UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended August 31, 2005

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                      to

BULL RUN CORPORATION

(Exact name of registrant as specified in its charter)

Georgia (State or other jurisdiction incorporation or organization)		58-2458679 (I.R.S. Employer Identification No.)
4370 Peachtree Road, N.E., Atlanta, GA (Address of principal executive offices)		30319 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: None		Name of each exchange on which registered: N/A

Securities registered pursuant to Section 12(g) of the Act:		Common Stock, $.01 par value (Title of class)

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 o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No

The aggregate market value of the voting and non-voting common equity held by non-affiliates was $1,552,489 based on the price at which Bull Run’s common stock was last sold on February 25, 2005, the last business day of Bull Run’s most recently completed second fiscal quarter, as reported on the Pink Sheets, a centralized quotation service for OTC securities. The number of shares outstanding of Bull Run’s common stock as of October 31, 2005 was 6,889,767.

DOCUMENTS INCORPORATED BY REFERENCE

Documents		Form 10-K Reference
None		Not Applicable

 

 

BULL RUN CORPORATION
FORM 10-K
For the fiscal year ended August 31, 2005

INDEX

				Page
PART I
Item 1		Business			3
Item 2		Properties			7
Item 3		Legal Proceedings			7
Item 4		Submission of Matters to a Vote of Securities Holders			8
PART II
Item 5		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			9
Item 6		Selected Financial Data			9
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 7A		Quantitative and Qualitative Disclosures About Market Risk			27
Item 8		Financial Statements and Supplementary Data			28
Item 9		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			58
Item 9A		Controls and Procedures			58
Item 9B		Other Information			59
PART III
Item 10		Directors and Executive Officers of the Registrant			59
Item 11		Executive Compensation			61
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			63
Item 13		Certain Relationships and Related Transactions			65
Item 14		Principal Accountant Fees and Services			67
PART IV
Item 15		Exhibits and Financial Statement Schedules			68
		Signatures			71
EX-21
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

Item 1. Business

General

Bull Run Corporation, also referred to as Bull Run or the Company, based in Atlanta, Georgia, conducts a sports and affinity marketing, printing and publishing, and association management company through its sole operating business, Host Communications, Inc., or Host. Host’s Collegiate Marketing and Production Services business segment provides sports marketing and production services to a number of collegiate conferences and universities, and, through a contract with CBS Sports, on behalf of the National Collegiate Athletic Association, or NCAA. Host’s Association Management Services business segment provides various associations with services such as member communication, recruitment and retention, conference planning, Internet web site management, marketing and administration.

In August 2005, Bull Run announced its intention, subject to shareholder approval, to merge with Triple Crown Media, Inc., or TCM, a newly-formed company. Following the merger, TCM would be comprised of Host’s Collegiate Marketing and Production Services business, Host’s Association Management Services business and the newspaper publishing business and Graylink Wireless business currently operated by Gray Television, Inc., or Gray.

Pursuant to the plan of merger, Bull Run would be merged with and into BR Acquisition Corp. (a wholly owned subsidiary of TCM) immediately following Gray’s transfer to TCM of the equity interests of Gray Publishing, LLC and Graylink Wireless, and the distribution of TCM’s outstanding shares of common stock owned by Gray to Gray’s stockholders, referred to as the Spin-off. In the merger, each Bull Run shareholder will receive 0.0289 shares of TCM common stock for each share of Bull Run common stock owned. In the merger, Bull Run preferred stock held by non-affiliated holders will be redeemed for its redemption value as of the date of the transaction. Holders of preferred stock and other loans to Bull Run who are affiliates of Bull Run, including J. Mack Robinson, Gray’s current Chairman and Chief Executive Officer and Chairman of the Board of Bull Run, will receive shares of TCM common stock in exchange for shares of Bull Run series F preferred stock and accrued and unpaid dividends thereon; shares of TCM series A convertible preferred stock in exchange for shares of Bull Run series D and series E preferred stock and accrued and unpaid dividends thereon; and shares of TCM series B convertible preferred stock in exchange for cash previously advanced to Bull Run. The agreement is subject to certain closing conditions, including the approval of Bull Run’s shareholders. TCM has received a long-term financing commitment from bank lenders that will accommodate the payment of a $40 million cash distribution to Gray contemplated in connection with the Spin-off, the redemption in cash of all Bull Run preferred stock held by those other than the Chairman and his affiliates, the refinancing of all of the surviving corporation’s bank and subordinated indebtedness, and transaction and financing costs.

For financial information for each of our business segments described below, see Note 19 of the Notes to Consolidated Financial Statements appearing in Item 8 “Financial Statements and Supplementary Data.”

Collegiate Marketing and Production Services Segment

Collegiate Sports — The Company, through Host, provides sports and marketing services for a number of NCAA Division I universities and athletic conferences. The agreements relating to the services rendered by the Company vary by school or conference, but typically provide for some or all of the following:

	•		production of radio and television broadcasts of certain athletic events and coaches’ shows;
	•		sale of advertising during radio and television broadcasts of games and coaches’ shows;
	•		sale of media advertising and venue signage;
	•		sale of “official sponsorship” rights to corporations;
	•		publishing, printing and vending of game-day and other programs;
	•		creative design of materials, video production, and construction and management of Internet web sites; and

•

coaches’ endorsements and pay-per-view telecasts.

Institutions and organizations with which the Company has agreements include the University of Arizona, Florida State University, the University of Kentucky, the University of Michigan, Oklahoma State University, the University of Tennessee, the University of Texas and the Southeastern Conference. The Company also has marketing rights to the SBC Red River Rivalry featuring the University of Texas and University of Oklahoma’s annual football game, and the Lone Star Showdown series of games featuring the University of Texas and Texas A&M University. In addition, the Company has published Dave Campbell’s Texas Football Magazine and has had marketing rights to an annual series of football games that feature six prominent Texas high school teams. Contracts with institutions and organizations for marketing and production services are generally three to ten years in length and require the Company to pay to the institution or organization an annual guaranteed rights fee, a percentage of revenues or profits derived from the relationship, or a combination thereof. The percentage of revenues derived by the Company under contracts for the multi-media marketing rights described above that are ultimately shared with the institution and organization is generally greater than 50% and the percentage of revenue shared typically increases upon reaching certain total revenue threshold amounts as specified in the agreements. For the fiscal year ended August 31, 2005, the Company’s rights fee expense was approximately $22.3 million, of which, approximately $15.9 million represented guaranteed rights fees.

Under an agreement with CBS Sports, which expires in June 2007, the Company has the exclusive rights to produce, distribute and sell all of the approximately 150 game programs and publications in connection with 87 NCAA championships, including the Men’s and Women’s Final Four Division I basketball championships. Host has published NCAA championship programs since 1977. The agreement with CBS Sports requires the Company to pay to CBS Sports an annual guaranteed rights fee and internally incur the cost of producing the NCAA championship programs and publications, and in return, the Company generates and retains print advertising and vending revenues derived in connection with such programs and publications.

In addition to the publishing rights through CBS Sports, the Company has an exclusive agreement with NCAA Football USA, Inc., or NCAA Football, a not-for-profit entity organized to promote college football. Under the terms of the agreement, the Company manages the entity, licenses certain trademarks for corporate sponsorships or for merchandise for resale and is entitled to retain 40% of all revenues derived through the sale of corporate sponsorships and all merchandise licensing associated with the brand. Through its Integrated Media Group, the Company produces various commercial spots and other media to promote the brand. The Company’s current contract with NCAA Football expires in 2013.

Integrated Media Group — Under Host, the Company produces more than 700 publications annually for a variety of clients, including the NCAA, college football conferences, universities, and various collegiate associations. The Company’s publications include game programs, media guides, posters and marketing brochures. The Company also provides high quality printing services for corporations and not-for-profit organizations nationwide, consisting of directories, annual reports, brochures, posters, programs and catalogs.

The Company produces television programs, videos, radio broadcasts, commercial audio and Internet related services, and administers the regional radio networks of seven NCAA Division I universities and the Southeastern Conference. The Company’s digital recording studios handle network quality soundtracks for radio, television and multi-image presentations.

Association Management Services Segment

Under Host, the Association Management Services segment provides a full range of management services to multi-national associations, including the National Tour Association (a nearly 4,000-member global association for the packaged travel industry, which has been a client since 1974), Quest International Users Group, Inc. (a not-for-profit association for users of JD Edwards Enterprise One and World software and PeopleSoft Enterprise software), the International SPA Association and the

International Coach Federation (a global association of personal and business coaches having over 8,000 members). The Company’s services include association management, financial reporting, accounting, marketing, publishing, government lobbying, education, event management, Internet web site management and membership growth activities.

Discontinued Segments

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, printing and publishing and association management businesses. In December 2004, the Company sold the Affinity Events business. The Company’s Affinity Events segment formerly produced and managed large participatory sporting events throughout the United States and Canada. In connection with these events, the Company provided professional marketing and management services to corporations. The Company organized and promoted the events, sold national, regional and local sponsorships and advertising, and generated merchandise sales. Sponsors and advertisers received, among other benefits, on-site consumer interactive opportunities, print and other media advertising, and signage. Events tours operated under the Affinity Events segment included the “Hoop-It-Up^®” 3-on-3 basketball tour and the “3v3 Soccer Shootout.” The Company also created and executed specific events and promotional tours for corporate clients, including mobile marketing units.

The Company formerly provided consulting services to Gray from time to time. Consulting services have included transaction search, analysis, due diligence, negotiation and closing. Fees were based on a rate of 1% of transaction value. Such services ceased in October 2002.

The Company formerly marketed and sold heavy-duty dot matrix and thermal printers under the “Datasouth” name. The Company sold its Datasouth business in September 2000.

For additional information with respect to discontinued business segments, including financial reporting as discontinued operations, see “Management’s Discussion and Analysis — Discontinued Operations” in Item 7 hereof and Note 4 to the Company’s Consolidated Financial Statements in Item 8.

Sales and Marketing

The Company not only provides corporations and organizations a wide array of advertising and sponsorship opportunities to associate its brand, product or service with collegiate sports, specific universities and collegiate conferences, and multi-national associations, but also by virtue of the Company’s printing, publishing, broadcast, Internet and other media production capabilities provides its customers with support in preparing advertising materials in connection with its marketing rights agreements with such universities and conferences and its association management contracts. The Company also provides sports and marketing services for a number of NCAA Division I universities and conferences under contracts typically ranging from three to ten years in length. The Company intends to continue to seek long-term multi-media rights agreements. Initial multi-media rights agreements with universities and conferences generally result from a competitive bid proposal process. These contracts generally contain provisions for exclusive negotiation periods of contract renewal terms.

The Company employs a full-time national sales and marketing staff and has dedicated a senior group of sales and marketing executives to identify potential client relationship opportunities and promote the Company’s expertise and range of services. The Company solicits prospective clients and advertisers through its sales team and through personal contacts by members of Host’s management. Each university, athletic conference and association property has its own dedicated sales team that solicits local sponsorship and advertising arrangements, complemented by a national/regional sales team. Some contracts for corporate sponsorship and advertising are for periods of more than one year. Personnel assigned to university and athletic conference properties are generally located at or near the particular university campuses or athletic conference location.

Competition

As a provider of marketing services, the Company competes with suppliers of traditional advertising in broadcast and print media as well as with other marketing service producers and internal marketing programs. The competition for brand marketing expenditures is very intense and highly fragmented. In the collegiate sports marketing industry, the Company principally competes with companies that hold marketing rights to a greater number of university properties, such as Learfield Sports and ISP Sports, companies that have greater financial resources than the Company, such as ESPN Regional and Viacom Sports, and companies that have a concentration in a single area of marketing rights, as Action Sports Media does in the area of arena signage. The Company has chosen to focus its resources on acquiring marketing rights to NCAA Division I universities and conferences that have large concentrated fan bases, and on opportunities to obtain a significant amount of the marketing rights provided by universities and conferences. The Company believes that Host Communications is the most recognized name in the industry due in part to its founder establishing the first-ever radio rights agreement for NCAA championships in 1974 and creating the NCAA corporate partner program in 1985, and that the business has a reputation for creativity and high quality. The Company also believes that it has the most vertically-integrated company among those in the industry, as a result of its printing and publishing operation and its internet web site development and management capabilities. In its recent past, the Company’s competitive disadvantage has been primarily that its financial condition has been impaired by the operating losses produced by its Affinity Events business segment, which was discontinued and sold in 2004. However, the Company believes that the anticipated improved financial stability provided by the proposed merger with TCM will significantly reduce this competitive disadvantage.

The Company has a negligible market share of the association management business, an industry dominated by large companies such as SmithBucklin Corporation. Despite the size of certain association management companies, the industry includes a significant number of companies the size of or smaller than the Company. The Company believes that its association management capabilities are customized to meet its clients’ needs, with senior staff assigned to serve only one association, and that this customization and individual attention provides it a competitive advantage to associations seeking value-added services. The Company also believes that its printing, publishing, media production and Internet in-house capabilities provide it a competitive advantage. Like the collegiate marketing business, the association management business has endured the competitive disadvantage caused by the effects on its financial condition caused by the discontinued Affinity Events business segment. Other competitive disadvantages result from the few number of associations currently managed by the Company, and the lack of having an accreditation with for example, the American Society of Association Executives Accreditation Program.

Seasonality

The Company’s Collegiate Marketing and Production Services business is seasonal, in that the majority of the revenue and operating profit is derived from the period beginning in September and concluding in March, since much of the revenue derived in this segment is related to events and promotions held during the collegiate football and basketball seasons.

Employees

The Company has approximately 270 full-time employees, of whom, approximately 225 are employed by Host at its Lexington, Kentucky facilities. The rest of the employees are located in offices throughout the United States supporting either sales or the collegiate properties. The Company is not a party to any collective bargaining agreements and believes its relations with its employees are satisfactory.

Executive Officers

The information contained in Item 10 hereof is incorporated herein by reference.

Available Information

The Company’s Internet address is www.bullruncorp.com, where we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as practicable after such reports are electronically filed with, or furnished to, the SEC. The SEC reports can be accessed through the “SEC Reports” link in the index on our web site. Other information found on our web site is not part of this or any other report we file with or furnish to the SEC.

The public may also read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, at www.sec.gov.

Item 2. Properties

The Company’s executive offices are located in Atlanta, Georgia in approximately 2,000 square feet of office space leased on a month-to-month basis from Delta Life Insurance Company, a company in which the Company’s Chairman of the Board is an executive officer and principal stockholder.

The Company owns seven acres of land and a building with approximately 25,000 square feet of production, office and warehouse space in Lexington, Kentucky for Host’s Printing and Publishing Divisions. Host also has approximately 41,000 square feet of leased office space in two locations in Lexington expiring in April 2006; approximately 49,000 square feet of office space under lease in Dallas, Texas through December 2005, of which, all space except approximately 1,700 square feet still utilized by the Company is currently subleased through December 2005; and approximately 4,300 square feet of office space under lease in New York City through August 2010, all of which has been subleased. Host also has small regional and local field offices primarily located close to the universities and conferences with which it has contracts.

Item 3. Legal Proceedings

Sarkes Tarzian, Inc. v. Bull Run Corporation and Gray Television, Inc.

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

On February 12, 1999, Tarzian filed suit in the United States District Court for the Southern District of Indiana against U.S. Trust Company of Florida Savings Bank as Personal Representative of the Estate, claiming that Tarzian had a binding and enforceable contract to purchase the Tarzian Shares from the Estate. On February 3, 2003, the Court entered judgment on a jury verdict in favor of Tarzian and against the Estate for breach of contract and awarded Tarzian $4.0 million in damages. The Estate appealed the judgment and Tarzian cross-appealed. On February 14, 2005, the Seventh Circuit Court of Appeals issued a decision concluding that no contract was ever created between Tarzian and the Estate, reversing the judgment of the District Court, and remanding the case to the District Court with instructions to enter judgment for the Estate. Tarzian’s petition for rehearing was denied by the Seventh Circuit, and on October 3, 2005, the U.S. Supreme Court denied Tarzian’s petition for certiorari. Tarzian has also filed a motion for a new trial in the District Court based on the Estate’s alleged failure to produce certain documents in discovery, and on June 16, 2005, the Court denied Tarzian’s motion. On July 21, 2005, Tarzian filed a notice of appeal to the Seventh Circuit Court of Appeals from the District

Court’s denial of its motion for new trial and entry of final judgment for the Estate, which is pending. The Company is not directly involved in this litigation, but has been the subject of litigation related to this matter as described below.

On March 7, 2003, Tarzian filed suit in the United States District Court for the Northern District of Georgia against Gray and the Company for tortious interference with contract and conversion. The lawsuit alleges that Bull Run and Gray purchased the Tarzian Shares with actual knowledge that Tarzian had a binding agreement to purchase the stock from the Estate. The lawsuit seeks damages in an amount equal to the liquidation value of the interest in Tarzian that the stock represents, which Tarzian claims to be as much as $75 million, as well as attorneys’ fees, expenses, and punitive damages. The lawsuit also seeks an order requiring Gray and the Company to turn over the Tarzian Shares to Tarzian and relinquish all claims to the stock. The stock purchase agreement with the Estate would permit the Company to make a claim against the Estate in the event that title to the Tarzian Shares is ultimately awarded to Tarzian. There is no assurance that the Estate would have sufficient assets to honor any or all of such claim. The Company filed its answer to the lawsuit on May 14, 2003 denying any liability for Tarzian’s claims. On May 27, 2005, the Court issued an Order administratively closing the case pending resolution of Tarzian’s lawsuit against the Estate in Indiana federal court as described in the preceding paragraph. The Company believes it has meritorious defenses and intends to vigorously defend the lawsuit. The Company cannot predict when the final resolution of this litigation will occur or when Tarzian’s claim against the Estate will be resolved.

Item 4. Submission of Matters to a Vote of Security Holders

The Company did not submit any matter to a vote of security holders during the quarter ended August 31, 2005.

PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

Market Information —

The Company’s common stock, par value $.01 per share, is quoted on the Pink Sheets (www.pinksheets.com) centralized quotation service for OTC securities under the symbol “BULL.PK.” Until January 2004, the Company’s common stock was traded on the Nasdaq SmallCap Market under the symbol “BULL.” The following table sets forth for each period indicated the high and low sale prices for the Company’s common stock as reported by the Pink Sheets and previously, by The Nasdaq Stock Market. Such prices reflect interdealer prices without adjustments for retail markups, markdowns or commissions.

		High				Low
Fiscal Year Ended August 31, 2004
First Quarter ended November 30, 2003		$	3.61			$	1.01
Second Quarter ended February 29, 2004			1.80				.51
Third Quarter ended May 31, 2004			.65				.48
Fourth Quarter ended August 31, 2004			.50				.18
Fiscal Year Ended August 31, 2005
First Quarter ended November 30, 2004		$	.85			$	.23
Second Quarter ended February 28, 2005			.70				.36
Third Quarter ended May 31, 2005			.91				.60
Fourth Quarter ended August 31, 2005			.90				.38

Holders —

As of October 31, 2005, there were 2,091 holders of record of the Company’s common stock.

Dividends —

Since its inception, the Company has not declared or paid a cash dividend on its common stock. It is the present policy of the Company’s Board of Directors to retain all earnings to finance the development and growth of the Company’s business. The Company’s future dividend policy will depend upon its earnings, capital requirements, financial condition and other relevant circumstances existing at that time. The Company’s bank credit agreement also contains restrictions on the Company’s ability to declare and pay dividends on its common stock.

Item 6. Selected Financial Data

The following tables set forth certain selected historical consolidated financial data of the Company. The selected consolidated financial data as of and for the fiscal years ended August 31, 2005, 2004 and 2003; as of and for the two months ended August 31, 2002; and as of and for the fiscal years ended June 30, 2002 and 2001 are derived from the audited consolidated financial statements of the Company. The selected consolidated financial data for the two months ended August 31, 2001 are derived from unaudited condensed consolidated financial information of the Company. The unaudited condensed consolidated financial information includes all adjustments, consisting of normal, recurring items, which the Company considers necessary for a fair statement of its financial position and results of operations for the period. This information should be read in conjunction with the audited consolidated financial statements of the Company and related notes thereto appearing elsewhere herein, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

SELECTED FINANCIAL DATA
(Dollar and share amounts in thousands, except per share amounts)

STATEMENT OF OPERATIONS DATA:

														Two Months Ended
		Year Ended August 31,												August 31,								Year Ended June 30,
		2005				2004				2003				2002				2001				2002				2001
																		(Unaudited)
Total revenue		$	61,879			$	55,779			$	64,129			$	4,591			$	7,853			$	93,813			$	96,136
Loss from continuing operations			(5,141	)			(7,137	)			(28,444	)			(3,946	)			(3,490	)			(32,278	)			(16,143	)
Net loss			(5,290	)			(14,611	)			(37,986	)			(5,355	)			(3,428	)			(34,558	)			(18,704	)
Net loss available to common stockholders			(5,290	)			(16,848	)			(39,135	)			(5,448	)			(3,473	)			(34,954	)			(18,704	)
Loss from continuing operations available to common stockholders per basic and diluted common share		$	(0.81	)		$	(2.01	)		$	(7.42	)		$	(1.07	)		$	(0.98	)		$	(8.96	)		$	(4.57	)

BALANCE SHEET DATA:

		As of August 31,																As of June 30,
		2005				2004				2003				2002				2002				2001
Working capital (deficit)		$	(26,229	)		$	(19,146	)		$	(12,034	)		$	(32,252	)		$	(26,827	)		$	(16,951	)
Investment in affiliated companies			-0-				-0-				-0-				25,013				25,115				50,399
Total assets			64,676				60,942				73,812				143,780				151,007				201,061
Amounts due to (due from) related parties			11,786				9,290				96				(127	)			(100	)			68
Long-term obligations			61,625				64,625				72,641				93,091				98,091				107,693
Redeemable preferred stock, noncurrent liability			22,082				24,296				-0-				-0-				-0-				-0-
Stockholders’ deficit			(59,061	)			(56,551	)			(27,002	)			(2,188	)			(1,274	)			37,604

NOTES TO THE SELECTED FINANCIAL DATA

The changes from year to year are primarily a result of the following items:

2005		— Bank debt of $7.5 million classified as a current liability at August 31, 2005 (noncurrent at August 31, 2004.)

2004		— Intangibles impairment charge of $3.3 million; classification of redeemable preferred stock of $24.3 million as a noncurrent liability (of which, $19.7 million is held by the Company’s Chairman or one of his affiliates) since the Chairman’s beneficial ownership of the Company’s outstanding common stock exceeded 50% at August 31, 2004 for the first time (such preferred stock was previously included as a component of stockholders’ deficit).

2003		— Sale of investments in Gray Television, Inc. common stocks, warrants for Gray common stocks and Rawlings Sporting Goods Company, Inc. common stock, resulting in an aggregate gain of $17.2 million, with $38 million of the proceeds being applied to long-term debt; impairment charge of $30.5 million taken to reduce the carrying value of goodwill and other acquisition intangible assets (of which, $7.0 million included in discontinued operations); and an aggregate of $5.2 million in valuation impairment charges taken to reduce carrying value of investments in affiliates and non-trade receivables.

2002		— Sale of investments in Gray preferred stock and Sarkes Tarzian, Inc. common stock with such proceeds being applied to long-term debt; and the acceleration of costs and expenses, including an intangibles impairment charge of $6.6 million, as a result of a change in a significant contractual relationship; proportionate share of Gray’s accounting change cumulative effect adjustment, net of tax.

No dividends were declared or paid during the periods presented.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Bull Run Corporation, or the Company, based in Atlanta, Georgia, conducts a sports and affinity marketing, printing and publishing, and association management company through its sole operating business, Host Communications, Inc., or Host. Host’s Collegiate Marketing and Production Services business segment provides sports marketing and production services to a

number of collegiate conferences and universities, and through a contract with CBS Sports, on behalf of the National Collegiate Athletic Association, or NCAA. Host’s Association Management Services business segment provides various associations with services such as member communication, recruitment and retention, conference planning, Internet web site management, marketing and administration.

In August 2005, Bull Run and Gray Television, Inc., or Gray, announced that Triple Crown Media, Inc., or TCM, BR Acquisition Corp. (a wholly owned subsidiary of TCM), and Bull Run had entered into an agreement and plan of merger, pursuant to which Bull Run will be merged with and into BR Acquisition Corp. immediately following Gray’s transfer to TCM of the equity interests of Gray Publishing, LLC and certain other assets, and the distribution of TCM’s outstanding shares of common stock owned by Gray to Gray’s stockholders, such transfer and distribution being referred to as the Spin-off. In the merger, each Bull Run shareholder will receive 0.0289 shares of TCM common stock for each share of Bull Run common stock owned. In the merger, Bull Run preferred stock held by non-affiliated holders will be redeemed for its redemption value as of the date of the transaction. Holders of preferred stock and other loans to Bull Run who are affiliates of Bull Run, including J. Mack Robinson, Gray’s current Chairman and Chief Executive Officer and Chairman of the Board of Bull Run, will receive shares of TCM common stock in exchange for shares of Bull Run series F preferred stock and accrued and unpaid dividends thereon; shares of TCM series A convertible preferred stock in exchange for shares of Bull Run series D and series E preferred stock and accrued and unpaid dividends thereon; and shares of TCM series B convertible preferred stock in exchange for approximately $6 million of cash previously advanced to Bull Run. The agreement is subject to certain closing conditions, including the approval of Bull Run’s shareholders.

TCM has received a long-term financing commitment from bank lenders that will accommodate the payment of a $40 million cash distribution to Gray contemplated in connection with the Spin-off, the redemption in cash of all Bull Run preferred stock held by those other than the Chairman and his affiliates, the refinancing of all of the surviving corporation’s bank and subordinated indebtedness, and transaction and financing costs.

CERTAIN RELATIONSHIPS

J. Mack Robinson, Chairman of the board of the Company, is the beneficial owner of approximately 58.6% of the Company’s common stock as of August 31, 2005, and Mr. Robinson and his affiliates also own shares of the Company’s convertible preferred stock having an aggregate face amount of approximately $19.8 million as of that date representing approximately 89.5% of the aggregate face amount of all outstanding preferred stock on that date. Mr. Robinson is also Chief Executive Officer, Chairman and a director of Gray, and the beneficial owner of Gray common stocks representing approximately 29.9% of the combined voting power of Gray’s two classes of common stock as of March 29, 2005. Robert S. Prather, Jr., President, Chief Executive Officer and a director of the Company, is President, Chief Operating Officer and a director of Gray, and the beneficial owner of Gray common stocks representing approximately 2.8% of the combined voting power of Gray’s two classes of common stock as of March 29, 2005. Hilton H. Howell, Jr., the Company’s Vice President and Secretary, is Vice Chairman and a director of Gray, and the beneficial owner of Gray common stocks representing approximately 7.5% of the combined voting power of Gray’s two classes of common stock as of the same 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.

W. 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 August 31, 2005, 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.

Through a rights-sharing agreement with Gray, the Company participates jointly with Gray in the marketing, selling and broadcasting of certain collegiate sporting events and in related programming, production and other associated activities of one university. In its role under the agreement with Gray, the Company manages the preponderance of the revenue-generating and sales fulfillment activities and provides all administrative functions for the Company and Gray. As a result, the Company recognizes the total revenues derived and expenses incurred in connection with services performed on behalf of the university, and expenses amounts paid to Gray under the rights-sharing agreement as a rights fee. During the fiscal year ended August 31, 2004, Gray paid $1.5 million under this provision, and as of August 31, 2005, the Company has accrued fees payable to Gray of approximately $1.2 million, comprised of $1.0 million of the $1.5 million paid by Gray on behalf of the Company in the fiscal year ended August 31, 2004, plus $0.2 million payable to Gray in connection with annual settlements of certain shared revenues and operating expenses. In April 2005, the Company, Gray and the university entered into a new agreement for expanded sports marketing rights for an initial seven year term with an option to extend the license for three additional years. At the same time, the Company and Gray entered into a new rights sharing agreement for the same 10-year period. Under this new agreement with Gray, the Company continues to recognize the total revenues derived and the total expenses incurred in connection with services performed on behalf of the university, and expenses amounts payable to Gray as a component of the Company’s rights fee expense. The amount payable to Gray will be 50% of the profit or loss to be derived from these marketing activities, as determined at the conclusion of each contract year. The new agreement with Gray also requires Gray to pay to the university 50% of the rights fees payable under the contract with the university as each rights fee installment payment becomes due. Such amounts paid by Gray during the contract year will be added to the annual settlement amount between the Company and Gray.

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, and consists primarily of advertising revenues in connection with broadcast and print media sold by the Company, the rights to which are generally acquired by the Company under the multi-media rights agreements with collegiate institutions or associations. Advertising revenues are recognized when the event occurs or the publication is publicly distributed. In addition, to a lesser extent, the Company derives revenue from corporate sponsorship and licensing arrangements, association management fees, radio station rights fees, sales of commercial printing and other miscellaneous revenues generated from product sales and production services. Corporate sponsorships related to specific events are recognized when the event occurs or as the events occur. Corporate sponsor license fee revenue that is not related to specific events is recognized evenly over the term of the licensing arrangement. Association management fees are recognized over the term of the contract year as the related services are performed. Radio station rights fees are recognized ratably as games are broadcast. Sales of commercial printing and other product sales are recognized when title passes to the customer, or in the case of vending revenues, when the game is played.

The allowance for doubtful accounts represents the Company’s best estimate of the accounts receivable that will be ultimately collected, based on, among other things, historical collection experience, a review of the current aging status of customer receivables, and a review of specific information for those customers that are deemed to be higher risk. The Company evaluates the adequacy of the allowance for doubtful accounts on at least a quarterly basis. Unfavorable changes in economic conditions might impact the amounts ultimately collected from advertisers and corporate sponsors and therefore may result in an inadequate allowance.

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 evenly over each annual term specified in the contract. The Company’s contractual arrangements with associations or institutions may also involve net profit sharing arrangements 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. Estimates used in the determination of profit split expense are updated monthly and adjusted to actual when the profit split settlement is determined at the end of each contract year.

Goodwill and Other Intangible Assets —

The Company’s accounting for goodwill is based on Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS 142. Under the provisions of SFAS 142, the Company is not required to amortize goodwill, but is required to assess on at least an annual basis, the carrying value of goodwill associated with each of four distinct business units that comprise two business segments of the Company’s continuing operations to determine if an impairment in value has occurred. Until August 31, 2003, such an assessment was also required in connection with a discontinued business segment. Impairment charges are recorded if and when management concludes that the carrying amount of goodwill for any acquired business unit does not exceed its net realizable value based on the Company’s estimate of expected future cash flows to be generated by each of the business units. In prior years, based on a valuation model incorporating expected future cash flows in consideration of historical cash flows and operating results, goodwill impairment charges have been necessary to reduce the carrying value of goodwill to net realizable value, as further discussed in Note 8 to the consolidated financial statements.

The impairment analysis is based on the Company’s estimates of the net present value of future cash flows derived from each of four business units, and judgment is used in assessing whether the impairment analysis should be performed more frequently than annually. The determination of fair value requires significant management judgment including estimating operating cash flow to be derived in each of the four business units for the following three years, annual operating cash flow growth rates for each business unit beyond the next three years, changes in working capital, capital expenditures and the selection of an appropriate discount rate. For each of two of the four business units, a future reduction in the estimated net present value of future cash flows derived from an affected business unit would likely result in an impairment charge that could approximate the amount of the reduction in the estimated net present value calculated for that business unit. Factors potentially leading to a reduction in the estimated present value of future cash flows could include (i) the loss of a significant customer or contract, (ii) significantly less favorable terms of new contracts and contract renewals, and (iii) prolonged economic downturns affecting corporate advertising spending.

If the Company concludes in the future that the adjusted carrying value of goodwill for any of the four business units comprising the Company’s continuing operations exceeds its respective net realizable value, the Company would expense such excess and decrease goodwill as reported in the consolidated balance sheet.

Other purchased intangibles, including customer relationships, are amortized 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. The remaining value assigned to acquisition intangibles other than goodwill will continue to be amortized over a 16-year average life, at a rate of approximately $0.7 million per year. In prior years, the Company has determined that impairment charges have been necessary to reduce the carrying amount of certain customer relationship intangible assets, as further discussed in Note 8 to the consolidated financial statements. If the Company concludes in the future that significant changes occur in its customer relationships, additional impairment charges may be necessary.

Goodwill and intangible assets, net of accumulated amortization, were approximately $48.0 million as of August 31, 2005 and $48.7 million as of August 31, 2004, of which, goodwill was approximately $40.4 million as of each date. The carrying value of goodwill and acquired intangibles, net of accumulated amortization, represented approximately 74% of the Company’s total assets as of August 31, 2005.

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 August 31, 2005 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.

Valuation of Certain Non-Trade Receivables —

As of August 31, 2005, the Company has a non-trade subordinated note receivable from the purchaser of Datasouth Computer Corporation, or 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 the fiscal year ended August 31, 2003, a $1.7 million impairment charge reduced the carrying amount of 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 $0.8 million as of August 31, 2005.

The estimated reserve on the note issued by the purchaser of Datasouth is based on management’s estimate of amounts ultimately collectible on the note upon consideration of modifications made to the agreement, payment history and an understanding of the financial condition of the note issuer, among other factors. If there would be evidence of unfavorable conditions affecting the ultimate collection of the carrying value, such as an unfavorable trend in payment history or unfavorable changes in the note issuer’s financial condition, additional impairment charges may become necessary in future periods.

Transactions with Related Parties —

The terms of all material transactions involving related persons or entities have been on terms similar to those of Company transactions with independent parties, or in cases where the Company has not entered into similar transactions with unrelated parties, on terms that were then believed to be representative of those that would likely be negotiated with independent parties. All material transactions with related parties are reviewed and approved by the independent

directors of the Company. Although the Company might not have been otherwise able to enter into an agreement with an independent party to personally guarantee the Company’s bank debt, the terms by which the Company’s Chairman has been compensated for such personal guarantee were approved by the Company’s shareholders at the Company’s annual meeting of shareholders on January 7, 2004.

LIQUIDITY AND CAPITAL RESOURCES

Credit Arrangements —

As of August 31, 2005, the Company’s indebtedness to its bank lenders was approximately $58.9 million. In October 2005, the bank credit agreement was amended to provide an additional $3 million in available financing, all of which was borrowed in October 2005. The agreement, having a maturity date of November 15, 2006 at which time all remaining amounts outstanding become due and payable, requires quarterly principal payments of $2.5 million each beginning February 28, 2006. The Company’s ability to meet the principal payment requirements is contingent upon continued investments in the Company’s debt or equity securities or cash advances by the Company’s Chairman. The agreement provides for no additional borrowing capacity beyond the additional $3 million borrowed in October 2005. The agreement requires the maintenance of interest coverage ratios, which are measured quarterly.

The Company’s debt to the banks 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 the banks, and thereby become the holder of the debt currently payable to the banks and the related lien on the Company’s assets. Through January 26, 2005, the Chairman has been 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. In August 2005, in return for the consideration that he is expecting to receive in the proposed merger with TCM, the Chairman agreed to permanently waive his right to receive compensation accrued since January 26, 2005. 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.

In September 2004, a company under the Chairman’s control provided the Company $1.5 million of cash which was used for working capital purposes, in exchange for a subordinated note bearing interest at 6% per annum. 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 December 31, 2006, as amended in October 2005. In January 2005, $1.5 million was received from the Company’s Chairman and used for working capital purposes. During the fiscal year ended August 31, 2004, the Company received approximately $6.6 million from the Company’s Chairman, of which $2 million was invested in newly-issued shares of the Company’s preferred stock. The remaining investment of $4.55 million, plus the $1.5 million received in January 2005, is presented in the consolidated balance sheet as “Advances from stockholder.” If the TCM merger is consummated, the current terms of the merger provide that these advances, combined with shares of Bull Run preferred stock owned by the Chairman and his affiliates, along with all accrued dividends thereon, would be exchanged for shares of TCM preferred stock.

In connection with the credit agreement, as amended in October 2005, the Chairman committed to the Company an additional aggregate cash investment of up to $10 million as and when needed to fund the required principal payments on the bank debt. Under the terms of the amended bank credit facility, the Chairman is entitled to have returned to him certain marketable

securities pledged by him on his personal guarantee at the time of and valued at the amount of each principal payment made by the Company on the outstanding balance of the bank debt, subject to the maintenance of margin requirements on the value of the pledged marketable securities. Under the terms of the credit agreement, up to an aggregate of $15 million in future 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.

As amended in October 2005, the Company’s bank credit agreement provides for (a) two term loans (the “Term Loans”) for borrowings totaling approximately $35.9 million and (b) two revolving loan commitments (the “Revolvers”) for aggregate maximum borrowings of $26 million. All amounts outstanding bear interest at either (a) the banks’ 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.

In connection with the acquisition of Host in December 1999, the Company issued 8% subordinated notes, representing long-term debt of approximately $8.7 million as of August 31, 2005. 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 8% subordinated notes have a maturity date of December 31, 2006, as amended in October 2005. Payment of interest and principal on all subordinated notes is subordinate to the Company’s bank credit agreement.

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 fiscal years ended August 31, 2005 and 2004, the Company’s Chairman provided an aggregate total of $3.0 million and $6.6 million, respectively, in cash that was used for operating purposes. The Chairman has also committed to fund, if necessary, cash for the Company to meet the quarterly principal payment requirements under the bank credit facility, as amended in October 2005, totaling $10 million before the November 2006 maturity of the facility. Funding of some or all of these payments is likely to be necessary for the Company to continue as a going concern for the next 12 months. While there can be no assurance, based upon (a) the Company’s forecasted operating cash flows and capital expenditures for its fiscal year ending August 31, 2006, and (b) the commitment from the Chairman to invest cash of up to $10 million to meet all principal payment requirements prior to the November 15, 2006 maturity date of the Company’s bank credit agreement, management believes the Company has sufficient liquidity through at least the November 15, 2006 maturity date of its bank credit agreement. Prior to the November 15, 2006 maturity date, the Company anticipates that it 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 15, 2006 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 $15.0 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 $400,000 for the fiscal year ending August 31, 2006.

Historical Cash Flow Information — Summary —

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

		Year Ended August 31,
		2005				2004				2003
Cash flows from operating activities:
Continuing operations		$	(4,579	)		$	(4,130	)		$	6,831
Discontinued operations			(1,558	)			(6,363	)			(11,918	)
Cash flows from investing activities:
Continuing operation investing activities			(207	)			(533	)			45,290
Discontinued operation investing activities			1,333				447				(117	)
Cash flows from financing activities			4,708				6,509				(35,963	)
Net increase (decrease) in cash and cash equivalents		$	(303	)		$	(4,070	)		$	4,123

Historical Cash Flow Information — Cash Flows from Operating Activities —

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

		Year Ended August 31,
		2005				2004				2003
Operating income (loss) from continuing operations		$	1,653			$	(2,694	)		$	(21,012	)
Depreciation, amortization and impairment charges included in operating income (loss)			1,339				5,700				32,949
Interest expense, net of noncash preferred stock dividends			(4,421	)			(4,416	)			(8,005	)
Net change in operating assets and liabilities			(3,142	)			(2,570	)			2,893
Other changes in operating cash flows			(8	)			(150	)			6
Total cash flows from continuing operations			(4,579	)			(4,130	)			6,831
Cash flows from discontinued operating activities			(1,558	)			(6,363	)			(11,918	)
Total cash flows from operating activities		$	(6,137	)		$	(10,493	)		$	(5,087	)

The net change in operating assets and liabilities had a negative impact on total cash flows from continuing operations during the fiscal years ended August 31, 2005 and 2004, and a positive impact during the fiscal year ended August 31, 2003. During the fiscal years ended August 31, 2005 and 2004, cash available at the beginning of each period was used toward the reduction of accounts payable and accrued expenses by $1.6 million and $3.7 million, respectively, compared to an increase in accounts payable and accrued expenses of $2.6 million in the fiscal year ended August 31, 2003. Accounts receivable increased $5.4 million in the fiscal year ended August 31, 2005, and decreased $2.4 million and $0.8 million in the fiscal years ended August 31, 2004 and 2003, respectively. The increase in accounts receivable during the fiscal year ended August 31, 2005 was due to an increase in total revenues compared to the prior fiscal year, and a more concerted effort at the end of the current fiscal year to accelerate the invoicing of customers under advertising agreements which incorporate installment billing arrangements. Decreases in accounts receivable during each of the fiscal years ended August 31, 2004 and 2003 resulted primarily from a reduction in revenues derived in the thirty to sixty days preceding the end of those periods, particularly in 2004, since most of the Company’s collegiate properties began their college football seasons in September 2004 as compared to August in 2003. The Company’s total cash flows from continuing operations were also used to fund interest expense. Interest paid, net of interest income received and accrued preferred stock dividends reported as interest expense, was $4.5 million, $4.4 million and $8.3 million for fiscal years ended August 31, 2005, 2004 and 2003, respectively, with the reduction from 2003 caused by the decrease in total outstanding debt and reductions in interest rates to which the debt is subject.

Historical Cash Flow Information — Cash Flows from Investing Activities —

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

		Year Ended August 31,
		2005				2004				2003
Capital expenditures		$	(195	)		$	(384	)		$	(230	)
Proceeds on dispositions of investments											46,183
Other investing cash flows			(12	)			(149	)			(663	)
Total cash flows from continuing operation investing activities			(207	)			(533	)			45,290
Cash flows from discontinued operation investing activities			1,333				447				(117	)
Total cash flows from investing activities		$	1,126			$	(86	)		$	45,173

In the fiscal year ended August 31, 2005, the Company received approximately $0.9 million in proceeds on the sale of the discontinued Affinity Events segment assets. In the fiscal years ended August 31, 2005 and 2004, the Company received aggregate payments on the Company’s note receivable from the purchaser of Datasouth, a discontinued business segment, of approximately $0.4 million in each year.

In the fiscal year ended August 31, 2003, the Company sold its investment in Rawlings Sporting Goods Company, Inc., or Rawlings, common stock to an unrelated company for cash proceeds of approximately $6.8 million, and sold its investments in Gray common stocks and warrants to purchase additional shares of Gray common stocks to parties affiliated with the Company’s Chairman and to Gray for aggregate cash proceeds of approximately $39.4 million.

Historical Cash Flow Information — Cash Flows from Financing Activities —

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

		Year Ended August 31,
		2005				2004				2003
Net borrowings on notes payable and revolving line of credit		$	3,000			$				$	175
Borrowings on note issued by related party			1,500
Net repayments on long-term debt			(590	)							(38,000	)
Cash advances made by stockholder			1,500				4,550
Issuance of preferred stock							2,000				3,000
Preferred stock dividends paid			(257	)
Debt issue costs and other financing cash flows			(445	)			(41	)			(1,138	)
Total cash flows from financing activities		$	4,708			$	6,509			$	(35,963	)

In the fiscal year ended August 31, 2003, the Company reduced its long-term debt as a result of proceeds on the sales of its investment in Rawlings common stock, Gray common stocks and warrants to purchase additional shares of Gray common stocks. There were no discontinued operation financing activities in any of the fiscal periods presented above.

OFF BALANCE SHEET ARRANGEMENTS

As of August 31, 2005, the Company did not have any material off balance sheet arrangements as defined under Item 303(a)(4)(ii) of SEC Regulation S-K.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The following summarizes the Company’s contractual obligations (amounts in 000’s):

		Payments Due by Period as of August 31, 2005
						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		$	69,125			$	7,500			$	61,625			$				$
Interest obligations			3,039				2,011				1,028
Capital lease obligations			182				80				102
Operating lease obligations			3,582				1,137				1,053				945				447
Purchase obligations			70,722				16,591				21,191				9,478				23,462
Total		$	146,650			$	27,319			$	84,999			$	10,423			$	23,909

Operating lease obligations are presented net of future receipts on contracted sublease arrangements totaling approximately $1.1 million as of August 31, 2005.

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 2015.

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 accruing through June 30, 2003 on issued shares of the Company’s preferred stock have been paid. Dividends on Series D Preferred Stock payable for the years ended June 30, 2004 and 2005 in shares of the Company’s common stock under the terms of such issuance, 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 to 150% of an annual dividend, the holders of such preferred stock shall be entitled to vote for and elect two additional directors of the Company. Such rights would thereby be afforded the holders of Series D Preferred Stock if dividends accrued through June 30, 2004 are not paid by December 31, 2006. Under the terms of the proposed merger with TCM, all accrued and unpaid dividends on outstanding shares of Series D Preferred Stock will be converted, along with the outstanding shares of Series D Preferred Stock, into shares of TCM preferred stock. The amount of dividends accruing through August 31, 2005 on the outstanding shares of Series D Preferred Stock and Series F Preferred Stock, potentially payable in cash or common stock, at the holder’s option, during the fiscal year ending August 31, 2006 is approximately $2.8 million. All holders of Series D Preferred Stock and Series F Preferred Stock consist of the Chairman and companies affiliated with the Chairman.

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, under the terms of the Company’s Articles of Incorporation, was 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 Company’s board of directors did not declare a dividend on shares of Series E Preferred Stock as of June 30, 2005. Under the terms of the proposed merger with TCM, all accrued and unpaid dividends on outstanding shares of Series E Preferred Stock, except as to those shares held by the Company’s Chairman, will be redeemed in cash at the closing of the merger. Under the terms of the merger, accrued dividends payable to the

Chairman on shares of Series E Preferred Stock held by him, will be converted, along with his shares of Series E Preferred Stock, into shares of TCM preferred stock. The amount of dividends accruing through August 31, 2005 on the outstanding shares of Series E Preferred Stock potentially payable in cash during the fiscal year ending August 31, 2006 is approximately $1.4 million, including $1.0 million in connection with shares of Series E Preferred Stock issued to the Company’s Chairman.

Since the payment of preferred dividends is conditioned on the declaration of such dividends by the Company’s board of directors, neither accrued preferred stock dividends of approximately $4.2 million as of August 31, 2005 nor preferred stock dividends accruing subsequent to August 31, 2005 are included in the preceding contractual obligations table.

All shares of preferred stock issued by the Company are redeemable by the Company solely at the Company’s option. Since the Chairman’s beneficial ownership of the Company’s common stock is more than 50%, he has the ability to require the Company to repurchase its preferred stock after the repayment of amounts due under the bank credit agreement. The aggregate amount of redeemable preferred stock as of August 31, 2005 is approximately $22.1 million and is not included in the preceding contractual obligations table.

RESULTS OF CONTINUING OPERATIONS — FISCAL YEAR ENDED AUGUST 31, 2005 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 2004

Results Derived from Operating Businesses —

Operating results for the fiscal years ended August 31, 2005 and 2004 are summarized as follows (amounts in $000’s):

		Year Ended August 31,
		2005				2004
Revenues
Collegiate Marketing and Production Services		$	53,212			$	47,106
Association Management Services			8,667				8,673
		$	61,879			$	55,779
Operating Costs and Expenses
Direct operating costs of services rendered		$	40,776			$	35,699
Selling, general and administrative			17,966				18,220
Costs incurred in connection with the merger			766
Amortization and impairment of acquisition intangibles			718				4,554
		$	60,226			$	58,473
Income (Loss) from Operations
Collegiate Marketing and Production Services		$	2,275			$	977
Association Management Services			1,794				2,009
Amortization and impairment of acquisition intangibles			(718	)			(4,554	)
Unallocated general and administrative costs			(1,698	)			(1,126	)
		$	1,653			$	(2,694	)

Total revenues and operating results for the Collegiate Marketing and Production Services segment were impacted in the fiscal year ended August 31, 2005 by the addition of two university contractual relationships beginning in the current fiscal year, partially offset by 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 segment’s revenues and direct costs by approximately $3.8 million and $3.4 million, respectively, and had substantially no impact on operating profit, compared to the prior year. Offsetting the increase in segment revenues provided by the new contractual relationships was the impact of a change in the Company’s services rendered on behalf of the NCAA which took effect after such services were rendered in the prior fiscal year. The Company is no longer eligible to receive certain NCAA merchandise

licensing revenues or generate revenue in connection with the production of an event on behalf of the NCAA. Aggregate revenues derived from these services were approximately $2.0 million and the production of the event resulted in approximately $1.5 million of direct costs, resulting in a $0.5 reduction in segment operating income in the fiscal year ended August 31, 2005. Other increases in segment revenues resulted from an increase in advertising sales, due in some cases to additional rights acquired from certain universities; and an increase in revenues generated by the segment’s printing, publishing and broadcasting operations of approximately $1.4 million. The increase in advertising sales was the primary reason for the increase in the operating income derived by the segment.

Total revenues and operating results for the Association Management Services segment were favorably impacted in the fiscal year ended August 31, 2005 by a new multi-year association management services contract effective May 1, 2005, and a one-year contract to provide management services to an organization in connection with an event. Results for the fiscal year ended August 31, 2005 were unfavorably affected by a reduction in the scope of management services provided to an association. The effects of the services scope reduction, net of the two new contracts, reduced total segment revenues and operating profit by $0.3 million and $0.4 million, respectively, in the current fiscal year compared to the prior year.

Direct operating costs of services rendered increased for the fiscal year ended August 31, 2005 compared to the prior fiscal year due to (a) the $3.4 million increase from the additional university contracts, net of the terminated contract, as discussed above; (b) an increase of approximately $0.7 million in guaranteed rights fees and revenue and profit splits, excluding the effects of the new and terminated contracts; and (c) an increase of approximately $1.1 million in production expenses in the printing, publishing and broadcasting operations, less (d) approximately $1.5 million of direct costs for services rendered in the prior year period on behalf of the NCAA, as previously discussed.

Selling, general and administrative costs associated with continuing operations decreased slightly for the fiscal year ended August 31, 2005 compared to the prior fiscal year. However, in the prior fiscal year, approximately $1.9 million of general and administrative costs were allocable to the discontinued Affinity Events segment. These costs were effectively eliminated as a result of the discontinuation of the segment prior to the current fiscal year.

Unallocated general and administrative costs increased in the fiscal year ended August 31, 2005 compared to the prior fiscal year due to expenses incurred in connection with the proposed merger with Triple Crown Media, Inc. in the current year of approximately $0.8 million.

Amortization and impairment of acquisition intangibles for the fiscal year ended August 31, 2004 included a goodwill impairment charge of $3.3 million.

Results Derived from Derivative Instruments —

The net change in the value of certain derivative instruments was approximately $0.4 million and $1.3 million for the fiscal years ended August 31, 2005 and 2004, respectively, due to an increase in the value of an interest rate swap agreement. The interest rate swap agreement terminated on December 31, 2004.

Interest Expense and Debt Related Costs —

Interest expense increased to approximately $6.4 million for the fiscal year ended August 31, 2005 from approximately $4.4 million for the same period in the prior year. The increase is attributable to approximately $2.0 million of preferred stock dividends classified as interest expense in the current year period. The effects 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 offset the favorable effect of the interest rate swap agreement termination on December 31, 2004.

Debt issue cost amortization was approximately $0.8 million and $1.2 million for the fiscal years ended August 31, 2005 and 2004, respectively. Debt issue costs consist of fees paid by the Company to bank lenders and other costs in connection with the issuance of debt and significant amendments to the bank credit agreement, and compensation paid in the form of shares of the Company’s common stock 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. In August 2005, in return for the consideration that he is expecting to receive in the anticipated merger with TCM, the Chairman agreed to permanently waive his right to receive compensation accrued since January 26, 2005. The waiver resulted in income of approximately $0.3 million recorded in the fourth quarter of the fiscal year ended August 31, 2005 related to the reversal of debt issue cost amortization from January 27, 2005 through May 31, 2005. During the year ended August 31, 2005, the Company issued approximately 1,076,000 shares of restricted common stock to the Chairman and the former director, then valued at approximately $0.5 million, for such purpose. During the year ended August 31, 2004, the Company issued approximately 805,000 shares of restricted common stock to the Chairman, then valued at approximately $0.9 million.

Income Taxes —

As of August 31, 2005, the Company had net operating loss carryforwards for tax purposes of approximately $74 million to reduce federal taxable income in the future, and other tax credit carryforwards totaling approximately $0.6 million to reduce regular federal income tax liabilities in the future. As of August 31, 2005, the Company increased its valuation allowance for net deferred tax assets by approximately $1.6 million to approximately $25.3 million, which, consistent with August 31, 2004, provides a full valuation allowance on the Company’s net deferred tax assets. In the prior fiscal year, the valuation allowance was increased by $4.2 million. The principal differences between the federal statutory tax rate of 34% and the effective tax rate are, when applicable, nondeductible goodwill impairment charges, state income taxes and, the increase in the amount of the valuation allowance.

RESULTS OF CONTINUING OPERATIONS — FISCAL YEAR ENDED AUGUST 31, 2004 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 2003

Results Derived from Operating Businesses —

Operating results for the fiscal years ended August 31, 2004 and 2003 are summarized as follows (amounts in $000’s):

		Year Ended August 31,
		2004				2003
Revenues
Collegiate Marketing and Production Services		$	47,106			$	55,354
Association Management Services			8,673				8,775
		$	55,779			$	64,129
Operating Costs and Expenses
Direct operating costs of services rendered		$	35,699			$	42,603
Selling, general and administrative			18,220				20,397
Amortization and impairment of acquisition intangibles			4,554				22,141
		$	58,473			$	85,141
Income (Loss) from Operations
Collegiate Marketing and Production Services		$	977			$	930
Association Management Services			2,009				1,553
Amortization and impairment of acquisition intangibles			(4,554	)			(22,141	)
Unallocated general and administrative costs			(1,126	)			(1,354	)
		$	(2,694	)		$	(21,012	)

Total revenues and operating results for the Collegiate Marketing and Production Services segment were impacted in the fiscal year ended August 31, 2004 by the termination of three university contractual relationships at the end of the previous fiscal year. Such contracts generated revenues of approximately $5.3 million during the fiscal year ended August 31, 2003 and generated operating profit of approximately $0.5 million during that period. The change in total revenues of this segment was also affected by certain printing, publishing and broadcasting projects and activities which occurred in the fiscal year ended August 31, 2003 but not in the fiscal year ended August 31, 2005. Total revenues derived from printing, publishing, broadcasting and other integrated media activities, net of the elimination of intercompany revenues, were approximately $0.6 million less for the fiscal year ended August 31, 2004 than the fiscal year ended August 31, 2003. Additionally, revenues derived from NCAA publications and related activities during the fiscal year ended August 31, 2004 were approximately $1.2 million less than the same period of the earlier fiscal year.

Direct operating costs of services rendered decreased for the fiscal year ended August 31, 2004 from the fiscal year ended August 31, 2003 due to (a) the termination of certain contractual relationships as discussed previously, which substantially contributed to a reduction in total guaranteed rights fee and profit split expenses of approximately $2.1 million; (b) the elimination of approximately $1.5 million of other direct costs associated with the three terminated university contracts; and (c) the reduction of approximately $0.7 million in production expenses associated with the printing, publishing and broadcasting operations due to lower volume during the fiscal year ended August 31, 2004 in comparison with the fiscal year ended August 31, 2003.

Selling, general and administrative costs decreased for the fiscal year ended August 31, 2004 compared to the fiscal year ended August 31, 2003 due to a general reduction in corporate overhead spending, including a decline in employee compensation costs to approximately $12.1 million from approximately $12.6 million and a decline in rent expense from $1.9 million to $1.4 million. Administrative expenses of the Association Management Services segment declined by $0.3 million on relatively consistent total revenues due primarily to reductions in employee compensation costs, thereby contributing to an increase in operating profit generated by the segment in comparison with the fiscal year ended August 31, 2003.

Amortization and impairment of acquisition intangibles in the fiscal year ended August 31, 2004 included a goodwill impairment charge of $3.3 million based on management’s consideration of historical operating results and reevaluation of the forecasted operating results and business plans for one of the Company’s business units. In the fiscal year ended August 31, 2003, amortization and impairment of acquisition intangibles included a goodwill impairment charge of approximately $21.0 million based on management’s consideration of historical operating results and reevaluation of the forecasted operating results and business plans for each of the Company’s business units.

Results Derived from Investments and Derivative Instruments —

Equity in losses of affiliated companies of approximately $0.2 million for the fiscal year ended August 31, 2003 was derived from the Company’s proportionate share of the net losses reported by Gray and iHigh, Inc. (“iHigh”), a company in which Host has a 35.1% equity ownership that provides marketing services and programs in connection with high school sports and activities. The Company’s sale of its investment in Gray common stocks in August 2003 resulted in a gain to the Company of approximately $17.2 million. As a result of Gray’s issuance of common stock in October and November 2002 for average net proceeds to Gray of approximately $7.72 per share, and since the Company’s carrying value of its investment in Gray common stocks 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 fiscal year ended August 31, 2003.

In the fiscal year ended August 31, 2003, an investment valuation charge of approximately $4.2 million was reported by the Company to reduce a non-trade receivable from iHigh and the carrying value of the investment in iHigh to zero. During the fiscal year ended August 31, 2003,

the Company 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.

The net change in the value of certain derivative instruments was approximately $1.3 million for the fiscal year ended August 31, 2004 due to an increase in the value of an interest rate swap agreement, and approximately $(1.0) million for the fiscal year ended August 31, 2003 due to a decline in the value of warrants for Gray common stock held by the Company prior to the Company’s sale of the warrants in April 2003, net of an increase in the value of interest rate swap agreements as the agreements reached, in one case, and approached, in the other case, the dates on which the agreements terminate.

Interest Expense and Debt Related Costs —

Interest expense decreased to approximately $4.4 million for the fiscal year ended August 31, 2004 from approximately $8.2 million for the fiscal year ended August 31, 2003, 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 $1.2 million and $2.4 million for the fiscal years ended August 31, 2004 and 2003, respectively. During the fiscal year ended August 31, 2004, the Company issued approximately 805,000 shares of restricted common stock to the Chairman to compensate him for his personal guarantee, then valued at approximately $0.9 million. During the fiscal year ended August 31, 2003, the Company issued approximately 221,000 shares of restricted common stock to the Chairman to compensate him for his personal guarantee, then valued at approximately $1.3 million. Amortization of the value of all shares issued to the Chairman, of approximately $0.8 million and $1.4 million, is included in debt issue cost amortization for the fiscal years ended August 31, 2004 and 2003, respectively.

Income Taxes —

As of August 31, 2004, the Company increased its valuation allowance for net deferred tax assets by $4.2 million to $23.7 million, which, consistent with August 31, 2003, provides a full valuation allowance on the Company’s net deferred tax assets. In the fiscal year ended August 31, 2003, the valuation allowance was increased by $5.2 million, which reduced the carrying amount of deferred taxes in the balance sheet to zero. The principal differences between the federal statutory tax rate of 34% and the effective tax rate are nondeductible goodwill impairment charges, state income taxes and, the increase in the amount of the valuation allowance.

RESULTS OF DISCONTINUED OPERATIONS

The Company discontinued its Consulting and its Affinity Events business segments during the fiscal year ended August 31, 2004. Accordingly, the operating results and net assets associated with the Consulting and the Affinity Events business segments as of and for all periods presented herein, have been reflected as discontinued operations in the accompanying consolidated financial statements. In January 2004, the Company determined that it would not be engaged in consulting services to Gray or any other party. The Company made the decision in August 2004 to suspend the Affinity Events business and offer it for sale, and subsequent to August 2004, the Company completed 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.

The Company sold the operations of Datasouth Computer Corporation, or Datasouth, in September 2000 for cash and a subordinated note receivable issued by the purchaser. Accordingly, the operating results and net assets associated with Datasouth’s computer printer manufacturing business, including the note receivable, have been reported as discontinued

operations in the accompanying financial statements for all periods presented. As of August 31, 2005, the carrying amount of the subordinated note receivable issued by the purchaser of Datasouth, net of reserve, was approximately $0.8 million. An impairment charge of approximately $1.7 million was included in the Company’s loss from discontinued operations at August 31, 2003 to reduce the carrying amount of the subordinated note receivable to the estimated net realizable value as of that date. To the extent actual proceeds on the note differ from carrying amount of the note receivable, such differences will be reported as income or loss from discontinued operations in future periods.

Results derived from the Company’s discontinued operations are summarized as follows (amounts in 000’s):

		Year Ended August 31,
		2005				2004				2003
Revenues:
Affinity Events		$	655			$	10,843			$	14,052
Consulting											5,664
		$	655			$	10,843			$	19,716
Costs and Expenses:
Affinity Events:
Direct operating costs of services rendered		$	426			$	9,020			$	12,467
Selling, general and administrative			378				9,297				5,481
Amortization and impairment of acquisition intangibles											9,615
		$	804			$	18,317			$	27,563
Income (Loss) from Discontinued Operations:
Affinity Events		$	(149	)		$	(7,474	)		$	(3,896	)
Consulting											5,664
Amortization and impairment of acquisition intangibles											(9,615	)
Datasouth											(1,695	)
		$	(149	)		$	(7,474	)		$	(9,542	)

Results for the fiscal year ended August 31, 2005 reflect solely the results of certain events to which the Company was contractually committed prior to the suspension and sale of the Affinity Events business. General and administrative costs for the fiscal year ended August 31, 2005 include a $160,000 charge to increase the estimated loss on the discontinuation of the Affinity Events business.

Total revenues and direct operating costs for the Affinity Events business segment were lower in the fiscal year ended August 31, 2004 than 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. As a result of the change, total revenues and direct operating costs from Hoop-It-Up were approximately $4.0 million and $3.1 million less, respectively, in the fiscal year ended August 31, 2004 compared to the fiscal year ended August 31, 2003.

General and administrative costs for the fiscal year ended August 31, 2004 include approximately $2.7 million in accrued restructuring charges associated with the discontinuation of the Affinity Events business. Such charges included the costs of remaining lease obligations for the Company’s vacated office space in Dallas and New York City, net of future sublease income; the remaining costs for multi-year consulting agreements under which the Company no longer benefits; severance costs for terminated employees; and other costs of terminating operations and offering the business for sale. The charges were reduced by the estimated amount of proceeds to be ultimately derived from the sale of assets of the Affinity Events segment.

The amount ultimately to be realized on the sale of the Affinity Events assets and other unanticipated income or expenses derived from or in connection with the discontinued business,

could differ materially from amounts assumed in arriving at the loss on discontinuation of the Affinity Events business. To the extent actual proceeds or other amounts differ from those estimated as of August 31, 2005, or as management’s estimates are revised, such amounts would be reported as income or loss from discontinued operations in future periods.

In the fiscal year ended August 31, 2003, amortization and impairment of acquisition intangibles included an impairment charge attributable to Affinity Events acquisition intangibles, of approximately $9.5 million (of which, approximately $2.5 million was attributable to goodwill, $6.5 million to trademarks and $0.5 million to customer relationships) based on management’s consideration of historical operating results and reevaluation of the forecasted operating results and business plans for each of the Company’s business units.

During the fiscal year ended August 31, 2003, the Company recognized as income a $5 million consulting fee from Gray for services performed in connection with Gray’s acquisition of Stations Holding Company, Inc., or Stations, which was consummated in October 2002. Also in October 2002, Gray completed a public offering of its common stock, and in November 2002, Gray issued additional shares of its common stock. These issuances of common stock by Gray resulted in a reduction of the Company’s equity investment in Gray’s outstanding common stock from 12.9% to 4.0% (representing 18.0% of the voting rights). In August 2003, the Company sold its investment in Gray common stocks. As a result of these transactions by Gray, and ultimately as a result of the Company’s disposition of its ownership position in Gray, the Company recognized previously deferred consulting fee income of $5 million in the fiscal year ended August 31, 2003 attributable to Gray’s acquisition of Stations, plus approximately $0.7 million of previously deferred consulting fee income.

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. Until December 31, 2004, the Company 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 evaluated the credit quality of the counterparty to its interest rate swap agreement and did not believe there was 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 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 each fiscal year end, a 1% increase in market interest rates would increase interest expense and increase the loss from continuing operations before income taxes by approximately $0.5, $0.3 million and $0.5 million for the fiscal years ended August 31, 2005, 2004 and 2003, respectively. These amounts were determined by calculating the effect of the hypothetical interest rate on the Company’s floating rate debt, after giving effect to the Company’s interest rate swap agreement. The Company’s floating rate debt increased and fixed rate debt decreased by $25 million after the termination of the interest rate swap 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 Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “believes,” “expects,” “anticipates,” “estimates” and similar words and expressions are generally intended to identify forward-looking statements. Statements that describe the Company’s future strategic plans, goals or objectives, including its proposed merger with TCM, 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 15, 2006 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 15, 2006 maturity date, or be successful in obtaining financing at acceptable terms; (iii) the TCM merger may not be consummated or may be significantly delayed; (iv) 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; (v) significant segments of the Company’s business are seasonal; (vi) the Company’s business depends on short term contracts and the inability to renew or extend these contracts could adversely affect its business; and (vii) the Company may lose money on some of its contracts, because it guarantees certain payments thereunder.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

See “Interest Rate and Market Rate Risk” in Item 7 of this Form 10-K.

Item 8. Financial Statements and Supplementary Data

Consolidated Financial Statements of Bull Run Corporation:

		Page
Report of Independent Registered Public Accounting Firm		29
Consolidated Balance Sheets as of August 31, 2005 and 2004		30
Consolidated Statements of Operations for each of the three years in the period ended August 31, 2005		31
Consolidated Statements of Stockholders’ Deficit for each of the three years in the period ended August 31, 2005		32
Consolidated Statements of Cash Flows for each of the three years in the period ended August 31, 2005		33
Notes to Consolidated Financial Statements		34
Selected Quarterly Financial Data (Unaudited)		57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BOARD OF DIRECTORS AND STOCKHOLDERS OF BULL RUN CORPORATION:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders’ deficit and cash flows present fairly, in all material respects, the financial position of Bull Run Corporation at August 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years ended August 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1, the Company has announced its intention to merge with Triple Crown Media, Inc. subject to certain closing conditions, including shareholder approval.

As discussed in Note 2, approximately $52 million and $10 million of the Company’s outstanding bank and subordinated debt matures in November and December 2006, respectively.

PRICEWATERHOUSECOOPERS LLP

Louisville, Kentucky
November 8, 2005

BULL RUN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)

		August 31,				August 31,
		2005				2004
ASSETS
Current assets:
Cash and cash equivalents		$	147			$	450
Accounts receivable, net of allowance of $302 and $309 as of August 31, 2005 and 2004, respectively			10,647				5,219
Inventories			1,113				663
Prepaid costs and expenses			1,038				1,757
Total current assets			12,945				8,089
Property and equipment, net			2,767				3,184
Goodwill			40,364				40,364
Customer relationships and trademarks			7,591				8,308
Other assets			1,009				997
Total assets		$	64,676			$	60,942
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt		$	7,500			$	590
Accounts payable			5,933				5,866
Deferred revenue			8,285				4,819
Accrued fees payable to related party			1,217				1,721
Advances from stockholder			6,050				4,550
Accrued and other liabilities			9,570				9,215
Net current liabilities of discontinued segment			619				474
Total current liabilities			39,174				27,235
Long-term debt (including $4,519 and $3,019 payable to related parties as of August 31, 2005 and 2004, respectively)			61,625				64,625
Other liabilities, excluding redeemable preferred stock			226				497
Net noncurrent liabilities of discontinued segments			630				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 having a $7,585 liquidation value as of August 31, 2005 and 9.8 shares having a $9,799 liquidation value as of August 31, 2004)			7,585				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			123,737				117,493
Commitments and contingencies
Stockholders’ deficit:
Common stock, $.01 par value (authorized 100,000 shares; issued 6,890 and 5,386 shares as of August 31, 2005 and 2004, respectively)			69				54
Additional paid-in capital			84,471				81,706
Accumulated deficit			(143,601	)			(138,311	)
Total stockholders’ deficit			(59,061	)			(56,551	)
Total liabilities and stockholders’ deficit		$	64,676			$	60,942

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

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

		Year Ended August 31,
		2005				2004				2003
Revenue from services rendered		$	61,879			$	55,779			$	64,129
Operating costs and expenses:
Direct operating costs of services rendered			40,776				35,699				42,603
Selling, general and administrative			17,966				18,220				20,397
Costs incurred in connection with proposed merger			766
Amortization and impairment of acquisition intangibles			718				4,554				22,141
			60,226				58,473				85,141
Operating income (loss)			1,653				(2,694	)			(21,012	)
Other income (expense):
Net change in value of certain derivative instruments			412				1,294				(1,035	)
Interest expense, related parties			(2,345	)			(130	)			(113	)
Interest expense, other			(4,093	)			(4,286	)			(8,054	)
Debt issue cost amortization, related parties			(374	)			(783	)			(1,369	)
Debt issue cost amortization, other			(386	)			(388	)			(998	)
Equity in losses of affiliated companies											(204	)
Loss on issuance of shares by affiliate											(2,339	)
Gain on disposition of investments											17,150
Reduction in valuation of investment in affiliates											(5,189	)
Other expense, net			(8	)			(150	)			(59	)
Loss from continuing operations before income taxes			(5,141	)			(7,137	)			(23,222	)
Income tax provision											(5,222	)
Loss from continuing operations			(5,141	)			(7,137	)			(28,444	)
Loss from discontinued operations			(149	)			(7,474	)			(9,542	)
Net loss			(5,290	)			(14,611	)			(37,986	)
Preferred dividends							(2,237	)			(1,149	)
Net loss available to common stockholders		$	(5,290	)		$	(16,848	)		$	(39,135	)
Loss per share available to common stockholders, basic and diluted:
Loss from continuing operations		$	(0.79	)		$	(2.01	)		$	(7.42	)
Loss from discontinued operations			(0.02	)			(1.60	)			(2.40	)
		$	(0.81	)		$	(3.61	)		$	(9.82	)
Weighted average number of common shares outstanding:
Basic and diluted			6,505				4,668				3,987

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

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

														Additional
		Preferred				Common Stock								Paid-In
		Stock				Shares				Amount				Capital
As of September 1, 2002		$	4,097				3,855			$	38			$	79,448
Cancellation of treasury stock							(54	)			(1	)			(1,392	)
Exchange of Series B and C preferred stock and subordinated notes for Series D preferred stock			7,183
Issuance of Series D preferred stock			3,000
Issuance of common stock							463				5				2,257
Exercise of stock options							60				1				206
Tax effect of nonqualified stock options															(381	)
As of August 31, 2003		$	14,280				4,324			$	43			$	80,138
Exchange of subordinated notes and Series D preferred stock for Series E preferred stock			8,016
Issuance of Series F preferred stock			2,000
Issuance of common stock							1,062				11				1,568
Reclassify preferred stock to redeemable preferred stock			(24,296	)
As of August 31, 2004		$	0				5,386			$	54			$	81,706
Conversion of Series E redeemable preferred stock to shares of common stock							316				3				2,211
Issuance of common stock							1,188				12				554
As of August 31, 2005		$	0				6,890			$	69			$	84,471

						Other
						Comprehensive								Total
		Treasury				Accumulated				Accumulated				Stockholders'
		Stock				Loss				Deficit				Deficit
As of September 1, 2002		$	(1,393	)		$	(2,050	)		$	(82,328	)		$	(2,188	)
Cancellation of treasury stock			1,393												0
Exchange of Series B and C preferred stock and subordinated notes for Series D preferred stock															7,183
Issuance of Series D preferred stock															3,000
Issuance of common stock															2,262
Exercise of stock options															207
Tax effect of nonqualified stock options															(381	)
Other comprehensive income							2,050								2,050
Preferred dividends											(1,149	)			(1,149	)
Net loss											(37,986	)			(37,986	)
As of August 31, 2003		$	0			$	0			$	(121,463	)		$	(27,002	)
Exchange of subordinated notes and Series D preferred stock for Series E preferred stock															8,016
Issuance of Series F preferred stock															2,000
Issuance of common stock															1,579
Reclassify preferred stock to redeemable preferred stock															(24,296	)
Preferred dividends											(2,237	)			(2,237	)
Net loss											(14,611	)			(14,611	)
As of August 31, 2004		$	0			$	0			$	(138,311	)		$	(56,551	)
Conversion of Series E redeemable preferred stock to shares of common stock															2,214
Issuance of common stock															566
Net loss											(5,290	)			(5,290	)
As of August 31, 2005		$	0			$	0			$	(143,601	)		$	(59,061	)

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

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

		Year Ended August 31,
		2005				2004				2003
Cash flows from operating activities:
Net loss		$	(5,290	)		$	(14,611	)		$	(37,986	)
Loss from discontinued operations			149				7,474				9,542
Adjustments to reconcile net loss to net cash used in continuing operations:
Provision for bad debts			237				75				300
Depreciation, amortization and intangibles impairment			2,099				6,871				35,326
Equity in (earnings) losses of affiliated companies											204
Loss on issuance of shares by affiliate											2,339
Dividends received from affiliated company											162
Other income derived from investment in affiliates, net											(11,906	)
Net change in value of derivative instruments			(412	)			(1,294	)			1,035
Interest accrued on redeemable preferred stock			2,017
Deferred income taxes											5,222
Change in operating assets and liabilities:
Accounts receivable			(5,665	)			2,317				485
Inventories			(376	)			(286	)			622
Prepaid costs and expenses			718				(611	)			(10	)
Accounts payable and accrued expenses			1,624				(3,770	)			2,588
Other long-term assets and liabilities			320				(295	)			(1,092	)
Net cash provided by (used in) continuing operations			(4,579	)			(4,130	)			6,831
Net cash used in discontinued operations			(1,558	)			(6,363	)			(11,918	)
Net cash used in operating activities			(6,137	)			(10,493	)			(5,087	)
Cash flows from investing activities:
Capital expenditures			(195	)			(384	)			(230	)
Proceeds on dispositions of investments											46,183
Other investing activities			(12	)			(149	)			(663	)
Net cash provided by (used in) continuing operation investing activities			(207	)			(533	)			45,290
Net cash provided by (used in) discontinued operation investing activities			1,333				447				(117	)
Net cash provided by (used in) investing activities			1,126				(86	)			45,173
Cash flows from financing activities:
Borrowings on revolving line of credit			3,000								5,175
Borrowings on note issued by related party			1,500
Cash advances made by stockholder			1,500				4,550
Repayments on note payable and revolving line of credit			(590	)							(5,000	)
Repayments on long-term debt											(38,000	)
Debt issue costs			(445	)			(41	)			(1,345	)
Preferred stock dividends			(257	)
Exercise of stock options											207
Issuance of preferred stock							2,000				3,000
Net cash provided by (used in) continuing operation financing activities			4,708				6,509				(35,963	)
Net increase (decrease) in cash and cash equivalents			(303	)			(4,070	)			4,123
Cash and cash equivalents, beginning of period			450				4,520				397
Cash and cash equivalents, end of period		$	147			$	450			$	4,520

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

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

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Bull Run Corporation, also referred to as Bull Run or collectively with its subsidiaries, the Company, based in Atlanta, Georgia, conducts a sports and affinity marketing, printing and publishing, and association management company through its sole operating business, Host Communications, Inc., or Host. Host’s Collegiate Marketing and Production Services business segment provides sports marketing and production services to a number of collegiate conferences and universities, and, through a contract with CBS Sports, on behalf of the National Collegiate Athletic Association, or NCAA. Host’s Association Management Services business segment provides various associations with services such as member communication, recruitment and retention, conference planning, Internet web site management, marketing and administration.

Proposed Merger of Bull Run into Triple Crown Media, Inc. — In August 2005, Bull Run announced its intention to merge with Triple Crown Media, Inc., or TCM, a newly-formed company. Following the merger, TCM would be comprised of Host’s Collegiate Marketing and Production Services business, Host’s Association Management Services business and the newspaper publishing business and Graylink wireless business currently operated by Gray Television, Inc., or Gray.

Pursuant to the plan of merger, Bull Run would be merged with and into BR Acquisition Corp. (a wholly owned subsidiary of TCM) immediately following Gray’s transfer to TCM of the equity interests of Gray Publishing, LLC and Graylink Wireless, and the distribution of TCM’s outstanding shares of common stock owned by Gray to Gray’s stockholders, referred to as the Spin-off. In the merger, each Bull Run shareholder will receive 0.0289 shares of TCM common stock for each share of Bull Run common stock owned. In the merger, Bull Run preferred stock held by non-affiliated holders will be redeemed for its redemption value as of the date of the transaction. Holders of preferred stock and other loans to Bull Run who are affiliates of Bull Run, including J. Mack Robinson, Gray’s current Chairman and Chief Executive Officer and Chairman of the Board of Bull Run, will receive shares of TCM common stock in exchange for shares of Bull Run series F preferred stock and accrued and unpaid dividends thereon; shares of TCM series A convertible preferred stock in exchange for shares of Bull Run series D and series E preferred stock and accrued and unpaid dividends thereon; and shares of TCM series B convertible preferred stock in exchange for cash previously advanced to Bull Run. The agreement is subject to certain closing conditions, including the approval of Bull Run’s shareholders. TCM has received a long-term financing commitment from bank lenders that will accommodate the payment of a $40,000 cash distribution to Gray contemplated in connection with the Spin-off and the refinancing of all of the surviving corporation’s bank and subordinated indebtedness.

Discontinued Operations — 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. In December 2004, the principal assets of the Affinity Events segment were sold. In January 2004, the Company determined that it would not be engaged in providing consulting services to Gray or any other party in the future. Previously, the Company periodically provided consulting services to Gray in connection with Gray’s acquisitions and dispositions. In September 2000, the Company sold the computer printer manufacturing operation of its Datasouth Computer Corporation, or Datasouth, business segment. Certain of the proceeds to be realized on the sale of Datasouth’s assets are receivable under a subordinated note agreement with the purchaser. As a result, the Affinity Events, Consulting and Datasouth segments have been reflected in the Company’s financial statements as discontinued operations.

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

2. LIQUIDITY

As of August 31, 2005, the Company’s negative working capital was $26,229, including $7,500 of bank debt maturing within the fiscal year ending August 31, 2006. Certain current liabilities, including deferred revenue of $8,285, advances from stockholder of $6,050 and certain accrued preferred stock dividends of $3,725, do not represent cash obligations or do not represent liabilities expected to be paid in cash prior to the November 15, 2006 maturity date of the bank credit facility. The Company has reported substantial losses and consumed substantial cash in its operations. The Company has previously funded its liquidity needs through the sale of investments, the issuance of preferred stock and receipt of 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. During the fiscal year ended August 31, 2005, a company affiliated with the Company’s Chairman provided cash of $1,500 used for working capital purposes in connection with the Company’s issuance of a subordinated note. The Company’s Chairman has committed to fund the necessary cash to ultimately repay this note, and in addition, the Chairman provided cash advances to the Company of $1,500 and $4,550 during the fiscal years ended August 31, 2005 and 2004, respectively. The Chairman has also committed to fund, if necessary, cash for the Company to meet the quarterly principal payment requirements under the bank credit facility, as amended in October 2005, totaling $10,000 before the November 2006 maturity of the facility. Funding of some or all of these payments is likely to be necessary for the Company to continue as a going concern for the next 12 months. While there can be no assurance, based upon (a) the Company’s forecasted operating cash flows and capital expenditures for its fiscal year ending August 31, 2006, and (b) the commitment from the Chairman to invest cash of up to $10,000 to meet all principal payment requirements prior to the November 15, 2006 maturity date of the Company’s bank credit agreement, management believes the Company has sufficient liquidity through at least the November 15, 2006 maturity date of its bank credit agreement.

As further discussed in Note 10, the Company had $58,932 of debt outstanding as of August 31, 2005 under its bank credit agreement, and increased the amount of outstanding debt to $61,932 in October 2005. As further discussed in Note 10, the Company’s Chairman has personally guaranteed repayment of up to $58,932 of the outstanding bank debt. Amounts outstanding under the credit agreement are due on November 15, 2006. The Company’s ability to continue this or similar financing beyond the November 15, 2006 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 the Company’s future operating results, the continued support of its Chairman or the completion of the proposed merger with TCM.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Bull Run and its wholly owned subsidiaries, after elimination of intercompany accounts and transactions.

Use of Estimates — The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition and Rights Fee Expenses — Revenue from services is recognized as the services are rendered, and consists primarily of advertising revenues in connection with broadcast and print media sold by the Company, the rights to which are generally acquired by the Company under the multi-media rights agreements with collegiate institutions or associations. Advertising revenues are recognized when the event occurs or the publication is publicly distributed. In addition, to a lesser extent, the Company derives revenue from corporate sponsorship and licensing arrangements, association management fees, radio station rights fees, sales of commercial printing and other miscellaneous revenues generated from product sales and production services. Corporate sponsorships related to specific events are recognized when the event occurs or as the events occur. Corporate sponsor license fee revenue that is not related to specific events is recognized evenly over the term of the licensing arrangement. Association management fees are recognized over the term of the contract year as the related services are performed. Radio station rights fees are recognized ratably as games are broadcast. Sales of commercial printing and other product sales are recognized when title passes to the customer, or in the case of vending revenues, when the game is played.

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 evenly over each annual term specified in the contract. The Company’s contractual arrangements with associations or institutions may also involve net profit sharing arrangements 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. Estimates used in the determination of profit split expense are updated monthly and adjusted to actual when the profit split settlement is determined at the end of each contract year.

Barter Transactions — The Company provides advertising and licensing rights to certain customers or sublicensees in exchange for services. The estimated fair value of the services to be received is recognized as accounts receivable and deferred revenue. As these services are used, an amount is charged to operating expense. Advertising revenue is recognized as the advertising is used by the customer and license fee revenue is recognized ratably over the term of the sublicense agreement. For the fiscal years ended August 31, 2005, 2004 and 2003, net revenues and operating expenses included barter transactions of approximately $700, $2,900 and $3,000, respectively, of which, approximately $0, 2,500 and $2,500, respectively, was associated with discontinued operations.

Cash and Cash Equivalents — Cash equivalents are composed of all highly liquid investments with an original maturity of three months or less.

Accounts Receivable and Credit Risk — Accounts receivable include customer billings on invoices issued by the Company, and to a lesser extent, unbilled receivables for contracted services billed after the service is rendered or the revenue is earned. In certain situations, the Company may invoice certain customers 30 to 60 days in advance, in which case, revenue is deferred until earned. Accounts receivable pertaining to advance billings are also included as deferred revenue until such time as the revenue is earned.

The Company performs ongoing credit evaluations of its customers’ financial condition and requires no collateral from its customers. The allowance for doubtful accounts represents the Company’s best estimate of the accounts receivable that will be ultimately collected, based on, among other things, historical collection experience, a review of the current aging status of customer receivables, and a review of specific information for those customers that are deemed to be higher risk. The Company evaluates the adequacy of the allowance for doubtful accounts on at least a quarterly basis. Unfavorable changes in economic conditions might impact the amounts ultimately collected from advertisers and corporate sponsors and therefore may result in changes to the estimated allowance. Once an account is considered uncollectible or otherwise settled with a customer, the uncollectible amount is charged against the allowance for doubtful accounts.

Inventories — Inventories, stated at cost, consist primarily of materials and supplies associated with the Company’s printing operations.

Property and Equipment — Property and equipment is stated at cost less depreciation computed on the straight-line method over the estimated useful life of the asset, generally from three to ten years. Leasehold improvements and equipment held under capital leases are amortized over the lesser of the lease term or the estimated useful life of the asset. Depreciation expense for continuing operations was $652, $891 and $1,048 for the fiscal years ended August 31, 2005, 2004 and 2003, respectively. Depreciation expense for discontinued operations was $3, $198 and $145 for the fiscal years ended August 31, 2005, 2004 and 2003, respectively.

Investment in Affiliated Companies — The Company accounts for its investment in iHigh, Inc., or iHigh, a company that provides marketing services and programs in connection with high school sports and activities, by the equity method. As of August 31, 2005 and 2004, the carrying value of the Company’s investment in iHigh was zero, and there exists no requirement to provide iHigh any funding for operations. The Company accounted for its investment in Gray, an owner and operator of television stations and newspapers, by the equity method until the sale of the investment in August 2003. The Company accounted for its investment in Rawlings Sporting Goods Company, Inc., or Rawlings, a supplier of team sports equipment, as an “available-for-sale” marketable security in the fiscal year ended August 31, 2003 until such investment was sold in December 2002.

The Company recognizes a gain or loss on the issuance of shares by an investee company resulting in dilution of the Company’s interest in the investee. The gain or loss is determined based on the difference between (a) the Company’s post-issuance allocable share of the investee’s underlying equity, as compared to the Company’s allocable share of the investee’s underlying equity immediately prior to the issuance, and (b) a pro rata reduction of the unamortized difference between the Company’s carrying value of the investment and the Company’s allocable share of the investee’s underlying equity immediately prior to the issuance. Deferred taxes are provided on recognized gains or losses, subject to a determination of deferred tax valuation allowances.

Goodwill and Other Long-Lived Assets — The Company’s accounting for goodwill is based on Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS 142. Under the provisions of SFAS 142, the Company is not required to amortize goodwill, but is required to assess on at least an annual basis, the carrying value of goodwill associated with each of four distinct business units that comprise two business segments of the Company’s continuing operations to determine if an impairment in value has occurred. Until August 31, 2003, such an assessment was also required in connection with a discontinued business segment. Impairment charges are recorded if and when management concludes that the carrying amount of goodwill for any acquired business unit does not exceed its net realizable value based on the Company’s estimate of expected future cash flows to be generated by each of the business units. In prior years, based on a valuation model incorporating expected future cash flows in consideration of historical cash flows and operating results, goodwill impairment charges have been necessary to reduce the carrying value of goodwill to net realizable value, as further discussed in Note 8.

The impairment analysis is based on the Company’s estimates of the net present value of future cash flows derived from each of four business units, and judgment is used in assessing whether the impairment analysis should be performed more frequently than annually. The determination of fair value requires significant management judgment including estimating operating cash flow to be derived in each of the four business units for the following three years, annual operating cash flow growth rates for each business unit beyond the next three years, changes in working capital, capital expenditures and the selection of an appropriate discount rate. For each of two of the four business units, a future reduction in the estimated net present value of future cash flows

derived from an affected business unit would likely result in an impairment charge that could approximate the amount of the reduction in the estimated net present value calculated for that business unit. Factors potentially leading to a reduction in the estimated present value of future cash flows could include (i) the loss of a significant customer or contract, (ii) significantly less favorable terms of new contracts and contract renewals, and (iii) prolonged economic downturns affecting corporate advertising spending.

If the Company concludes in the future that the adjusted carrying value of goodwill for any of the four business units comprising the Company’s continuing operations exceeds its respective net realizable value, the Company would expense such excess and decrease goodwill as reported in the consolidated balance sheet.

Other purchased intangibles, including customer relationships, are amortized 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. The remaining value assigned to acquisition intangibles other than goodwill will continue to be amortized over a 16-year average life, at a rate of approximately $0.7 million per year. In prior years, the Company has determined that impairment charges have been necessary to reduce the carrying amount of certain customer relationship intangible assets, as further discussed in Note 8. If the Company concludes in the future that significant changes occur in its customer relationships, additional impairment charges may be necessary.

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.

Valuation of Certain Non-Trade Receivables — The Company has a non-trade subordinated note receivable from the purchaser of Datasouth and a note receivable from iHigh. 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 the fiscal year ended August 31, 2003, a $1.7 million impairment charge reduced the carrying amount of 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 $0.8 million as of August 31, 2005.

The estimated reserve on the note issued by the purchaser of Datasouth is based on management’s estimate of amounts ultimately collectible on the note upon consideration of modifications made to the agreement, payment history and an understanding of the financial condition of the note issuer, among other factors. If there would be evidence of unfavorable conditions affecting the ultimate collection of the carrying value, such as an unfavorable trend in payment history or unfavorable changes in the note issuer’s financial condition, additional impairment charges may become necessary in future periods.

As further discussed in Note 6, the non-trade receivable from iHigh of approximately $3.4 million was fully reserved as of August 31, 2003. Any recovery of this amount in the future will be recognized as income in the period recovered.

Stock-Based Compensation — The Company follows the provisions of Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation,” or SFAS 123. SFAS 123 allows companies to either expense the estimated fair value of stock options or continue to follow the intrinsic value method set forth in Accounting Principles Board Opinion No. 25,

“Accounting for Stock Issued to Employees,” or APB 25, but disclose the pro forma effects on net income (loss) had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans. In December 2004, the Financial Accounting Standards Board issued a revision to SFAS 123 entitled “Share-Based Payment,” or SFAS 123(R). SFAS 123(R) will require the Company to measure the cost of employee services received in exchange for certain awards of equity instruments, including stock options, based on the grant-date fair value of the award over the requisite service period (usually the vesting period). SFAS 123(R) is effective for the interim period beginning September 1, 2005. The Company intends to adopt SFAS 123(R) prospectively as of its effective date, and therefore the Company does not anticipate that the adoption of SFAS 123(R) will have any effect on the Company’s financial statements in connection with any currently outstanding stock options, since all such stock options are currently vested in full. However, stock options or other awards of equity instruments issued on or after September 1, 2005 in exchange for employee services will likely result in additional operating expense over the vesting period.

For purposes of the following pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period:

		Year Ended August 31,
		2005				2004				2003
Net loss available to common stockholders, as reported		$	(5,290	)		$	(16,848	)		$	(39,135	)
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards			(2	)			(367	)			(568	)
Net loss available to common stockholders, pro forma, for computation of basic and diluted loss per share		$	(5,292	)		$	(17,215	)		$	(39,703	)
Loss per common share, basic and diluted:
As reported		$	(0.81	)		$	(3.61	)		$	(9.82	)
Pro forma		$	(0.81	)		$	(3.69	)		$	(9.96	)

Except for certain stock options granted to former holders of Host stock options in connection with the Company’s acquisition of Host , the Company has granted stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. In accordance with APB 25, no compensation expense is recognized for such grants.

Derivative Instruments and Hedging Activities — The Company recognizes all derivatives, which include the value of interest rate swap agreements and, previously, the value of the Company’s warrants to purchase Gray common stocks (which were sold by the Company to Gray in April 2003), on the balance sheet at fair value in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” or SFAS 133. 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. Net appreciation (depreciation) in the value of the Company’s derivatives was $412, $1,294 and $(1,035) for the fiscal years ended August 31, 2005, 2004 and 2003, respectively.

Loss Per Share — Basic earnings (loss) per share excludes any dilutive effects of stock options, convertible preferred stock and accrued preferred stock dividends potentially payable in common stock. In periods where they are anti-dilutive, such amounts are excluded from the calculation of dilutive earnings (loss) per share.

4. DISCONTINUED OPERATIONS

As discussed in Note 1, the Company’s Affinity Events, Consulting and Datasouth business segments have been reflected in the Company’s financial statements as discontinued operations. As a result of the suspension of its Affinity Events business, in the fiscal year ended August 31, 2004, the Company incurred $2,729 in nonrecurring costs charged to discontinued operations, including employee severance costs of $256, the present value of future lease obligations, net of estimated sublease income, to be incurred through 2010 of $1,811, and the present value of consulting agreement commitments through 2010 of $1,315 for arrangements under which no future benefits are expected to be derived, less $875 for estimated proceeds to be derived from the sale of Affinity Events assets. In the fiscal year ended August 31, 2005, the Company revised its estimate of the loss on disposal of assets, incurring an additional charge of $160. As of August 31, 2005, $2,014 is accrued as a liability for restructuring obligations associated with discontinued operations.

A reconciliation of the accrued liability associated with the suspension and sale of the Affinity Events segment is as follows:

Accrued liability as of August 31, 2004		$	2,625
Proceeds on sale of Events assets			870
Additional liability accrued during the fiscal year ended August 31, 2005			160
Costs incurred during the period			(1,641	)
Accrued liability as of August 31, 2005		$	2,014

Income subsequent to August 31, 2005 to be derived from subleasing vacated office space under executed sublease agreements is $1,236 over the remaining lives of the leases. There is no vacated office space that has not yet been subleased. The estimated proceeds to be derived from the sale of Affinity Events assets do not include a $675 note receivable due the Company in the future which is subordinated to the purchaser’s bank financing. Actual amounts received in connection with the note receivable and any other unanticipated income or expenses, 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 estimated liability accrued as of August 31, 2005, or as management’s estimates are revised, the variance will be reported in discontinued operations in future periods. Proceeds of $870 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.

The Company provided consulting services to Gray from time to time in connection with Gray’s acquisitions (including acquisition financing) and dispositions. In the fiscal year ended August 31, 2003, the Company recognized a $5,000 fee for services provided in connection with an acquisition by Gray. As a result of the Company’s equity investment in Gray, a portion of all consulting fees previously charged to Gray was deferred (such portion equal to the Company’s ownership percentage of Gray’s outstanding common stock). Upon the Company’s sale of its investment in Gray’s common stock in August 2003, the Company recognized as consulting fee income all previously deferred income.

As discussed in Note 1, certain of the proceeds to be realized on the sale of Datasouth’s assets are receivable under a subordinated note agreement with the purchaser. The note agreement, as subsequently amended, provides for gradually reducing discounts on the amount due to the Company which are earned by the purchaser as payments are made through the note’s maturity in December 2006. As of August 31, 2005, the amount due to the Company was $1,834; however the Company has recorded a $1,039 reserve on the note receivable as of August 31, 2005 as an estimate of the amounts that might ultimately become uncollectible and/or discounted. To the extent actual proceeds on the note differ from management’s current estimate of the proceeds to be ultimately received, such differences will be reported as discontinued operations in future periods.

There are no known material contingent liabilities related to discontinued operations, such as product or environmental liabilities or litigation, which remain with the Company after the termination and/or disposal of its discontinued 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 following is a summary of assets and liabilities of discontinued operations:

		August 31,
		2005				2004
Current liabilities:
Accounts payable and accrued expenses		$	72			$	1,429
Restructuring obligations			585				513
Deferred revenue							831
Current assets:
Accounts receivable, net			(38	)			(2,163	)
Inventories							(6	)
Prepaid costs and expenses							(130	)
Net current liabilities of discontinued segment		$	619			$	474
Noncurrent liabilities:
Restructuring obligations		$	1,429			$	2,112
Noncurrent assets:
Note receivable, net			(795	)			(1,245	)
Property and equipment, net			(2	)			(12	)
Other assets			(2	)			(15	)
Net noncurrent liabilities of discontinued segment		$	630			$	840

     The following summarizes revenues and operating results from discontinued operations:

		Year Ended August 31,
		2005				2004				2003
Revenues:
Affinity Events		$	655			$	10,843			$	14,052
Consulting											5,664
		$	655			$	10,843			$	19,716
Costs and expenses:
Affinity Events:
Direct operating costs of services rendered		$	426			$	9,020			$	12,467
Selling, general and administrative			378				9,297				5,481
Amortization and impairment of acquisition intangibles											9,615
		$	804			$	18,317			$	27,563
Income (loss) from discontinued operations:
Affinity Events		$	(149	)		$	(7,474	)		$	(3,896	)
Consulting											5,664
Datasouth											(1,695	)
Amortization and impairment of acquisition intangibles											(9,615	)
		$	(149	)		$	(7,474	)		$	(9,542	)

5. SUPPLEMENTAL CASH FLOW DISCLOSURES

		Year Ended August 31,
		2005				2004				2003
Interest paid		$	4,504			$	4,365			$	8,271
Income taxes paid, net			0				21				61
Noncash investing and financing activities:
Conversion of Series E preferred stock to shares of common stock			2,214				0				0
Issuance of common stock in payment of preferred stock dividends			0				503				571
Exchange of subordinated debt for shares of Series E preferred stock			0				8,016				1,783
Issuance of common stock in connection with debt issuance costs			499				925				1,349
Issuance of common stock to a retirement plan and as a component of directors’ fees			67				150				297