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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

FOR THE TRANSITION PERIOD FROM __________ TO __________.

COMMISSION FILE NUMBER
0-22582

TBA ENTERTAINMENT CORPORATION

(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 o.

     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. x

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

     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 June 28, 2002 on the American Stock Exchange) was approximately $12,716,700.

     As of March 31, 2003, 7,368,100 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. With a base of Fortune 1000 companies, fairs, festivals and recording artists as clients, TBA links global business with popular culture, enabling clients to maximize the impact of the message and the results achieved. TBA has nine offices spanning from Los Angeles to London including Nashville, Chicago, San Diego, Salt Lake City, Atlanta, Omaha and Seattle. TBA’s four business segments are as follows:

	•		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 offers 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 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, BEA Systems, Motorola, Sanofi, McDonald’s Corporation, and Mass Mutual. SAP accounted for 21% and 10% of total Company revenues in 2001 and 2000, respectively.

     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 and recognition events. TBA believes that it has benefited from the decision by an increasing number of major corporations to outsource their business communications and entertainment needs. TBA produced approximately 227 and 288 communication and entertainment events in 2002 and 2001, respectively. The reduced number of events reflects a reduction in customer demand during 2002 as a result of the continued impact of September 11 and the global economic slowdown. However, the

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recurring nature of certain 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 Communications division serves its nationwide client base from offices in Chicago, Nashville, Salt Lake City and San Diego. These offices were assembled via strategic acquisitions over the past five years. During 2002, TBA elected to close Corporate Communications offices in Atlanta, Dallas, Phoenix and New York. The closures were instituted to consolidate operations into larger, more profitable offices and, thus, reduce Company-wide expenses.

     Through its nationwide offices, 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 has made four strategic acquisitions over the past five years in assembling the Corporate Communications division. 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.

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 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, network television broadcast specials, point of purchase campaigns, premium/incentive programs, brand imaging campaigns, sponsorship fulfillment, 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 programs for clients that include Kelloggs, General Motors, and Nescafe. In addition, the Company has produced major television broadcast events and specials for clients that include Turner Sports, NASCAR, Blockbuster and Hard Rock Café. The Entertainment Marketing division also provides unique opportunities for the Company to show case artist management clients In addition, relationships with corporate sponsors also create opportunities to sell corporate communications 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 effect on the Company’s revenues.

     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 web cast in 2000, 2001 and 2002. In lieu of cash distributions of profits from

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EELLC, the Company was entitled to receive a percentage of the gross revenues 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. In December 2002, TBA sold its interest in EELLC.

     TBA has made two strategic acquisitions in the past five years, increasing the Company’s competitive position in the entertainment marketing industry, including the February 2001 acquisition of Moore Entertainment, Inc., a producer of music tours and corporate sponsored events. Management believes that there are a number of companies who compete with TBA in providing entertainment marketing services including specialty marketing companies, advertising agencies and other media and entertainment companies. Like the corporate communications business, the most important competitive factors include creative and production capabilities, quality and price. The Company believes that many of these competitors have been in business longer and have greater resources than those of the Company.

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 100 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 April 2000. The Company believes that the fairs and festivals industry is highly fragmented and its competitors consist of primarily small, regional Companies that, like the Company, have long standing relationships with their clients. The most important competitive factors are the ability to provide the fairs and festivals with quality music entertainment at a competitive price and to produce an exceptional entertainment event. The Company believes that it can compete successfully in this market by utilizing the Company’s extensive entertainment relationships with artists and artist booking agencies to secure musical talent while utilizing the Company’s production capabilities to produce a high quality event.

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ARTIST MANAGEMENT

     The Artist Management division develops and implements career strategies for music industry artists, including high-profile artists in country music (such as Brooks & Dunn, Terri Clark and Clay Walker), classic rock (such as Styx, Foreigner and Survivor), alternative rock (such as Papa Roach) and contemporary Christian (such as Point of Grace and Jaci Velasquez). The Company, as a leader in the production of corporate communications and entertainment programs, entertainment marketing initiatives, special events and 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 that 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 five strategic acquisitions over the past five years in assembling the Artist Management division, including the July 2001 acquisition of Alliance Artists Ltd, which manages Styx, Survivor, Joe Stark Band and others. In 2000, 2001 and 2002, the Company also added other artist managers, representing artists such as Papa Roach, 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, within various music genres, including country, 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. Accordingly, this former segment is accounted for as a discontinued operation.

BUSINESS SEGMENT INFORMATION

     The Company classifies its operations into the four business segments discussed above. See Note 12 to the consolidated financial statements contained in Item 8 of this 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 obtained registered trademarks for the “ TBA Entertainment Corporation” mark for television show production and programming. The Company has also filed Intent-To-Use Trademark Applications for the “TBA Entertainment Corporation” mark for the various other 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 materially and adversely could affect the Company.

EMPLOYEES

     As of December 31, 2002, the Company had approximately 130 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 corporate communication or 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 eight cities in which the Company operates. These leases expire at various dates through September 2006. As of December 31, 2002, the Company’s wholly-owned subsidiary, TBA Entertainment Group Dallas, Inc., owned the building in which its offices and production facilities were located, as well as certain vacant land adjacent to such building. As a result of the Company’s decision to close the Dallas office, the Dallas facility was reclassified as “Asset Held for Sale” as of December 31, 2002. In February 2003, the Company sold the land and building, using the proceeds to reduce the balance of its bank credit facility.

     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.

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ITEM 3. LEGAL PROCEEDINGS.

     In November 2001, a Complaint was filed in the Marion County Superior Court in the State of Indiana against TBA alleging breach of contract arising with respect to the tax indemnification provisions contained in the Stock Purchase Agreement related to the purchase by TBA of a merchandising company, now classified as discontinued operations. The issue is the amount, if any, that is due pursuant to the indemnification provision. In January 2003, TBA and the plaintiff agreed to arbitrate this dispute, which arbitration is tentatively scheduled for May 2003. Management does not believe that the outcome of this dispute will have a material adverse effect on the consolidated financial condition or results of operations of the Company.

     In January 2003, a Petition was filed in the Civil Court of New York against TBA alleging breach of contract arising from a real estate lease for office space in New York City. In 2002, TBA terminated its operations in New York and ceased paying rent in July 2002. TBA continued to try to sublease this office space throughout the remainder of 2002. The Petition seeks unpaid rent through the date of the filing, in the amount of approximately $140,000. The Company is in negotiations with the plaintiff in an effort to negotiate a buy-out of the remaining lease obligation. Management believes that it has adequately reserved for this obligation as of December 31, 2002.

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

     The annual meeting of stockholders of TBA Entertainment Corporation was held on November 20, 2002.

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

     In addition, the stockholders voted 6,825,467 shares in ratification of BDO Seidman, LLP as the Company’s independent public accountants for the year ending December 31, 2002. Stockholders voted 51,100 shares against ratification of BDO Seidman, LLP with 4,000 shares abstaining.

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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.” On March 31, 2003, the last reported sale price of the Common Stock was $0.76 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 during each quarterly period within the two most recent fiscal years.

	(b)		The approximate number of holders of record of Common Stock on March 31, 2003 was 141.
	(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.
	(d)		The following table summarizes as of December 31, 2002, the shares of Common Stock authorized for issuance under the Company’s equity compensation plans:

EQUITY COMPENSATION PLAN INFORMATION

     The only equity compensation plan of the Company that was not approved by the Company’s stockholders is the 1995 Stock Option Plan. The options outstanding under this plan were originally granted between August 1995 and April 1996. All of such options are fully vested and expire 10 years from the date of grant.

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ITEM 6. SELECTED FINANCIAL DATA

1)		Prior to 1998, the Company acquired and operated certain businesses that were sold in 1998. In 1999, the Company acquired a business that was discontinued in 2001. The discontinuation and sale of these businesses has resulted in the reclassification of the operating results and net assets and liabilities of these businesses to discontinued operations for all periods presented.
		The Company has completed ten acquisitions from 1998 to 2001. No acquisitions were made in 2002. Results of operations of each of these acquisitions are included from their respective acquisition dates. The accounting for these acquisitions was in accordance with the purchase method of accounting.
2)		Working capital represents total current assets (excluding net short-term assets of discontinued operations) less total current liabilities (excluding net short-term liabilities of discontinued operations).
3)		In September 2002, the Company reduced its recorded goodwill and long-term debt by $3,518,400, representing the outstanding amount of promissory notes that are subject to earn-out adjustments, as payment of such amounts was no longer considered probable. See Note 5 to the Consolidated financial Statements contained in Item 8 of this Form 10-K for further discussion concerning the Company’s long-term debt.
4)		Long-term debt excludes notes payable and current portion of long-term debt totaling $1,617,200, $1,830,000, $3,049,600, $2,913,200 and $759,600 as of December 31, 2002, 2001, 2000, 1999 and 1998, respectively.
5)		Upon the 2002 adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and other Intangible Assets”, the Company tested its goodwill for impairment. Based on the estimated fair market value of its fairs and festivals group, the Company recorded a goodwill impairment loss in the first quarter of 2002 of $1,988,600 associated with the fairs and festivals reporting unit.

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6)

EBITDA is defined as earnings from continuing operations before interest income and expense, income taxes and depreciation and amortization. EBITDA is presented supplementally because management believes it allows for a more complete analysis of results of operations. This information should not be considered as an alternative to any measure of performance or liquidity as promulgated under accounting principles generally accepted in the United States (such as net income or cash provided by or used in operating, investing or financing activities), nor should it be considered as an indicator of the overall financial performance of the Company. The Company’s calculation of EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

The calculation of EBITDA is shown below:

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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 20.

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 nine offices to serve its client base. In 2000, the Company completed the acquisitions of Romeo Entertainment Group in January and EJD Concert Services (“EJD”) (in March) (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 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 business segments. See Note 12 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.

Critical Accounting Policies

     In response to the SEC’s Release No. 33-8040, “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, costs related to revenue and impairment of intangibles and other long-lived assets.

Revenue Recognition

     The Company continues to derive a majority of its revenues (61%, 70%, and 70% of total revenues for the years ended December 31, 2002, 2001 and 2000, 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 event are also deferred until the event occurs. At December 31, 2002, deferred revenue was $3,560,200 compared to $3,335,600 at December 31, 2001.

     The remainder of the Company’s revenues are generated from its roster of artist clients (10%, 6% and 4% of total revenues for the years ended December 31, 2002, 2001 and 2000, respectively), entertainment marketing clients (8%, 8% and 15% of total revenues for the years ended December 31, 2002, 2001 and 2000, respectively) and fairs and festivals clients (21%, 16% and 11% of total revenues for the years ended December 31, 2002, 2001 and 2000). 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 and when the event has occurred.

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     Costs Related to Revenue

     Costs related to revenue is comprised of all costs associated with the production of an event, including talent fees, contracted services, equipment rentals, costs associated with the production of audio-visual effects and the cost of internal production labor. Direct out-of-pocket costs are deferred until the event occurs. Internal production labor costs are expensed as incurred. At December 31, 2002, deferred costs were $1,030,700 compared to $424,200 at December 31, 2001.

     Impairment of Intangibles

     Intangible assets consist primarily of goodwill arising from business combinations

     Upon the 2002 adoption of Statement of Financial Accounting Standard No. 142, “Goodwill and other Intangible Assets”, the Company tested its goodwill for impairment. Based on the estimated fair market value of its fairs and festivals group, the Company recorded a goodwill impairment loss in the first quarter of 2002 of $1,988,600 associated with the fairs and festivals reporting unit. The Company no longer records amortization of goodwill and performs an annual impairment test in the fourth quarter. During the year management will also review each quarter for other factors that may indicate impairment.

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FINANCIAL IMPACT OF SEPTEMBER 11 TERRORIST ATTACKS AND GLOBAL ECONOMIC SLOWDOWN

     The September 11, 2001 terrorist attacks 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. The Company also experienced some cancellations of programs that were scheduled to take place in early 2002. The global economic slowdown that began in 2001, and which was exacerbated by the terrorist attacks, has continued to impact the Company’s corporate client business activity throughout 2002, with particular impact during the first half of 2002.

     In response to this reduction in revenues, the Company took 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 throughout 2002 include reductions in headcount (28% since August 31, 2001) and related compensation costs, elimination of unprofitable offices, elimination of certain incentive compensation costs, and a reduction in travel-related and other general and administrative expenses. As a result of these actions, the Company’s operating results, EBITDA and cash flows improved in the second half of 2002, from the levels the Company experienced in the second half of 2001 and first half of 2002.

     Based on the Company’s current sales activity, and absent major additional external disruptions, the Company expects that consolidated revenues for 2003 will remain relatively consistent with 2002 revenues through the first half of 2003; with increasing revenues in the second half of 2003 due to new programs the Company has already been awarded. As a result of the expected increase in revenues and impact of reduced operating expenses, management believes that the Company’s operating results and EBITDA will improve in 2003 over the results achieved in 2002.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

     Revenues decreased $11,273,000, or 19%, to $49,131,800 for 2002 from $60,404,800 for 2001. Revenues from the corporate client group decreased $12,227,500, or 29%, from $42,194,200 2001 to $29,966,700 in 2002. The number of corporate client events decreased to 227 in 2002 from 288 in 2001, due to a reduction in customer demand during 2002 as a result of the continued impact of September 11 and the global economic slowdown as more fully described in “Financial Impact of September 11 Terrorist Attacks and Global Economic Slowdown” above. The average revenue per event decreased to $131,300 per event for 2002, compared to $146,500 per event for 2001 due to a reduction in the number of large corporate events produced in 2002. In 2002, the Company produced 32 events with revenues in excess of $250,000, versus 36 such events in 2001. The reduction is due primarily to certain larger corporate events that occurred in 2001, which were not repeated or were scaled back due to the global economic slowdown.

     Revenues from the entertainment marketing client group decreased $754,700, or 15%, from $4,871,100 in 2001 to $4,116,400 in 2002. The decrease is primarily due two larger 2001 entertainment marketing programs that did not repeat in 2002. The decrease was partially offset by an increase in the number of smaller entertainment marketing programs and promoted music tour dates occurring in 2002.

     Revenues from artist clients, which were not significantly impacted by the September 11, 2001, terrorist attacks, increased $1,013,100, or 22%, to $4,672,800 in 2002 from $3,659,700 in 2001. Of this increase, $458,400 is attributed to a full year of operations of Alliance, which was acquired in July 2001. The remaining increase is due to revenues generated by our TBA’s expanding roster of artist clients.

     Revenues from the fairs and festivals client group increased $695,900, or 7%, to $10,375,900 in 2002 from $9,680,000 in 2001. This increase is reflective of the 25% increase in the number of fairs and festivals programs represented by TBA to 217 in 2002 from 174 in 2001.

     Cost of revenues decreased $7,989,100, or 19%, to $33,010,100 for 2002 from $40,999,200 for 2001. The decrease is attributable to the overall decrease in revenues for the corporate client and entertainment marketing client groups from 2001 to 2002. Cost of revenues, as a percentage of revenues, decreased 1%, resulting in an increase in gross profit margin to 33% for 2002 from 32% in 2001. The increase is primarily attributable to the 22% increase in artist client revenues, which generally have minimal direct costs of revenues, offset by lower gross profit margins on revenues from the corporate communications and entertainment marketing client groups. The lower gross profit margins are a result of a more competitive corporate environment brought about by the global economic slow down and an increase in the number of promoted music tour dates, which generally have a lower gross profit margin.

     Selling, general and administrative expenses decreased $3,323,800, or 17%, to $16,440,300 for 2002 from $19,764,100 for 2001. The decrease results primarily from a comparative decrease in sales expense attributable to the reduced level of revenues and cost

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savings implemented beginning in the third quarter of 2001, including reductions in headcount and related compensation costs, elimination of costs attributable to unprofitable operations, elimination of certain incentive compensation costs and a reduction in travel-related and other general and administrative expenses. The decrease is partially offset by the impact of incremental selling, general and administrative expenses associated with the 2001 Acquisitions, a $250,000 reserve for an account receivable from a corporate client in bankruptcy, a $481,600 accrual for termination costs associated with closed offices and approximately $280,000 of costs associated with the termination of certain transactional discussions.

     Excluding 2001 goodwill amortization of $2,069,800, depreciation expense and other amortization decreased $150,800, or 8%, to $677,600 in 2002 from $828,400 for 2001. The decrease results primarily from the retirement of certain equipment and other equipment being fully depreciated. The Company adopted FAS142 in 2002 and no longer amortizes goodwill.

     Other income for 2002 includes $364,800 from the reversal of accrued interest expense recorded in prior years associated with contingent promissory notes payable related to certain of the Company’s acquisitions in 1999-2001. The Company is no longer accruing interest on this contingent purchase price consideration because payment is not considered probable. Other income for both years included income from an agreement with EELLC, which provided for the Company to receive a percentage of gross revenues of EELLC. The Company received $63,000 in 2002 compared to $299,700 in 2001 under this agreement. In December 2002, the Company sold its interest in EELLC.

     Net interest expense decreased $81,400 to $466,900 for 2002, versus net interest expense of $548,400 for 2001. The decrease is attributable primarily to no longer accruing interest expense related to contingent purchase price consideration and lower interest expense from repayments of other acquisition notes payable, offset by increased interest expense associated with additional bank borrowings.

     The income tax benefit for 2002 is $860,000 or 83%, on a loss from continuing operation before taxes of $1,035,400 compared to an income tax benefit of $189,100, or 5%, for 2001 on a loss from continuing operations before taxes of $3,469,700, and reflects statutory tax rates adjusted for estimated permanent book/tax differences. The primary reason contributing to the income tax benefit increase in the current year is the additional recoverable federal taxes paid in prior years. At December 31, 2002, no further income tax carryback is available.

     In 2002, the Company recognized a goodwill impairment loss of $1,988,600 related to the adoption of SFAS No. 142, “Goodwill and Other Intangibles”. Pursuant to the transitional rules of SFAS No. 142, this loss was recorded in the first quarter of 2002 as a cumulative effect of accounting change. There was no tax effect of this impairment as none of the goodwill impairment loss was deductible for tax purposes.

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 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 2001 from $127,600 for 2000. During 2001, the Company produced 36 corporate client events with revenues in excess of $250,000 compared to 48 such events during 2000. 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.

     Revenues from entertainment marketing clients 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.

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     Revenues from artist clients, 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 July 2001 acquisition of Alliance, offset in part by the loss of revenue in 2001 from to the departure of an artist client.

     Revenues from fairs and festivals clients 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 March 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 EELLC, which provided for the Company to receive a percentage of gross revenues, as defined, of EELLC. 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.

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. Operating results of this business segment and other information for discontinued operations appear in the notes to consolidated financial statements captioned “Dispositions” (Note 7).

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LIQUIDITY AND CAPITAL RESOURCES

     The September 11, 2001 terrorist attacks 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. The Company also experienced some cancellations of programs that were scheduled to take place in early 2002. The global economic slowdown that began in 2001, and which was exacerbated by the terrorist attacks, has continued to impact the Company’s corporate client business activity throughout 2002, with particular impact during the first half of 2002.

     Primarily as a result of the operating losses incurred in 2002, cash and cash equivalents at December 31, 2002 were $1,527,800, compared to $2,151,200 at December 31, 2001. In addition, the Company had a working capital deficit of $3,622,000 at December 31, 2002 compared to a working capital deficit of $2,636,000 at December 31, 2001. Both years exclude discontinued operations.

     In order to provide additional working capital and to repay certain maturing bank indebtedness, the Company entered into a bank credit facility in October 2001. The credit facility provided for maximum borrowings of up to $4,050,000. The credit facility was comprised of: (a) a $1,050,000 term loan, repayable in monthly principal installments of $43,750 commencing November 1, 2001, with an original maturity date of September 30, 2003; and (b) a revolving credit line of up to $3,000,000, with an original maturity date of June 30, 2003. The credit facility was initially 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 loan agreement. 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). 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 that were outstanding in October 2001. 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 Company was not in compliance with certain required financial ratios, specifically a debt/EBITDA ratio, a fixed charge ratio and a minimum net worth ratio, as of December 31, 2001. Pursuant to an April 2002 restructuring agreement with the bank, the Company was granted a temporary waiver of the financial covenant events of default provisions under the original loan agreement and the bank’s forbearance from exercising its available remedies, which extended through January 2, 2003. In addition, new financial covenants were established and the Company 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, which was sold in February 2003 with the bank’s consent (see Note 11). The maturity date for both the term loan and revolving credit line was extended to April 30, 2003.

     The bank also agreed to provide the Company $500,000 of additional financing (“New Bank Loan”). The New Bank Loan was conditioned upon the funding of a second loan of $500,000 (“Affiliate Loan”) from an entity controlled by the Chief Executive Officer of the Company (“Heritage”). The New Bank Loan and the Affiliate Loan were repaid in June 2002, upon receipt of the Company’s federal income tax refund. In addition, the Company repaid $659,400 on the revolving credit line with proceeds from the Company’s federal income tax refund.

     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 was secured by 950,336 shares of common stock held by the Chief Executive Officer (772,876 shares) and President (177,460 shares) of the Company and a personal guaranty of the President of the Company. The Pass-Through Loan was 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 accrued at 12% per annum. These costs were passed-through to the Company as part of the Affiliate Loan.

Although the Company has maintained its aggressive sales improvement efforts, the Company was in technical noncompliance with the revised financial covenants under the restructured bank credit facility as of December 31, 2002. In February 2003, the bank required the Company to use the proceeds from the sale of its Dallas facility (see Note 11), to repay the outstanding balance of the term loan ($393,700) and a portion of the revolving credit line ($92,500). After this repayment, there was $2,248,000 outstanding under the revolving credit line. In April 2003, the Company and the bank negotiated a further restructuring of the bank credit facility (“2003 Restructuring”). Pursuant to the 2003 Restructuring, the Company was granted a new waiver of the financial covenant events of default and the bank’s continued forebearance from exercising its available remedies, which now extends through January 1, 2004. In addition, the Company was granted the right to re-borrow up to $750,000 under the revolving credit line through May 31, 2003, for the purpose of making scheduled principal and interest payments and additional earn-out payments under the acquisition notes as well as for working capital purposes. Subsequent to May 31, 2003, the then outstanding

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balance of the revolving credit line will be converted to a term loan (“2003 Term Loan”) and the Company will be required to make seven equal monthly principal payments from June 30, 2003 through December 31, 2003. The total amount to be repaid will equal the greater of the amount re-borrowed through May 31, 2003 or that amount which will cause the Company to be in compliance with the financial covenants contained in the October 2001 credit agreement. Interest will continue to be paid monthly. All remaining amounts outstanding under the 2003 Term Loan will be due April 30, 2004. The 2003 Restructuring provided for new financial covenants and reporting requirements and included provisions for an accelerated maturity date upon the occurrence of certain events including, among other things, an Event of Default (as defined) or the sale or change of control of a material amount of the Company’s assets. In consideration for entering into the 2003 Restructuring and for providing the first $500,000 of re-borrowings, the Company will pay the bank a fee of $40,000, payable $20,000 in August and October of 2003, and issued 177,645 warrants to purchase shares of common stock of the Company at an exercise price of $0.75 per share. If the 2003 Term Loan is repaid on or before December 31, 2003 and there has been no sale of the Company within the six month period prior to repayment, the bank will return to the Company the lessor of (i) the unexercised warrants on such date and (ii) 88,822 warrants. If the Company re-borrows the remaining $250,000 available through May 31, 2003, the Company will issue additional warrants to the bank to purchase common stock of the Company at the rate of one warrant for every two dollars borrowed and at an exercise price of $0.01 per share.

     The Company incurred net losses during 2001 and 2002, has $3,622,000 of negative working capital at December 31, 2002, and will experience seasonally lower operating results for the first half of 2003. However, the Company has significantly reduced its operating expenses and anticipates increased revenues in the second half of 2003 due to new programs the Company has already been awarded. Accordingly, management believes its operating results, EBITDA and cash flows for 2003 will improve from the levels the Company experienced in 2002. 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. Management believes that the Company’s future cash flows from operations, its current cash reserves and availability of funds under its revolving credit line will be sufficient to satisfy its current and future debt service and working capital requirements through at least March 31, 2004. However, there is no assurance that management’s assumptions will correspond to actual events.

     The Company is also exploring strategic opportunities for the Company. The Company has retained an investment-banking firm 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.

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Cash Flow Statement Analysis

     Summarized Statements of Cash Flow

     Cash provided by continuing operations was $1,540,500, $ 1,646,700, and $ 2,283,100 for 2002, 2001 and 2000, respectively. The reduction in each year is due primarily to net losses from continuing operations incurred in 2001 and 2002, offset by the add-back of non-cash depreciation and amortization and other items, the timing of collections of accounts receivable and payment of accounts payable and accrued liabilities and the timing of deferred revenues and deferred charges associated with programs occurring in the following year.

     Cash used in investing activities was $1,637,100, $ 1,812,100, and $5,351,300, in 2002, 2001 and 2000, respectively. In all years, cash was used to fund additional earn-out payments for acquisitions made in prior years. In 2001, initial cash payments were also made to acquire Moore ($1,100,000) and Alliance ($100,000) and in 2000, initial cash payments were also made to acquire Romeo ($3,475,000) and EJD ($540,000). Capital expenditures were $51,600, $376,200 and $836,900 in 2002, 2001 and 2000, respectively. Capital expenditures were higher in 2000, corresponding to the Company’s expansion during that period. Capital expenditures in 2001 and 2002 represent primarily replacements of computer equipment.

     Cash used in financing activities was $511,800, $794,100, and $5,568,300 for 2002, 2001, and 2000, respectively, resulting primarily from the payment of bank and acquisition debt and from the 2001 and 2000 purchases of treasury shares pursuant to the Company’s stock repurchase program.

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Commitments

     Future minimum annual commitments under bank and other debt agreements and non-cancelable operating leases as of December 31, 2002, are as follows:

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

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 political, 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.

Other Recently Issued Accounting Standards.

     In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 144, (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses the financial accounting and reporting for the impairment of long-lived assets. This statement supersedes Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions for the disposal of a segment of a business of APB Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” The adoption of SFAS 144 in fiscal 2002 did not have a material impact on the financial position or results of operations of the Company. See note “for discussion of sale of Dallas land and building.

     In April 2002, the FASB issued Statement No. 145 (SFAS No. 145), “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” effective on or after May 15, 2002. This Statement rescinds SFAS No. 4 and an amendment of that Statement, and SFAS No. 64. This Statement also rescinds SFAS No. 44. This Statement amends SFAS No. 13, to eliminate an inconsistency between the required accounting for certain lease modifications that have economic effects that are similar to sale leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The adoption of SFAS No. 145 did not have a material effect on the Company’s financial position or results of operations.

     In June 2001, the FASB issued Statement No. 143 (SFAS No. 143), “Accounting for Asset Retirement Obligations,” effective for fiscal years beginning after June 15, 2002. The Statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the

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liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The adoption of SFAS No. 143 is not expected to have a material effect on the Company’s financial position or results of operations.

     In June 2002, FASB issued Statement No. 146 (SFAS No. 146), “Accounting for Costs Associated with Exit or Disposal Activities,” effective for activities that are initiated after December 31, 2002, with early application encouraged. This Statement 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 adoption of SFAS No. 146 is not expected to have a material effect on the Company’s financial position or results of operations.

     In December 2002, FASB issued Statement No. 148 (SFAS No. 148), “Accounting for Stock Based Compensation — Transition and Disclosure — An Amendment of FASB Statement No. 123.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company is required to follow the prescribed format and provide the additional disclosures required by SFAS No. 148 in its annual financial statements for the year ended December 31, 2002 and must also provide the disclosures in its quarterly reports containing condensed financial statements for interim periods beginning with the quarterly period ended March 31, 2003. The adoption of SFAS No. 148 did not have a material effect on the Company’s financial position or results of operations.

     In November 2002, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which disclosures are effective for financial statements issued after December 15, 2002. The Company adopted the disclosure requirements of FIN 45 as of December 31, 2002. The adoption of the measurement requirements of FIN 45 will not have a material impact on the Company’s financial position or results of operations.

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 on the Company’s bank credit facility are at variable interest rates. All other borrowings are at fixed rates. At December 31, 2002, the Company had $2,340,600 outstanding under a revolving credit facility at an interest rate of 4.51% 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.

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 CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders of TBA Entertainment Corporation:

We have audited the accompanying consolidated balance sheet of TBA Entertainment Corporation (a Delaware corporation) and subsidiaries as of December 31, 2002 and the related consolidated statements of operation, stockholders’ equity and cash flows for the year then ended. 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 audit. The consolidated financial statements of TBA Entertainment Corporation and subsidiaries as of December 31, 2001 and for each of the two years then ended (before revision) were audited by other auditors, who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated April 16, 2002.

We conducted our audit 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 audit provides 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, 2002 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed above, the financial statements of TBA Entertainment Corporation and subsidiaries as of December 31, 2001 and for each of the two years in the period ended December 31, 2001, were audited by other auditors, who have ceased operations. As described in Note 4, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures in Note 4 with respect to 2001 and 2000 included (i) agreeing the previously reported net income to the previously issued financial statements and the adjustments to reported net income representing amortization expense (including any related tax effects) recognized in those periods related to goodwill, to the Company’s underlying records obtained from management, and (ii) testing the mathematical accuracy of the reconciliation of adjusted net income to reported net income, and the related earnings per share amounts. In our opinion, the disclosures for 2001 and 2000 in Note 4 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 consolidated financial statements of the Company other than with respect to such disclosure and, accordingly, we do not express an opinion or any other form of assurance on the 2001 or 2000 consolidated financial statements taken as a whole.

The quarterly financial data in Note 13 contain information that we did not audit, and, accordingly, we do not express an opinion on that data. We did not review the quarterly data for the three month period ended March 31, 2002 in accordance with standards established by the American Institute of Certified Public Accountants because we were not engaged to do so.

BDO SEIDMAN, LLP

Los Angeles, California
February 21, 2003, except for Notes 1 and 5, which are as of April 10, 2003.

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This report is a conformed copy of the report previously issued by Arthur Anderson LLP and has not been reissued.

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, 2002 AND 2001

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

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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000