U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended August 31, 2003
-------------------------------------------------

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

For the transition period from ________________to___________________

Commission File Number 000-21623

OBIE MEDIA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

OREGON 93-0966515
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

4211 West 11th Ave., Eugene, Oregon 97402
- --------------------------------------------------------------------------------
(Address of principal executive offices)

541-686-8400 FAX 541-345-4339
- --------------------------------------------------------------------------------
(Issuer's telephone number)

Indicate by check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [ ].

As of October 1, 2003, 5,908,577 shares of the issuer's common stock were
outstanding.

OBIE MEDIA CORPORATION
FORM 10-Q
INDEX

PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----

Item 1. Financial Statements

Consolidated Balance Sheets as of August 31, 2003 and November 30, 2002 2

Consolidated Statements of Operations for the three month and nine month
periods ended August 31, 2003 and 2002 3

Consolidated Statements of Cash Flows for the nine months
ended August 31, 2003 and 2002 4

Notes to Financial Statements 5

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11

Item 3. Quantitative and Qualitative Disclosures about Market Risk 20

Item 4. Controls and Procedures 20

PART II - OTHER INFORMATION
- ---------------------------

Item 4. Submission of Matters to Vote of Security Holders 20

Item 6. Exhibits and Reports on Form 8-K 20

Certifications 21

Item 1. Financial Statements
- -----------------------------

OBIE MEDIA CORPORATION
Consolidated Balance Sheets

ASSETS

August 31, November 30,
2003 2002
(Unaudited)
------------ ------------

CURRENT ASSETS:
Cash $ 940,070 $1,815,886
Accounts receivable, net 5,367,000 7,327,681
Prepaids and other current assets 5,725,770 4,990,859
Deferred income taxes 1,742,204 1,732,395
------------ ------------
Total current assets 13,775,044 15,866,821

Property and equipment, net 15,035,857 15,864,193
Goodwill, net 5,448,552 5,448,552
Other assets 821,290 947,322
------------ ------------
$35,080,743 $38,126,888
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt $15,509,881 $2,847,311
Working capital revolver 3,790,483 2,980,483
Accounts payable 220,590 283,075
Accrued transit fees 501,818 1,102,519
Accrued expenses 775,016 737,698
Income taxes payable 113,881 0
Unearned revenue 761,119 767,637
------------ ------------
Total current liabilities 21,672,788 8,718,723

Deferred tax 1,586,930 1,573,729
Other liabilities 20,127
Long-term debt, net 3,636,733 17,707,306
------------ ------------
Total liabilities 26,916,578 27,999,758
------------ ------------

Shareholders' equity:
Preferred stock, without par value, 10,000,000 shares
authorized, no shares issued or outstanding
Common stock, without par value, 20,000,000 shares
authorized, 5,908,577 shares issued and outstanding 17,272,128 17,272,128
Other comprehensive income (loss) (46,566) 5,350
Accumulated deficit (9,061,397) (7,150,348)
------------ ------------
Total shareholders' equity 8,164,165 10,127,130
------------ ------------
$35,080,743 $38,126,888
============ ============

See accompanying notes

OBIE MEDIA CORPORATION
Consolidated Statements of Operations
(Unaudited)

Three Months Ended August Nine Months Ended August
------------------------- -------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------

REVENUES:
Transit advertising $ 9,506,089 $ 9,754,948 $25,453,336 $27,116,736
Outdoor advertising 1,857,271 1,851,931 5,242,898 5,274,821
------------ ------------ ------------ ------------
Net revenue 11,363,360 11,606,879 30,696,234 32,391,557
------------ ------------ ------------ ------------

OPERATING EXPENSES:
Production and installation 1,470,753 1,609,810 4,392,478 4,833,381
Transit and outdoor occupancy 5,289,138 4,800,044 13,459,925 13,357,770
Selling 1,941,640 2,015,934 5,766,680 6,809,874
General and administrative 1,930,299 1,868,087 5,449,891 5,787,606
Depreciation and amortization 450,572 547,696 1,369,516 1,642,582
------------ ------------ ------------ ------------
Total operating expenses 11,082,402 10,841,571 30,438,490 32,431,213
------------ ------------ ------------ ------------

Operating income ( loss) 280,958 765,308 257,744 (39,656)

OTHER (INCOME) EXPENSE:
Interest expense 625,239 558,990 1,752,997 1,191,033
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (344,281) 206,318 (1,495,253) (1,230,689)

INCOME TAX PROVISION (BENEFIT) (25,431) 60,316 109,100 60,316
------------ ------------ ------------ ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS (318,850) 146,002 (1,604,353) (1,291,005)

DISCONTINUED OPERATIONS, NET OF INCOME TAXES (88,195) (123,682) (306,696) (728,515)
------------ ------------ ------------ ------------

NET INCOME (LOSS) $ (407,045) $ 22,320 $(1,911,049) $(2,019,520)
============ ============ ============ ============

Earnings (loss) per share:
Basic and diluted, from continuing operations $ (0.05) $ 0.02 $ (0.27) $ (0.22)
Basic and diluted, discontinued operations $ (0.02) $(0.02) $ (0.05) $ (0.12)
Basic and diluted, on net income (loss) $ (0.07) $ 0.00 $ (0.32) $ (0.34)

See accompanying notes

OBIE MEDIA CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)

Nine Months Ended August 31,
----------------------------
2003 2002
------------ -------------

Cash Flows From Operating Activities:
Net loss $(1,911,049) $ (2,019,519)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,242,061 1,599,278
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 1,960,681 3,275,576
Prepaid and other assets (618,688) 1,106,087
Increase (decrease) in:
Acccounts payable (62,485) (711,058)
Other liabilities (442,820) (3,892,307)
------------ -------------
Net cash provided from (used in) operating activities 167,700 (641,943)
------------ -------------

Cash Flows From Investing Activities:
Capital expenditures (413,725) (748,285)
------------ -------------
Net cash used in investing activities (413,725) (748,285)
------------ -------------

Cash Flows From Financing Activities:
Net borrowings on line of credit 810,000 2,718,366
Borrowings of long-term debt 92,679 1,300,000
Payments on long-term debt (1,480,555) (696,684)
Other 0 (3,999)
------------ -------------
Net cash (used in) provided from financing activities (577,876) 3,317,683
------------ -------------

Effect of exchange rate changes on cash (51,915) (6,794)

Net (decrease) increase in cash (875,816) 1,920,661
Cash, beginning of period 1,815,886 404,473
------------ -------------
Cash, end of period $ 940,070 $ 2,325,134
============ =============

See accompanying notes

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The interim financial statements have been prepared by Obie Media
Corporation ("Obie," "Obie Media" or the "Company") without audit. In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments necessary to present fairly the financial position of the
Company as of August 31, 2003 and 2002, and the results of operations and cash
flows of the Company for the nine months ended August 31, 2003 and 2002, as
applicable. The condensed consolidated financial statements include the accounts
of the Company and its subsidiaries, and all significant intercompany accounts
and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by rules and regulations
of the Securities and Exchange Commission. The organization and business of the
Company, accounting policies followed by the Company and other information are
contained in the notes to the Company's financial statements filed as part of
the Company's November 30, 2002 Form 10-K. This quarterly report should be read
in conjunction with such annual report.

2. CONTRACT TERMINATION

On December 5, 2001 the Company received notice from the Chicago
Transit Authority (CTA) that it was terminating the Company's transit
advertising agreement effective as of that date. The Company and the CTA had
been disputing settlement of 2001 transit fees in light of the nature of the
early termination and a shortage of advertising space made available to the
Company, and the parties entered into an agreement effective May 28, 2002
resolving all of the outstanding issues.

The agreed upon fee for the 2001 contract year has been settled at $17
million, substantially less than the original contracted guaranteed payment of
$21.8 million. As of May 31, 2002, approximately $7.5 million had been paid to
the CTA, and an additional $1.5 million was paid on June 1, 2002. The balance is
payable in substantially equal monthly payments of $116,080 beginning June 1,
2002 and ending May 1, 2007, with an additional $1.0 million balloon payment due
January 1, 2004. The monthly payments are without interest through May 2003, and
include a 5% interest charge thereafter. These periodic deferred payments have
been valued using a junior unsecured discount rate of 15%, resulting in a
present value of approximately $5.4 million as of August 31, 2003.

3. DEBT AGREEMENTS

The Company's credit arrangements with U.S. Bank include a $13.8
million term loan revolver and a $4.5 million working capital revolver, both
maturing on December 15, 2003, and are collateralized by substantially all of
the assets of the Company. The term loan revolver limits decrease quarterly
through the maturity date. The interest rates are at U.S. Bank's prime rate plus
3.75% for the term revolver and prime rate plus 3.25% for the working capital
revolver. At August 31, 2003 the effective rates were 7.75% and 7.25% for the
term loan and working capital revolvers respectively. The amount outstanding
under the term revolver was $13,500,000 and $3,790,483 under the working capital
revolver at August 31, 2003. Because the Company's debt agreements expire in
December 2003, all of the outstanding debt has been classified as current. The
Company expects to replace these credit arrangements with alternate arrangements
which will contain terms and conditions typical for the media industry.
Management is actively engaged with discussions with other lenders.

The U.S. Bank loan agreements contain certain restrictive covenants and
required ratios. These include Fixed Charge Coverage, Interest Coverage and
Leverage ratios and a minimum EBITDA level covenant, all of which are measured
quarterly. On February 25, 2003 U.S. Bank and Obie agreed to a revised credit
facility which included a reduction in the working capital line of credit to
$4.5 million, modifications of the above mentioned financial ratios and
covenants, and a reduction of principal payment requirements for fiscal 2003.
$710,000 was available under the working capital line of credit as of August 31,
2003. The revised agreement extends the term of the credit facility through
December 15, 2003, when both the term revolver and working capital credit line
expire. As of August 31, 2003, the Company was not in compliance with the
revised covenants. The Company expects to replace these credit arrangements with
alternative arrangements which will contain terms and conditions typical for the
media industry. Management is actively engaged in discussions with other
lenders.

The Company has an arrangement with Travelers Casualty & Surety Company
of America ("Travelers"), to bond the CTA settlement as well as to provide other
bonds required by the Company. The Company and Travelers have entered into a
security agreement whereby Travelers maintains a second secured position on
certain of the Company's assets, subordinate to the security arrangements with
US Bank or any other replacement primary lender.

4. ACCOUNTING FOR GOODWILL

In accordance with SFAS No. 142, goodwill amortization was discontinued
as of November 30, 2002. Goodwill at August 31, 2003 and November 30, 2002
amounted to $5,448,552, net of accumulated amortization of $2,181,571.
Summarized below are the effects on our net loss and per share data if we had
followed the amortization provisions of SFAS No. 142:

For the nine months ended August 31,
2003 2002
------------ -------------
Reported net loss ($1,911,049) ($2,019,519)
Addback goodwill amortization - 376,784
------------ -------------
Adjust net loss ($1,911,049) ($1,642,735)
============ =============

Basic and diluted loss per share:
Reported net loss ($0.32) ($0.34)
Goodwill amortization - 0.06
------------ -------------
Adjusted net loss ($0.32) ($0.28)
============ =============

5. INCOME TAXES

The provision for (benefit from) income taxes for the nine months ended
August 31, 2003 and 2002 differs from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to pretax income as follows:

Nine Months ended
August 31,
-----------------
2003 2002
-----------------

Statutory federal income tax rate (34.0%) (34.0%)
Increase in income taxes resulting from:
State and local taxes, net of federal benefit ( 3.6%) ( 3.6%)
Net operating loss valuation allowance 37.6% 37.6%
Foreign income taxes 7.3% 5.1%
------------------
Actual income tax rate 7.3% 5.1%
------------------

6. EARNINGS PER SHARE

Basic earnings per share (EPS) is calculated using the weighted average
number of common shares outstanding for the period and diluted EPS is calculated
using the weighted average number of common shares and dilutive common
equivalent shares outstanding. The following is a reconciliation of the basic
and diluted shares used in the per share calculation:

Nine Months Ended
August 31
2003 2002
------------ ------------
Basic shares (weighted average) 5,908,577 5,908,577
Dilutive effect of stock options - -
------------ ------------
Diluted shares 5,908,577 5,908,577
------------ ------------

At August 31, 2003 and 2002 the Company had options outstanding
covering 654,908 and 713,982 shares respectively of the Company's common.stock.
These common stock equivalents have not been included in Earnings Per Share
calculations since they would have been antidilutive for the three and nine
month periods ended August 31, 2003 and 2002.

7. COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS
No. 130). This statement establishes standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. The objective of SFAS No. 130 is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners. Comprehensive
income did not materially differ from reported net loss for the three and nine
month periods ended August 31, 2003 and 2002.

8. DISCONTINUED OPERATIONS

Effective during its fiscal year ending November 30, 2002, the Company
adopted Statements of Financial Accounting Standards No. 144 "Accounting for the
Impairment of Long-Lived Assets" (SFAS 144) and No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146).

Pursuant to these pronouncements, the Company has classified as
"Discontinued Operations" the results of operations and any exit costs
associated with transit agreements that were economically not viable, and/or
where the Company plans to or has already either exited the market or intends
not to be a competitive participant in new contract awards for expiring
agreements. Accordingly, the Company exited these markets and has no ongoing
advertising operations. These operations qualify as components of an entity with
separate financial reporting as described in SFAS No. 144. The assets associated
with the discontinued markets are, in the aggregate, not material. The U.S.
transit districts included in Discontinued Operations are: Chicago, San Antonio,
Cincinnati, Kitsap, Santa Cruz and Bridgeport. The Canadian transit districts
included are: Pickering, Whitby, Cambridge and St. Catharines. The Chicago (see
Note 2 above), Pickering, Whitby, Cambridge and St. Catharines contracts were
terminated during fiscal year 2002; the contract in San Antonio was terminated
in December 2002. The results of operations for these transit districts for 2002
have been reclassified to Discontinued Operations for comparability purposes.

Net revenues and the components of the net loss related to the discontinued
operations were as follows:

Nine months ended August 31,
2003 2002
------------ ------------
Net revenues $ 258,308 $ 1,142,944

Production and Installation Expenses (53,350) (216,793)
Occupancy Expense (168,710) (868,622)
Sales Expense (53,576) (612,767)
General and administrative Expense (289,368) (173,227)
------------ ------------
Income (loss) from discontinued operations
before income taxes (306,696) (728,515)
Income tax benefit - -
------------ ------------
Net loss from discontinued operations $ (306,696) $ (728,515)
============ =============

9. STOCK OPTIONS

STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NO. 123 AND NO. 148

During 1995, the Financial Accounting Standards Board issued SFAS No.
123, which defines a fair value based method of accounting for employee stock
options and similar equity instruments and encourages all entities to adopt that
method of accounting for all their employee stock compensation plans. However,
it allows an entity to continue to measure compensation cost for those plans
using the method of accounting prescribed by APB No. 25. Entities electing to
continue to use the accounting treatment in APB No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share, as if the fair
value based method of accounting defined in SFAS No. 123 had been adopted.

The Company adopted the applicable provisions of SFAS No. 148 effective
March 1, 2003. SFAS No. 148, among other things, extends the pro forma
disclosures required by APB No. 25 to interim periods beginning after December
15, 2002. Accordingly the Company has included the information following
regarding its employee stock option plan.

The Company has elected to account for its stock-based compensation
plans under APB No. 25; however, the Company has computed, for pro forma
disclosure purposes the value of all options granted during the three and nine
month periods ended August 31, 2003 and 2002 using the Black-Scholes option
pricing model as prescribed by SFAS No. 123 using the following weighted average
assumptions for grants for all periods presented:

Risk-free interest rate 4.9%
Expected dividend yield 0%
Expected lives 6 years
Expected volatility 81.48%

Using the Black-Scholes methodology, the total value of options granted
during the three month and nine month periods ending August 31, 2003 and 2002 is
as follows:

Three Months Ended August 31, Nine Months Ended August 31,
2003 2002 2003 2002
--------------------------------- --------------------------------

$ 7,236 $ 56,363 $ 20,636 $ 319,903

These amounts would be amortized on a pro forma basis over the vesting
period of the options (typically five years). The weighted average per share
value of options granted during the three months ended August 31, 2003 and 2002
and nine months ended August 31, 2003 and 2002 was $1.44, $2.39, $1.65 and $2.28
respectively.

If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's net loss and net loss per share
would approximate the pro forma disclosures below:

Three Months Ended August 31,
-----------------------------
2003 2002
------------------------- -----------------------
As As
Reported Pro Forma Reported Pro Forma
----------- ----------- -------- ----------
Net Income (loss) $ (407,045) $ (487,334) $ 22,320 $ (92,044)
Basic net income (loss)
per share $ (.07) $ (.08) $ .00 $ (.02)
Diluted net income (loss)
per share $ (.07) $ (.08) $ .00 $ (.02)

Nine Months Ended August 31,
----------------------------
2003 2002
--------------------------------------------------------
As As
Reported Pro Forma Reported Pro Forma
--------------------------------------------------------

Net loss ($1,911,049) ($2,151,916) ($2,019,520) ($2,378,643)
Basic net loss
per share $.32 $.36 $.34 $.40
Diluted net loss per share $.32 $.36 $.34 $.40

10. NEW ACCOUNTING PRONOUNCEMENTS

On October 3, 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal
of Long-Lived Assets". SFAS No. 144 supercedes Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS No. 144 applies to all long-lived
assets (including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30, "Reporting Results of Operations -- Reporting
the Effects of Disposal of a Segment of a Business". SFAS No. 144 develops one
accounting model for long-lived assets that are to be disposed of by sale. SFAS
No. 144 requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less the cost to sell. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001,
however, earlier adoption is permitted. The Company early adopted the provisions
of SFAS No. 144 in Fiscal 2002 and has recorded the results of operations from
transit markets that it has exited as discontinued operations.

On June 28, 2002, the FASB adopted Statement of Financial Accounting
Standards No. 146 ("SFAS No. 146"), "Accounting for Exit or Disposal
Activities", effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. SFAS No. 46 addresses
significant issues regarding the recognition, measurement, and reporting of
costs that are associated with exit and disposal activities, including
restructuring activities that are currently accounted for pursuant to the
guidance that the Emerging Issues Task Force ("EITF") has set forth in 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 Company early adopted the provisions of SFAS No. 146 in Fiscal 2002 and has
recorded exit costs relating to contract terminations resulting from its exit of
certain transit markets in accordance with the provisions of SFAS No. 146. These
costs have been recorded as a component of discontinued operations in accordance
with SFAS No. 144.

11. RECLASSIFICATIONS

Certain amounts previously reported in the Company's financial
statements as of May 31, 2002 have been reclassified to conform to the current
fiscal year presentation.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion includes certain forward-looking statements
that involve a number of risks and uncertainties. Obie's actual results could
differ materially from the forward-looking statements. Factors that could cause
or contribute to such differences include: failure to conclude favorable
negotiations on pending transactions with existing transit agency partners or to
successfully assimilate expanded operations; potential impairments of liquidity
or capital resources; inability to generate sufficient advertising revenues to
meet contractual guarantees; inability to renew existing lending arrangements as
they expire; potential for cancellation or interruption of contracts with
governmental agencies; a further decline in the demand for advertising in the
areas where we conduct our business, or a deterioration of business conditions
generally in those areas; slower than expected acceptance of our innovative
display products; competitive factors, including increased competition and price
pressures; changes in the seasonality of our business; and changes in regulatory
or other external factors; as well as those factors listed from time to time in
Obie's SEC reports, including, but not limited to, the factors discussed in this
quarterly report. You should recognize that these forward-looking statements,
which speak only as of the date of this quarterly report, reflect management's
expectations based on information available as of that date; you should not
construe our forward-looking statements as assurances of future performance. We
do not intend to update our forward-looking statements except as required by
law.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of
operations following are based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires us to make estimates and judgements that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities.

We believe that the estimates, assumptions and judgements involved in
the accounting policies described below have the greatest potential impact on
our financial statements, so we consider these to be our critical accounting
policies. Because of the uncertainty inherent in these matters, actual results
could differ from the estimates we use in applying the critical accounting
policies. Certain of these critical accounting policies affect working capital
account balances, including the reserve for uncollectible accounts receivable
and deferred income taxes. These policies require that we make estimates in the
preparation of our financial statements as of a given date. However, since our
business cycle is relatively short, actual results related to the estimates
relative to uncollectible accounts receivable are generally known within the six
month period following the financial statement date. Thus, these policies
generally affect only the timing of reported amounts across two to three
quarters. The estimate of deferred tax assets may affect reported amounts beyond
that time period.
11

Within the context of these critical accounting policies, we are not
currently aware of any reasonably likely events or circumstances which would
result in materially different amounts being reported.

RECOGNITION OF REVENUE

Revenue from advertising contracts is recognized ratably over the
contract term, and the estimated cost components of a contract (cost of the
advertising space and the costs of producing and installing advertising copy)
are deferred and matched against the periodic recognition of revenue on
essentially a straight-line basis. This method also necessitates the recognition
of an unearned revenue liability for billings to customers for time periods
beyond the end of the current accounting cycle.

DISCONTINUED OPERATIONS

Effective during its fiscal year ending November 30, 2002, the Company
adopted Statements of Financial Accounting Standards No. 144 "Accounting for the
Impairment of Long-Lived Assets" (SFAS No. 144) and No. 146 "Accounting for
Costs Associated with Exit or Disposal Activities" (SFAS No. 146).

Pursuant to these pronouncements, the Company has classified as "
Discontinued Operations" the results of operations and any exit costs associated
with transit district contracts that were exited. As a result the Company has no
further involvement with these markets. The U.S. transit districts included in
Discontinued Operations are: Chicago, San Antonio, Cincinnati, Kitsap, Santa
Cruz and Bridgeport. The Canadian transit districts included are: Pickering,
Whitby, Cambridge and St. Catharines. Results of operations for these transit
districts for 2002 have been reclassified to Discontinued Operations for
comparability purposes.

RESERVE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE

We make ongoing estimates relating to the collectiblity of our accounts
receivable and maintain a reserve for estimated losses resulting from the
inability of our customers to make required payments. In determining the amount
of the reserve, we consider our historical level of credit losses, the aging
spread of accounts at the date the estimate is made, trends in the overall media
economy, and general business conditions. Historically, losses from
uncollectible accounts have not exceeded our reserves except that writeoffs
exceeded reserves by approximately $525,000 in fiscal 2002. Since we cannot
predict future changes in the financial stability of our customers, actual
future losses from uncollectible accounts may differ from our estimates. If the
financial condition of our customers were to deteriorate, resulting in their
inability to make payments, a larger reserve might be required. In the event
that a smaller or larger reserve was appropriate, we would record a credit or
charge to administrative expense in the period in which we made such a
determination.

INCOME TAXES

We record valuation allowances against our deferred tax assets, when
necessary, in accordance with SFAS No. 109, "Accounting for Income Taxes."
Realization of deferred tax assets (such as net operating loss carryforwards) is
dependent on future taxable earnings and is therefore uncertain. At least
quarterly, we assess the likelihood that our deferred tax asset balance will be
recovered from future taxable income. To the extent that we believe recovery is
unlikely, we establish a valuation allowance against our deferred tax assets
increasing our income tax expense in the period such determination is made. An
increase in the valuation allowance would result in a charge to income tax
expense. A decrease in the valuation allowance would result in a reduction to
income tax expense.
12

On an interim basis, we estimate what our effective tax rate will be
for the full fiscal year and record a quarterly income tax provision in
accordance with the anticipated annual rate. As the fiscal year progresses we
continually refine our estimate based upon actual events and earnings during the
year. This continual estimation process periodically results in a change to our
expected tax rate for the fiscal year. When this occurs, we adjust the income
tax provision during the quarter in which the change in estimate occurs so that
the year-to-date provision is in accordance with the annual anticipated rate.

PROPERTY, PLANT AND EQUIPMENT AND OTHER LONG-LIVED ASSETS

Property, plant and equipment, including buildings, equipment, and
computer hardware and software is recorded at cost (including, in some cases,
the cost of internal labor) and is depreciated over estimated useful lives.
Changes in circumstances (such as technological advances or changes to our
business operations) can result in differences between the actual and estimated
useful lives. In those cases where we determine that the useful life of a
long-lived asset should be shortened, we increase depreciation expense over the
remaining estimated useful life to depreciate the asset to its salvage value.

In accordance with SFAS No. 142, goodwill amortization was discontinued
as of November 30, 2002. We completed our first phase impairment analysis during
the quarter ended February 28, 2003 and found no instances of impairment.
Goodwill at August 31, 2003 and November 30, 2002 amounted to $5,448,552, net of
accumulated amortization of $2,181,571.

OTHER CONTINGENCIES

In the ordinary course of business, we are involved in legal
proceedings involving contractual, employment relationships and a variety of
other matters. We record contingent liabilities resulting from claims against us
when it is probable that a liability has been incurred and the amount of the
loss is reasonably estimable. We disclose contingent liabilities when there is a
reasonable possibility that the ultimate loss will exceed the recorded
liability. Estimating probable losses requires analysis of multiple factors, in
some cases including judgements about the potential actions of third party
claimants and courts. Therefore, actual losses in any future period are
inherently uncertain. Currently, we do not believe that any of our pending legal
proceedings or claims will have a material impact on our financial position or
results of operations. However, if actual or estimated probable future losses
exceed our recorded liability for such claims, we would record additional
charges as other expense during the period in which the actual loss or change in
estimate occurred.

RECENT DEVELOPMENTS

In July of 2003, the Company was awarded the contract to provide
transit advertising for the Pittsburgh (Allegheny County) transit system. The
system has approximately 900 transit vehicles available for advertising
displays. The contract is three years in length with options for an additional
two years of renewals. Also during the third quarter of 2003 we were awarded new
five year contracts in the markets of Palm Beach, FL and London, ON, Canada
where we were the predecessor contract provider.

Effective February 19, 2001, Obie entered into a financing arrangement
with U.S. Bank. The arrangement provided for a $16.0 million term line maturing
in August of 2007, and a $6.0 million working capital line of credit available
for general purposes. These credit facilities are secured by substantially all
of the assets of Obie and its subsidiaries. Obie used the term revolver to
refinance all of its then-existing debt, including the previously outstanding
line of credit.

On February 25, 2003, U.S. Bank and Obie agreed to a revised credit
facility which included a reduction in the working capital line of credit to
$4.5 million, modified financial ratio covenants, and reduced principal payment
requirements during fiscal 2003. At August 31, 2003, available borrowing
capacity under the line of credit, based upon collateralized accounts, was
$710,000. The revised agreement extends the term of the credit facility through
December 15, 2003, when both the term revolver and working capital credit line
expire. The credit facility requires Obie's continued compliance with the
revised covenants. Because the debt agreements expire in December 2003, all of
the outstanding debt has been classified as current. The Company expects to
replace these credit arrangements with alternate arrangements which will contain
terms and conditions typical for the media industry. Management is actively
engaged with discussions with other lenders.

Effective December 1, 2002, we formed a new wholly owned subsidiary,
Select Media, Inc. under which our national sales organization operates.

COMPARISON OF THE THREE MONTHS ENDED AUGUST 31, 2003 AND 2002

RESULTS OF CONTINUING OPERATIONS

the sale of design and installation services and the production of advertising
display content. We focus our sales efforts on maximizing occupancy levels in
our markets. Net revenues for the three months ended August, 2003 decreased
$244,000, or 2.1%, to $11.4 million in 2003 from $11.6 million for the same
period in fiscal 2002. Transit net revenues decreased $249,000, or 2.6% , to
$9.5 million for the three month period in fiscal 2003, from $9.8 million for
the same period of fiscal 2002. The decrease is reflective of the continuing
weaknesses in the advertising economy principally in our northeastern and
midwestern United States markets. Outdoor net revenues remained unchanged at
$1.8 million in the three month periods in fiscal 2003 and fiscal 2002.

PRODUCTION AND INSTALLATION EXPENSES. These expenses relate primarily to the
production of transit advertising content and the installation of the content on
transit vehicles, benches and shelters. Also included is the cost of billboard
content and installation. Production and installation expenses decreased
approximately $139,000, or 8.6%, to $1.5 million in fiscal 2003 from $1.6
million in fiscal 2002. The Company's production and installation activities are
primarily related to the transit advertising part of our business, and decreased
to 15.5% of net transit sales in the three month period in 2003, when compared
to 16.5% in the same period of 2002. The decrease reflects lower production
income (and related costs) when compared to total transit sales.

TRANSIT AND OUTDOOR OCCUPANCY EXPENSES. These expenses include fees paid to
transit authorities and lease payments to landowners for billboard sites. Under
Obie Media's transit agreements, we typically guarantee to pay the transit
district the greater of a minimum stated amount or a percentage of the
advertising revenues generated by our use of the district's vehicles. Occupancy
expense for outdoor structures includes the cost of illuminating outdoor
displays and property taxes on the outdoor advertising structures. Transit and
outdoor occupancy expenses increased approximately $489,000, or 10.0%, to $5.3
million in the fiscal quarter ended in 2003 compared to $4.8 million in the
third quarter of fiscal 2002. Approximately $67,000 of the increase was related
to increased billboard lease costs. The balance was related to contracted
increases in transit fee costs.

SELLING EXPENSES. Sales expenses consist primarily of employment and
administrative expenses associated with our sales force. These expenses
decreased $74,000, or 3.7%, to $1.9 million for the three month period in fiscal
2003, from $2.0 million in the same period in fiscal 2002. The reduction is
related primarily to increased realization of cost containment measures enacted
throughout the prior year.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses include
costs related to individual markets, as well as corporate expenses. Expenses
related to individual markets include expenses for the personnel and facilities
required to administer that market and neighboring markets. Corporate general
and administrative expenses represent personnel and facilities costs for Obie
Media's executive offices and centralized staff functions which include
accounting, marketing, human resources and technology management.

General and administrative expenses were unchanged at $1.9 million for the third
quarters of both 2003 and 2002.

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expenses
decreased approximately $97,000, or 17.7%, to $451,000 in fiscal 2003 as
compared to $548,000 for the same period in fiscal 2002. The decrease is related
almost entirely to the fact that effective at the beginning of fiscal year 2003
we have adopted the provisions of SFAS No. 142 and no longer amortize goodwill.

OPERATING INCOME. Due to the events and factors discussed above we generated
operating income of $281,000 in the three month period ending May 30, 2003,
compared to $765,000 in the same period of fiscal 2002.

INTEREST EXPENSE. Interest expense increased $66,000, or 11.9%, to $625,000 for
the three month period in fiscal 2003 from $559,000 for the comparable period of
fiscal 2002. The increase was due primarily to a quarterly loan extension fee
paid to US Bank during the fiscal 2003 period.

PROVISION FOR INCOME TAXES. The Company accounted for all available loss
carryback refunds in the fiscal 2001 provision for income taxes. The Company has
substantial loss carryforwards, against which valuation allowances have been
provided. Since the operating loss carryforwards expire at certain times, we
have evaluated the likeliness of utilizing those carryforwards against future
taxable income in that time frame and have established a valuation allowance
accordingly.

The difference between the statutory United States federal income tax rate and
the beneficial tax rate for the third fiscal quarter of 2002 is due primarily to
the deferred tax valuation reserve for the net operating loss carryforwards. The
provision for income taxes of $25,000 in the comparable period of 2003 reflects
income tax liabilities of the Company's Canadian subsidiary.

INCOME (LOSS) FROM CONTINUING OPERATIONS. Due to the items and factors discussed
above we generated a loss of $319,000 in the three month period in fiscal 2003,
as compared to income of $146,000 for the same period in fiscal 2002.

RESULTS OF DISCONTINUED OPERATIONS

Most transit arrangements include a provision that a certain percentage of net
revenues be shared with the transit authorities (transit fees) on a revenue
sharing basis (a certain percentage to the transit authority, the balance
retained by Obie), but often with minimum payment requirements. Agreements that
contain large minimum transit fee payment guarantees, relative to market size,
significantly hinder Obie's ability to manage its operating expenses in weak
economic environments. These high minimum payment requirements have prompted the
Company to negotiate modifications to such contracts, negotiate or effect early
terminations to such contracts, or exit such markets at the end of the contract
term.

As discussed above, discontinued operations contain the operating results, net
of income taxes, for transit markets from which we have exited. The discontinued
operations for the three month period of both fiscal 2003 and 2002 include the
operations of San Antonio, Texas, Cincinnati, Ohio (transit), Kitsap,
Washington, Santa Cruz, California, Bridgeport, Connecticut and the Ontario,
Canada markets described above.

NET LOSS

Due to the items and factors discussed above, Obie realized a net loss of
$407,000 during the three months ending August 31 of fiscal 2003, compared to
net income of $22,000 in the same period of fiscal 2002.

COMPARISON OF THE NINE MONTHS ENDED AUGUST 31, 2003 AND 2002

RESULTS OF CONTINUING OPERATIONS

REVENUES. Obie's revenues are derived from providing advertising space on
out-of-home advertising displays, primarily on transit vehicles under transit
district agreements and on outdoor advertising displays we own or operate.
Revenues are also derived from the sale of design and installation services and
the production of advertising display content. We focus our sales efforts on
maximizing occupancy levels in our markets. Net revenues for the nine months
ended August, 2003 decreased $1.7 million or 5.2%, to $30.7 million in 2003 from
$32.4 million for the same period in fiscal 2002. Transit net revenues decreased
$1.7 million, or 6.1%, to $25.5 million for the nine month period in fiscal
2003, from $27.1 million for the same period of fiscal 2002. The decrease is
reflective of the continuing weaknesses in the advertising economy principally
in our northeastern and midwestern United States markets. Outdoor net revenues
were relatively unchanged at $5.3 million in the nine month period of both
years.

PRODUCTION AND INSTALLATION EXPENSES. These expenses relate primarily to the
production of transit advertising content and the installation of the content on
transit vehicles, benches and shelters. Also included is the cost of billboard
content and installation. Production and installation expenses decreased
approximately $441,000, or 9.1%, to $4.4 million in fiscal 2003 from $4.8
million in fiscal 2002. The Company's production and installation activities are
primarily related to the transit advertising part of our business, and decreased
to 17.3% of net transit sales in the nine month period in 2003, when compared to
17.8% in the same period of 2002. The decrease reflects lower production income
(and related costs) when compared to total transit sales.

TRANSIT AND OUTDOOR OCCUPANCY EXPENSES. These expenses include fees paid to
transit authorities and lease payments to landowners for billboard sites. Under
Obie Media's transit agreements, we typically guarantee to pay the transit
district the greater of a minimum stated amount or a percentage of the
advertising revenues generated by our use of the district's vehicles. Occupancy
expense for outdoor structures includes the cost of illuminating outdoor
displays and property taxes on the outdoor advertising structures. Transit and
outdoor occupancy expenses increased approximately $102,000, or .8%, to $13.5
million for the nine month period of fiscal 2003, from $13.4 million in the
comparable period of fiscal 2002. Billboard lease costs increased approximately
$182,000 during the nine month period ended in 2003 as compared to the same
period in fiscal 2002; transit fees decreased to account for the difference.

SELLING EXPENSES. Sales expenses consist primarily of employment and
administrative expenses associated with our sales force. These expenses
decreased $1.0 million, or 15.3%, to $5.8 million for the nine month period in
fiscal 2003 from $6.8 million in the same period in fiscal 2002. The reduction
is related primarily to increased realization of cost containment measures that
were not present in the entire nine months of fiscal 2002.

General and administrative expenses decreased approximately $338,000, or 5.8%,
to $5.4 million in the nine month period of fiscal 2003 from $5.8 million in the
same period of fiscal 2002. The decrease was due primarily to personnel
reductions in marketing, human resources and the business office at the
corporate headquarters that were implemented in the final two quarters of fiscal
2002. These reductions impacted the first and second quarters of 2003 to a
greater extent than in the third quarter.

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expenses
decreased approximately $273,000, or 16.6%, to $1.4 million in fiscal 2003 as
compared to $1.6 million for the same period in fiscal 2002. The decrease is
related almost entirely to the fact that effective at the beginning of fiscal
year 2003 we have adopted the provisions of SFAS No. 142 and no longer amortize
goodwill.

OPERATING INCOME. Due to the events and factors discussed above we generated
operating income of $258,000 in the nine month period ending August 31, 2003,
compared to a loss of $40,000 in the same period of fiscal 2002.

INTEREST EXPENSE. Interest expense increased $562,000, or 47.2%, to $1.8 million
for the nine month period in fiscal 2003 from $1.2 million for the comparable
period of fiscal 2002. $50,000 of the increase was due to a loan extension fee
paid to US Bank in the third quarter of 2003 with no comparable charge in the
same period of fiscal 2002. The remaining increase was due primarily to the
amortization of the discount on the Chicago Transit Authority settlement in the
nine month period of fiscal 2003, of which there was comparable amortization
only in the third quarter of fiscal 2002.

The difference between the statutory United States federal income tax rate and
the beneficial tax rate for fiscal 2002 is due primarily to the deferred tax
valuation reserve for the net operating loss carryforwards. The provision for
income taxes of $109,000 in the fiscal period of 2003 reflects income tax
liabilities of the Company's Canadian subsidiary.

INCOME (LOSS) FROM CONTINUING OPERATIONS. Due to the items and factors discussed
above we experienced a loss of $1.6 million in the nine month period in fiscal
2003, as compared to a loss of $1.3 million for the same period in fiscal 2002.

RESULTS OF DISCONTINUED OPERATIONS

As discussed above, discontinued operations contain the operating results, net
of income taxes, for transit markets from which we have exited. The discontinued
operations for the six month period of both fiscal 2003 and 2002 include the
operations of San Antonio, Texas, Cincinnati, Ohio (transit), Kitsap,
Washington, Santa Cruz, California, Bridgeport, Connecticut and the Ontario,
Canada markets described above.

NET LOSS

Due to the items and factors discussed above, Obie realized a net loss of $1.9
million during the first nine months of fiscal 2003, compared to a net loss of
$2.0 million in the same period of fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company's credit arrangements with U.S. Bank include a $13.5
million term loan revolver and a $4.5 million working capital revolver, both
maturing on December 15, 2003, and are secured by substantially all of the
assets of the Company. The term loan revolver limits decrease quarterly through
the maturity date. The interest rates are at U.S. Bank's prime rate plus 3.75%
for the term revolver and prime rate plus 3.25% for the working capital
revolver. At August 31, 2003 the effective rates were 7.75% and 7.25% for the
term loan and working capital revolvers respectively. $13,500,000 was
outstanding under the term revolver and $3,790,483 under the working capital
revolver at August 31, 2003. Because the Company's debt agreements expire in
December 2003, all of the outstanding debt has been classified as current. The
Company expects to replace these credit arrangements with alternative
arrangements which will contain terms and conditions typical for the media
industry. Management is actively engaged in discussions with other lenders.

The U.S. Bank loan agreements contain certain restrictive covenants and
required ratios. These include Fixed Charge Coverage, Interest Coverage and
Leverage ratios and a minimum EBITDA level covenant, all of which are measured
quarterly. On February 25, 2003 U.S. Bank and Obie agreed to a revised credit
facility which included a reduction in the working capital line of credit to
$4.5 million, modifications of the above mentioned financial ratios and
covenants, and a reduction of principal payment requirements for fiscal 2003. At
August 31, 2003, available borrowing capacity under the line of credit, based on
collateralized accounts, was approximately $710,000. The revised agreement
extends the term of the credit facility through December 15, 2003, when both the
term revolver and working capital credit line expire. As of August 31, 2003 the
Company was not in compliance with the revised covenants.

The Company has historically satisfied our working capital requirements
with cash from operations and revolving credit borrowings. Our working capital
at August 31, 2003 was a negative $7.9 million as compared to a positive $7.2
million at November 30, 2002. This decrease is due primarily to the fact that
the bank debt classified as long-term at November 30, 2002 has

been classified as current at August 31, 2003, pending completion of the
refinancing process. Acquisitions and capital expenditures, primarily for the
construction of new outdoor advertising displays, digital printing equipment and
technology related assets have been financed primarily with borrowed funds. At
August 31, 2003, Obie had outstanding borrowings of $23.0 million, of which
$17.3 million was pursuant to credit agreements with U.S. Bank, $190,000
pursuant to the agreement to acquire the minority interest in O. B. Walls in
2002, and $5.4 million relative to the settlement of the Chicago Transit
Authority dispute and $100,000 in other notes The Company's indebtedness is
collateralized by substantially all of its assets. At August 31, 2003, available
borrowing capacity under the line of credit, based on collateralized accounts,
was approximately $710,000.

Obie's net cash provided from operating activities was $168,000 during
the nine months ended August 31, 2003, as compared to net cash used in operating
activities of $642,000 for the same period in fiscal 2002. The difference was
due primarily to higher transit fee payments during the nine month period of
2002 (other liabilities) as compared to the same period of 2003 .

Net cash used in investing activities was $414,000 and $748,000 during
the nine month periods ended August 31, 2003 and 2002, respectively. The amounts
spent on billboard upgrades and on other equipment was approximately the same in
both fiscal year periods. However, in the nine month period of fiscal 2002, we
also purchased our third large format digital production printer, which
accounted for the majority of the difference.

Net cash used in financing activities was $578,000 for the nine month
period ended August 31, 2003, as compared to net cash provided of $3.3 million
in the same period of fiscal 2002. The decrease was primarily the result of
reduced utilization ($1.9 million) of the working capital credit line during
fiscal 2003, no term debt borrowed in 2003 as compared to $1.3 million borrowed
in fiscal 2002, and term debt payments in fiscal 2003 exceeding those in fiscal
2002 by approximately $784,000.

We expect to pursue a policy of measured growth through obtaining
favorable new transit district agreements, acquiring out-of-home advertising
companies or assets and constructing new outdoor advertising displays. We intend
to finance future expansion activities using a combination of internal and
external sources. We believe that internally generated funds and funds available
for borrowing under bank credit facilities will be sufficient to satisfy all
debt service obligations, to finance existing operations, including anticipated
capital expenditures, but excluding possible acquisitions, through fiscal 2003.
However, as discussed above, the Company's current financing is due on December
15, 2003. Future acquisitions by Obie, if any, may require additional debt or
equity financing.

SEASONALITY

Obie's revenues and operating results historically have fluctuated by
season, generally following the advertising trends in our major transit markets.
Typically, results of operations are strongest in the fourth quarter and weakest
in the first quarter of our fiscal year which ends on November 30. Transit
advertising operations are more seasonal than outdoor advertising operations as

the Company's outdoor advertising display space, unlike its transit advertising
display space, is and has been sold largely by means of 12-month contracts. The
Company believes that the seasonality of revenues and operating results will
increase if transit advertising operations continue to expand more rapidly than
outdoor advertising operations. This seasonality, together with fluctuations in
general and regional economic conditions and the timing and expenses related to
acquisitions, the obtaining of new transit agreements and other actions that
have been taken to implement the Company's growth strategy, have contributed to
fluctuations in periodic operating results. These fluctuations likely will
continue. Accordingly, results of operations in any period may not be indicative
of the results to be expected for any future period.

ITEM 3. QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into derivative financial instruments.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures pursuant to applicable rules under the
Securities Exchange Act of 1934, as amended, within 90 days of the date of this
report. Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer have concluded that these disclosure controls and
procedures are effective. There were no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of their evaluation.

PART II - OTHER INFORMATION
- ---------------------------

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matters were submitted to security holders for vote during the three
months ended August 31, 2003.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits
31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002

(b) The Company filed a Form 8-K on April 10, 2003 reporting that it had issued
a press release on April 7, 2003 reporting earnings for the fiscal quarter
ended February 28, 2003. The Company also filed a Form 8-K on May 22, 2003
reporting that the Company's stock listing on NASDAQ had moved to the
SmallCap Listing service. On July 14, 2003 the Company filed an 8-K
reporting that it had issued a press release on that date reporting
earnings for the fiscal quarter ending May 31, 2003.

Signature

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Obie Media Corporation

Date October 15, 2003 By: /s/ GARY F. LIVESAY *
Gary F. Livesay
Vice President - Chief Financial Officer

* Signing on behalf of the registrant as principal financial
and accounting officer