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

     (Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2004; 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       (I.R.S. Employer Identification No.)
      incorporation or organization)


            111 MONUMENT CIRCLE, SUITE 4800                      46204
                 INDIANAPOLIS, INDIANA
     ----------------------------------------------     ------------------------
       (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 _X_    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               Outstanding at
                  $.0001 par value           June 14, 2004
                                             3,109,333 shares


<PAGE>



                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
                                      INDEX

                                                                            PAGE

PART I - FINANCIAL INFORMATION:

  Item 1 - Condensed Consolidated Financial Statements:

           Condensed Consolidated Balance Sheets - April 30, 2004
             and October 31, 2003                                             3

           Condensed Consolidated Statements of Operations
             Three and Six Months Ended April 30, 2004 and 2003               5

           Condensed Consolidated Statement of Changes of Stockholders'
             Deficit and Comprehensive Loss                                   6

           Condensed Consolidated Statements of Cash Flows
             Three and Six Months Ended April 30, 2004 and 2003               7

           Notes to Condensed Consolidated Financial Statements               9

  Item 2 - Management's Discussion and Analysis of Financial Condition
    and Results of Operations                                                22

  Item 3 - Quantitative and Qualitative Disclosures About Market Risk        31

  Item 4 - Controls and Procedures                                           31


PART II - OTHER INFORMATION:

  Item 1 - Legal Proceedings                                                 32

  Item 2 - Changes in Securities, Use of Proceeds and Issuer
           Purchases of Equity Securities                                    32

  Item 3 - Defaults Upon Senior Securities                                   33

  Item 4 - Submission of Matters to a Vote of Security Holders               33

  Item 5 - Other Information                                                 33

  Item 6 - Exhibits and Reports on Form 8-K                                  33






                                       2
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<CAPTION>


                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                              OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (in thousands except share data)
                                                               (unaudited)


                                                                                    April 30,       October 31,
                                                                                      2004             2003
                                                                                 ----------------------------------
<S>                                                                                <C>             <C>
Assets

Current assets:
    Cash and cash equivalents                                                      $          561  $        1,148
    Marketable securities                                                                      80             114
    Accounts receivable, net of allowance for doubtful accounts
      of $506 for 2004 and $496 for 2003                                                    3,922           3,665
    Accounts receivable, related parties                                                       77              52
    Inventories, net                                                                        8,083           7,455
    Prepaid expenses and other assets                                                         871           1,081
                                                                                 ----------------------------------

Total current assets                                                                       13,594          13,515

Property, plant and equipment, net                                                         23,729          24,480

Other assets:
    Other intangible assets, net of accumulated amortization of $1,082 for
      2004 and $907 for 2003                                                                7,633           7,878
    Other                                                                                      13               9
                                                                                 ----------------------------------
                                                                                   $      44,969   $       45,882
                                                                                 ==================================




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

</TABLE>




                                       3
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<TABLE>
<CAPTION>



                                            OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (in thousands except per share and share data)
                                                            (unaudited)

                                                                                    April 30,       October 31,
                                                                                       2004             2003
                                                                                 ----------------------------------
<S>                                                                                <C>              <C>
Liabilities and Stockholders' Deficit

Current liabilities:
    Current portion of long-term debt                                              $        9,231   $        2,379
    Current portion of long-term debt, related parties                                                          --
    Accounts payable, trade                                                                 5,467            2,742
    Accounts payable, related parties                                                         758              837
    Accrued expenses and customer deposits                                                  1,337            1,512
                                                                                 ----------------------------------

Total current liabilities                                                                  16,793            7,470

Accounts payable, related parties                                                             556               --

Long-term debt, net of current portion                                                     16,945           24,765

Long-term debt, related parties                                                            16,071           13,937

Deferred income tax liabilities                                                               647              651

Commitments and contingencies

Minority interest                                                                             196              172

Redeemable stock:
  Common stock, 154,482 shares outstanding for 2004                                         1,007               --
  Class of Series C Preferred Stock: 386,206 shares outstanding for
    2003                                                                                       --            1,803
  Class of Series D Preferred Stock: 32,143 shares outstanding for 2003                        --              337

Stockholders' equity (deficit):
    Common stock, par value $.0001 per share; 10,000,000 shares authorized,
     outstanding 2,784,400 in 2004, 720,157 in 2003                                             1                1
    Preferred stock, 5,000,000 shares authorized, no shares outstanding in
     2004; Class of Series C convertible preferred stock, par value $.001,
     4,600,000 authorized, 3,982,193 issued and outstanding for 2003, 200,000
     shares of undesignated preferred stock authorized                                         --                5
    Preferred stock, 200,000 shares authorized, no shares outstanding in 2004;
     Class of Series D convertible preferred stock, par value $.001, 88,330
     shares issued and outstanding in 2003                                                     --               --
    Additional paid-in capital                                                             12,625           11,745
    Accumulated other comprehensive loss                                                      (34)              --
    Accumulated deficit                                                                   (19,838)         (15,004)
                                                                                 ----------------------------------

Total stockholders' deficit                                                                (7,246)          (3,253)
                                                                                 ----------------------------------

                                                                                   $       44,969   $       45,882
                                                                                 ==================================



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


                                       4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                              OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                            (in thousands except per share and share data)
                                                              (unaudited)


                                                       Three Months Ended                  Six Months Ended
                                               ----------------------------------------------------------------------
                                                April 30, 2004   April 30, 2003    April 30, 2004    April 30, 2003
                                               ----------------------------------------------------------------------
<S>                                              <C>              <C>               <C>               <C>
Net sales                                        $       16,292   $       15,107    $     28,338      $     26,007

Cost of sales                                            15,189           13,316          26,168            23,056
                                               ----------------------------------------------------------------------

Gross profit                                              1,103            1,791           2,170             2,951

Selling, general and administrative expenses              3,019            2,197           5,364             4,253
                                               ----------------------------------------------------------------------

Loss from operations                                     (1,916)            (406)         (3,194)           (1,302)

Other income (expense):
  Interest expense, net                                    (982)            (904)         (1,951)           (1,688)
  Other expense, net                                          8               --              37                 3
                                               ----------------------------------------------------------------------

Loss before income taxes and discontinued
 operations                                              (2,890)          (1,310)         (5,108)           (2,987)

Income tax benefit                                           --              401              --               559
                                               ----------------------------------------------------------------------

Loss before discontinued operations                      (2,890)            (909)         (5,108)           (2,428)

Loss from discontinued operations, net of tax                --               --              --               (49)
                                               ----------------------------------------------------------------------

Loss before minority interest                            (2,890)            (909)         (5,108)           (2,477)
                                               ----------------------------------------------------------------------

Minority interest                                             7               --             (24)               --
                                               ----------------------------------------------------------------------

Net loss                                         $       (2,883)  $         (909)   $     (5,132)     $     (2,477)
                                               ======================================================================

Basic and diluted loss per share
 attributable to common shareholders:
  From continuing operations                     $        (1.00)  $        (1.26)   $      (3.28)     $      (3.37)
  Discontinued operations, net of tax                        --               --           --                 (.07)
                                               ----------------------------------------------------------------------

Net loss per share                               $        (1.00)  $        (1.26)   $      (3.28)     $      (3.44)
                                               ======================================================================

Weighted average common shares outstanding
 basic and diluted                                    1,941,861          720,157       1,320,884           720,157
                                               ======================================================================



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





                                       5
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<TABLE>
<CAPTION>



                                              OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                           CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND COMPREHENSIVE LOSS
                                                        (dollars in thousands)
                                                              (unaudited)


                                                                                        Series C Convertible   Series D Convertible
                                                     Comprehensive     Common Stock        Preferred Stock       Preferred Stock
                                                                   -----------------------------------------------------------------
                                                         Loss        Shares     Amount     Shares     Amount     Shares      Amount
                                                     -------------------------------------------------------------------------------

<S>                <C> <C>                                             <C>      <C>        <C>        <C>          <C>       <C>
Balance at October 31, 2003                                            720,157  $     1    3,982,193  $     5      118,687   $    --

Assignment  of 16,071  shares of Series D  mandatory
 redeemable Preferred Stock                            $       --           --       --           --       --       16,071        --

Extension of stock options                                     --           --       --           --       --           --        --

Conversion  of  Series C and  Series  D  convertible
 Preferred Stock to common stock                               --    2,064,243       --   (3,982,193)      (5)    (134,758)       --

Loss on available-for-sale marketable securities              (34)          --       --           --       --           --        --

Fair value adjustment on redeemable Preferred Stock            --           --       --           --       --           --        --

Net loss                                                   (5,132)          --       --           --       --           --        --
                                                     -------------------------------------------------------------------------------

Total comprehensive loss                               $   (5,166)
                                                     ==============


Balance at April 30, 2004                               $12,625   $     (34)     $(19,838)  $(7,246)
                                                     ===============================================





                                                      Additional    Other
                                                       Paid-in  Comprehensive  Accumulated
                                                       Capital      Loss         Deficit     Total
                                                     -----------------------------------------------

Balance at October 31, 2003                             $11,745   $      --      $(15,004)   $(3,253)

Assignment  of 16,071  shares of Series D  mandatory
 redeemable Preferred Stock                                  337         --            --        337

Extension of stock options                                    40         --            --         40

Conversion  of  Series C and  Series  D  convertible
 Preferred Stock to common stock                               5         --            --         --

Loss on available-for-sale marketable securities              --        (34)           --        (34)

Fair value adjustment on redeemable Preferred Stock          498         --           298        796

Net loss                                                      --         --        (5,132)    (5,132)
                                                     -----------------------------------------------

Total comprehensive loss

Balance at April 30, 2004                               $12,625   $     (34)     $(19,838)   $(7,246)
                                                     ===============================================


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


</TABLE>

                                       6
<PAGE>
<TABLE>
<CAPTION>

                                              OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                            (in thousands)
                                                             (unaudited)

                                                                                           Six Months Ended
                                                                                    --------------------------------
                                                                                    April 30, 2004    April 30, 2003
                                                                                    --------------------------------
<S>                                                                                   <C>             <C>
Cash flow from operating activities:
  Loss from continuing operations                                                     $    (5,132)    $    (2,428)
  Adjustments to reconcile loss from continuing operations to net cash used in
   operating activities:
  Depreciation and amortization                                                             1,563           1,446
  Other                                                                                       201            (413)
  Changes in operating assets and liabilities
    Accounts receivable, net                                                                 (269)           (687)
    Inventories, net                                                                         (628)           (614)
    Other, net                                                                              2,764             100
                                                                                    --------------------------------

Net cash used in operating activities                                                      (1,501)         (2,596)
                                                                                    --------------------------------

Cash flows from investing activities:
  Capital expenditures                                                                       (627)           (296)
  Other                                                                                        60              --
                                                                                    --------------------------------

Net cash used in investing activities                                                        (567)           (296)
                                                                                    --------------------------------

Cash flows from financing activities:
  Advances from (repayments to) related parties, net                                        1,312            (961)
  Net borrowings (repayments) on lines of credit                                             (193)          1,188
  Net borrowings (repayments) on long-term debt, including related parties                    362           2,533
                                                                                    --------------------------------

Net cash provided by financing activities                                                   1,481           2,760

Net cash used in discontinued operations                                                       --             (41)
                                                                                    --------------------------------

Decrease in cash and cash equivalents                                                        (587)           (173)

Cash and cash equivalents, beginning of period                                              1,148             920
                                                                                    --------------------------------

Cash and cash equivalents, end of period                                              $       561     $       747
                                                                                    ================================

Interest paid                                                                         $     1,160     $       832
                                                                                    ================================

Taxes paid                                                                            $        57     $        63
                                                                                    ================================



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

</TABLE>

                                       7
<PAGE>
<TABLE>
<CAPTION>

                                    OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (in thousands)
                                                   (unaudited)

                                                                                           Six Months Ended
                                                                                    --------------------------------
                                                                                    April 30, 2004  April 30, 2003
                                                                                    --------------------------------
<S>                                                                                   <C>             <C>
Supplemental disclosure of noncash operating, investing and financing
 activities:
Acquisition of coaches and equipment through issuance of debt                         $        --     $     2,304
Contribution to capital from sale of Champion to related party                        $        --     $     1,142
Issuance of mandatory redeemable preferred stock in conjunction with the sale of
   Champion                                                                           $        --     $       675
Tax effect of sale of coaches to a related party                                      $        --     $        96
Fair value change on redeemable stock                                                 $       796     $      (131)
Reclassification of debt due to assumption of credit agreement by Fair
   Holdings                                                                           $        --     $     1,488
Assignment and assumption of mandatory redeemable preferred stock                     $       337     $        --






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




</TABLE>

                                       8
<PAGE>




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

Pursuant to the Plan of Acquisition and Reorganization, United Expressline, Inc.
was acquired July 31, 2001.

The  accompanying  financial  data as of April 30,  2004 and for the six  months
ended April 30, 2004 and 2003 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, 2003 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, 2003.  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 April 30, 2004 and results of  operations,  cash flows
and  stockholders'  deficit  for the six months  ended  April 30, 2004 have been
made.  The results of operations for the six months ended April 30, 2004 are not
necessarily  indicative of the operating results for the full fiscal year or any
future periods.

The entities  resulting from the merger described above,  considered  accounting
subsidiaries of U.S. Rubber Reclaiming, Inc. (the accounting acquirer) and legal
subsidiaries  of Obsidian  Enterprises,  Inc. after the  Acquisition and Plan of
Reorganization are as follows:

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.

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



                                       9
<PAGE>
                   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

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

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"),  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,  Inc.  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.

United  Expressline,  Inc.  ("United")  manufactures and sells general use cargo
trailers  and  specialty  trailers  used in the  racing  industry  and for other
special purposes.

Champion  Trailer,  Inc.  ("Champion"),  which  manufactures and sells transport
trailers to be used  primarily in the auto racing  industry.  Effective  October
2002, the Company's  Board of Directors  agreed to a plan to dispose of Champion
as further  described in Note 3. The sale of Champion was completed  January 30,
2003.  Accordingly,  the operations of Champion are  classified as  discontinued
operations in the accompanying financial statements.


BASIS OF PRESENTATION:

In the period since June 2001, the Company has incurred losses and reductions in
equity.  During this period losses and certain  third-party debt repayments have
been financed with DC  Investments,  LLC ("DC  Investments")  and its subsidiary
Fair Holdings,  Inc.  ("Fair  Holdings"),  entities  controlled by the Company's
Chairman.  Borrowings  from DC Investments  and Fair Holdings have been on terms
that may not have been available from other sources. As of April 30, 2004, total
debt  outstanding to DC Investments  and Fair Holdings was $16,792.  The Company
incurred  a net  loss for the year  ended  October  31,  2003 of  $3,873,  which
included a loss from  discontinued  operations of $49. In addition,  the Company
incurred  a net loss from  continuing  operations  of $5,132  for the six months
ended April 30, 2004.

The Company has  continued  to address  liquidity  and working  capital  through
various means  including  operational  changes and  refinancing  existing  debt.
During the period these plans were put in place, the Company received  financial
support from Fair Holdings.

During 2003, the Company undertook various actions to improve its operations and
liquidity.  Such  actions  as  described  below  include  the sale of  Champion,
conversion of debt to equity and refinancing of certain of its debt  agreements.
Management  believes  that the  Company  has  financing  agreements  in place to
provide adequate liquidity and working capital throughout fiscal 2004.  However,
there can be no assurance  that such working  capital and liquidity will in fact
be adequate. Therefore, the Company may be required to draw upon other liquidity
sources.  The Company has therefore  secured an increased  financial  commitment
from Fair Holdings to provide, as needed,  additional borrowings under a $15,000
line of credit agreement, which expires January 1, 2007. Currently, availability
under the agreement is approximately $7,186.




                                       10
<PAGE>

                   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

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 and generating
positive  cash flow and  earnings,  is taking the  actions as  described  below.
Although   management   believes  these  actions  will  improve  operations  and
liquidity, there can be no assurance that such actions will sufficiently improve
operations or liquidity.

     o    We commenced a strategy in late 2003 of pursuing 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  believed  to be
          attractive.  While no material  negotiations are currently active with
          respect to any targets,  we anticipate that over the course of 2004 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.

     o    Implementation  of the new fine grind production  process in the butyl
          rubber reclaiming segment. The new process provides the opportunity to
          maximize the use of the existing raw  materials in the existing  butyl
          reclaim production and also provides potential  additional  production
          of natural rubber.

     o    We continue to organize  our butyl  rubber  reclamation  project  with
          chapters  of the Future  Farmers of  America  in various  States.  The
          success of this project will provide a new resource for  obtaining the
          additional raw materials for our butyl reclaim segment.

     o    Capitalize on the trailer  production line that provides a new product
          line  at  Danzer   Industries  and  its  existing  and  potential  new
          customers.  This production line and related sales effort have allowed
          us to enter a new market  along the East coast of the U.S. Our ability
          to capitalize on this opportunity will be a determining  factor on our
          ability to reduce this  operation's use of working capital  resources.
          Management  will  continue to evaluate the  operations on a continuous
          basis.




                                       11
<PAGE>


                   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 Partners." They
are also mitigated by the divestiture of Champion completed in January 2003, and
the completed refinancing efforts over the past year with respect to U.S. Rubber
and the coach leasing segment.

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 4.


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.


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. In
addition,  the  Company has  options  outstanding  to purchase a total of 16,000
shares of common stock, at a weighted average exercise price of $4.50.  However,
because  the Company  incurred a loss for the  periods  ended April 30, 2004 and
2003,  respectively,  the  inclusion  of those  potential  common  shares in the
calculation of diluted loss per share would have an antidilutive effect.




                                       12
<PAGE>
<TABLE>
<CAPTION>

                   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 Company's Series C Preferred Stock and Series D Preferred Stock,  which have
all the rights and privileges of the Company's  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,  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 April 30, 2004.

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

                                                    Three Months Ended                      Six Months Ended
                                          --------------------------------------- --------------------------------------
                                            April 30, 2004      April 30, 2003     April 30, 2004      April 30, 2003
                                          ------------------- ------------------- ------------------ -------------------
<S>                                         <C>                 <C>                 <C>                <C>
Loss before discontinued operations and
 minority interest                          $       (2,883)     $         (909)     $       (5,132)    $       (2,428)
Change in fair value of mandatory
 redeemable stock                                      935                 (32)                796               (131)
                                          ------------------- ------------------- ------------------ -------------------

Loss attributable to common
 shareholders before discontinued
 operations                                         (1,948)               (941)             (4,336)            (2,559)

Loss from discontinued operations, net
 of tax                                                 --                  --                  --                (49)
                                          ------------------- ------------------- ------------------ -------------------

Net loss attributable to common
 shareholders                               $       (1,948)     $         (941)     $       (4,336)    $       (2,608)
                                          =================== =================== ================== ===================

Weighted average common shares
 outstanding, basic and diluted                  1,941,861             720,157           1,320,884            720,157
                                          =================== =================== ================== ===================

Loss per share, basic and diluted,
 attributable to common shareholders:

  From continuing operations                $      (1.00)       $      (1.26)       $      (3.28)      $      (3.37)
  Discontinued operations                             --                  --               --                  (.07)
                                          ------------------- ------------------- ------------------ -------------------

Net loss per share                          $      (1.00)       $      (1.26)       $      (3.28)      $      (3.44)
                                          =================== =================== ================== ===================




                                       13
</TABLE>
<PAGE>

                   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 have been as follows:

<TABLE>
<CAPTION>

                                                Three Months Ended                      Six Months Ended
                                       -------------------------------------- -------------------------------------
                                        April 30, 2004      April 30, 2003     April 30, 2004     April 30, 2003
                                       ------------------ ------------------- ------------------ ------------------

<S>                                      <C>                <C>                 <C>                <C>
Net loss as reported                     $       (2,883)    $         (909)     $       (5,132)    $       (2,477)
Deduct total stock-based employee
 compensation expense determined
 under fair value methods                            --                 --                  --                 --
                                       ------------------ ------------------- ------------------ ------------------

Pro forma net loss                               (2,833)              (909)             (5,132)            (2,477)

Loss per share:
  As reported, basic and diluted:        $        (1.00)    $        (1.26)     $        (3.28)    $        (3.44)

  Pro forma, basic and diluted:          $        (1.00)    $        (1.26)     $        (3.28)    $        (3.44)


</TABLE>

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 and six  months  ended  April 30,  2004 and  2003.  During  2004 and 2003,
certain  options  were  extended.  Their  effect  on pro forma  net  income  was
immaterial.




                                       14
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)



2.   INVENTORIES

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

                                             April 30,         October 31,
                                                2004               2003
                                         ------------------ -------------------

        Raw materials                      $        5,059     $        4,647
        Work-in-process                               887                499
        Finished goods                              2,444              2,630
        Valuation reserve                            (307)              (321)
                                         ------------------ -------------------

        Total                              $        8,083     $        7,455
                                         ================== ===================


3.   DISCONTINUED OPERATIONS

On October 30, 2002, the Company's Board of Directors  agreed to sell the assets
of Champion to an entity controlled by Messrs. Durham and Whitesell (Officers of
the Company) for the  assumption of all  liabilities  of Champion  excluding its
subordinated  debt.  The  decision to divest  Champion was based on the entity's
inability to achieve  profitable  operations in the  foreseeable  future without
substantial  cash  infusion.  The Company also agreed in principal to settle the
outstanding  subordinated  debt due to Markpoint Equity Fund J.V.  ("Markpoint")
from  Champion in exchange  for a cash  payment of $675 and issuance to the debt
holder of 32,143 shares of the Company's  Series D Preferred Stock. In addition,
the agreement provided Markpoint the option to require the Company to repurchase
these shares at a price of $21 per share.  The sale of Champion was completed on
January 30, 2003.  Champion is accounted  for as a  discontinued  operation  and
therefore  the results of  operations  and cash flows have been removed from the
Company's continuing operations for all periods presented.

The sale of Champion resulted in an increase in equity of the Company of $1,142,
net of tax of $97.  No gain or loss was  recognized  on the sale  because of the
involvement of related parties.

A summary of the Company's discontinued  operations for the three and six months
ended April 30, 2003 are as follows:

                                        Three Months         Six Months
                                            Ended              Ended
                                       April 30, 2003      April 30, 2003
                                      ------------------ -------------------

        Net sales                       $           --     $          170
        Operating expenses                          --               (286)
        Interest                                    --                (85)
        Other                                       --                127
        Tax benefit                                 --                 25
                                      ------------------ -------------------

        Net loss                        $           --     $          (49)
                                      ================== ===================



                                       15
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)


4.   FINANCING ARRANGEMENTS

UNITED

At April 30, 2004,  United was not in compliance  with financial  covenants with
Huntington  Capital  Investment  Company.  Huntington Capital Investment Company
covenants  require  the  Company  to  maintain a minimum  level of fixed  charge
coverage.  Huntington  waived their covenant  violations and we are currently in
discussions regarding modifications to the covenants.


US Rubber Reclaiming, Inc.

At April 30, 2004 US Rubber Reclaiming,  Inc. was not in compliance with certain
covenants with PNC Bank requiring a fixed charge coverage ratio of not less than
1.0 to 1.0 and  maintaining  maximum  capital  expenditures of $400. The Company
received a waiver with certain conditions to be met by July 31, 2004 including a
capital contribution of $242.


GUARANTEES OF PARTNERS

We have an agreement  with 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  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.


5.   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  2003 and  through  the 2nd  quarter of 2004,  DC
Investments Leasing reported positive operating results.  As a result,  minority
interest  related to the income of DC  Investments  Leasing in the amount of $24
has been recorded as a charge in the April 30, 2004  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 six months ended April 30, 2004,
DW Leasing recorded income of $17. As of April 30, 2004,  accumulated  losses of
DW Leasing recognized in consolidated  statements of operations  exceeded income
by approximately $318.


6.   MANDATORY REDEEMABLE PREFERRED STOCK

On November 10, 2003,  Markpoint  exercised  its  remaining  Put Option that was
assigned to Fair  Holdings,  as discussed in Note 3.  Markpoint was paid $337 by
Fair  Holdings  and the  exercise  of the  option  resulted  in a  reduction  in
mandatory  redeemable  preferred  stock and an  increase in  additional  paid-in
capital of $337.




                                       16
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)



7.   STOCKHOLDERS' DEFICIT

On December 3, 2003, 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 of the reverse stock split and the
amendment to the Certificate of Incorporation,  approximately  720,157 shares of
common  stock were  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 2,219,013 shares including
154,482  shares  classified  as mandatory  redeemable  stock.  Preferred  shares
authorized  remain  five  million  shares  with no  preferred  shares  issued or
outstanding as of April 30, 2004.

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.



8.   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:

<TABLE>
<CAPTION>

                                                       Three Months Ended April 30, 2004
                           ------------------------------------------------------------------------------------------
                               Trailer                   Butyl Rubber
                            Manufacturing Coach Leasing   Reclaiming   Total Segments   Corporate     Consolidated
                           ------------------------------------------------------------------------------------------
<S>                          <C>             <C>          <C>            <C>           <C>            <C>
Sales:
  Domestic                   $   11,422      $    974     $    2,134     $   14,530    $         --   $     14,530
  Foreign                         1,108            --            654          1,762              --          1,762
                           ------------------------------------------------------------------------------------------

Total                        $   12,530      $    974     $    2,788     $   16,292    $         --   $     16,292

Cost of goods sold           $   11,858      $    528     $    2,803     $   15,189    $         --   $     15,189

Loss before taxes and        $
minority interest          (896)             $   (296)    $     (357)    $   (1,549)   $     (1,341)  $     (2,890)

Identifiable assets          $   20,248      $ 13,714     $   10,260     $   44,222    $        747   $     44,969

Depreciation and
amortization expense         $      176      $    226     $      353     $      756    $         34   $        789

Interest expense             $      421      $    273     $      125     $      819    $        163   $        982


</TABLE>

                                       17
<PAGE>
<TABLE>
<CAPTION>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)


8.   BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED


                                                       Three Months Ended April 30, 2003
                           ------------------------------------------------------------------------------------------
                               Trailer                   Butyl Rubber
                            Manufacturing Coach Leasing   Reclaiming   Total Segments   Corporate     Consolidated
                           ------------------------------------------------------------------------------------------
<S>                          <C>             <C>          <C>            <C>           <C>            <C>
Sales:
  Domestic                   $    9,970      $  1,419     $    2,439     $   13,828    $         --   $     13,828
  Foreign                           876            --            403          1,279              --          1,279
                           ------------------------------------------------------------------------------------------

Total                        $   10,846      $  1,419     $    2,842     $   15,107    $         --   $     15,107

Cost of goods sold           $   10,034      $    732     $    2,550     $   13,316    $         --   $     13,316

Loss before taxes and
minority interest            $     (865)     $   (173)    $     (129)    $   (1,167)   $       (143)  $     (1,310)

Identifiable assets          $   21,271      $ 13,871     $   10,363     $   45,505    $        756   $     46,261

Depreciation and
amortization expense         $      189      $    258     $      311     $      758    $         --   $        758

Interest expense             $      342      $    341     $      116     $      799    $        105   $        904





                                                        Six Months Ended April 30, 2004
                           ------------------------------------------------------------------------------------------
                               Trailer                   Butyl Rubber
                            Manufacturing Coach Leasing   Reclaiming   Total Segments   Corporate     Consolidated
                           ------------------------------------------------------------------------------------------

Sales:
  Domestic                   $   18,921      $  2,014     $    4,453     $   25,388    $         --   $     25,388
  Foreign                         2,088            --            862          2,950              --          2,950
                           ------------------------------------------------------------------------------------------

Total                        $   21,009      $  2,014     $    5,315     $   28,338    $         --   $     28,338

Cost of goods sold           $   19,746      $  1,115     $    5,307     $   26,168    $         --   $     26,168

Loss before taxes and
minority interest            $   (1,717)     $   (634)    $     (664)    $   (3,015)   $     (2,093)  $     (5,108)

Identifiable assets          $   20,248      $ 13,714     $   10,260     $   44,222    $        747   $     44,969

Depreciation and
amortization expense         $      355      $    435     $      705     $    1,500    $         68   $      1,563

Interest expense             $      818      $    601     $      242     $    1,661    $        290   $      1,951




</TABLE>

                                       18
<PAGE>
<TABLE>
<CAPTION>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)


8.   BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED



                                                       Six Months Ended April 30, 2003
                           ----------------------------------------------------------------------------------------
                               Trailer         Coach     Butyl Rubber
                            Manufacturing     Leasing     Reclaiming       Total       Corporate    Consolidated
                           ----------------------------------------------------------------------------------------
<S>                          <C>            <C>          <C>             <C>           <C>           <C>
Sales:
  Domestic                   $   16,982     $    2,526   $    4,652      $   24,160    $       --    $   24,160
  Foreign                         1,223             --          624           1,847            --         1,847
                           ----------------------------------------------------------------------------------------

Total                        $   18,205     $    2,526   $    5,276      $   26,007    $       --    $   26,007

Cost of goods sold           $   16,754     $    1,354   $    4,948      $   23,056    $       --    $   23,056

Loss before taxes and
minority interest            $   (1,867)    $     (400)  $     (478)     $   (2,745)   $     (242)   $   (2,987)

Identifiable assets          $   21,271     $   13,871   $   10,363      $   45,505    $      756    $   46,261

Depreciation and
amortization expense         $      378     $      448   $      620      $    1,446    $       --    $    1,446

Interest expense             $      674     $      611   $      239      $    1,524    $      164    $    1,688

</TABLE>

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 and six months ended April 30, 2004 and 2003,
allocated corporate expenses by segment were as follows:



                                  Three Months Ended     Six Months Ended
                                ---------------------------------------------
                                  April 30,   April 30, April 30,  April 30,
                                     2004       2003       2004      2003
                                ---------------------------------------------

Trailer manufacturing              $   844     $ 339    $ 1,275    $ 657
Coach leasing                          125        44        188       92
Butyl rubber reclaiming                213        90        323      189
                                -------------------------------------------

                                   $ 1,182     $ 473    $ 1,786    $ 938
                                ===========================================


                                       19
<PAGE>
<TABLE>
<CAPTION>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)


9.   RELATED PARTIES

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

                                                                   April 30,         October 31,
                                                                     2004               2003
                                                               ------------------ ------------------
<S>                                                              <C>                <C>
Balance sheet:
  Current assets:
    Accounts receivable, Obsidian Capital Partners               $          8       $          8
    Accounts receivable, DC Investments and Fair Holdings                  13                 --
    Accounts receivable, other affiliated entities                         56                 44
                                                               ------------------ ------------------

Total assets                                                     $         77       $         52
                                                               ================== ==================

  Current liabilities:
    Accounts payable, Obsidian Capital Company                   $         34       $        275
    Accounts payable, related parties                                      --                320
    Accounts payable, DC Investments and Fair Holdings                    721                221
    Accounts payable, other affiliated entities                             3                 21
  Long-term portion:
    Accounts payable, related parties                                     556                 --
    Notes payable, DC Investments                                         700                700
    Notes payable, Fair Holdings                                        7,557              7,192
    Line of credit, Fair Holdings                                       7,814              6,045
                                                               ------------------ ------------------

Total liabilities                                                $     17,385       $     14,774
                                                               ================== ==================
</TABLE>
<TABLE>
<CAPTION>

                                                   Three Months Ended                      Six Months Ended
                                          -------------------------------------- -------------------------------------
                                            April 30, 2004     April 30, 2003     April 30, 2004     April 30, 2003
                                          ------------------- ------------------ ------------------ ------------------
<S>                                         <C>                 <C>                <C>                <C>
Statement of operations:
  Interest expense, DC
    Investments and Fair Holdings           $        338        $        324       $        840       $        503
  Rent expense, Obsidian Capital
    Company                                 $         --        $         15       $         --       $         30
  Rent expense, Fair Holdings               $         13        $         13       $         26       $         18

</TABLE>


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,  amounts
that are  expected to be converted  to equity  subsequent  to April 30, 2004 and
October  31,  2003,  respectively,   or  amounts  converted  to  long-term  debt
subsequent to April 30, 2004.



                                       20
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except per share and share data)
                                   (unaudited)



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.


11.  SUBSEQUENT EVENTS

As of the  close of  business  on April 30,  2004,  Obsidian  Enterprises,  Inc.
acquired   all  of  the   outstanding   shares  of  capital   stock  of  Classic
Manufacturing, Inc. a Michigan-based manufacturer of open and enclosed trailers,
for a purchase  price of $2,250,000 in cash and 170,451  shares of the Company's
Common Stock.




                                       21
<PAGE>



                   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.  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

The  Company  operates  in three  industry  segments,  comprised  of trailer and
related transportation  equipment  manufacturing,  butyl rubber reclaiming,  and
coach  leasing.  Trailer  and  related  transportation  equipment  manufacturing
includes the operations of United and Danzer Industries. Butyl rubber reclaiming
includes the operations of U.S. Rubber and coach leasing includes the operations
of Pyramid, DW Leasing, Obsidian Leasing and DC Investments Leasing.

Champion is accounted for as a discontinued operation, therefore, its results of
operations  and cash  flow  have  been  removed  from the  Company's  continuing
operations for all periods presented.


RESULTS OF OPERATIONS

The Company's overall  operating results and financial  condition during the six
months ended April 30, 2004 compared to the six months ended April 30, 2003 were
adversely  affected by the limited  availability  of raw  materials in the butyl
reclaiming segment,  significant  increases in material costs in the trailer and
related  transportation  manufacturing  segment  primarily  related to steel and
plywood. Also there was decrease in availability of freight carriers and adverse
weather  conditions that affected the Company's ability to deliver orders in the
trailer and related transportation equipment manufacturing segment.

During the quarter  ended April 30, 2004 we  initiated  price  increases  on our
products in the trailer and related transportation manufacturing segment ranging
form nine to eleven percent.  These price  increases were  implemented to offset
the significant increases we experienced in material costs.

We  commenced  a  strategy  in  late  2003  of  pursuing  strategic  acquisition
opportunities that include targets both in our traditional, basic industries and
manufacturing  sectors as well as targets that possessed assets (including cash)
that, while outside our traditional areas of focus, were available on terms that
our management believed to be attractive.  During the six months ended April 30,
2004 we were active with respect to an exchange offer for Net Perceptions,  Inc.
As of April 2, 2004 we  withdrew  our offer  with  respect  to the  exchange  of
shares. We incurred expenses for the exchange offer which totaled $577 above our
normal  administrative  expenses.  We anticipate that over the course of 2004 we
will pursue other acquisition opportunities that we deem attractive in a variety
of  industry  sectors.  Ultimately,  these  acquisitions  may  (but  can  not be
guaranteed  to) result in our  qualifying  for  listing  on the Nasdaq  SmallCap
Market or a national securities  exchange,  having increased financial resources
and potentially a broader asset base and more diversified sources of revenue.



                                       22
<PAGE>
<TABLE>
<CAPTION>


The following table shows net sales by product segment:

                                            Three Months Ended                           Six Months Ended
                                 ------------------------------------------ -------------------------------------------
                                    April 30, 2004       April 30, 2003        April 30, 2004        April 30, 2003
                                 --------------------- -------------------- --------------------- ---------------------
<S>                                  <C>                   <C>                  <C>                   <C>
Trailer manufacturing                $     12,530          $     10,846         $     21,009          $     18,205
Butyl rubber reclaiming                     2,788                 2,842                5,315                 5,276
Coach leasing                                 974                 1,419                2,014                 2,526
                                 --------------------- -------------------- --------------------- ---------------------

Net Sales                            $     16,292          $     15,107         $     28,338          $     26,007
                                 ===================== ==================== ===================== =====================



The  following is a discussion  of the major  elements  impacting  the Company's
operating  results by segment for the three and six months  ended April 30, 2004
compared to the three and six months  ended April 30, 2003.  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.


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                           Six Months Ended
                                 ------------------------------------------ -------------------------------------------
                                    April 30, 2004       April 30, 2003        April 30, 2004        April 30, 2003
                                 --------------------- -------------------- --------------------- ---------------------

Net Sales                            $     12,530          $     10,846         $     21,009          $     18,205
Cost of Sales                              11,858                10,034               19,746                16,754
                                 --------------------- -------------------- --------------------- ---------------------

Gross Profit                         $        672          $        812         $      1,263          $      1,451
                                 ===================== ==================== ===================== =====================

Gross Profit %                                5.4%                  7.5%                 6.0%                  8.0%
                                 ===================== ==================== ===================== =====================

</TABLE>


Three Months  Ended April 30, 2004  Compared to The Three Months Ended April 30,
2003

Net sales in this  segment for the three months ended April 30, 2004 as compared
to the three month period ended April 30, 2003 increased  15.5% in the amount of
$1,684.  Sales in this segment were higher than the prior year due  primarily to
two factors.  First, a discount/rebate  program was implemented in February 2003
for the cargo  trailers to stimulate  sales and remain  competitive  until a new
economy cargo trailer was introduced.  The discounts  totaled $600 for the three
months ended April 30, 2004 and no special discount  programs have been offered.
Cargo  trailer sales have also  increased at our  Hagerstown MD facility by $473
for the three  months ended April 30,  2004.  Sales of truck bodies  continue to
lag, and are below 2003 and  decreased $38 for the quarter ended April 30, 2004.
The Company  does not  anticipate  any  significant  pick up in orders from this
segment's truck body customers in the near future.

The gross profit percentage  decreased 2.1% for the three months ended April 30,
2004. The reduction in gross profit is attributable to the following factors.

First we have experienced  significant  price increases from our vendors for raw
materials, primarily for steel and plywood. The increases on average ranged from
20 to 55 percent. During our second quarter sales prices were increased by 9% to
realign our margins to offset the material cost increases.

Second, during the first quarter of 2003, the Company opened an additional cargo
trailer  manufacturing  facility.  This  facility  did not  obtain  the level of
efficiency as anticipated and therefore was closed during March 2004. Production
from this facility was redirected to our other operating facilities.






                                       23
<PAGE>

Gross profit has also been negatively  impacted by a reduction in sales of truck
bodies,  which has  reduced  the  ability to absorb  overhead  at the truck body
manufacturing  facility in Hagerstown MD. The Company began  manufacturing cargo
trailers in this facility to provide additional  capacity and serve new markets.
Production  levels are increasing but have not yet reached a level of efficiency
of existing cargo trailer facilities.  Management is currently analyzing the use
of the truck body facility and considering  options of continuing  production of
truck  bodies  and  cargo  trailers,  discontinuing  one of these  lines at this
facility or closing the facility.

In conjunction  with the analysis of operations at the truck body  manufacturing
facility,  management is also analyzing any potential  asset  impairment at this
facility.  Total  assets  of  Danzer as of April  30,  2004  were  $1,896  which
represents approximately 4% of consolidated total assets.


Six Months Ended April 30, 2004 Compared to The Six Months Ended April 30, 2003

Sales in this segment  increased  $2,804 or 15.4% over the comparable  period of
2003.  The increase was primarily  related to the  acceptance of our new product
introduction  of the economy line trailer as well as a stronger  order  position
for our cargo  trailers as compared to 2003.  Additional  capacity  was obtained
through our Hagerstown MD facility as well as increased  production at all other
operating  facilities.  The truck body line continues to be depressed as capital
spending in the telecommunications industries as remained low.

Looking ahead, for the trailer and related equipment  manufacturing  segment are
expected to grow in fiscal 2004  compared to fiscal  2003.  Orders for our cargo
trailers remain strong and have increased  approximately 43% and our new economy
line trailer is being well received by our customers.  We believe sales of truck
bodies will continue at about the same level as 2003 unless a replacement market
can be developed.

The gross profit  decrease of 2% was  primarily a result of  increased  material
cost.  The cost of plywood and steel,  major  components of our cargo  trailers,
increased  significantly  starting in August 2003 and  continued  through  April
2004.  The increase in price on average  ranged from 20 to 55%. We have and will
continue to evaluate  alternative  materials to replace the plywood and continue
to negotiate with new suppliers.  We also believe gross profits will continue to
be adversely impacted by the lack of sales volume in truck bodies during 2004 at
the Hagerstown, Maryland, plant. Although the Hagerstown plant has increased its
production and sales of cargo trailers,  the volume is currently below levels to
fully absorb its fixed overhead costs.


BUTYL RUBBER RECLAIMING

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

<TABLE>
<CAPTION>
                                          Three Months Ended                           Six Months Ended
                               ------------------------------------------ -------------------------------------------
                                  April 30, 2004       April 30, 2003        April 30, 2004        April 30, 2003
                               --------------------- -------------------- --------------------- ---------------------
<S>                                <C>                   <C>                  <C>                   <C>
Net Sales                          $     2,788           $     2,842          $     5,315           $     5,276
Cost of Sales                            2,803                 2,550                5,307                 4,948
                               --------------------- -------------------- --------------------- ---------------------

Gross Profit                       $       (15)          $       292          $         8           $       328
                               ===================== ==================== ===================== =====================

Gross Profit %                             (.5)%                10.3%                  .2%                  6.2%
                               ===================== ==================== ===================== =====================

</TABLE>

Three Months  Ended April 30, 2004  Compared To The Three Months Ended April 30,
2003

Net sales for the three months ended April 30, 2004  compared to same period for
2003 decreased $54 or 1.9%.  Sales in this segment  decreased due to the lack of
consistent  sources of raw materials.  In addition,  harsher weather  conditions
during the winter months slow the reclamation of butyl tubes in the North.





                                       24
<PAGE>

Gross profit  decreased  10.8% for the three  months  ended April 30, 2004.  The
primary  reasons  for this  decrease  are a lack of a  consistent  supply of raw
materials,  increased  energy costs and  increased  repairs and  maintenance  on
machinery and equipment.  The Company's  reclaim  process is most efficient when
raw  material  consists of  primarily  road worn inner tubes with a mix of other
butyl rubber. As a result of having to use less than optimum raw material mix in
the  reclaiming  process,  additional  processing  time is  incurred  to  ensure
delivery of quality product.


Six Months Ended April 30, 2004 Compared To the Six Months Ended April 30, 2003

Net sales in this segment for the six months ended April 30, 2004 as compared to
the six-month period ended April 30, 2003 increased .7% in the amount of $39.

Sales in this  segment  were  higher  than the six months  ended  April 30, 2002
because of increased demand from Company's tire manufacturing customers as noted
above. While the Company  experienced an increase in sales,  management does not
anticipate  a return to historic  levels of sales of  reclaimed  butyl rubber to
tire manufacturers, due to the lack of consistent sources of raw materials.

Looking   ahead,   future  sales  growth  will  depend   greatly  on  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  process will  increase the ability to utilize
some  additional  rubber products in our butyl reclaim process and add potential
new products.

Gross profit  percentage  decreased 6.0% for the six months ended April 30, 2004
compared to the six months  ended April 30, 2003.  As noted  above,  the primary
reasons for this decrease is a lack of a consistent  supply of raw materials and
increasing  energy costs and increased  repairs and maintenance on machinery and
equipment.  The Company's  reclaim  process is most  efficient when raw material
consists of  primarily  road worn inner tubes with a mix of other butyl  rubber.
Since the  introduction  of the  tubeless  tire for  automobiles  in the  1970s,
sources of material  have declined  substantially  and the cost of available raw
materials  has  increased.  As a result of having to use less than  optimum  raw
material mix in the reclaiming process,  additional  processing time is incurred
to ensure  delivery of quality  product.  In  addition,  alternative  sources of
material,  including overseas sources, are being pursued to provide a consistent
supply of material in the future. Until such time that consistent sources of raw
materials are  available,  sales growth and gross profit in this segment will be
limited.


COACH LEASING

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

<TABLE>
<CAPTION>
                                            Three Months Ended                           Six Months Ended
                                 ------------------------------------------ -------------------------------------------
                                    April 30, 2004       April 30, 2003        April 30, 2004        April 30, 2003
                                 --------------------- -------------------- --------------------- ---------------------
<S>                                 <C>                   <C>                  <C>                   <C>
Net Sales                           $        974          $      1,419         $      2,014          $      2,526
Cost of Sales                                528                   732                1,115                 1,354
                                 --------------------- -------------------- --------------------- ---------------------

Gross Profit                        $        446          $        687         $        899          $      1,172
                                 ===================== ==================== ===================== =====================

Gross Profit %                              45.8%                 48.4%                44.6%                 46.4%
                                 ===================== ==================== ===================== =====================


</TABLE>


Three Months  Ended April 30, 2004  Compared To The Three Months Ended April 30,
2003

Sales for the three months ended April 30, 2004  decreased  $445 or 31% from the
period April 30 2003. The decrease in sales relates to a lower utilization of or
fleet compared to the same period for 2003.  Our  management  believes the lower
utilization  is due to increased  market  competition.  Tours which utilized our
coaches during the winter months of 2003 did not return in 2004. The seasonality
of the segment  sales also have an impact and  historically  are stronger in the
spring, summer and fall.


                                       25
<PAGE>

The gross profit percentage  decreased 2.6% for the three months ended April 30,
2004  compared to the period  April 30,  2003.  The  reduction  is  attributable
primarily to the cost of maintaining a larger fleet and lower utilization of our
coaches for the three months ended April 30, 2004. Also additional  coaches were
leased from  unrelated  third parties to meet current  demand for newer coaches.
Third party leases reduce the overall gross margin of the segment.


Six Months Ended April 30, 2004 Compared To The Six Months Ended April 30, 2003

Sales for the six months  ended  April 30, 2004  decreased  20% in the amount of
$512 over the comparable  six-month period ended April 30, 2003. The decrease in
sales is  attributable  to  decreased  utilization  of the  coach  fleet  due to
increased market competition.  Our management believes utilization will increase
as a result from  marketing  efforts to  specialized  tour groups and  corporate
customers  through the remainder of 2004. These customers are in addition to the
traditional  country and western  performers  who have  traditionally  been this
segment's primary customer base.

Looking  ahead,  the first half of the year is typically  the  segment's  lowest
sales period due to seasonality. Business is historically stronger in the summer
and fall.

Gross  profit for this segment was 44.6% for the six months ended April 30, 2004
compared to 46.4% for the comparable  six-month  period ended April 30, 2003. As
noted above,  the reduction is  attributable  primarily to  additional  costs of
maintaining a larger fleet during the lower  utilization  period of the year and
the need to sublease newer coaches from third parties.


SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES

The Company's selling, general and administrative expenses increased $822 or 37%
for the three months  ended April 30, 2004  compared to the  three-month  period
ended April 30,  2003 and $1,111 or 26% for the six months  ended April 30, 2004
compared to the six-month  period ended April 30, 2003. The increase in expenses
were primarily  professional fees and other expenses related to the unsuccessful
exchange  offer for Net  Perceptions,  Inc. These expenses are non recurring and
totaled $577 for the six months ended April 30, 2004.  Other  increases  include
additional  marketing  expenses  for  website  advertising  and an  increase  in
amortization expense for the six months ended April 30, 2004.


INTEREST EXPENSE

Interest expense as a percentage of average borrowings is as follows:


<TABLE>
<CAPTION>
                                            Three Months Ended                           Six Months Ended
                                 ------------------------------------------ -------------------------------------------
                                    April 30, 2004       April 30, 2003        April 30, 2004        April 30, 2003
                                 --------------------- -------------------- --------------------- ---------------------
<S>                                 <C>                   <C>                  <C>                   <C>
Average debt borrowings             $     41,960          $     39,300         $     41,663          $     37,321

Interest expense as a
 percentage of average debt
 borrowings                                2.3%                  2.3%                 4.7%                  4.5%

Interest expense as a
 percentage of average debt
 borrowings, annualized                    9.4%                  9.2%                 9.4%                  9.0%
                                 ===================== ==================== ===================== =====================


</TABLE>

The increase is primarily due to the variable  rates and  refinancing of debt at
higher rates.




                                       26
<PAGE>

INCOME TAX PROVISION

There was no income tax benefit  recorded  for the three- or  six-month  periods
ended  April 30,  2004 as  compared  to $401 of tax  benefit in the  three-month
period  ended April 30, 2003 and $559 for the  six-month  period ended April 30,
2003.  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 quarter ended January 31, 2004 have
been reserved with a valuation  allowance.  Any quarterly tax benefits are based
on the estimated effective tax rate for the full year.


DISCONTINUED OPERATIONS

On  October  30,  2002,  the  Company's  Board  of  Directors   agreed  to  sell
substantially all assets of Champion to an entity  controlled by Messrs.  Durham
and Whitesell in exchange for assumption of all  liabilities of Champion,  other
than its subordinated debt. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 144,  Accounting for Impairment of Long-Lived Assets, the
operating  results of Champion have been classified as discontinued  operations.
The losses from discontinued  operations for the six months ended April 30, 2003
represent the losses of Champion during this period,  net of tax benefit of $97.
The loss from  discontinued  operations for the three and six months ended April
30, 2003 were $0 and $49, respectively.

Substantially  all assets of Champion  subject to its  liabilities  were sold on
January 30, 2003. No gain or loss was recognized in the  consolidated  statement
of  operations  due to the  involvement  of  related  parties.  The  benefit  of
liabilities  assumed by the  purchaser in excess of assets sold in the amount of
$1,142 was recorded as additional paid-in capital.


LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

In June  2001,  we  purchased  four new  businesses  and began  operations  as a
consolidated holding company with multiple operating subsidiaries. In the period
since June 2001, we have incurred  losses and  reductions in our equity.  During
this period we have financed our losses and have been able to refinance  certain
third-party  obligations  with DC  Investments,  LLC and  its  subsidiary,  Fair
Holdings,  and other third parties.  Our borrowings from Fair Holdings have been
on terms that may not have been available  from other  sources.  As of April 30,
2004,  our total  debt  outstanding  to DC  Investments  and Fair  Holdings  was
$16,792.

We are continuing to address our liquidity and working  capital  through various
means including  operational  changes and financing  matters which are discussed
below.  During the period  these plans are put in place,  we have  continued  to
receive  financing,  and  have  in  place  arrangements  to  receive  additional
financial support, from Fair Holdings, if necessary.


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 have separate  revolving credit agreements
and term loan  borrowings  through which the subsidiary  finances its operations
together with cash  generated  from  operations.  Our working  capital  position
(current  assets over  current  liabilities)  was  negative at April 30, 2004 by
$3,198.  At October 31,  2003,  our working  capital  position  was  positive by
$6,045.  The decrease in working capital is primarily  attributable to a balloon
payment on our coach group debt of approximately  $3,800 that is due in December
2004 and reclassification of approximately $4,000 of debt under revolving credit
lines that are due for  renewal in  November  2004.  Other  unfavorable  changes
include increases in accounts payable.




                                       27
<PAGE>

WORKING CAPITAL, CONTINUED

We continue to address liquidity and working capital issues in a number of ways.
At April 30, 2004, net cash used in continuing operations was $1,501 compared to
$2,549 in 2003.  The use of cash and working  capital was  primarily  related to
operating losses and business seasonality.  In 2004, we expect our operations to
generate positive cash and increase our overall working capital through improved
operations as follows:

     o    We continue to look for ways to strengthen our  liquidity,  equity and
          working capital through ongoing  evaluations of merger and acquisition
          candidates.

     o    Discontinuing the cargo trailer discounting program that ended in July
          2003 with the  introduction  of a new product line to replace the need
          to provide  discounts to maintain  market share.  The new product line
          has a competitive  price,  while  providing  gross profits at historic
          levels.

     o    Cost  reduction and  management  initiatives  for raw materials in the
          trailer  and related  transportation  manufacturing  segment  with the
          implementation  of  alternative  materials  and  additional  discounts
          through volume purchasing.

     o    Implementation  of the new fine grind production  process in the butyl
          rubber  reclaiming  segment.  The new process will maximize the use of
          the existing raw materials in the existing  butyl  reclaim  production
          and also provide potential additional production of natural rubber.

     o    Capitalize on the trailer  production  line put in place in the fourth
          quarter  of 2002 that  provides  a new  product  line to the  existing
          customers of Danzer.  This  production  line and related  sales effort
          have allowed us to enter a new market along the East coast of the U.S.
          Our ability to  capitalize on this  opportunity  will be a determining
          factor  on our  ability  to reduce  this  operation's  use of  working
          capital resources. Management will continue to evaluate the operations
          on a continuous basis.

     o    We secured an additional  financial  commitment  from Fair Holdings to
          provide,  as needed,  additional  borrowings  under a $15,000  line of
          credit  agreement,  which  expires  on  January  1,  2007.  Currently,
          approximately $7,186 is available to us under the agreement.

     o    We are  actively  working to  refinance  our current  maturities  on a
          long-term  basis.  Approximately  $7,800 of the current  maturities of
          long term debt is expected to be refinanced during fiscal 2004.

Management  believes the steps taken to improve our operations  will  positively
impact our liquidity and working  capital for fiscal 2004.  However,  success is
dependent on our ability to restore  gross  profits and  capitalize on potential
new markets in the trailer and  related  transportation  manufacturing  segment,
obtain  consistent  material supply in the butyl rubber  reclaiming  segment and
continue to grow the coach leasing  segment.  If our operating  results are less
than  expected,  the  increased  commitment  from  Fair  Holdings  will  provide
additional liquidity in 2004.


FINANCIAL COVENANT WAIVERS

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.  At
April 30, 2004, United had violated financial  covenants with Huntington Capital
Investment Company.  Huntington Capital Investment Company waived their covenant
violations and we are currently in discussions  regarding  modifications  to the
covenants.

US Rubber Reclaiming, Inc. did not meet its fixed charge coverage ratio covenant
with PNC Bank.  PNC  waived  their  covenant  and are  currently  in  process of
modifying the covenants and amending the loan agreement.




                                       28
<PAGE>

FUNDS AVAILABILITY

On a consolidated  basis,  as of April 30, 2004,  the Company had  approximately
$561 of cash and cash equivalents.  Danzer Industries,  U.S. Rubber,  United and
Obsidian  Enterprises  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 April 30, 2004,  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              $   28                     $   28
        U.S. Rubber                        --                         --
        United                             --                         --
        Obsidian Enterprises            7,186                      7,186

The Company  generated  negative net cash flow of $1,501 from operations  during
the six months ended April 30, 2004. Cash used in operations is primarily due to
operating  losses and increases in  inventories  offset by increases in accounts
payable.  The Company has  increased  inventories  primarily  in the trailer and
related  transportation   equipment  manufacturing  segment.   Inventories  were
increased  primarily  due to the  limited  availability  of freight  carriers to
deliver the products.  Funding during the period was provided through borrowings
on lines of credit and from related parties.


GUARANTEES OF PARTNERS

We have an agreement  with 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  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.


CASH FLOWS

Cash flow and liquidity are discussed  further  below,  and the footnotes to our
financial statements discuss cash flow, liquidity and the current classification
of debt.

We also have a commercial commitment as described below:



       Other Commercial          Total Amount   Outstanding at     Date of
         Commitment                Committed    April 30, 2004    Expiration
------------------------------   ------------   --------------    ----------


Line of credit, related party       $ 1,500        $ 1,472      April 1, 2006
Line of credit                        4,000          4,000      February 1, 2005
Line of credit                        4,000          2,172      October 1, 2005
Line of credit, related party        15,000          7,814      January 9, 2007

The  Company's  net cash used in  operations  for the six months ended April 30,
2004 was $1,501.  This is  comprised  of a loss from  continuing  operations  of
$5,132, offset by non-cash changes as follows:  depreciation and amortization of
$1,563,  accretion of interest expense of $137, minority interest of $24 and the
extension  of stock  options of $40. In addition,  the Company had  increases in
accounts  receivable  of $269,  inventories  of $629,  and  accounts  payable of
$2,725,  a decrease in accrued  expenses  and  customer  deposits  of $172,  and
decreases in other assets of $212.





                                       29
<PAGE>

Net cash flow provided from financing  activities for the six months ended April
30, 2004 was $1,481.  This is comprised of borrowings of long-term  debt and net
borrowings of short-term  debt of $358 and  borrowings  from related  parties of
$2,410, offset by principal repayments of long-term debt of $1,287.

Cash flow used in investing  activities  for the six months ended April 30, 2004
was $567. This is comprised of purchases of equipment of $627 net of proceeds on
sale of equipment of $60.


<TABLE>
<CAPTION>

The total decrease in cash is summarized as follows:

                                                                  Six Months Ended
                                                        --------------------------------------
                                                            April 30,           April 30,
                                                               2004               2003
                                                        ------------------- ------------------

<S>                                                       <C>                 <C>
Net cash used in operations                               $       (1,501)     $       (2,596)
Net cash used in investing activities                               (567)               (296)
Net cash provided by financing activities                          1,481               2,760
Net cash provided by (used in) discontinued operations                --                 (41)
                                                        ------------------- ------------------

Decrease in cash and cash equivalents                     $         (587)     $         (173)
                                                        =================== ==================

</TABLE>

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, 2003 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 2002 of a
customer  resulted  in a bad debt  charge of $379.  We believe  our  reserve for
doubtful  accounts of $506 should be  adequate  for any  exposure to loss in our
April 30,  2004  accounts  receivable.  We have also  established  reserves  for
slow-moving  and  obsolete  inventories  and  believe  the  reserve  of  $307 is
adequate.  We  depreciate  our property and  equipment  and amortize  intangible
assets (except for goodwill)  over their  estimated  useful lives.  Property and
equipment  is reviewed for  impairment  when events and  circumstances  indicate
potential impairment factors are present. In assessing the recoverability of the
Company's  property and  equipment,  the Company  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 their related assumptions
change in the future,  the Company may be required to record impairment  charges
for these assets in future periods.  Any such resulting impairment charges could
be material to the Company's results of operations.

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 the
goodwill  of $5,784 is  primarily  dependent  on the  future  operations  of the
operating  entity  whether the  goodwill is allocated  (at  United).  Historical
operating results,  current product demand and estimated future results indicate
the results of  operations  at United  should be adequate to continue to realize
this amount.  However,  future results may not meet expectations due to economic
or other factors,  and failure to meet  expectations  may result in the goodwill
not being fully  realizable and accordingly  result in impairment  charges which
could be material to the Company's operating results.




                                       30
<PAGE>

The initial cost of coaches acquired is depreciated  over a straight-line  basis
over  15  years  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  four 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 have
not disposed of a material  number of coaches,  and our estimate of depreciation
is based on information other than actual disposal experience.  Accordingly,  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
386,206  shares of Series C preferred  stock to  Huntington  Capital  Investment
Corporation  ("Huntington").  On March 12, 2004,  these shares were converted to
154,482  shares of common stock.  The  conversion  did not effect the repurchase
option described below.  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 April 30, 2004, 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 April 30,
2004.


ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk related to interest rate changes.  See the
discussion of market risk in  Management's  Discussion and Analysis of Financial
Condition and Results of Operations in Item 2, which  discussion is incorporated
by reference herein.


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.  Such
information  is  accumulated  and  communicated  to  the  Company's  management,
including  its  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate,  to allow  timely  decisions  regarding  required  disclosure.  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,  any controls
and  procedures,  no matter how well  designed  and  operated,  can provide only
reasonable, and not absolute, assurance of achieving the desired objectives. The
Company's management believes,  however,  that the Company's disclosure controls
and procedures  provide  reasonable  assurance that the disclosure  controls and
procedures are effective.

The  Company  has carried out as of April 30,  2004,  an  evaluation,  under the
supervision and with the  participation of the Company's  management,  including
the  Company's  Chief  Executive  Officer and Chief  Financial  Officer,  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures.  Based on this evaluation, the Chief Executive Officer and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures were effective.  Effective November 1, 2003, 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 and plans to physically  inventory our United  Expressline
operations on a quarterly  basis.  Management will continue to evaluate  whether
additional steps are needed to improve our financial infrastructure.  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 April 30, 2004 evaluation.



                                       31
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is 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,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
        SECURITIES

(a) At the Company's  Annual Meeting of  Stockholders  held on December 3, 2003,
the   stockholders   approved   amendments  to  the  Company's   Certificate  of
Incorporation  to implement a 50-to-1 reverse stock split and a reduction of the
Company's  authorized  shares of Common  Stock from  40,000,000  to  10,000,000.
Holders of fractional shares subsequent to the reverse stock split received cash
payments for their  fractional  shares.  On February 13, 2004, the Company filed
the  Certificate of Amendment  amending the Fourth Article of the Certificate of
Incorporation  with the  Delaware  Secretary  of State  and the  Certificate  of
Amendment became effective on February 16, 2004.

(b) Not applicable

(c) As disclosed in the Company's Annual Report on Form 10-K for the fiscal year
ended  October 31, 2003 (the "2003  10-K"),  which  disclosure  is  incorporated
herein by reference,  on February 9, 2004, the Company  received an extension of
the requirement to provide audited financial statements to debenture holders. In
exchange  for  this  extension,  the  Company  issued  warrants  to  each of the
debenture  holders to purchase up to 8,000 shares of the Company's  common stock
at an exercise  price of $10.00 per share.  These  warrants  expire  February 9,
2007.  The  issuances of the warrants  were made in reliance  upon the exemption
from the registration  provisions of the Securities Act of 1933, as amended, set
forth in Section 4(2) thereof,  for  transactions by an issuer not involving any
public offering and other applicable exemptions.  Copies of the February 9, 2004
warrant agreements were attached as exhibits to the 2003 Form 10-K.

As  disclosed  in a  Current  Report on Form 8-K  filed on May 14,  2004,  which
disclosure is incorporated  herein by reference,  on April 30, 2004, the Company
issued  170,451  shares of its  Common  Stock as partial  consideration  for the
acquisition of all of the outstanding shares of Classic  Manufacturing,  Inc., a
Michigan-based  manufacturer of trailers.  The issuances of the shares were made
in  reliance  upon  the  exemption  from  the  registration  provisions  of  the
Securities  Act of 1933,  as amended,  set forth in Section  4(2)  thereof,  for
transactions by an issuer not involving any public offering and other applicable
exemptions.

(d) Not applicable.

(e) The following  table  presents  information  on the  Company's  purchases of
equity securities during the quarter ended April 30, 2004.



                                       32
<PAGE>
<TABLE>
<CAPTION>



                                              Issuer Purchases of Equity Securities
---------------------------- ---------------------- ----------------------- ---------------------- -------------------------
                                                                                                   (d) Maximum Number (or
                                                                            (c) Total Number of    Approximate Dollar
                                                                            Shares (or Units)      Value) of Shares (or
                             (a) Total Number of    (b) Average Price       Purchased as Part of   Units) that May Yet be
                             Shares (or Units)      Paid per Share (or      Publicly Announced     Purchased Under the
Period                       Purchased              Unit)                   Plans or Programs      Plans or Programs
---------------------------- ---------------------- ----------------------- ---------------------- -------------------------
<C> <C>                               <C>                   <C>
February 1, 2004- February
29, 2004*                             328                   $12.09                   N/A                     N/A
---------------------------- ---------------------- ----------------------- ---------------------- -------------------------
March 1, 2004 -March 31,
2004                                  --                      --                     N/A                     N/A
---------------------------- ---------------------- ----------------------- ---------------------- -------------------------
April 1, 2004 to April 30,
2004                                  --                      --                     N/A                     N/A
---------------------------- ---------------------- ----------------------- ---------------------- -------------------------
Total                                 328                   $12.09                   N/A                     N/A
---------------------------- ---------------------- ----------------------- ---------------------- -------------------------

*On February 16, 2004, the Company  repurchased  fractional  share  interests in
connection with a 50-to-1 reverse stock split.

</TABLE>


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


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

None.


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.




                                       33
<PAGE>



                                   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.

                                      OBSIDIAN ENTERPRISES, INC.

June 21, 2004                         By: /s/ Timothy S. Durham
--------------                            --------------------------------------
 Date                                     Timothy S. Durham, Chairman and
                                              Chief Executive Officer




June 21, 2004                         By: /s/ Rick D. Snow
--------------                            --------------------------------------
Date                                       Rick D. Snow, Executive Vice
                                              President/Chief Financial Officer





                                       34
<PAGE>
<TABLE>
<CAPTION>



                                  EXHIBIT INDEX
<S>    <C>         <C>                                                             <C>

------------------ --------------------------------------------------------------- --------------------------------
   Exhibit No.                              Description
------------------ --------------------------------------------------------------- --------------------------------
       3.1         Certificate of Amendment (effective February 16, 2004)          Attached
------------------ --------------------------------------------------------------- --------------------------------
      10.1         Stock  Purchase  Warrant,  dated  February 9, 2004,  issued by  Incorporated by reference to
                   Obsidian  Enterprises,  Inc.  to HSBC Global  Custody  Nominee  Exhibit 10.74 to the Company's
                   (UK) Limited, FBO BFS US Special Opportunities Trust PLC.       Annual Report on Form 10-K for
                                                                                   the fiscal year ended October
                                                                                   31, 2003.
------------------ --------------------------------------------------------------- --------------------------------
      10.2         Stock  Purchase  Warrant,  dated  February 9, 2004,  issued by  Incorporated by reference to
                   Obsidian Enterprises,  Inc. to Frost National Bank, Custodian,  Exhibit 10.75 to the Company's
                   FBO  Renaissance  US Growth  Investment  Trust PLC,  Trust No.  Annual Report on Form 10-K for
                   W00740100.                                                      the fiscal year ended October
                                                                                   31, 2003.
------------------ --------------------------------------------------------------- --------------------------------
      31.1         Certification of Timothy S. Durham.                             Attached
------------------ --------------------------------------------------------------- --------------------------------
      31.2         Certification of Rick D. Snow.                                  Attached
------------------ --------------------------------------------------------------- --------------------------------
      32.1         Statement  Regarding  Certification  Pursuant  to 18 U.S.C.ss.  Attached
                   1350 by Timothy S. Durham, Chief Executive Officer.
------------------ --------------------------------------------------------------- --------------------------------
      32.2         Statement  Regarding  Certification  Pursuant  to 18 U.S.C.ss.  Attached
                   1350 by Rick D. Snow, Chief Financial Officer.
------------------ --------------------------------------------------------------- --------------------------------



</TABLE>


                                       35