       | (3.15 | ) |   | $       | (4.77 | )
|                                                                                                                                            |                                |   |                    |       |                   |   |        |       |      |   |         |       |   |   |         |      
|                                                                                                                                           
|Risk free interest rates                                                                                                                    |                                |   | 5.15               | %     |                   |   | 5.17   | %     |      |   | 5.15    | %     |   |   | 5.17    | %    
|Dividend yields                                                                                                                             |                                |   | 0.00               | %     |                   |   | 0.00   | %     |      |   | 0.00    | %     |   |   | 0.00    | %    
|Expected volatility rates                                                                                                                   |                                |   | 0.48               |       |                   |   | 0.48   |       |      |   | 0.48    |       |   |   | 0.48    |      
|Weighted average expected life of the options                                                                                               |                                |   | 7.3                |       |                   |   | 7.3    |       |      |   | 7.3     |       |   |   | 7.3     |      

The Company follows the provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123). The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
(APB25), but disclose the pro forma effects on net income (loss) had the fair
value of the options been expensed. The Company has elected to continue to
apply APB 25 in accounting for its stock option incentive plans.

Implementation of Other New Accounting Principles In June 2002, the FASB
issued Statement of Financial Accounting Standards No. 146, Accounting for
Costs Associated with Exit of Disposal Activities (SFAS 146), effective for
exit or disposal activities that are initiated after December 31, 2002. The
Companys adoption of this new standard did not have a material impact on the
results of operations or financial position.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS 145), effective for fiscal
years beginning after May 15, 2002. For most companies, SFAS 145 requires gains
and losses on extinguishments of debt to be classified as income or loss from
continuing operations rather than as extraordinary items as previously required
under FASB Statement No. 4.

Previously, in each of the current fiscal year and for the year ended August
31, 2002, Gray Television, Inc. (Gray), a company in which Bull Run has a
significant investment (refer to Note 3), recorded an extraordinary charge in
connection with an early extinguishment of debt. Since Bull Run accounts for
its investment in Gray using the equity method, Bull Run reported its
proportionate share of each of Grays extraordinary losses as an extraordinary
charge, net of tax, in its financial statements. Gray adopted SFAS 145 in its
first quarter ended March 31, 2003, and accordingly, reclassified each of its
losses on its early extinguishment of debt from an extraordinary charge to
income from continuing operations. Therefore, Bull Run has reclassified its
proportionate share of such losses, amounting to $(406,000) and

7



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$(950,000) in the nine months ended May 31, 2003 and 2002, respectively, to
continuing operations as a component of Equity in earnings (losses) of
affiliates. The related income tax benefit of $323,000 in the nine months
ended May 31, 2002 was reclassified to Income tax benefit. There was no
income tax benefit recorded for the proportionate share of the loss in the nine
months ended May 31, 2003.

2. SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow information follows (amounts in 000s):

|                                            |                                                                                     |   |                   |       |      |   |       |     | 
|------------------------------------------- | ----------------------------------------------------------------------------------- | - | ----------------- | ----- | ---- | - | ----- | --- | 
|                                            |                                                                                     |   | Nine Months Ended
|                                            |                                                                                     |   | May 31,          
|                                            |                                                                                     |   |                  
|                                            |                                                                                     |   | 2003              |       | 2002
|                                            |                                                                                     |   |                   |       |     
|Interest paid                               |                                                                                     | $ | 6,453             |       |      | $ | 7,823 |    
|Income taxes paid (recovered)               |                                                                                     | $ | 58                |       |      | $ | (374  | )  
|Noncash investing and financing activities: |                                                                                     |   |                   |       |      |   |       |    
|                                            | Issuance of common stock primarily in
connection with debt issuance costs           |   | $                 | 1,127 |      |   | $     | 384 | 
|                                            | Issuance of common stock to a retirement plan
and as a component of directors fees |   | $                 | 248   |      |   |       |     | 
|                                            | Conversion of subordinated debt to Series D
convertible preferred stock             |   | $                 | 1,783 |      |   |       |     | 

3. INVESTMENT IN AFFILIATED COMPANIES

The Companys investment in affiliated companies is comprised of the following
(dollar amounts in 000s):

|                                      |  |              |        |                 |  |        |      |          |  |   |        |  |  |  |      |  
|------------------------------------- |  | ------------ | ------ | --------------- |  | ------ | ---- | -------- |  | - | ------ |  |  |  | ---- | -
|                                      |  | May 31, 2003 |        | August 31, 2002
|                                      |  |              |        |                
|                                      |  | Amount       |        | Voting %        |  | Amount |      | Voting %
|                                      |  |              |        |                 |  |        |      |         
|Gray Television, Inc.                 |  | $            | 17,120 |                 |  |        | 18.0 | %        |  | $ | 19,102 |  |  |  | 26.1 | %
|Rawlings Sporting Goods
Company, Inc. |  |              |        |                 |  |        |      |          |  |   | 4,377  |  |  |  | 10.1 | %
|iHigh, Inc.                           |  |              | 904    |                 |  |        | 35.1 | %        |  |   | 1,534  |  |  |  | 35.1 | %
|                                      |  |              |        |                 |  |        |      |          |  |   |        |  |  |  |      |  
|                                      |  | $            | 18,024 |                 |  |        |      |          |  | $ | 25,013 |  |  |  |      |  
|                                      |  |              |        |                 |  |        |      |          |  |   |        |  |  |  |      |  

The Company accounts for its investments in 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 accounted for its investment in Rawlings Sporting Goods Company, Inc.
(Rawlings) as an available-for-sale marketable security until it was sold
in its entirety in December 2002. As a result, the Companys carrying value of
its investment in Rawlings was based on the closing price of Rawlings common
stock as quoted on the Nasdaq Stock Market, and was included as a component of
Investment in affiliated companies. The cash proceeds on the December 2002
sale of the Companys investment in Rawlings of $6,764,000 were used to reduce
the Companys bank debt. A loss on the Rawlings investment of $1,032,000 that
had been previously reported as Other comprehensive accumulated loss (a
component of the Companys stockholders equity) was expensed in the nine
months ended May 31, 2003, and reported as an investment valuation adjustment
in the Companys results of operations.

In October 2002, Gray completed a public offering of 30 million shares of its
common stock for net proceeds of approximately $231 million, and in November
2002, Gray issued 4.5 million additional shares for additional proceeds of
approximately $35 million. 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

8



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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 $2,339,000 on the issuance of shares by
Gray was reported by the Company in the nine months ended March 31, 2003.
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 Company has a receivable due from iHigh, net of
reserve,
amounting to $1,619,000 as of May 31, 2003, reported as a component
of Other assets in the Companys balance sheet. In the three months and
nine months ended May 31, 2003, a $1,650,000 investment valuation charge was reported by
the Company to reduce the combined receivable and related investment
in iHigh to estimated net realizable value. Amounts due from iHigh were
previously reported as a component of Accounts receivable. In April 2003, the Company sold all of its warrants to acquire Gray common
stock to Gray for cash of $5,121,000. The sales price was based on an
independent appraisal of the warrants. The value of the warrants was
previously reported as a component of Other assets in the Companys balance
sheet.

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 (amounts in 000s):

|                       |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         |  
|---------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- | -
|                       |  | Three Months Ended |        | Nine Months Ended
|                       |  | May 31,            |        | May 31,          
|                       |  |                    |        |                  
|                       |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                       |  |                    |        |                   |  |      |        |     
|Net revenue            |  | $                  | 76,762 |                   |  | $    | 43,940 |      |  | $ | 209,796 |  |  | $ | 123,333 |  
|Income from operations |  |                    | 21,524 |                   |  |      | 12,662 |      |  |   | 55,150  |  |  |   | 23,206  |  
|Net income (loss)      |  |                    | 6,148  |                   |  |      | 3,287  |      |  |   | 9,769   |  |  |   | (40,552 | )

The Company had a $2,620,000 charge for the cumulative effect of accounting
change in the nine months ended May 31, 2002, representing its proportionate
share of a cumulative effect adjustment reported by Gray. During this prior
year period, Gray adopted FASB Statement No. 142 and thereby reduced certain of
its previously unamortized goodwill and purchased intangibles resulting in a
$30.6 million charge, net of tax.

4. 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 $63,932,000 as of
May 31, 2003, bearing interest at either the banks prime rate plus .75% or the
London Interbank Offered Rate (LIBOR) plus 3.75%, currently requiring minimum
aggregate principal payments of $5,000,000 by 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 $20,000,000 until
maturity on September 30, 2003, bearing interest at either the banks prime
rate plus .75% or LIBOR plus 3.75%. In order to facilitate the funding of the
$5,000,000 principal payment obligation due by July 15, 2003, the Company
intends to issue an interest-bearing short-term subordinated note or notes to
an affiliate or affiliates of the Company, having an aggregate face value of
$5,000,000.

The Company currently anticipates that its operations
through September 2003 will experience negative cash flow. The Company is
currently pursuing potential remedies to deal with its debt obligations coming due and with the cash
 required by its operations. The Company expects to negotiate the terms of a long-term refinancing or extension 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 or extension of the credit facility, there is no assurance that it will be able to do so. Other
remedies include (a) the sale of certain investment and/or operating assets of the Company; (b) the issuance and sale of equity securities
of the Company, which may include the Companys preferred stock; (c) the
issuance of subordinated debt; or (d) a combination
thereof. The ability to use proceeds

9



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from the sale of investment assets for
purposes other than reduction of bank debt requires the consent of all parties
to the Companys bank credit agreement. The Companys bank credit agreement
does provide 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. 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 necessary time frame, on the basis of preliminary discussions with
third parties, including affiliates, with whom such transactions may be
consummated, the Company believes that it has viable options available to it to
satisfactorily address its current working capital deficiency.

Since all amounts outstanding under the bank credit agreement are due and payable by the September
30, 2003 maturity date, all such amounts are classified as a current
liability in the Companys May 31, 2003 balance sheet.

Interest on amounts borrowed from 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 May 31, 2003 and August
31, 2002, borrowings of $63,932,000 and $73,932,000 were outstanding under the
Term Loans, respectively, borrowings of $20,000,000 and $19,825,000,
respectively, were outstanding under the Revolver. As of May 31, 2003, all
borrowings under the bank credit agreement were subject to an interest rate of
4.75%.

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 periods ended November 30, 2002, February 28, 2003 and May 31, 2003.
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 $81.5 million 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 become the
holder of the Companys debt currently payable to the banks as a secured
creditor. During the nine months ended May 31, 2003, the Company issued
158,053 restricted shares of its common stock, then valued at $1,127,000, to
the Companys Chairman as compensation for his guarantee.

In connection with the Host-USA Acquisition, the Company currently has
outstanding 8% subordinated notes having an aggregate face amount of
$16,709,000. Interest is payable quarterly and the notes mature beginning in
2005. The Company also has 9% subordinated notes having an aggregate
outstanding balance of $590,000 due in March 2004. Payment of interest and
principal on all subordinated notes is subordinate to the Companys bank credit
agreement.

The Company has been 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
$20,000,000 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 $25,000,000 notional
amount upon which the payments are based. The differential paid or received as
interest rates

10



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change is settled quarterly and is accrued and recognized as an
adjustment of interest expense related to the debt.

5. 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 nine months ended May 31, 2003, a
$3,500,000 increase in the valuation allowance for potentially non-realizable
deferred tax assets.

6. STOCKHOLDERS EQUITY

On May 15, 2003, the Company completed a 1-for-10 reverse split of its common
stock and reduced the total number of authorized common shares from 100,000,000
shares to 25,000,000 shares. All applicable share and per share data have been
adjusted to give effect to the reverse stock split. Certain prior period
amounts included in Stockholders equity have likewise been reclassified for
comparative purposes.

In September 2002, the Companys Chairman invested $3,000,000 for 3,000 shares
of the Companys series C convertible preferred stock (Series C Preferred
Stock) having an aggregate face amount of $3,000,000, which was used by the
Company for working capital purposes.

In May 2003, all holders of the Companys redeemable series B convertible
preferred stock (Series B Preferred Stock), consisting of companies in which
the Companys chairman is an executive officer and a principal stockholder in
either the company or the controlling parent of such company, and the holder of
the Series C Preferred Stock, converted all outstanding shares of Series B and
Series C Preferred Stock to a like number of shares of the Companys series D
convertible preferred stock (Series D Preferred Stock). Terms of the Series
D Preferred Stock are identical to the terms of the Series C Preferred Stock
except for an adjustment in the conversion ratio caused by the reverse stock
split. Terms of the Series D Preferred Stock are virtually identical to the
terms of Series B Preferred Stock, except for the same adjustment in the
conversion ratio, and except that shares of Series D Preferred Stock are not
mandatorily redeemable by the Company (as provided under the terms of the
Series B Preferred Stock), but like Series B Preferred Stock, shares of the
Series D Preferred Stock may be redeemed at any time by the Company solely at
the Companys option.

Each share of the Series D Preferred Stock is convertible at the holders
option into 100 shares of the Companys common stock beginning two years after
the date of issuance (or alternative date associated with the original issuance
of a previous series of preferred stock). The holder of Series D Preferred
Stock is entitled to receive dividends at an annual rate of $90.00 per share in
cash or in shares of the Companys common stock at the holders option, except
that, until the second anniversary of the date of issuance of the preferred
stock (or such alternative date as may be applicable), 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 D 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.

Also in May 2003, a director of the Company and his spouse holding 8%
subordinated notes representing an aggregate face amount of $1,783,000
converted their notes to 1,783 shares of the Companys Series D Preferred
Stock.

11



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##### 



7. OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is as follows (amounts in 000s):

|                            |                                                                                |   |                    |   |                   |   |        |   |      |   |         |       |  |   |         |   | 
|--------------------------- | ------------------------------------------------------------------------------ | - | ------------------ | - | ----------------- | - | ------ | - | ---- | - | ------- | ----- |  | - | ------- | - | 
|                            |                                                                                |   | Three Months Ended |   | Nine Months Ended
|                            |                                                                                |   | May 31,            |   | May 31,          
|                            |                                                                                |   |                    |   |                  
|                            |                                                                                |   | 2003               |   | 2002              |   | 2003   |   | 2002
|                            |                                                                                |   |                    |   |                   |   |        |   |     
|Net loss                    |                                                                                | $ | (4,659             | ) |                   | $ | (7,396 | ) |      | $ | (10,945 | )     |  | $ | (16,764 | )
|Other comprehensive loss:   |                                                                                |   |                    |   |                   |   |        |   |      |   |         |       |  |   |         |  
|                            | Change in the valuation of available-for-sale
investments, net of deferred tax |   |                    |   |                   |   |        |   |      |   |         | 2,050 |  |   |         |   | 
|                            |                                                                                |   |                    |   |                   |   |        |   |      |   |         |       |  |   |         |  
|Comprehensive income (loss) |                                                                                | $ | (4,659             | ) |                   | $ | (7,396 | ) |      | $ | (8,895  | )     |  | $ | (16,764 | )
|                            |                                                                                |   |                    |   |                   |   |        |   |      |   |         |       |  |   |         |  

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 each fiscal period, resulted in comprehensive income or loss until
December 2002, when the investment was sold. During the nine months ended May
31, 2003, $1,032,000 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 that period.

8. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings
(loss) per share (amounts in 000s, except per share amounts):

|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |         |  
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                                |                                                                           |   | Three Months Ended |        | Nine Months Ended
|                                                                                                                |                                                                           |   | May 31,            |        | May 31,          
|                                                                                                                |                                                                           |   |                    |        |                  
|                                                                                                                |                                                                           |   | 2003               |        | 2002              |   | 2003   |        | 2002
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |     
|Loss before cumulative effect adjustment                                                                        |                                                                           | $ | (4,659             | )      |                   | $ | (7,396 | )      |      | $ | (10,945 | )       |   | $ | (14,144 | )      
|Preferred dividends                                                                                             |                                                                           |   | (288               | )      |                   |   | (121   | )      |      |   | (828    | )       |   |   | (309    | )      
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                                                | Loss available to common stockholders before
cumulative effect adjustment |   |                    | (4,947 | )                 |   |        | (7,517 | )    |   |         | (11,773 | ) |   |         | (14,453 | )
|                                                                                                                | Cumulative effect adjustment                                              |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         | (2,620  | )
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                                                | Net loss available to common stockholders                                 |   | $                  | (4,947 | )                 |   | $      | (7,517 | )    |   | $       | (11,773 | ) |   | $       | (17,073 | )
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Weighted average number of common shares
outstanding for basic earnings (loss) per share                        |                                                                           |   | 3,971              |        |                   |   | 3,697  |        |      |   | 3,890   |         |   |   | 3,648   |        
|Effect of dilutive employee stock options                                                                       |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Adjusted weighted average number of common
shares and assumed conversions for diluted
earnings (loss) per share |                                                                           |   | 3,971              |        |                   |   | 3,697  |        |      |   | 3,890   |         |   |   | 3,648   |        
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Loss per share (basic and diluted):                                                                             |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                                                | Loss available to common stockholders before
cumulative effect adjustment |   | $                  | (1.25  | )                 |   | $      | (2.03  | )    |   | $       | (3.03   | ) |   | $       | (3.96   | )
|                                                                                                                | Cumulative effect adjustment                                              |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         | (0.72   | )
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                                                                                | Net loss available to common stockholders                                 |   | $                  | (1.25  | )                 |   | $      | (2.03  | )    |   | $       | (3.03   | ) |   | $       | (4.68   | )
|                                                                                                                |                                                                           |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        

For each period presented, the Company incurred a loss available to common
stockholders before cumulative effect adjustment. As a result, common shares
related to outstanding stock options that could potentially dilute basic
earnings per share in the future were not included in the computation of
diluted

12



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earnings per share as they would have an antidilutive effect for the periods.
The effects of convertible preferred stock that could potentially dilute basic
earnings per share in the future were likewise not included in the computation
of diluted earnings per share as they would likewise have an antidilutive
effect for the periods. The number of common stock equivalents excluded from
diluted earnings per share because of their antidilutive effect (comprised
solely of in-the-money stock options) are as follows (amounts in 000s):

|                                                              |  |                    |    |                   |  |      |    |      |  |  |    |  |  |  |     | 
|------------------------------------------------------------- |  | ------------------ | -- | ----------------- |  | ---- | -- | ---- |  |  | -- |  |  |  | --- | 
|                                                              |  | Three Months Ended |    | Nine Months Ended
|                                                              |  | May 31,            |    | May 31,          
|                                                              |  |                    |    |                  
|                                                              |  | 2003               |    | 2002              |  | 2003 |    | 2002
|                                                              |  |                    |    |                   |  |      |    |     
|Common stock equivalents excluded from
diluted loss per share |  |                    | 19 |                   |  |      | 97 |      |  |  | 50 |  |  |  | 105 | 
|                                                              |  |                    |    |                   |  |      |    |      |  |  |    |  |  |  |     | 

9. 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).

Information for each of the Companys segments is presented below (amounts in
000s):

|                         |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |        |  
|------------------------ | -------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                         |                                              |   | Three Months Ended |        | Nine Months Ended
|                         |                                              |   | May 31,            |        | May 31,          
|                         |                                              |   |                    |        |                  
|                         |                                              |   | 2003               |        | 2002              |   | 2003   |        | 2002
|                         |                                              |   |                    |        |                   |   |        |        |     
|Net revenues:            |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |       
|                         | Collegiate Marketing and Production Services |   | $                  | 12,322 |                   |   | $      | 24,551 |      |   | $      | 49,340 |   |   | $      | 71,638 |  
|                         | Affinity Events                              |   |                    | 3,688  |                   |   |        | 5,420  |      |   |        | 6,040  |   |   |        | 9,616  |  
|                         | Affinity Management Services                 |   |                    | 2,144  |                   |   |        | 2,445  |      |   |        | 6,242  |   |   |        | 10,902 |  
|                         | Consulting                                   |   |                    |        |                   |   |        |        |      |   |        | 5,267  |   |   |        | 7      |  
|                         |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |       
|                         |                                              | $ | 18,154             |        |                   | $ | 32,416 |        |      | $ | 66,889 |        |   | $ | 92,163 |       
|                         |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |       
|Operating income (loss): |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |       
|                         | Collegiate Marketing and Production Services |   | $                  | 45     |                   |   | $      | (4,271 | )    |   | $      | 2,694  |   |   | $      | (2,988 | )
|                         | Affinity Events                              |   |                    | (528   | )                 |   |        | (264   | )    |   |        | (3,277 | ) |   |        | (3,485 | )
|                         | Affinity Management Services                 |   |                    | 385    |                   |   |        | 219    |      |   |        | 1,061  |   |   |        | 805    |  
|                         | Consulting                                   |   |                    |        |                   |   |        |        |      |   |        | 5,267  |   |   |        | 7      |  
|                         | Amortization of acquisition intangibles      |   |                    | (304   | )                 |   |        | (311   | )    |   |        | (912   | ) |   |        | (968   | )
|                         | Unallocated general and administrative costs |   |                    | (336   | )                 |   |        | (442   | )    |   |        | (1,023 | ) |   |        | (1,522 | )
|                         |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |       
|                         |                                              | $ | (738               | )      |                   | $ | (5,069 | )      |      | $ | 3,810  |        |   | $ | (8,151 | )     
|                         |                                              |   |                    |        |                   |   |        |        |      |   |        |        |   |   |        |       

In the nine months ended May 31, 2003, the Company realized $4,810,000 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 in Gray decreases, a
proportionate amount of the previously deferred income is reported as income.
As a result of the dilution in the Companys investment in Gray resulting from
Grays issuance of its common stock, previously deferred consulting fee income
of $457,000 was realized in the
nine months ended May 31, 2003.

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 and nine months ended May 31, 2003.

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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 two other companies, Gray
Television, Inc. (Gray), the owner and operator of 29 television stations,
four newspapers and other communications businesses; and iHigh, Inc. (iHigh),
an Internet and marketing company focused on high school students. The Company
sold its investment in Rawlings Sporting Goods Company, Inc. (Rawlings), a
supplier of team sports equipment, 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 the transition period from July
1, 2002 to August 31, 2002, comprised of three calendar months ending November
30, February 28 (or 29), May 31 and August 31.

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 31.0% of the combined voting power of
Grays two classes of common stock as of May 31, 2003. 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 20.2% of the combined voting power
of Grays two classes of common stock as of May 31, 2003. 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 23.3% of the combined voting power of Grays two classes of
common stock as of May 31, 2003. Each of Messrs. Robinson, Prather and
Howells beneficial ownership percentages includes the Companys beneficial
ownership of approximately 17.2% of the combined voting power of Grays two
classes of common stock as of May 31, 2003. 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, May 31, 2003.

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

14



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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 $74,224,000 as of May 31, 2003
and $74,861,000 as of August 31, 2002, of which, goodwill was $57,862,000 as of
both dates. A significant portion of the goodwill and other intangible assets is associated with business units
acquired from USA in the Host-USA Acquisition. In connection with a legal claim made by the Company, a study is being
performed by an independent party to assess the value of these business units. The results of this study will be considered
 in the Companys future assessments of goodwill and other intangible assets, and may impact the carrying amount of goodwill
 and other intangible assets in future reporting periods.

The carrying value of the Companys investment in Gray of $17,120,000 as of May
31, 2003 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 May 31, 2003 the Company has a
net deferred tax asset of $20,302,000, primarily due to a net operating loss
carryforward for federal tax purposes that expires beginning in 2017, net of a
valuation allowance of approximately $6,625,000. 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, all of which were sold in
April 2003, 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 $(2,378,000) and $4,451,000 as of
May 31, 2003 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 interest rate swap agreements based on estimated market
values provided by the counterparties to the swap agreements and prior to their
disposal in April 2003, estimated the fair value of the warrants based on
independent appraisals received on a quarterly basis.

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

15



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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. As a result, the Companys carrying
value of its investment in Rawlings was based on the closing price of Rawlings
common stock as quoted on the Nasdaq Stock Market, and was reported on the
balance sheet as a component of Investment in affiliated companies prior to
the investments sale in December 2002. In the nine months ended May 31, 2003,
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.

LIQUIDITY AND CAPITAL RESOURCES

Credit Arrangements 
As of May 31, 2003, the Companys indebtedness to its bank lenders was
$83,932,000. 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 is required to 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. In April 2003, the Company sold its investment in warrants for
Gray common stock, resulting in proceeds of $5,121,000, of which, $3,233,000
was used to a make a principal payment. As a result, the Company met the
requirement to make aggregate principal payments of at least $5,000,000 by each
of January 15, 2003 and April 15, 2003. In order to facilitate the funding of
the $5,000,000 principal payment obligation due by July 15, 2003, the Company
intends to issue an interest-bearing short-term subordinated note or notes to
an affiliate or affiliates of the Company, having an aggregate face value of
$5,000,000.

The Company currently anticipates that its operations
through September 2003 will experience negative cash flow. The Company is
currently pursuing potential remedies to deal with its debt obligations coming due and with the cash required by its operations.
The Company expects to negotiate the terms of a long-term refinancing
or extension 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 or extension of the credit facility, there is no assurance that it will be able to do so. Other remedies include (a) the sale of certain investment and/or operating assets
of the Company; (b) the issuance and sale of equity securities of the Company,
which may include the Companys preferred stock; (c) the issuance of
subordinated debt; or (d) a combination thereof. The
ability to use proceeds from the sale of investment assets for purposes other
than reduction of bank debt requires the consent of all parties to the
Companys bank credit agreement. The Companys bank credit agreement does
provide 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. 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 necessary time frame, on the basis of preliminary discussions with
third parties, including affiliates, with whom such transactions may be
consummated, the Company believes that it has viable options available to it to
satisfactorily address its current working capital deficiency.

Since all amounts outstanding under the bank credit agreement are due and payable by the September 30, 2003
 maturity date, all such amounts are classified as a current
liability in the Companys May 31, 2003 balance sheet.

16



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The Companys credit agreement currently provides for (a) two term loans for
borrowings currently totaling $63,932,000, 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 May 31,
2003, 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.

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 stock, or by the issuance of subordinated debt.
Through May 31, 2003, 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.

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 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 reduces 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 $16,709,000 as of May 31, 2003.
Interest is payable quarterly, and the notes mature beginning in 2005. Payment
of interest and principal on all subordinated notes is subordinate to the
Companys bank credit agreement. During the three months ended May 31, 2003, a
director of the Company and his spouse holding 8% subordinated notes
representing an aggregate face amount of $1,783,000 converted their notes to
shares of the Companys Series D Preferred Stock.

The Companys capital expenditures are not expected to exceed $500,000 for the
fiscal year ending August 31, 2003.

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

|                                                     |                                             |   |                   |        |      |   |         |        |  
|---------------------------------------------------- | ------------------------------------------- | - | ----------------- | ------ | ---- | - | ------- | ------ | -
|                                                     |                                             |   | Nine Months Ended
|                                                     |                                             |   | May 31,          
|                                                     |                                             |   |                  
|                                                     |                                             |   | 2003              |        | 2002
|                                                     |                                             |   |                   |        |     
|Cash flows from operating activities:                |                                             |   |                   |        |      |   |         |       
|                                                     | Continuing operations                       |   | $                 | (3,412 | )    |   | $       | (3,002 | )
|                                                     | Discontinued operations                     |   |                   | 106    |      |   |         | (168   | )
|Cash flows from investing activities:                |                                             |   |                   |        |      |   |         |       
|                                                     | Continuing operation investing activities   |   |                   | 11,118 |      |   |         | 15,900 |  
|                                                     | Discontinued operation investing activities |   |                   | (5     | )    |   |         | (153   | )
|Cash flows from financing activities                 |                                             |   | (7,817            | )      |      |   | (11,813 | )     
|                                                     |                                             |   |                   |        |      |   |         |       
|Net increase (decrease) in cash and cash equivalents |                                             | $ | (10               | )      |      | $ | 764     |       
|                                                     |                                             |   |                   |        |      |   |         |       

17



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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):

|                                                      |  |                   |        |      |  |   |        |  
|----------------------------------------------------- |  | ----------------- | ------ | ---- |  | - | ------ | -
|                                                      |  | Nine Months Ended
|                                                      |  | May 31,          
|                                                      |  |                  
|                                                      |  | 2003              |        | 2002
|                                                      |  |                   |        |     
|Operating income (loss)                               |  | $                 | 3,810  |      |  | $ | (8,151 | )
|Depreciation and amortization included in operations  |  |                   | 1,815  |      |  |   | 2,178  |  
|Interest expense, net of interest and dividend income |  |                   | (6,203 | )    |  |   | (6,962 | )
|Net change in operating assets and liabilities        |  |                   | (3,034 | )    |  |   | 9,586  |  
|Other changes in operating cash flows                 |  |                   | 200    |      |  |   | 347    |  
|                                                      |  |                   |        |      |  |   |        |  
|Total cash flows from continuing operations           |  |                   | (3,412 | )    |  |   | (3,002 | )
|Cash flows from discontinued operating activities     |  |                   | 106    |      |  |   | (168   | )
|                                                      |  |                   |        |      |  |   |        |  
|Total cash flows from operating activities            |  | $                 | (3,306 | )    |  | $ | (3,170 | )
|                                                      |  |                   |        |      |  |   |        |  

The Collegiate Marketing and Production Services segment primarily generates
revenues during the collegiate football and basketball seasons, which begin in
August and end in the following April. 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. The Affinity Events segment consists primarily of participatory
sports tours that generally begin in March and end in September. Therefore,
this segment generates a substantial amount of its revenues during the fiscal
quarters ending on May 31 and August 31 each year.

Operating income for the nine months ended May 31, 2003 includes consulting
fees of $5,267,000, which were received as cash in the year ended August 31,
2002 and reported as deferred revenues at that time. As a result, accounts
payable and accrued expenses declined by $3,707,000 during the nine months
ended May 31, 2003, which were offset by a decrease in accounts receivable of
$1,216,000 during the same period. Therefore, the total cash flow from
operating activities for the nine months ended May 31, 2003, was significantly
affected by the net change in operating assets and liabilities of $(3,034,000)
and interest expense, which combined, exceeded operating income before non-cash
depreciation and amortization expense. The Companys total cash flows from
continuing operations for the nine months ended May 31, 2002 was unfavorably
affected by interest expense and the Companys operating loss before
depreciation and amortization expense, which greatly exceeded the net change in
operating assets and liabilities. Operating income provided by Host
Communications, Bull Runs wholly-owned operating company, improved by
approximately $5,800,000 for the nine months ended May 31, 2003 compared to the
same period in the prior year, on total revenues of $61,622,000 compared to
$92,156,000, respectively.

Other changes in operating cash flows for the nine months ended May 31, 2002
included the income on Grays option to purchase the Companys former
investment in Sarkes Tarzian, Inc. (Tarzian) of $233,000. Gray exercised the
option in December 2001 and no additional option income was recognized
subsequent to exercise.

18



---



##### 



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):

|                                                                |  |                   |        |      |  |   |        |  
|--------------------------------------------------------------- |  | ----------------- | ------ | ---- |  | - | ------ | -
|                                                                |  | Nine Months Ended
|                                                                |  | May 31,          
|                                                                |  |                  
|                                                                |  | 2003              |        | 2002
|                                                                |  |                   |        |     
|Capital expenditures                                            |  | $                 | (216   | )    |  | $ | (342   | )
|Proceeds from sale of investments, net                          |  |                   | 11,885 |      |  |   | 16,803 |  
|Decrease (increase) in other assets                             |  |                   | (551   | )    |  |   | (561   | )
|                                                                |  |                   |        |      |  |   |        |  
|Total cash flows from continuing operation investing activities |  |                   | 11,118 |      |  |   | 15,900 |  
|Cash flows from discontinued operation investing activities     |  |                   | (5     | )    |  |   | (153   | )
|                                                                |  |                   |        |      |  |   |        |  
|Total cash flows from investing activities                      |  | $                 | 11,113 |      |  | $ | 15,747 |  
|                                                                |  |                   |        |      |  |   |        |  

In the nine months ended May 31, 2003, the Company sold all of its shares of
Rawlings common stock to an unrelated company for $6,764,000 and sold all of
its warrants for Gray common stock to Gray for $5,121,000. In the nine months
ended May 31, 2002, 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, and sold its investment in Tarzian to Gray for $10,000,000.

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):

|                                                        |  |                   |         |      |  |   |         |  
|------------------------------------------------------- |  | ----------------- | ------- | ---- |  | - | ------- | -
|                                                        |  | Nine Months Ended
|                                                        |  | May 31,          
|                                                        |  |                  
|                                                        |  | 2003              |         | 2002
|                                                        |  |                   |         |     
|Net borrowings (repayments) on revolving line of credit |  | $                 | 175     |      |  | $ | 5,400   |  
|Net proceeds (repayments) on long-term debt             |  |                   | (10,000 | )    |  |   | (19,743 | )
|Proceeds on issuance of preferred and common stocks     |  |                   | 3,000   |      |  |   | 2,750   |  
|Debt issue costs                                        |  |                   | (992    | )    |  |   | (220    | )
|                                                        |  |                   |         |      |  |   |         |  
|Total cash flows from financing activities              |  | $                 | (7,817  | )    |  | $ | (11,813 | )
|                                                        |  |                   |         |      |  |   |         |  

In the nine months ended May 31, 2003, the Company reduced its long-term debt
by $10,000,000 with the proceeds from the sale of its investment in Rawlings
and warrants for Gray common stock. In the nine months ended May 31, 2002, the
Company reduced its long-term debt by $19,743,000 in part with the proceeds
from the sale of Gray preferred stock, the proceeds received from Gray on
Grays exercise of its option to purchase the Companys investment in Tarzian,
and proceeds received on the issuance of the Companys preferred stock.

CONTRACTUAL OBLIGATIONS

The following summarizes the Companys contractual obligations as of May 31,
2003 (amounts in 000s):

|                            |       |       |                                           |         |  |            |           |            |             |         |             |        |           |   |     |       |  |   |     |     | 
|--------------------------- | ----- | ----- | ----------------------------------------- | ------- |  | ---------- | --------- | ---------- | ----------- | ------- | ----------- | ------ | --------- | - | --- | ----- |  | - | --- | --- | 
|                            |       |       | Payments Due by Period as of May 31, 2003
|                            |       |       |                                          
|                            |       |       |                                           |         |  |            | Less than |            | More than 1 |         | More than 3 |        | More than
|Contractual Obligations     |       | Total |                                           | 1 Year  |  | to 3 Years |           | to 5 Years |             | 5 Years
|                            |       |       |                                           |         |  |            |           |            |             |        
|Long-term debt obligations  |       | $     | 101,231                                   |         |  | $          | 84,522    |            |             | $       | 16,709      |        |           | $ |     |       |  | $ |     |    
|Operating lease obligations |       |       | 5,519                                     |         |  |            | 1,971     |            |             |         | 2,678       |        |           |   | 545 |       |  |   | 325 |    
|Purchase obligations        |       |       | 36,269                                    |         |  |            | 15,207    |            |             |         | 20,212      |        |           |   | 850 |       |  |   |     |    
|                            |       |       |                                           |         |  |            |           |            |             |         |             |        |           |   |     |       |  |   |     |    
|                            | Total |       | $                                         | 143,019 |  |            | $         | 101,700    |             |         | $           | 39,599 |           |   | $   | 1,395 |  |   | $   | 325 | 
|                            |       |       |                                           |         |  |            |           |            |             |         |             |        |           |   |     |       |  |   |     |    

Purchase obligations primarily consist of future guaranteed rights fee
commitments to associations or institutions under multi-year contractual
arrangements.

19



---



##### 



RESULTS OF CONTINUING OPERATIONS  THREE MONTHS ENDED MAY 31, 2003 COMPARED TO
THREE MONTHS ENDED MAY 31, 2002

Results Derived from Operating Businesses

Total revenues for the three months ended May 31, 2003 and 2002 are summarized
as follows (amounts in 000s):

|                                             |  |                    |        |      |  |   |        | 
|-------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                             |  | Three Months Ended
|                                             |  | May 31,           
|                                             |  |                   
|                                             |  | 2003               |        | 2002
|                                             |  |                    |        |     
|Collegiate Marketing and Production Services |  | $                  | 12,322 |      |  | $ | 24,551 | 
|Affinity Events                              |  |                    | 3,688  |      |  |   | 5,420  | 
|Affinity Management Services                 |  |                    | 2,144  |      |  |   | 2,445  | 
|                                             |  |                    |        |      |  |   |        | 
|                                             |  | $                  | 18,154 |      |  | $ | 32,416 | 
|                                             |  |                    |        |      |  |   |        | 

In the three months ended May 31, 2003, total revenues for the Collegiate
Marketing and Production Services segment declined by $12,229,000 from the
three months ended May 31, 2002 as the segment continued to be impacted by the
termination of most of the Companys contracts with NCAA corporate sponsors as
of or prior to June 30, 2002. As previously reported, the Host-NCAA Contract
expired on August 31, 2002 and, given what the Company believes to be the
strong preference of NCAA corporate sponsors for multi-year renewable
commitments, it was 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. In the three months ended
May 31, 2002, the Company recognized revenues of approximately $14,750,000 in
connection with NCAA corporate sponsorships. No such revenue was recognized in
the three months ended May 31, 2003. The Company anticipates that this segment
will continue to experience total revenues that are lower than total segment
revenues for periods prior to June 30, 2002 and that direct operating costs of
services rendered will continue to be lower than those of periods prior to June
30, 2002 due to a significant reduction in guaranteed rights fees that were
incurred in prior years to acquire such licensing rights.

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.

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

Total operating costs and expenses for the three months ended May 31, 2003 and
2002 are summarized as follows (amounts in 000s):

|                                            |  |                    |        |      |  |   |        | 
|------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                            |  | Three Months Ended
|                                            |  | May 31,           
|                                            |  |                   
|                                            |  | 2003               |        | 2002
|                                            |  |                    |        |     
|Direct operating costs of services rendered |  | $                  | 11,873 |      |  | $ | 29,404 | 
|Selling, general and administrative         |  |                    | 6,715  |      |  |   | 7,770  | 
|Amortization of acquisition intangibles     |  |                    | 304    |      |  |   | 311    | 
|                                            |  |                    |        |      |  |   |        | 
|                                            |  | $                  | 18,892 |      |  | $ | 37,485 | 
|                                            |  |                    |        |      |  |   |        | 

Direct operating costs of services rendered decreased for the three months
ended May 31, 2003 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 approximately $13,500,000 for the three months
ended May 31, 2002, plus (b) decreases in other rights fees and profit split
expenses of $2,800,000. As noted above, the Company anticipates that direct
operating costs will be significantly lower 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.

20



---



##### 



Selling, general and administrative costs declined for the three months ended
May 31 2003 from the prior fiscal year due primarily to a reduction in the
Companys workforce. 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 $3,773,000
for the three months ended May 31, 2003 compared to $4,365,000 for the same
period in the prior year.

Operating income (loss) for the three months ended May 31, 2003 and 2002 is
summarized as follows (amounts in 000s):

|                                             |  |                    |      |      |  |   |        |  
|-------------------------------------------- |  | ------------------ | ---- | ---- |  | - | ------ | -
|                                             |  | Three Months Ended
|                                             |  | May 31,           
|                                             |  |                   
|                                             |  | 2003               |      | 2002
|                                             |  |                    |      |     
|Collegiate Marketing and Production Services |  | $                  | 45   |      |  | $ | (4,271 | )
|Affinity Events                              |  |                    | (528 | )    |  |   | (264   | )
|Affinity Management Services                 |  |                    | 385  |      |  |   | 219    |  
|Amortization of acquisition intangibles      |  |                    | (304 | )    |  |   | (311   | )
|Unallocated general and administrative costs |  |                    | (336 | )    |  |   | (442   | )
|                                             |  |                    |      |      |  |   |        |  
|                                             |  | $                  | (738 | )    |  | $ | (5,069 | )
|                                             |  |                    |      |      |  |   |        |  

Results Derived from Investments and
Derivative Instruments 
Equity in earnings (losses) of affiliated companies, totaling $40,000 for the
three months ended May 31, 2003 and $(200,000) for the three months ended May
31, 2002 included the Companys proportionate share of the earnings or losses
of Gray and iHigh.

In the three months ended May 31, 2003, the Company
reduced its combined receivable and related investment in iHigh to estimated net
 realizable value, resulting in an investment valuation charge of $1,650,000.

The net change in the value of certain derivative instruments, consisting of
warrants to purchase Gray common stock and interest rate swap agreements, was
$155,000 for the three months ended May 31, 2003 primarily due to an increase
in the value of the interest rate swap agreement; and $(446,000) for the three
months ended May 31, 2002, due to a decrease in the value of the warrants, less
an increase in the value of the interest rate swap agreements.

Interest Expense and Debt Related Costs

Interest expense decreased to $1,882,000 for the three months ended May 31,
2003 from $2,267,000 for the same period in the prior year, as a result of (a)
a reduction in variable interest rates in effect during the period and (b)
lower amounts outstanding under the Term Loans in the current year, net of (c)
higher average amounts outstanding under the Revolver in the current year; and
(d) amortization in the prior year period of a gain on a modification in an
interest rate swap agreement that terminated in December 2002.

Debt issue cost amortization was $585,000 and $648,000 for the three months
ended May 31, 2003 and 2002, 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 $348,000 and $352,000 of such amortization is
included in debt issue cost amortization for the three months ended May 31,
2003 and 2002, 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 May 31, 2003, a change in the
amount of a valuation allowance for potentially non-realizable deferred tax
assets.

21



---



##### 



RESULTS OF CONTINUING OPERATIONS  NINE MONTHS ENDED MAY 31, 2003 COMPARED TO
NINE MONTHS ENDED MAY 31, 2002

Results Derived from Operating Businesses

Total revenues for the nine months ended May 31, 2003 and 2002 are summarized
as follows (amounts in 000s):

|                                             |  |                   |        |      |  |   |        | 
|-------------------------------------------- |  | ----------------- | ------ | ---- |  | - | ------ | 
|                                             |  | Nine Months Ended
|                                             |  | May 31,          
|                                             |  |                  
|                                             |  | 2003              |        | 2002
|                                             |  |                   |        |     
|Collegiate Marketing and Production Services |  | $                 | 49,340 |      |  | $ | 71,638 | 
|Affinity Events                              |  |                   | 6,040  |      |  |   | 9,616  | 
|Affinity Management Services                 |  |                   | 6,242  |      |  |   | 10,902 | 
|Consulting                                   |  |                   | 5,267  |      |  |   | 7      | 
|                                             |  |                   |        |      |  |   |        | 
|                                             |  | $                 | 66,889 |      |  | $ | 92,163 | 
|                                             |  |                   |        |      |  |   |        | 

In the nine months ended May 31, 2003, total revenues for the Collegiate
Marketing and Production Services segment declined by $22,298,000 from the nine
months ended May 31, 2002 as the segment continued to be impacted by the
termination of most of the Companys contracts with NCAA corporate sponsors as
of or prior to June 30, 2002. In the nine months ended May 31, 2002, the
Company recognized revenues of approximately $25,200,000 in connection with
NCAA corporate sponsorships. No such revenue was recognized in the nine months
ended May 31, 2003. Refer to the paragraph under the heading Results of
Continuing Operations  Three Months Ended May 31, 2003 Compared To Three
Months Ended May 31, 2002  Results Derived From Operating Business for a
discussion on the impact of the Host-NCAA Contract expiration, and the
resulting decline in total revenues in comparison with prior fiscal periods.

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,
this segment would generally be expected to produce the vast majority of its
revenue during the fiscal quarters ended May 31 and August 31.

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

In the prior fiscal year, 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 nine months ended May 31, 2003 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 May 31, 2003,
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.

22



---



##### 



Total operating costs and expenses for the nine months ended May 31, 2003 and
2002 are summarized as follows (amounts in 000s):

|                                            |  |                   |        |      |  |   |         | 
|------------------------------------------- |  | ----------------- | ------ | ---- |  | - | ------- | 
|                                            |  | Nine Months Ended
|                                            |  | May 31,          
|                                            |  |                  
|                                            |  | 2003              |        | 2002
|                                            |  |                   |        |     
|Direct operating costs of services rendered |  | $                 | 42,718 |      |  | $ | 75,954  | 
|Selling, general and administrative         |  |                   | 19,449 |      |  |   | 23,392  | 
|Amortization of acquisition intangibles     |  |                   | 912    |      |  |   | 968     | 
|                                            |  |                   |        |      |  |   |         | 
|                                            |  | $                 | 63,079 |      |  | $ | 100,314 | 
|                                            |  |                   |        |      |  |   |         | 

Direct operating costs of services rendered decreased for the nine months ended
May 31, 2003 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 approximately $21,100,000 for the nine months ended May 31, 2002,
plus (b) a decrease in events management and other production costs of
$3,700,000, plus (c) decreases in other rights fees and profit split expenses
of $7,700,000.

Selling, general and administrative costs declined for the nine months ended
May 31, 2003 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
$11,536,000 for the nine months ended May 31, 2003 compared to $13,900,000 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 $721,000 for the nine months ended May 31, 2003 compared to
$1,029,000 for the same period in the prior year.

Operating income (loss) for the nine months ended May 31, 2003 and 2002 is
summarized as follows (amounts in 000s):

|                                             |  |                   |        |      |  |   |        |  
|-------------------------------------------- |  | ----------------- | ------ | ---- |  | - | ------ | -
|                                             |  | Nine Months Ended
|                                             |  | May 31,          
|                                             |  |                  
|                                             |  | 2003              |        | 2002
|                                             |  |                   |        |     
|Collegiate Marketing and Production Services |  | $                 | 2,694  |      |  | $ | (2,988 | )
|Affinity Events                              |  |                   | (3,277 | )    |  |   | (3,485 | )
|Affinity Management Services                 |  |                   | 1,061  |      |  |   | 805    |  
|Consulting                                   |  |                   | 5,267  |      |  |   | 7      |  
|Amortization of acquisition intangibles      |  |                   | (912   | )    |  |   | (968   | )
|Unallocated general and administrative costs |  |                   | (1,023 | )    |  |   | (1,522 | )
|                                             |  |                   |        |      |  |   |        |  
|                                             |  | $                 | 3,810  |      |  | $ | (8,151 | )
|                                             |  |                   |        |      |  |   |        |  

Results Derived from Investments and
Derivative Instruments 
Equity in earnings (losses) of affiliated companies, totaling $(153,000) for
the nine months ended May 31, 2003 and $(2,034,000) for the nine months ended
May 31, 2002 included (a) the Companys proportionate share of the earnings or
losses of (i) Gray; (ii) iHigh; and (iii) until December 31, 2001, Rawlings.
In the nine months ended May 31, 2003, 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.

In the nine months ended May 31, 2003, the Company
reduced its combined receivable and related investment in iHigh to estimated net
 realizable value, resulting in an investment valuation charge of $1,650,000.

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

23



---



##### 



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 nine months ended May 31,
2003 of $2,339,000. In the nine months ended May 31, 2002, 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
$(1,708,000) for the nine months ended May 31, 2003 primarily due to a decrease
in the value of warrants, offset by an increase in the value of the interest
rate swap agreements; and $(3,305,000) for the nine months ended May 31, 2002,
due to a decrease in the value of the warrants and the interest rate swap
agreements. The warrants were sold in April 2003 at book value, which was
based on an independent appraisal.

The Company had a $2,620,000 charge for the cumulative effect of accounting
change in the nine months ended May 31, 2002, representing its proportionate
share of a cumulative effect adjustment reported by Gray, due to Grays
adoption of FASB Statement No. 142 and the resulting reduction in Grays
previously unamortized goodwill and purchased intangibles.

Interest Expense and Debt Related Costs

Interest expense decreased to $6,213,000 for the nine months ended May 31, 2003
from $6,963,000 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 $1,739,000 and $2,190,000 for the nine months
ended May 31, 2003 and 2002, 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 $1,062,000 and $1,164,000 of
such amortization is included in debt issue cost amortization for the nine
months ended May 31, 2003 and 2002, 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 nine months ended May 31, 2003, 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 4 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 May 31, 2003 and 2002, 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 $150,000 and $119,000 for the three
months ended May 31, 2003 and 2002, respectively, and by $411,000 and $377,000
for the nine months ended May 31, 2003 and 2002, 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

24



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##### 



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 previously held
investments in warrants to purchase Gray common stock and 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 3 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 $3,600,000 as of May 31,
2003 and $4,500,000 as of August 31, 2002.

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 May 31, 2003.

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 May 31, 2003.

25



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##### 



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Sarkes Tarzian, Inc. v. Bull Run Corporation
and Gray Television, Inc. In
January 1999, the Company acquired shares of Sarkes Tarzian, Inc. (Tarzian)
common stock, $4.00 par value, (the Tarzian Shares) from the Estate of Mary
Tarzian (the Estate) for $10.0 million. In March 1999, the Company and Gray
entered into an option agreement whereby Gray purchased an option to acquire
the Tarzian Shares from the Company, and in December 2001, Gray exercised such
option, purchasing the Tarzian Shares from the Company for $10.0 million.
During the option period, the Company received fees from Gray in the aggregate
amount of $3.2 million.

On February 12, 1999, Tarzian filed suit in the United States District Court
for the Southern District of Indiana against U.S. Trust Company of Florida
Savings Bank as Personal Representative of the Estate, claiming that Tarzian
had a binding and enforceable contract to purchase the Tarzian Shares from the
Estate. On February 3, 2003, the Court entered judgment on a jury verdict in
favor of Tarzian for breach of contract and awarding Tarzian $4.0 million in
damages. On June 23, 2003, the Court denied the Estates renewed motion for
judgment as a matter of law, and alternatively, for a new trial on the issue of
liability; denied Tarzians motion to amend the judgment to award Tarzian
specific performance of the contract and title to the Tarzian Shares; and
granted Tarzians motion to amend the judgment to include pre-judgment interest
on the $4.0 million damage award. The parties have thirty days from the
Courts order in which to appeal. The Company cannot predict when the final
resolution of this litigation will occur.

On March 7, 2003, Tarzian filed suit in the United States District Court for
the Northern District of Georgia against Gray and the Company for tortious
interference with contract and conversion. The lawsuit alleges that Bull Run
and Gray purchased the Tarzian Shares with actual knowledge that Tarzian had a
binding agreement to purchase the stock from the Estate. The lawsuit seeks
damages in an amount equal to the liquidation value of the interest in Tarzian
that the stock represents, which Tarzian claims to be as much as $75 million,
as well as attorneys fees, expenses, and punitive damages. The lawsuit also
seeks an order requiring Gray and the Company to turn over the Tarzian Shares
to Tarzian and relinquish all claims to the stock. The stock purchase
agreement with the Estate would permit the Company to make a claim against the
Estate in the event that title to the Tarzian Shares is ultimately awarded to
Tarzian. The Company filed an answer to the lawsuit on May 14, 2003. The
Company believes it has meritorious defenses and intends to vigorously defend
the lawsuit. The Company cannot predict when the final resolution of this
litigation will occur.

Bull Run Corporation v. Ernst & Young, LLP In January 2002, the Company filed
a lawsuit in the State Court of Fulton County, Georgia, against Ernst & Young
LLP, as previously reported on the Companys Form 8-K dated January 8, 2002.
In September 2002, the Court ruled that the matter was subject to arbitration.
The arbitration hearing has recently been scheduled to begin in September 2003.

26



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##### 



Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits

|     |  |                                                                             
|---- |  | ----------------------------------------------------------------------------
|3.1  |  | Certificate of Amendment to the Articles of Incorporation filed May 13, 2003
|3.2  |  | Certificate of Amendment to the Articles of Incorporation filed May 30, 2003
|99.1 |  | Certifications Pursuant to U.S.C. Section 1350                              

(b)   Reports on Form 8-K



| |  |  | Form 8-K dated April 15, 2003 related to the Companys issuance
of a press release announcing the Companys second quarter and
fiscal year-to-date financial results.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Form 8-K dated May 15, 2003 related to the Companys issuance of
a press release announcing a 1-for-10 reverse split of its common
stock.                            



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: July 14, 2003 |  | By:                  |  | /s/ FREDERICK J. ERICKSON                                
|                    |  |                      |  |                                                          
|                    |  |                      |  | Frederick J. Erickson                                    
|                    |  |                      |  | Vice President-Finance, Treasurer and Assistant Secretary

27



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##### 



CERTIFICATION

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



|1. |  | I have reviewed this quarterly report on Form 10-Q of Bull Run
Corporation;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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:   |  | July 14, 2003                        
| |  |         |  |                                      
| |  | Signed: |  | /s/ ROBERT S. PRATHER, JR.           
| |  |         |  |                                      
| |  |         |  | Robert S. Prather, Jr.               
| |  |         |  | President and Chief Executive Officer

28



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##### 



CERTIFICATION

I, Frederick J. Erickson, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Bull Run
Corporation;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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:   |  | July 14, 2003                                       
| |  |         |  |                                                     
| |  | Signed: |  | /s/ FREDERICK J. ERICKSON                           
| |  |         |  |                                                     
| |  |         |  | Frederick J. Erickson                               
| |  |         |  | Vice President  Finance and Chief Financial Officer

29