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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2003

Commission file number 0-25596

400 Fifth Avenue South, Suite 205
Naples, Florida 34102
(Address of principal executive offices)

Registrant’s telephone number, including area code: (786) 206-0047

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) for the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and, (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [  ]

The aggregate market value of the shares of the registrant’s common stock held by non-affiliates was approximately $109,503,918 as of June 30, 2003, based on the last sales price reported for that date on the NASDAQ Stock Market.

Number of shares of common stock outstanding as of March 1, 2004 was 44,114,385.

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SUMMIT AMERICA TELEVISION, INC.

FORM 10-K
FOR THE YEAR ENDED
DECEMBER 31, 2003

INDEX

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SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS

     All statements, other than statements of historical fact, contained within this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). In some cases you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “estimate,” “potential,” “expect,” “plan” or the negative of these terms, as well as similar expressions intended to identify forward-looking statements.

     Summit America Television, Inc. (NASDAQ: SATH), which was formerly known as Shop At Home, Inc. (also referred to in this report as the “Company,” “Summit” “we,” or “us”), based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the financial condition of its business. These forward-looking statements present our estimates and assumptions only as of the date of this report, without taking into consideration the proposed merger we have announced with The E.W. Scripps Company, and are subject to a number of risks, uncertainties and assumptions about Summit, including, among other things:

	•		general economic and business conditions, both nationally and in our markets;
	•		our expectations and estimates concerning future financial performance and financing plans, including the revenue expectations and risks associated with our joint venture with Scripps;
	•		availability of and costs associated with liquidity;
	•		the successful implementation of our business strategy;
	•		restrictions imposed by the terms of our indebtedness; and
	•		fluctuations in our operating results;
	•		continued employment of key personnel and our ability to hire qualified personnel;
	•		existing and future regulations affecting our business operations and profitability;
	•		the consistent and reliable operation of our broadcasting equipment and the satellite transponders we lease;
	•		technological changes in the television industry; and
	•		anticipated business trends in the television industry generally.

     Except for our ongoing obligation to disclose material information as required by federal securities laws, we do not intend to publicly update you or revise any forward-looking statements resulting from new information, future events or otherwise after the date of this report. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

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PART I

ITEM 1. BUSINESS

Company Overview

     The Company owns and operates five television stations and holds a 30% interest in Shop At Home Network, LLC, which operates a nationally televised home shopping channel (the “Network”). The Company’s television stations are located in San Francisco (KCNS, Channel 38), Boston (WMFP, Channel 62), Cleveland (WOAC, Channel 67), Raleigh-Durham (WRAY, Channel 30) and Bridgeport, Connecticut (WSAH, Channel 43). Four of these television stations are positioned in the top 20 television markets in the United States, including the Bridgeport, Connecticut, station, which serves a portion of the New York City market.

     The following table sets forth certain information regarding each of the broadcast stations owned by the Company:

(1)

While WSAH, Bridgeport, Connecticut, is inside the New York DMA, the station only covers a portion of the market.

          The Network is a retail seller of a variety of consumer products through interactive electronic media including broadcast, cable and satellite television and the internet. The Network produces programming at its facilities in Nashville, Tennessee. The programming is transmitted by satellite to cable television systems, direct broadcast satellite systems and television broadcasting stations across the country.

     On October 31, 2002, the Company sold a 70% interest in the Network (including the assignment of all rights the Company had in the name “Shop At Home”) to a subsidiary of The E.W. Scripps Company (“Scripps”). From the second to the fifth anniversary of the sale date, the Company has the right to require Scripps to purchase its 30% ownership interest in the Network for cash equal to the fair market value. The Company also entered into an affiliation agreement with the Network under which the Company’s television stations carry the Network’s programming through October 2005. Under the terms of this affiliation agreement, the Company’s television stations are required to broadcast all programming provided by the Network on an exclusive basis (subject to Federal Communications Commission (“FCC”) mandated programming requirements), and the Company is presently dependent upon the Network as the Company’s principal source of revenue. The Network has agreed to provide 24-hour over-the-air programming seven days per week. The Company retains the right to terminate this affiliation agreement under certain conditions.

     On October 31, 2002, the Company changed its legal name from “Shop At Home, Inc.” to “Summit America Television, Inc.,” reflecting the change in the Company’s business focus.

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     On December 19, 2003, the Company reached a definitive agreement for Scripps to acquire Summit, including Summit’s 30% minority interest in the Network and the Company’s affiliated broadcast television stations.

     The transaction will be structured as a merger and will result in Scripps attaining 100% ownership of Summit and the Network. As a result, Scripps will control and own Summit’s five television stations that broadcast Shop At Home programming. The five television stations reach about 5.4 million cable television households.

     Each share of the Company’s common stock, $0.0025 par value per share, will be exchanged for the right to receive cash in the amount of $4.05, or about $184 million, for the approximately 44 million fully diluted outstanding shares of Summit common stock. Each share of the Company’s Series A Preferred Stock, $10.00 par value per share, will be exchanged for the right to receive cash in the amount of $10.00, plus any accrued and unpaid dividends. Each share of the Company’s Series D Preferred Stock, $10.00 par value per share, will be converted into one share of Preferred Stock of the surviving corporation.

     As part of the merger, Scripps has agreed to forego repayment of a $47.5 million secured loan that Scripps extended to Summit as part of the 2002 Network joint venture. Scripps also has agreed to forego redemption of $3 million in Summit preferred stock that Scripps holds, bringing the total consideration of the merger to about $235 million.

     The merger requires approval by Summit shareholders and appropriate federal regulatory agencies. Assuming no unusual delays in securing the required approvals, the merger should be completed in April 2004.

     The FCC has initiated proceedings to make decisions on a possible auction of 700 MHz spectrum rights. This auction could result in band-clearing proposals from which the Company’s stations in Boston and Cleveland, and a former Company station in Houston, might receive economic proposals to relocate the incumbent broadcast stations owned by the Company. The Company retained a 50% interest in any economic benefit that might accrue to the Houston station.

     The Company was incorporated in June 1986 under the laws of Tennessee, and its principal place of business and executive offices are located at 400 Fifth Avenue South, Suite 205, Naples, Florida 34102. The Company’s telephone number is (786) 206-0047, and its internet address is www.summitamericatv.com.

Employees

     As of December 31, 2003, the Company employed approximately 12 people, and approximately 11 were full-time employees. Management believes it maintains a good relationship with its employees. Presently, no collective bargaining agreements exist between the Company and its employees.

FCC Regulation

General

     The Company’s television broadcast operations are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). Among other things, the Communications Act empowers the FCC to:

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	•		determine stations’ operating frequencies, location and power;
	•		issue, renew, revoke and modify station licenses;
	•		regulate equipment used by stations;
	•		impose penalties for violation of the Communications Act or of FCC regulations;
	•		impose fees for processing applications and other administrative functions; and
	•		adopt regulations to carry out the Communications Act’s provisions.

     The Communications Act also prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without prior FCC approval. Under the Communications Act, the FCC regulates certain aspects of the operation of cable television systems and other electronic media that compete with television stations. Further, the Act prohibits direct or indirect record ownership of a broadcast licensee—or the power to vote more than one-fourth of a licensee’s stock—from being held by aliens, foreign governments or their representatives, or corporations formed under the laws of foreign countries.

Station Licenses

     Under the Communications Act, as amended by the Telecommunications Act of 1996 (the “1996 Act”), the FCC grants television station licenses for terms of up to eight years. The 1996 Act requires renewal of a television license if the FCC finds that:

	•		the station has served the public interest, convenience and necessity;
	•		there have been no serious violations by the licensee of either the Communications Act or the FCC’s rules and regulations; and
	•		there have been no other violations by the licensee of either the Communications Act or the FCC’s rules and regulations which, taken together, constitute a pattern of abuse.

     In making its determination, the FCC cannot consider whether the public interest would be better served by a party other than the renewal applicant. Under the 1996 Act, competing applications for the same frequency may be accepted only after the FCC has denied an incumbent’s application for renewal of a license.

     The current license expiration dates for each of the Company’s television broadcast stations are as follows:

Programming and Operations

     FCC rules and policies, and rules and policies of other federal agencies, regulate matters such as network/affiliate relations, cable and DBS systems’ carriage of television programming, political advertising practices, obscene and indecent programming, accessibility of television programming to audience members who are visually or hearing disabled, programming and advertising directed toward children, employment practices, and other areas affecting the business or operations of broadcast stations.

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     The Children’s Television Act of 1990 limits the permissible amount of commercial matter in children’s television programs and requires each television station to present educational and informational children’s programming. The FCC’s children’s programming requirements include a requirement that television broadcasters provide a minimum of three hours of children’s educational programming per week. Broadcasters also are required to place “issues/programs lists” in their public inspection files to provide their communities with information on their “public interest” programming.

     In August 2003, FCC Chairman Michael Powell announced that the agency would open an inquiry proceeding to seek comment on a wide range of measures aimed at promoting “localism” in broadcasting. While the Commission has not released a Notice of Inquiry, the “Localism in Broadcasting” initiative has resulted in the creation of a Localism Task Force to conduct studies to measure localism, organize a series of public hearings on localism around the country, and offer recommendations to both the agency and Congress on how to promote localism in television and radio. It is expected that the Commission will evaluate whether certain elements of its regulation of broadcasting—including the license renewal process, the network affiliate rules, political broadcasting mandates, and public interest obligations—should be strengthened or otherwise supplemented to advance localism on the airwaves.

     In October 2002 the FCC adopted new EEO rules that went into effect March 10, 2003. The new rules impose job information dissemination, recruitment and reporting requirements on stations having five or more full time employees. Because none of the Company’s stations currently have the requisite number of employees, they are generally exempt from these new requirements. In its order announcing the new rules, the FCC reaffirmed its rule prohibiting broadcasters from discriminating against individuals on the basis of race, religion, color, national origin or gender.

Cable and Satellite Transmission of Local Television Signals

     The FCC has adopted various regulations to implement provisions of the Cable Television Consumer Protection and Competition Act of 1992, as amended by the 1996 Act, governing the relationship between broadcasters and cable operators. Among other matters, these regulations require cable systems to devote a specified portion of their channel capacity to the carriage of the signals of local television stations and permit TV stations to elect between having a right to mandatory carriage on local cable systems, referred to as “must carry rights,” or a right to restrict or prevent cable systems from carrying the station’s signal without the station’s permission, referred to as “retransmission consent”. The Communications Act and FCC regulations also contain measures to facilitate competition among cable systems, telephone companies and other systems in the distribution of TV signals, video programming and other services.

     In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”), which established a copyright licensing system for limited distribution of television programming to DBS viewers and directed the FCC to initiate rulemaking proceedings to implement the new system. SHVIA also extended the current system of satellite distribution of distant network signals to unserved households (i.e., those that do not receive a Grade B signal from a local network affiliate).

     As part of those rulemakings, the FCC established a market-specific requirement for mandatory carriage of local television stations, similar to that applicable to cable systems, for those markets in which a satellite carrier chooses to provide any local signal, beginning January 1, 2002. Stations in affected markets were required to select either must carry or retransmission consent rights by July 1, 2001. Further, until 2006, those broadcasters selecting retransmission consent (as opposed to must carry rights) are required to meet certain “good faith” requirements in negotiating for carriage rights. The July 1, 2001 election is effective from January 1, 2002 to December 31, 2005.

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     In December 2001, a panel of the U.S. Court of Appeals for the Fourth Circuit upheld the federal law that requires DBS carriers to carry the signals of all local television stations in markets where they elect to carry any local signals. The court also upheld an FCC rule that permits DBS operators to offer all local television stations on a single tier or on an a la carte basis.

Digital Television Service

     In April 1997, the FCC adopted rules for implementing digital television (“DTV”) service in the United States, which will improve the technical quality of television signals received by viewers and give television broadcasters the ability to provide new services, including high-definition television.

     On April 3, 1997, a second channel on which to initially provide separate DTV programming or simulcast its analog programming was assigned to all broadcasters holding a license or construction permit for a full-power television station. These second channels are assigned for an eight-year transition period scheduled to end in 2006. Stations with granted FCC construction permits were required to construct their DTV facilities and be on the air with a digital signal according to a schedule set by the FCC based on the type of station and the size of the market in which it is located. Under current FCC rules KCNS, WOAC and WRAY-TV were required to construct DTV facilities and commence operations by May 2002. The FCC has not yet granted either WSAH or WMFP a construction permit and those stations therefore have not constructed their DTV facilities or commenced DTV operations.

     At the end of the DTV transition period, analog television transmissions will cease and DTV channels will be reassigned to a smaller segment of the broadcasting spectrum comprising channels 2-51. Although the FCC has targeted December 31, 2006 as the date by which all television broadcasters must return their analog licenses, the Balanced Budget Act of 1997 allows broadcasters to keep both their analog and digital licenses until at least 85% of the television households in their respective markets can receive a digital signal. During the transition, broadcasters are required to “simulcast” the traditional free, analog, over-the-air broadcast service on their digital channels as follows: currently, broadcasters must simulcast 50% of the traditional broadcast service on their digital spectrum; as of April 2004, they must simulcast 75% of the traditional broadcast service; as of April 2005, they must simulcast 100% of the traditional broadcast service.

     When the FCC adopted service rules for the digital television transition, it stated that it would periodically review the transition’s progress. In its first review, completed in 2001, the Commission decided to permit broadcasters to construct initial minimal DTV facilities (i.e., facilities that only cover their cities of license) while retaining interference protection for their allotted and maximized facilities. KCNS, WOAC and WRAY-TV are operating at reduced power pursuant to such authority.

     In January 2003, the FCC opened its second periodic review of the DTV transition. In this ongoing review, the Commission is revisiting several of the issues addressed in 2001 and considering a number of new matters. These include:

	•		Setting a date by which broadcasters operating with minimal (e.g. reduced power) DTV facilities must either provide service to their full authorized coverage areas or else lose interference protection to the unserved areas;
	•		Deciding when commercial broadcasters with both analog and digital channel assignments within the DTV core spectrum (channels 2-51) must choose their permanent post-transition DTV channel;

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	•		Determining whether the FCC’s simulcasting requirement should be retained, revised, or removed; and
	•		Establishing the criteria and methodology for determining when a broadcaster must return its analog spectrum (i.e. selecting measurement standards to determine when 85% of TV households in a station’s service area can receive the broadcaster’s digital signal).

This review remains pending and the Company cannot predict its outcome. The FCC will continue to review the progress of DTV periodically and make adjustments to the 2006 target date, if necessary.

     In addition, in April 2002, FCC Chairman Michael Powell challenged the broadcast, cable, satellite and consumer electronics industries to take certain voluntary actions designed to speed the DTV transition. Although members of the broadcast, cable and satellite industries quickly made commitments to comply with Chairman Powell’s proposals, the consumer electronics industry was reluctant to embrace the plan. Accordingly, the FCC found it necessary to formally mandate a phased-in DTV tuner requirement. Under the new requirements, all new television sets 13 inches and larger and all TV interface devices (VCRs, etc.) must include the capability of tuning and decoding over-the-air digital signals by 2007.

     In January 2001, the FCC issued a preliminary decision regarding the carriage (“must carry”) rights of digital television broadcasters on local cable and certain Direct Broadcast Satellite (“DBS”) systems. Although the FCC deferred making a decision as to whether broadcasters are entitled to simultaneous carriage of both their digital and analog signals during the transition to DTV, the FCC did determine the following:

	•		Digital-only television stations may immediately assert carriage rights on local cable systems;
	•		Television stations that return their analog spectrum and convert to digital operations are entitled to must carry rights; and
	•		A digital-only station asserting must carry rights is entitled only to carriage of a single programming stream and other “program-related” content, regardless of the number of programs it broadcasts simultaneously on its digital spectrum.

Several parties filed petitions for reconsideration of various parts of the FCC’s DTV must carry decision. Those petitions remain pending before the agency and the Company cannot predict what changes, if any, the FCC will make to its DTV must carry rules on reconsideration.

     In addition to digital must carry rights, another area of major concern for the DTV transition involves the technical standards needed to ensure that digital television sets can connect to cable systems. In December 2002, the cable and consumer electronics industries filed a Memorandum of Understanding (“MOU”) with the FCC detailing an agreement on a cable compatibility standard for an integrated, one-way digital cable television receiver, as well as other unidirectional digital cable products. On September 10, 2003 the FCC adopted “plug-and-play” rules for cable adaptability that are substantially similar to those proposed in the MOU. Under these rules, consumers will be able to plug their cable directly into their digital televisions, without the need for a set-top box. These rules cover one-way programming only, and the cable and electronics industries continue to work towards an agreement on two-way “plug-and-play” standards that would eliminate the need for set-top boxes for advanced services such as video on demand, impulse pay-per-view, and cable operator-enhanced electronic programming guides. The Company cannot predict the outcome of those negotiations.

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     More recently, the FCC issued a decision regarding how over-the-air digital broadcasts may be protected from unauthorized copying and distribution. Specifically, on November 4, 2003, the Commission adopted anti-piracy protection for digital television in the form of a “broadcast flag” mechanism. A broadcast flag is a digital code that can be embedded into a digital broadcasting stream. This will allow a broadcaster to prevent mass distribution of its digital signal over the Internet, without affecting consumers’ ability to make digital copies. The broadcast flags may be used at the discretion of the broadcaster. The Commission also adopted a Further Notice of Proposed Rulemaking seeking comment on a permanent objective process for the approval of digital recording and output content protection technologies that will foster innovation and marketplace competition. This proceeding remains pending, and the Company cannot predict its outcome.

     In December 1999, the FCC commenced a proceeding seeking comment on the public interest obligations of television broadcast licensees in the DTV era. Specifically, the FCC requested information in four general areas:

	•		The new flexibility and capabilities of digital television, such as multiple channel transmission;
	•		Service to local communities, including information on public interest activities and disaster relief;
	•		Enhancing access to the media by persons with disabilities and using DTV to encourage diversity in the digital era; and
	•		Enhancing the quality of political discourse.

In commencing the proceeding, the FCC did not propose specific new rules or policies, but stated that it was seeking to create a forum for public debate on how broadcasters can best serve the public interest during and after the transition to DTV. In early 2003, the Commission called for further comments to update the record on the public interest issues, particularly with regard to multicasting obligations. This proceeding remains pending, and the Company cannot predict its outcome.

     In addition, the FCC has commenced, but not completed, a proceeding specifically addressing the children’s programming obligations of DTV broadcast licensees and how the current children’s programming rules should apply to DTV. In this proceeding, the FCC is considering a number of measures that might increase licensees’ current obligation to air at least three hours of educational programming per week.

Ownership Rules

     The FCC’s broadcast ownership rules limit the ownership, operation or control of, as well the “attributable” interests or voting power in: (1) television stations serving the same area; (2) television stations and daily newspapers serving the same area; and (3) television stations and radio stations serving the same area. The rules also limit the aggregate national audience reach of television stations that may be under common ownership, operation and control, or in which a single person or entity may hold office or have more than a specified interest or percentage of voting power. Pursuant to the 1996 Act, and recent appropriations legislations, the FCC must review all of its broadcast ownership rules every four years to determine if they remain necessary in the public interest.

     On June 2, 2003, the FCC modified several of its rules governing the ownership of television stations and other media outlets in local and national markets. The modified rules are currently subject to further FCC and judicial review as well as possible congressional action. Specifically, multiple petitions

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for review of the Commission’s June 2 decision have been consolidated in an appellate proceeding before the U.S. Court of Appeals for the Third Circuit. In September 2003, the Third Circuit issued a stay order preventing the FCC from putting the new media ownership rules into effect pending the outcome of the appeal proceeding. As a result, the former media ownership rules will remain in effect at least until the Court issues a decision. Further, there are several legislative efforts currently in process that ultimately may alter or roll back the new media ownership rules. It is presently difficult to predict how the ownership rule modifications will impact the broadcasting industry generally or the Company specifically.

     The following describes the FCC’s broadcast ownership rules directly affecting the Company prior to the FCC’s June 2, 2003 decision, and the changes that will occur if the new rules become effective:

Local TV Ownership Rule

Attribution Rules

     Pursuant to FCC rules adopted in August 1999, as modified slightly on January 2001, the following positions and interests generally are considered “attributable” for purposes of the agency’s broadcast ownership restrictions:

	•		All officers and directors of a licensee and its direct or indirect parent(s);
	•		Voting stock interests of at least 5%;
	•		Stock interests of at least 20%, if the holder is a passive institutional investor (investment companies, banks, insurance companies);
	•		Any equity interest in a limited partnership or limited liability company, unless properly “insulated” from management activities; and
	•		Equity and/or debt interests which in the aggregate exceed 33% of a licensee’s total assets, if the interest holder supplies more than 15% of the station’s total weekly programming, or is a same-market broadcast company, cable operator or newspaper.

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     The foregoing does not purport to be a complete summary of all the provisions of the Communications Act, other applicable statutes or the regulations and policies of the FCC thereunder. Proposals for additional or revised regulations and requirements are pending before and are considered by Congress and federal regulatory agencies from time to time. The Company cannot predict the effect of existing and proposed federal legislation, regulations and policies on its business. Also, several of the foregoing matters are now, or may become, the subject of court litigation, and the Company cannot predict the outcome of any such litigation or the impact on its business.

Available Information

     The Company’s internet website, www.summitamericatv.com, provides a broad range of information to investors and the interested public regarding the five owned and operated broadcast television stations, the Company’s asset profile, and its directors and executive leadership. It also provides full access to all of the Company’s news releases, its periodic reports and all amendments filed with the Securities and Exchange Commission, including current reports on Form 8-K, quarterly reports on Form 10-Q, and annual reports on Form 10-K. As soon as reasonably practicable after the Company files or furnishes these reports with the SEC, electronic copies of these reports are available free of charge on the Company’s website under “Public Filings.” All materials filed by the Company with the SEC may be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, and information on the operation of the Public Reference Room may be obtained by the SEC at 1-800-SEC-0330. The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers (including Summit) that file such information electronically with the SEC.

ITEM 2. PROPERTIES

     The Company leases all of its office and television station real estate, including all of the transmitter towers, with the exception of the television transmitter tower serving WOAC (Cleveland), which is owned.

     Management believes that its leased and owned properties are in reasonably good working condition.

ITEM 3. LEGAL PROCEEDINGS

Classic Collectibles, LLC

     A lawsuit was filed against the Company in January 2000 by a former vendor, Classic Collectibles, LLC, in state Chancery Court in Chattanooga, Tennessee. The vendor alleged that the Company improperly canceled certain orders, that certain amounts it paid to the Company under a written agreement should be refunded, and that certain amounts were left owing on the account. The vendor also claimed entitlement to alleged lost profits of approximately $2 million, asserting the Company did not provide an amount of broadcast network time in 1999 that the vendor alleged was orally promised in connection with the written agreement. A jury trial began for this case in September 2003 and ended in a mistrial. The matter has been set for trial again in April 2004. The Company continues to vigorously defend this matter.

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Dixie Health, Inc.

     On September 27, 2002, Dixie Health, Inc. (“Dixie”) sued the Company, later adding the Network as a defendant, in the United States District Court for the Middle District of Tennessee at Nashville. Dixie asserts causes of action based upon Summit’s alleged use of trade dress owned by Dixie, arising from events occurring after the Company’s termination of Dixie as a vendor. Dixie asserted violations of the Lanham Act, unfair competition and false advertising, unfair or deceptive acts or practices, and an amount owed on the account. The Company has filed its answer and counterclaim and is vigorously pursuing discovery and defense.

Other Matters

     The Company is also subject to legal actions arising in the ordinary course of its business. The Company believes that the ultimate outcome of these actions is not likely to have a material adverse effect on its financial position, results of operations or liquidity.

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

     None

PART II

ITEM 5. MARKET FOR SUMMIT AMERICA TELEVISION’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Trading History

     The Company’s common stock is quoted in the NASDAQ National Market under the symbol “SATH.”

     The range of market prices for the Company’s common stock during the two most recent years, as reported by the high and low closing prices on the NASDAQ National Market, are as follows.

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Equity Holders

     As of March 1, 2004, there were approximately 645 owners of the Company’s common stock of record.

Payment of Dividends

     The Company has not declared or paid any dividends on its Common Stock in the two most recent fiscal years. The Company does not anticipate declaring or paying any dividends in the foreseeable future. Any future determination as to the declaration and payment of dividends will be made at the discretion of the Company’s Board of Directors and will depend on then-existing conditions, including its financial condition, results of operations, contractual restrictions, capital requirements, business prospects and such other factors as the Board of Directors deems relevant.

Securities Authorized for Issuance under Equity Compensation Plans

     The following table provides information as of December 31, 2003, regarding the options outstanding and available under the Company’s 1999 Employee Stock Option Plan and under the stock incentive plan adopted for eligible employees in 1991.

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EQUITY COMPENSATION PLAN INFORMATION

ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s consolidated financial statements and notes thereto included as Item 8. The statements of operations and balance sheet data set forth below as of and for each of the four years ended June 30, and as of and for the six months ended December 31, 2002, and as of and for the year ended December 31, 2003, are derived from the audited financial statements of the Company.

For factors affecting the comparability of Selected Financial Data, refer to Item 7 and the footnotes below.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with the “Selected Financial Data” and the Company’s consolidated financial statements and related notes included elsewhere herein.

Executive Summary

     The fiscal year ended December 31, 2003, was the first full year of Company operations after the sale by the Company in October 2002 of a 70% interest in the Network to a subsidiary of Scripps. Prior to that sale, the Company’s revenues consisted of the Network’s retail sales of various consumer products. For the fiscal year ended June 30, 2002, the Company’s net revenues were approximately $195.8 million. Following October 2002, the Company’s principal assets consisted of its 30% interest in the Network and five television stations, and its revenues consisted primarily of fees paid to the television stations by the Network for the carriage of the Network’s programming. The Company’s net revenues for the current fiscal year were approximately $6.7 million. Because the Company was fundamentally different after October 2002, comparisons between the current fiscal year and prior fiscal years may not be meaningful.

     In the fiscal year ended December 31, 2003, the Company had a net loss of $2.5 million, which resulted primarily from operating expenses of $6.5 million, interest expenses of $3.0 million, and a loss of $1.3 million from the operations of the Network.

     The Company entered into an agreement in December 2003 to merge with a newly-organized subsidiary of Scripps. Under the merger agreement, Scripps will acquire the remaining 30% of the Network and the Company’s five television stations in return for a payment of $4.05 in cash for each share of common stock of the Company issued and outstanding, or about $184 million, for approximately 44 million fully diluted outstanding shares of Company common stock. As part of the transaction, Scripps has agreed to forego repayment of a $47.5 million secured loan that Scripps extended to the Company as part of the 2002 acquisition of the 70% interest in the Network. Scripps also has agreed to forego redemption of $3 million in Company preferred stock that Scripps holds, bringing the total consideration of the transaction to about $235 million.

     The merger is expected to close during April 2004.

     While the Company believes the merger is likely to close, in the event the acquisition of the Company by Scripps does not occur, the Company will need additional cash during the 2004 fiscal year. The Company believes that it would be able to obtain these funds from any one of a number of sources, including the proceeds of a commercial loan, sale of additional equity, sale of assets, or renegotiation of its programming affiliation agreements.

Critical Accounting Policies and Estimates

     The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management continually evaluates its estimates and assumptions. Management bases its estimates and assumptions on historical information and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Management believes the following critical accounting policies affect the more significant assumptions and estimates used in the preparation of its consolidated financial statements:

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     The carrying value of the Company’s television station licenses is tested for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. If an impairment test indicates that the carrying value of the television station licenses is impaired, the carrying value of the television station licenses is reduced by the amount by which the carrying value exceeds the fair value of the television station licenses. The implied fair value of the television station licenses are based upon assumptions which may prove to be untrue in the future.

     The Company records a valuation allowance to reduce its net deferred tax assets to the amount that is more likely than not to be realized. While management has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for its valuation allowance, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in an amount in excess of the net recorded amount, an adjustment to the valuation allowance would decrease income tax expense in the period such determination was made. If it was determined that future taxable income and that planning strategies were not likely to materialize, significant additional valuation allowances could result with corresponding changes in the tax provision. During the second quarter of the calendar year, the Company rescinded certain transactions that it had previously authorized. The Company believes that no tax liability arose out of the rescission of such transactions. Should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future or should such rescission be found to be ineffective for tax purposes, in whole or in part, there would be an increase in income tax expense, which increase could be material.

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Results of Operations

     The following table sets forth for the periods indicated the percentage relationship to net revenues of certain items included in the Company’s Statements of Operations:

Sale of Network Assets to Scripps in 2002

     On October 31, 2002, the Company closed the sale of its 70% interest in the Network to Scripps. The Company retains a 30% interest in the Network and also retains ownership of its five full-power television stations, certain wireless spectrum assets and tax-loss carry-forward benefits.

     The closing was completed in accordance with the terms of a Share Purchase Agreement between the Company and Scripps dated August 14, 2002, and approved by the Company’s shareholders on October 30, 2002. Pursuant to the Purchase Agreement, the Company transferred the business operations of its television and internet home shopping network to an operating company (known as Shop At Home Network, LLC) in a two-tier holding company structure. The Network received substantially all the assets of the television and internet home shopping network and assumed certain of its current liabilities, as well. As part of the transaction, the Company retired its obligations under a $17.5 million senior credit facility and its $75.0 million of 11% Senior Secured Notes due 2005, but retained certain liabilities associated with pending litigation and certain other contractual obligations. The Company sold

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to Scripps a 70% interest in the Network for a cash purchase price of $49.5 million, and the Company retained $3.0 million in cash.

     In addition, Scripps loaned $47.5 million to the Company payable in three years. The loan accrues interest at the fixed annual rate of 6%, payable quarterly. The payment and performance of the loan is secured by the Company’s assignment of its 30% interest in the Network and a security interest in the assets of the Company’s television stations located in the Boston, San Francisco and Cleveland markets.

     The Company has entered into a three year affiliation agreement with the Network, under which the Company agrees to carry the Network’s programming on its five television stations. The Company has reserved the right to terminate the affiliation agreement at any time upon (conditioned upon providing six months advance notice to the Network).

     In addition, on August 15, 2002, Scripps purchased from the Company its newly authorized Series D Senior Redeemable Preferred Stock for an aggregate purchase price of $3,000,000. The Series D shares will mature on April 15, 2005, at which time the Company will be obligated to redeem the shares for a price equal to their original purchase price plus accrued and unpaid dividends. Dividends of 6% are payable quarterly, and the Company has the right to defer payment of the dividends until maturity. The Series D shares are not convertible to any other shares of capital stock of the Company and have no voting rights (except any rights or privileges conveyed by statute). The Series D shares also carry a liquidation preference to the Company’s Common Stock and are on parity with the Company’s outstanding shares of Series A Preferred Stock. Other than the Series A and Series D shares, the Company has no other series of preferred stock outstanding.

Twelve Months ended December 31, 2003

     Because the Company sold a 70% interest in the Network on October 31, 2002, a comparison of the results of operations of the Company for the twelve months ended December 31, 2003, with prior periods may not be meaningful. Accordingly, the following discussion concerns the results of operations of the Company for the year ended December 31, 2003, without comparison to a prior period.

     The Company’s net revenues for the twelve months ended December 31, 2003, were $6.7 million, substantially all of which were payments under an affiliation agreement between Summit and the Network for carriage of the Network’s programming on the Company’s five television stations. The affiliation agreement can be terminated at any time by the Company. The Company believes that it could receive higher affiliation payments from either the Network or another programmer if the Company is willing to agree to a longer term affiliation agreement.

     Salaries and wages for the twelve months ended December 31, 2003, were $0.8 million, reflecting the fact that the Company has only about 12 employees including only two or three employees at its largely automated television station facilities. During 2003, the Company reduced the number of its television station personnel to lower its compensation expenses but has little ability to make further reductions due to FCC-imposed restrictions regarding station personnel.

     General and administrative expenses for the twelve months ended December 31, 2003, were $5.0 million. These expenses primarily reflect the operational costs of the Company’s television stations, the largest items of which are rent and utility costs and which are mostly fixed costs. These expenses also reflect corporate overhead, the largest items of which are insurance, legal and accounting expenses. Reduction or control of these expenses is a priority for the Company, and it has some capacity to reduce these costs, although some costs are difficult to effectively limit or control. Insurance costs, for example, are dependent to some extent upon market conditions and claims experience. Legal expenses are subject

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to some factors beyond the Company’s immediate control, such as litigation against the Company and unexpected legal issues that arise from time to time.

     Interest expense during the period was $3.0 million and is substantially the result of interest paid on the $47.5 million loan made to the Company by Scripps. Interest on this loan accrues at a fixed rate of 6%. Loss of unconsolidated subsidiary of $1.3 million during the period represents the Company’s 30% share of the operational results of the Network until such point that the carrying value of the investment in the Network was reduced to zero.

Six Months Ended December 31, 2002, compared with Six Months Ended December 31, 2001

     Net Revenues. The Company’s net revenues for the six months ended December 31, 2002, were $68.2 million, a decrease of 26.3% over net revenues of $92.6 million for the period ended December 31, 2001. This decrease is attributable to the sale of 70% of the Network to Scripps completed on October 31, 2002. Retail sales through the television network accounted for 88.0% of net revenues. Affiliate fee income from the Company’s owned television stations contributed 1.6% of net revenues. The remaining 10.4% of net revenues was derived from shopathometv.com. Returns of merchandise increased to a rate of 22.3% of gross sales from 18.1% in the prior year. Affiliate fee income became the Company’s chief revenue source effective October 31, 2002, with the sale of the Network assets.

     Cost of Goods Sold. Cost of goods sold represents the purchase price of merchandise and freight. For the six months ended December 31, 2002, the cost of goods sold as a percentage of net revenues increased to 65.2% from 64.6% for the six months ended December 31, 2001. Cost of goods expense included a markdown of $1.1 million on sports inventory.

     Salaries and Wages. Salaries and wages for the six months ended December 31, 2002, were $8.0 million, a decrease of 9.5% compared to the six months ended December 31, 2001. The decrease in salaries is primarily due to the sale of Network assets, partially offset by $1.3 million of compensation expense occurring upon the sale of the Network and triggered by the change in control termination provisions of executive employment agreements.

     Transponder and Affiliate. Transponder and affiliate costs for the six months ended December 31, 2002, were $16.8 million, a decrease of $2.6 million or 13.3% compared to the six months ended December 31, 2001. The decrease in transponder and affiliate fees is primarily due to the sale of Network assets.

     General and Administrative. General and administrative expenses for the six months ended December 31, 2002, were $8.7 million, a decrease of $0.7 million or 7.5% compared to the six months ended December 31, 2001. The decrease in general and administrative expenses is primarily due to the sale of Network assets.

     Depreciation and Amortization. Depreciation and amortization for the six-months ended December 31, 2002, was $3.9 million, a decrease of $1.9 million or 33.0% compared to the six months ended December 31, 2001. The decrease in depreciation and amortization is primarily due to the sale of Network assets.

     Interest Expense. Interest expense for the six months ended December 31, 2002, was $4.9 million, a decrease of $0.5 million over the six months ended December 31, 2001. The decrease was due to the retirement of $75 million in Senior Secured Notes and $17.5 million Senior Credit Facility associated with the sale of Network assets.

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     Gain on sale of Network. Gain on sale of the Network resulted from the sale, on October 31, 2002, of 70% of the Network to Scripps. After October 31, 2002, the Company reports its share of the operations of the Network utilizing the equity-method of accounting rather than consolidating the results of the Network in the Company’s financial statements.

     Loss on unconsolidated subsidiary. Loss on unconsolidated subsidiary represents the Company’s 30% share of the operational results after the sale of the Company’s 70% of the Network to Scripps on October 31, 2002.

     Interest Income. Interest income from cash and cash equivalents for the six months ended December 31, 2002, was $0.2 million compared to $0.3 million in six months ended December 31, 2001. The decrease in interest income was due to lower average cash balances and interest rates.

Year Ended June 30, 2002, compared with Year Ended June 30, 2001

     Net Revenues. The Company’s net revenues for the year ended June 30, 2002, were $195.8 million, an increase of 10.3% over net revenues of $177.6 million for the year ended June 30, 2001. The core business of retail sales through the television network accounted for 89.9% of net revenues. The remaining 10.1% of net revenues were derived from shopathometv.com. Returns of merchandise decreased to a rate of 18.3% of gross sales from 25.6% in the prior year. The increase in net revenues is attributable to a greater number of television households reached as well as more informative, precise on-air presentations resulting in fewer returns of merchandise.

     Cost of Goods Sold. Cost of goods sold represents the purchase price of merchandise and freight. For the year ended June 30, 2002, the cost of goods sold as a percentage of net revenues decreased to 65.0% from 68.9% for the year ended June 30, 2001. The improvement was due to better merchandise planning and price negotiations with suppliers.

     Salaries and Wages. Salaries and wages for the year ended June 30, 2002, were $17.7 million, a decrease of 19.9% compared to the year ended June 30, 2001. Salaries and wages as a percentage of revenues decreased to 9.0% from 12.5%. The improvement was due to the absence of any significant severance payments (in the prior year, the Company made a $3.2 million severance payment to its former CEO) as well as this year’s reduction in average headcount. Average headcount declined due to various cost containment initiatives implemented by the Company through the year.

     Transponder and Affiliate. Transponder and affiliate costs for the year ended June 30, 2002, were $41.2 million, an increase of $1.4 million or 3.6% compared to the year ended June 30, 2001. The increase was due to the addition of new affiliates and homes reached.

     General and Administrative. General and administrative expenses for the year ended June 30, 2002, were $20.0 million, a decrease of $2.6 million or 11.4% compared to the year ended June 30, 2001. The improvement was due to reduction of bad debt expense of $1.5 million, reflective of improved credit approval and collection procedures, and a variety of cost containment and renegotiation efforts.

     Depreciation and Amortization. Depreciation and amortization for the year ended June 30, 2002, was $11.7 million, a decrease of $2.2 million or 15.9% compared to the year ended June 30, 2001. The decrease was primarily due to the elimination of $2.7 million of amortization of television station license costs as a result of the adoption of SFAS No. 142, Goodwill and Other Intangible Assets.

     Offering Costs. During the year ended June 30, 2002, the Company pursued the private placement of $135 million of senior secured notes to refinance its existing indebtedness and provide

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additional working capital. The private placement was not completed and, consequently, the Company expensed $0.8 million of costs related to the offering.

     Interest Expense. Interest expense for the year ended June 30, 2002, was $10.9 million, a decrease of $1.0 million over the year ended June 30, 2001. The decrease was due to lower interest rates.

     Interest Income. Interest income from cash and cash equivalents for the year ended June 30, 2002, was $0.6 million compared to $0.9 million in 2001. The decrease in interest income was due to lower average cash balances and interest rates.

     Income Tax (Benefit) Expense. Income tax benefit from continuing operations was $10.7 million for the year ended June 30, 2002, versus a tax expense of $0.3 million in 2001. The expense in 2001 was the result of a full valuation allowance being recorded against the Company’s state net operating loss carryforward. Due to the length of time until the expiration date of the federal net operating loss carryforwards and the value of the Company’s commercial television stations, management does not deem it necessary to provide a valuation allowance against its federal net operating loss carryforwards.

     Other Income. On March 20, 2001, the Company sold its Houston television station KZJL for $57.0 million. The gain recognized on the sale was the result of the proceeds less $6.8 million for the net book value of fixed assets and license cost and $1.3 million in closing costs. There were no sales of stations in 2002.

     Discontinued Operations. In December 2000, the Company discontinued the operations of its subsidiary, Collector’s Edge of Tennessee, Inc. (“CET”). This resulted in a loss of $3.5 million, net of applicable tax benefits, for the year ended June 30, 2001.

     Cumulative Effect of Accounting Change. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, the Company changed its method of recording sales to customers in 2001. Beginning in 2001, the Company recognized sales at the point of delivery rather than at the point of shipment. As a result, the Company reduced revenue for the products that were shipped at the end of the period but not received by the customer by recording a cumulative effect of an accounting change of $1.4 million (net of a tax benefit of $0.8 million) for the effects through June 30, 2000.

Liquidity and Capital Resources

     The Company had approximately $2.8 million cash on hand at December 31, 2003. Management believes that the affiliate fee income from its owned television stations, as currently structured, along with cash on hand will be sufficient to fund capital expenditures, operating expenses and interest payments through the second quarter of 2004, at which time the Company may be required to obtain additional cash to fund Company operations. The Company may be required to borrow or to obtain from other sources up to $6 million for general corporate purposes and to fund its projected capital expenditures.

     Management believes that the funding described in the above paragraph will be reasonably obtainable. If the merger with Scripps is completed, which the Company expects to occur during April 2004, the Company will become a wholly-owned subsidiary of Scripps, and Scripps will be responsible thereafter for the Company’s future funding requirements. In the event the Scripps merger does not close, or is subject to some delay, and the Company has a need to obtain cash to continue to fund its operations, the Company believes that such funds could be reasonably obtainable through one or a combination of the following sources:

	•		Currently, two of the Company’s five television stations are not pledged as collateral for other debt of the Company and would be available to secure a commercial loan, although there is no assurance the Company could obtain this financing on terms and conditions acceptable to the Company.
	•		The Company might also be able to raise additional cash through the sale of equity securities to existing shareholders or third parties, although there is no assurance that buyers for such securities are available at a reasonable price.
	•		The Company also has the option to sell one or more of its assets, including its television stations, to raise additional cash, although such a sale would take several months or longer to close.
	•		The Company might also increase its revenues by renegotiating the affiliation agreement covering the Company’s stations to modify its terms and extend its expiration date.

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     The Company’s future contractual obligations and commitments at December 31, 2003, consist of the following:

     In addition to the above commitments, the Company has 3,718 shares of redeemable preferred stock outstanding at December 31, 2003. Any holder of any shares of Series A Preferred Stock may require the Company to redeem all or any portion of the Series A Preferred Stock for a redemption price per share of $10.00 plus accrued and unpaid dividends. The Series A Preferred Stock is convertible at any time into shares of the Company’s common stock at a ratio of one share of common stock for one share of Series A Preferred Stock. Holders of the Series A Preferred Stock are entitled to receive, but only when declared by the Board of Directors, cash dividends at the rate of $0.10 per share per annum.

Proposed Merger with Scripps

     On December 19, 2003, the Company entered into a definitive merger agreement with Scripps to acquire the business and properties of the Company, including Summit’s 30% minority interest in the Network and its Network-affiliated broadcast television stations.

     Each share of the Company’s common stock, $0.0025 par value per share, will be exchanged for the right to receive cash in the amount of $4.05, or about $184 million, for approximately 44 million fully diluted outstanding shares of the Company’s common stock. Each share of the Company’s Series A Preferred Stock, $10.00 par value per share, will be exchanged for the right to receive cash in the amount of $10.00, plus any accrued and unpaid dividends. Each share of the Company’s Series D Preferred Stock, $10.00 par value per share, will be converted into one share of Preferred Stock of the surviving corporation.

     As part of the transaction, Scripps has agreed to forego repayment of a $47.5 million secured loan that Scripps extended to the Company as part of the 2002 Network joint venture transaction. Scripps also has agreed to forego redemption of $3 million in Summit preferred stock that Scripps holds, bringing the total consideration of the transaction to about $235 million.

     The merger will result in Scripps attaining 100% ownership of the Company and of the Network. Scripps will then control and own the Company’s five television stations that broadcast Network

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programming in key major metropolitan markets, including San Francisco, Boston, Cleveland, Bridgeport, Conn., and Raleigh-Durham. The five television stations reach an estimated 5.4 million cable television households.

     The transaction requires approval by Summit shareholders at a special shareholders meeting scheduled for March 30, 2004, as well as approval by appropriate federal regulatory agencies. Assuming no unusual delays in obtaining the required approvals, the transaction should be completed in April 2004.

Capital Expenditures

     The Company projects capital expenditures during 2004 of approximately $2.2 million, primarily for digital transmission facilities at three of its stations and for maintaining and upgrading equipment and facilities in the normal course of business

New Accounting Pronouncements

     In June 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The principal difference between this Statement and EITF Issue No. 94-3 relates to its requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of an entity’s commitment to an exit plan. The adoption of SFAS No. 146 did not have a material effect on the Company’s consolidated balance sheet or consolidated statements of operation.

     In November 2002, the FASB issued Interpretation No.  (“FIN”) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34 . The interpretation requires that upon issuance of a guarantee, the entity must recognize a liability for the fair value of the obligation it assumes under that obligation. This interpretation is intended to improve the comparability of financial reporting by requiring identical accounting for guarantees issued with separately identified consideration and guarantees issued without separately identified consideration. The initial recognition and measurement provisions of FIN 45 are applicable to the guarantees issued or modified after December 31, 2002. The disclosure provisions of FIN 45 were effective December 31, 2002. The adoption of FIN 45 did not have a material effect on the Company’s consolidated balance sheet or consolidated statements of operation.

     In December 2003, the FASB issued FIN 46 (revised 2003), “Consolidation of Variable Interest Entities.” This interpretation, which replaces FIN 46, addresses consolidation by business enterprises of variable interest entities (“VIE”) when certain characteristics are present. This interpretation applies immediately to VIE’s created after December 31, 2003, and to VIE’s in which an enterprise obtains an interest after that date. Interests held in VIE’s created on or before December 31, 2003 are not subject to the provisions of this interpretation until the end of the first reporting period after March 15, 2004 unless the VIE meets the definition of a special-purpose entity as defined by this statement. This interpretation must be applied for special-purpose entities for periods ending after December 15, 2003. As of December 31, 2003, we did not have any entities that are considered to be special-purpose entities. We do not believe that the adoption of the remaining portion of this interpretation will have a material effect on our consolidated balance sheet or consolidated statements of operations.

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     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. On July 1, 2003, the Company adopted the provisions of SFAS No. 150 which require that mandatorily redeemable preferred stock be classified as a liability and any related dividends be recorded as interest expense. As such, the Company has reflected its Series A and D preferred stock as a liability in the accompanying balance sheets and has recorded interest expense related to the dividends on the Series D preferred stock of $91 in the accompanying consolidated statements of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk represents the risk of loss that may affect the financial position, results of operations, or cash flows of the Company due to adverse changes in financial market prices, including interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks.

     The Company is exposed to some market risk through interest rates related to its investment of its current cash and cash equivalents of approximately $2.8 million as of December 31, 2003. These funds are generally invested in highly liquid instruments with short-term maturities. As such instruments mature and the funds are re-invested, the Company is exposed to changes in market interest rates. This risk is not considered material, and the Company manages such risk by continuing to evaluate the best investment rates available for short-term, high-quality investments.

     The Company is not exposed to market risk through potential interest rate fluctuation on its $47.5 million of long-term debt, because interest accrues on this debt at the fixed rate of 6%.

     The Company has no activities related to derivative financial instruments or derivative commodity instruments.

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ITEM 8. FINANCIAL STATEMENTS

Index to Consolidated Financial Statements

(See also Schedule 3-09, Financial Statements of the Company’s Significant
Unconsolidated Investee, attached to this annual report as part of Item 15.)

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Independent Auditors’ Report

To the Board of Directors and Stockholders of
Summit America Television, Inc.

We have audited the accompanying consolidated balance sheets of Summit America Television, Inc. and subsidiaries as of December 31, 2003, December 31, 2002 and June 30, 2002, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2003, the six months ended December 31, 2002 and the year ended June 30, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Summit America Television, Inc. and subsidiaries as of December 31, 2003, December 31, 2002, and June 30, 2002, and the results of their operations and their cash flows for the year ended December 31, 2003, the six months ended December 31, 2002, and for the year ended June 30, 2002 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 4 to the consolidated financial statements, effective July 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which resulted in the Company changing the method in which it accounts for goodwill and other intangible assets.

As discussed in Note 2 to the consolidated financial statements, effective July 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liability and Equity,” which resulted in the Company changing the method in which it accounts for mandatorily redeemable preferred stock.

/s/ Deloitte & Touche LLP

Nashville, Tennessee
March 15, 2004

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Report of Independent Auditors

Board of Directors and Stockholders
Shop At Home, Inc.

In our opinion, the consolidated statements of operations, stockholders’ equity and cash flows listed in the Index to Consolidated Financial Statements present fairly, in all material respects, the results of operations and cash flows of Summit America Television, Inc. (formerly Shop At Home, Inc.) for the year ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for the year ended June 30, 2001, listed in the Index appearing under Item 15 (a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit. We conducted our audit of these financial statements and the financial statement schedule in accordance with auditing standards generally accepted in the United States of America, which 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 audit provides a reasonable basis for our opinion expressed above.

/s/ PricewaterhouseCoopers LLP
Knoxville, Tennessee
September 12, 2001

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SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

ASSETS

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

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