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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR

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

FOR THE TRANSITION PERIOD FROM __________ TO __________.

COMMISSION FILE NUMBER
0-22582

TBA ENTERTAINMENT CORPORATION
(Name of Issuer in its Charter)

(818) 728-2600
(Issuer’s telephone number, including area code)

     SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

COMMON STOCK, PAR VALUE $0.001 PER SHARE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

     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.   [  ]

     The aggregate market value of the voting stock held by non-affiliates of the registrant (based on the closing sale price of such stock as reported on March 28, 2002 on the American Stock Exchange was approximately $24,136,400.

     As of March 28, 2002, 7,362,400 shares of the registrant’s Common Stock were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE:

     None.

PART I

ITEM 1. BUSINESS.

GENERAL

     TBA Entertainment Corporation (“TBA” or the “Company”) is a strategic communications and entertainment company that creates comprehensive programs to reach and engage audiences worldwide. TBA provides a broad range of strategic communications and entertainment services through its four integrated business segments. TBA believes it has a strong presence in each of these very fragmented industries and is building an industry-leading integrated services company. TBA has offices in key markets worldwide to provide local market presence with global impact.

	•		Corporate Communications — Develops and produces strategic communications, entertainment and special event services to corporate clients worldwide.
	•		Entertainment Marketing — Creates and executes innovative entertainment marketing initiatives including music tours, television broadcasts and special events.
	•		Fair and Festivals — Develops and produces a broad range of entertainment programs, national sponsorship initiatives and seasonal programming for fairs and festival clients.
	•		Artist Management — Develops and implements career strategies and corporate partnerships for some of the most successful artists in the entertainment industry.

     The integration of TBA’s four business divisions creates competitive advantages for the Company. TBA believes that while a variety of competitors exist with each of the Company’s divisions, none offer the complete scope of services provided by TBA. This intra-company synergy provides TBA’s clients with an expanded range of comprehensive services while creating additional sources of revenues and profits for the Company. For example, in producing corporate meetings and entertainment marketing programs, the Company creates opportunities to showcase artist management clients. Providing entertainment marketing programs for corporate clients conversely provides opportunities to cross-sell client decision makers on other corporate communication and entertainment events.

     The Company’s current operating structure is the result of strategic acquisitions within each of the four business divisions. A brief description of each of the acquisitions completed since January 1, 1998 is included below in the detailed description of each of the four business divisions.

     The Company was incorporated in Tennessee in June 1993 and reincorporated in Delaware in September 1997.

CORPORATE COMMUNICATIONS

     The Corporate Communications division is an industry leader in the strategic development and production of innovative business communications, entertainment and special event programs that enable corporate clients to reach and engage targeted internal and business-to-business audiences worldwide. TBA utilizes award-winning creative capabilities and state-of-the-art technology to help corporate clients worldwide deliver targeted messages that educate, inspire and motivate. The Corporate Communications division targets clients with recurring needs for business communications and entertainment services. The Company’s client list encompasses a number of industry sectors including telecommunications, information technology, pharmaceuticals, food service and insurance. Representative clients include BellSouth, SAP, Applied Materials, Motorola, Elan, McDonald’s Corporation, and Mass Mutual.

     The Corporate Communications division specializes in the creative development, design, production and staging of a wide range of internal and business-to-business events including: sales conferences, business meetings and headline entertainment, product introductions, recognition events, shareholder meetings, live network broadcasts and web casts. TBA believes that it has benefited from the decision by an increasing number of major corporations to outsource their business communications and entertainment needs.

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TBA produced approximately 288 and 433 communication and entertainment events in 2001 and 2000, respectively. The recurring nature of these events serves as a source of more predictable revenues as they occur on a more regular basis. The large number of events also provides opportunities for the Company’s other divisions, including corporate event opportunities for TBA’s artist management clients.

     The Corporate division serves its clients from offices nationwide, including Atlanta, Chicago, Dallas, London, Nashville, New York, Salt Lake City and San Diego. These offices were assembled via strategic acquisitions and internal growth over the past three years.

     The Company acquired its first corporate communications company in April 1997 with the acquisition of all of the outstanding capital stock of TBA Entertainment Group Nashville, Inc., formerly Avalon Entertainment Group, Inc. (“AEG”), with offices in Nashville and San Diego. In 1998, the Company acquired all of the outstanding capital stock of TBA Entertainment Group Chicago, Inc., formerly Corporate Productions, Inc. (“CPI”), a Chicago-based company, TBA Entertainment Group Phoenix, Inc., formerly Image Entertainment Productions, Inc. (“Image”), a Phoenix-based company, and TBA Entertainment Group Dallas, Inc., formerly Magnum Communications, Inc. (“Magnum”), with offices in Dallas and Salt Lake City. The Company also opened offices in Atlanta and New York in 1999 and London in 2000 to service its growing client list.

     With the completion of the acquisitions and internal growth described above, TBA delivers a full range of strategic communications and entertainment services to its clients. The Corporate Communications division emphasizes the coordination and allocation of resources and services between the division’s offices. TBA has long-standing relationships with freelance contractors in various production, technical and creative disciplines, and supplements its full-time staff with independent contractors where needed.

     The Company believes, based on its experience, that the corporate communications industry is highly fragmented. Further, the Company believes that many of its competitors consist of a number of small, primarily regional companies that provide only a limited range of services. However, the Company believes that there are other competitors who have been in business longer and have larger staffs and whose business, like the Company’s, is full service in scope. The most important competitive factors include creative and production capabilities, quality and price. The Company believes that it can compete successfully in this market by utilizing the Company’s production capabilities and existing entertainment relationships to produce an exceptional event. TBA’s commitment to providing exceptional events has developed a loyal client base. The Company also competes with in-house corporate communications staffs of existing and potential clients and with staffs of hotel and convention centers.

     Because of the highly fragmented nature of the corporate communications industry, the Company believes that there are a number of acquisition opportunities available to the Company. The Company believes, based on its experience with past acquisitions, that some portion of the small, regional, limited-services companies would welcome the opportunity to provide a full range of corporate communications and entertainment services that would result from an association with the Company.

ENTERTAINMENT MARKETING

     The Entertainment Marketing division links global business with popular culture through the development, marketing and production of consumer-focused entertainment events, music marketing initiatives, concert tours, television broadcasts, recorded music products and brand building initiatives. This division continually forges new ways for clients to reach their audiences and realize their marketing objectives. The entertainment marketing division specializes in the creative development, design, production and execution of a broad range of marketing initiatives that may include: national music tours, lifestyle events, nationally syndicated radio programs, satellite media tours, network television broadcast specials, point of purchase campaigns, premium/incentive programs, brand imaging campaigns, sponsorship fulfillment, web casts, experiential branding initiatives and consumer/trade promotions.

     TBA provides companies with the power to reach and engage their customers in a fresh, contemporary manner utilizing relevant programming and experiential branding techniques to integrate their company or brand into the lifestyle of their consumers. The Entertainment Marketing division seeks to develop music-marketing programs that appeal to highly focused demographic segments. In addition, corporations are increasingly utilizing entertainment personalities as advertising tools, having recognized the effectiveness of concert/tour sponsorship as a cost-effective means to reach a target audience. The Company has produced sponsored music-marketing tours for clients that include General Motors, Red Lobster and Nescafe. In addition, the Company has produced major television broadcast events and specials including Turner Sports 1998 Goodwill Games Opening Celebration on CBS, NASCAR Rocks on TNN, Blockbuster RockFest on MTV, as well as pay-per-view broadcasts for Viewer’s Choice, DirecTV and Primestar. TBA produced entertainment marketing special events including “The Show” at the NBA All-Star Weekend, produced for TNT and the NBA, NFL on TNT Tailgate Party and the Montreux Jazz Festival in New York City. In 2000 and 1999, the Company produced

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the proprietary event RockFest in conjunction with Hard Rock Cafe. RockFest counted the Oldsmobile “Alero,” Circuit City and the Discover Card, among others, as corporate sponsors. The Entertainment Marketing & Special Events division also provides unique opportunities for the Company to showcase artist management clients . In addition, relationships with corporate sponsors also create opportunities to sell corporate communications and entertainment services to an expanded client base.

     The Company works with its clients to customize entertainment marketing to the exact specifications of that particular client. Over time, TBA believes existing clients will expand their programs, both by increasing the scope of existing components of programs and by adding new components to programs. The Company’s Entertainment Marketing division is currently characterized by a relatively small number of accounts with high revenues per account. As a result, the loss or addition of any one account could have a material affect on the Company’s revenues.

     Prior to the year 2000, the Company operated the Entertainment Marketing division both for its own account and through joint venture arrangements, including Warner/TBA, a strategic joint venture between Time Warner’s Warner Custom Music Group (“Warner”) and TBA. The Company’s 50% interest in Warner/TBA was acquired as part of the acquisition of AEG in April 1997. Although the formal joint venture arrangement reached the end of its term in December 1999, TBA continued to execute programs in 2000 that were developed by Warner/TBA.

     Effective April 2000, the Company became a member in a limited liability company, Earth Escapes, LLC (“EELLC”). One of the other members of EELLC was a former executive of the Company, whose employment with the Company terminated in December 2000. EELLC was formed to develop, produce and distribute a broadcast music special entitled Music in High Places. Music in High Places was broadcast primarily on cable and via webcast in 2000 and 2001. In lieu of cash distributions of profits from EELLC, the Company is entitled to receive a percentage of the gross revenues, as defined, of EELLC. In addition, the Company generated commission income in 2000 from the solicitation of sponsorships from Radio Shack and MSN for the Music in High Places series. Management of EELLC is currently evaluating a second season of the Music in High Places series. The Company retains a 30% voting and liquidation interest in EELLC.

     TBA has made two strategic acquisitions in the past three years, increasing the Company’s competitive position in the entertainment marketing industry. In December 1998, the Company acquired all of the outstanding capital stock of TKS Marketing, Inc., which specializes in sponsorship fulfillment. In February 2001, the Company acquired Moore Entertainment, Inc., a producer of music tours and corporate sponsored events.

FAIRS AND FESTIVALS

     The Fairs and Festivals division engages in the strategic development and production of a broad range of entertainment programs, national sponsorship initiatives and seasonal programming for many of the country’s largest fairs, festivals and rodeos. The Company provides entertainment, production and consultation services to more than 125 fairs, festivals and rodeos across North America, including Cheyenne Frontier Days, Greeley Stampede, Colorado and Nebraska State Fairs, and Country Thunder Festival. Combined, these programs reach over 17 million consumers annually. This unique platform provides a powerful opportunity to promote consumer brand awareness, product sampling and sales programs to corporate advertisers.

     By utilizing established relationships with corporate clients, the Company can work with fair and festival clients to participate in mutually beneficial sponsorship programs, content development and facilities utilization strategies to help them successfully compete against other entertainment venues. In addition, the Company can utilize its strong entertainment background to offer its fairs and festival clients improved pricing for entertainment, while at the same time providing a more efficient and turnkey routing solution for its touring artist clients.

     The Company’s Fairs and Festivals division was assembled through the acquisition of Romeo Entertainment Group (“Romeo”) in January 2000 and EJD Concert Services (“EJD”) in March 2000. The acquisitions of Romeo and EJD were the first steps in TBA’s strategy to build a strong niche position in this large and highly fragmented market. The Company believes that there are a number of other acquisition opportunities available to the Company to add additional fairs and festivals businesses.

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ARTIST MANAGEMENT

     The Artist Management division develops and implements career strategies for music industry artists, including high-profile artists such as Brooks & Dunn, Kathy Mattea, Chely Wright, Point of Grace and Jaci Velasquez. The Company, as a leader in the production of corporate communications and entertainment programs, entertainment marketing initiatives and special events sponsorship procurement, is uniquely positioned to create opportunities for artists. Management believes that the Company’s familiarity with all facets of the entertainment industry enables it to help artists create and capitalize on opportunities. With its expertise in concert production and corporate entertainment events and its relationships with venue managers, outside concert promoters, broadcasting executives and other industry professionals, management believes that the Company is uniquely positioned to offer services which can significantly enhance the careers of its clients. The Company develops long-term career strategies and represents music industry artists in the negotiation of recording, touring, merchandising and performance contracts. Using these integrated resources, the Artist Management team is unified around the strategy of creating long-term, sustained success for the Company’s artist management clients.

     The Company has made three strategic acquisitions over the past three years in assembling the Artist Management division. In June 1998, the Company acquired all of the equity interests in Titley Spalding & Associates LLC (“TSA”), which currently manages Brooks & Dunn, Kathy Mattea and Chely Wright, among others. In December 1999, the Company acquired Mike Atkins Management, Inc. (“Atkins”), one of the largest artist management companies serving contemporary Christian music. Atkins manages Christian music artists Point of Grace and Jaci Velasquez, among others. In July 2001 the Company acquired Alliance Artists Ltd, which manages Styx, Survivor, Joe Stark Band and others. In 2000 and 2001, the Company also added other artist managers, representing artists such as World Classic Rockers, Foreigner and UB40, among others.

     The Company believes that the artist management industry is highly-fragmented and its competitors consist primarily of small independent artist managers with a limited roster of clients, although there are several participants in the industry that have capabilities and resources comparable to and, in certain respects, greater than those of the Company. Because of the highly fragmented nature of the artist management industry, the Company believes that there are a number of acquisition opportunities available to the Company, both within the country music genre as well as in other music genres, including pop and rock.

DISCONTINUED OPERATIONS

     During the first quarter of 2001, the Company approved a formal plan to discontinue its merchandising operations in order to better focus on its core business as a strategic communications and entertainment company. The disposition of the merchandising operations represents the disposal of a business segment under Accounting Principles Board (“APB”) Opinion No. 30. Accordingly, this former segment is accounted for as a discontinued operation and amounts in the financial statements and related notes for all periods shown have been reclassified to reflect discontinued operations accounting.

BUSINESS SEGMENT INFORMATION

     The Company classifies its operations into the four major business segments discussed above. See Note 11 to the consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for summarized financial information concerning the Company’s reportable segments.

COMPETITION

     In addition to the competitive factors outlined above for each of the Company’s four business groups, the success of the Company’s entertainment operations are dependent upon numerous factors beyond the Company’s control, including economic conditions, amounts of available leisure time, transportation costs, lifestyle trends and weather conditions.

SEASONALITY

     The Company experiences quarterly fluctuations in revenue, operating income and net income as a result of many factors, including the timing of clients’ meetings and events, timing of artists’ tours and recording releases, weather related issues, delays in or cancellation of clients’ entertainment marketing programs, as well as changes in the Company’s mix among the various services offered.

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TRADEMARKS

     The Company has filed Intent-To-Use Trademark Applications for the TBA Entertainment Corporation mark for the various classes of goods and services in which the Company’s mark will be utilized. In addition, the Company has filed or intends to file Intent-To-Use Trademark Applications for other proprietary programs developed by the Company. There can be no assurance, however, that these trademarks will proceed to registration, and if so registered, that the trademarks, in any one or more classes, will not violate the proprietary rights of others, that any registration of the trademarks or the Company’s use thereof will be upheld if challenged, or that the Company will not be prevented from using the trademarks.

REGULATION AND LICENSES

     The Company is subject to federal, state and local laws affecting its business, including various health, sanitation and safety standards. The Company’s entertainment operations are subject to state and local government regulation, including regulations relating to live music performances. Each live concert performance must comply with regulations adopted by federal agencies and with licensing and other regulations enforced by state and local health, sanitation, safety, fire and other departments. Difficulties or failures in obtaining the required licenses or approvals can delay and sometimes prevent the promotion of live concerts. The failure to receive or retain, or delay in obtaining, a license to serve alcohol and beer in a particular location could adversely affect the Company’s operations in that location and impair the Company’s ability to obtain licenses elsewhere. The failure or inability of the Company to maintain insurance coverage could materially and adversely affect the Company.

EMPLOYEES

     As of December 31, 2001, the Company had approximately 165 full-time and part-time employees. It is the Company’s intention to manage its growth consistent with its ability to attract and retain qualified employees to manage its operations. Over the course of any given event or program, the Company evaluates the production personnel requirements and determines the extent to which it must supplement its available employee base with the use of independent contractors or part-time employees. The Company believes that its relationship with its employees and independent contractors is good.

     The Company has no full-time employees whose employment is covered by collective bargaining or similar agreements with unions; however, the Company does from time to time independently contract with or hire part-time union personnel, especially during the production of a particular entertainment marketing program and, accordingly, the Company is a party to certain agreements with unions governing the hiring and terms of employment of such personnel.

ITEM 2. PROPERTIES.

     The Company and/or its subsidiaries have entered into lease agreements with respect to leased office space in numerous cities in which the Company operates. These leases expire at various dates through September 2006. The Company’s wholly-owned subsidiary, TBA Entertainment Group Dallas, Inc., owns the building in which its offices and production facilities are located, as well as certain vacant land adjacent to such building.

     The Company has offices located in Hickory Valley, Tennessee in a building owned by a limited partnership, the general partner of which is a corporation owned by Thomas J. Weaver III and Frank A. McKinnie Weaver, Sr., each an officer and director of the Company, and of which they also are limited partners. The limited partnership does not charge the Company rent for its Hickory Valley, Tennessee offices. The fair market rental value for this office space is not material to the Company’s consolidated results of operations.

     TBA believes that the properties and facilities it owns or leases are suitable and adequate for the Company’s current business and operations. The Company anticipates that as it expands, it will require additional office space to support such growth and believes that suitable space will be available as needed on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS.

     The Company, from time to time, is a party to legal proceedings incidental to its business. Management believes that there are no open matters that could have a material adverse effect on its financial position or results of operations pending at this time.

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

     The annual meeting of stockholders of TBA Entertainment Corporation was held on October 10, 2001.

     The stockholders approved the election of eight directors to serve until the next annual meeting of stockholders and until their respective successors have been duly elected and qualified.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)

The Common Stock is listed for trading on The American Stock Exchange under the symbol “TBA.” Prior to December 26, 2000, the Common Stock was quoted on the Nasdaq National Market under the symbol “TBAE.” On March 28, 2002, the last reported sale price of the Common Stock was $3.99 per share. The following table sets forth the range of high and low sales prices of the Common Stock as reported on the American Stock Exchange and the range of high and low bid prices of the Common Stock as reported by the Nasdaq National Market during each quarterly period within the two most recent fiscal years.

	(b)		The approximate number of holders of record of Common Stock on March 28, 2002 was 144.
	(c)		The Company has not paid or declared cash distributions or dividends and does not intend to pay cash dividends on the Common Stock in the foreseeable future. The Company currently intends to retain all earnings to finance the development and expansion of its operations. The declaration of cash dividends in the future will be determined by the Board of Directors based upon the Company’s earnings, financial condition, capital requirements and other relevant factors.

ITEM 6. SELECTED FINANCIAL DATA

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

     The purpose of the following discussion and analysis is to explain the major factors and variances between periods of the Company’s results of operations. The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the historical consolidated financial statements and notes thereto included in Item 8, beginning on page 16.

INTRODUCTION

     The Company is a strategic communications and entertainment company that creates, develops and produces comprehensive programs to reach and engage its clients’ target audiences. The Company produces a broad range of innovative business communications programs, develops and produces highly integrated entertainment marketing programs, develops content and entertainment programs for a nationwide network of fairs and festivals and develops and implements career strategies and corporate partnerships for its artist clients.

     The Company has built this comprehensive communications and entertainment business model through a combination of internal growth and strategic acquisitions. Since April 1997, the Company has completed 11 strategic acquisitions and has built a comprehensive network of 14 offices to serve its growing client base. In 1999, the Company completed the acquisition of Mike Atkins Management, Inc. (December) (the “1999 Acquisition”). In 2000, the Company completed the acquisitions of Romeo Entertainment Group (January) and EJD Concert Services (“EJD”) (April) (collectively, the “2000 Acquisitions”). In 2001, the Company completed the acquisitions of Moore Entertainment, Inc. (“Moore”) in February and Alliance Artists, Ltd. (“Alliance”) in July (collectively, the “2001 Acquisitions”). The results of operations of the 1999 Acquisition, 2000 Acquisitions and the 2001 Acquisitions are included from the corresponding acquisition dates.

GENERAL

     In accordance with SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” the Company classifies it operations according to four major client groups. See Note 11 to the consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for summarized financial information concerning the Company’s reportable segments.

     The Company continues to derive a majority of its revenues (70%, 70%, and 88% of total revenues for the years ended December 31, 2001, 2000 and 1999, respectively) from the production of innovative business communications programs to help corporate clients reach and engage their target audiences. The Company helps businesses effectively communicate their message via a broad range of business communications, meeting production, and entertainment production services. The Company receives a fee for providing these services, which may include developing creative content, providing comprehensive project management and arranging for live entertainment and related production services. Revenue is recognized when an event occurs. Costs of producing the events are also deferred until the event occurs.

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     The remainder of the Company’s revenues are generated from its roster of artist clients (6%, 4% and 8% of total revenues for the years ended December 31, 2001, 2000 and 1999, respectively), entertainment marketing clients (8%, 15% and 4% of total revenues for the years ended December 31, 2001, 2000 and 1999, respectively) and fairs and festivals clients (16%, 11% and 0% of total revenues for the years ended December 31, 2001, 2000 and 1999). Revenues from these three clients groups are subject to seasonal variations, with significantly more revenues generated in the second and third calendar quarters. Commissions received from artists’ earnings are recognized in the period during which the artist earns the revenue. There are generally only minimal direct costs associated with generating revenue from artist clients. Entertainment marketing revenues and cost of revenues are recognized when the services are completed for each program or, for those programs with multiple events, apportioned to each event and recognized as each event occurs. Fairs and festivals also recognize revenue and cost of revenues when the services are completed for each program.

FINANCIAL IMPACT OF SEPTEMBER 11 TERRORIST ATTACKS AND GLOBAL ECONOMIC SLOWDOWN

     The September 11, 2001 terrorist attacks and the global economic slowdown of 2001 had a significant negative impact on the nation’s economy and the Company’s corporate clients’ businesses in particular. As a result, the Company experienced significantly reduced revenues in 2001, with particular impact on the third and fourth quarters of 2001. The September 11 terrorist attacks and the global economic slowdown resulted in program cancellations and postponements impacting greater than $15 million of revenue, which otherwise would have expected to have been realized during 2001. In response to this reduction in revenues, the Company has and will continue to take aggressive action to implement cost reductions necessary to ensure that its infrastructure is appropriate for expected business volumes. Such reductions initiated during the third quarter of 2001 and continuing into 2002 include reductions in headcount (14% since August 31, 2001) and related compensation costs, elimination of certain incentive compensation costs, and a reduction in travel-related and other general and administrative expenses.

     The Company has also experienced some cancellations of programs scheduled to take place in early 2002, and management believes that the economic slowdown will continue to impact the Company’s business activity through the first half of 2002. Although it is difficult to provide estimates of TBA’s future operating results in the current economic, political and military environment, management believes, based on its current view of sales activity, expense reductions already implemented and absent major additional external disruptions, that the Company’s 2002 full-year operating results, EBITDA and cash flow will improve, especially in the second half of 2002, from the levels the Company experienced in 2001.

DISCONTINUED OPERATIONS

     In March 1999, the Company completed the acquisition of Karin Glass & Associates Inc. and affiliated companies (collectively, “KGA”). KGA, along with two smaller acquisitions completed prior to 1999, comprised the Company’s merchandising operations. During the first quarter of 2001, the Company approved a formal plan to discontinue its merchandising operations in order to better focus on its core business as a strategic communications and entertainment company. The disposition of the merchandising operations represents the disposal of a business segment under Accounting Principles Board (“APB”) Opinion No. 30. Accordingly, this former segment is accounted for as a discontinued operation and amounts in the financial statements and related notes for all periods shown have been reclassified to reflect discontinued operations accounting. Operating results of this business segment and other information for discontinued operations appear in the notes to consolidated financial statements captioned “Dispositions” (Note 7).

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

     For the 2001 period, results of operations of each of the 2001 Acquisitions are included from their respective acquisition dates. Results of operations of each of the 2000 Acquisitions are included from the corresponding acquisition dates in 2000.

     Revenues decreased $18,135,500, or 23%, to $60,404,800 for 2001 from $78,540,300 for 2000. Of the total decrease, $13,055,900 was attributable to corporate client group revenues, which decreased 24% to $42,194,200 for 2001 from $55,250,100 for 2000. The number of corporate client events decreased to 288 for 2001 from 433 for 2000 due to a reduction in customer demand during 2001 attributable to matters discussed more fully in Financial Impact of September 11 Terrorist Attacks and Global Economic Slowdown above. Due, in part, to an additional major event produced during the second quarter of 2001, the average revenue per event increased to $146,500 for the 2001 year from $127,600 for the 2000 year. During the 2001 year, the Company produced 36 corporate client events with revenues in excess of $250,000 compared to 48 such events during the 2000 year. For the first six months of 2001, however, the corporate client group had experienced an increase versus the first six months of 2000 in revenues and events with revenues in excess of $250,000. Accordingly, the aforementioned shortfalls for the full year of 2001 are solely attributable to a decrease in comparative activity for the second half of the year.

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     The entertainment marketing client group revenues decreased $ 6,521,600, or 57% from $11,392,700 in 2000 to $4,871,100 in 2001. The decrease is primarily due to the impact of three major, low-margin entertainment marketing programs delivered during the first and third quarters of 2000 that the Company elected not to pursue during 2001, which were partially offset by a new major entertainment marketing project delivered during the second quarter of 2001.

     Artist client revenues, which were not significantly impacted by the September 11, 2001 terrorist attacks, increased $146,500, or 4%, from $3,513,200 in 2000 to $3,659,700 in 2001. This increase is primarily attributed to the 2001 acquisition of Alliance, offset in part by the loss of revenue in 2001 from to the departure of an artist client.

     Fairs and festivals client revenues increased $1,295,700 or 15%, from $8,384,300 in 2000 to $9,680,000 in 2001, primarily due to an increase in the number of fair and festival clients for which the Company executed buy/sell arrangements with respect to artist performances.

     Cost of revenues decreased $13,972,700, or 25%, from $54,971,900 for 2000 to $40,999,200 for 2001. The overall decrease is due to the decrease in revenues for the corporate client and entertainment marketing client groups from 2000 to 2001. Cost of revenues, as a percentage of revenues, decreased from 2000 to 2001, resulting in an increase in gross profit margin to 32% for 2001 from 30% in 2000. This increase is primarily attributable to the decision not to pursue low-margin entertainment marketing programs during 2001, partially offset by lower gross margins on buy/sell arrangements executed with respect to artist performances for fairs and festivals clients.

     Selling, general and administrative expenses increased $292,200, or 2%, to $19,764,100 for 2001 compared to $19,471,900 for 2000. The increase results primarily from incremental selling, general and administrative expenses associated with the acquisitions of EJD (in April 2000), Moore (in February 2001) and Alliance (in July 2001), increased personnel and related operating expenses added during the second half of 2000 associated with the increased levels of business from corporate clients during that period and increased marketing costs to address the reduction in corporate client group revenues in 2001. These selling, general and administrative expense increases were substantially offset by cost savings implemented during the third quarter of 2001, which included reductions in headcount and related compensation costs, elimination of certain incentive compensation costs, and a reduction in travel-related and other general and administrative expenses.

     Depreciation and amortization expense increased $418,300, or 17%, to $2,898,100 for 2001 from $2,479,800 for 2000. The increase results primarily from the amortization of goodwill associated with the Moore and EJD acquisitions. Amortization of goodwill totaled $2,069,800 in 2001, as compared to $1,743,600 for 2000. The remainder of the increase is attributable to increased depreciation on incremental property and equipment additions.

     Other income is comprised primarily of income from an agreement with Earth Escapes LLC, which provided for the Company to receive a percentage of gross revenues, as defined, of Earth Escapes LLC. For the years 2001 and 2000, the Company recognized $221,900 and $272,700 of income, respectively, from this agreement.

     For 2001, net interest expense increased $384,300 to $548,300 for 2001 from $164,000 for 2000. The change is attributable primarily to increased interest expense associated with additional outstanding debt related to the 2000 Acquisitions and 2001 Acquisitions, and additional bank borrowings, as well as lower interest income from decreasing cash balances resulting from the use of cash for investing and financing activities.

     The income tax benefit for the 2001 period is $189,100, or 5%, on a loss from continuing operations before income taxes of $3,469,700. This compares to an income tax provision of $1,531,600, or 89%, for the 2000 period on income from continuing operations before income taxes of $1,725,400. The effective tax rates reflect statutory tax rates adjusted for estimated book/tax differences and reflect the significant impact of nondeductible amortization of goodwill from certain of the Company’s acquisitions. Nondeductible amortization of goodwill totaled $1,248,900 and $1,024,700 for 2001 and 2000, respectively. In addition, the income tax benefit for 2001 has been reduced by a valuation allowance due to the uncertainty as to the realization of the future tax benefits related to the Company’s deferred tax assets as of December 31, 2001.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

     For the 2000 period, results of operations of each of the 2000 Acquisitions are included from their respective acquisition dates. Results of operations of the 1999 Acquisition are included from the corresponding acquisition date in 1999.

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     Revenues increased $39,921,600, or 103%, to $78,540,300 for 2000 from $38,618,700 for 1999. The corporate client group increased its revenues $21,075,800, or 62%, from 1999 to 2000. The increase is attributable to an increase in the average revenue per event, offset by a decrease in the actual number of events produced. This division produced 433 corporate meeting production and entertainment events in 2000, compared to 583 events in 1999. However, the average revenue per event increased dramatically to $127,600 per event for 2000, compared to $58,600 per event for 1999. The Company continued to expand its sales force and aggressively pursue larger corporate entertainment and meeting events with Fortune 1000 companies. In addition, the Company has been successful in expanding its relationships with its existing client base. In 2000, the Company produced 48 events with revenues in excess of $250,000, versus 28 such events in 1999.

     The entertainment marketing client group increased its revenues $9,824,500, from 1999 to 2000. In 2000, the Company recognized $8,864,800 of revenues from programs previously produced by the Warner/TBA joint venture. Prior to 2000, the Company accounted for the Warner/TBA joint venture on the equity method of accounting. The remaining increase is attributable to commissions generated on sponsorship sales, primarily from the Earth Escapes, LLC, which was formed in 2000.

     Fairs and festivals client group reflected revenues of $8,384,300 in 2000, as a result of the 2000 Acquisitions. The artist client group increased its revenues $636,900, or 22%, from 1999 to 2000. The increase is primarily attributable to revenues associated with the 1999 Acquisition, which occurred in December 1999.

     Cost of revenues increased $29,968,300, or 120%, to $54,971,900 for 2000 from $25,003,600 for 1999. The increase is attributable to the overall increase in revenues across all four business segments from 1999 to 2000. Cost of revenues, as a percentage of revenues, increased, resulting in a decrease in gross profit margin to 30% for 2000 from 35% in 1999. The decrease is primarily attributable to lower gross profit margins generated by programs developed by the Warner/TBA joint venture. As part of the termination of the Warner/TBA joint venture in December 1999, TBA agreed to complete production of a number of large-scale entertainment marketing programs in 2000. While the Company was able to control expenses, these programs resulted in low gross profit margins due to lower than expected revenues generated by the events.

     Selling, general and administrative expenses increased $8,893,900, or 84%, to $19,471,900 for 2000 from $10,578,000 for 1999. The overall increase in selling, general and administrative expenses is attributable to increased personnel and operating expenses associated with the overall increase in revenues across all four business segments from 1999 to 2000, including the 1999 Acquisition and the 2000 Acquisitions. In addition, the Company continued to add personnel to its sales force and artist manager ranks in 2000, with the intention that these additions would generate revenues beginning in 2001. The increase in 2000 is further explained by a full year of personnel and related expenses incurred to develop an administrative and accounting infrastructure to manage the Company’s growth. However, selling, general and administrative expenses, as a percentage of revenues, decreased to 25% in 2000 from 27% in 1999, as the Company began to leverage fixed office and administrative costs over increased revenues.

     Depreciation and amortization expense increased $ 944,600, or 62%, to $2,479,800 for 2000 from $ 1,535,200 for 1999. The increase results primarily from the amortization of goodwill associated with the 2000 Acquisitions and the 1999 Acquisition. Amortization of goodwill totaled $1,743,600 in 2000, as compared to $1,077,400 for 1999. The remainder of the increase is attributable to increased depreciation on incremental property and equipment additions.

     In 2000, other income of $272,700 is comprised of income from an agreement with Earth Escapes LLC, which provided for the Company to receive a percentage of gross revenues, as defined, of Earth Escapes LLC. In 1999, equity income from AEG’s 50% joint venture interest in Warner/TBA was $173,000. Effective December 31, 1999, the formal joint venture agreement with Warner reached the end of its term. In 1999, the Company recognized a gain of $250,000 related to the distribution of the net assets of Warner/TBA, which amount is included in Equity in income of Joint Venture in the accompanying 1999 consolidated statements of operations.

     For 2000, net interest expense was $164,000 versus net interest income of $262,100 for 1999. The change is attributable primarily to increased outstanding debt associated with the 1999 Acquisition and 2000 Acquisitions and lower interest income from decreasing cash balances resulting from the use of cash for investing and financing activities.

     The provision for income taxes, as a percentage of income from continuing operations before income taxes, was 89% for 2000 compared to 40% for 1999 and reflects statutory tax rates adjusted for estimated permanent book/tax differences. The primary reason contributing to the increase in the provision for taxes over statutory tax rates is the non-deductibility for tax purposes of a portion of the Company’s goodwill amortization expense. Nondeductible amortization of goodwill totaled $1,024,700 and $636,100 for 2000 and 1999, respectively.

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LIQUIDITY AND CAPITAL RESOURCES

     The September 11, 2001 terrorist attacks and the global economic slowdown of 2001 had a significant impact on the Company’s revenues in 2001, with particular impact on the third and fourth quarters of 2001. As a result of these events, the Company experienced program cancellations and postponements impacting greater than $15 million of revenue, which otherwise would have expected to have been realized in 2001. Accordingly, whereas the Company generated $2,577,100 of positive cash flows from operating activities in the first half of 2001, the Company had net cash flows used in operating activities of $930,400 in the second half of 2001. Through September 2001, the Company utilized its working capital to fund operations, acquisitions and to repay indebtedness. During the fourth quarter of 2001, the Company utilized cash reserves and borrowed $1,728,600 under a new bank credit facility (see below) to fund working capital needs.

     Primarily as a result of the operating losses incurred in 2001, cash and cash equivalents at December 31, 2001 were $2,151,200, compared to $3,751,100 at December 31, 2000. In addition, the Company had a working capital deficit of $2,636,000 at December 31, 2001 compared to positive working capital of $189,700 at December 31, 2000. Both years exclude discontinued operations.

     In order to provide additional working capital and to repay certain maturing bank indebtedness, the Company entered into a new bank credit facility in October 2001. The new credit facility provides for maximum borrowings of up to $4,050,000. The credit facility is comprised of: (a) a $1,050,000 term loan, which is repayable in monthly principal installments of $43,750 commencing November 1, 2001, and maturing on September 30, 2003; and (b) a revolving credit line of up to $3,000,000, which matures on June 30, 2003. The credit facility is secured by all accounts receivable and bears interest, payable monthly, at the Company’s choice of an interest rate based upon LIBOR or the bank’s prime rate, plus an incremental percentage margin, as defined in the Agreement (initial margins are 2.75% for LIBOR loans and .25% for prime rate loans). Upon the October 2001 closing of the facility, the Company borrowed $2,778,600 ($1,050,000 under the term loan and $1,728,600 under the revolving credit line), which was set at an initial 90 day LIBOR-based interest rate of 5.18%. The term loan proceeds were used to refinance the remaining principal obligations on the Company’s note payable to a bank and mortgage payable to a bank. Of the revolving credit line proceeds, $963,000 was used to repay all principal and interest due under the Company’s three revolving lines of credit, with the remaining $765,600 retained as working capital. In January 2002, the Company borrowed the remaining $1,271,400 balance of the revolving credit line.

     The new bank credit facility requires, among other things, compliance with certain financial ratios on a quarterly basis, specifically a debt/EBITDA ratio, a fixed charge ratio and a minimum net worth ratio. As a result of the operating losses incurred in the fourth quarter of 2001, the Company was not in compliance with the debt/EBITDA and fixed charge ratios as of December 31, 2001. In addition, due to operating losses incurred in the first quarter of 2002, the Company was not in compliance with the minimum net worth ratio as of March 31, 2002.

     In April 2002, the Company and the bank agreed to restructure the terms of the bank credit facility. Pursuant to the restructuring agreement, the Company was granted a temporary waiver of the financial covenant events of default provisions under the original loan agreement and the bank's forebearance from exercising its available remedies, which extends through January 2, 2003. New financial covenants were established that require the Company to operate in compliance with revised operating projections provided to the bank as well as provide the bank with monthly financial reports and a monthly compliance certificate that the Company remains in compliance with the terms of the restructuring agreement. The bank also agreed to provide the Company $500,000 of additional financing (“New Bank Loan”) under certain conditions (see below). The Company agreed to pay the bank a fee of $100,000 to enter into the restructuring agreement plus out-of-pocket costs incurred by the bank, such fees and expenses to be paid by June 30, 2002. The Company also granted the bank additional security for the entire restructured bank credit facility in the form of a pledge of the shares of certain of the Company’s subsidiaries and a first lien deed of trust on the Company’s land and building located in Dallas, Texas. Amounts outstanding under the original bank credit facility now mature on April 30, 2003.

     The New Bank Loan is conditioned upon the funding of a second loan of $500,000 loan (“Affiliate Loan”) from an entity controlled by the Chief Executive Officer of the Company (“Heritage”). Funding of the Affiliate Loan occurred on April 15, 2002. The proceeds from both loans will be used to make required payments pursuant to the Company’s acquisition notes payable and for working capital purposes. The New Bank Loan and the Affiliate Loan are due the earlier of receipt of the Company’s federal income tax refund (see below) or January 2, 2003.

     The New Bank Loan and the Affiliate Loan are secured by an interest in a deposit account and lock box at the bank (“Refund Account”) into which the Company is required, pursuant to the restructuring agreement, to deposit its federal income tax refund, expected to be received by June 30, 2002. The Affiliate Loan will be repaid upon receipt of the federal income tax refund, after the bank has been repaid any amounts outstanding under the New Bank Loan. Any remaining amounts in the Refund Account, after repaying the New Bank Loan and the Affiliate Loan, are to be used to repay a portion of the amounts outstanding under the original $3,000,000 revolving credit facility.

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     In order to provide the Affiliate Loan, Heritage obtained a $500,000 loan from an independent third party finance company (“Pass-Through Loan”). The Pass-Through Loan is secured by 950,336 shares of TBA common stock held by the Chief Executive Officer (772,876 shares) and President (177,460 shares) of the Company and a personal guarantee by the President of the Company. The Pass-Through Loan is to be repaid concurrently with the repayment of the Affiliate Loan. As a condition to obtaining the Pass-Through Loan, Heritage paid a fee of $5,000 and interest accrues at 12% per annum, due upon repayment. These costs are to be passed-through to the Company as part of the Affiliate Loan.

     The Company incurred a net loss during 2001, has negative working capital at December 31, 2001, and will experience reduced operating results for the first half of 2002 as a result of the September 11 terrorist events and the global economic slowdown. However, the Company has implemented a number of cost reductions and believes that the Company’s operating results, EBITDA and cash flows for the second half of 2002 will improve from the levels the Company experienced in 2001. In addition, in April 2002, the Company obtained $1,000,000 (see above) of additional financing to fund operations and other commitments. The Company’s liquidity needs for the foreseeable future are primarily for repayments of indebtedness and for working capital. Capital expenditures will be focused on equipment replacements and are not expected to be significant. Accordingly, management believes that the Company’s future cash flows from all sources and current cash reserves will be sufficient to satisfy its current and future working capital requirements through at least December 2002. However, there is no assurance that management’s assumptions will correspond to actual events.

     The Company is also exploring strategic opportunities for the Company, which may result in the sale of the Company in whole or in parts. The Company has retained the investment-banking firm of Wachovia Securities to assist the Company in evaluating a variety of transactional and financing alternatives. However, since this process is still on-going, no assurances can be given that any proposed plans or actions can be effectively executed.

Cash Flow Statement Analysis

     Summarized Statements of Cash Flow

     Cash provided by continuing operations was $ 1,646,700, $ 2,283,100 and $ 1,915,700 for 2001, 2000 and 1999, respectively. The fluctuation in cash provided by operations between 2000 and 2001 primarily reflects the 2001 loss from operations combined with payments in accounts payables and accrued liabilities, offset in part by the timing of deferred revenue associated with programs occurring in the following year and the collection of accounts receivables.

     Cash used in investing activities was $ 1,812,100, $5,351,300, and $1,088,200 in 2001, 2000 and 1999, respectively. In 2001, cash was used to acquire Moore and Alliance and to fund additional earnout payments for TSA and TKS. In 2000, cash was used to acquire Romeo and EJD and also to fund additional earnout payments for TSA and TKS. In 1999, cash was used to acquire KGA and property and equipment, offset by the remaining payment of $3,000,000 of proceeds from the sale of the Village at Breckenridge Resort.

     Cash used in financing activities was $794,100, $5,568,300, and $2,942,900 for 2001, 2000, and 1999, respectively, resulting primarily from the purchase of treasury shares pursuant to the Company’s stock repurchase program and the repayment of debt arising from acquisitions, offset in part in 2001 by a new long-term note and a new line of credit.

Commitments

     Future minimum annual commitments under bank and other debt agreements and non-cancelable operating leases as of December 31, 2001 are as follows:

				2002				2003				2004				2005				2006				After				Total
Bank and other debt				$	1,830,000			$	3,386,500			$	2,832,600			$	837,200			$	221,100			$	63,200			$	9,170,600
Operating leases					881,500				791,100				637,500				354,800				250,700				—				2,915,600
	Total			$	2,711,500			$	4,177,600			$	3,470,000			$	1,192,000			$	471,800			$	63,200			$	12,086,200

     Capital expenditures will be focused on equipment replacements and are not expected to be significant.

Critical Accounting Policies

     In response to the SEC’s Release No. 333-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policy,” the Company identified the most critical accounting principles upon which its financial status depends. The Company determined the critical accounting principles to be related to revenue recognition and impairment of intangibles and other long-lived assets. The Company states these accounting policies in the Notes to its Consolidated Financial Statements and in relevant sections in this management’s discussion and analysis, including the Recent Accounting Pronouncements discussed below.

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Forward Looking Statements

     The foregoing discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are intended to be covered by the safe harbors created by such provisions. These statements include management beliefs regarding the future operations of the Company and the plans and objectives of management for future growth or sale of the Company. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives of the Company will be achieved.

Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets” (SFAS 141 and SFAS 142). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. Additionally, SFAS 142 requires that goodwill included in the carrying value of equity method investments no longer be amortized.

     The Company will apply SFAS 142 beginning in the first quarter of 2002. Application of the nonamortization provisions of SFAS 142 is expected to result in an increase in pretax net income equal to the goodwill amortization expense recognized in 2001 of approximately $2,105,700. The Company will test goodwill for impairment using the two-step process prescribed in SFAS 142. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company expects to perform the first of the required impairment tests of goodwill as of January 1, 2002 in the first quarter of 2002. Any impairment charge resulting from these transitional impairment tests will be reflected as the cumulative effect of a change in accounting principle in the first quarter of 2002. The Company has not yet determined what the effect of these tests will be on its earnings and financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Impact of Interest Rate Changes

     The Company’s market risk relates to interest rate exposure on short-term borrowings. The Company does not use financial instruments for trading or other speculative purposes. Borrowings against lines of credit and various bank term loans are at variable interest rates. All other borrowings are at fixed rates. At December 31, 2001, the Company had $1,271,400 outstanding under a revolving credit facility at an interest rate of 5.18 percent. Management believes that a hypothetical adverse movement in the interest rates of ten percent of such recent rates would not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The following financial statements required by this item are filed herewith:

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TBA Entertainment Corporation:

We have audited the accompanying consolidated balance sheets of TBA Entertainment Corporation (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. 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 in accordance with auditing standards generally accepted in the 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. 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TBA Entertainment Corporation and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Los Angeles, California
April 16, 2002

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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2001 AND 2000

						2001				2000
ASSETS
Current assets:
	Cash and cash equivalents					$	2,151,200			$	3,751,100
	Accounts receivable, net of allowance for doubtful accounts of $398,400 and $182,400, respectively						1,574,300				3,973,000
	Deferred charges and other current assets						2,709,500				2,266,400
	Net short-term assets from discontinued operations						—				91,600
			Total current assets				6,435,000				10,082,100
Property and equipment, net							2,006,100				2,441,700
Other assets, net:
	Goodwill						25,668,700				23,834,800
	Other						249,900				527,200
Net long-term assets of discontinued operations							48,000				2,531,100
			Total assets			$	34,407,700			$	39,416,900
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
		Accounts payable and accrued liabilities				$	3,905,400			$	4,433,900
		Deferred revenue					3,335,600				2,317,300
		Notes payable and current portion of long term-debt					1,830,000				3,049,600
		Net short-term liabilities from discontinued operations					276,200				—
				Total current liabilities			9,347,200				9,800,800
Long-term debt, net of current portion							7,340,600				4,373,600
				Total liabilities			16,687,800				14,174,400
Commitments and contingencies (Note 10)
Stockholders’ equity:
		Preferred stock, $.001 par value; authorized 1,000,000 shares, 2,000 and 2,200, respectively, of Series A convertible preferred stock issued and outstanding, total liquidation preference $100 per share					100				100
		Common stock, $.001 par value; authorized 20,000,000 shares; 7,362,400 and 7,507,600 shares outstanding, respectively; 8,857,200 and 8,857,100 shares issued, respectively					8,900				8,900
		Additional paid-in capital					30,589,300				30,600,700
		Retained (deficit) earnings					(6,797,900	)			133,500
		Less treasury stock, at cost, 1,494,800 and 1,349,500 shares, respectively					(6,080,500	)			(5,500,700	)
				Total stockholders’ equity			17,719,900				25,242,500
				Total liabilities and stockholders’ equity		$	34,407,700			$	39,416,900

The accompanying notes are an integral part of these consolidated balance sheets.

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CONSOLIDATED STATEMENTS OF OPERATIONS

					FOR THE YEARS ENDED DECEMBER 31,
					2001				2000				1999
Revenues					$	60,404,800			$	78,540,300			$	38,618,700
Costs related to revenues						40,999,200				54,971,900				25,003,600
			Gross profit margin			19,405,600				23,568,400				13,615,100
Selling, general and administrative expenses						19,764,100				19,471,900				10,578,000
Depreciation and amortization expense						2,898,100				2,479,800				1,535,200
Other income						(335,200	)			(272,700	)			(173,000	)
Interest expense (income), net						548,300				164,000				(262,100	)
(Loss) income from continuing operations before income taxes						(3,469,700	)			1,725,400				1,937,000
		Benefit (provision) for income taxes				189,100				(1,531,600	)			(770,200	)
(Loss) income from continuing operations						(3,280,600	)			193,800				1,166,800
Discontinued operations (Notes 2 and 7):
(Loss) income from operations, net of income tax benefit (expense) of $321,900 for 2001, $731,600 for 2000 and $(19,800) for 1999						(1,260,000	)			(92,500	)			30,000
(Loss) gain on disposition of discontinued operations, net of income tax benefit (expense) of $42,100 for 2001 and $(399,600) for 1999						(2,390,700	)			—				329,200
(Loss) income from discontinued operations						(3,650,800	)			(92,500	)			359,200
Net (loss) income					$	(6,931,400	)		$	101,300			$	1,526,000
Earnings per common share — basic:
	(Loss) income from continuing operations				$	(0.45	)		$	0.02			$	0.14
	(Loss) income from discontinued operations					(0.49	)			(0.01	)			0.04
Net (loss) income per common share — basic					$	(0.94	)		$	0.01			$	0.18
Earnings per common share — diluted:
	(Loss) income from continuing operations				$	(0.45	)		$	0.02			$	0.14
	(Loss) income from discontinued operations					(0.49	)			(0.01	)			0.04
Net (loss) income per common share — diluted					$	(0.94	)		$	0.01			$	0.18

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

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[Additional columns below]

[Continued from above table, first column(s) repeated]

			RETAINED				TREASURY STOCK								TOTAL
			EARNINGS												STOCKHOLDERS'
			(DEFICIT)				SHARES				AMOUNT				EQUITY
BALANCES, December 31, 1998			$	(1,493,800	)			196,700			$	(724,500	)		$	28,515,700
	Issuance of common stock			—				—				—				30,000
	Issuance of treasury stock for employee stock purchase plan			—				(19,200	)			79,800				66,100
	Repurchase of common stock			—				508,600				(2,299,100	)			(2,299,100	)
	Common stock cancelled			—				(190,600	)			881,700				—
	Conversion of preferred stock into common stock			—				—				—				100
	Net income			1,526,000				—				—				1,526,000
BALANCES, December 31, 1999				32,200				495,500				(2,062,100	)			27,838,800
	Issuance of common stock upon acquisition			—				—				—				750,000
	Issuance of treasury stock for employee stock purchase plan			—				(15,100	)			62,400				53,400
	Repurchase of common stock			—				869,100				(3,501,000	)			(3,501,000	)
	Conversion of preferred stock into common stock			—				—				—				—
	Net income			101,300				—				—				101,300
BALANCES, December 31, 2000				133,500				1,349,500				(5,500,700	)			25,242,500
	Issuance of treasury stock for employee stock purchase plan			—				(10,000	)			40,800				29,400
	Repurchase of common stock			—				155,300				(620,600	)			(620,600	)
	Conversion of preferred stock into common stock			—				—				—				—
	Net loss			(6,931,400	)			—				—				(6,931,400	)
BALANCES, December 31, 2001			$	(6,797,900	)			1,494,800			$	(6,080,500	)		$	17,719,900

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

						FOR THE YEARS ENDED DECEMBER 31,
						2001				2000				1999
Cash flows from operating activities:
	Net (loss) income					$	(6,931,400	)		$	101,300			$	1,526,000
	Adjustments to reconcile net (loss) income to net cash provided by continuing operations:
			Loss (income) from discontinued operations				3,650,800				92,500				(359,200	)
			Depreciation and amortization				2,898,100				2,479,800				1,535,200
			Loss or disposal of assets				300				93,400				—
			Bad debt expense				216,000				154,600				—
			Undistributed earnings of Joint Venture				—				—				(173,000	)
			Deferred tax provision				—				113,900				(372,000	)
			Changes in operating assets and liabilities, net of acquisitions:
				Decrease (increase) in accounts receivable			2,376,600				(758,900	)			(416,900	)
				Increase in deferred charges and other current assets			(242,200	)			236,900				(979,100	)
				(Increase) decrease in other assets			(144,000	)			35,900				(15,400	)
				(Decrease) increase in accounts payable and accrued liabilities			(1,195,800	)			1,913,900				(1,212,700	)
				Increase (decrease) in deferred revenue			1,018,300				(2,180,200	)			2,382,800
			Net cash provided by continuing operations				1,646,700				2,283,100				1,915,700
Cash flows from investing activities:
	Acquisitions of businesses, net of cash acquired						(1,435,900	)			(4,514,400	)			(3,586,600	)
	Net proceeds from dispositions of businesses						—				—				3,337,100
	Expenditures for property and equipment						(376,200	)			(836,900	)			(838,700	)
			Net cash used in investing activities				(1,812,100	)			(5,351,300	)			(1,088,200	)
Cash flows from financing activities:
		Net borrowings on credit lines					629,500				59,000				—
		Proceeds from long-term debt					1,050,000				—				—
		Repayments of long-term debt					(1,882,500	)			(2,179,700	)			(710,000	)
		Repurchase of common stock					(620,500	)			(3,500,600	)			(2,299,100	)
		Issuance of treasury stock for employee stock purchase plan					29,400				53,000				66,200
			Net cash used in financing activities				(794,100	)			(5,568,300	)			(2,942,900	)
Net cash used in discontinued operations							(640,400	)			(460,000	)			(500,000	)
Net decrease in cash and cash equivalents							(1,599,900	)			(9,096,500	)			(2,615,400	)
Cash and cash equivalents — beginning of year							3,751,100				12,847,600				15,463,000
Cash and cash equivalents — end of year						$	2,151,200			$	3,751,100			$	12,847,600
Supplemental Cash Flow Information for Continuing Operations:
Cash paid during the year for interest						$	693,600			$	289,800			$	282,400
Cash paid during the year for income taxes						$	344,500			$	930,000			$	1,435,700