SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

|(Mark One) | 
|---------- | 

| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2005; OR
| | -------------------------------------------------------------------------------------------------------------------------------------------

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

0-17430
Commission File Number

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

|DELAWARE                                                       | 35-2154335                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer Identification No.)

|111 MONUMENT CIRCLE, SUITE 4800
INDIANAPOLIS, INDIANA | 46204     
|----------------------------------------------------- | ----------
|(Address of principal executive offices)              | (Zip code)

|(317) 237-4122                                      
|----------------------------------------------------
|(Registrant's telephone number, including area code)

|                                                                                  
|----------------------------------------------------------------------------------
|(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by checkmark whether the registrant is an accelerated filer (as defined
by Rule 12b-2 of the Exchange Act).    Yes     No

Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

|Common Stock
$.0001 par value | Outstanding at
March 11, 2005
3,109,333 shares
|----------------------------- | ----------------------------------------------

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
INDEX

|                                                                                                            
|------------------------------------------------------------------------------------------------------------
|                                                                                                            
|PART I - FINANCIAL INFORMATION:                                                                             
|                                                                                                            
|Item 1 - Condensed Consolidated Financial Statements:                                                       
|                                                                                                            
|Condensed Consolidated Balance Sheets
                January 31, 2005 and October 31, 2004                 
|                                                                                                            
|Condensed Consolidated Statements of Operations
                Three Months Ended January 31, 2005 and 2004
|                                                                                                            
|Condensed Consolidated Statement of Changes of Stockholders Deficit                                        
|                                                                                                            
|Condensed Consolidated Statements of Cash Flows
                Three Months Ended January 31, 2005 and 2004
|                                                                                                            
|Notes to Condensed Consolidated Financial Statements                                                        
|                                                                                                            
|Item 2 - Management's Discussion and Analysis of Financial Condition
       and Results of Operations       
|                                                                                                            
|Item 3 - Quantitative and Qualitative Disclosures About Market Risk                                         
|                                                                                                            
|Item 4 - Controls and Procedures                                                                            
|                                                                                                            
|PART II - OTHER INFORMATION:                                                                                
|                                                                                                            
|Item 1 - Legal Proceedings                                                                                  
|                                                                                                            
|Item 2 - Changes in Securities and Use of Proceeds                                                          
|                                                                                                            
|Item 3 - Defaults Upon Senior Securities                                                                    
|                                                                                                            
|Item 4 - Submission of Matters to a Vote of Security Holders                                                
|                                                                                                            
|Item 5 - Other Information                                                                                  
|                                                                                                            
|Item 6 - Exhibits and Reports on Form 8-K                                                                   

2

PART I  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

|                                                                    | January 31,
2005 | October 31,
2004
|------------------------------------------------------------------- | ---------------- | ----------------
|                                                                   
|Assets                                                              |                  |                 
|                                                                   
|Current assets:                                                     |                  |                 
|Cash and cash equivalents                                           |                  |                 
|Marketable securities                                               |                  |                 
|Accounts receivable, net of allowance for doubtful accounts         |                  |                 
|of $777 for 2005 and $494 for 2004                                  |                  |                 
|Accounts receivable, related parties (Note 8)                       |                  |                 
|Inventories, net (Note 2)                                           |                  |                 
|Prepaid expenses and other assets                                   |                  |                 
|Deferred income tax assets                                          |                  |                 
|                                                                    |                 
|                                                                   
|Total current assets                                                |                  |                 
|                                                                   
|Property, plant and equipment, net                                  |                  |                 
|                                                                   
|Other assets:                                                       |                  |                 
|Intangible assets:                                                  |                  |                 
|Goodwill not subject to amortization                                |                  |                 
|Noncompete agreements, less accumulated amortization of $864        |                  |                 
|for 2005 and $783 for 2004                                          |                  |                 
|Trade name and customer relations, less accumulated amortization    |                  |                 
|of $419 for 2005 and $390 for 2004                                  |                  |                 
|Deferred debt costs, less accumulated amortization of $319 for 2005 |                  |                 
|and $289 for 2004                                                   |                  |                 
|Idle equipment                                                      |                  |                 
|Other                                                               |                  |                 
|                                                                    |                 
|                                                                   
|                                                                    |                  |                 
|                                                                    |                 

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

3

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

|                                                                        | January 31,
2005 | October 31,
2004
|----------------------------------------------------------------------- | ---------------- | ----------------
|
|Liabilities and Stockholders' Deficit                                   |                  |                 
|                                                                       
|Current liabilities:                                                    |                  |                 
|Current portion of long-term debt                                       |                  |                 
|Accounts payable, trade                                                 |                  |                 
|Accounts payable, related parties (Note 8)                              |                  |                 
|Accrued compensation                                                    |                  |                 
|Accrued expenses and customer deposits                                  |                  |                 
|                                                                        |                 
|                                                                       
|Total current liabilities                                               |                  |                 
|                                                                       
|Accounts payable, related parties                                       |                  |                 
|                                                                       
|Long-term debt, net of current portion                                  |                  |                 
|                                                                       
|Long-term debt, related parties (Note 8)                                |                  |                 
|                                                                       
|Deferred income tax liabilities                                         |                  |                 
|                                                                       
|Commitments and contingencies:                                          |                  |                 
|                                                                       
|Minority interest                                                       |                  |                 
|                                                                       
|Redeemable stock:                                                       |                  |                 
|Common stock, 324,933 shares outstanding for 2005 and 2004              |                  |                 
|                                                                       
|Stockholders' equity (deficit):                                         |                  |                 
|Common stock, par value $.0001 per share; 10,000,000 shares authorized; |                  |                 
|3,109,333 in 2005 and 2004                                              |                  |                 
|Preferred stock, 5,000,000 shares authorized, no shares outstanding     |                  |                 
|Additional paid-in capital                                              |                  |                 
|Accumulated other comprehensive loss                                    |                  |                 
|Accumulated deficit                                                     |                  |                 
|                                                                        |                 
|                                                                       
|Total stockholders' deficit                                             |                  |                 
|                                                                        |                 
|                                                                       
|                                                                        |                  |                 
|                                                                        |                 

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

4

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

|                                                                                                | Three Months Ended
|----------------------------------------------------------------------------------------------- | ------------------
|
|                                                                                               
|Net sales                                                                                       |                   
|                                                                                               
|Cost of sales                                                                                   |                   
|                                                                                                |                   
|                                                                                               
|Gross profit                                                                                    |                   
|                                                                                               
|Selling, general and administrative expenses                                                    |                   
|                                                                                                |                   
|                                                                                               
|Loss from operations                                                                            |                   
|                                                                                               
|Other income (expense):                                                                         |                   
|Interest expense, net                                                                           |                   
|Other income (expense)                                                                          |                   
|                                                                                                |                   
|                                                                                               
|Loss before income taxes                                                                        |                   
|                                                                                               
|Income tax expense                                                                              |                   
|                                                                                                |                   
|                                                                                               
|Loss before minority interest                                                                   |                   
|                                                                                               
|Minority interest                                                                               |                   
|                                                                                                |                   
|                                                                                               
|Net loss                                                                                        |                   
|                                                                                                |                   
|                                                                                               
|Basic and diluted loss per share attributable tocommon shareholders from continuing operations: |                   
|                                                                                                |                   
|                                                                                               
|Weighted average common and common equivalentshares outstanding, basic and diluted:             |                   
|                                                                                                |                   

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

5

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
(in thousands, except per share and share data)
(unaudited)

|                                                    | Comprehensive
Loss | Common Stock
Shares        Amount | Additional
Paid-in
Capital | Accumulated
Other
Comprehensive
Loss | Accumulated
Deficit | Total
Deficit |          
|--------------------------------------------------- | ------------------ | --------------------------------- | -------------------------- | ------------------------------------ | ------------------- | ------------- | ---------
|                                                   
|Balance at October 31, 2004                         |                    |                                   |                            |                                      |                     |               | 3,109,333
|                                                   
|Gain on available-for-sale marketable securities    |                    |                                   | $                          | 23                                   |                     |               |          
|                                                   
|Fair value adjustment on redeemable Preferred Stock |                    |                                   |                            |                                      |                     |               |          
|                                                   
|Net loss                                            |                    |                                   |                            | (3,119                               | )                   |               |          
|                                                    |                   
|                                                   
|Total comprehensive loss                            |                    |                                   | $                          | (3,096                               | )                   |               |          
|                                                    |                   
|                                                   
|Balance at January 31, 2005                         |                    |                                   |                            |                                      |                     |               | 3,109,333
|                                                    |                    |                                  

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

6

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

|                                                                             | Three Months Ended | 
|---------------------------------------------------------------------------- | ------------------ | 
|
|                                                                            
|Cash flow from operating activities:                                         |                    | 
|Loss from continuing operations                                              |                    | 
|Adjustments to reconcile loss from continuing operations to net cash used in |                    | 
|operating activities:                                                        |                    | 
|Depreciation and amortization                                                |                    | 
|Other                                                                        |                    | 
|Changes in operating assets and liabilities:                                 |                    | 
|Accounts receivable, net                                                     |                    | 
|Inventories, net                                                             |                    | 
|Other                                                                        |                    | 
|                                                                             |                   
|                                                                            
|Net cash used in operating activities                                        |                    | 
|                                                                             |                   
|                                                                            
|Cash flows from investing activities:                                        |                    | 
|Capital expenditures                                                         |                    | 
|Proceeds from sale of equipment                                              |                    | 
|                                                                             |                   
|                                                                            
|Net cash used in investing activities                                        |                    | 
|                                                                             |                   
|                                                                            
|Cash flows from financing activities:                                        |                    | 
|Advances from related parties, net                                           |                    | 
|Net repayments on lines of credit                                            |                    | 
|Net borrowings on long-term debt, including related parties                  |                    | 
|                                                                             |                   
|                                                                            
|Net cash provided by financing activities                                    |                    | 
|                                                                            
|Increase (decrease) in cash and cash equivalents                             |                    | 
|                                                                            
|Cash and cash equivalents, beginning of period                               |                    | 
|                                                                             |                   
|                                                                            
|Cash and cash equivalents, end of period                                     |                    | 
|                                                                             |                   
|                                                                            
|Interest paid                                                                |                    | 
|                                                                            
|Taxes paid                                                                   |                    | 
|                                                                             |                   

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

7

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

|                                                                                     | Three Months Ended | 
|------------------------------------------------------------------------------------ | ------------------ | 
|
|Supplemental disclosure of noncash operating, investing and
 financing activities:  
|Fair value change on mandatory redeemable preferred stock                            |                    | 
|Assignment and assumption of mandatory redeemable preferred   stock to Fair Holdings |                    | 
|                                                                                     |                    | 

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

8

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

|1. | BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|-- | ---------------------------------------------------------------------------------------------

DESCRIPTION OF BUSINESS:

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

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

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

Butyl-Rubber Reclaiming

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

Coach Leasing

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

Trailer and Related Transportation Equipment Manufacturing

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

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

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

9

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

|1. | BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, CONTINUED
|-- | --------------------------------------------------------------------------------------------------------

The
accompanying financial data as of January 31, 2005 and for the three months
ended January 31, 2005 and 2004 has been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. The October 31,
2004 consolidated balance sheet was derived from audited financial statements,
but does not include all disclosures required by accounting principles generally
accepted in the United States of America. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K for the period ended October 31, 2004.
The Company follows the same accounting policies in preparation of interim
reports.

In the
opinion of management, all adjustments (which include normal recurring
adjustments except as disclosed herein) necessary to present a fair statement of
financial position as of January 31, 2005 and results of operations, cash flows
and stockholders deficit for the three months ended January 31, 2005 have
been made. The results of operations for the three months ended January 31, 2005
are not necessarily indicative of the operating results for the full fiscal year
or any future periods.

BASIS OF PRESENTATION:

The
Companys financial statements have been presented on the basis that it is
a going concern which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. In the period since June 2001,
Obsidian Enterprises and its subsidiaries have incurred losses and reductions in
equity on a consolidated basis. Certain subsidiaries of the Company are in
violation of certain financial covenants in their respective credit agreements
as of January 31, 2005 (as discussed in Note 3 below). All amounts
outstanding as of January 31, 2005 under these credit agreements have been
classified as current on our balance sheet. We are currently negotiating to
amend or refinance the credit agreements where covenant violations exist and
debt has matured and we do not expect these violations to impair our ability to
fund current and future obligations of the Company. Historically, losses and
certain third-party debt repayments have been financed through loans from DC
Investments and its subsidiary Fair Holdings, Inc. (Fair Holdings),
entities controlled by the Companys Chairman, on terms that may not have
been available from other sources. As of January 31, 2005, Fair Holdings was in
violation of certain covenants in its credit agreement with its lender, although
the lender has waived these violations as of January 31, 2005. As of January 31, 2005, total
debt outstanding to DC Investments and Fair Holdings was $23,641.

In view of
these matters, realization of assets and satisfaction of liabilities in the
ordinary course of business is dependent on the Companys ability to
generate sufficient cash flow to satisfy its obligations on a timely basis,
maintain compliance with its financing agreements and continue to receive
financing support from Fair Holdings to provide liquidity if needed.

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

10

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

|1. | BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, CONTINUED
|-- | --------------------------------------------------------------------------------------------------------

| | » | Obsidian Enterprises secured an additional financial commitment from Fair
Holdings to provide additional borrowings under a $15,000 line of credit
agreement, which expires on January 1, 2007. Approximately $1,621 is currently
available under the agreement.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Uniteds existing line of credit and term loan with First Indiana has
matured and the Company is currently in negotiations with a new lender to
replace these loans. Management expects to complete the refinancing of this debt
in the first half of fiscal 2005. Under the terms of the new commitment, the
maximum borrowing availability will increase by $1,400. Upon completions of this
refinancing, Uniteds working capital will improve by approximately $4,100,
as that amount of the debt will be reclassified from current to long-term, less
the current portion.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | In November 2004, Obsidian Leasings credit facility with Old National Bank
matured and Obsidian Leasing now has current debt obligations due of $3,260. The
Company is in the process of negotiating a forbearance agreement with Old
National Bank, and management is actively working to refinance this debt with
other banks in the first half of fiscal 2005. Additionally, in November 2004,
management sold two older coaches, reducing Obsidian Leasings debt by
$209. Management is also in negotiations to sell three additional coaches, which
will further reduce debt by an estimated $354.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | » | Management is actively working to restructure or refinance portions of its high
interest rate debt on more favorable terms. Approximately $22,900 of our debt
bears interest from rates ranging from 10% to 15%.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

11

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

|1. | BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, CONTINUED
|-- | --------------------------------------------------------------------------------------------------------

Our high
level of debt creates liquidity issues for us and the stringent financial
covenants that are common for this type of debt increase the probability that
our subsidiaries may from time to time be in technical default under these
loans. These risks are mitigated, in part, for our United and U.S. Rubber
subsidiaries by the right described under Guarantees of Obsidian Capital
Partners.

Significant
financial covenants in our credit agreements are the maintenance of minimum
ratios, levels of earnings to funded debt and fixed charge coverage rate. We did
not meet requirements and covenants in certain debt agreements as further
discussed in Note 3.

SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates:

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In
December 2004, the Financial Accounting Standards Board (FASB) issued
Statement No. 123R, Share-Based Payment, requiring that the compensation cost
relating to stock options and other share-based compensation transactions be
recognized at fair value in financial statements. Statement No. 123R is
effective for the Company for its quarter ending January 31, 2006. The Company
will then be required to record any compensation expense using the fair value
method in connection with option grants to employees that have an exercise price
at or above fair market value at the grant date and for shares issued under its
employee stock purchase plan. Management is still evaluating but does not
believe that its adoption will have a material impact on the Companys
results of operations or financial position.

INSURANCE RECOVERY:

On December
1, 2004, U.S. Rubber was damaged by an electrical fire. The Company is in the
process of processing its claims with its insurance carrier for damaged
equipment and facilities and business interruption losses. As of January 31,
2005 the insurance claims are in process and no settlement has been made. The
Company does not expect a material gain or loss on involuntary conversion or
business interruption as a result of this fire.

12

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

|1. | BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, CONTINUED
|-- | --------------------------------------------------------------------------------------------------------

EARNINGS PER SHARE:

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

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

The Company
has a note payable agreement which is convertible by the holder to common stock
totaling 100,000 shares at a conversion rate of $5.00 per share. However,
because the Company incurred a loss for the periods ended January 31, 2005 and
2004, respectively, the inclusion of those potential common shares in the
calculation of diluted loss per share would have an antidilutive
effect.

Our Series C
Preferred Stock and Series D Preferred Stock, which have all the rights and
privileges of our common stock, were convertible into common stock at rates of
..40-to-1 and 3.50-to-1, respectively. Following the effective date of the
50to-1 reverse split of the common stock, on February 18, 2004, these
shares were converted to common stock, and such shares are included in the
weighted average common shares outstanding from the date of conversion. There
were no shares of preferred stock outstanding as of January 31, 2005.

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

|                                                                                                         | Three Months Ended | 
|-------------------------------------------------------------------------------------------------------- | ------------------ | 
|
|                                                                                                        
|Loss before discontinued operations                                                                      |                    | 
|Change in fair value of mandatory redeemable preferred stock                                             |                    | 
|                                                                                                         |                    | 
|                                                                                                        
|Net loss attributable to common shareholders                                                             |                    | 
|                                                                                                         |                    | 
|                                                                                                        
|Weighted average common and common equivalent shares
  outstanding, basic and diluted                    |                    | 
|                                                                                                         |                    | 
|                                                                                                        
|Net loss per share, basic and diluted, attributable to common
  shareholders from continuing operations: |                    | 
|                                                                                                         |                    | 
|                                                                                                         |                    | 

13

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

|1. | BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, CONTINUED
|-- | --------------------------------------------------------------------------------------------------------

STOCK OPTIONS:

The Company
accounts for stock-based compensation under the provisions of APB No. 25. The
Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation. Accordingly, no compensation expense is recognized
if the exercise price of stock options equals the fair market value of the
underlying stock at the date of grant. Had compensation expense for the
Companys stock option plans been determined based on the fair value at the
grant date for awards consistent with the provisions of SFAS No. 123, the
Companys basic and diluted net loss per share would remain the same. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. There were no stock options issued for the
three months ended January 31, 2005 and 2004. During fiscal 2004, certain
options were extended. Their effect on pro forma net income was
immaterial.

|2. | INVENTORIES
|-- | -----------

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

|                  | January 31,2005 | October 31,2004
|----------------- | --------------- | ---------------
|Raw materials     |                 |                
|Work-in-process   |                 |                
|Finished goods    |                 |                
|Valuation reserve |                 |                
|                  |                 |                
|Total             |                 |                
|                  |                 |                

|3. | FINANCING ARRANGEMENTS
|-- | ----------------------

UNITED

Uniteds
existing line of credit and term loan with First Indiana has matured and the
Company is currently working with the bank on a short-term extension until a
refinancing is completed. The Company is in negotiations with a new lender to
replace these loans. Management expects to complete the refinancing of this debt
in the first half of fiscal 2005. During the three months ended January 31,
2005, the Company paid down the line of credit by $400 and the maximum
availability was reduced to $3,600. The total amount of this debt is classified
as current.

Additionally,
at January 31, 2005, United did not meet financial covenants under the terms of
its term note with Huntington Capital Investment Company. Specifically, United
did not meet its EBITDA and fixed charge coverage ratios. Huntington Capital
Investment Company waived these covenant violations as of January 31, 2005. All
amounts under the term note are classified as current until the Company
and

14

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

|3. | FINANCING ARRANGEMENTS, CONTINUED
|-- | ---------------------------------

Huntington
Capital Investment Company enter into an amendment, currently being negotiated,
to provide relief under these covenants.

OBSIDIAN LEASING

The Company
is currently discussing a forbearance agreement with its Bank and the total
related debt of $3,260 is classified as current. Management is currently
exploring options with regard to refinancing the outstanding debt. Should
refinancing or an extension of the current agreement not be obtained by the
expiration date of the forbearance agreement, the debt will be repaid through
current sources of availability including borrowings under the Companys
line of credit and agreements with Fair Holdings. In addition, Fair Holdings has
informally indicated that it would make available additional financial support
if necessary, although we currently do not have any commitment for such support.

GUARANTEES OF OBSIDIAN CAPITAL PARTNERS

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

|4. | MINORITY INTEREST IN AFFILIATE
|-- | ------------------------------

As discussed
in Note 1, DW Leasing and DC Investments Leasing, entities controlled by the
Companys Chairman are included in consolidated financial statements and
are subject to the provisions of FIN No. 46. Historically, these entities
generated negative operating results and the operating model did not anticipate
income in excess of losses previously recognized in the consolidated financial
statements. During the first quarter of 2005, DC Investments Leasing reported
negative operating results. As a result, minority interest related to the loss
of DC Investments Leasing in the amount of $15 has been recorded as a charge in
the January 31, 2005 statement of operations and has been recognized on the
balance sheet. Future operating results of DC Investments Leasing, if positive,
will continue to be charged to minority interest. In addition, should DW Leasing
generate future income in excess of previously recognized losses, such amounts
would be charged to minority interest in the consolidated statement of
operations and recognized as minority interest on the consolidated balance
sheet. During the quarter ended January 31, 2005, DW Leasing recorded a loss of
$16. As of January 31, 2005, accumulated losses of DW Leasing recognized in
consolidated statements of operations exceeded income by approximately
$377.

|5. | REDEEMABLE STOCK
|-- | ----------------

In
conjunction with financing of the acquisition of United in fiscal 2001, the
Company issued 154,482 shares of common stock to Huntington Capital Investment
Corporation (Huntington). The note purchase agreement includes a
provision that gives Huntington the option to require the Company to repurchase
these shares at 90% of market value upon the earlier of: a) fifth anniversary of
issuance of such shares, b) default under the subordinated debt agreement, or c)
other factors related to a sale of substantially all assets of the Company as
defined in the agreement. Increases in the value of the

15

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

|5. | REDEEMABLE
STOCK, CONTINUED
|-- | ---------------------------

Companys stock will result in a corresponding increase to this
repurchase requirement. At January 31, 2005, the Company had violated certain
financial covenants defined in the subordinated debt agreement with Huntington.
The Company received a waiver of these violations as of January 31,
2005.

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

|6. | STOCKHOLDERS
DEFICIT
|-- | ---------------------

The
Companys stockholders and Board of Directors approved a 50-to-1 reverse
stock split. The reverse stock split was effective for trading purposes as of
February 18, 2004. As a result, approximately 3,109,333 shares of common stock
are now outstanding and the number of authorized shares of common stock has been
reduced to 10,000,000.

On March 12,
2004, the preferred shares for Series C and D were converted to common, which
increased common stock outstanding by 2,218,725 shares including 154,482 shares
classified as redeemable stock. Preferred shares authorized remain five million
shares with no preferred shares issued or outstanding as of January 31,
2005.

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

16

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

|7. | BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA
|-- | -----------------------------------------

The Company
operates in three industry segments comprised of trailer and related
transportation equipment manufacturing (trailer manufacturing); coach leasing;
and butyl rubber reclaiming. All sales are in North and South America primarily
in the United States, Canada and Brazil. Selected information by segment
follows:

|                                       | Three Months Ended January 31, 2005
|-------------------------------------- | -----------------------------------
|
|Sales:                                 |                                    
|Domestic                               |                                    
|Foreign                                |                                    
|                                       |                                    
|                                      
|Total                                  |                                    
|                                      
|Cost of goods sold                     |                                    
|                                      
|Loss before taxes andminority interest |                                    
|                                      
|Identifiable assets                    |                                    
|                                      
|Depreciation andamortization expense   |                                    
|                                      
|Interest expense                       |                                    
|                                      
|
|
|                                      
|Sales:                                 |                                    
|Domestic                               |                                    
|Foreign                                |                                    
|                                       |                                    
|                                      
|Total                                  |                                    
|                                      
|Cost of goods sold                     |                                    
|                                      
|Loss before taxes andminority interest |                                    
|                                      
|Identifiable assets                    |                                    
|                                      
|Depreciation andamortization expense   |                                    
|                                      
|Interest expense                       |                                    

Obsidian
Enterprises, Inc. (legal parent) allocates selling, general and administrative
expenses to the respective companies primarily based on a percentage of sales.
For the three months ended January 31, 2005 and 2004, allocated corporate
expenses by segment were as follows:

17

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

|7. | BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED
|-- | ----------------------------------------------------

|                        | Three Months Ended | 
|----------------------- | ------------------ | 
|
|Trailer manufacturing   |                    | 
|Coach leasing           |                    | 
|Butyl rubber reclaiming |                    | 
|                        |                   
|                        |                    | 
|                        |                   

|8. | RELATED PARTIES
|-- | ---------------

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

|                                                      | January 31, 2005 | October 31, 2004
|----------------------------------------------------- | ---------------- | ----------------
|
|Balance sheet:                                        |                  |                 
|Current assets:                                       |                  |                 
|Accounts receivable, Obsidian Capital Company(2)      |                  |                 
|Accounts receivable, stockholders                     |                  |                 
|Accounts receivable, other affiliated entities        |                  |                 
|                                                      |                 
|                                                     
|Total assets                                          |                  |                 
|                                                      |                 
|                                                     
|Current liabilities:                                  |                  |                 
|Accounts payable, Obsidian Capital Company(2)         |                  |                 
|Accounts payable, stockholders                        |                  |                 
|Accounts payable, DC Investments and Fair Holdings(2) |                  |                 
|Accounts payable, other affiliated entities           |                  |                 
|Long-term portion:                                    |                  |                 
|Accounts payable, Obsidian Capital Company(2)         |                  |                 
|Accounts payable, stockholders                        |                  |                 
|Notes payable, DC Investments(2)                      |                  |                 
|Notes payable, Fair Holdings(2)                       |                  |                 
|Line of credit, Fair Holdings(2)                      |                  |                 
|                                                      |                 
|                                                      |                  |                 
|                                                     
|Total liabilities                                     |                  |                 
|                                                      |                 

|                                                      | Three Months Ended | 
|----------------------------------------------------- | ------------------ | 
|
|Income statement:                                     |                    | 
|Interest expense, DC Investments and Fair Holdings(2) |                    | 
|                                                      |                    | 
|Rent expense, Fair Holdings(2)                        |                    | 
|                                                      |                    | 
|Sales to Champion Trailer, Inc.(2)                    |                    | 
|                                                      |                    | 
|Purchases from Champion Trailer, Inc.(2)              |                    | 
|                                                      |                    | 
|Rent expense, Roost Leasing(1)                        |                    | 
|                                                      |                    | 

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

18

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

|8. | RELATED PARTIES, CONTINUED
|-- | --------------------------

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

|9. | ACQUISITION
OF CLASSIC MANUFACTURING, INC.
|-- | ------------------------------------------

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

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

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

The period
for which the results of operations of Classic are included in the consolidated
income statement is for the three months ended January 31, 2005.

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

|                                                  | 
|------------------------------------------------- | 
|Purchase Price:                                   | 
|Common stock                                      | 
|Cash to seller                                    | 
|Acquisition costs                                 | 
|                                                  | 
|                                                 
|Total purchase price                              | 
|                                                  | 
|                                                 
|Purchase Price Allocation:                        | 
|Current assets, including accounts receivable and | 
|inventory                                         | 
|Machinery and equipment                           | 
|Goodwill                                          | 
|Intangibles                                       | 
|Liabilities assumed                               | 
|                                                  | 
|                                                 
|Total                                             | 
|                                                  | 

19

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

|9. | ACQUISITION OF CLASSIC MANUFACTURING, INC., CONTINUED
|-- | -----------------------------------------------------

|                                                          | 
|--------------------------------------------------------- | 
|
|Supplemental cash flow disclosure related to acquisition: | 
|Net assets acquired                                       | 
|Less: Common stock issued                                 | 
|Less: Cash acquired                                       | 
|                                                          | 
|                                                         
|Total cash paid                                           | 
|                                                          | 

# PRO FORMA INFORMATION:

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

|                                                                                                  | Three Months Ended
|------------------------------------------------------------------------------------------------- | ------------------
|
|Net sales                                                                                         |                   
|                                                                                                 
|Net loss                                                                                          |                   
|                                                                                                  |                   
|                                                                                                 
|Loss per share, basic and diluted, attributable to commonshareholders from continuing operations: |                   
|                                                                                                  |                   

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

|10. | COMMITMENTS
AND CONTINGENCIES
|--- | -----------------------------

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

20

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

|ITEM 2 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|------ | -------------------------------------------------------------------------------------

# IMPORTANT NOTE ABOUT FORWARD-LOOKING STATEMENTS.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. The Company and its representatives may from time to
time make written or oral forward-looking statements, including statements
included in or incorporated by reference into this Quarterly Report on Form 10-Q
and the Companys other filings made with the Securities and Exchange
Commission. These forward-looking statements are based on managements
views and assumptions and involve risks, uncertainties and other important
factors, some of which may be beyond the control of the Company, that could
cause actual results to differ materially from those expressed or implied in the
forward-looking statements. Factors that might cause or contribute to such
differences include, but are not limited to, those discussed in this Item 2.
Readers should carefully review the risks described in this and other documents
that the Company files from time to time with the Securities and Exchange
Commission and the risks described under Risk Factors at the end of
this Item 2. The forward-looking statements speak only as of the date that they
are made and the Company undertakes no obligation to update or revise any of the
forward-looking statements.

# OVERVIEW

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

Butyl Rubber Reclaiming

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

Coach Leasing

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

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

| | » | DW Leasing, LLC and DC Investments Leasing, formed in fiscal 2003, are controlled by
individuals who are also controlling shareholders of Obsidian Enterprises and,
accordingly, Pyramid. In addition, these entities meet the requirements for consolidation
under FASB Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest
Entities, an interpretation of Accounting Research Bulletin No. 51.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Trailer and Related Transportation Equipment Manufacturing

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

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

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

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

21

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

# RESULTS OF OPERATIONS

# OVERVIEW

The Companys
financial statements have been presented on the basis that it is a going concern
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. In the period since June 2001, Obsidian
Enterprises and its subsidiaries have incurred losses and reductions in equity
on a consolidated basis. Certain subsidiaries of the Company are in violation of
certain financial covenants in their respective credit agreements as of
January 31, 2005 (as discussed in Financial Covenant Waivers
below). All amounts outstanding as of January 31, 2005 under these credit
agreements have been classified as current on our balance sheet. We are
currently negotiating to amend or refinance the credit agreements where covenant
violations exist and we do not expect these violations to impair our ability to
fund current and future obligations of the Company. Historically, losses and
certain third-party debt repayments have been financed with DC Investments and
its subsidiary Fair Holdings, Inc. (Fair Holdings), entities
controlled by the Companys Chairman, on terms that may not have been
available from other sources. As of January 31, 2005, Fair Holdings was in
violation of certain covenants in the credit agreement with its lender, although
its lender has waived these violations as of January 31, 2005. As of January 31,
2005, total debt outstanding to DC Investments and Fair Holdings was
$23,641.

In view of these
matters, realization of assets and satisfaction of liabilities in the ordinary course of
business is dependent on the Companys ability to generate sufficient cash flow to
satisfy its obligations on a timely basis, maintain compliance with its financing
agreements and continue to receive financing support from Fair Holdings to provide
liquidity, if needed.

Our results of
operations for the three months ended January 31, 2005 were negatively impacted by various
events discussed below.  During fiscal 2005, we intend to focus our efforts on
generating positive cash flow and increasing our working capital through improved
operations and pursuing significant strategic initiatives. Although management
believes these actions will improve operations and liquidity, there can be no assurance
that such actions will sufficiently improve operations or liquidity.

| | » | In the trailer and related transportation equipment manufacturing segment we successfully
completed the acquisition of Classic in Sturgis, Michigan in fiscal 2004. The addition of
Classic enabled us to add synergistic products to our trailer line. The addition of
Classic added revenues to this segment of 24% on an annualized basis and helped improve
our gross margins in this segment by approximately 3% on an annualized basis. The segment
was negatively affected by the significant increases in raw material prices during fiscal
2004 and the three months ended January 31, 2005, which reduced our gross margins. We were
able to pass some of the increases through to our customers through price increases of
approximately 12% beginning in April 2004. Our price increases lagged behind the raw
material price increases, which reduced our overall gross margins.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

22

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

| | » | In our butyl rubber reclaiming segment we continue to search for new market
sources of butyl raw material. We are continuing to expand our recycling program
with the chapters of The National FFA Organization. We implemented a new fine
grind process that increases our ability to use other types of rubber in our
butyl reclaim process. Additional costs were incurred to maintain the equipment
in this very capital intensive operation. We also incurred significant increases
in energy costs. During January 2005, we implemented a five percent price
increase as our cost to obtain raw materials and maintain equipment have
increased. For fiscal 2005 we expect the market demand for our product to be
high due to our current order backlog. The availability of raw material for
butyl rubber reclaiming to meet the market demands continues to be a concern. We
expect our continued participation with The National FFA Organization will
improve our ability to recover and process additional butyl materials. In
addition we will continue to modify our fine grind operation to increase our
rubber resource utilization of existing material. Also during the fourth quarter
of fiscal 2004 we started the design and implementation of a cryogenic process.
This process will enable the Company to expand its product lines of natural
rubber in new markets. Full implementation is expected to be completed by the
second quarter of fiscal 2005.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Our luxury coach leasing segment was negatively affected by a decrease in sales
from a lower utilization of our fleet. The lower utilization is due to increased
market competition in the industry and a significant decrease in the number of
entertainers touring. As noted in Part II, Item 1 of this report, the Company
filed a law suit in December 2004 against the former owners of Pyramid for
violation of their non-compete agreement. Utilization of our fleet decreased
approximately 18% for the three months ended January 31, 2005 as compared to the
three months ended January 31, 2004 which in turn had a significant negative
impact on the earnings of this segment.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The following
table shows net sales by product segment:

|                        | Three Months Ended | 
|----------------------- | ------------------ | 
|
|                       
|Trailer manufacturing   |                    | 
|Coach leasing           |                    | 
|Butyl rubber reclaiming |                    | 
|                        |                    | 
|                       
|Net Sales               |                    | 
|                        |                    | 

The following is a
discussion of the major elements impacting the Companys operating results
by segment for the three months ended January 31, 2005 compared to the three
months ended January 31, 2004. The comments that follow should be read in
conjunction with the Companys condensed consolidated financial statements
and related notes contained in this Form 10-Q.

23

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

# TRAILER AND RELATED TRANSPORTATION EQUIPMENT MANUFACTURING

The following
table shows sales, cost of sales and gross profit for this segment for the
periods indicated:

|                                       | Three Months Ended | 
|-------------------------------------- | ------------------ | 
|
|Net Sales                              |                    | 
|Cost of Sales                          |                    | 
|                                       |                    | 
|                                      
|Gross Profit                           |                    | 
|                                       |                    | 
|                                      
|Gross Profit %                         |                    | 
|                                       |                    | 
|                                      
|Loss before taxes andminority interest |                    | 
|                                       |                    | 

# Three Months Ended January 31, 2005 Compared to Three Months Ended January 31,
2004

Sales

Net sales in
this segment for the three months ended January 31, 2005 increased $2,038 or
24.0% compared to the three months ended January 31, 2004. The increase was
primarily due to the acquisition of Classic, which increased our sales for the
three months ended January 31, 2005 by $2,013. Sales of United products
decreased for the three months ended January 31, 2005 by $626, primarily due to
the increased sales of the economy line trailers, which sell at a lower price
and a slow start to the race trailer season. The decrease in sales at United was
partially offset by an increase in Danzers sales of $512 for cargo
trailers and $139 for truck bodies, which was due the addition of new customers
on the East coast for cargo trailers and a modest increase in orders from the
telecommunications industry.

Gross Profit

The gross
profit in this segment for the three months ended January 31, 2005 decreased
slightly by 0.7% to 6.4% of revenues as compared to 7.1% for the same period in
fiscal 2004. The cost of plywood and steel, major components of our cargo
trailers, increased significantly during fiscal 2004. Although material cost
surcharges were initiated in April 2004 to offset the significant price
increases we incurred from our vendors, which somewhat improved our gross
margins, we were unable to pass all the cost increases through to our customers
during either fiscal 2004 or the first quarter of fiscal 2005. For that reason,
our margins were negatively affected for the three months ended January 31,
2005. These negative effects on our gross margins were offset somewhat by the
purchase of Classic in May 2004. The gross margins for the Classic trailer lines
typically are higher than our historical gross margins.

Loss before taxes and minority interest

For the three
months ended January 31, 2005, loss before taxes and minority interest increased
by $384 when compared to the three months ended January 31, 2004. The negative
trend is primarily due to the impact of rising raw material costs as further
described in our gross profit analysis.

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

24

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

# BUTYL RUBBER RECLAIMING

The following table
shows sales, cost of sales and gross profit for this segment for the periods indicated:

|                                   | Three Months Ended | 
|---------------------------------- | ------------------ | 
|
|                                  
|Net Sales                          |                    | 
|Cost of Sales                      |                    | 
|                                   |                    | 
|                                  
|Gross Profit (loss)                |                    | 
|                                   |                    | 
|                                  
|Gross Profit (loss) %              |                    | 
|                                   |                    | 
|                                  
|Loss before taxesminority interest |                    | 
|                                   |                    | 

# Three Months Ended January 31, 2005 Compared To Three Months Ended January 31,
2004

Sales

Net sales in
this segment for the three months ended January 31, 2005 as compared to the
three months ended January 31, 2004 have decreased by $37 or 1.5%. Sales in this
segment remain relatively flat due to the limited availability of raw materials;
additional increases in sales will depend on finding new sources of butyl inner
tubes and developing other natural rubber products. We continue to work with the
National FFA Association to implement a reclamation program to increase our
resources in the agricultural industries. As noted above, management has been
testing other materials including butyl pad scrap as a replacement material with
some success. In addition, alternative sources of material, including overseas
sources, are being pursued to provide a consistent supply of material. We
continue to utilize our fine grind and other processes to increase our ability
to process other types of products for our butyl reclaim process as well as
other natural rubber products.

Gross Profit

Gross profit
as a percentage of sales decreased by 5% for three months ended January 31, 2005
as compared to the three months ended January 31, 2004. The primary reason for
this decrease is due to lower production because of an electrical fire that
closed the plant for seven days in December 2004. In addition, a major piece of
production equipment was taken out of commission for a maintenance overhaul and
production was performed on backup equipment which increased our cost to produce
material and reduced our throughput efficiency. As a result of having to use
less than optimum raw material mix in the reclaiming process, additional
processing time was incurred to ensure delivery of quality product. Our
processes require significant amounts of natural gas and electricity, the cost
of which increased significantly during the three months ended January 31, 2005.
During January 2005, we initiated price increases of 5% to partially offset
increasing costs of production and materials.

Loss before taxes and minority interest

For the three months
ended January 31, 2005, the loss before taxes and minority interest increased by $203 as
compared to the three months ended January 31, 2004. The decrease in profitability and
negative trend as noted above has been primarily due to the lower production due to the
plant fire and inefficiencies in production due to the maintenance of equipment.

25

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

Looking
ahead, sales are expected to increase moderately. Sales growth will depend on
the successful implementation of our recycling program with the chapters of The
National FFA Organization and finding other sources of material. In addition,
the continued implementation of our fine grind and Cryogenic grinding processes
will increase the ability to utilize some additional rubber products in our
Butyl reclaim process and add new products. Gross profit improvement will depend
greatly on the success of finding consistent sources of raw material and
improved efficiencies in our operations through our new cryogenic and fine grind
processes.

# COACH LEASING

The following
table shows sales, cost of sales and gross profit for this segment for the
periods indicated:

|                                       | Three Months Ended | 
|-------------------------------------- | ------------------ | 
|
|Net Sales                              |                    | 
|Cost of Sales                          |                    | 
|                                       |                    | 
|                                      
|Gross Profit                           |                    | 
|                                       |                    | 
|                                      
|Gross Profit %                         |                    | 
|                                       |                    | 
|                                      
|Loss before taxes andminority interest |                    | 
|                                       |                    | 

# Three Months Ended January 31, 2005 Compared To Three Months Ended January 31,
2004

Sales

Net sales for the three
months ended January 31, 2005 decreased by $402 or 38.7% compared to the three months
ended January 31, 2004. The decrease in sales relates to a lower utilization of our fleet.
Management believes the lower utilization is due to increased market competition in the
industry and to a significant decrease in the number of professional acts touring. We also
experienced turnover in management which also contributed to the loss of several tours.
Utilization of our fleet decreased 18% for the three months ended January 31, 2005 as
compared to the three months ended January 31, 2004 which had a negative impact on our
operations. At this time, we cannot estimate when tours for the entertainment industry
will return to previous historical levels. As noted in legal matters in section, the
company filed a lawsuit in December 2004 against the former owners of Pyramid for
violation of their non-compete agreement.

Gross Profit

Gross profit
percentage for this segment was 40.3% for the three months ended January 31,
2005 compared to 43.6% for the three months ended January 31, 2004. The decrease
is attributable primarily to the increase of costs for maintaining a larger
fleet while revenues per coach have decreased. In addition, some of our
increased costs as a percentage of revenue were offset by the mix of utilization
of the coaches owned in our fleet and the need to sublease additional buses from
third parties to meet demand. Coaches which we must sublease from third parties
are typically leased to our customers at lower gross margins for us. As demand
has decreased, our need for third party coaches has also decreased. In November
2004 we sold two of our older coaches at no material gain or loss. We also plan
to sell three other older coaches in the first half of fiscal 2005. The sale of
our older coaches is expected to reduce our fleet maintenance expenses as the
older coaches require a higher level of maintenance.

26

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

Loss before taxes and minority interest

For the three months
ended January 31, 2005, the loss before taxes and minority interest increased $219 from
the three months ended January 31, 2004. The decrease in profitability and negative trend
as noted above has been primarily due to increased market competition and to the
significant decrease in the number of professional acts touring. The touring industry in
general decreased 30% in fiscal 2004 and continued for the three months ended January 31,
2005, which in turn reduced the utilization of our coaches. We also operated a larger
fleet than prior years, which increased our depreciation and interest costs.

Looking ahead, segment
sales, gross profits and segment profitability in fiscal 2005 will depend on the industry
market conditions. We are continually working to improve our utilization of our owned
coaches to increase our revenues and minimize additional costs from leasing third party
buses. In addition, we continue to explore other non-traditional uses for our coaches to
improve the utilization and therefore increase our cash flow and working capital in this
segment. We are also evaluating our coaches and as noted above selling the older coaches
in our fleet to reduce our costs.

# SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES

The
Companys SG&A expenses for the three months ended January 31, 2005
increased $391 or 16.7% compared to the three months ended January 31, 2004. The
increase relates primarily to the inclusion of Classic with SG&A of $230, an
increase in professional fees of $130, and other general increases for
compensation and other general and administrative expenses.

# INTEREST EXPENSE

Interest
expense for the three months ended January 31, 2005 as a percentage of average
debt borrowings of $48,365 was 2.4% (9.6% on an annual basis). Interest expense
for the three months ended January 31, 2004 as a percentage of average debt
borrowings of $41,377 was 2.3% (9.2% on an annual basis). The increase is
primarily due to additional borrowings from Fair Holdings at higher interest
rates.

# INCOME TAX PROVISION

Income tax
expense for the three months ended January 31, 2005 and 2004 was $18 and none,
respectively. There was no federal income tax benefit recorded for the three
months ended January 31, 2005 and 2004. Income tax benefits are created
primarily through NOL carry forwards recognized to the extent they are available
to offset the Companys net deferred tax liability. Operating losses during
the three months ended January 31, 2005 have been reserved with a valuation
allowance. Any quarterly tax benefits are based on the estimated effective tax
rate for the full year.

# LIQUIDITY AND CAPITAL RESOURCES

# OVERVIEW

As discussed
in Results of Operations  Overview, above, the Companys
financial statements have been presented on the basis that it is a going concern
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. The Companys realization of its assets and
satisfaction of its liabilities in the normal course of business is dependent
upon our ability to generate sufficient cash flow to meet our financial
obligations, to comply with the terms of our debt financing agreements, to
obtain refinancing of certain obligations and to continue to receive financial
support under its line of credit with Fair Holdings.

27

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

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

# WORKING CAPITAL

Our
businesses are working capital intensive and require funding for purchases of
production inventory, capital expenditures and expansion and upgrading of
facilities. Each of our subsidiaries has a separate revolving credit agreement
and term loan borrowings through which the subsidiary finances its operations
together with cash generated from operations. Our consolidated working capital
position (current assets over current liabilities) was negative at January 31,
2005 by $9,801. For the fiscal year ended October 31, 2004 our working capital
position was negative by $10,504. The increase in working capital is primarily
attributable to the pay down of the Companys debt during the three-month
period ended January 31, 2005. We are currently working to refinance loans for
United in the amount of $4,100, Obsidian Leasing in the amount of $3,400 and
U.S. Rubber in the amount of $5,300, as noted in further detail below. The
successful refinancing of these obligations will improve our working capital to
a positive position upon completion.

We continue
to address liquidity and working capital issues in a number of ways. At January
31, 2005, net cash used in continuing operations was $1,657 compared to $929 at
October 31, 2004. The use of cash and working capital was primarily related to
funding operating losses and business seasonality. For fiscal 2005, we expect
our operations to begin to generate positive cash and expect to increase our
overall working capital through improved operations as follows:

| | » | We secured an additional financial commitment from Fair Holdings to provide,
additional borrowings under a $15,000 line of credit agreement, which expires on
January 1, 2007. Approximately $1,621 is currently available to us under the
agreement.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Uniteds existing line of credit and term loan with First Indiana has matured and the
Company is currently in negotiations with a new lender to replace these loans. Management
expects to complete the refinancing of this debt in the first half of fiscal 2005. Under
the terms of the new commitment, the maximum borrowing availability will increase by
$1,400. Upon completions of this refinancing, Uniteds working capital will improve
by approximately $4,100, as that amount of the debt will be reclassified from current to
long-term, less the current portion.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | In November 2004, Obsidian Leasings credit facility with Old National Bank matured
and Obsidian Leasing now has current debt obligations due of $3,260. The Company is in the
process of negotiating a forbearance agreement with Old National Bank, and management is
actively working to refinance this debt with other banks in the first half of fiscal 2005.
Additionally, in November 2004, management sold two older coaches, reducing Obsidian
Leasings debt by $209. Management is also in negotiations to sell three additional
coaches, which will further reduce debt by an estimated $354.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

28

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

| | » | We are actively working to restructure or refinance our high interest rate debt on more
favorable terms. Approximately $22,900 of our debt bears interest from rates ranging from
10% to 15%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

Management
believes the steps taken to improve operations will positively impact our
liquidity and working capital for fiscal 2005. However, success is dependent on
our ability to restore gross profits and capitalize on new markets in the
trailer and related transportation manufacturing segment, obtain consistent
material supply in the butyl rubber reclaiming segment and restore our market
share in the coach leasing segment. Moreover, improvement in our liquidity and
working capital position is substantially dependent upon our ability to
successfully refinance approximately $12,800 of debt at United, Obsidian
Leasing, and U.S. Rubber. Failure to complete the refinancing on a timely basis
could have a material adverse effect on our liquidity and working capital
position and could impair the ability of our subsidiaries to continue
operations.

# FINANCIAL COVENANT WAIVERS

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

At January
31, 2005, United did not meet certain financial covenants relating to minimum
levels of EBITDA and fixed charge coverage ratios in its agreements with
Huntington Capital Investment Company. Huntington Capital Investment Company
waived its covenant violations as of January 31, 2005. The amount is classified
as current upon completion of an amendment to cure future violations.
Uniteds existing line of credit and term loan with First Indiana has
matured and the Company is currently working with the bank on a short-term
extension until a refinancing is completed. The Company is in negotiations with
a new lender to replace these loans. Management expects to complete the
refinancing of this debt in the first half of fiscal 2005. During the three
months ended January 31, 2005, the Company paid down the line of credit by $400
and the maximum availability was reduced to $3,600. The total amount of this
debt is classified as current.

29

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

In November
2004, Obsidian Leasings credit facility with Old National Bank matured and
Obsidian Leasing now has current debt obligations due of $3,260. The Company is
in the process of negotiating a forbearance agreement with Old National Bank,
and management is actively working to refinance this debt with other banks in
the first half of fiscal 2005.

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

# FUNDS AVAILABILITY

On a
consolidated basis, as of January 31, 2005, the Company had approximately $727
of cash and cash equivalents. Danzer Industries, U.S. Rubber, United, Obsidian
Enterprises and Classic each have revolving credit lines available for working
capital at each individual entity. Borrowings under the credit facilities are
available to the lesser of the maximum amount or the borrowing base as defined
in the credit agreement. At January 31, 2005, additional current availability
under these credit lines and maximum availability if supported by their
individual borrowing base are:

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

|(1) | Additional borrowings only through Fair Holdings, a Related
Party, under existing lines of credit.
|--- | --------------------------------------------------------------------------------------------------

The Company
incurred negative net cash flow of $1,657 from operations during the three
months ended January 31, 2005. Cash used in operations during the quarter is
primarily due to operating losses and increases in inventories offset by
increases in accounts payable. The Company has increased inventories during the
first quarter primarily in the trailer and related transportation equipment
manufacturing segment. The first quarter is historically the lowest volume
quarter in this segment due to seasonality of this business. Inventories were
increased during this quarter to provide an increase in the Companys
ability to deliver orders during the second and third quarters when sales have
historically been higher than in the first quarter. Funding during the quarter
was provided through borrowings on lines of credit and from related
parties.

We have commercial
commitments as described below:

|Commercial Commitments        | Total Amount Committed |  | Commercial Commitments |        | Date of Expiration
|----------------------------- | ---------------------- |  | ---------------------- | ------ | ------------------
|
|Line of credit, related party |                        |  | $                      | 3,000  |                   
|Line of credit                |                        |  |                        | 3,600  |                   
|Line of credit                |                        |  |                        | 4,000  |                   
|Line of credit, related party |                        |  |                        | 15,000 |                   
|Line of credit                |                        |  |                        | 1,000  |                   
|                              |                        |  |                       

|(1) | The bank extended the maturity date of the line of credit to February 28, 2005
and continues to work with the Company on a short term extension. United is in
negotiations with another lender to refinance its line of credit and term loan.
Management expects to complete the refinancing of this debt during the first
half of fiscal 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

Our net cash
used in continuing operations for the three months ended January 31, 2005 was
$1,657. This is comprised of a loss from continuing operations of $3,119, offset
by noncash depreciation and amortization of $844, increases in inventories of
$756 and accounts payable of $54 and decreases in accounts receivable of $1,289,
other assets of $392, customer deposits of $19 and accrued expenses of $334. In
addition, we had minority interest of $15, and accretion of interest of
$89.

Net cash flow
provided from financing activities for the three months ended January 31, 2005
was $1,938. This is comprised of borrowings of long-term debt of $2,272 and
related parties of $203, offset by repayments on lines of credit of
$537.

Cash flow was
used in investing activities for the three months ended January 31, 2005 of
$242. This is comprised of purchases of equipment of $512 offset by proceeds
from the sale of equipment of $270.

The total
decrease in cash is summarized as follows:

|                                                 | Three Months Ended
|------------------------------------------------ | ------------------
|
|                                                
|Net cash used in operations                      |                   
|Net cash used in investing activities            |                   
|Net cash provided by financing activities        |                   
|                                                
|Increase (Decrease) in cash and cash equivalents |                   
|                                                 |                   

GUARANTEES OF OBSIDIAN CAPITAL PARTNERS

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

# CRITICAL ACCOUNTING POLICIES

Our
significant accounting policies are summarized in Note 2 to the consolidated
financial statements in the Annual Report on Form 10-K for the fiscal year ended
October 31, 2004 and describe the significant accounting policies and methods
used in the preparation of the consolidated financial statements. Some of the
most critical policies are also discussed below.

As a matter
of policy, we review our major assets for impairment. Our major operating assets
are accounts receivable, inventory, intangible assets and property and
equipment. We have not historically experienced significant bad debts expense,
although the filing of Chapter 11 bankruptcy during fiscal 2002 of a customer
resulted in a bad debt charge of $379. However, we believe our reserve for
doubtful accounts of $777 should be adequate for any exposure to loss in our
January 31, 2005 accounts receivable. We have also established reserves for
slow-moving and obsolete inventories and believe the reserve of $300 is
adequate. We depreciate our property and equipment and amortize intangible
assets (except for goodwill) over their estimated useful lives. Property and
equipment are reviewed for impairment when events and circumstances indicate
impairment factors may be present. During fiscal 2004, certain equipment became
idle due to the realignment of the plant at U.S. Rubber. The equipment will be
used in the future for replacement of existing equipment as needed. Due to the
uniqueness of the equipment and the high cost to buy new similar pieces, the net
book value of $353 was transferred to other assets under idle equipment and is
subject to impairment valuation. Accordingly, we continue to analyze the Danzer
and US Rubber assets for impairment in conjunction with our analysis of the
continuing operations of these facilities. In assessing the recoverability of
our property and equipment, we must make various assumptions regarding estimated
future cash flows and other factors in determining the fair values of the
respective assets. If these estimates or related assumptions change in the
future, we may be required to record impairment charges for these assets in
future periods. Any such resulting impairment charges could be material to our
results of operations. As of January 31, 2005 we determined there is no
impairment of our property and equipment.

31

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

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

The initial
cost of coaches acquired is depreciated over a straight-line basis to a salvage
value of 38% of original cost. Subsequent enhancements and refurbishments of
coaches are depreciated over five years using the straight-line method. The age
of coaches in our fleet range from less than one year to ten years, with an
average age of approximately five years. Actual value of coaches after 15 years
is dependent on several factors including the level of maintenance and the
market conditions at the time of disposal. We recently disposed of two coaches
that did not result in a material gain or loss. We continue to evaluate our
estimates with respect to the actual depreciation of such vehicles based on
market conditions and our experience in disposals when they occur. Should future
factors indicate the current depreciation policy is not adequate, we will adjust
the depreciation rates, and such adjustments may have an adverse impact on our
results of operations.

In
conjunction with financing of the acquisition of United, the Company issued
154,482 shares of common stock to Huntington Capital Investment Corporation
(Huntington). The note purchase agreement includes a provision that
gives Huntington the option to require the Company to repurchase these shares at
90% of market value upon the earlier of: a) fifth anniversary of issuance of
such shares, b) default under the subordinated debt agreement, c) other factors
related to a sale of substantially all assets of the Company as defined in the
agreement. Increases in the value of the Companys stock will result in a
corresponding increase to this repurchase requirement. Accordingly, a
substantial increase in stock price at the repurchase date may have an adverse
impact on the Companys liquidity. At January 31, 2005, the Company
violated certain financial covenants and did not meet its EBITDA and fixed
charge coverage ratios defined in the subordinated debt agreement with
Huntington. The Company received a waiver of these violations as of January 31,
2005.

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

# RISK FACTORS

There are a
number of risk factors related to the future results of the Company. The Company
wishes to caution readers that the following important factors among others, in
some cases have affected, and in the future could affect, the Companys
actual results and could differ materially from those expressed in any
forward-looking statements made by, or on behalf of the Company:

| | 1. | Our financial statements have been presented on the basis that the Company will
continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Companys
independent auditor has included a going concern qualification in its audit
report relating to the Companys audited financial statements for the
fiscal year ended October 31, 2004, based on concerns regarding debt covenant
violations, working capital deficit and losses from operations. Our losses have
historically been funded by related party loans from Fair Holdings, which
recently received a waiver from its lender of its violations of certain
covenants under its credit agreement. The Companys realization of its
assets and satisfaction of its liabilities in the normal course of business is
dependent upon the Companys ability to generate sufficient cash flow to
meet its financial obligations, to comply with the terms of its debt financing
agreements, to obtain refinancing of certain obligations and to continue to
receive financial support under its line of credit with Fair
Holdings.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

32

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

| | 2. | Our inability to obtain additional financing may prevent additional expansion
               in our current business or acquiring new businesses. Additional financing may
               not be available to us on advantageous terms or at all, if, for example the
               interest rates are unattractive or we do not have sufficient collateral
               available to secure the desired increase in debt. Currently all of our assets
               are being used to secure outstanding debt, so unless we acquire unsecured assets
               or obtain a partial release from our secured creditors of their security
               interests, we will not have available additional collateral to pledge to new
               debtors.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | We may issue equity to finance any future acquisitions or refinance existing
               debt. This would dilute the proportionate ownership of our current shareholders
               and may reduce per share value. Acquisitions may also lead to increased levels
               of borrowing. This would result in increased interest expense. Acquisitions are
               also likely to increase our depreciation and amortization expense. These factors
               may incur losses or reduced profits in the future.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | The prices of the raw materials we utilize are subject to fluctuation, as
               occurred in fiscal 2004 and the three months ended January 31, 2005. We may not
               be able to pass along any or all of these increases to our customers. As a
               result, increases in the price of raw materials may decrease the profit margin
               from sales of our products.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | Our overall strategy includes increasing revenue and reducing/controlling
               operating expenses. We have concentrated our efforts in ongoing, company-wide
               efficiency activities intended to increase productivity and reduce costs,
               including personnel reductions, reduction or elimination of non-personnel
               expenses and realigning and streamlining operations. We cannot assure that our
               efforts will result in increased profitability for any meaningful period of
               time.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | We face significant competition in connection with the products and services we
               provide. The level of competition has increased recently and is expected to
               continue at increasing levels in the future. There are many other companies
               engaged in the manufacture of cargo trailers, luxury coach leasing and butyl
               rubber reclaiming, and many of these companies have greater financial and other
               business resources than those possessed by us. Furthermore, other companies may
               enter the our area of business in the future. If competition increases, our
               sales and profits are likely to decline.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7. | We may have difficulty receiving our requirements for butyl rubber tubes, our
               principle raw material in this segment. In recent years, the number of sources
               of supply has been reduced. We continue to search for additional sources and to
               make purchases from foreign suppliers. However, if the number of suppliers is
               further reduced, or if we are otherwise unable to obtain butyl raw material
               requirements on a timely basis and on favorable terms, our operations may be
               harmed.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8. | There is a limited market for our Common Stock. There can be no assurance that
               a broader market for the Common Stock will develop. Selling shares of the Common
               Stock may be difficult because smaller quantities of shares are bought and sold
               and security analysts and news media coverage about the Company is
               limited. These factors could result in lower prices and larger spreads in the
               bid and asked prices for the shares of Common Stock.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 9. | Recently, there have been significant regulatory changes, including the
               Sarbanes-Oxley Act of 2002, and there may be new accounting pronouncements or
               regulatory rulings that will have an impact on our future consolidated financial
               position and results of operations. The Sarbanes-Oxley Act of 2002 and other
               rule changes and proposed legislative initiatives following several highly
               publicized corporate accounting and corporate governance failures are likely to
               increase general and administrative costs.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

|ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------ | ----------------------------------------------------------

The Company
is exposed to market risk related to interest rate changes. Approximately 60% of
our primary debt at January 31, 2005 bore interest at a variable rate. An
interest rate increase of one percentage point would increase our interest
expense over a one-year period by approximately $224 at current debt
levels.

|ITEM 4 | CONTROLS AND PROCEDURES
|------ | -----------------------

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

Under the
supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of the Companys
disclosure controls and procedures as of January 31, 2005. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, for the reasons more fully set forth below, the Companys
disclosure controls and procedures were not effective on January 31, 2005 in
providing reasonable assurance that information required to be disclosed in the
reports we file pursuant to the Securities Exchange Act of 1934 was recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms.

More
specifically, the Companys management has concluded that (i) additional
accounting personnel were needed both at the parent company level and at certain
subsidiaries at January 31, 2005 to ensure that certain disclosure controls and
procedures were operating effectively; (ii) greater segregation of duties was
needed in the accounting functions; and (iii) certain procedures should be
documented to ensure that personnel turnover does not result in a failure of
those procedures. In fiscal 2004 the Company hired two additional employees to
join the accounting staff and is evaluating how best to utilize the time of
these new employees. The Company will continue to evaluate the need for
additional staff at the parent and subsidiary levels, but given the size and
location of the Companys subsidiaries the Company believes it will
continue to face challenges in attracting and retaining qualified personnel.
Additionally, the Company is also in the process of evaluating ways in which the
impact of personnel turnover on the implementation of disclosure controls and
procedures can be reduced. Finally, as discussed below, the Company believes that the
implementation of its new accounting system has enhanced the segregation of
duties of accounting personnel, although management continues to evaluate the
effectiveness of this segregation and the need for additional enhancements,
including, but not limited to, the addition of accounting personnel.

In fiscal
2004, the Company implemented an enterprise wide, integrated accounting system
that replaced the separate accounting systems previously maintained by the
several subsidiaries and since that date has implemented an enhanced segregation
of duties of various accounting personnel. There have been no other significant
changes in the Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the date of the January 31,
2005 evaluation.

34

OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

PART II  OTHER INFORMATION

|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

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

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

|ITEM 2. | CHANGES IN SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------

None.

|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

Uniteds existing line of credit and term loan with First Indiana has matured
and the Company is currently in negotiations with a new lender to replace these
loans. Management expects to complete the refinancing of this debt in the first
half of fiscal 2005. Under the terms of the new commitment, the maximum
borrowing availability will increase by $1,400. Upon completions of this
refinancing, Uniteds working capital will improve by approximately $4,100, as
that amount of the debt will be reclassified from current to long-term, less the
current portion.

Additionally, at January 31, 2005, United did not meet financial covenants under
the terms of its term note with Huntington Capital Investment Company.
Specifically, United did not meet its EBITDA and fixed charge coverage ratios.
Huntington Capital Investment Company waived these covenant violations as of
January 31, 2005. All amounts under the term note are classified as current
until the Company and Huntington Capital Investment Company enter into an
amendment, currently being negotiated, to provide relief under these covenants.

In November
2004, Obsidian Leasings credit facility with Old National Bank matured and
Obsidian Leasing now has current debt obligations due of $3,260. The Company is
in the process of negotiating a forbearance agreement with Old National Bank,
and management is actively working to refinance this debt with other banks in
the first half of fiscal 2005. Should refinancing or an extension of the current
agreement not be obtained by the expiration date of the forbearance agreement,
the debt will be repaid through current sources of availability including
borrowings under the Companys line of credit and agreements with Fair
Holdings. In addition, Fair Holdings has informally indicated that it would make
available additional financial support if necessary, although we currently do
not have any commitment for such support. Additionally, in November 2004,
management sold two older coaches, reducing Obsidian Leasings debt by
$209. Management is also in negotiations to sell three additional coaches, which
will further reduce debt by an estimated $354.

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

No matters
were submitted to a vote of our stockholders during the first quarter of fiscal
2005.

|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.

|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------

# EXHIBITS

The exhibits
filed as part of this Form 10-Q are listed in the Exhibit Index, which is
incorporated herein by reference.

# REPORTS ON FORM 8-K

None.

35

# 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.

|March 17, 2005
Date | OBSIDIAN ENTERPRISES, INC.
By:  /s/ Timothy S. Durham
Timothy S. Durham, Chairman and Chief Executive Officer
|------------------- | -------------------------------------------------------------------------------------------------------------

|March 17, 2005
Date | By:  /s/ Rick D. Snow
Rick D. Snow, Executive Vice President/Chief Financial Officer
|------------------- | ------------------------------------------------------------------------------------

36

EXHIBIT INDEX

|Exhibit No. | Description | 
|----------- | ----------- | 

|3.1 | Articles of Incorporation | Incorporated by reference to Exhibit 3.3 to Amendment No. 1 to the Registration
Statement on Form S-4 filed on December 17, 2003
|--- | ------------------------- | --------------------------------------------------------------------------------------------------------------------------------

|3.2 | By-laws | Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on
Form 10K for the Year Ended October 31, 2002
|--- | ------- | --------------------------------------------------------------------------------------------------------------------------

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

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

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