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 May 31, 2004
----------------------------
[ ] 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 [ v ]. No [ ].

Indicate by check mark whether the issuer is an accelerated filer as defined in
amended SEC Rule 12-b2.

Yes [ ] No [v ]

As of July 1, 2004, 5,985,110 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 Condensed Balance Sheets as of May 31, 2004 and November 30, 2003 2

Consolidated Condensed Statements of Operations for the three month and six month
periods ended May 31, 2004 and 2003 3

Consolidated Condensed Statements of Cash Flows for the three month and six month
periods ended May 31, 2004 and 2003 4

Notes to Consolidated Condensed 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 21

ITEM 6. Exhibits and Reports on Form 8-K 21

Certifications 22

OBIE MEDIA CORPORATION
Consolidated Condensed Balance Sheets

ASSETS

May 31,
2004 November 30,
(Unaudited) 2003
------------ ------------

CURRENT ASSETS:
Cash $ 447,059 $ 1,943,169
Accounts receivable, net 5,194,777 5,774,226
Prepaids and other current assets 6,410,081 5,099,504
Deferred income taxes 1,540,315 1,543,750
------------ ------------
Total current assets 13,592,232 14,360,649

Property and equipment, net 14,341,446 14,886,619
Goodwill, net 5,448,552 5,448,552
Other assets 1,658,828 749,936
------------ ------------
$35,041,058 $35,445,756
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt $ 1,000,000 $ 1,723,695
Working capital revolver 5,082,876 3,890,483
Accounts payable 219,665 307,901
Accrued transit fees 710,361 1,148,124
Accrued expenses 1,239,774 1,220,754
Income taxes payable - 214,540
Unearned revenue 982,013 928,051
------------ ------------
Total current liabilities 9,234,689 9,433,548

Deferred tax liability 1,581,212 1,586,631
Long-term debt, net 18,643,718 17,246,748
------------ ------------
Total liabilities 29,459,619 28,266,927
------------ ------------

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, 5,985,110 and 5,913,602 shares issued
and outstanding at May 31, 2004 and
November 30, 2003 respectively 17,469,554 17,282,128
Deferred stock based compensation (103,041) -
Other comprehensive loss (74,286) (45,495)
Accumulated deficit (11,710,788) (10,057,804)
------------ -----------
Total shareholders' equity 5,581,439 7,178,829
------------ -----------
$35,041,058 $35,445,756
============ ===========
See accompanying notes

OBIE MEDIA CORPORATION
Consolidated Condensed Statement of Operations
(Unaudited)

Three Months Ended May Six Months Ended May
2004 2003 2004 2003
----------- ----------- ------------ ------------

REVENUES:
Transit advertising $ 9,795,336 $ 9,053,680 $17,813,833 16,076,911
Outdoor advertising 2,092,556 1,581,634 4,052,582 3,255,963
----------- ----------- ------------ ------------
Net revenue 11,887,892 10,635,314 21,866,415 19,332,874

OPERATING EXPENSES:
Production and installation 1,695,157 1,559,641 3,212,918 2,921,725
Transit and outdoor occupancy 4,679,686 4,546,695 8,464,427 8,170,787
Selling 2,161,704 2,029,521 4,377,875 3,825,040
General and administrative 2,198,555 1,686,656 4,309,493 3,519,596
Depreciation and amortization 475,572 449,992 958,935 918,944
----------- ----------- ------------ ------------
Total operating expenses 11,210,674 10,272,505 21,323,648 19,356,092

Operating income (loss) 677,218 362,809 542,767 (23,218)

OTHER EXPENSE:
Interest expense 608,588 583,760 1,157,162 1,127,758
Loss on debt extinguishment - - 961,411 -
----------- ----------- ------------ ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 68,630 (220,951) (1,575,806) (1,150,976)

INCOME TAX PROVISION 46,415 134,531 46,415 134,531

----------- ----------- ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 22,215 (355,482) (1,622,221) (1,285,507)

DISCONTINUED OPERATIONS, NET OF INCOME TAXES (17,018) (105,914) (30,763) (218,501)

----------- ----------- ------------ ------------
$ 5,197 $ (461,396) $(1,652,984) $(1,504,008)
=========== =========== ============ ============

Earnings (loss) per share:
Basic and diluted, from continuing operations $ 0.00 $ (0.06) $ (0.27) $ (0.21)
Basic and diluted, from discontinued operations 0.00 (0.02) (0.01) (0.04)
Basic and diluted, on net loss $ 0.00 $ (0.08) $ (0.28) $ (0.25)

See accompanying notes

OBIE MEDIA CORPORATION
Consolidated Condensed Statement of Cash Flows
(Unaudited)

Six Months Ended May 31,
-
2004 2003
------------ ------------

Cash Flows From Operating Activities:
Net loss $(1,652,984) $(1,504,008)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 958,935 843,885
Loss on debt extinguishment 961,411 -
Compensation expense from restricted stock 46,837 -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 579,449 1,810,466
Prepaid and other assets (1,208,097) (906,574)
Deferred income taxes 3,435
Increase (decrease) in:
Accounts payable (88,236) 24,021
Other liabilities (705,285) (420,938)
------------ ------------
Net cash used in operating activities (1,104,535)
(153,148)
------------ ------------

Cash Flows From Investing Activities:
Capital expenditures (277,203) (350,709)
------------ ------------
Net cash used in investing activities (277,203) (350,709)
------------ ------------

Cash Flows From Financing Activities:
Net borrowings on line of credit 1,192,393 400,000
Borrowings of long-term debt 20,038,614 -
Payments on long-term debt (20,075,156)
(1,178,225)
Loan fees incurred with financing (1,241,432)
------------ ------------
Net cash used in financing activities (85,581) (778,225)
------------ ------------

Effect of exchange rate changes on cash (28,791) (65,622)

Net decrease in cash (1,496,110) (1,347,704)

Cash, beginning of period 1,943,169 1,815,886
------------ ------------
Cash, end of period $ 447,059 $ 468,182
============ ============

See accompanying notes
4

NOTES TO CONSOLIDATED CONDENSED 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 May 31, 2004 and 2003, and the results of operations and cash
flows of the Company for the three and six months ended May 31, 2004 and 2003,
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, 2003 Form 10-K. This quarterly report should be read
in conjunction with such annual report.

2. STOCK OPTIONS

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

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees -" , (APB 25),
and provides pro forma disclosures of net income (loss) and net income (loss)
per common share as if the fair value method had been applied in measuring
compensation expense in accordance with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", (SFAS No. 123).

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, (SFAS No. 148), "Accounting for Stock-Based Compensation -
Transition and Disclosure - an amendment of FAS 123." SFAS No. 148 amends SFAS
No. 123 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 about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
Finally, SFAS No.148 amends APB Opinion No. 28 ("APB 28"), "Interim Financial
Reporting," to require disclosure about those effects in interim financial
information. The amendments to the transition and disclosure provisions is
effective for fiscal years ending after December 15, 2002. The amendment to APB
28 is effective for financial reports containing condensed financial statements
for interim periods beginning after December 15, 2002. We adopted the disclosure
provisions of SFAS No. 148 during our quarter ended May 31, 2003.

As required by SFAS No. 123, the Company computed the value of options
granted during the three and six month periods months ended May 31, 2004 and
2003 using the Black-Scholes option pricing model for pro forma disclosure
purposes. The weighted average assumptions used for stock option grants for the
three and six month periods ended May 31, 2004 and 2003 were a risk-free
interest rate of 3.46% and 4.9%, respectively, expected dividend yields of 0%,
expected lives of 6.0 years and expected volatility of 78.72% and 81.48%,
respectively.

Options are assumed to be exercised upon vesting for purposes of this
valuation. Adjustments are made for options forfeited as they occur. For the
three and six month periods ended May 31, 2004 and 2003, the total value of the
options granted was approximately $132,600 and $7,500, respectively, which would
be amortized on a straight-line basis over the vesting periods of the options.

Had Obie accounted for these plans in accordance with SFAS No. 123, the
Company`s net loss and pro forma net loss per share would have been reported as
follows:

THREE MONTHS ENDED MAY 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2004 2003
---- ----

Net income (loss) as reported $5 $(461)

Deduct total stock-based compensation expense determined under
fair value based method for all awards, net of related tax effects (40) (80)

-------- --------
Pro-forma net loss $(35) $(541)
======== ========

Net loss per Share
Basic:
As reported $ 0.00 $(0.08)
Pro forma $(0.01) $(0.09)
Fully diluted:
As reported $(0.00) $(0.08)
Pro forma $(0.01) $(0.09)

SIX MONTHS ENDED MAY 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2004 2003
---- ----

Net loss as reported $(1,653) $(1,504)

Deduct total stock-based compensation expense determined under
fair value based method for all awards, net of related tax effects (80) (160)

-------- --------
Pro-forma net income loss $(1,733) $(1,664)
======== ========

Net loss per Share

Basic:
As reported $(0.28) $(0.25)
Pro forma $(0.29) $(0.28)
Fully diluted:
As reported $(0.28) $(0.25)
Pro forma $(0.29) $(0.28)

The effects of applying SFAS No. 123 for providing pro forma disclosure
for the three and six month periods ended May 31, 2004 and 2003 are not likely
to be representative of the effects on reported net income (loss) and net income
(loss) per share for future years since options vest over several years and
additional awards are made each year.

The Company entered into restricted stock agreements with five
executives in November 2003 in exchange for certain of their stock options. The
restricted stock agreements were approved by the Company's board of directors.
Under the terms of the agreements,

71,508 shares of restricted stock were exchanged for 143,008 stock options. The
restricted stock vests over three and one-half years. The fair value of the
restricted stock on the date of grant amounted to $187,351, of which $46,837 was
recorded as compensation expense during the six months ended May 31, 2004.
Unamortized compensation expense at May 31, 2004 totaled $103,041 and has been
recorded as Deferred Stock Based Compensation in the balance sheet. The
restricted stock shares were issued in December 2003.

3. 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
was to be 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 were to be without interest
through May 2003, and included a 5% interest charge thereafter. This obligation
was paid in full in January 2004 from funds provided by new financing
arrangements described in Note 4 below.

4. DEBT AGREEMENTS

On January 14, 2004 the Company entered into a new long-term financing
agreement with CapitalSource Finance, LLC. The arrangement includes a $17.5
million term loan and a $6.0 million revolver to the parent company, both of
which mature on November 30, 2008. The arrangement also includes a $2.5 million
term loan to Obie Media Ltd., the Company's Canadian subsidiary which expires on
January 31, 2009. Funds from the term loans were used to (1) pay off the
existing term loan with U.S. Bank, (2) pay off the balance of the settlement
obligation with the Chicago Transit Authority, and (3) pay off the promissory
note related to the purchase of the minority interest of O.B. Walls, Inc. The
new revolver was used to pay off the outstanding balance on the operating line
of credit due to U.S. Bank. The interest charged is prime plus 4.5% on the
revolver and prime plus 5.5% on the term loans. These margins may be reduced by
up to 1.0% depending on the Company's leverage ratio. The effective rates on the
revolver and term loans at May 31, 2004 were 8.5% and 9.5%, respectively. The
first date the margins may be adjusted is the quarter ending November 30, 2004.
This transaction resulted in a write off of the discount on the obligation with
the Chicago Transit Authority in the amount of $709,817, and write off of
prepaid loan costs in the amount of $251,594. These amounts have been shown as
loss on debt extinguishment in the Consolidated Statement of Operations.

The loan agreement with CapitalSource Finance LLC contains financial
covenants regarding (1) minimum rolling EBITDA, (2) maximum leverage ratios, (3)
fixed-charge coverage ratios, and (4) interest coverage ratios, all of which are
measured on a quarterly basis. The first measurement date was as of February 29,
2004. The loan agreement also restricts the Company's ability to pay dividends.
The loans are collateralized by substantially all of the assets of the Company.
The Company was in compliance with all covenants at May 31, 2004.

The Company has an arrangement with Travelers Casualty & Surety Company
of America ("Travelers"), to provide bonds required by the Company. The Company
and Travelers have entered into a security agreement whereby Travelers maintains
a second position security interest in certain of the Company's assets,
subordinate to the security arrangements with CapitalSource Finance LLC or any
other replacement primary lender.

5. ACCOUNTING FOR GOODWILL

In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets", (SFAS No. 142), goodwill amortization
was discontinued as of November 30, 2002. We continued our impairment analysis
during the

quarter ending May 31, 2004 and have found no instances of impairment. Goodwill
at May 31, 2004 and November 30, 2003 amounted to $5,448,552, net of accumulated
amortization of $2,181,571.

6. INCOME TAXES

The provision for (benefit from) income taxes for the six months ended
May 31, 2004 and 2003 differs from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to pretax income as follows:

Six Months ended May 31,
------- -------
2004 2003
------- -------

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 2.9% 11.7%

------- -------
2.9% 11.7%
======= =======

7. 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:

Three Months Ended
May 31,
2004 2003
---- ----

Basic Shares (weighted average) 5,985,110 5,908,577
Dilutive effect of stock options 18,148 -

--------- ---------
Diluted shares (weighted average) 6,003,258 5,908,577
========= =========

Six Months Ended
May 31,
2004 2003
---- ----

Basic Shares (weighted average) 5,985,110 5,908,577
Dilutive effect of stock options - -

--------- ---------
Diluted shares (weighted average) 5,985,110 5,908,577
========= =========

At May 31, 2004 and 2003 the Company had options outstanding covering
531,328 and 670,181 shares, respectively, of the Company's common stock.

8. 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 income (loss) for the six
month periods ended May 2004 and 2003.

9. DISCONTINUED OPERATIONS

Effective during its fiscal year ended 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
agreements that were economically not viable, and 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. For fiscal 2004, the transit
districts included in Discontinued Operations are San Antonio, Pittsburgh and
Bridgeport. For fiscal 2003 the U.S. transit districts included in Discontinued
Operations are: Chicago, San Antonio, Cincinnati, Kitsap, Santa Cruz and
Bridgeport, and the Canadian transit districts included are: Pickering, Whitby,
Cambridge and St. Catharines. The Chicago (see Note 3 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 Company did not
aggressively participate in new contract awards in Cincinnati, Kitsap, Santa
Cruz or Bridgeport, which contracts expired either during fiscal 2002 or early
in fiscal 2003. The results of operations for these transit districts for 2003
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:

Three months ended May 31,
2004 2003
---- ----

Net revenues $ - $2,764

Production and installation expenses (929) (143,433)
Occupancy expense (1,968) (17,822)
Sales expense 55 (8,700)
General and administrative expense (14,176) (68,723)
--------- ----------

Loss from discontinued operations before income taxes (17,018) (105,914)
Income tax expense - -
--------- ----------
Net loss from discontinued operations $(17,018) $(105,914)
========= ==========

Six months ended May 31,
2004 2003
---- ----

Net revenues $ - $247,820

Production and installation expenses (5,643) (49,122)
Occupancy expense (3,937) (139,701)
Sales expense (2,792) (52,654)
General and administrative expense (18,391) (224,844)

--------- ----------
Loss from discontinued operations before income taxes (30,763) (218,501)
Income tax expense
--------- ----------
Net loss from discontinued operations $(30,763) $(218,501)
========= ==========

10. NEW ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, while the provisions of the disclosure
requirements are effective for the financial statements of interim or annual
reports ending after December 15, 2002. The Company has adopted the requirements
of FIN 45. The adoption of FIN 45 did not have a material effect on the
Company's financial position or results of operations.

11. RECLASSIFICATIONS

Certain amounts previously reported in the Company's financial
statements as of May 31, 2003 have been reclassified to conform to the current
fiscal year presentation. These reclassifications had no effect on previously
reported net income (loss) or shareholders' equity.

12. CONTINGENCIES

From time to time the Company is subject to legal proceedings and
claims in the ordinary course of business. The Company is currently involved in
claims and legal proceedings in which monetary damages and other relief are
sought. The Company is vigorously contesting these claims; however, resolution
is not expected to occur quickly, and their ultimate outcome cannot presently be
predicted. In the opinion of the Company's management, the ultimate resolution
of these claims and proceedings will not be likely to have an adverse effect on
the consolidated financial condition, results of operations or cash flows of the
Company.

Also, the Company is party to a suit in the District Court of Bexar
County, Texas brought by VIA Metropolitan Transit (VIA), the transit authority
for San Antonio, Texas. The suit alleges breach of contract, fraud and theft
relative to a contract for transit advertising services between the Company and
VIA. Damages have been claimed to be in excess of $600,000. The Company believes
these claims are without merit and is vigorously contesting them; however,
resolution is not expected to occur quickly, and their ultimate outcome cannot
presently be predicted.

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.

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. For fiscal 2004, the transit districts
included in Discontinued Operations are San Antonio, Pittsburgh and Bridgeport.
For fiscal 2003 the U.S. transit districts included in Discontinued Operations
are: Chicago, San Antonio, Cincinnati, Kitsap, Santa Cruz and Bridgeport, and
the Canadian transit districts included are: Pickering, Whitby, Cambridge and
St. Catharines.

ALLOWANCE 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. 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.

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 Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets, (SFAS No. 142), goodwill amortization was
discontinued as of November 30, 2002. We conducted an impairment analysis as of
November 30, 2003 and found no instances of impairment. Goodwill at May 31, 2004
and November 30, 2003 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. 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

On January 14, 2004 Obie entered into a new long-term financing
arrangement with CapitalSource Finance LLC. The arrangement includes a $17.5
million term loan and a $6.0 million revolver with Obie Media Corporation, both
of which mature on November 30, 2008. The arrangement also includes a $2.5

million term loan to Obie Media Ltd., our wholly owned Canadian subsidiary,
which matures on January 31, 2009. The interest rates are prime plus 4.5% on the
revolver and prime plus 5.5% on the term loans, respectively. These margins may
be reduced by up to 1.0% depending on the Company's leverage ratio. The
effective rates on the revolver and term loans at May 31, 2004 were 8.5% and
9.5%, respectively. The first date the margins may be adjusted is the quarter
ending November 30, 2004.

Funds from the term loan were used to (1) pay off the existing term
loan with the previous lender, (2) pay off the balance of the settlement
obligation with the Chicago Transit Authority, and (3) pay off the promissory
note related to the purchase of the minority interest of O. B. Walls, Inc. in
fiscal 2002. Funds from the new revolver were used to pay off the existing
revolver with the previous lender and to fund closing costs and working capital
needs. Availability under the revolver amounted to approximately $917,000 as of
May 31, 2004. The term loan principal payment amounts are $1.0 million in fiscal
2004, $1.0 million in fiscal 2005, $2.0 million in fiscal 2006, $3.0 million in
fiscal 2007, $11.1 million in fiscal 2008, with the balance due at maturity. The
revolver balance is due in full at maturity.

The loan agreement with CapitalSource Finance, LLC contains financial
covenants regarding (1) minimum rolling EBITDA, (2) maximum leverage ratios, (3)
fixed-charge coverage ratios, and (4) interest coverage ratios, all of which are
measured on a quarterly basis. The Company was in compliance with all covenants
as of May 31, 2004. The loan agreement also restricts the Company's ability to
pay dividends. The loans are collateralized by substantially all of the assets
of the Company.

COMPARISON OF THE THREE MONTHS ENDED MAY 2004 AND 2003

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. Net revenues for the three months
ended May 31, 2004 increased $1.3 million, or 11.8%, to $11.9 million in 2004
from $10.6 million for the same period in fiscal 2003. Transit net revenues
increased $742,000, or 8.2%, to $9.8 million for the three month period in
fiscal 2004, from $9.1 million for the same period of fiscal 2003. The increase
reflects our continuing success in selling annual transit advertising contracts
to our customers. Outdoor net revenues increased $511,000, or 32.3% to $2.1
million for the three months ended May 2004 compared to $1.6 million for the
same period of fiscal 2003. The increase was due primarily to higher occupancy
(sell-out) rates of the billboard plant.

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 increased
$136,000, or 8.7%, to $1.7 million in fiscal 2004 from $1.6 million in fiscal
2003. The Company's production and installation activities are primarily related
to the transit advertising part of our business, and were approximately 17% of
net transit revenues for the three month periods of both years.

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 $133,000, or 2.9%, to $4.7
million in the fiscal quarter ended in 2004 compared to $4.5 million in the
first quarter of fiscal 2003. The increase was related primarily to contracted
increases in transit agency fees. These expenses, as a percentage of net
revenues, decreased to 39.4% in the second quarter of fiscal 2004 as compared to
42.8% of net revenues in the same period of fiscal 2003. The decrease in the
ratio was primarily due to reduced guaranteed payments on transit contracts.

SELLING EXPENSES. Sales expenses consist primarily of employment and
administrative expenses associated with our sales force. These expenses
increased $132,000, or 6.5%, to $2.2 million for the three month period in
fiscal 2004, from $2.0 million in the same period in fiscal 2003. However,
selling expenses, as a percentage of net revenues, dropped to 18.2% for the
three month period in 2004 as compared to 19.1% in the same period in fiscal
2003 due to increased sales. . The decrease was primarily related to cost
containment elements of our sales incentive compensation programs.

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 increased $512,000, or 30.3% to $2.2 million
for the three months ended May 2004 as compared to $1.7 million in the same
period of fiscal 2003. The increase was related primarily to (1) additional
costs in the corporate marketing department in support of the annual incentive
contract sales mentioned above ($130,000), (2) management performance incentives
accrued in the fiscal 2004 period where none were accrued in fiscal 2003
($65,000), and rent on the Chicago office space in fiscal 2004 ($60,000).

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expenses
increased $26,000, or 5.7 %, to $476,000 in fiscal 2004 as compared to $450,000
for the same period in fiscal 2003. The increase was due to increased loan cost
amortization expense relative to the new financing arrangements consumated in
January 2004.

OPERATING INCOME. Due to the events and factors discussed above we generated
operating income of $677,000 in the three month period ending May, 2004 compared
to operating income of $363,000 in the same period of fiscal 2003.

INTEREST EXPENSE. Interest expense increased $25,000, or 4.3%, to $609,000 for
the three month period in fiscal 2004 from $584,000 for the comparable period of
fiscal 2003. The increase was due primarily to increased interest rates on the
Company's new financing arrangements with CapitalSource Finance, LLC.

have evaluated the likeliness of utilizing those carryforwards against future
taxable income in such time frames and have established a valuation allowance
accordingly. The current provision for income taxes, both for the 2004 and 2003
fiscal periods, is comprised of Canadian income taxes of one of our subsidiaries
that also operates in Canada.

INCOME (LOSS) FROM CONTINUING OPERATIONS. Due to the items and factors discussed
above we generated income from continuing operations of $22,000 in the three
month period in fiscal 2004, as compared to an operating loss of $355,000 for
the same period in fiscal 2003.

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 fiscal 2004 include the operations of
Chicago, San Antonio, Pittsburgh and Bridgeport. For the same period of fiscal
2003 discontinued operations include the operations of San Antonio, Texas;
Cincinnati; Kitsap, Washington; Santa Cruz, California; Bridgeport, Connecticut;
and the Ontario, Canada markets of Pickering, Whitby, Cambridge and St.
Catharines.

NET INCOME (LOSS)

Due to the items and factors discussed above, Obie realized net income of $5,000
during the three months ending May 31, 2004, compared to a net loss of $461,000
in the same period of fiscal 2003.

COMPARISON OF THE SIX MONTHS ENDED MAY 2004 AND 2003

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. Net revenues for the six months
ended May 31, 2004 increased $2.5 million, or 13.1%, to $21.9 million in 2004
from $19.3 million for the same period in fiscal 2003. Transit net revenues
increased $1.7 million, or 10.8%, to $17.8 million for the six month period in
fiscal 2004, from $16.1 million for the same period of fiscal 2003. The increase
reflects our continuing success in selling annual transit advertising contracts
to our customers. Outdoor net revenues increased $797,000, or 24.5% to $4.1
million for the six months ended May 2004 compared to $3.3 million for the same
period of fiscal 2003. The increase was due primarily to higher occupancy
(sell-out) rates of the billboard plant.

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 increased
$291,000, or 10.0%, to $3.2 million in fiscal 2004 from $2.9 million in fiscal
2003. The Company's production and installation activities are primarily related
to the transit advertising part of our business, and were approximately 18.0% of
net transit revenues for the six month periods of both years.

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 $294,000, or 3.6%, to $8.5
million in the fiscal period ended in 2004 compared to $8.2 million in the same
period of fiscal 2003. The increase was related to contracted increases in
transit agency fees ($250,000) and increased land lease expenses for billboard
sites ($44,000). These expenses, as a percentage of net revenues, decreased to
38.7% in the first six months of fiscal 2004 as compared to 42.3% of net
revenues in the same period of fiscal 2003. The decrease in the ratio is
primarily due to reduced guaranteed payments on transit contracts.

SELLING EXPENSES. Sales expenses consist primarily of employment and
administrative expenses associated with our sales force. These expenses
increased $553,000, or 14.5%, to $4.4 million for the six month period in fiscal
2004, from $3.8 million in the same period in fiscal 2003. Selling expenses, as
a percentage of net revenues, increased to 20.0% for the six month period in
2004 as compared to 19.8% in the same period in fiscal 2003. The increase was
primarily due to variable sales costs that fluctuate with sales volume.

General and administrative expenses increased $790,000, or 22.4% to $4.3 million
for the six months ended May 2004 as compared to $3.5 million in the same period
of fiscal 2003. The increase was related primarily to (1) additional costs in
the corporate marketing department in support of the annual incentive contract
sales mentioned above ($350,000, (2) management performance incentives accrued
in the fiscal 2004 period where none were accrued in fiscal 2003 ($85,000), and
rent on the Chicago office space that was charged to discontinued operations in
fiscal 2003 ($120,000).

DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expenses
increased $40,000, or 4.4 %, to $959,000 in fiscal 2004 as compared to $919,000
for the same period in fiscal 2003. The increase was due to increased loan cost
amortization expense relative to the new financing arrangements consumated in
January 2004.

OPERATING INCOME. Due to the events and factors discussed above we generated
operating income of $543,000 in the six month period ending May, 2004 compared
to operating an operating loss of $23,000 in the same period of fiscal 2003.

INTEREST EXPENSE. Interest expense increased $29,000, or 2.6%, to $1.2 million
for the six month period in fiscal 2004 from $1.1 million for the comparable
period of fiscal 2003. The increase was due primarily to increased interest
rates on the Company's new financing arrangements with CapitalSource Finance,
LLC.

LOSS ON DEBT EXTINGUISHMENT. The Company experienced a loss on debt
extinguishment resulting from the pay-off of its old debt in the first quarter
of fiscal 2004 with the proceeds from its new financing arrangements with
CapitalSource Finance, LLC. The loss is comprised of charges of approximately
$709,000 relating to the write-off of unamortized discount on the Chicago
Transit Authority settlement payoff, and approximately $252,000 relating to
unamortized prepaid loan costs on the previous debt arrangements.

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 such time frames and have established a valuation allowance
accordingly. The current provision for income taxes, both for the 2004 and 2003
fiscal periods, is comprised of Canadian income taxes of one of our subsidiaries
that also operates in Canada.

INCOME (LOSS) FROM CONTINUING OPERATIONS. Due to the items and factors discussed
above we generated an operating loss from continuing operations of $1.6 million
in the six month period in fiscal 2004, as compared to an operating loss of $1.3
million for the same period in fiscal 2003.

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 fiscal 2004 include the operations of
Chicago, San Antonio, Pittsburgh and Bridgeport. The same period of fiscal 2003
includes the operations of San Antonio; Cincinnati; Kitsap, Washington; Santa
Cruz, California; Bridgeport; and the Ontario, Canada of Pickering, Whitby,
Cambridge and St. Catharines

NET INCOME (LOSS)

Due to the items and factors discussed above, Obie generated a net loss of $1.7
million during the six months ending May 31, 2004, compared to a net loss of
$1.5 million in the same period of fiscal 2003.

LIQUIDITY AND CAPITAL RESOURCES

On January 14, 2004, we entered into a new long-term financing
arrangement with CapitalSource Finance LLC. The arrangements with Obie Media
Corporation includes a $17.5 million term loan and a $6.0 million revolver both
of which mature on November 30, 2008. In addition, there is a $2.5 million term
loan with Obie Media Ltd. (the Company's Canadian subsidiary) which matures on
January 31, 2009.

The interest rates are prime plus 4.5% on the revolver and prime plus
5.5% on the term loans. These margins may be reduced by up to 1.0% depending on
the Company's leverage ratio. The effective rates on the revolver and term loans
at May 31, 2004 were 8.5% and 9.5% respectively. The first date the margin may
be adjusted is the quarter ending November 30, 2004.

Funds from the term loans were used to (1) pay off the existing term
loan with the previous lender, (2) pay off the balance of the settlement
obligation with the Chicago Transit Authority, and (3) pay off the promissory
note related to the purchase of the minority interest of O. B. Walls, Inc. Funds
from use of the revolver were used to pay off the existing revolver with the
previous lender and to fund closing costs and working capital needs.
Availability under the revolver amounted to approximately $900,000 as of May 31,
2004.

This new financing arrangement with CapitalSource Finance, LLC allowed
us to consolidate debt obligations, provide additional revolver availability,
and restructure principal payment obligations to better fit the growth and cash
flow needs of the Company. The term loan principal payment amounts are $1.0
million in fiscal 2004, $1.0 million in fiscal 2005, $2.0 million in fiscal
2006, $3.0 million in fiscal 2007, $11.1 million in fiscal 2008, with the
balance due at maturity. The revolver balance is due in full at maturity.

The loan agreement with CapitalSource Finance LLC contains financial
covenants regarding (1) minimum rolling EBITDA, (2) maximum leverage ratios, (3)
fixed-charge coverage ratios, and (4) interest coverage ratios, all of which are
measured on a quarterly basis. The Company was in compliance with all covenants
as of May 31, 2004. The loan agreement also restricts the Company's ability to
pay dividends. The loans are collateralized by substantially all of the assets
of the Company.

The Company has historically satisfied our working capital requirements
with cash from operations and revolving credit borrowings. Our working capital
at May 31, 2004 was $4.4 million as compared to $4.9 million at November 30,
2003. The decrease was due primarily to funding the loan fees related to the new
financing arrangements.

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 May 31,
2004, Obie had outstanding borrowings of $24.7 million, of which $24.6 million
was pursuant to credit agreements with CapitalSource Finance LLC, and $100,000
in other notes. The Company's indebtedness is collateralized by substantially
all of its assets. At May 31, 2004, available borrowing capacity under the line
of credit was approximately $900,000.

Obie's net cash used in operating activities was $1.1 million during
the six months ended May 31, 2004 , as compared to $153,000 for the same period
in fiscal 2003. The difference was primarily due to (1) a decrease in other
liabilities, primarily accrued transit fees of $284,000, (2) an increase in

prepaid expenses of $302,000, and (3) a decrease in accounts receivable of $1.2
million less in fiscal 2004 when compared to fiscal 2003, and (4) the effect, in
fiscal 2004, of the loss on debt extinguishment of $961,000.

Net cash used in investing activities was $277,000 and $351,000 during
the six month periods ended May 2004 and 2003, respectively. The amounts used in
both years were for equipment purchases, primarily automobiles and computing
equipment.

Net cash used in financing activities was $86,000 for the six month
period ended May, 2004, as compared to $778,000 in the same period of fiscal
2003. The difference between the two periods is related to the effects of the
new financing arrangements that were consumated in the first quarter of fiscal
2004.

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 lender 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 2004.
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

The Company held its annual meeting of shareholders on May 20, 2004. At
the meeting, Brian Obie, Richard C. Williams, Stephen A. Wendell, Randall C.
Pape and Delores Mord were elected to the Board of Directors for one year terms.
Voting on the election of directors was as follows:

Votes for Votes Withheld Abstained
Brian Obie 5,572,660 412,450 0
Richard C. Williams 5,572,660 412,450 0
Randall C. Pape 5,572,660 412,450 0
Stephen A. Wendell 5,572,660 412,450 0
Delores Mord 5,572,660 412,450 0

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 16, 2004 reporting that it had issued
a press release on April 15, 2004 reporting earnings for the fiscal quarter
ended February 29, 2004.
..

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 July 15, 2004 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