UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[X]~~þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 29~~November 30, 2004


		OR

[o ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		For the transition period from to .


		Commission file number 0-9385

Bull Run Corporation

(Exact name of registrant as specified in its charter)


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

4370 Peachtree Road, N.E., Atlanta, GA 30319
(Address of principal executive offices) (Zip Code)

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 46,~~731~~413,~~087~~879 shares of Common Stock, par value $.01 per share, were outstanding as of ~~March~~January 317, ~~2004~~2005.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
oYes þ No

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
		CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
	PART II. OTHER INFORMATION
	Item 2. Unregistered Sales of Equity Securities
	Item 6. Exhibits
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

	February 29,			August 31,
	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	135		$	4,520
Accounts receivable, net of allowance of $282 as of February 29, 2004 and $465 as of August 31, 2003		12,723			10,071
Inventories		700			409
Prepaid costs and expenses		1,350			1,576
Total current assets		14,908			16,576
Property and equipment, net		3,987			4,310
Goodwill		43,664			43,664
Customer relationships and trademarks		8,935			9,562
Other assets		798			803
Net noncurrent assets of discontinued segment		1,695			1,695
	$	73,987		$	76,610
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	56,522		$	590
Accounts payable		5,275			11,878
Deferred revenue		2,984			6,542
Accrued and other liabilities		17,950			9,600
Total current liabilities		82,731			28,610
Long-term debt		8,693			72,641
Other liabilities		2,319			2,361
Total liabilities		93,743			103,612
Commitments and contingencies
Stockholders’ deficit:
Series D preferred stock, $.01 par value (authorized 100 shares; issued and outstanding 12.497 shares having a $12,497 liquidation value and 14.28 shares having a $14,280 liquidation value as of February 29, 2004 and August 31, 2003, respectively)		12,497			14,280
Series E preferred stock, $.01 par value (authorized 25 shares; issued and outstanding 9.799 shares; $9,799 liquidation value)		9,799
Series F preferred stock, $.01 par value (authorized 25 shares; issued and outstanding 2.0 shares; $2,000 liquidation value)		2,000
Common stock, $.01 par value (authorized 100 shares; issued 4.731 and 4.324 shares as of February 29, 2004 and August 31, 2003, respectively)		47			43
Additional paid-in capital		81,266			80,138
Accumulated deficit		(125,365	)		(121,463	)
Total stockholders’ deficit		(19,756	)		(27,002	)
	$	73,987		$	76,610

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands)


	November 30,			August 31,
	2004			2004
ASSETS
Current assets:
Cash and cash equivalents	$	810		$	450
Accounts receivable, net of allowance of $445 and $309 as of November 30, 2004 and August 31, 2004, respectively		15,339			5,219
Inventories		1,019			663
Prepaid costs and expenses		1,393			1,757

Total current assets		18,561			8,089
Property and equipment, net		3,056			3,184
Goodwill		40,364			40,364
Customer relationships and trademarks		8,129			8,308
Other assets		1,495			997

	$	71,605		$	60,942

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	61,022		$	590
Accounts payable		3,142			5,866
Deferred revenue		5,430			4,819
Accrued fees payable to related party		1,189			1,721
Advances from stockholder		4,550			4,550
Accrued and other liabilities		16,507			9,215
Net current liabilities of discontinued segment		973			474

Total current liabilities		92,813			27,235
Long-term debt		8,693			64,625
Other liabilities, excluding redeemable preferred stock		356			497
Net noncurrent liabilities of discontinued segments		697			840
Redeemable preferred stock:
Series D preferred stock, $.01 par value (authorized 100 shares; issued and outstanding 12.5 shares; $12,497 liquidation value)		12,497			12,497
Series E preferred stock, $.01 par value (authorized 25 shares; issued and outstanding 7.6 shares as of November 30, 2004 and 9.8 shares as of August 31, 2004; $7,606 and $9,799 liquidation value, respectively)		7,606			9,799
Series F preferred stock, $.01 par value (authorized 25 shares; issued and outstanding 2.0 shares; $2,000 liquidation value)		2,000			2,000

Total liabilities		124,662			117,493

Commitments and contingencies
Stockholders’ deficit:
Common stock, $.01 par value (authorized 100,000 shares; issued 6,414 and 5,386 shares as of November 30, 2004 and August 31, 2004, respectively)		64			54
Additional paid-in capital		84,149			81,706
Accumulated deficit		(137,270	)		(138,311	)

Total stockholders’ deficit		(53,057	)		(56,551	)

	$	71,605		$	60,942

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

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

	Three Months Ended						Six Months Ended
	February 29,			February 28,			February 29,			February 28,
	2004			2003			2004			2003
Revenue from services rendered	$	16,921		$	17,626		$	38,555		$	43,468
Operating costs and expenses:
Direct operating costs for services rendered		11,067			12,779			26,458			30,845
Selling, general and administrative		6,053			6,303			12,040			12,734
Amortization of acquisition intangibles		314			304			627			608
Total operating costs and expenses		17,434			19,386			39,125			44,187
Loss from operations		(513	)		(1,760	)		(570	)		(719	)
Other income (expense):
Equity in losses of affiliated companies					(366	)					(193	)
Net change in value of certain derivative instruments		241			(189	)		547			(1,863	)
Loss on issuance of shares by affiliate											(2,339	)
Loss on investment valuation adjustments											(977	)
Interest expense		(1,108	)		(2,138	)		(2,194	)		(4,331	)
Debt issue cost amortization		(293	)		(610	)		(584	)		(1,154	)
Other income (expense), net		(17	)		21			(11	)		23
Loss from continuing operations		(1,690	)		(5,042	)		(2,812	)		(11,553	)
Income from discontinued segment											5,267
Net loss		(1,690	)		(5,042	)		(2,812	)		(6,286	)
Preferred dividends		(558	)		(281	)		(1,090	)		(540	)
Net loss available to common stockholders	$	(2,248	)	$	(5,323	)	$	(3,902	)	$	(6,826	)
Loss per share available to common stockholders, basic and diluted:
Loss from continuing operations	$	(0.50	)	$	(1.38	)	$	(0.88	)	$	(3.14	)
Income from discontinued segment											1.37
Net loss available to common stockholders	$	(0.50	)	$	(1.38	)	$	(0.88	)	$	(1.77	)
Weighted average number of common shares outstanding, basic and diluted		4,500			3,867			4,420			3,849

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


	Three Months Ended
	November 30,
	2004			2003
Revenue from services rendered	$	23,075		$	19,495


Operating costs and expenses:
Direct operating costs of services rendered		15,776			12,958
Selling, general and administrative		4,343			4,408
Amortization of acquisition intangibles		179			313

Total operating costs and expenses		20,298			17,679


Operating income		2,777			1,816

Other income (expense):
Net change in value of derivative instrument		310			306
Interest expense		(1,171	)		(1,086	)
Debt issue cost amortization		(249	)		(291	)
Other income (expense)		12			6


Income from continuing operations		1,679			751
Loss from discontinued operations		(109	)		(1,873	)


Net income (loss)		1,570			(1,122	)

Preferred dividends		(529	)		(532	)

Net income (loss) available to common stockholders	$	1,041		$	(1,654	)


Income (loss) per share available to common stockholders, basic:
Income from continuing operations	$	0.20		$	0.05
Loss from discontinued operations		(0.02	)		(0.43	)

	$	0.18		$	(0.38	)


Income (loss) per share available to common stockholders, diluted:
Income from continuing operations	$	0.11		$	0.05
Loss from discontinued operations		(0.01	)		(0.43	)

	$	0.10		$	(0.38	)

Weighted average number of common shares outstanding:
Basic		5,713			4,340
Diluted		15,278			4,340

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

BULL RUN CORPORATION ~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited)~~ ~~(Amounts in thousands)~~

	Series DPreferred			Series EPreferred		Series FPreferred		Common Stock
	Stock			Stock		Stock		Shares		Amount
As of September 1, 2003	$	14,280		$		$			4,324	$	43
Exchange of subordinated notes for shares of Series E preferred stock					8,016
Issuance of Series F preferred stock							2,000
Exchange of Series D preferred stock for shares of Series E preferred stock		(1,783	)		1,783
Issuance of common stock									407		4
As of February 29, 2004	$	12,497		$	9,799	$	2,000		4,731	$	47

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (Unaudited)
(Amounts in thousands)

	Additional						Total
	Redeemable
	Paid-In			Accumulated			Stockholders’
	Preferred			Common Stock
	Capital			Deficit			Deficit
	Stock			Shares			Amount
As of September 1, 2003	$	80,138		$	(121,463	)	$	(27,002	)
As of September 1, 2004	$	24,296			5,386		$	54
Exchange of subordinated notes for shares of Series E preferred stock								8,016
Conversion of redeemable preferred stock to shares of common stock		(2,193	)		313			3
Issuance of Series F preferred stock								2,000
Issuance of common stock					715			7
Exchange of Series D preferred stock for shares of Series E preferred stock								0
As of November 30, 2004	$	22,103			6,414		$	64
Issuance of common stock		1,128						1,132
Preferred dividends					(1,090	)		(1,090	)
Net loss					(2,812	)		(2,812	)
As of February 29, 2004	$	81,266		$	(125,365	)	$	(19,756	)


	Additional					Total
	Paid-In		Accumulated			Stockholders’
	Capital		Deficit			Deficit
As of September 1, 2004	$	81,706	$	(138,311	)	$	(56,551	)
Conversion of redeemable preferred stock to shares of common stock		2,190					2,193
Issuance of common stock		253					260
Preferred dividends				(529	)		(529	)
Net income				1,570			1,570

As of November 30, 2004	$	84,149	$	(137,270	)	$	(53,057	)

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

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

	Six Months Ended
	February 29,			February 28,
	2004			2003
Cash flows from operating activities:
Net loss	$	(2,812	)	$	(6,286	)
Income from discontinued segment					(5,267	)
Adjustments to reconcile net loss to net cash used in operations:
Provision for bad debts		(63	)		235
Depreciation and amortization		1,736			2,390
Equity in losses of affiliated companies					193
Dividends received from affiliated company					81
Net change in value of certain derivative instruments		(547	)		1,863
Loss on issuance of shares by affiliate					2,339
Loss on investment valuation adjustments					1,032
Change in operating assets and liabilities:
Accounts receivable		(2,589	)		(5,205	)
Inventories		(291	)		196
Prepaid costs and expenses		376			(405	)
Accounts payable and accrued expenses		(3,673	)		7,388
Other long-term liabilities		(20	)		(585	)
Net cash used in continuing operations		(7,883	)		(2,031	)
Net cash provided by discontinued operations					106
Net cash used in operating activities		(7,883	)		(1,925	)
Cash flows from investing activities:
Capital expenditures		(204	)		(121	)
Proceeds on sale of investments					6,764
Decrease in other assets		(57	)		197
Net cash provided by (used in) investing activities		(261	)		6,840
Cash flows from financing activities:
Borrowings from revolving line of credit					175
Cash advances made by stockholder		1,800
Repayments of long-term debt					(6,767	)
Debt issue costs		(41	)		(981	)
Issuance of preferred stock		2,000			3,000
Net cash provided by (used in) financing activities		3,759			(4,573	)
Net increase (decrease) in cash and cash equivalents		(4,385	)		342
Cash and cash equivalents, beginning of period		4,520			397
Cash and cash equivalents, end of period	$	135		$	739

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


	Three Months Ended
	November 30,
	2004			2003
Cash flows from operating activities:
Net income (loss)	$	1,570		$	(1,122	)
Loss from discontinued operations		109			1,873
Adjustments to reconcile net loss to net cash used in continuing operations:
Provision for bad debts		45			50
Depreciation, amortization and intangibles impairment		573			871
Net change in value of derivative instrument		(310	)		(306	)
Change in operating assets and liabilities:
Accounts receivable		(10,164	)		(4,972	)
Inventories		(356	)		(48	)
Prepaid costs and expenses		371			442
Accounts payable and accrued expenses		4,309			(425	)
Other long-term liabilities		169

Net cash used in continuing operations		(3,684	)		(3,637	)
Net cash provided by (used in) discontinued operations		99			(2,722	)

Net cash used in operating activities		(3,585	)		(6,359	)


Cash flows from investing activities:
Capital expenditures		(17	)		(48	)
Other investing activities		10			13

Net cash used in continuing operation investing activities		(7	)		(35	)
Net cash provided by (used in) discontinued operation investing activities		150			(12	)

Net cash provided by (used in) investing activities		143			(47	)


Cash flows from financing activities:
Borrowings from notes payable and revolving line of credit		4,500
Debt issue costs		(444	)		(38	)
Preferred stock dividends paid		(254	)
Issuance of preferred stock					2,000

Net cash provided by continuing operation financing activities		3,802			1,962


Net increase (decrease) in cash and cash equivalents		360			(4,444	)
Cash and cash equivalents, beginning of period		450			4,520

Cash and cash equivalents, end of period	$	810		$	76

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

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)

1. BASIS OF PRESENTATION

InThe ~~management’s~~accompanying ~~opinion~~unaudited condensed consolidated financial statements of Bull Run Corporation (“Bull Run” or the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the ~~accompanying~~information ~~unaudited~~and ~~condensed~~footnotes ~~consolidated~~required by generally accepted accounting principles for complete financial statements. ~~reflect~~In the opinion of management, all adjustments (consisting solely of normal, recurring adjustments) considered necessary tofor ~~present~~a ~~fairly~~fair presentation of the Company’s financial position and results of operations have been included. Operating results for the ~~transition~~three-month ~~and~~period ~~comparative~~ended ~~period~~November 30, ~~reported.~~2004 are not ~~These~~necessarily ~~condensed~~indicative ~~consolidated~~of ~~financial~~the ~~statements~~results ~~should~~that may be ~~read~~expected infor ~~conjunction~~the fiscal year ending August 31, ~~with~~2005. For further information, refer to the consolidated financial statements ~~contained~~and footnotes thereto included in the Company’s Annual Report on ~~Form~~ Form 10-K ~~of Bull Run Corporation~~ for the fiscal year ended August 31, ~~2003~~ 2004.

OnThe ~~December 17,~~accompanying ~~1999,~~condensed ~~Bull~~consolidated ~~Run~~financial ~~Corporation~~statements (“include the accounts of Bull Run”) ~~acquired~~and its ~~the~~wholly ~~stock~~owned of subsidiaries, including Host Communications, Inc. (“Host” ~~or “Host Communications”~~), ~~Universal~~after ~~Sports~~elimination of ~~America,~~intercompany ~~Inc.~~accounts ~~(“USA”)~~ and ~~Capital~~transactions. ~~Sports~~Bull ~~Properties~~Run, ~~Inc.~~through ~~not~~Host, ~~previously~~provides ~~owned~~comprehensive sales, ~~directly~~marketing, ~~or indirectly~~multimedia, byspecial ~~Bull~~event ~~Run~~and ~~(the~~convention/hospitality ~~“Host-USA~~services, ~~Acquisition”).~~primarily ~~All~~for National ~~operations~~Collegiate ofAthletic ~~the~~Association ~~acquired~~(“NCAA”) ~~entities~~Division ~~are~~I ~~now~~universities ~~combined~~and ~~under~~conferences, ~~Host~~and national/global associations.

~~The~~Discontinued ~~accompanying~~Operation ~~condensed~~– ~~consolidated~~In August 2004, the Company announced its intent to suspend and sell its “Affinity Events” business segment due to the segment’s historical operating losses and the Company’s intention to focus on its Collegiate Marketing and Production Services segment and its Association Management segment. As a result, the Affinity Events segment has been reflected in the Company’s financial statements ~~include~~as a discontinued operation for all periods presented. In December 2004, the principal assets of the Affinity Events segment were sold. Proceeds on the sale received ~~accounts~~at closing of ~~Bull~~approximately ~~Run~~$875 ~~and~~were ~~its~~used ~~wholly~~to ~~owned~~reduce ~~subsidiaries~~current ~~(collectively~~liabilities, ~~unless~~approximately $300 of which pertained to the ~~context~~cancellation ~~otherwise~~of ~~requires~~the remaining principal amount and accrued interest on subordinated debt previously issued by the Company to an officer of the company purchasing the assets. In addition, the “Company”) received a $675 subordinated installment note issued by the purchaser and other future consideration estimated to be valued at approximately $150. At this time, ~~after~~the ~~elimination~~Company has judged that the collection of the note is in doubt, due to its subordinate ~~intercompany~~nature ~~accounts~~and the amount of time before which scheduled payments are to be made. As a result, the Company’s loss on its discontinued operations reported in the fiscal year ended August 31, 2004 was presented net of the $875 proceeds then anticipated on, and ~~transactions~~ultimately received at the closing of, the sale of the Affinity Events assets. If the Company ultimately receives more than $875 on the sale, such income will be reported in the future as income from discontinued operations.

Prior to the current fiscal year, the Company provided consulting services to Gray Television, Inc. (“Gray”), a company in which Bull Run had a significant investment until August 2003 (refer to Note 4), in connection with Gray’s acquisition and divestiture activities. In January 2004, the Company determined that it will not be engaged in such services in the future, with Gray or any other party, and as a result, the Company presents consulting income for all prior fiscal periods as income from discontinued operations beginning with the comparative financial statements filed in this Form 10-Q. There are no expenses associated with the consulting segment, nor are there any associated assets or liabilities as of February 29, 2004 or August 31, 2003. Unless otherwise indicated, amounts provided in these notes to the condensed consolidated ~~financial~~ financial statements pertain to continuing operations.

InStock-Based Compensation ~~April 2002,~~– The Company follows the ~~FASB~~provisions ~~issued~~of Statement of Financial Accounting Standards No. ~~145,~~ 123 “~~Rescission~~Accounting offor ~~FASB~~Stock-Based ~~Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections~~Compensation” (“SFAS ~~145~~123”)~~, effective for fiscal years beginning after May 15, 2002~~. ~~For~~SFAS ~~most~~123 allows companies, ~~SFAS~~to ~~145~~either ~~requires~~expense ~~gains and~~the ~~losses~~estimated onfair ~~extinguishments~~value of ~~debt~~stock tooptions beor ~~classified~~continue asto ~~income~~follow ~~or loss from~~the ~~continuing~~intrinsic ~~operations~~value ~~rather~~method ~~than~~set asforth ~~extraordinary~~in ~~items~~Accounting asPrinciples ~~previously~~Board ~~required under~~Opinion ~~FASB Statement~~ No. ~~4. Previously~~25, in“Accounting ~~the six months ended February 28,~~for ~~2003,~~Stock ~~Gray~~Issued ~~recorded~~to anEmployees” ~~extraordinary~~(“APB ~~charge~~25”), inbut ~~connection~~disclose ~~with an early extinguishment of debt. Since~~ the ~~Company~~pro ~~accounted~~forma ~~for~~effects ~~its~~on ~~investment~~net inincome ~~Gray~~(loss) had ~~using~~ the ~~equity~~fair ~~method,~~value ~~the Company reported its proportionate share~~ of ~~Gray’s extraordinary~~the ~~losses~~options asbeen ~~an extraordinary charge in its financial statements~~expensed. ~~Gray~~ ~~adopted~~The ~~SFAS~~Company ~~145~~has inelected ~~its~~to ~~first~~continue ~~quarter ended March 31, 2003, and accordingly, reclassified each of its losses on its early extinguishment of debt, from an extraordinary charge~~ to ~~income~~apply ~~from~~APB ~~continuing operations.~~25 ~~Therefore,~~in ~~Bull~~accounting ~~Run~~for ~~has reclassified~~ its ~~proportionate~~stock ~~share~~option ofincentive ~~such losses, amounting to $(406) in the six months ended February 28, 2003, to continuing operations as a component of “Equity in losses of affiliates~~plans.”

2. LIQUIDITY

As of February 29, 2004, the Company’s negative working capital was $67,823, including $55,932 of bank debt maturing on November 30, 2004. In recent fiscal years, the Company has reported substantial losses and has consumed substantial cash in its operations. The Company has funded its liquidity needs through the issuance of preferred stock and through the sale of investments. Although

~~management~~For ~~anticipates~~purposes that the Company will continue to experience negative working capital ranging from approximately $60,000 to $70,000, management believes the Company has sufficient liquidity to meet its cash obligations until the maturity date of the ~~bank~~following ~~credit~~pro ~~agreement.~~forma ~~The Company intends to commence discussions with its bank lenders regarding an extension of the agreement or other refinancing plan by August 2004~~disclosures, ~~and currently believes that it will be able to extend or refinance~~ the ~~agreement~~estimated ~~under~~fair ~~terms~~value ~~similar to those~~ of the ~~present~~options ~~bank credit~~is ~~agreement.~~amortized ~~The Company’s Chairman previously committed~~ to ~~contribute~~expense ~~an additional~~over ~~$1,000 in capital to~~ the ~~Company through November 2004, if necessary, for additional shares of the Company~~options’s ~~common~~vesting ~~or preferred stocks or~~period: ~~for subordinated debt. In January 2004, the Chairman provided $1,800 in cash~~ ~~used for working capital purposes, of which, at least $800 (classified as a~~ component of “Other liabilities,” a noncurrent liability, in the Condensed Consolidated Balance Sheet as of February 29, 2004) is expected to ultimately be applied as proceeds for newly-issued subordinated debt or equity. The remaining $1,000 is currently classified as a component of “Accrued and other liabilities,” a current liability, until such time as a more definitive application of the cash advance is determined by the parties.

As noted above and as further discussed in Note 5, the Company has $55,932 of debt outstanding as of February 29, 2004 under its bank credit agreement, which matures on November 30, 2004. As further discussed in Note 5, the Company’s Chairman has guaranteed repayment of $53,000 of the outstanding bank debt. The Company’s ability to continue this or similar financing beyond the November 30, 2004 maturity date is significantly dependent on the continued support of the Company’s Chairman and, in part, on the Company’s future operating results. There can be no assurances with respect to either the Company’s future operating results or the continued support of its Chairman.


	Three Months Ended
	November 30,
	2004			2003
Net income (loss) available to common stockholders, as reported	$	1,041		$	(1,654	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1	)		(92	)


Net income (loss) available to common stockholders, pro forma, for computation of basic income (loss) per share	$	1,040		$	(1,746	)


Net income (loss) per common share, basic:
As reported	$	0.18		$	(0.38	)

Pro forma	$	0.18		$	(0.40	)


Net income (loss) available to common stockholders, as reported	$	1,041		$	(1,654	)
Adjustment to accrued preferred dividends for computation of diluted earnings (loss) per share		500
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1	)		(92	)

Net income (loss) available to common stockholders, pro forma, for computation of diluted income (loss) per share	$	1,540		$	(1,746	)


Net income (loss) per common share, diluted:
As reported	$	0.10		$	(0.38	)

Pro forma	$	0.10		$	(0.40	)

32. ~~SUPPLEMENTAL CASH FLOW DISCLOSURES~~LIQUIDITY

~~Supplemental~~As of November 30, 2004, the Company’s negative working capital was $74,252, including $58,932 of bank debt maturing on November 30, 2005 and $2,090 of subordinated debt maturing on December 31, 2004. Certain current liabilities, including deferred revenue of $5,430, advances from stockholder of $4,550 and certain accrued preferred stock dividends of $2,392, do not represent cash obligations ~~flow~~or ~~information~~do ~~follows:~~not represent liabilities expected to be paid in cash prior to the November 30, 2005 maturity date of the bank credit facility. In recent fiscal years, the Company has reported substantial losses and has consumed substantial cash in its operations. The Company has funded its liquidity needs through the sale of investments, the issuance of preferred stock and other cash advances made by the Company’s majority stockholder and Chairman of the board, and the issuance of subordinated debt to the Chairman and companies affiliated with the Chairman. Based upon the Company’s forecasted operating cash flows and capital expenditures for the remainder of its fiscal year ending August 31, 2005 and a commitment from the Chairman to invest cash of up to $3,000 prior to the November 30, 2005 maturity date of the Company’s bank credit agreement (from which, $1,500 would be used to repay a subordinated note payable to a company controlled by the Chairman), management believes the Company has sufficient liquidity until the November 30, 2005 maturity date of its bank credit agreement.

	Six Months Ended
	February 29,		February 28,
	2004		2003
Interest paid	$	2,320	$	4,480
Income taxes paid		27		9
Noncash investing and financing activity:
Exchange of subordinated debt for shares of preferred stock		8,016
Issuance of common stock in payment of preferred stock dividends		503
Issuance of common stock primarily in connection with debt issuance costs		479		919
Issuance of common stock to a retirement plan and as a component of directors’ fees		150		146

As further discussed in Note 6, the Company currently has $58,932 of debt outstanding under its bank credit agreement. As further discussed in Note 6, the Company’s Chairman has guaranteed repayment of up to $55,932 of the outstanding bank debt. Amounts outstanding under the credit agreement are due on November 30, 2005. The Company’s ability to continue this or similar financing beyond the November 30, 2005 maturity date is significantly dependent on the continued support of the Company’s Chairman and, in part, on the Company’s future operating results. There can be no assurances with respect to either the Company’s future operating results or the continued support of its Chairman.

43. ~~INVESTMENT~~DISCONTINUED ~~IN AFFILIATED COMPANIES~~OPERATIONS

~~Prior~~The ~~to August 31, 2003, the~~ Company ~~held~~discontinued ~~investments~~its in“Affinity ~~Gray~~Events” ~~common~~business ~~stocks and~~segment ~~warrants~~during tothe ~~purchase~~fiscal ~~additional~~year ~~shares~~ended ofAugust 31, ~~Gray~~2004. ~~common~~In ~~stocks.~~August 2004, ~~The~~the Company ~~accounted~~ ~~for~~announced its ~~investments~~decision into ~~Gray’s~~suspend ~~two~~the ~~publicly~~Affinity ~~traded~~Events business, ~~classes~~and ofdeclared ~~common stock~~its ~~using~~intent to offer the ~~equity~~business ~~method.~~unit Infor ~~April 2003~~sale, ~~the~~and ~~Company~~ultimately sold the ~~warrants~~ ~~back~~principal toassets ~~Gray.~~of ~~In August 2003,~~ the ~~Company~~segment ~~sold its investments~~ in ~~Gray~~December 2004. ~~common stocks~~Accordingly, tothe ~~Gray~~operating results and ~~other~~net assets ~~parties~~associated ~~affiliated~~ with the ~~Company,~~Consulting ~~including~~and the ~~Company’s~~ ~~Chairman~~Affinity ofEvents ~~its~~business ~~board~~segments ofas ~~directors.~~of

~~In October 2002, Gray completed a public offering of 30,000 shares of its common stock for net proceeds of approximately $231,200,~~ and ~~in November 2002, Gray issued an additional 4,500 shares~~ for ~~additional proceeds of approximately~~all ~~$34,900.~~fiscal Asperiods apresented ~~result~~herein ofhave ~~these~~been ~~transactions~~reflected by Gray, the Company’s ownership of Gray’s outstanding common stock was reduced from 12.9% to 4.0%. Since Gray’s net proceeds per share of issued common stock was an amount which was less than the Company’s carrying value per share of Gray common stock owned prior to such transactions, a loss of $2,339 on the issuance of shares by Gray was reported by the Company in the six months ended February 28, 2003. Certain executive officers of Gray and certain directors of Gray are also executive officers and directors of the Company; therefore until such time as ~~the~~discontinued ~~Company~~operations ~~sold its investments~~ in ~~Gray common stocks,~~ the ~~Company continued to account for its~~accompanying ~~investment~~consolidated infinancial Gray under the equity method subsequent to the issuance of shares by Gray, despite the dilution of the Company’s voting power to less than 20%, since the Company continued to have significant influence in Graystatements.

~~The~~As ~~Company~~a ~~sold~~result ~~its~~of ~~investment~~the insuspension ~~Rawlings~~of ~~Sporting~~its ~~Goods~~Affinity ~~Company~~Events business, ~~Inc.~~the Company incurred certain costs ~~(“Rawlings”)~~charged ~~common~~to ~~stock~~discontinued operations in ~~December 2002~~the ~~for~~fiscal ~~cash~~year ~~proceeds~~ended ofAugust 31, $62004,~~764.~~ ~~Prior~~including (a) employee toseverance costs; (b) the ~~sale,~~present avalue ~~loss~~ of ~~$1,032~~future onlease ~~the~~obligations, ~~Rawlings~~net ~~investment~~of ~~that~~estimated ~~had been~~sublease ~~previously~~income, ~~reported~~to asbe ~~“other~~incurred ~~comprehensive~~through ~~accumulated~~2010; ~~loss”~~and (ac) the ~~component~~present value of consulting agreement commitments ~~the~~through ~~Company’s~~2010 ~~stockholders’~~for ~~equity)~~arrangements ~~was~~under ~~expensed,~~which ~~and~~no ~~reported~~future asbenefits anare ~~investment valuation~~expected ~~adjustment~~to inbe derived; less (d) the ~~Company’s~~estimated ~~results~~proceeds ofto ~~operations~~be ~~for~~derived from the ~~six~~sale ~~months ended~~of ~~February 28,~~Affinity ~~2003~~Events assets.

5.A ~~LONG-TERM~~reconciliation ~~DEBT~~of the accrued liability associated with the suspension and sale of the Affinity Events segment is as follows:

Long-term debt and notes payable consist of the following:


Accrued liability as of August 31, 2004	$	2,625
Costs incurred during the period		(524	)

Accrued liability as of November 30, 2004	$	2,101

	February 29,		August 31,
	2004		2003
Term loans	$	35,932	$	35,932
Revolver		20,000		20,000
Subordinated notes		9,283		17,299
		65,215		73,231
Less current portion		56,522		590
	$	8,693	$	72,641

Potential income subsequent to November 30, 2004 to be derived from subleasing vacated office space has been estimated to be approximately $750 over the remaining lives of the leases. The estimated proceeds to be derived from the sale of Affinity Events assets do not include amounts payable to the Company in the future which are anticipated to be subordinated to the purchaser’s bank financing. Actual amounts received in connection with deferred proceeds on the sale and any other unanticipated income or expenses, including income from the future subleases of vacated office space, could differ materially from amounts assumed in arriving at the loss on termination of the business. To the extent actual proceeds or other amounts differ from the estimates that are reflected as of November 30, 2004, or as management’s estimates are revised, the variance will be reported in discontinued operations in future periods. Likewise, the results of any remaining Events operations occurring subsequent to November 30, 2004 will be reported in discontinued operations in future periods. Proceeds of $875 derived from the sale of the Affinity Events assets at closing in December 2004 were used to repay a subordinated note totaling $295 and certain liabilities associated with the prior operations of the business.

AsThe ~~amended~~Company inconsummated ~~August 2003,~~ the ~~Company~~sale of Datasouth’s ~~bank~~computer ~~credit~~printer ~~agreement~~manufacturing ~~provides~~operation ~~for (a)~~on ~~two~~September 29, ~~term~~2000. ~~loans~~Certain (of the ~~“Term~~proceeds ~~Loans”)~~to ~~for~~be ~~borrowings~~realized ~~totaling~~on ~~$35,932~~the ~~and~~sale ~~(b) a~~of Datasouth’s assets are ~~revolving~~deferred ~~loan~~under ~~commitment~~a (subordinated note agreement with the ~~“Revolver”)~~purchaser ~~for~~that ~~maximum~~was ~~borrowings~~amended ofduring ~~$20~~the fiscal year ended August 31,~~000~~ 2004. ~~All~~ ~~amounts~~The ~~outstanding~~amended ~~under~~note ~~the~~agreement ~~Term~~provides ~~Loans~~for ~~and~~gradually ~~the~~reducing ~~Revolver~~discounts ~~are~~on the amount due onto the ~~November 30,~~Company ~~2004,~~which ~~and~~are ~~bear~~earned ~~interest~~by atthe ~~either~~purchaser ~~the~~as ~~banks’~~payments ~~prime~~are ~~rate~~made orthrough the ~~London~~ ~~Interbank~~note’s ~~Offered~~maturity ~~Rate~~in December 2006. ~~(“LIBOR”)~~As ~~plus~~of ~~2.75%~~November 30, ~~payable~~2004, ~~monthly.~~the ~~The amendment~~amount indue ~~August 2003~~to ~~reduced~~ the ~~interest~~Company ~~rate~~was ~~charged~~$2,217; byhowever the Company ~~banks~~has ~~and revised~~recorded ~~the~~a ~~maturity~~$1,122 ~~date~~reserve ofon the ~~agreement~~note toreceivable as of November 30, 2004 ~~from~~as ~~September~~an estimate ~~30,~~of ~~2003.~~the Asamounts ofthat ~~February 29,~~might ~~2004,~~ultimately ~~all~~become ~~amounts~~uncollectible ~~available~~and/or ~~under~~discounted. To the ~~Revolver~~extent actual ~~were~~proceeds ~~borrowed,~~on ~~and~~the nonote ~~additional~~differ ~~borrowing~~from ~~capacity~~management’s ~~was~~current ~~available.~~estimate As of ~~February 29,~~ ~~2004,~~the ~~substantially~~proceeds ~~all~~to ~~borrowings~~be ~~under~~ultimately received, ~~the~~such ~~Term~~differences ~~Loans~~will ~~and Revolver~~be ~~were~~reported ~~subject~~as todiscontinued ~~the~~operations ~~LIBOR-based~~in ~~rate~~future ~~of 3~~periods.~~85%.~~

~~Under~~There ~~the~~are ~~terms~~no ofmaterial ~~the~~contingent ~~credit~~liabilities ~~agreement,~~related up to andiscontinued ~~aggregate of $12~~operations,~~500~~ ~~in funding~~such ~~for~~as ~~working~~product ~~capital purposes, if necessary, may be sourced from the~~or ~~issuance~~environmental ofliabilities ~~equity securities, including shares of the Company’s preferred stock,~~ or ~~by the issuance of subordinated debt. Through February 29~~litigation, ~~2004,~~which ~~the Company~~remain ~~has~~with ~~received an aggregate total of approximately $10,900 of such funding for working capital purposes, including $2,000 received from~~ the ~~Company’s~~ ~~Chairman in November 2003 for shares of the~~ Company’s ~~series~~after ~~F preferred stock, and~~ the ~~$1,800~~termination ~~received from the Chairman in January 2004~~and/or ~~discussed~~disposal ~~in Note 2. As a result~~ of ~~the these transactions, the Company would currently be permitted under~~ its ~~bank~~discontinued ~~credit agreement to source up to an additional $1,600 of cash from the issuance of equity or debt securities during the remaining term of the credit facility~~operations.

Assets and liabilities of the discontinued operations have been reflected in the consolidated balance sheets as current or noncurrent based on the original classification of the accounts, except that current liabilities are presented net of current assets and noncurrent liabilities are presented net of noncurrent assets.

The ~~bank~~following ~~credit agreement, as amended, contains certain financial covenants, including the maintenance of minimum interest coverage ratios determined quarterly. Long-term debt~~ is ~~collateralized~~a bysummary ~~all~~ of ~~the Company’s~~ assets~~. The~~ ~~Company~~and isliabilities ~~presently in compliance with all provisions~~ of ~~the~~discontinued ~~credit~~operations: ~~agreement as last amended.~~

In connection with the Company’s bank credit facilities, the Company’s Chairman of the board entered into a guarantee agreement in favor of the banks, for which he receives compensation from the Company in the form of shares of the Company’s common stock. During the six months ended February 29, 2004, the Company issued approximately 151 restricted shares of the Company’s common stock then valued at approximately $479. During the six months ended February 28, 2003, the Company issued approximately 119 restricted shares of the Company’s common stock then valued at approximately $919. The value of the shares issued to the Chairman is based on an annual compensation rate of 1.625% of the guarantee amount. The guarantee agreement currently requires the Chairman to personally guarantee up to $53,000 of the Company’s outstanding bank debt. The guaranteed amount has historically reduced, and will continue to reduce, dollar for dollar, as the aggregate outstanding amount under the Term Loans is reduced, subject to certain limitations. The guarantee agreement provides that if the Company defaults on its bank loan, the banks have the right to require the Chairman to repay the amount of such loan to the banks up to the maximum amount of his personal guarantee. Under the terms of his guarantee, if the banks exercise their rights to demand repayment from the guarantor, the Chairman has the option to purchase the entire loan from the banks, and thereby becoming the holder of the Company’s debt currently payable to the banks as a secured creditor.


	November 30,			August 31,
	2004			2004
Current liabilities:
Accounts payable and accrued expenses	$	805		$	1,429
Restructuring obligations		282			513
Deferred revenue		339			831
Current assets:
Accounts receivable, net		(365	)		(2,163	)
Inventories					(6	)
Prepaid costs and expenses		(88	)		(130	)

Net current liabilities of discontinued segment	$	973		$	474


Noncurrent liabilities:
Restructuring obligations	$	1,819		$	2,112
Noncurrent assets:
Note receivable, net		(1,095	)		(1,245	)
Property and equipment, net		(12	)		(12	)
Other assets		(15	)		(15	)

Net noncurrent liabilities of discontinued segments	$	697		$	840

InThe ~~connection~~following ~~with~~summarizes ~~the~~revenues ~~Host-USA Acquisition, the Company issued 8% subordinated notes to former stockholders of Host~~ and ~~USA,~~operating ~~representing~~results long-term debt of $8,693 as of February 29, 2004 and $16,709 as of August 31, 2003. Interest is payable quarterly and the notes, as amended, have a maturity date of January 17, 2006. During the six months ended February 29, 2004, holders of 8% subordinated notes representing an aggregate face value of $8,016 exchanged their notes for shares of Series E Preferred Stock (refer to Note 7). In February 2004, a note having a face value of $3,019 was acquired by the Company’s Chairman from ~~the~~discontinued ~~note holder, and the Chairman has agreed to modify~~operations: ~~the terms of the note to amend the maturity date from January 2005 to January~~ ~~2006, as well as to defer the payment of interest to the maturity date of the~~ note. The Company also has outstanding 9% subordinated notes representing an aggregate amount of $590 having a maturity date of December 31, 2004. Payment of interest and principal on all subordinated notes is subordinate to the Company’s bank credit agreement.

Aggregate maturities of the Company’s long-term debt and notes payable as of February 29, 2004 (including the effects of the note modifications discussed above) in the fiscal years ending August 31, 2004, 2005 and 2006 are, respectively, $0, $55,932 (all of which maturing on November 30, 2004) and $8,693, and none thereafter.


	Three Months Ended
	November 30,
	2004			2003
Revenues:
Affinity Events	$	292		$	2,139

Costs and Expenses:
Affinity Events:
Direct operating costs of services rendered	$	285		$	2,433
Selling, general and administrative		116			1,579

	$	401		$	4,012

Income (Loss) from Discontinued Operations:
Affinity Events	$	(109	)	$	(1,873	)

~~The Company is a party to an interest rate swap agreement terminating on December 31, 2004, which involves the exchange of interest at a fixed rate of 6~~4.~~71%~~ ~~for~~SUPPLEMENTAL ~~interest~~CASH atFLOW ~~a variable rate, determined quarterly, equal to the~~DISCLOSURES ~~90-day LIBOR rate, without an exchange of the $25,000 notional amount upon~~ ~~which the payments are based. The differential paid or received as interest~~ ~~rates change is settled quarterly and is accrued and recognized as an~~ ~~adjustment of interest expense related to the debt.~~

6.Supplemental ~~INCOME~~cash ~~TAXES~~flow information follows:


	Three Months Ended
	November 30,
	2004		2003
Interest paid	$	1,089	$	1,211
Income taxes paid		0		27

Noncash investing and financing activities:
Exchange of subordinated debt for shares of preferred stock				8,016
Issuance of common stock in connection with debt issuance costs		260
Issuance of common stock to a retirement plan and as a component of directors’ fees				100
Conversion of Series E preferred stock to shares of common stock		2,190

~~and~~5. ~~$1,700~~GOODWILL ~~for~~AND ~~the~~OTHER ~~three months~~ACQUISITION ~~ended~~INTANGIBLE ~~February 29, 2004 and February 28, 2003, respectively, and $929~~ASSETS ~~and $2,025 for the six months ended February 29, 2004 and February 28, 2003,~~ ~~respectively.~~

7.The ~~PREFERRED~~net ~~STOCK~~change ~~ISSUANCE~~in ~~AND~~the ~~EXCHANGE~~carrying amount of goodwill by reportable business segment is as follows:

As of February 29, 2004, 12.497 shares of the Company’s series D convertible preferred stock (“Series D Preferred Stock”) were outstanding, having an aggregate face value of $12,497, 5.4 shares of which are currently convertible at the holder’s option into 540 shares of the Company’s common stock. An additional 4.097 shares of Series D Preferred Stock is convertible at the holder’s option into approximately 410 shares of the Company’s common stock beginning in July 2004 and the remaining 3 shares of Series D Preferred Stock are convertible into 300 shares of the Company’s common stock beginning in September 2004. Each holder of the Series D Preferred Stock is entitled to receive dividends at an annual rate of $90.00 per share in cash or in shares of the Company’s common stock at the holder’s option, except that, until the second anniversary of the date of issuance, the Company has the option to pay such dividends in cash or in shares of the Company’s common stock. The liquidation and redemption price of the Series D Preferred Stock is $1,000 per share, and dividends are cumulative. The Company has the option to redeem the Series D Preferred Stock at any time. All shares of preferred stock rank, as to payment of dividends and as to distribution of assets upon liquidation or dissolution of the Company, on a parity with all other currently issued preferred stock and any preferred stock issued by the Company in the future, and senior to the Company’s currently issued common stock and common stock issued in the future.

Collegiate

Marketing and

Affinity

Production

Management

Services

Total

As of September 1, 2003

37,189

6,475

43,664

Impairment charge

(3,300

)

(3,300

)

As of August 31, 2004

33,889

6,475

40,364

As of November 30, 2004

33,889

6,475

40,364

AsThe ofnet ~~February 29,~~change 2004, 9.799 shares of the Company’s series E convertible preferred stock (“Series E Preferred Stock”) were outstanding, having an aggregate face value of $9,799. Each share of the Series E Preferred Stock is convertible at the holder’s option into 0.14286 shares of the Company’s common stock beginning one year following the date of issuance of the Series E Preferred Stock (initially, October 2004). Each holder of the Series E Preferred Stock is entitled to receive dividends at an annual rate of $90.00 per share in ~~cash or in shares of~~ the ~~Company’s~~carrying common stock at the holder’s option, except that, no dividend is payable prior to June 30, 2005, or upon conversion to common stock, if earlier. The liquidation and redemption price of the Series E Preferred Stock is $1,000 per share. The Company has the option to redeem the Series E Preferred Stock at any time. During the six months ended February 29, 2004, subordinated note holders elected to exchange an aggregate $8,016 of subordinated debt for an aggregate 8.016 shares of Series E Preferred Stock, including subordinated notes having an aggregate face amount of ~~$5,257~~customer ~~acquired~~relationships ~~by the Company’s Chairman immediately prior to the exchange. Also during the six months ended February 29, 2004, 1.783 shares of Series D Preferred Stock issued to a former director of the Company~~ and ~~his spouse~~trademarks ~~(both~~by ~~of whom were formerly holders of subordinated notes) were~~reportable ~~exchanged~~business ~~for~~segment ~~the~~is ~~same~~as ~~number of shares of Series E Preferred Stock.~~follows:

As of February 29, 2004, 2.0 shares of the Company’s series F convertible preferred stock (“Series F Preferred Stock”) were outstanding, having an aggregate face value of $2,000. All of these shares were issued to the Company’s Chairman in the six months ended February 29, 2004. Each share of the Series F Preferred Stock is convertible at the holder’s option into 0.78125 shares of the Company’s common stock beginning in November 2006. The holder of Series F Preferred Stock is entitled to receive dividends at an annual rate of $90.00 per share in cash or in shares of the Company’s common stock at the holder’s option, except that, until the second anniversary of the date of issuance, the Company has the option to pay such dividends in cash or in shares of the Company’s common stock. The liquidation and redemption price of the Series F Preferred Stock is $1,000 per share. The Company has the option to redeem the Series F Preferred Stock at any time.


	Collegiate
	Marketing and			Affinity
	Production			Management
	Services			Services			Total
As of September 1, 2003	$	7,306		$	2,256		$	9,562
Amortization		(1,113	)		(141	)		(1,254	)

As of August 31, 2004		6,193			2,115			8,308
Amortization		(144	)		(35	)		(179	)

As of November 30, 2004	$	6,049		$	2,080		$	8,129

InAs of November ~~2003~~30, ~~the~~2004, ~~Company’s~~customer ~~Articles~~relationships ofconstitute ~~Incorporation~~$6,385 ~~were~~and ~~amended~~trademarks torepresent $1,744 ~~effectively~~of ~~cancel~~the ~~all~~$8,129 ~~authorized~~carrying ~~but~~amount ~~unissued~~presented ~~shares~~above, ofand ~~the~~as ~~Company’s~~of ~~series A~~August 31, ~~series~~2004, Bcustomer ~~and~~relationships constitute ~~series~~$6,525 Cand ~~preferred~~trademarks ~~stocks.~~represent ~~There~~$1,783 ~~were no shares~~ of ~~such preferred~~the ~~stocks~~$8,308 ~~issued~~carrying ~~at that time~~amount.

A goodwill impairment charge of $3,300 was recognized during the fiscal year ended August 31, 2004, upon management’s consideration of current fiscal year operating results and the forecasted operating results and business plans for one of the Company’s business units. The Company currently estimates that annual amortization expense of customer relationships and trademarks for the fiscal year ending August 31, 2005 will total approximately $718 per year until fully amortized in December 2015.

Accumulated amortization of acquisition intangibles and impairment charges was $39,560 as of November 30, 2004 and $39,381 as of August 31, 2004, including $29,689 associated with goodwill as of each of the respective dates.

6. LONG-TERM DEBT

Long-term debt and notes payable consist of the following:


	November 30,		August 31,
	2004		2004
Term Loans	$	35,932	$	35,932
Revolving Loans		23,000		20,000
Subordinated Notes		10,783		9,283

		69,715		65,215
Less current portion		61,022		590

	$	8,693	$	64,625

8As amended in October 2004, the Company’s bank credit agreement provides for (a) two term loans (the “Term Loans”) for borrowings totaling $35,932 and (b) two revolving loan commitments (the “Revolving Loans”) for aggregate maximum borrowings of $23,000. ~~OTHER~~All ~~COMPREHENSIVE~~amounts ~~INCOME~~outstanding bear interest at either (~~LOSS~~a) the banks’ prime rate or (b) the London Interbank Offered Rate (“LIBOR”) plus 2.75%, payable monthly. Under the October 2004 amendment, the Company was provided a new $3,000 revolving loan commitment (the “Revolver B” included as a component of the Revolving Loans), which was funded in full in October 2004, thereby increasing the bank indebtedness to $58,932. As amended, the agreement has a maturity date of November 30, 2005, at which time all amounts outstanding become due and payable. The amended agreement does not require any payments of principal prior to maturity, nor does it provide for any additional borrowing capacity beyond the Revolver B. The Company anticipates that it will continue to utilize fully the availability under the Revolving Loans throughout the remaining term of the credit agreement.

AIn ~~reconciliation~~September 2004, ofa company under the ~~net~~Chairman’s ~~loss~~control asprovided ~~reported~~the Company $1,500 of cash which was used for working capital purposes in exchange for a subordinated note bearing interest at 6% per annum, having a maturity date of December 31, 2004. This note was refinanced by another company under the ~~Condensed~~Chairman’s ~~Consolidated~~control, by substituting a subordinated note bearing interest at 6% ~~Statement~~per annum, having a maturity date of ~~Operations~~February 28, 2006. Under the terms of the amended credit agreement, up to an aggregate of $10,000 in funding for working capital purposes, if necessary, may be sourced from the ~~comprehensive~~issuance ~~loss~~of equity securities, including shares of the Company’s preferred stock, or by the issuance of subordinated debt. During the fiscal year ended August 31, 2004, the Company received $6,550 from the Company’s Chairman, of which $2,000 was invested in newly-issued shares of the Company’s preferred stock. The remaining investment of $4,550 is presented in the consolidated balance sheet as ~~follows:~~“Advances from stockholder.” Management believes that it is the Chairman’s intention to ultimately convert these advances to subordinated debt or equity securities. In connection with the credit agreement amendment, the Chairman committed to the Company an additional aggregate cash investment of up to $3,000 as and when needed at any time and from time to time on or prior to the maturity date, provided that up to $1,500 of such cash investments would be used to repay the $1,500 subordinated note issued by his affiliated company.

	Three Months Ended						Six Months Ended
	February 29,			February 28,			February 29,			February 28,
	2004			2003			2004			2003
Net loss	$	(1,690	)	$	(5,042	)	$	(2,812	)	$	(6,286	)
Other comprehensive income:
Change in the valuation of available-for-sale investments					366						2,050
Comprehensive loss	$	(1,690	)	$	(4,676	)	$	(2,812	)	$	(4,236	)

Since the maturity date of the bank credit agreement is November 30, 2005, the total amount outstanding under the agreement has been presented in the consolidated balance sheet as a current liability as of November 30, 2004. As of November 30, 2004, principally all borrowings under the bank credit agreement were subject to the banks’ LIBOR rate-based rate of 4.74%.

9The bank credit agreement, as amended, contains certain financial covenants, including the maintenance of minimum interest coverage ratios determined quarterly. ~~SEGMENT~~The ~~INFORMATION~~Company is presently in compliance with all provisions of the credit agreement as last amended. Long-term debt is collateralized by all of the Company’s assets. In addition, the Company’s Chairman personally guarantees up to $55,932 of the debt outstanding under the bank credit agreement, and if the Company is unable to meet payment obligations under the agreement, it is likely that the bank lenders would call the guarantee, thereby requiring the Chairman to repay the amount of the loan to the banks. The Chairman’s guarantee is collateralized by certain personal holdings of marketable securities pledged to the Company’s bank lenders. Under the terms of his guarantee, the Chairman has the option to purchase the entire loan from the banks, and thereby becoming the holder of the debt currently payable to the banks and the related lien on the Company’s assets. The Chairman is compensated by the Company for his guarantee in the form of newly issued shares of the Company’s common stock, valued at an annual rate of 1.625% of the guarantee amount. The guarantee amount will reduce in the future if principal payments are made to the bank lenders on the outstanding term loans, and may increase if additional bank financing is made available to the Company. During the three months ended November 30, 2004, the Chairman was compensated by the Company for his personal guarantee in the form of 675 restricted shares of the Company’s common stock then valued at $247. There was no compensation paid to the Chairman in any form in the three months ended November 30, 2003.

~~The~~In December 1999, the Company ~~has~~issued ~~three~~8% ~~business~~subordinated ~~segments~~notes ~~associated~~in connection with ~~its~~the ~~continuing~~acquisition of ~~operations~~Host, ~~that~~representing ~~provide~~long-term ~~different~~debt ~~products~~of or$8,693 ~~services:~~as ~~(a)~~of November ~~marketing~~30, 2004 and August 31, 2004. During the ~~production~~three ~~services~~months ended November 30, ~~which~~2003, ~~primarily~~holders ~~include~~of ~~services~~8% ~~rendered~~subordinated innotes ~~connection~~representing an aggregate ~~with~~face ~~college~~value ~~athletics~~of ~~(“Collegiate~~approximately ~~Marketing~~$8,016 ~~and~~exchanged ~~Production~~their ~~Services”);~~notes ~~(b)~~for shares of Series E Preferred Stock. ~~event~~Interest ~~management~~is ~~and~~payable ~~marketing~~quarterly ~~services~~in ~~(“Affinity~~cash ~~Events”);~~on ~~and~~all ~~(c) association~~but ~~management~~a ~~services~~$3,019 ~~(“Affinity~~subordinated ~~Management~~note ~~Services”).~~payable Ato ~~fourth~~the ~~business~~Company’s ~~segment~~Chairman, ~~associated~~on ~~with~~which ~~consulting~~interest ~~services~~is ~~rendered~~payable toat amaturity ~~related~~in the form of cash or shares of the ~~party~~Company’s common stock, ~~has~~at ~~been~~the ~~classified~~Company’s asoption. The notes all have a ~~discontinued~~maturity ~~segment~~date ~~beginning~~of inJanuary 17, 2006. In connection with the ~~fiscal~~acquisition of certain business operations, the Company also issued ~~period~~two ~~ended~~9% ~~February~~subordinated notes in September 292000, representing long-term debt of $590 as of November 30, 2004 and August 31, 2004. One note for $295 was cancelled in connection with the Company’s sale of its Affinity Events segment assets (~~see~~discussed ~~Note~~in Notes 1 and 3). ~~Information~~and ~~for~~the ~~each~~outstanding balance of $295 on the other note was repaid subsequent to November 30, 2004. Payment of interest and principal on all subordinated notes is subordinate to the Company’s ~~segments~~bank iscredit ~~presented~~agreement. ~~below:~~The amended bank agreement provides for the terms under which these notes may be paid by the maturity date.

	Three Months Ended						Six Months Ended
	February 29,			February 28,			February 29,			February 28,
	2004			2003			2004			2003
Net revenues, continuing operations:
Collegiate Marketing and Production Services	$	13,990		$	15,238		$	31,323		$	37,018
Affinity Events		578			568			2,717			2,352
Affinity Management Services		2,353			1,820			4,515			4,098
	$	16,921		$	17,626		$	38,555		$	43,468
Operating income (loss), continuing operations:
Collegiate Marketing and Production Services	$	744		$	103		$	2,686		$	2,649
Affinity Events		(1,446	)		(1,513	)		(3,318	)		(2,749	)
Affinity Management Services		862			280			1,371			676
Amortization of acquisition intangibles		(314	)		(304	)		(627	)		(608	)
Unallocated general and administrative costs		(359	)		(326	)		(682	)		(687	)
	$	(513	)	$	(1,760	)	$	(570	)	$	(719	)

Aggregate maturities of the Company’s long-term debt as of November 30, 2004 were $2,090 and $67,625 in the fiscal years ending August 31, 2005 and 2006, respectively, and none thereafter.

The Company was a party to an interest rate swap agreement that terminated on December 31, 2004, which involved the exchange of interest at a fixed rate of 6.71% for interest at a variable rate, determined quarterly, equal to the 90-day LIBOR rate, without an exchange of the $25,000 notional amount upon which the payments were based. The differential paid or received as interest rates changed was settled quarterly and was accrued and recognized as an adjustment of interest expense related to the debt.

7. INCOME TAXES

The Company has recognized a full valuation allowance for net deferred tax assets. The differences between the federal statutory tax rate of 34% and the effective tax rate of zero are principally due to increases (decreases) in the valuation allowance for potentially non-realizable deferred tax assets of $(645) and $352 for the three months ended November 30, 2004 and 2003, respectively.

8. PREFERRED STOCK

As of November 30, 2004, 12.497 shares of the Company’s series D convertible preferred stock (“Series D Preferred Stock”) were outstanding, having an aggregate face value of $12,497, all of which are currently convertible at the holder’s option into an aggregate 1,250 shares of the Company’s common stock. Each holder of the Series D Preferred Stock is entitled to receive dividends at an annual rate of $90.00 per share in cash or in shares of the Company’s common stock at the holder’s option, except that, until the second anniversary of the date of issuance, the Company has the option to pay such dividends in cash or in shares of the Company’s common stock. The liquidation and redemption price of the Series D Preferred Stock is $1,000 per share, and dividends are cumulative. The Company has the option to redeem the Series D Preferred Stock at any time.

As of November 30, 2004, 7.606 shares of the Company’s series E convertible preferred stock (“Series E Preferred Stock”) were outstanding, having an aggregate face value of $7,606. Each share of the Series E Preferred Stock is convertible at the holder’s option into 0.14286 shares of the Company’s common stock beginning one year following the date of issuance of the Series E Preferred Stock (initially, October 2004). Each holder of the Series E Preferred Stock is entitled to receive dividends at an annual rate of $90.00 per share in cash or in shares of the Company’s common stock at the holder’s option, except that, no dividend is payable prior to June 30, 2005, or upon conversion to common stock, if earlier. The liquidation and redemption price of the Series E Preferred Stock is $1,000 per share. The Company has the option to redeem the Series E Preferred Stock at any time. During the three months ended November 30, 2004, certain holders of Series E Preferred Stock, including a former director of the Company and his spouse, elected to convert an aggregate 2.193 shares of Series E Preferred Stock to an aggregate 313 shares of the Company’s common stock, in accordance with terms of the Series E Preferred Stock. During the three months ended November 30, 2003, subordinated note holders elected to exchange an aggregate $8,016 of subordinated debt for an aggregate 8.016 shares of Series E Preferred Stock, including subordinated notes having an aggregate face amount of $5,257 acquired by the Company’s Chairman immediately prior to the exchange. Also during the three months ended November 30, 2003, 1.783 shares of Series D Preferred Stock issued to the former director and his spouse were exchanged for the same number of shares of Series E Preferred Stock.

As of November 30, 2004, 2.0 shares of the Company’s series F convertible preferred stock (“Series F Preferred Stock”) were outstanding, having an aggregate face value of $2,000, all of which were issued in the fiscal year ended August 31, 2004. Each share of the Series F Preferred Stock is convertible at the holder’s option into 0.78125 shares of the Company’s common stock beginning in November 2006. The holder of Series F Preferred Stock is entitled to receive dividends at an annual rate of $90.00 per share in cash or in shares of the Company’s common stock at the holder’s option, except that, until the second anniversary of the date of issuance, the Company has the option to pay such dividends in cash or in shares of the Company’s common stock. The liquidation and redemption price of the Series F Preferred Stock is $1,000 per share. The Company has the option to redeem the Series F Preferred Stock at any time.

As of November 30, 2004, all shares of Series D Preferred Stock and Series F Preferred Stock, and certain shares of Series E Preferred Stock are held by either the Company’s Chairman or his affiliates. All shares of preferred stock issued by the Company are redeemable by the Company at solely the Company’s option. Since the Chairman’s beneficial ownership of the Company’s common stock is more than 50%, all issued and outstanding preferred stock is required to be classified as liabilities in the consolidated balance sheet in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” issued in May 2003. As of November 30, 2004, 89.4% of the aggregate carrying amount of all preferred stock was held by the Chairman or one of his affiliates. Management

does not believe that any of the preferred stock issued to the Chairman or his affiliates or any other party will be redeemed in the foreseeable future.

All shares of preferred stock rank, as to payment of dividends and as to distribution of assets upon liquidation or dissolution of the Company, on a parity with all other currently issued preferred stock and any preferred stock issued by the Company in the future, and senior to the Company’s currently issued common stock and common stock issued in the future.

9. EARNINGS (LOSS) PER SHARE

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


	Three Months Ended
	November 30,
	2004			2003
Income (loss) for computation of basic income (loss) per share:
Income from continuing operations	$	1,679		$	751
Preferred dividends		(529	)		(532	)

Income from continuing operations available to common stockholders		1,150			219
Loss from discontinued operations		(109	)		(1,873	)

Net income (loss) available to common stockholders	$	1,041		$	(1,654	)


Weighted average number of common shares outstanding for the computation of basic income (loss) per share		5,713			4,340

Basic income (loss) per share:
Income from continuing operations	$	0.20		$	0.05
Discontinued operations		(0.02	)		(0.43	)

Net income (loss) available to common stockholders	$	0.18		$	(0.38	)


Income (loss) for computation of diluted income (loss) per share:
Income from continuing operations	$	1,679		$	751
Preferred dividends		(529	)		(532	)

Income from continuing operations available to common stockholders		1,150			219
Adjustment to preferred dividends assuming preferred stock was converted to common stock at the beginning of the period, except to the extent of preferred shares actually converted and preferred dividends paid in cash during the period		500

		1,650			219
Loss from discontinued operations		(109	)		(1,873	)

Net income (loss) available to common stockholders for the computation of diluted earnings (loss) per share	$	1,541		$	(1,654	)


Weighted average number of common shares outstanding		5,713			4,340
Effect of accrued stock compensation for guarantee of debt and asset pledge		22
Effect of weighted average dilutive convertible preferred stock outstanding		4,075
Effect of accrued preferred stock dividends at the beginning of the period potentially payable in the form of common stock		5,468

Adjusted weighted average number of common shares and assumed conversions for the computation of diluted earnings (loss) per share		15,278			4,340


Diluted earnings (loss) per share:
Income from continuing operations	$	0.11		$	0.05
Discontinued operations		(0.01	)		(0.43	)

Net income (loss) available to common stockholders	$	0.10		$	(0.38	)

10. SEGMENT INFORMATION

The Company has two business segments associated with its continuing operations that provide different products or services: (a) marketing and production services, which primarily include services rendered in connection with college athletics (“Collegiate Marketing and Production Services”); and (b) association management services (“Association Management Services”). Discontinued operations include event management and marketing services (“Affinity Events”) and computer printer manufacturing and related sales and services formerly operated by wholly-owned Datasouth Computer Corporation (“Datasouth”).

Information for each of the Company’s segments associated with continuing operations follows:


	Three Months Ended
	November 30,
	2004			2003
Net revenues, continuing operations:
Collegiate Marketing and Production Services	$	20,937		$	17,332
Association Management Services		2,138			2,163

	$	23,075		$	19,495


Operating income (loss), continuing operations:
Collegiate Marketing and Production Services	$	2,703		$	1,942
Association Management Services		508			509
Amortization of acquisition intangibles		(179	)		(313	)
Unallocated general and administrative costs		(255	)		(322	)

	$	2,777		$	1,816

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

OVERVIEW

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

The Company ~~formerly~~discontinued ~~held~~its ~~significant~~“Consulting” ~~investments~~and inits ~~other~~“Affinity ~~sports,~~Events” ~~media~~business ~~and~~segments during the ~~marketing~~fiscal ~~companies~~year ended August 31, ~~including~~2004. In January 2004, the Company determined that it would not be engaged in consulting services to Gray Television, Inc. (“Gray”), ~~the~~an ~~owner~~affiliated ~~and~~party, or any other ~~operator~~party ofin 29the ~~television~~future. ~~stations~~In August 2004, ~~four~~the ~~newspapers~~Company ~~and~~announced ~~other~~its ~~communications~~decision to suspend the Affinity ~~businesses~~Events business, and ~~Rawlings~~declared ~~Sporting~~its ~~Goods~~intent ~~Company,~~to ~~Inc~~offer the business unit for sale. ~~(“Rawlings”)~~Accordingly, ~~a supplier~~the ofoperating ~~team~~results ~~sports~~and ~~equipment.~~net ~~The~~assets ~~Company~~associated ~~currently~~with ~~owns~~the ~~35.1%~~Consulting ofand the ~~outstanding common~~Affinity ~~stock~~Events ofbusiness segments ~~iHigh,~~presented ~~Inc.~~herein ~~(“iHigh”),~~are anreflected ~~Internet~~as ~~and~~discontinued ~~marketing~~operations ~~company focused~~in onthe ~~high~~accompanying ~~school~~consolidated financial ~~students~~statements. ~~The~~In ~~Company~~November 2004, ~~sold~~the ~~its~~Company ~~investments~~reached inan ~~Gray (representing~~agreement ~~approximately~~to ~~4.0%~~sell ofthe ~~Gray’s~~assets associated ~~outstanding~~with ~~common~~the ~~stock~~basketball and ~~warrants~~ tosoccer ~~purchase~~tours ~~additional~~operated ~~shares~~within ofthe ~~Gray~~Affinity ~~common~~Events ~~stocks)~~business segment, and ~~Rawlings (representing~~closed ~~approximately~~the 10sale in December 2004.1% ofAccrued ~~Rawlings’~~restructuring ~~outstanding~~charges ~~common~~associated ~~stock)~~with ~~during~~the discontinuation of this segment recognized in the fiscal year ended August 31, ~~2003.~~2004 ~~The~~have ~~Gray~~been reduced ~~common~~by ~~stocks~~the ~~and~~estimated ~~warrants were~~amount ~~sold~~of byproceeds to be ultimately derived from the ~~Company~~sale. toActual ~~Gray~~amounts ultimately realized on the sale and any other ~~parties~~unanticipated ~~affiliated~~income ~~with~~or ~~the Company~~expenses, including income from the ~~Company’s~~future ~~Chairman~~subleases of ~~its~~vacated ~~board~~office space, could differ materially from amounts assumed in arriving at the loss on termination of ~~directors~~the business. ~~The~~To ~~Company formerly~~the ~~provided~~extent ~~consulting~~actual ~~services~~proceeds toor ~~Gray~~other amounts indiffer ~~connection~~from ~~with~~the ~~certain~~estimates that are reflected as of ~~Gray~~ November 30, 2004, or as management’s estimates ~~acquisitions~~are ~~and~~revised, ~~dispositions.~~the ~~The~~variance ~~“Consulting”~~will ~~segment~~be is reported ~~as a~~in discontinued ~~operation~~operations in future periods.

CERTAIN RELATIONSHIPS

J. Mack Robinson, Chairman of the board of the Company, is ~~Chief Executive Officer, Chairman and a director of Gray, and~~ the beneficial owner of ~~Gray common stocks representing~~ approximately 31 57.0% of the ~~combined voting power of Gray’s two classes of common stock as of the date of the~~ Company’s ~~disposition of its investment in Gray~~ common ~~stocks (the “Gray Disposition Date”). Additionally, Mr. Robinson is the beneficial owner of approximately 48.2% of the Company’s common~~ stock as of ~~February~~November 2930, 2004, and Mr. Robinson and his ~~affiliates~~ affiliates also own shares of the Company’s convertible preferred stock having an aggregate face amount of approximately $19.8 million as of ~~February 29, 2004,~~that date representing approximately 8189.54% of the aggregate face amount of all outstanding preferred stock on that date. ~~Robert S~~Mr. Robinson ~~Prather,~~is ~~Jr.,~~also ~~President,~~ Chief Executive Officer ~~and a director of the Company~~, isChairman ~~President, Chief Operating Officer~~ and a director of Gray, and the beneficial owner of Gray common stocks representing approximately 2028.28% of the combined voting power of Gray’s two classes of common stock as of ~~the~~March 22, ~~Gray~~2004. ~~Disposition~~Robert ~~Date~~S. ~~Hilton~~Prather, HJr. ~~Howell~~, ~~the~~President, ~~Company’s~~Chief ~~Vice~~Executive ~~President~~Officer and ~~Secretary~~a director of the Company, is ~~Vice~~President, ~~Chairman~~Chief Operating Officer and a director of Gray, and the beneficial owner of Gray common stocks representing approximately 232.36% of the combined voting power of Gray’s two classes of common stock as of ~~the~~March 22, ~~Gray~~2004. ~~Disposition~~Hilton ~~Date~~H. ~~Each~~Howell, ~~of Messrs~~Jr. ~~Robinson~~, ~~Prather~~ ~~and~~the ~~Howell~~Company’s ~~beneficial~~Vice ~~ownership~~President and ~~percentages~~Secretary, ~~noted~~is ~~above~~Vice ~~includes~~Chairman and a director of Gray, and the ~~Company’s~~ beneficial ~~ownership~~owner of Gray common stocks representing approximately 177.20% of the combined voting power of Gray’s two classes of common stock as of the ~~Gray~~same ~~Disposition Date~~date. Beneficial ownership percentages include warrants and options to acquire shares of Gray common stocks that were exercisable on, or within 60 days after, such date.

Mr. Robinson personally guarantees substantially all of the debt outstanding under the Company’s bank credit facility. Under the terms of his guarantee, Mr. Robinson has the option to purchase the entire loan from the banks, and thereby would become the holder of the debt currently payable to the banks and the related lien on the Company’s assets.

12W. James Host, a director of the Company until his resignation in January 2004, previously owned along with his wife, shares of the Company’s convertible preferred stock having an aggregate face amount of approximately $1.8 million. In October 2004, Mr. Host and his wife exercised their right to convert their shares of preferred stock to approximately 255,000 shares of the Company’s common stock. As of November 30, 2004, other officers or directors of the Company own shares of the Company’s preferred stock having an aggregate face value of approximately $0.2 million.

~~loan~~Through ~~from~~a rights-sharing agreement with Gray, the ~~banks~~Company participates jointly with Gray in the marketing, selling and broadcasting of certain collegiate sporting events and in related ~~thereby~~programming, ~~would~~production ~~become~~and other associated activities on behalf of a university. The current agreement commenced in April 2000 and terminates in April 2005. As a result of the ~~holder~~current rights-sharing agreement, Gray may be called upon for payment of a share of certain guaranteed rights fees to the ~~debt~~university. ~~currently~~During the fiscal year ended August 31, 2004, Gray had paid approximately $1.5 million under this provision, and as of November 30, 2004, the Company has accrued fees payable to Gray of approximately $1.2 million. In October 2004, both the ~~banks~~Company and Gray executed a new 10-year multimedia rights-sharing agreement with the ~~related~~university ~~lien~~commencing onin April 2005 at the end of the Company’s ~~assets~~current contract. The Company

~~W. James Host, a director of the Company until his resignation in January 2004,~~15 owns along with his wife, shares of the Company’s convertible preferred stock having an aggregate face amount of approximately $1.8 million. Other officers or directors of the Company own shares of the Company’s preferred stock having an aggregate face value of approximately $0.2 million.

and Gray will share equally the costs of the rights, and will jointly administer and manage the rights over the term of the agreement.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make judgments and estimations that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company considers the following accounting policies to be critical policies that require judgments or estimations in their application where variances in those judgments or estimations could make a significant difference to future reported results.

Revenue Recognition and Rights Fee Expenses – Revenue from services is recognized as the services are rendered. Corporate sponsor license fee revenue that is not related to specific events is recognized ratably over the term of the sponsorship. In certain circumstances, the Company enters into contractual arrangements with associations or institutions it represents in various capacities which involve payment of guaranteed rights fees. Guaranteed rights fee expense that is not related to specific events is recognized ratably over the term specified in the contract. The Company’s contractual arrangements with associations or institutions may also involve net profit sharing arrangements (“profit splits”) based on the net profit associated with services rendered under the contract. Profit split expense is accrued over the contract period, based on estimates, and is adjusted at the end of the contract term in order to reflect the actual profit split.

~~Revenue~~Goodwill ~~from~~and ~~services~~Other isIntangible ~~recognized~~Assets as– Prior ~~the~~to ~~services~~July 1, ~~are~~2001, ~~rendered~~goodwill was amortized over 20 years. ~~Corporate~~Effective July 1, 2001, the Company ~~sponsor~~adopted ~~license~~Statement ~~fee~~of ~~revenue~~Financial ~~that~~Accounting isStandards ~~not~~No. 142, ~~related~~“Goodwill and Other Intangible Assets,” (“SFAS 142”) which eliminated the requirement to ~~specific~~amortize ~~events~~goodwill, ~~is recognized~~and ~~ratably~~also ~~over~~affected the Company’s ~~term~~accounting for its equity in losses of ~~the~~affiliated ~~sponsorship~~companies. InUnder ~~certain~~the ~~circumstances,~~provisions of SFAS 142, the Company ~~enters~~is ~~into~~required ~~contractual~~to ~~arrangements~~periodically ~~with~~assess ~~associations~~the orcarrying value of goodwill associated ~~institutions~~with iteach ~~represents~~of infour ~~various~~distinct ~~capacities~~business ~~which~~units ~~involve~~that ~~payment~~comprise two business segments of the Company’s ~~guaranteed~~continuing ~~rights~~operations ~~fees.~~to ~~Guaranteed~~determine ~~rights~~if ~~fee~~an ~~expense~~impairment ~~that~~in isvalue ~~not~~has ~~related~~occurred. Prior to the fiscal ~~specific~~year ~~events~~ended isAugust 31, ~~recognized~~2004, ~~ratably~~such ~~over~~an ~~the~~assessment ~~term~~was ~~specified~~also required in ~~the~~connection ~~contract~~with a discontinued business segment. Annual impairment tests prior to the fiscal year ended August 31, 2003 concluded ~~The~~that the carrying amount of goodwill for each acquired business unit did not exceed its net realizable value based on the Company’s ~~contractual~~estimate ~~arrangements~~of ~~with~~expected future ~~associations~~cash orflows ~~institutions~~to ~~may~~be generated by each of the business units. However, the Company updated its ~~also~~assessment ~~involve~~as ~~net~~of ~~profit~~August 31, ~~sharing~~2003 ~~arrangements~~and ~~(“profit~~concluded ~~splits”)~~that based on a valuation model incorporating expected future cash flows in consideration of historical cash flows and operating results, a goodwill impairment charge of $23.4 million was necessary to reduce the ~~net~~carrying value of goodwill ~~profit~~to ~~associated~~net ~~with~~realizable ~~services~~value, ~~rendered~~$2.4 million ~~under~~of which was attributable to the ~~contract~~discontinued business segment. ~~Profit~~Management ~~split~~further determined that an additional goodwill impairment charge of $3.3 ~~expense~~million iswas ~~accrued~~necessary ~~over~~during the ~~contract~~fiscal ~~period,~~year ~~based~~ended onAugust 31, ~~estimates~~2004, ~~and~~upon ismanagement’s consideration ~~adjusted~~of atcurrent fiscal year operating results and the ~~end~~forecasted operating results and business plans for one of the ~~contract~~Company’s ~~term~~business units. If the Company concludes in ~~order~~the tofuture ~~reflect~~that the ~~actual~~adjusted carrying ~~profit~~value of goodwill for any of the four business units comprising the Company’s continuing ~~split~~operations exceeds its respective net realizable value, the Company would expense such excess and decrease goodwill as reported in the consolidated balance sheet.

~~Goodwill~~Other purchased intangibles, including customer relationships, are amortized primarily over a 16-year average life. The use of a 16-year average life for customer relationships acquired in the acquisition of Host, amortized on a straight-line method, is not materially different from using the estimated life of each individual relationship using a systematic allocation method. Prior to the fiscal year ended August 31, 2003, the Company determined that an impairment charge of approximately $6.6 million was necessary to reduce the carrying amount of certain customer relationship intangible assets as a result of a significant change in the contractual nature of the Company’s underlying relationship with the NCAA. An updated impairment analysis performed as of August 31, 2003 indicated the need for an additional charge to reduce customer relationships and other ~~Other~~acquisition ~~Intangible~~intangibles ~~Assets~~by –approximately $7.0 million at that date, all of which was attributable to a discontinued operating segment. If the Company concludes in the future that significant changes occur in its customer relationships, additional impairment charges may be necessary.

~~Prior~~The toremaining ~~July 1,~~value ~~2001,~~assigned ~~goodwill~~to ~~and~~acquisition ~~certain~~intangibles ~~purchased~~other ~~intangible~~than ~~assets~~goodwill ~~(i.e., trademarks)~~will ~~were~~continue to be amortized over ~~20 years.~~a ~~Effective~~16-year ~~July 1,~~average ~~2001~~life, ~~the~~at ~~Company adopted~~a ~~Statement~~rate of ~~Financial~~approximately ~~Accounting Standards No~~$0.7 ~~142,~~million ~~“Goodwill~~per and Other Intangible Assets,” (“SFAS 142”) which eliminated the requirement to amortize goodwill and trademarks, and also affected the Company’s accounting for its equity in earnings (losses) of affiliated companiesyear. ~~Under~~The ~~the~~use ~~provisions~~ of ~~SFAS~~a 142, the Company is required to periodically assess the carrying value of goodwill and trademarks associated with each of five distinct business units that comprise three business segments of the Company to determine if an impairment in value has occurred. Annual impairment tests prior to the fiscal 16-year ~~ended~~average ~~August 31,~~life ~~2003 concluded that the carrying amount~~ of ~~goodwill~~customer ~~and~~relationships ~~trademarks~~amortized ~~for~~on ~~each~~a ~~acquired~~straight-line ~~business~~method ~~unit~~is ~~did~~ not ~~exceed~~materially ~~its~~different ~~net~~than ~~realizable~~using ~~value based on~~ the ~~Company’s~~estimated ~~estimate~~life of ~~expected future cash flows to be generated by~~ each ofindividual ~~the~~relationship ~~five~~using ~~business units. However, the Company updated its assessment as of August 31, 2003 and concluded that based on~~ a ~~valuation model incorporating expected future cash flows in~~ ~~consideration~~systematic ofallocation ~~historical cash flows and operating results, an impairment charge of $28~~method.~~2 million was necessary to reduce the carrying value of goodwill~~ ~~and trademarks to net realizable value. If the Company concludes in the future~~ ~~that the adjusted carrying value of goodwill for any of the business units~~ ~~exceeds its respective net realizable value, the Company would expense such~~ ~~excess and decrease goodwill as reported in the consolidated balance sheet.~~

~~Other~~Goodwill ~~purchased~~and ~~intangibles,~~intangible ~~including customer relationships~~assets, ~~are~~net ~~amortized primarily over a 16-year average life. The use~~ of aaccumulated ~~16-year average life for customer relationships acquired in the Host-USA Acquisition~~amortization, ~~amortized~~were onapproximately a$48.5 million ~~straight-line~~as ~~method, is not materially different from using the estimated life~~ of ~~each~~November 30, ~~individual~~2004 ~~relationship~~and ~~using a systematic allocation method~~$48.7 million ~~Prior~~as ~~to the~~of ~~fiscal year ended~~ August 31, ~~2003~~2004, ~~the~~of ~~Company~~which, ~~determined~~goodwill ~~that an~~was ~~impairment charge of~~ approximately $640.64 million ~~was~~as ~~necessary~~of toeach ~~reduce~~date. ~~the~~ The carrying ~~amount~~value of ~~certain~~goodwill ~~customer~~and ~~relationship~~acquired intangibles, ~~intangible~~net ~~assets as a result~~ of aaccumulated ~~significant~~amortization, ~~change~~represented inapproximately ~~the~~68% ~~contractual nature~~ of the Company’s ~~underlying~~total ~~relationship~~assets ~~with~~as ~~the~~of November 30, 2004.

NCAA. An updated impairment analysis performed as of August 31, 2003 indicated the need for an additional impairment charge of approximately $2.3 million at that date. If the Company concludes in the future that significant changes occur in its customer relationships, additional impairment charges may be necessary.

The remaining value assigned to customer relationships will continue to be amortized over a 16-year average life, at a rate of approximately $0.6 million per year, except for a specific customer relationship having a remaining carrying value of approximately $0.3 million that is being amortized over the fiscal year ending August 31, 2004. The use of a 16-year average life of customer relationships amortized on a straight-line method is not materially different than using the estimated life of each individual relationship using a systematic allocation method.

Goodwill and intangible assets, net of accumulated amortization, were approximately $52.6 million as of February 29, 2004 and $53.2 million as of August 31, 2003, of which, goodwill was approximately $43.7 million as of each date. As of February 29, 2004, the carrying value of goodwill and acquired intangibles, net of accumulated amortization, represented approximately 71% of the Company’s total assets.

Deferred Income Taxes –

Deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on certain deferred tax assets if it is more likely than not that some or all of these deferred tax assets will not be realized. As of February 29, 2004 the Company has recognized a full valuation allowance for net deferred tax assets thereby resulting in a carrying amount for deferred taxes in the balance sheet of zero. If and when the Company generates taxable income in the future and benefits primarily from net operating loss carryforwards for federal tax purposes that expire beginning in 2018, some or all of the deferred tax assets may be reinstated on the balance sheet, and the Company would report income tax benefits in the period that such reinstatement occurs.

Derivative Instruments and Hedging Activities –

Effective July 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Investments and Hedging Activities” (“SFAS 133”). SFAS 133 requires the Company to recognize all derivative instruments (i.e., interest rate swap agreements, and until sold in April 2003, warrants to purchase additional shares of Gray common stocks) on the balance sheet at fair value. The aggregate fair market value of derivatives as of February 29, 2004 and August 31, 2003 of approximately $(1.2) million and $(1.7) million, respectively, is included in the Company’s balance sheet as a component of “Other liabilities.” Changes in the estimated fair value of derivatives that do not meet the specific criteria in SFAS 133 for hedge accounting are included in the earnings (losses) reported for the period of the change. None of the Company’s derivative instruments have been determined to qualify for hedge accounting treatment. Management estimates the fair value of interest rate swap agreements based on estimated market values provided by the counterparties to the swap agreements.

Valuation of Certain Non-Trade Receivables –

The Company recorded impairment charges of approximately $5.2 million and $1.7 million in the fiscal year ended August 31, 2003 (but subsequent to the six months ended February 28, 2003), associated with its investment in and amounts due from iHigh and a note receivable from the purchaser of Datasouth, respectively. The Company performs ongoing credit evaluations of parties from such non-trade receivables are due, and if and when management determines that the carrying value of such receivables may not ultimately be realized, the estimated impairment amount is charged to the earnings (losses) reported for the period in which the determination is made. The impairment charges recorded in the fiscal year ended August 31, 2003 reduced the carrying amount of the investment in and amounts due from iHigh to zero, and the Company’s note receivable from the purchaser of Datasouth to approximately $1.7 million.

LIQUIDITY AND CAPITAL RESOURCES

Credit Arrangements –

As of February 29, 2004, the Company’s indebtedness to its bank lenders was approximately $55.9 million. The bank credit agreement has a maturity date of November 30, 2004 at which time all amounts outstanding become due and payable. The agreement does not require any payments of principal prior to maturity, nor does it provide for any additional borrowing capacity. The agreement, which was last amended on August 18, 2003, requires the maintenance of interest coverage ratios, determined quarterly beginning November 30, 2003. Prior to the maturity date, the Company will be required to refinance the total amount due and payable to the banks at that time. The Company’s debt to the banks is collateralized by a lien on all of the Company’s assets, and is personally guaranteed by the Company’s Chairman. The Company’s ability to continue this or similar financing beyond the November 30, 2004 maturity date is significantly dependent on the continued support of the Company’s Chairman and, in part, on the Company’s future operating results. There can be no assurances with respect to either the Company’s future operating results or the continued support of its Chairman.

As amended in August 2003, the Company’s bank credit agreement provides for (a) two term loans (the “Term Loans”) for borrowings totaling approximately $35.9 million and (b) a revolving loan commitment (the “Revolver”) for maximum borrowings of $20 million. All amounts outstanding bear interest at either the banks’ prime rate or the London Interbank Offered Rate (“LIBOR”) plus 2.75%, payable monthly. The amendment in August 2003 reduced the interest rate charged by the banks and revised the maturity date of the agreement to November 30, 2004 from September 30, 2003. The Company anticipates that it will continue to utilize fully the availability under the Revolver throughout the remaining term of the agreement.

Under the terms of the credit agreement, up to an aggregate of $12.5 million in funding for working capital purposes, if necessary, may be sourced from the issuance of equity securities, including shares of the Company’s preferred stock, or by the issuance of subordinated debt. In July 2002, the Company’s Chairman provided the Company short-term loans totaling $4 million to provide cash to the Company for working capital purposes. In August 2002, the loans were refinanced with the issuance of the Company’s convertible preferred stock having a face amount of approximately $4.1 million to the Chairman. In September 2002, the Chairman and certain other affiliates of the Chairman invested an aggregate $3 million in cash used for working capital purposes, for shares of the Company’s convertible preferred stock. In November 2003, the Chairman invested an additional $2 million in cash used for working capital purposes for shares of the Company’s Series F Preferred Stock. The Chairman previously committed to invest up to an additional $1 million in cash over the next year for additional shares of the Company’s common or preferred stocks or for subordinated debt, to be used for working capital purposes. In January 2004, the Chairman provided $1.8 million in cash used for working capital purposes, of which, at least $0.8 million is expected to ultimately be applied as proceeds for newly-issued subordinated debt or equity. Therefore, as of February 29, 2004, the Company has sourced approximately $10.9 million of cash for working capital purposes, and as a result, the Company would currently be permitted under its bank credit agreement to source up to an additional $1.6 million of cash from the issuance of equity or debt securities during the remaining term of the credit facility.

The Company’s Chairman personally guarantees substantially all of the debt outstanding under the current credit facility, and if the Company is unable to meet its principal payment obligations under the recently amended credit facility, it is likely that the bank lenders would call the guarantee, thereby requiring the Chairman to repay the amount of the loan to the banks. Under the terms of his guarantee, the Chairman has the option to purchase the entire loan from the banks, and thereby becoming the holder of the debt currently payable to the banks and the related lien on the Company’s assets. The Chairman is compensated by the Company for his guarantee in the form of newly issued shares of the Company’s common stock, valued at an annual rate of 1.625% of the guarantee amount. The guarantee amount will reduce in the future as principal payments are made to the bank lenders on the outstanding term loans.

In connection with the Host-USA Acquisition, the Company issued 8% subordinated notes to former stockholders of Host and USA, representing long-term debt of approximately $8.7 million as of February 29, 2004 and approximately $16.7 million as of August 31, 2003. During the six months ended February 29, 2004, holders of 8% subordinated notes representing an aggregate face value of approximately $8.0 million exchanged their notes for shares of Series E Preferred Stock. Interest is payable quarterly on all but a $3.0 million subordinated note payable to the Company’s Chairman, for which interest is payable at maturity, and the notes, as amended, have a maturity date of January 17, 2006. Payment of interest and principal on all subordinated notes is subordinate to the Company’s bank credit agreement.

The Company met and exceeded all of its principal payment requirements during the fiscal year ended August 31, 2003, reducing its bank debt by $38 million. The Company sourced these principal payments through the sales of its investments in Rawlings common stock, Gray common stocks and warrants to purchase additional shares of Gray common stocks, for cash proceeds aggregating approximately $46.2 million.

As a result of the seasonality of its business, the Company generally expects to use more cash than it generates during the first half of its fiscal year, and generate more cash than it uses during the second half of its fiscal year. Due to negative operating cash flow generated in the past, the Company currently has trade payables and other cash obligations that exceed its current assets. In the six months ended February 29, 2004, the Company’s Chairman provided an aggregate total of $3.8 million in cash used for operating purposes. While the Company believes its cash flow will be sufficient to meet its immediate needs through the maturity date of its bank credit agreement, the Company may also seek to (a) issue and sell equity securities of the Company, which may include the Company’s preferred stock; (b) issue additional subordinated debt; (c) accelerate cash flows otherwise anticipated to be received later in the current fiscal year or future fiscal years; or (d) a combination thereof. The Company’s bank credit agreement does provide the Company the ability to issue additional subordinated debt or equity securities for cash proceeds of currently up to approximately $1.6 million without requiring an associated reduction in its outstanding debt to the banks. The Company’s capital expenditures are not expected to exceed $600,000 for the fiscal year ending August 31, 2004.

Historical Cash Flow Information – Summary –

The following summarizes the Company’s historical cash flow activities (amounts in 000’s):

	Six Months Ended
	February 29,			February 28,
	2004			2003
Cash flows from operating activities:
Continuing operations	$	(7,883	)	$	(2,031	)
Discontinued operations					106
Cash flows from investing activities		(261	)		6,840
Cash flows from financing activities		3,759			(4,573	)
Net increase (decrease) in cash and cash equivalents	$	(4,385	)	$	342

~~Historical~~Deferred ~~Cash~~Income ~~Flow~~Taxes ~~Information~~ – Deferred ~~Cash~~income ~~Flows~~tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on certain deferred tax assets if it is more likely than not that some or all of these deferred tax assets will not be realized. As of November 30, 2004 the Company has recognized a full valuation allowance for net deferred tax assets thereby resulting in a carrying amount for deferred taxes in the balance sheet of zero. If and when the Company generates taxable income in the future and benefits primarily from ~~Operating~~net ~~Activities~~operating –loss carryforwards for federal tax purposes that expire beginning in 2018, some or all of the deferred tax assets may be reinstated on the balance sheet, and the Company would report income tax benefits in the period that such reinstatement occurs.

Derivative Instruments and Hedging Activities – Effective July 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Investments and Hedging Activities” (“SFAS 133”). SFAS 133 requires the Company to recognize all derivative instruments (since April 2003, consisting solely of an interest rate swap agreement which terminated on December 31, 2004) on the balance sheet at fair value. The ~~following~~aggregate ~~summarizes~~fair market value of the derivative as of November 30, 2004 and August 31, 2004 of approximately $(0.1) million and $(0.4) million, respectively, is included in the Company’s ~~historical~~balance ~~cash~~sheet ~~flows~~as ~~from~~a ~~operating~~component of “Other ~~activities~~liabilities.” ~~(amounts~~Changes in ~~000~~the estimated fair value of derivatives that do not meet the specific criteria in SFAS 133 for hedge accounting are included in the earnings (losses) reported for the period of the change. The Company’s): interest rate swap agreement does not qualify for hedge accounting treatment. Management estimates the fair value of interest rate swap agreement based on the estimated market value provided by the counterparty to the swap agreement.

	Six Months Ended
	February 29,			February 28,
	2004			2003
Operating income (loss)	$	(570	)	$	(719	)
Depreciation and amortization included in operations		1,152			1,229
Interest expense, net of interest and dividend income		(2,194	)		(4,322	)
Net change in operating assets and liabilities		(6,261	)		1,624
Other operating cash flows		(10	)		157
Net cash flows from continuing operations		(7,883	)		(2,031	)
Net cash flows from discontinued operations					106
Net cash flows from operating activities	$	(7,883	)	$	(1,925	)

Valuation of Certain Non-Trade Receivables –
As of November 30, 2004, the Company has a non-trade receivable from iHigh, Inc., a 37%-owned equity investee of the Company, and a subordinated note receivable from the purchaser of Datasouth Computer Corporation (“Datasouth”), the Company’s former computer printer manufacturing company. The Company performs ongoing credit evaluations of parties from which such non-trade receivables are due, and if and when management determines that the carrying value of such receivables may not ultimately be realized, the estimated impairment amount is charged to the earnings (losses) reported for the period in which the determination is made. In prior years, impairment charges reduced the carrying amount of the investment in and amounts due from iHigh to zero, and the Company’s note receivable from the purchaser of Datasouth to estimated net realizable value. As a result of payments received on the note subsequent to the adjustment to net realizable value, the carrying amount of the subordinated note receivable has been reduced to approximately $1.1 million as of November 30, 2004.

~~The~~LIQUIDITY ~~Collegiate~~AND ~~Marketing~~CAPITAL ~~and Production Services segment primarily generates~~RESOURCES ~~revenues during the collegiate football and basketball seasons. In the six~~ ~~months ended February 28 (or 29), the segment primarily derived revenues from~~ ~~projects and services associated with the college football and college~~ basketball regular seasons. The Affinity Events segment consists primarily of participatory sports tours that generally begin in March and end in September each year. Therefore, this segment generates a proportionately low amount of revenues during the six months ended February 28 (or 29).

~~The~~Credit ~~net~~Arrangements ~~change in operating assets and liabilities had an unfavorable impact on~~– ~~total~~As ~~cash~~of ~~flows from continuing operations during the six months ended February~~November 2930, 2004, ~~and a favorable impact during~~ the ~~six~~Company’s ~~months~~indebtedness ~~ended~~to ~~February 28,~~its ~~2003.~~bank ~~Accounts~~lenders ~~receivable~~was ~~increased~~approximately $258.~~7 million in the six months ended~~9 ~~February 29, 2004 and $5.0~~ million. inIn ~~the six months ended February~~October ~~29,~~ 2004 ~~respectively~~, ~~due~~the tobank ~~advertising~~credit ~~billings~~agreement ~~associated~~was ~~with~~amended ~~the college football~~ and ~~college~~restated ~~basketball seasons during the period subsequent~~ to ~~August 31~~provide ~~of the~~an ~~preceding~~additional ~~calendar~~$3 million ~~year.~~in ~~Advertising~~financing, ~~and~~which ~~other~~was ~~revenues~~borrowed ~~generated during this period result~~ in ~~increases in the Company’s accounts receivable~~October 2004. InThe ~~addition~~agreement, ~~during~~ ~~the~~having ~~six~~a maturity ~~months~~date ~~ended~~of ~~February~~November 2930, ~~2004,~~2005 ~~cash available~~ at ~~the~~which ~~beginning of~~time ~~the~~all ~~period~~amounts ~~was~~outstanding ~~used~~become todue ~~reduce accounts payable~~ and ~~accrued expenses by $3.7 million, compared to an increase in accounts~~ payable ~~and accrued expenses of $7.4 million in the six months ended February 28~~, ~~2003. The Company’s total~~ ~~cash~~does ~~flows~~not ~~from~~require ~~continuing~~any ~~operations~~payments ~~were~~of ~~also~~principal ~~used~~prior to ~~fund interest expense. Interest paid~~maturity, ~~net~~nor ofdoes ~~interest~~it ~~income~~provide ~~received, was approximately $2.3 million and $4.5 million~~ for ~~the six months ended February 29, 2004 and February 28,~~any ~~2003,~~additional ~~respectively,~~borrowing ~~with~~capacity. ~~the~~The ~~reduction~~agreement ~~caused~~requires by the ~~decrease~~maintenance inof ~~total outstanding debt and reductions in~~ interest ~~rates~~coverage toratios, determined ~~which the debt is subject~~quarterly.

~~Historical~~The ~~Cash~~Company’s ~~Flow~~debt ~~Information~~to –the ~~Cash~~banks ~~Flows~~is collateralized by a lien on all of the Company’s assets. In addition, the Company’s Chairman personally guarantees substantially all of the debt outstanding under the bank credit agreement, and if the Company is unable to meet payment obligations under the agreement, it is likely that the bank lenders would call the guarantee, thereby requiring the Chairman to repay the amount of the loan to the banks. The Chairman’s guarantee is collateralized by certain personal holdings of marketable securities pledged to the Company’s bank lenders. Under the terms of his guarantee, the Chairman has the option to purchase the entire loan from ~~Investing~~the ~~Activities~~banks, and thereby becoming the holder of the debt currently payable to the banks and the related lien on the Company’s assets. The Chairman is compensated by the Company for his guarantee in the form of newly issued shares of the Company’s common stock, valued at an annual rate of 1.625% of the guarantee amount. The guarantee amount will reduce in the future if principal payments are made to the bank lenders on the outstanding term loans, and may increase if additional bank financing is made available to the Company.

~~The~~In ~~following~~September 2004, ~~summarizes~~a company under the ~~Company~~Chairman’s ~~historical~~control provided the Company $1.5 million of cash which ~~flows~~was ~~from~~used ~~investing~~for working capital purposes, in exchange for a subordinated note bearing interest ~~activities~~at ~~(amounts~~6% per annum, having a maturity date of December 31, 2004. This note was refinanced by another company under the Chairman’s control, by substituting a subordinated note bearing interest at 6% per annum, having a maturity date of February 28, 2006. Under the terms of the credit agreement, as amended in ~~000~~October 2004, up to an aggregate of $10 million in additional funding for working capital purposes, if necessary, could be sourced from the issuance of equity securities, including shares of the Company’s): preferred stock, or by the issuance of subordinated debt. During the fiscal year ended August 31, 2004,

	Six Months Ended
	February 29,			February 28,
	2004			2003
Capital expenditures	$	(204	)	$	(121	)
Proceeds on sales of investments					6,764
Decrease (increase) in other assets		(57	)		197
Net cash flows from investing activities	$	(261	)	$	6,840

In the six months ended February 28, 2003, the Company sold its investment in Rawlings common stock to an unrelated company for cash proceeds of approximately $6.8 million.

~~Historical~~the ~~Cash~~Company ~~Flow~~received ~~Information~~approximately –$6.6 million ~~Cash~~from ~~Flows~~the Company’s Chairman, of which $2 million was invested in newly-issued shares of the Company’s preferred stock. The remaining investment of approximately $4.6 million is presented in the consolidated balance sheet as “Advances from stockholder.” ~~Financing~~Management ~~Activities~~believes that it is the Chairman’s intention to ultimately convert these advances to subordinated debt or equity securities. In connection with the credit agreement amendment, the Chairman committed to the Company an additional aggregate cash investment of up to $3 million as and when needed at any time and from time to time on or prior to the maturity date, and provided that up to $1.5 million of such cash investments would be used to repay the $1.5 million subordinated note issued by his affiliated company.

~~The~~As ~~following~~amended ~~summarizes~~in October 2004, the Company’s ~~historical~~bank ~~cash~~credit ~~flows~~agreement ~~from~~provides ~~financing~~for (a) two term loans ~~activities~~(the “Term Loans”) for borrowings totaling approximately $35.9 million and (b) two revolving loan commitments (the “Revolvers”) for aggregate maximum borrowings of $23 million. All amounts outstanding inbear ~~000~~interest at either (a) the banks’s prime rate or (b): the London Interbank Offered Rate (“LIBOR”) plus 2.75%, payable monthly. The Company anticipates that it will continue to utilize fully the availability under the Revolvers throughout the remaining term of the credit agreement.

	Six Months Ended
	February 29,			February 28,
	2004			2003
Borrowings from revolving line of credit	$			$	175
Cash advances made by stockholder		1,800
Repayments of long-term debt					(6,767	)
Debt issue costs		(41	)		(981	)
Proceeds on issuance of preferred stock		2,000			3,000
Net cash flows from financing activities	$	3,759		$	(4,573	)

In connection with the Host-USA Acquisition, the Company issued 8% subordinated notes, representing long-term debt of approximately $8.7 million as of November 30, 2004. During the fiscal year ended August 31, 2004, holders of 8% subordinated notes representing an aggregate face value of approximately $8.0 million exchanged their notes for shares of Series E Preferred Stock. Interest is payable quarterly in cash on all but a $3.0 million subordinated note payable to the Company’s Chairman, on which interest is payable at maturity in the form of cash or shares of the Company’s common stock, at the Company’s option. The notes all have a maturity date of January 17, 2006. Payment of interest and principal on all subordinated notes is subordinate to the Company’s bank credit agreement.

~~CONTRACTUAL~~Due ~~OBLIGATIONS~~to ~~AND~~negative ~~OTHER~~operating ~~COMMITMENTS~~cash flow generated in the past, the Company currently has trade payables and other cash obligations that exceed its current assets. In the fiscal year ended August 31, 2004, the Company’s Chairman provided an aggregate total of $6.6 million in cash used for operating purposes. Management believes the Company has sufficient liquidity sources, which include the Company’s Chairman and his affiliates, to meet its cash obligations until the November 30, 2005 maturity date of its bank credit agreement. Prior to the November 30, 2005 maturity date, the Company anticipates that will be required to refinance the total amount due and payable to the banks at that time. The Company’s ability to continue this or similar financing beyond the November 30, 2005 maturity date is significantly dependent on the continued support of the Company’s Chairman and, in part, on the Company’s future operating results. There can be no assurances with respect to either the Company’s future operating results or the continued support of its Chairman. In exchange for cash advances made in the past or in the future by the Company’s Chairman, his affiliates and/or other parties, the Company may (a) issue and sell equity securities of the Company, which may include the Company’s preferred stock; (b) issue additional subordinated debt; or (c) a combination thereof. The use of future cash investments or advances in excess of an aggregate $10 million for purposes other than the reduction of the bank debt would require approval of the Company’s bank lenders. The Company’s capital expenditures are not expected to exceed $600,000 for the fiscal year ending August 31, 2005.

Historical Cash Flow Information – Summary – The following summarizes the Company’s ~~contractual~~historical ~~obligations~~cash asflow ofactivities ~~February 29, 2004~~ (amounts in 000’s):

	Payments Due by Period as of February 29, 2004
	Three Months Ended
				Less than			More than 1		More than 3		More than
	November 30,
Contractual Obligations	Total			1 Year			to 3 Years		to 5 Years		5 Years
	2004			2003
Long-term debt obligations	$	65,215		$	56,522		$	8,693	$		$
Cash flows from operating activities:
Operating lease obligations		3,426			1,288			1,059		649		430
Continuing operations	$	(3,684	)	$	(3,637	)
Purchase obligations		32,545			13,550			14,059		4,569		367
Discontinued operations		99			(2,722	)
Total	$	101,186		$	71,360		$	23,811	$	5,218	$	797
Cash flows from investing activities:
Continuing operation investing activities		(7	)		(35	)
Discontinued operation investing activities		150			(12	)
Cash flows from financing activities		3,802			1,962
Net increase (decrease) in cash and cash equivalents	$	360		$	(4,444	)

Purchase obligations primarily consist of future guaranteed rights fee commitments to associations or institutions under contractual arrangements of typically one to four years, which expire at varying times through 2009.

The Company is a party to an interest rate swap agreement described in Note 5 to the Condensed Consolidated Financial Statements. The estimated cost of terminating the swap agreements, if the Company elected to do so, was approximately $1.4 million as of February 29, 2004, including accrued interest through that date.

Dividends on Series D Preferred Stock and Series F Preferred Stock are payable annually at an annual rate of $90 per share in cash or in shares of the Company’s common stock, at the holder’s option, except that, until the second anniversary of the date of issuance, the Company has the option to pay such dividends in cash or in shares of the Company’s common stock. For purposes of determining the number of shares of common stock to be issued as payment of a dividend, the common stock is valued at the average market closing price for the twenty trading days immediately preceding each dividend payment date. All dividends payable through February 29, 2004 on issued shares of the Company’s preferred stock have been paid, including Series D Preferred Stock dividends payable to the Company’s Chairman that were declared effective June 30, 2003, having an aggregate value at that time of approximately $0.5 million, paid to the Chairman in January 2004 in the form of approximately 149 shares of the Company’s common stock, following the Company’s stockholders’ approval of the issuance of such shares.

~~RESULTS~~Historical OFCash ~~CONTINUING~~Flow Information ~~OPERATIONS~~ – Cash ~~THREE~~Flows ~~MONTHS~~from ~~ENDED~~Operating ~~FEBRUARY~~Activities ~~29, 2004~~– ~~COMPARED~~The TOfollowing ~~THREE~~summarizes ~~MONTHS~~the ~~ENDED~~Company’s ~~FEBRUARY~~historical ~~28,~~cash ~~2003~~flows from operating activities (amounts in 000’s):

Results Derived from Operating Businesses –


	Three Months Ended
	November 30,
	2004			2003
Income from operations	$	2,777		$	1,816
Depreciation and amortization included in operations		344			530
Interest expense		(1,171	)		(1,086	)
Net change in operating assets and liabilities		(5,626	)		(4,953	)
Other operating cash flows		(8	)		56

Net cash flows from continuing operations		(3,684	)		(3,637	)
Net cash flows from discontinued operations		99			(2,722	)

Net cash flows from operating activities	$	(3,585	)	$	(6,359	)

~~Operating~~The ~~results~~net ~~for~~change in operating assets and liabilities had an unfavorable impact on total cash flows from continuing operations during the three months ended ~~February~~November 2930, 2004 and ~~February~~2003. The Company’s most significant business segment, the Collegiate Marketing and Production Services segment, produces a high proportion of its annual revenues during the three months ended November 2830, since the college football season generally begins in September and the college basketball season generally begins in November. For this reason, accounts receivable increase substantially during the first fiscal quarter. Accounts receivable associated with continuing operations increased approximately $10.1 million and $4.9 million during the three months ended November 30, 2004 and 2003, ~~are~~respectively. ~~summarized~~The increase in 2004 was substantially higher than in 2003 because, in addition to generating more revenue in 2004 compared to 2003, most of the Company’s collegiate properties began their college football seasons in September 2004 as ~~follows~~compared ~~(amounts~~to August in 2003. The accounts payable and accrued expenses increase of approximately $~~000~~4.3 million during the three months ended November 30, 2004 was not as significant as the increase in accounts receivable due to the Company’s): use of $3 million in proceeds on additional bank debt during the period to pay outstanding current liabilities. The accounts payable and accrued expenses decrease of approximately $0.4 million during the three months ended November 30, 2003 was likewise not consistent with the increase in accounts receivable during the period due to the Company’s use of cash available at the beginning of the period to reduce accounts payable and accrued expenses to the extent possible, in addition to funding losses of the Affinity Events discontinued segment operations.

	Three Months Ended
	February 29,			February 28,
	2004			2003
Revenues
Collegiate Marketing and Production Services	$	13,990		$	15,238
Affinity Events		578			568
Affinity Management Services		2,353			1,820
	$	16,921		$	17,626
Operating Costs and Expenses
Direct operating costs of services rendered	$	11,067		$	12,779
Selling, general and administrative		6,053			6,303
Amortization of acquisition intangibles		314			304
	$	17,434		$	19,386
Income (Loss) from Operations
Collegiate Marketing and Production Services	$	744		$	103
Affinity Events		(1,446	)		(1,513	)
Affinity Management Services		862			280
Amortization of acquisition intangibles		(314	)		(304	)
Unallocated general and administrative costs		(359	)		(326	)
	$	(513	)	$	(1,760	)

The Company’s total cash flows from continuing operations were also used to fund interest expense. Interest paid, net of interest income received, was approximately $1.2 million and $1.1 million for three months ended November 30, 2004 and 2003, respectively, with the increase caused by a combination of an increase in variable interest rates to which a significant amount of the debt is subject, and an increase in the average amount of outstanding debt during the current year period.

~~Total~~Historical ~~revenues~~Cash ~~and operating results for the Collegiate Marketing and~~Flow ~~Production~~Information ~~Services~~– Cash ~~segment~~Flows ~~were~~from ~~impacted~~Investing ~~in the three months ended February~~Activities ~~29,~~The ~~2004~~following bysummarizes the ~~termination~~Company’s ofhistorical ~~three~~cash ~~university~~flows ~~contractual~~from ~~relationships~~investing ~~at the~~activities ~~end~~(amounts ~~of the previous fiscal year. Such contracts generated revenues of~~in ~~approximately $1.5 million during the three months ended February 28, 2003 and~~000’s): ~~generated a negligible operating loss during that period. For the fiscal year~~ ~~ended August 31, 2003, such terminated contracts generated revenues of~~ ~~approximately $5.3 million and operating profit of approximately $0.5 million.~~

The three months ended February 28 (or 29) is typically a period of proportionately low activity in the Affinity Events segment. The tours and events currently operated within the Affinity Events segment generally take place during the months of March through September, except for the soccer tour finals, which take place in January; therefore, the three month period ended February 28 (or 29) is expected to reflect proportionately low revenue and a loss from operations. A greater proportion of the Company’s selling, general and administrative costs has been allocated to the Affinity Events segment in the current fiscal year, causing approximately $0.2 million of the increased loss from operations for this segment. This change was made to reflect the additional sales and management resources devoted to this segment in the current fiscal year. Therefore, in periods of proportionately low revenue activity within the Affinity Events segment, operating losses may be higher than those reported in the prior fiscal year due to the higher amount of selling, general and administrative costs absorbed by this segment in comparison with the prior year.


	Three Months Ended
	November 30,
	2004			2003
Capital expenditures	$	(17	)	$	(48	)
Increase in other assets		10			13

Net cash flows from continuing operation investing activities		(7	)		(35	)
Net cash flows from discontinued operation investing activities		150			(12	)

Net cash flows from investing activities	$	143		$	(47	)

~~Total~~In ~~revenues for~~ the three months ended ~~February~~November 2930, 2004, ~~for~~ the Affinity Management Services segment represented an increase over the same period in the prior year due to a change in the terms of a management contract which provided additional revenue and profit incentives in exchange for a lower management fee. The Company ~~met~~received ~~such~~$150 ~~incentives,~~as ~~thereby~~payment ~~increasing~~on its ~~revenues and~~note ~~profits~~receivable infrom ~~comparison with~~ the ~~same~~purchaser ~~period~~of ~~in the prior year~~Datasouth.

~~Direct~~Historical ~~operating~~Cash ~~costs~~Flow Information of– ~~services~~Cash ~~rendered~~Flows ~~decreased~~from ~~for~~Financing ~~the three months~~Activities ~~ended~~The ~~February 29,~~following ~~2004~~summarizes ~~from~~ the ~~same~~Company’s ~~period~~historical incash ~~the~~flows ~~prior~~from ~~year~~financing ~~due~~activities (~~a) to~~amounts ~~the termination of certain contractual relationships as discussed above, which substantially contributed to a reduction~~ in ~~total guaranteed rights fee and~~ ~~profit split expenses of approximately $0.6 million; and (b~~000’s) ~~the elimination of~~: ~~approximately $0.5 million of other direct costs associated with the three~~ ~~terminated university contracts.~~

Results Derived from Investments and Derivative Instruments –


	Nine Months Ended
	May 31,
	2004			2003
Borrowings from revolving line of credit	$	3,000		$
Proceeds on subordinated note payable to affiliated company		1,500
Debt issue costs		(444	)		(38	)
Preferred stock dividends paid		(254	)
Proceeds on issuance of preferred stock					2,000

Net cash flows from financing activities	$	3,802		$	1,962

~~Equity~~CONTRACTUAL inOBLIGATIONS ~~losses~~AND ofOTHER ~~affiliated companies of approximately $0.4 million for the~~COMMITMENTS ~~three months ended February 28, 2003 was derived from the Company’s~~ ~~proportionate share of the net losses reported by Gray and iHigh. The Company~~ ~~sold its investments in Gray common stocks in August 2003 and recorded an~~ impairment charge to reduce the carrying amount of its investment in iHigh to zero as of August 31, 2003. Since there is no commitment for the Company to provide any additional capital to iHigh in the future, and since the carrying amount of the Company’s investment in iHigh has been reduced to zero, the Company has reported no equity in earnings or losses of affiliated companies subsequent to August 31, 2003, nor does it anticipate reporting such amounts in the foreseeable future.

The ~~net~~following ~~change~~summarizes in the ~~value~~Company’s ofcontractual ~~certain~~obligations ~~derivative~~as ~~instruments, currently consisting~~ of ~~an interest rate swap agreement, and previously consisting of a second interest rate swap agreement that expired on December~~November 3130, ~~2002 and warrants to purchase shares of Gray common stocks that were sold in April 2003, was approximately $0.2 million for the three months ended February 29,~~ 2004 ~~due to~~(amounts ~~an increase~~ in ~~the value of the remaining interest rate swap agreement, and~~ ~~$(0.2~~000’s) ~~million for the three months ended February 28, 2003 primarily due to a~~: ~~decline in the value of warrants.~~

Interest Expense and Debt Related Costs –


	Payments Due by Period as of November 30, 2004
			Less than		More than 1		More than 3		More than
Contractual Obligations	Total		1 Year		to 3 Years		to 5 Years		5 Years
Long-term debt obligations	$	69,715	$	61,022	$	8,693	$		$
Capital lease obligations		217		79		138
Operating lease obligations		5,647		1,716		1,756		1,292		883
Purchase obligations		79,896		15,222		27,264		12,772		24,638

Total	$	155,475	$	78,039	$	37,851	$	14,064	$	25,521

~~Interest~~Operating ~~expense~~lease ~~decreased~~obligations toare ~~approximately~~presented ~~$1.1 million~~net ~~for~~of ~~the~~future ~~three~~receipts ~~months ended~~on ~~February 29,~~contracted ~~2004~~sublease arrangements ~~from~~totaling approximately $20.19 million ~~for the same period in the prior year,~~ as ~~a result~~ of aNovember 30, ~~reduction in long-term debt and declines in variable interest rates to which a significant amount of the debt is subject~~2004.

~~Debt~~Purchase ~~issue~~obligations ~~cost~~primarily ~~amortization~~consist of ~~approximately~~future ~~$0.3 million~~guaranteed ~~and~~rights ~~$0.6 million~~fee ~~for the~~commitments ~~three months ended February 29, 2004 and February 28, 2003, respectively, results from the amortization of costs paid in connection with amendments~~ to ~~the~~ ~~Company’s bank credit agreement, as well as amortization of the value of~~associations ~~shares~~or ofinstitutions ~~the Company’s common stock issued to the Company’s Chairman, who has personally guaranteed the Company’s debt~~ under ~~its~~contractual ~~bank~~arrangements ~~credit agreement. During the three months ended February 29, 2004, the Company issued approximately 151,000 shares~~ of ~~restricted~~typically ~~common~~one ~~stock~~ to ~~the~~four ~~Chairman to compensate him for his personal guarantee~~years, ~~then~~which ~~valued~~expire at ~~approximately $0.5~~ ~~million.~~varying ~~The~~times ~~value~~through ~~of all shares issued to the Chairman is amortized over the period for which the shares provide compensation, and approximately $0~~2015.2 ~~million and $0.3 million of such amortization is included in debt issue cost~~ ~~amortization for the three months ended February 29, 2004 and February 28,~~ ~~2003, respectively.~~

~~Income~~The ~~Taxes~~Company –is a party to an interest rate swap agreement described in Note 6 to the Condensed Consolidated Financial Statements. The estimated cost of terminating the swap agreements, if the Company elected to do so, was approximately $0.3 million as of November 30, 2004, including accrued interest through that date.

~~The~~Dividends ~~principal~~on ~~differences~~Series D ~~between~~Preferred ~~the~~Stock ~~federal~~and ~~statutory~~Series F ~~tax~~Preferred Stock are payable annually at an annual rate of ~~34%~~$90 ~~and~~per share in cash or in shares of the Company’s common stock, at the holder’s ~~effective~~option, ~~tax~~except ~~rate~~that, until the second anniversary of ~~zero~~the ~~are~~date ~~increases~~of inissuance, the ~~valuation~~Company ~~allowance~~has ~~for~~the ~~potentially~~option ~~non-realizable~~to ~~deferred~~pay ~~tax~~such ~~assets~~dividends in cash or in shares of $0the Company’s common stock.~~6 million~~ ~~and~~For $1purposes of determining the number of shares of common stock to be issued as payment of a dividend, the common stock is valued at the average market closing price for the twenty trading days immediately preceding each dividend payment date.7 All dividends accruing through June ~~million~~30, 2003 on issued ~~for~~shares of the ~~three~~Company’s ~~months~~preferred ~~ended~~stock ~~February~~have been paid. Dividends on Series 29D Preferred Stock payable through June 30, 2004 ~~and~~in ~~February 28~~shares of the Company’s common stock under the terms of such issuance, ~~2003~~have not been declared by the board of directors. Under the Company’s Articles of Incorporation, if dividends on any class of its preferred stock are in arrears in an amount equal ~~respectively.~~to ~~The~~150% ~~valuation~~of ~~allowance~~an ~~for~~annual ~~net~~dividend, ~~deferred~~the ~~tax~~holders ~~assets~~of ~~was~~such preferred stock shall be entitled to vote for ~~approximately~~and ~~$20~~elect two additional directors of the Company.~~4 million~~ asSuch rights would thereby be afforded the holders of ~~February~~Series 29D Preferred Stock if dividends accrued through June 30, 2004 are not paid by December 31, 2006.

Dividends on Series E Preferred Stock are payable annually at an annual rate of $90 per share in cash or in shares of the Company’s common stock at the holder’s option, except that the initial dividend on Series E Preferred Stock is not payable until July 2005 on dividends accruing through June 30, 2005, or upon a conversion of shares of Series E Preferred Stock to shares of the Company’s common stock, whichever is sooner. The amount of dividends accruing through November 30, 2004 on the outstanding shares of Series E Preferred Stock potentially payable in cash in the fiscal year ending August 31, 2005 is approximately $0.9 million, including $0.6 million in connection with shares of Series E Preferred Stock issued to the Company’s Chairman.

RESULTS OF CONTINUING OPERATIONS – ~~SIX~~THREE MONTHS ENDED ~~FEBRUARY~~NOVEMBER 2930, 2004 COMPARED TO ~~SIX~~THREE MONTHS ENDED ~~FEBRUARY~~NOVEMBER 2830, 2003

Results Derived from Operating Businesses – Operating results for the three months ended November 30, 2004 and 2003 are summarized as follows (amounts in $000’s):

Operating results for the six months ended February 29, 2004 and February 28, 2003 are summarized as follows (amounts in $000’s):


	Three Months Ended
	November 30,
	2004			2003
Revenues
Collegiate Marketing and Production Services	$	20,937		$	17,332
Association Management Services		2,138			2,163

	$	23,075		$	19,495


Operating Costs and Expenses
Direct operating costs of services rendered	$	15,776		$	12,958
Selling, general and administrative		4,343			4,408
Amortization of acquisition intangibles		179			313

	$	20,298		$	17,679


Income (Loss) from Operations
Collegiate Marketing and Production Services	$	2,703		$	1,942
Association Management Services		508			509
Amortization of acquisition intangibles		(179	)		(313	)
Unallocated general and administrative costs		(255	)		(322	)

	$	2,777		$	1,816

	Six Months Ended
	February 29,			February 28,
	2004			2003
Revenues
Collegiate Marketing and Production Services	$	31,323		$	37,018
Affinity Events		2,717			2,352
Affinity Management Services		4,515			4,098
	$	38,555		$	43,468
Operating Costs and Expenses
Direct operating costs of services rendered	$	26,458		$	30,845
Selling, general and administrative		12,040			12,734
Amortization of acquisition intangibles		627			608
	$	39,125		$	44,187
Income (Loss) from Operations
Collegiate Marketing and Production Services	$	2,686		$	2,649
Affinity Events		(3,318	)		(2,749	)
Affinity Management Services		1,371			676
Amortization of acquisition intangibles		(627	)		(608	)
Unallocated general and administrative costs		(682	)		(687	)
	$	(570	)	$	(719	)

Total revenues and operating results for the Collegiate Marketing and Production Services segment were impacted in the three months ended November 30, 2004 by the addition of two university contractual relationships beginning in the current fiscal year, less the effects of a contractual relationship that terminated at the end of the previous fiscal year. The additional contracts, net of the terminated contract, increased the segments revenues, direct costs and operating profits by approximately $1.4 million, $1.2 million and $0.1 million, respectively, compared to the prior year period. Other increases in segment revenues resulted from (a) an increase in advertising sales, due in some cases to additional rights acquired from the universities; and (b) an increase in revenues generated by the segment’s printing, publishing and broadcasting operations of approximately $0.6 million.

~~Total~~Direct ~~revenues and~~ operating ~~results~~costs ~~for~~of ~~the~~services ~~Collegiate~~rendered ~~Marketing~~increased ~~and Production~~for ~~Services segment were impacted in~~ the ~~six~~three months ended ~~February~~November 2930, 2004 from by the ~~termination~~same ofperiod ~~three~~in ~~university~~the ~~contractual~~prior ~~relationships~~year atdue ~~the end~~to of (a) the ~~previous~~additional ~~fiscal~~university ~~year. Such~~ contracts, ~~generated~~net ~~revenues~~ of ~~approximately~~ ~~$4.8 million during~~ the terminated ~~six months ended February 28~~contract, ~~2003~~as ~~and generated~~discussed ~~operating~~above; ~~profit~~(b) an increase of approximately $01.60 million ~~during that period. The change~~ in ~~total revenues of this segment was also affected by certain~~ ~~printing,~~guaranteed ~~publishing~~rights fees and ~~broadcasting~~revenue ~~projects~~ and ~~activities~~profit ~~which~~splits, ~~occurred~~excluding in the ~~prior~~effects ~~year~~of ~~period but not in~~ the ~~current~~new ~~fiscal year. Total revenues~~and ~~derived~~terminated ~~from~~contracts; ~~printing, publishing, broadcasting~~ and ~~other~~(c) an ~~integrated~~increase ~~media activities, net~~ of ~~the elimination of intercompany revenues, were~~ approximately $30.94 million ~~and~~in ~~$4.8 million~~production ~~for~~expenses associated with the ~~six~~previously-discussed ~~months~~increased ~~ended~~revenues ~~February 29~~from the printing, ~~2004~~publishing and ~~February 28,~~broadcasting ~~2003, respectively~~operations.

~~The~~Selling, ~~six~~general ~~months ended February 28 (or 29) is typically a period of proportionately low activity in the Affinity Events segment. The tours~~ and ~~events~~ ~~currently~~administrative ~~operated~~costs ~~within~~associated ~~the~~with ~~Affinity~~continuing ~~Events~~operations ~~segment~~decreased ~~generally take~~slightly ~~place during the months of March through September, except~~ for the ~~soccer~~three ~~tour finals,~~months ~~which~~ended ~~take place in January; therefore~~November 30, ~~the~~2004 ~~six~~compared ~~month period ended February 28 (or 29) is expected~~ to ~~reflect proportionately low revenue and a loss from operations. The increase in revenues from~~ the same period in the prior ~~year~~fiscal ~~was primarily due to the timing of certain events, and the addition of the U~~year.~~S. Cowboy Tour finals, which was held in September 2003. The~~ ~~segment’s loss from operations for the six months ended February 29~~However, ~~2004 is greater than the same period~~ in the prior year ~~due~~period, toapproximately ~~higher~~$0.4 million ~~losses derived from the end~~ of ~~the~~general ~~2003~~and ~~tour~~administrative ~~event~~costs were ~~season~~allocable ~~as compared~~ to the ~~2002~~discontinued ~~tour~~Affinity ~~events, and~~Events ~~losses~~segment. ~~derived~~These ~~from~~costs ~~certain~~were ~~events taking place in the current fiscal~~effectively ~~period~~eliminated ~~that~~as ~~did~~a ~~not~~result ~~take~~of ~~place in~~ the ~~prior~~discontinuation ~~year.~~of ~~The change in~~ the ~~Company’s allocation~~segment ofprior ~~selling, general and administrative costs~~ to the ~~Affinity Events segment in the~~ current fiscal year ~~caused approximately $0~~.~~4 million of the~~ ~~increased operating loss for this segment.~~

Results Derived from Derivative Instrument –
The net change in the value of the interest rate swap agreement discussed in Note 6 to the Condensed Consolidated Financial Statements was approximately $0.3 million in each of the three months ended November 30, 2004 and 2003. The interest rate swap agreement terminated on December 31, 2004.

Interest Expense and Debt Related Costs –
Interest expense increased to approximately $1.2 million for the three months ended November 30, 2004 from approximately $1.1 million for the same period in the prior year, as a result of an increase in variable interest rates to which a significant amount of the debt is subject, and an increase in average outstanding debt during the current year period.

~~Total~~Debt ~~revenues~~issue cost amortization was approximately $0.2 million and $0.3 million for the ~~six~~three months ended ~~February~~November 2930, 2004 ~~for~~and ~~the~~2003, ~~Affinity~~respectively. Debt issue costs consist of fees paid by the ~~Management~~Company ~~Services~~to ~~segment~~bank ~~increased~~lenders ~~due~~and other costs in connection with the issuance of debt and significant amendments to the ~~change~~bank credit agreement, and compensation paid in the ~~terms~~form of shares of the ~~management~~Company’s ~~contract~~common ~~discussed~~stock ~~previously~~to the Company’s Chairman to compensate him for his personal guarantee and to a former director of the Company to compensate him for his pledge of personal assets to the Company’s bank lenders. During the three months ended November 30, 2004, the Company issued approximately 715,000 shares of restricted common stock to the Chairman and the former director, then valued at approximately $0.3 million.

~~Direct~~Income ~~operating~~Taxes ~~costs~~– The ofprincipal ~~services~~differences ~~rendered~~between ~~decreased for~~ the ~~six~~federal ~~months~~statutory ~~ended February 29,~~tax ~~2004~~rate ~~from~~of ~~the~~34% ~~same~~and ~~period in~~ the ~~prior~~effective ~~year~~tax ~~due to the termination~~rate of ~~certain~~zero ~~contractual~~are ~~relationships~~increases as(or ~~discussed~~decreases) ~~previously, which substantially contributed to a reduction~~ in ~~total~~the ~~guaranteed~~valuation ~~rights~~allowance ~~fee~~for ~~and~~potentially non-realizable ~~profit~~deferred ~~split~~tax ~~expenses~~assets of ~~approximately~~ $~~1.9 million;~~ (b0.6) ~~the~~ ~~elimination~~million ~~of approximately~~and $10.4 million offor ~~other direct costs associated with~~ the three ~~terminated~~ ~~university~~months ~~contracts;~~ended ~~and (c)~~November ~~the~~30, ~~reduction of approximately $0.7~~2004 ~~million~~and ~~in production expenses associated with the printing~~2003, ~~publishing~~respectively. ~~and broadcasting~~The ~~operations~~valuation ~~due~~allowance tofor ~~lower~~net ~~volume~~deferred ~~during~~tax ~~the~~assets ~~current~~was ~~year in~~approximately ~~comparison~~$23.1 million ~~with~~as ~~the~~of ~~prior~~November 30, ~~fiscal year~~2004.

Selling, general and administrative costs declined for the six months ended February 29, 2004 compared to the same period in the prior fiscal year due to the decline in employee compensation costs of approximately $0.4 million.

Results Derived from Investments and Derivative Instruments –

Equity in losses of affiliated companies of approximately $0.2 million for the six months ended February 28, 2003 was derived from the Company’s proportionate share of the net losses reported by Gray and iHigh.

During the six months ended February 28, 2003, the Company accounted for its prior investment in Rawlings as an “available-for-sale” marketable security, and recorded an investment valuation charge of approximately $1.0 million for the unrealized loss on its investment in Rawlings. The amount of the charge was determined based on the actual proceeds derived from the Company’s sale of its investment in Rawlings common stock in December 2002.

As a result of Gray’s issuance of common stock in October and November 2002 for average net proceeds to Gray of approximately $7.72 per share, and since the Company’s carrying amount of its investment in Gray common stock prior to Gray’s issuance exceeded $7.72 per share, the Company reported a non-cash loss of approximately $2.3 million on Gray’s issuance of shares in the six months ending February 28, 2003.

The net change in the value of certain derivative instruments was approximately $0.5 million for the six months ended February 29, 2004 due to an increase in the value of the remaining interest rate swap agreement, and $(1.9) million for the six months ended February 28, 2003 primarily due to a decline in the value of warrants.

Interest Expense and Debt Related Costs –

Interest expense decreased to approximately $2.2 million for the six months ended February 29, 2004 from approximately $4.3 million for the same period in the prior year, as a result of a reduction in long-term debt and declines in variable interest rates to which a significant amount of the debt is subject.

Debt issue cost amortization was approximately $0.6 million and $1.2 million for the six months ended February 29, 2004 and February 28, 2003, respectively. During the six months ended February 29, 2004, the Company issued approximately 151,000 shares of restricted common stock to the Chairman to compensate him for his personal guarantee, then valued at approximately $0.5 million. During the six months ended February 28, 2003, the Company issued approximately 49,000 shares of restricted common stock to the Chairman to compensate him for his personal guarantee, then valued at approximately $0.4 million. Amortization of the value of all shares issued to the Chairman, of approximately $0.4 million and $0.7 million, is included in debt issue cost amortization for the six months ended February 29, 2004 and February 28, 2003, respectively.

Income Taxes –

The principal differences between the federal statutory tax rate of 34% and the effective tax rate of zero are increases in the valuation allowance for potentially non-realizable deferred tax assets of approximately $0.9 million and $2.0 million for the six months ended February 29, 2004 and February 28, 2003, respectively.

RESULTS OF DISCONTINUED OPERATIONS

~~Prior~~Results toderived ~~the fiscal year ended August 31, 2003, the Company received a $5.0 million consulting fee~~ from Gray for services performed in connection with Gray’s acquisition of Stations Holding Company, Inc. (“Stations”), which was consummated in October 2002. Also in October 2002, Gray completed a public offering of its common stock, and in November 2002, Gray issued additional shares of its common stock. These issuances of common stock by Gray resulted in a reduction of the Company’s ~~equity~~discontinued ~~investment~~operations infor ~~Gray’s outstanding common stock from 12.9% to 4.0%. As a result of these transactions by Gray,~~ the ~~Company~~ ~~recognized~~three ~~consulting fee income of approximately $4.8 million in the six~~ months ended ~~February~~November 2830, ~~2003 attributable to Gray’s acquisition of~~ ~~Stations,~~2004 plus approximately an additional $0.5 million of previously deferred consulting fee income, as a result of the reduction in the Company’s proportionate ownership of Gray following Gray’s issuances of common stock. The Company does not anticipate receiving any additional consulting fees from Gray, and ~~in January 2004~~2003, ~~determined~~all ~~that it will not be engaged in such services with any other party in the future. Therefore, the consulting fee income~~ of ~~approximately~~which ~~$5.3 million~~pertaining ~~for~~to the ~~six~~Affinity ~~months~~Events ~~ended~~business ~~February 28~~segment, ~~2003~~ isare ~~reported~~summarized as follows ~~“Income~~(amounts ~~from discontinued segment”~~ in ~~the Condensed~~000’s): ~~Consolidated Statement of Operations.~~


	Three Months Ended
	November 30,
	2004			2003
Revenue from services rendered	$	292		$	2,139


Operating costs and expenses:
Direct operating costs of services rendered		285			2,433
Selling, general and administrative		116			1,579

		401			4,012


Loss from discontinued operations	$	(109	)	$	(1,873	)

Total revenues and direct operating costs for the Affinity Events business segment were lower in the three months ended November 30, 2004 than in the same period of the prior year due to a reduction in the number of Hoop-It-Up 3-on-3 basketball events held during the 2004 tour year and the shorter duration of the tour in 2004. The Company made the decision in August 2004 to suspend the Affinity Events business and offer it for sale. However, the Company committed to complete all previously-scheduled events, in order to fulfill contractual obligations. In December 2004, the principal assets of the Affinity Events business, consisting of the tangible and intangible assets associated with the Hoop-It-Up tour and the 3v3 Soccer Shootout tour, were sold. Under the terms of the asset sale agreement, the Company will fulfill its obligation to promote and operate the soccer national finals event in January 2005, and will retain the rights to any profits (or loss) to be derived from the event.

INTEREST RATE AND MARKET RATE RISK

The Company is exposed to changes in interest rates due to the Company’s financing of its acquisitions, investments and operations. Interest rate risk is present with both fixed and floating rate debt. ~~The~~Until December 31, 2004, the Company ~~uses~~used interest rate swap agreements to manage its debt profile. Interest rate swap agreements generally involve exchanges of underlying face (notional) amounts of designated hedges. The Company continually ~~evaluates~~evaluated the credit quality of ~~counterparties~~ the counterparty to its interest rate swap ~~agreements~~agreement and ~~does~~did not believe there iswas a significant risk of nonperformance by the counterparty to the agreement. The Company’s decision to forego interest rate swap agreements as a hedge against its ~~current~~floating rate debt is due to the relatively short duration of the Company’s bank credit agreement and the Company’s willingness to accept additional interest rate risk for that period of time.

Based on the Company’s debt profile as of ~~February 29,~~each ~~2004~~fiscal ~~and~~year ~~February 28~~end, ~~2003,~~ a 1% increase in market interest rates would increase interest expense and decrease the income before income taxes (or alternatively, increase interest expense and increase the loss before income taxes) by ~~approximately~~less than $0.1 million for each of the three-month ~~months~~periods ended ~~February~~November 2930, 2004 and ~~February 28,~~ 2003,. ~~and~~Such amount was approximately $0.~~2 million and $0.~~3 million for the ~~six~~fiscal ~~months~~ year ended ~~February~~August 2931, 2004 ~~and February 28, 2003, respectively~~. These amounts ~~were~~ were determined by calculating the effect of the hypothetical interest rate on the Company’s floating rate debt, after giving effect to the Company’s interest rate swap ~~agreements~~agreement. ~~These~~The ~~amounts do not include the effects of certain~~Company’s ~~potential~~floating ~~results~~rate ofdebt increased ~~interest~~and ~~rates,~~fixed ~~such~~rate asdebt adecreased ~~reduced~~by ~~level~~$25 million ~~of overall~~after ~~economic activity or other actions management may take to mitigate~~ the ~~risk.~~ ~~Furthermore,~~termination ~~this sensitivity analysis does not assume changes in the~~of ~~Company’s~~the ~~financial structure that could occur if~~ interest ~~rates~~rate ~~were~~swap ~~higher.~~agreement on

December 31, 2004. These amounts do not include the effects of certain potential results of increased interest rates, such as a reduced level of overall economic activity or other actions management may take to mitigate the risk. Furthermore, this sensitivity analysis does not assume changes in the Company’s financial structure that could occur if interest rates were higher.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “believes,” “expects,” “anticipates,” “estimates” and similar words and expressions are generally intended to ~~identify~~ identify forward-looking statements. Statements that describe the Company’s future ~~strategic~~ strategic plans, goals or objectives are also forward-looking statements. Readers of this Report are cautioned that any forward-looking statements, including those regarding the intent, belief or current expectations of the Company or management, are not guarantees of future performance, results or events, and involve risks and uncertainties. The forward-looking statements included in this report are made only as of the date hereof. The Company undertakes no obligation to update such forward-looking statements to reflect subsequent events or circumstances. Actual results and events may differ materially from those in the forward-looking statements as a result of various factors including, but not limited to the following: (i) the Company’s leverage and/or operating results may adversely affect its ability to obtain new financing or extend its current bank credit agreement beyond the November 30, 2005 maturity date under terms acceptable to the Company and its bank lenders, thereby impairing the Company’s ability to withstand economic downturns or competitive pressures; (ii) the Company may not ultimately be successful in obtaining bank financing beyond the November 30, 2005 maturity date, or be successful in obtaining financing at acceptable terms; (iii) the inability of the Company to currently meet listing requirements of The Nasdaq Stock Market or other national stock exchange may hinder the Company’s ability to raise new capital through the issuance of equity securities; (iv) significant segments of the Company’s business are seasonal; (v) the Company’s business depends on short term contracts and the inability to renew or extend these contracts could adversely affect its business; (vi) the Company may lose money on some of its contracts, because it guarantees certain payments thereunder; and (vii) war or acts of terrorism or a domestic economic downturn or recession could materially adversely impact corporate discretionary spending, such as advertising and corporate sponsorships sold by the Company.

23 Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~and~~See ~~uncertainties.~~“Interest ~~The~~Rate forward-looking statements included in this report are made only as of the date hereof. The Company undertakes no obligation to update such forward-looking statements to reflect subsequent events or circumstances. Actual results and ~~events~~Market ~~may~~Rate ~~differ materially~~Risk” ~~from those~~ in ~~the forward-looking statements as a result of various factors including, but not limited to the following: (i)~~Item ~~the~~2 Company’s leverage and/or operating results may adversely affect its ability to obtain new financing or extend its current bank credit agreement beyond the November 30, 2004 maturity date under terms acceptable to the Company and its bank lenders, thereby impairing the Company’s ability to withstand economic downturns or competitive pressures; (ii) the delisting of ~~the~~this ~~Company’s common stock from the Nasdaq SmallCap Market may hinder the Company’s ability to raise new capital through the issuance of equity securities; (iii)~~Form ~~significant~~10-Q ~~segments of the Company’s business are seasonal; (iv) the Company’s business~~ ~~depends on short term contracts and the inability to renew or extend these~~ ~~contracts could adversely affect its business; (v) the Company may lose money~~ ~~on some of its contracts, because it guarantees certain payments thereunder;~~ and (vi) war or acts of terrorism or a domestic economic downturn or recession could materially adversely impact corporate discretionary spending, such as sponsorships and advertising sold by the Company.

Item 4. Controls and Procedures

~~Based~~The onCompany carried out, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures performed pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as amended. Based on that evaluation, the Company’s Chief Executive Officer and its Chief Financial Officer ~~have~~ concluded that, ~~there~~as of November 30, 2004, the Company’s disclosure controls and procedures ~~were~~are noeffective ~~material~~in ~~weaknesses~~timely alerting them to information which is required to be included in ~~such~~the periodic ~~controls~~reports asthat ofthe ~~February 29,~~Company ~~2004~~must file with the Securities and Exchange Commission.

There were no ~~significant~~ changes toin the Company’s internal ~~controls~~control orover infinancial reporting during the quarter ~~other~~ended ~~factors~~November 30, ~~that~~2004 ~~could~~identified ~~significantly~~in ~~affect~~connection ~~these~~with ~~controls~~the ~~during~~evaluation thereof by the Company’s ~~quarterly~~management, ~~period~~including ~~ended~~the ~~February 29~~Chief Executive Officer and Chief Financial Officer, ~~2004~~that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2423

PART II. OTHER INFORMATION

Item 42. ~~Results~~Unregistered ofSales ~~Votes~~ of ~~Security~~Equity ~~Holders~~Securities

AnDuring ~~annual~~the ~~meeting~~three months ended November 30, 2004, certain holders of Series E Preferred Stock, including a former director of the Company’s ~~shareholders~~and ~~was~~his ~~held~~spouse, inelected ~~Atlanta,~~to ~~Georgia~~convert onan aggregate 2.193 ~~January~~shares of Series 7,E ~~2004.~~Preferred ~~All~~Stock to an aggregate 313 shares of the ~~proposals~~Company’s ~~considered~~common bystock, ~~shareholders were~~in ~~approved,~~accordance aswith ~~follows:~~terms of the Series E Preferred Stock.

~~(1)~~The ~~Proposal~~issuances toof ~~elect~~shares J.of ~~Mack~~common ~~Robinson,~~stock ~~Gerald~~were N.made ~~Agranoff,~~under ~~James~~the W.exemption ~~Busby,~~from W.registration ~~James~~provided ~~Host,~~by Section 4(2) ~~Hilton~~of H.the ~~Howell,~~Securities ~~Jr.,~~Act ~~Monte~~of ~~C. Johnson~~1933, ~~Robert~~as ~~S. Prather~~amended, ~~Jr.~~because ~~and~~the ~~Gordon~~issuances D.did ~~Whitener~~not asinvolve ~~directors:~~any public offering.

For:		3,558,794
Item 6.	Exhibits
Withhold:		9,685
		31.1	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		31.2	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		32.1	Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
		32.2	Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(2) Proposal to authorize the past and future issuance of shares of Bull Run common stock to the Company’s Chairman and his affiliates as compensation for his personal guarantee of the Company’s bank loans and as payment of annual dividends on investments in the Company’s preferred stock:SIGNATURES

For:			2,268,778
Against:			47,770
Abstain:			5,348

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.

(3) Proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent auditors:


	BULL RUN CORPORATION
Date: January 11, 2005	By:	/s/ FREDERICK J. ERICKSON
		Frederick J. Erickson
		Vice President-Finance, Treasurer and Assistant Secretary

For:			3,545,594
Against:			13,005
Abstain:			9,880

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

31.1		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)		Reports on Form 8-K
		Current Report on Form 8-K dated December 1, 2003 for the purpose of furnishing the press release announcing the Company’s financial results for the fiscal year ended August 31, 2003.
		Current Report on Form 8-K dated December 8, 2003 for the purpose of furnishing the press release announcing the Company’s receipt of a Nasdaq Staff Determination indicating the Company’s failure to comply with the minimum stockholders’ equity requirement for continued listing.
		Current Report on Form 8-K dated January 14, 2004 for the purpose of furnishing the press release announcing the Company’s financial results for the fiscal quarter ended November 30, 2003 and a change in the Company’s listing status from the Nasdaq Stock Market to the OTC Bulletin Board.

SIGNATURES

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

	BULL RUN CORPORATION
Date: April 13, 2004	By:	/s/ FREDERICK J. ERICKSON
		Frederick J. Erickson
		Vice President-Finance, Treasurer
		and Assistant Secretary

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