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<TITLE>CITI TRENDS, INC.</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
February&nbsp;28, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORM S-1</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>REGISTRATION STATEMENT UNDER</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CITI TRENDS, INC.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
(Exact name of Registrant as specified in its charter)
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>5600</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>52-2150697</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    (State or other jurisdiction of<BR>
    incorporation or organization)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    (Primary standard industrial<BR>
    classification code number)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    (IRS employer<BR>
    identification number)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
102 Fahm Street
</DIV>

<DIV align="center" style="font-size: 9pt;">
Savannah, Georgia 31401
</DIV>

<DIV align="center" style="font-size: 9pt;">
(912)&nbsp;236-1561
</DIV>

<DIV align="center" style="font-size: 9pt;">
(Address, including zip code, and telephone number, including
area code, of
</DIV>

<DIV align="center" style="font-size: 9pt;">
registrant&#146;s principal executive offices)
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>R. Edward Anderson</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>Chief Executive Officer</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>102 Fahm Street</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>Savannah, Georgia 31401</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>(912)&nbsp;236-1561</B>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Copies to:
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>William F. Schwitter, Esq.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Richard C. Tilghman,&nbsp;Jr.,&nbsp;Esq.</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Wm. David Chalk,&nbsp;Esq.</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>75 East 55th Street</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>DLA Piper Rudnick Gray Cary US LLP</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>New York, New York 10022</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>6225 Smith Avenue</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>(212)&nbsp;318-6000</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Baltimore, Maryland 21209</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>(212)&nbsp;319-4090 (fax)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>(410) 580-3000</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>(410) 580-3001 (fax)</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after this Registration
Statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap>Title of Each Class of</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Proposed Maximum</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Amount of</TD>
</TR>

<TR>
    <TD align="center" nowrap>Securities to be Registered</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Aggregate Offering Price(1)(2)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Registration Fee</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, par value $.01&nbsp;per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $57,500,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $6,767.75</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule&nbsp;457(o) under the Securities Act of
    1933, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes shares of common stock subject to the
    underwriters&#146; over-allotment option.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933, as amended or until the
registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<HR size="1" noshade color="#000000" style="margin-top: -2px">
</DIV>

<DIV align="left" style="font-size: 10pt;">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<B><FONT style="font-size: 8pt" color="#A32638">The information
in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and we
are not soliciting offers to buy these securities in any state
where the offer or sale is not
permitted.</FONT><FONT style="font-size: 8pt"> <BR>

</FONT></B>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#A32638">Subject To Completion, Dated
February&nbsp;28, 2005</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Preliminary Prospectus</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y05802y0580200.gif" alt="(CITITRENDS LOGO)">
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This is an initial public offering of shares of common stock of
Citi Trends, Inc. Citi Trends is
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and the selling stockholders identified in this
prospectus are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We anticipate that the initial public offering price will be
between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The market price of the shares after the offering may be
higher or lower than the offering price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to list our common stock on the Nasdaq National Market
under the symbol &#147;CTRN.&#148;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#A32638">Investing in the common stock involves
risks. See &#147;Risk Factors&#148; beginning on
page&nbsp;6.</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Per Share</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Price to the public</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds to Citi Trends, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds to the selling stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We and the selling stockholders have granted an option to the
underwriters to purchase up to a maximum
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock within 30&nbsp;days following the
date of this prospectus to cover over-allotments, if any. The
underwriters may purchase up to &nbsp;of the additional shares
from us and up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the additional shares from the selling stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters expect to deliver the shares of common stock to
purchasers on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#A32638">Neither the Securities and Exchange
Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a
criminal offense.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 1pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 52%; border-top: 1.5pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 20pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CIBC World Markets</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 12pt;">

<TR>
    <TD width="33%"></TD>
    <TD width="33%"></TD>
    <TD width="33%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Piper Jaffray</B></TD>
    <TD align="center"><B>SG Cowen&nbsp;&#38; Co.</B></TD>
    <TD align="right"><B>Wachovia Securities</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The date of this prospectus
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</DIV>

<DIV style="margin-top: 52pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<img src="y05802y0580201.gif" alt="(CITITRENDS MAP)">
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>[Pictures of the outside and inside of various stores]</B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Table of Contents</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Page</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Special Note&nbsp;Regarding Forward-Looking
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Selected Financial and Operating Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Related Party Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Principal and Selling Stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Description of Capital Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Index to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv1w1.txt">FORM OF UNDERWRITING AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv3w1.txt">FORM OF SECOND AMENDED & RESTATED CERTIFICATE OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv3w2.txt">FORM OF AMENDED & RESTATED BY-LAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w1.txt">LETTER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w2.txt">EMPLOYMENT AND NON-INTERFERENCE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w3.txt">AMENDED EMPLOYMENT & NON-INTERFERENCE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w4.txt">LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w5.txt">FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w6.txt">SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w7.txt">THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w8.txt">FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w9.txt">LEASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w10.txt">BANK OF AMERICA REVOLVING LINE OF CREDIT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv10w11.txt">FORM OF 2005 LONG TERM STOCK INCENTIVE PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y05802exv23w1.txt">CONSENT OF KPMG LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 39pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 45%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should rely only on the information contained in this
prospectus. Neither we, the selling stockholders nor the
underwriters have authorized anyone to provide you with
information different from, or in addition to, that contained in
this prospectus. We and the selling stockholders are offering to
sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&#147;Citi Trends,&#148; &#147;Citi Club,&#148; &#147;Citi
Knights,&#148; &#147;Citi Nite,&#148; &#147;Citi Steps,&#148;
&#147;Citi Trends Fashion for Less,&#148; &#147;Citi
Women,&#148; &#147;CT Sport,&#148; &#147;Vintage Harlem&#148;
and &#147;Univer Soul&#148; are registered trademarks of Citi
Trends, Inc. We also have applications pending with the U.S.
Patent and Trademark Office for additional trademarks. All
rights are reserved. All other trademarks, service marks or
trade names referred to in this prospectus are the property of
their respective owners.
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "Prospectus Summary" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Prospectus Summary</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>This summary highlights information contained in other parts
of this prospectus, and because it is only a summary, it does
not contain all of the information that you should consider
before buying shares. You should read the entire prospectus
carefully. All share numbers in this prospectus reflect
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-for-one
stock split of our common stock, which will occur simultaneously
with the closing of this offering. Our fiscal year ends on the
Saturday closest to January&nbsp;31, and, except as otherwise
provided, references in this prospectus to a fiscal year mean
the 52- or 53-week period ended on the Saturday closest to
January 31 of the succeeding year. Fiscal 2004, for example,
refers to the fiscal year ending January&nbsp;29, 2005.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. We offer quality,
branded merchandise for men, women and children, including
products from nationally recognized brands, as well as private
label products and a limited assortment of home d&#233;cor
items. Our merchandise offerings are designed to appeal to the
preferences of fashion conscious consumers, particularly
African-Americans. Through strong relationships with our
suppliers, we are able to offer our products at compelling
values, with nationally recognized branded merchandise offered
at 20% to 60% discounts to department and specialty stores&#146;
regular prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We currently operate 200 stores in both urban and rural markets
in 12&nbsp;states. Originally our stores were located in the
Southeast, and we have recently expanded into the Mid-Atlantic
region and Texas. Our stores average approximately
8,500&nbsp;square feet of selling space, and our stores opened
since the beginning of fiscal 2003 average approximately
10,300&nbsp;square feet of selling space. Our stores are
typically located in neighborhood strip shopping centers that
are convenient to low and moderate income consumers. These store
locations typically have attractive lease terms, and along with
our differentiated merchandise assortment, compelling value
proposition and efficient operating model, generate strong
returns on store investments. Our new stores typically pay back
our unit investment within 12 to 14&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners&nbsp;II, L.P., or
Hampshire Equity Partners, a private equity firm. Our management
team has implemented several strategies designed to
differentiate our stores, improve our operating and financial
performance and position us for growth, including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    focusing our merchandise offerings on more urban fashion apparel
    for the entire family, with a greater emphasis on nationally
    recognized brands;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    accelerating and completing the remodeling of virtually all of
    the 85 stores acquired in 1999;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    refining our new store model and implementing a real estate
    approach focused on locating stores in low to moderate income
    neighborhoods close to our core customers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    rebranding our stores and our company to Citi Trends;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    investing in infrastructure to support growth;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    implementing an aggressive growth strategy, including entering
    several new markets such as Houston, Norfolk and, most recently,
    Baltimore and Washington,&nbsp;D.C.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These strategies have enabled us to grow from 85 stores at the
time of the acquisition to 200 stores as of January&nbsp;29,
2005 and generate comparable store sales increases in each of
the past four fiscal years. Our net sales increased from
$80.9&nbsp;million in fiscal 2000 to $157.2&nbsp;million in
fiscal 2003, representing a compound annual growth rate of
approximately 25%, and from $108.0&nbsp;million in the 39-week
period ended November&nbsp;1, 2003 to $137.1&nbsp;million in the
39-week period ended October&nbsp;30, 2004. Net income has
increased from $1.2&nbsp;million in fiscal 2000 to
$5.9&nbsp;million in fiscal 2003.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">1
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our goal is to be the leading value-priced retailer of urban
fashion apparel and accessories. We believe the following
business strengths differentiate us from our competitors and are
important to our success:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    focus on providing a timely and fashionable assortment of urban
    apparel and accessories;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    superior value proposition, with nationally recognized brands
    offered at 20% to 60% discounts to department and specialty
    stores&#146; regular prices;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    merchandise mix that appeals to the entire family,
    distinguishing our stores from many competitors that focus only
    on women and reducing our exposure to fashion trends and demand
    cycles in any single category;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    strong and flexible sourcing relationships managed by our
    20-member buying team, staffed by individuals with an average of
    more than 20&nbsp;years of retail experience;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    attractive fashion presentation and store environment similar to
    a specialty apparel retailer, rather than a typical off-price
    store;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    highly profitable store model.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our growth strategy is to open stores in new and existing
markets, as well as to increase sales in existing stores. Adding
stores in the markets we currently serve enables us to benefit
from enhanced name recognition and achieve advertising and
operating synergies, and entering new markets opens additional
growth opportunities. We believe that we benefit from attractive
store level economics. Our new stores opened in fiscal 2002 and
fiscal 2003 generated average first full year cash return on
investment of approximately 100%, and we expect for stores
opened in fiscal 2004 to produce similar results. In each of
fiscal 2005 and fiscal 2006, we intend to open an additional 40
stores, approximately 70% of which will be located in states we
currently serve. We intend to increase comparable store sales
primarily through merchandising enhancements and the expansion
of product categories such as home d&#233;cor and intimate
apparel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We seek to serve low to moderate income consumers generally and,
particularly, to appeal to the preferences of those
African-American and other consumers who want a differentiated,
urban merchandise mix. We believe this market is underserved by
existing retailers and benefits from several favorable
characteristics including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    a growing market with favorable demographics;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our core consumers&#146; significant spending on
    apparel;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the expanding appeal of urban apparel brands.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a result of these characteristics, we believe there is
significant consumer demand for a value-priced retailer that
combines the operating efficiencies of a large retail chain with
fashion and sourcing expertise and is focused on meeting the
needs of low to moderate income consumers generally and
African-American consumers specifically.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Corporate Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are incorporated in Delaware, and our principal executive
offices are located at 102 Fahm Street, Savannah, Georgia 31401,
and our telephone number is (912)&nbsp;236-1561. Our website
address is www.cititrends.com. Information contained in, or
accessible through, our website does not constitute part of this
prospectus.
</DIV>

<P align="center" style="font-size: 10pt;">2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="32%"></TD>
    <TD width="1%"></TD>
    <TD width="67%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by Citi Trends, Inc.</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by the selling stockholders</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after the offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We estimate that the net proceeds to be received by us from this
    offering will be approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    after deducting underwriting discounts and commissions and
    offering expenses payable by us. Approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of these net proceeds will be used to redeem all of our
    outstanding Series&nbsp;A preferred stock, $.01 par value per
    share, or Series&nbsp;A Preferred Stock, and to pay all accrued
    and unpaid dividends thereon, and
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    will be used to repay outstanding indebtedness. We expect that
    the remainder of our net proceeds will be used for new store
    openings, the acquisition or design and construction of a new
    distribution center in fiscal 2006 and general corporate
    purposes. We will not receive any of the proceeds from the sale
    of shares of common stock offered by the selling stockholders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed Nasdaq National Market Symbol</TD>
    <TD></TD>
    <TD valign="top">
    &#147;CTRN&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Unless otherwise stated, information in this prospectus assumes:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for-one
    stock split of our common stock, which will occur simultaneously
    with the completion of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    no exercise of outstanding options to
    purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock outstanding as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    no exercise of the underwriters&#146; over-allotment option.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Financial and Operating Data</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides summary financial and operating
data for each of the fiscal years in the five-year period ended
January&nbsp;31, 2004 and for each of the 39-week periods ended
November&nbsp;1, 2003 and October&nbsp;30, 2004, including:
(a)&nbsp;our statement of operations data for each such period,
(b)&nbsp;additional operating data for each such period and
(c)&nbsp;our balance sheet data as of October&nbsp;30, 2004, on
an actual basis and as adjusted to give effect to the receipt
and application of the net proceeds from this offering. The
statement of operations data for fiscal 2002 and fiscal 2003 are
derived from financial statements included elsewhere in this
prospectus that have been audited by KPMG LLP, independent
registered public accountants. The statement of operations data
for fiscal 2001 are derived from our audited financial
statements included elsewhere in this prospectus. The statement
of operations data for fiscal 1999 and fiscal 2000 are derived
from our audited financial statements that are not included in
this prospectus. The statement of operations data for the
39-week periods ended November&nbsp;1, 2003 and October&nbsp;30,
2004 and the balance sheet data as of October&nbsp;30, 2004 are
derived from our unaudited condensed interim financial
statements included elsewhere in this prospectus. In the opinion
of management, these unaudited condensed interim financial
statements have been prepared on the same basis as the audited
financial statements and reflect all adjustments (consisting
only of normal recurring adjustments) and fairly present the
financial information for these periods. The summary financial
and operating data set forth below should be read in conjunction
with, and are qualified in their entirety by reference to, the
sections of this prospectus entitled &#147;Selected Financial
and Operating Data&#148; and &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations&#148; and our financial statements and related notes
included elsewhere in this prospectus. Historical results are
not necessarily indicative of results to be expected for any
future period.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap><B>Fiscal Year Ended<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>39 Weeks Ended</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;3,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>November&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October&nbsp;30,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2000<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27" align="center" nowrap>(dollars in thousands, except per share data amounts and additional operating data)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,841</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative<BR>
    expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(472</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest
    expense<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before<BR>
    income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(645</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,269</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,644</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(664</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income per<BR>
    common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares used to compute net income per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="31">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Additional Operating Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of stores:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Opened during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales
    increase<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="right" style="font-size: 10pt;">
<I>(footnotes on following page)</I>
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>As of October&nbsp;30, 2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>As Adjusted</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap>(in thousands)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD align="left">
    Our fiscal year ends on the Saturday closest to January 31 of
    each year. Fiscal years 2001, 2002 and 2003 comprise
    52&nbsp;weeks. Fiscal year 2000 comprises 53&nbsp;weeks.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD align="left">
    The fiscal year ended January&nbsp;29, 2000 consists only of the
    period from April&nbsp;13, 1999 (the date we were acquired by
    Hampshire Equity Partners) to January&nbsp;29, 2000. The period
    contained 41&nbsp;weeks and five&nbsp;days.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD align="left">
    Our Series&nbsp;A Preferred Stock, which will be redeemed using
    a portion of the net proceeds from this offering, was
    reclassified as debt as of the second quarter of fiscal 2003, in
    accordance with the Financial Accounting Standards Board&#146;s
    (&#147;FASB&#148;) Statement of Financial Accounting Standards
    (&#147;SFAS&#148;) No.&nbsp;150, <I>Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity</I>. The amount of dividends treated as interest
    expense in fiscal 2003 was $189,000 and none in fiscal 2002. For
    the 39-week periods ended October&nbsp;30, 2004 and
    November&nbsp;1, 2003, the amount of dividends treated as
    interest expense was $243,000 and $108,000, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD align="left">
    Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "Risk Factors" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risk Factors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>An investment in shares of our common stock involves a high
degree of risk. You should consider carefully the following
information about these risks, together with the other
information contained in this prospectus, before you decide
whether to buy our common stock. The occurrence of any of the
following risks could have a material adverse effect on our
business, financial condition and results of operations.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Relating to Citi Trends, Inc.</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Our success depends on our ability to anticipate, identify
    and respond rapidly to changes in consumers&#146; fashion
    tastes, and our failure to evaluate adequately fashion trends
    could have a material adverse effect on our business, financial
    condition and results of operations.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The apparel industry in general and our core customer market in
particular are subject to rapidly evolving fashion trends and
shifting consumer demands. Accordingly, our success is heavily
dependent on our ability to anticipate, identify and capitalize
on emerging fashion trends, including products, styles and
materials that will appeal to our target consumers. Our failure
to anticipate, identify or react appropriately to changes in
styles, trends, brand preferences or desired image preferences
is likely to lead to lower demand for our merchandise, which
could cause, among other things, sales declines, excess
inventories and higher markdowns. The inaccuracy of our
forecasts regarding fashion trends could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>The success of our growth strategy depends on our ability to
    add a significant number of new stores, and we may be unable to
    do so. Also, the addition of a significant number of stores
    could strain our resources and cause the performance of our
    existing stores to suffer.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to continue to increase our net sales and earnings
depends, in large part, on opening new stores and operating our
new and existing stores profitably. We opened 40 new stores in
fiscal 2004 and 25 new stores in fiscal 2003, and we intend to
open 40 new stores in each of fiscal 2005 and fiscal 2006. If we
are unable to open all of these stores or operate them
profitability, we may not achieve our forecasted sales and
earnings growth targets. This could have a material adverse
effect on our financial condition and results of operation as
well as cause a significant decline in the market price of our
common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The success of our growth strategy is dependent upon, among
other things:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    identifying suitable markets and sites within those markets for
    new store locations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    negotiating acceptable lease terms for new store locations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    hiring, training and retaining competent sales and store
    management personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    obtaining adequate capital;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    effectively managing higher levels of inventory to meet the
    needs of new and existing stores on a timely basis;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    maintaining the appropriate proportion of new stores to existing
    stores in a particular market so that sales at existing stores
    do not decline due to a lack of new customers and a dispersion
    of existing customers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    fostering existing and new relationships with suppliers capable
    of providing us with a sufficient amount of merchandise to meet
    our growing needs as we increase the number of our stores;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    successfully integrating the new stores into our existing
    operations and expanding our infrastructure to accommodate our
    growing number of stores;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    developing and operating additional distribution capacity as we
    increase the number of stores.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Growth of our store base will place increased demands on our
operating, managerial and administrative resources and may lead
to management and operating inefficiencies. These demands and
inefficiencies may cause deterioration in the financial
performance of our individual stores and, therefore, our entire
business.
</DIV>

<P align="center" style="font-size: 10pt;">6
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Expansion into new markets may present risks different from
    our existing markets, and we may have difficulty overcoming
    them.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our growth strategy includes entry into new geographic markets,
which may:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    present competitive and distribution challenges that are
    different from those we currently face;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    require us to alter our merchandise to appeal to fashion
    preferences in new markets that are different from those in our
    existing markets;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    require us to alter our merchandise selection to meet cultural
    and/or climate differences, such as colder winter weather than
    in the southeastern United States where most of our current
    stores are located;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    result in higher costs, such as rent, distribution, labor and
    advertising; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    cause the stores we open in new markets to achieve lower sales
    because consumers are not familiar with the Citi Trends name and
    concept in new markets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The opening of stores in new markets could have a material
adverse effect on our business, financial condition and results
of operations if the new stores do not perform at comparable
levels to our current stores or if we are unable to open new
stores on a timely basis.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Our net sales, inventory levels and earnings fluctuate on a
    seasonal basis, which makes our business more susceptible to
    adverse events that occur during those seasons.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our net sales and earnings are disproportionately higher during
the first and fourth quarters each year due to the importance of
the spring selling season, which includes Easter, and the fall
selling season, which includes Christmas. Factors negatively
affecting us during the first and fourth quarters, including
adverse weather and unfavorable economic conditions, will have a
greater adverse effect on our financial condition than if our
business were less seasonal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In order to prepare for the spring and fall selling seasons, we
must order and keep in stock significantly more merchandise than
during other parts of the year. This seasonality makes our
business more susceptible to the risk that our inventory will
not satisfy actual consumer demand. Any unanticipated demand
imbalances during these peak shopping seasons could require us
either to sell excess inventory at a substantial markdown or
fail to satisfy our consumers. In either event, our net sales
and gross margins may be lower than historical levels, which
could have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Our business and growth strategies depend on our ability to
    obtain a sufficient amount of merchandise, and our failure to
    meet current and increased merchandising needs could have a
    material adverse effect on our business, financial condition and
    results of operations.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our relationships with our suppliers generally are not on a
contractual basis and do not guarantee us adequate supplies,
quality or acceptable pricing on a long-term basis. Most of our
suppliers could discontinue selling to us at any time. In
addition, our growth strategy presents potential supply problems
if our existing suppliers are unable to meet our increased needs
and we cannot locate alternative sources of supply. If we lose
the services of one or more of our significant suppliers or one
or more of them fail to meet our needs, we may be unable to
obtain replacement merchandise in a timely manner. Any such
unforeseen supply problems could have a material adverse effect
on our business, financial condition and results of operations.
It is important that we establish relationships with reputable
vendors to prevent the possibility that we inadvertently receive
counterfeit brands or unlicensed goods. Although we have a
quality assurance team to check merchandise in an effort to
assure that we purchase only authentic brands and licensed goods
and are careful in selecting our vendors, we may receive
products that we are prohibited from selling or incur liability
for selling counterfeit brands or unlicensed goods, which could
have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Additionally, some of our suppliers sell us products under
license agreements with other manufacturers or other owners of
the brand or trademark. If any of these licenses is terminated,
we may be unable to obtain replacement merchandise of comparable
fashion appeal or quality, in the same quantities or at the same
prices. This could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We rely on only two distribution centers, one of which also
serves as our corporate headquarters, and our stores are
concentrated in the southeastern United States. Therefore, any
significant disruption to our distribution process or
southeastern retail locations could have a material adverse
effect on our business, financial condition and results of
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to distribute merchandise to our store locations in
a timely manner is essential to the efficient and profitable
operation of our business. At the center of our distribution
process are our two distribution centers located in Savannah,
Georgia, one of which also serves as our corporate headquarters.
Any natural disaster or other disruption to the operation of
either of these facilities due to fire, hurricane, other natural
disaster or any other cause could damage a significant portion
of our inventory or impair our ability to stock adequately our
stores and process product returns to suppliers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, Savannah, Georgia and the southeastern United
States are vulnerable to significant damage or destruction from
hurricanes and tropical storms. Although we maintain insurance
on our stores and other facilities, the economic effects of a
natural disaster that affects our distribution centers and/or a
significant number of our stores could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We will need additional distribution capacity in the next two to
three years to support our anticipated growth. Although we
currently intend to acquire or design and construct a new
distribution center in southeastern Georgia during this time
period, there is no assurance that we will be able to acquire or
design and construct such a center in a cost efficient manner.
In order to maintain the efficient operation of our business,
additional centers may need to be located in closer proximity to
the new markets that we enter. In addition, we may have
difficulty finding suitable locations for new distribution
centers, and, if we do, they may be more expensive to operate
than our existing facilities. Our failure to expand our
distribution capacity on a timely basis to keep pace with our
anticipated growth in stores could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fluctuations in our comparable store sales and quarterly
results of operations could cause the market price of our common
stock to decline substantially.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our comparable store sales and quarterly results have fluctuated
significantly in the past, and we expect them to continue to
fluctuate in the future. Our comparable store sales and
quarterly results of operations are affected by a variety of
factors, including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    fashion trends, including consumer response to new and existing
    styles;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    seasonal demand for apparel;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    calendar shifts of holidays;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our merchandise mix and the gross margins we achieve on the
    various merchandise we sell;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our ability to source, manage and distribute merchandise
    effectively;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    changes in general economic conditions, the retail sales
    environment and consumer spending patterns;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    weather conditions, natural disasters, acts of war or terrorism
    and other events outside of our control;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    actions of our competitors or anchor tenants in the strip
    shopping centers where our stores are located;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the timing and effectiveness of our advertising and other
    marketing campaigns;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the level of pre-opening expenses associated with new
    stores;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the timing of new store openings and the relative proportion of
    new stores to existing stores.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Since the beginning of fiscal 2003, our quarter-to-quarter
comparable store sales have ranged from an increase of 0.3% to
an increase of 9.6%. In addition, our comparable store sales in
the 39-week period ended October&nbsp;30, 2004 were lower than
our historical average. We cannot assure you that we will be
able to maintain historical levels of comparable store sales as
we execute our growth strategy and expand our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If our comparable store sales and quarterly results fail to meet
the expectations of the market generally, the market price of
our common stock could decline substantially.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We depend on the experience and expertise of our senior
management team, and the departure of one or more members of
that team could have a material adverse effect on our business,
financial condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The success of our business is dependent upon the close
supervision of all aspects of our business by our senior
management, particularly the operation of our stores, the
selection of our merchandise and the site selection for new
stores. If we lose the services of R. Edward Anderson, our Chief
Executive Officer, or George Bellino, our President and Chief
Merchandising Officer, or another member of our senior
management team, our business could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We experience significant employee turnover rates,
particularly among store sales associates and managers, and we
may be unable to hire and retain enough trained employees to
support our existing operations or our planned growth.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Like most retailers, we experience significant employee turnover
rates, particularly among store sales associates and managers,
and our continued growth will require us to hire and train even
more new personnel. We therefore must continually hire and train
new personnel to meet our staffing needs. We constantly compete
for qualified personnel with companies in our industry and in
other industries. A significant increase in the turnover rate
among our store sales associates and managers would increase our
recruiting and training costs and could decrease our operating
efficiency and productivity. If this were to occur, we may not
be able to service our customers as effectively, thus reducing
our ability to continue our growth and to operate our existing
stores as profitably as we have in the past. It is possible that
we will be unable to continue to recruit, hire, train and retain
a sufficient number of qualified store sales associates and
managers to execute our growth strategy or meet the needs of our
current business. Our continued success is dependent on our
ability to attract, retain and motivate quality employees,
including managers, and our failure to do so could have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Increases in the minimum wage could have a material adverse
effect on our business, financial condition and results of
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
From time to time, legislative proposals are made to increase
the minimum wage in the United States, as well as certain
individual states. Wage rates for many of our employees are at
or slightly above the minimum wage. As federal and/or state
minimum wage rates increase, we may need to increase not only
the wage rates of our minimum wage employees but the wages paid
to our other hourly employees as well. Any increase in the cost
of our labor could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our failure to protect our trademarks could have a negative
effect on our brand image and limit our ability to penetrate new
markets.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that our &#147;Citi Trends&#148; trademark is
integral to our store design and our success in building
consumer loyalty to our brand. We have registered this trademark
with the U.S.&nbsp;Patent and Trademark Office. We have also
registered, or applied for registration of, additional
trademarks with the U.S.&nbsp;Patent and Trademark Office that
we believe are important to our business. We cannot assure you
that these registrations will prevent imitation of our name,
merchandising concept, store design or private label merchandise
or the infringement of our other intellectual property rights by
others. Imitation of our name, concept, store design or
merchandise in a manner that projects lesser quality or carries
a negative connotation of our brand image could have a material
adverse effect on our business, financial condition and results
of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, we cannot assure you that others will not try to
block the manufacture or sale of our private label merchandise
by claiming that our merchandise violates their trademarks or
other proprietary rights. Other entities may have rights to
trademarks that contain the word &#147;Citi&#148; or may have
rights in similar or competing marks for apparel and/or
accessories. If these entities were to claim that we have
infringed on their rights, we may be unable to reach licensing
arrangements with these parties or otherwise reach agreements
for the continued manufacture and sale of our merchandise. This
could have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We are subject to various legal proceedings, which could have
a material adverse effect on our business, financial condition
and results of operations, if the outcome of such proceedings
are adverse to us.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are from time to time involved in various legal proceedings
incidental to the conduct of our business. Such claims may be
made by our customers, employees or former employees. We are
currently the defendant in two putative collective action
lawsuits commenced by former employees under the Fair Labor
Standards Act. The plaintiff in each of the lawsuits is
represented by the same law firm, and both suits are pending in
District Court of the United States for the Middle District of
Alabama, Northern Division. Each of the cases is in its early
stages, and we are in the process of evaluating the claims made.
Our review of the allegations is preliminary, and we plan to
defend these suits vigorously. No assurance can be given about
the outcome of these cases, and if they are adversely decided
they could have a material adverse effect on our business,
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our ability to attract consumers to our stores depends on the
success of the strip shopping centers and downtown business
districts where our stores are located.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We locate our stores in strip shopping centers, street front
locations and downtown business districts where we believe our
consumers and potential consumers shop. The success of an
individual store can depend on favorable placement within a
given strip shopping center or business district. We cannot
control the development of alternative shopping destinations
near our existing stores or the availability or cost of real
estate within existing or new shopping destinations. If our
store locations fail to attract sufficient consumer traffic or
we are unable to locate replacement locations on terms
acceptable to us, our business, results of operations, and
financial condition could suffer. If one or more of the anchor
tenants located in the strip shopping centers or business
districts where our stores are located close or leave, or if
there is significant deterioration of the surrounding areas in
which our stores are located, our business, results of
operations and financial condition may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>A key part of our operating policy is to offer merchandise
from nationally recognized brands, and our inability to obtain
this branded merchandise could have a material adverse effect on
our business, financial condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximately 30% of our net sales consist of merchandise of
nationally recognized brands. These brands are also offered by a
number of the major department stores, specialty retailers and
other off-price apparel chains such as The TJX Companies, Inc.,
or TJX Companies, Burlington Coat Factory Warehouse Corp., or
Burlington Coat Factory and Ross Stores, Inc., or Ross Stores.
Many of these retailers have better name recognition among
consumers than we have and purchase significantly more
merchandise from vendors. As a result, these retailers may be
able to purchase branded merchandise that we cannot purchase
because of their name recognition and relationships with
suppliers, or they may be able to purchase branded merchandise
with better pricing concessions than we receive. As a result, we
cannot be certain that we can continue to obtain sufficient
quantities of the most popular items of the nationally
recognized brands at attractive prices. If we cannot, our
business, financial condition and results of operations may be
adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The retail apparel market is highly competitive, and our
failure to meet the challenges of our competitors could have a
material adverse effect on our business, financial condition and
results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The retail apparel market is highly competitive, with few
barriers to entry. We compete against a diverse group of
retailers, including national and local off-price and specialty
retail stores, regional retail chains, traditional department
stores, Internet and other direct retailers, and, to a lesser
extent, mass merchandisers. Our competitors include national
off-price apparel chains such as TJX Companies, Burlington Coat
Factory and Ross Stores. We also compete with mass merchants
such as Wal-Mart and Kmart, general merchandise discount stores
and dollar stores, which offer a variety of products, including
apparel, for the value-conscious consumer. Finally, we compete
with a variety of smaller discount retail chains that only sell
women&#146;s products, such as Rainbow, Dots, Fashion Cents, and
Simply Fashions. The level of competition we face from these
retailers varies depending on the product segment, as many of
our competitors do not offer apparel for the entire family. Our
greatest competition is generally in women&#146;s apparel. Many
of our competitors are larger than we are and have substantially
greater resources than we do and, as a result, may be able to
adapt better to changing market conditions, exploit new
</DIV>

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<DIV align="left" style="font-size: 10pt;">
opportunities, exert greater pricing pressures on suppliers and
open new stores more quickly and effectively than we can. Our
local and regional competitors have extensive knowledge of the
consumer base and may be able to garner more loyalty from the
consumer than we can. If the consumer base we serve is satisfied
with the selection, quality and price of our competitors&#146;
products, consumers may decide not to shop in our stores.
Additionally, if our existing competitors or other retailers
decide to focus more on our core customers, particularly
African-Americans consumers, we may have greater difficulty in
competing effectively and our business, financial condition and
results of operations could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The retail industry periodically has experienced consolidation
and other ownership changes. In the future, other United States
or foreign retailers may consolidate, undergo restructurings or
reorganizations, or realign their affiliations. Any of these
developments could result in our competitors increasing their
buying power or market visibility. These developments may cause
us to lose market share and could have a material adverse effect
on our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are in the process of upgrading our website to enable
Internet sales of selected urban branded apparel provided by
third parties. While we are performing our upgrade, the loss of
consumers to online competitors could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Changes in the regulatory environment governing our business
could have a material adverse effect on our business, financial
condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are subject to a wide range of laws and regulations related
to the operation of our business. These include
truth-in-advertising, customs, consumer protection, zoning,
occupancy and other laws that regulate retailers generally
and/or govern the importation, promotion and sale of
merchandise, and the operation of retail stores and warehouse
facilities. Although we monitor changes in these laws,
violations by our employees, importers, buying agents,
manufacturers or distributors could result in delays in
shipments and receipt of goods and could subject us to fines or
other penalties, any of which could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our business is sensitive to general economic conditions and
consumer spending patterns, and adverse changes in these
conditions or spending patterns could have a material adverse
effect on our business, financial condition and results of
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Downturns, or the expectation of a downturn, in general economic
conditions could adversely affect consumer spending patterns and
our sales and results of operations. Because apparel generally
is a discretionary purchase, declines in consumer spending
patterns may have a more negative effect on apparel retailers
than some other retailers. Therefore, we may not be able to
maintain our historical rate of growth in revenues and earnings,
or remain as profitable, if there is a decline in consumer
spending patterns. In addition, since the majority of our stores
are located in the southeastern United States, our operations
are more susceptible to regional factors than the operations of
our more geographically diversified competitors. Therefore, any
adverse economic conditions that have a disproportionate effect
on the southeastern United States could have a greater negative
effect on our business, financial condition and results of
operations than on retailers with a more geographically
diversified store base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We depend on our management information systems to operate
our business efficiently, and we rely on third parties for
upgrading and maintaining these systems. Any failure of these
systems or the inability of third parties to continue to upgrade
and maintain the systems could have a material adverse effect on
our business, financial condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We depend on the accuracy, reliability and proper functioning of
our management information systems, including systems used to
track our sales and facilitate inventory management. We also
rely on our management information systems for merchandise
planning, replenishment and markdowns, and other key business
functions. These functions enhance our ability to optimize sales
while limiting markdowns and reducing inventory risk through
properly marking down slow-selling styles, reordering existing
styles and effectively distributing new inventory to our stores.
We do not currently have redundant systems for all functions
performed by our management information systems. Any
interruption in these systems could impair our ability to manage
our inventory
</DIV>

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<DIV align="left" style="font-size: 10pt;">
effectively, which could have a material adverse effect on our
business, financial condition and results of operations. To
support our growth, we will need to expand our management
information systems, and our failure to link and maintain these
systems adequately could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We depend on third-party suppliers to maintain and periodically
upgrade our management information systems, including the
software programs supporting our inventory management functions.
This software is licensed to us by third-party suppliers. If any
of these suppliers is unable to continue to maintain and upgrade
these software programs and if we are unable to convert to
alternate systems in an efficient and timely manner, it could
result in a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our failure to implement and maintain effective internal
controls in our business could have a material adverse effect on
our business, financial condition, results of operations and
stock price.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are in the process of documenting and testing our internal
control procedures in order to satisfy the requirements of
Section&nbsp;404 of the Sarbanes-Oxley Act of 2002.
Section&nbsp;404 requires annual management assessments of the
effectiveness of our internal controls over financial reporting
and a report by our independent auditors addressing these
assessments. We will be required to comply with Section&nbsp;404
no later than the time we file our annual report for fiscal 2005
with the Securities and Exchange Commission, or the Commission.
During the course of our testing, we may identify deficiencies
in our internal controls, which we may be unable to correct in
time to meet the deadline imposed by the Sarbanes-Oxley Act of
2002. If we fail to achieve and maintain the adequacy of our
internal controls in accordance with applicable standards as
then in effect supplemented or amended from time to time, we may
be unable to conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with
Section&nbsp;404. Moreover, effective internal controls,
particularly those related to revenue recognition, are necessary
for us to produce reliable financial reports and are important
in our effort to prevent financial fraud. If we cannot produce
reliable financial reports or prevent fraud, our business,
financial condition and results of operations could be harmed,
investors could lose confidence in our reported financial
information, the market price of our stock could decline
significantly and we may be unable to obtain additional
financing to operate and expand our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may need additional capital to fund future growth and may
not be able to obtain it on acceptable terms or at all.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may need to raise additional debt or equity capital in the
future to open new stores, to respond to competitive pressures
or to respond to unforeseen financial requirements. We may not
be able to obtain additional capital on commercially reasonable
terms or at all. If this were to occur, we could be forced to
incur indebtedness with above-market interest rates or with
substantial restrictive covenants, issue equity securities that
dilute the ownership interests of existing stockholders or scale
back our operations and/or store growth strategy. If we cannot
find adequate capital on acceptable terms, we could be forced to
curtail our growth plans and/ or our existing operations, which
could have a material adverse effect on our business, financial
condition and our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Adverse trade restrictions may disrupt our supply of
merchandise. We also face various risks because much of our
merchandise is imported from abroad.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We cannot predict whether any of the countries in which our
merchandise currently is manufactured or may be manufactured in
the future will be subject to new trade restrictions imposed by
the United States or other foreign governments, including the
likelihood, type or effect of any such restrictions. Trade
restrictions, including increased tariffs or quotas, embargoes,
and customs restrictions, against apparel items, as well as
United States or foreign labor strikes, work stoppages or
boycotts, could increase the cost or reduce the supply of
apparel available to us and have a material adverse effect on
our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We purchase the products we sell directly from over 1,000
vendors, and a substantial portion of this merchandise is
manufactured outside of the United States and imported by our
vendors. Our vendors&#146; imports may be subject to existing or
future duties and quotas, and they may face competition from
other companies for production facilities, import quota capacity
and shipping capacity. We also face a variety of other risks
generally associated
</DIV>

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<DIV align="left" style="font-size: 10pt;">
with relying on vendors that do business in foreign markets and
import merchandise from abroad, such as: (i)&nbsp;political
instability; (ii)&nbsp;enhanced security measures at United
States ports, which could delay delivery of imports;
(iii)&nbsp;imposition of new or supplemental duties, taxes, and
other charges on imports; (iv)&nbsp;delayed receipt or
non-delivery of goods due to the failure of foreign-source
suppliers to comply with applicable import regulations;
(v)&nbsp;delayed receipt or non-delivery of goods due to
organized labor strikes or unexpected or significant port
congestion at United States ports; and (vi)&nbsp;local business
practice and political issues, including issues relating to
compliance with domestic or international labor standards which
may result in adverse publicity. The United States may impose
new initiatives that adversely affect the trading status of
countries where apparel is manufactured. These initiatives may
include retaliatory duties or other trade sanctions that, if
enacted, would increase the cost of products imported from
countries where our vendors acquire merchandise. Any of these
factors could have a material adverse effect on our business,
financial condition and result of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The removal of import quotas may adversely affect our
business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On January&nbsp;1, 2005, in accordance with the World Trade
Organization, or the WTO, Agreement on Textiles and Clothing,
the import quotas on textiles and clothing manufactured by
countries that are members of the WTO were eliminated. While the
exact impact of this quota removal is uncertain, the increased
access to foreign textile markets could result in a surge of
imported goods from countries that benefit from the removal of
the quotas which, in turn, could create logistical delays in our
ability to maintain required inventory levels. In addition, the
quota removal may alter the cost differential between vendors
that source domestically and vendors that source more
extensively from overseas. We believe this could lower the cost
of apparel products and thereby reduce our average dollar amount
of sales per customer in our stores. Further, a number of
actions have been taken or threatened by parties affected by the
removal of the quotas, including domestic producers and foreign
countries that allege they will be unfairly competitively harmed
by the removal of the quotas on goods manufactured in larger
countries. These may include legal actions challenging the
removal of the quotas as well as retaliatory actions, which may
disrupt the supply chain of products from foreign markets or
make it difficult to predict accurately the prices of
merchandise to be imported from a particular country. The
outcome of these actions or other trade disruptions may have an
adverse effect on our business, financial condition or results
of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Relating to this Offering of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our stock price may be volatile, and you may lose all or a
part of your investment.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, there has been no public market for our
common stock, and an active market for our shares may not
develop or be sustained after this offering. The initial public
offering price for our common stock will be determined by
negotiations between us and the underwriters and may not be
representative of the price that will prevail in the open
market. The market price of our common stock may be subject to
significant fluctuations after our initial public offering. It
is possible that in some future periods, our results of
operations may be below the expectations of investors and any
securities analysts that choose to follow our common stock. If
this occurs, our stock price may decline. Factors that could
affect our stock price include the following:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    actual or anticipated fluctuations in our operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    changes in securities analysts&#146; recommendations or
    estimates of our financial performance;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    publication of research reports by analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    changes in market valuations of companies similar to ours;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    announcements by us, our competitors or other retailers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the trading volume of our common stock in the public market;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    changes in economic conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    financial market conditions;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the realization of some or all of the risks described in this
    section entitled &#147;Risk Factors.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, the stock markets have experienced significant
price and trading volume fluctuations from time to time, and the
market prices of the equity securities of retailers have been
extremely volatile and have recently experienced sharp price and
trading volume changes. These broad market fluctuations may
adversely affect the market price of our common stock.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We will have broad discretion in how we use the proceeds of
this offering, and we may not use these proceeds effectively.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We will have considerable discretion in how we use the net
proceeds from this offering. We currently intend to use the net
proceeds to redeem all of our Series&nbsp;A Preferred Stock and
to pay all accrued and unpaid dividends thereon, to repay all
indebtedness under the mortgage on our Fahm Street facility and
under our existing revolving lines of credit, for new store
openings, for the acquisition or design and construction of a
new distribution center and for general corporate purposes. See
the information in the section entitled &#147;Use of
Proceeds.&#148; We have not yet finalized the amount of net
proceeds that we will use specifically for each of these
purposes, other than the redemption of our Series&nbsp;A
Preferred Stock. We may use the net proceeds for purposes that
do not yield a significant return for our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>As a new investor, you will incur substantial dilution as a
result of this offering.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The initial public offering price will be substantially higher
than the pro forma net tangible book value per share of our
outstanding common stock. As a result, investors purchasing
common stock in this offering will incur immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in pro forma net tangible book value. See the information
in the section entitled &#147;Dilution.&#148; This dilution is
due primarily to earlier investors in our company having paid
substantially less than the initial public offering price when
they purchased their shares and to the deduction of the
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in
underwriting discounts and commissions and estimated offering
expenses payable by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities analysts may not initiate coverage of our common
stock, or, if they do, they may issue negative reports that
adversely affect the price of our common stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The trading market for our common stock will depend in part on
the research and reports that industry or financial analysts
publish about us or our industry. In the event that our common
stock receives research coverage, public statements by these
securities analysts may affect our stock price. If any of the
analysts who cover our company downgrades the rating of our
common stock, our common stock price would likely decline. If
any of these analysts ceases coverage of our company, we could
lose visibility in the market, which in turn could cause our
common stock price to decline. Further, if no analysts choose to
cover our company, the lack of research coverage may depress the
market price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, recently-adopted rules mandated by the
Sarbanes-Oxley Act of 2002 and a global settlement with the
Commission have caused a number of fundamental changes in how
securities analysts are reviewed and compensated. In particular,
many investment banking firms are now required to contract with
independent financial analysts for their stock research. In this
environment, it may be difficult for companies with smaller
market capitalizations, such as our company, to attract
independent financial analysts to cover them, which could have a
negative effect on the market price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>After this offering, a significant amount of our common stock
will be concentrated in the hands of one of our existing
stockholders whose interests may not coincide with yours.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the completion of this offering, Hampshire Equity Partners
will own approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our
common stock, or approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
if the over-allotment option is exercised in full. As a result,
Hampshire Equity Partners will continue to have an ability to
exercise control over matters requiring stockholder approval.
These matters include the election of directors and the approval
of significant corporate transactions, including potential
mergers, consolidations or sales of all or substantially all of
our assets. Immediately following the consummation of this
offering, Hampshire Equity Partners will have one
representative, our current Chairman of the Board, on our five
member board of directors. In connection with this offering, we
will enter into a nominating agreement with Hampshire Equity
Partners pursuant to which we, acting through our nominating and
corporate governance committee, will agree, subject to the
requirements of our directors&#146; fiduciary duties, that
(i)&nbsp;Hampshire Equity Partners will be entitled to designate
two directors to be nominated for election to our board of
directors as long as Hampshire Equity Partners owns in the
aggregate at least 40% of the shares of our common stock which
it owned immediately prior to the consummation of this offering
or (ii)&nbsp;Hampshire Equity Partners will be entitled to
designate one director to be nominated for election to our board
of directors as long as Hampshire Equity Partners owns in the
aggregate less than 40% and at least 15% of the shares of our
common stock which it owned
</DIV>

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<DIV align="left" style="font-size: 10pt;">
immediately prior to the consummation of this offering. If at
any time Hampshire Equity Partners owns less than 15% of the
shares of our common stock which it owned immediately prior to
the consummation of this offering, it will not have the right to
nominate any directors for election to our board of directors.
Your interests as a holder of the common stock may differ from
the interests of Hampshire Equity Partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>There may be sales of substantial amounts of our common stock
after this offering, which could cause our stock price to
fall.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our current stockholders hold a substantial number of shares
that they will be able to sell in the public market in the near
future. Upon the consummation of this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be outstanding. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock were subject to outstanding stock
options. All of the shares sold in this offering will be freely
tradable, except for any shares acquired by holders who are
subject to market stand-off provisions or lock-up agreements
entered into in connection with this offering, or by any of our
&#147;affiliates,&#148; as that term is defined in Rule&nbsp;144
promulgated under the Securities Act of 1933, as amended, which
generally includes officers, directors and 10% or greater
stockholders. Sales of a significant portion of the shares of
our common stock outstanding after this offering will continue
to be restricted as a result of securities laws or contractual
arrangements, including lock-up agreements entered into between
our directors and officers and the representatives of the
underwriters in this offering. These lock-up agreements restrict
holders&#146; ability to transfer their stock for 180&nbsp;days
after the date of this prospectus. Of the outstanding restricted
shares, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be available for sale in the public market beginning
90&nbsp;days after the consummation of this offering,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be available for sale in the public market 180&nbsp;days after
the date of this prospectus. The managing underwriter may,
however, waive the lock-up period at any time for any
stockholder who is party to a lockup agreement. In addition,
following consummation of this offering, Hampshire Equity
Partners will have certain registration rights related to shares
of our common stock held by it. Sales of a substantial number of
shares of our common stock after this offering, or after the
expiration of applicable lock-up periods, could cause our stock
price to fall and/or impair our ability to raise capital through
the sale of additional stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Provisions in our certificate of incorporation and by-laws
and Delaware law may delay or prevent our acquisition by a third
party.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our second amended and restated certificate of incorporation and
amended and restated by-laws contain several provisions that may
make it more difficult for a third party to acquire control of
us without the approval of our board of directors. These
provisions include, among other things, a classified board of
directors, advance notice for raising business or making
nominations at stockholder meetings and &#147;blank check&#148;
preferred stock. Blank check preferred stock enables our board
of directors, without stockholder approval, to designate and
issue additional series of preferred stock with such dividend,
liquidation, conversion, voting or other rights, including
convertible securities with no limitations on conversion, as our
board of directors may determine, including rights to dividends
and proceeds in a liquidation that are senior to the common
stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are also subject to several provisions of the Delaware
General Corporation Law that could delay, prevent or deter a
merger, acquisition, tender offer, proxy contest or other
transaction that might otherwise result in our stockholders
receiving a premium over the market price for their common stock
or may otherwise be in the best interests of our stockholders.
You should refer to the section entitled &#147;Description of
Capital Stock&#148; for more information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We do not currently intend to pay dividends on our common
stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have never declared or paid any cash dividends on our common
stock and do not currently intend to do so for the foreseeable
future. We currently intend to invest our future earnings, if
any, to fund our growth. Therefore, you are not likely to
receive any dividends on your common stock for the foreseeable
future.
</DIV>

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<A name='103'></A>
</DIV>

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<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Special Note&nbsp;Regarding Forward-Looking Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have made forward-looking statements in this prospectus,
including in the sections entitled &#147;Prospectus
Summary,&#148; &#147;Risk Factors,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operation&#148; and &#147;Business.&#148; All statements other
than historical facts contained in this prospectus, including
statements regarding our future financial position, business
policy and plans and objectives of management for future
operations, are forward-looking statements. The words
&#147;believe,&#148; &#147;may,&#148; &#147;could,&#148;
&#147;estimate,&#148; &#147;continue,&#148;
&#147;anticipate,&#148; &#147;intend,&#148; &#147;expect&#148;
and similar expressions, as they relate to us, are intended to
identify forward-looking statements. For example, our statements
to the effect that we intend to open a specified number of new
stores, that we intend to increase comparable store sales, and
that we intend to achieve a specified return on invested capital
constitute forward-looking statements. We have based these
forward-looking statements largely on our current expectations
and projections about future events, including, among other
things:
</DIV>

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    <TD> &#149; &nbsp;</TD>
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    implementation of our growth strategy;</TD>
</TR>

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    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our ability to anticipate and respond to fashion trends;</TD>
</TR>

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    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
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    competition in our markets;</TD>
</TR>

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    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    consumer spending patterns;</TD>
</TR>

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    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    actions of our competitors or anchor tenants in the strip
    shopping centers where our stores are located;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    anticipated fluctuations in our operating results;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    economic conditions in general.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These forward-looking statements are subject to a number of
risks, uncertainties and assumptions described in the section
entitled &#147;Risk Factors&#148; and elsewhere in this
prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Because forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely upon forward-looking statements
as predictions of future events. The events and circumstances
reflected in the forward-looking statements may not be achieved
or occur and actual results could differ materially from those
projected in the forward-looking statements. Except as required
by applicable law, including the securities laws of the United
States and the rules and regulations of the Commission, we do
not plan to publicly update or revise any forward-looking
statements contained herein after we distribute this prospectus,
whether as a result of any new information, future events or
otherwise.
</DIV>

<P align="center" style="font-size: 10pt;">16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='104'></A>
</DIV>

<!-- link1 "Use of Proceeds" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of Proceeds</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that we will receive net proceeds from this offering
of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. If
the underwriters exercise their over-allotment option in full,
we estimate that we will receive additional net proceeds of
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
We will not receive any of the proceeds from the sale of shares
of common stock offered by the selling stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to use the net proceeds from this offering as follows:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    to redeem all of our outstanding Series&nbsp;A Preferred Stock
    and to pay all accrued and unpaid dividends thereon;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    to repay outstanding indebtedness under the loan from National
    Bank of Commerce to us, that is secured by our Savannah, Georgia
    headquarters, and bears interest at a fixed rate of 6.80% and
    matures on July&nbsp;12, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    to repay outstanding indebtedness under our $3.0&nbsp;million
    revolving line of credit with Bank of America that, as of
    October&nbsp;30, 2004, bears interest at a rate of 3.96% per
    annum;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    to repay outstanding indebtedness under our $25.0&nbsp;million
    revolving line of credit with Congress Financial that, as of
    October&nbsp;31, 2004, bears interest at a rate of 4.75% per
    annum;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any remaining net proceeds for new store openings, including the
    acquisition or design and construction of a new distribution
    center in fiscal 2006 and general corporate purposes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='105'></A>
</DIV>

<!-- link1 "Dividend Policy" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dividend Policy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have never declared or paid any dividends on our common stock
and do not intend to pay any dividends on our common stock in
the foreseeable future. We currently intend to retain any future
earnings to finance the expansion of our business and for
general corporate purposes. Our board of directors has the
authority to declare and pay dividends on our common stock, in
its discretion, so long as there are funds legally available to
do so.
</DIV>

<P align="center" style="font-size: 10pt;">17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='106'></A>
</DIV>

<!-- link1 "Capitalization" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Capitalization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The table below sets forth the following information as of
October&nbsp;30, 2004:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    on an actual basis;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    as adjusted to give effect to (a) the sale by us of shares of
    common stock in this offering, (b) the receipt and application
    of net proceeds of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    after deducting estimated underwriting discounts and commissions
    and estimated offering expenses payable by us, and the repayment
    of indebtedness described under the section entitled &#147;Use
    of Proceeds&#148; and (c) the filing of our second amended and
    restated certificate of incorporation upon consummation of this
    offering.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>As of October&nbsp;30, 2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>As Adjusted</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap>(in thousands, except share and per</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>share amounts)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt (including current portion)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations (including current portion)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred shares subject to mandatory redemption:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    Series&nbsp;A preferred stock, $.01&nbsp;par value per share,
    3,500&nbsp;shares authorized, issued and outstanding, actual;
    none authorized, issued or outstanding, as
    adjusted<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $.01&nbsp;par value per
    share, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued
    and outstanding,
    actual; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued
    or outstanding, as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock, $.01 par value per share, none authorized,
    issued or outstanding,
    actual; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized, none issued or
    outstanding, as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(165</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD align="left">
    Our Series&nbsp;A Preferred Stock, which will be redeemed using
    a portion of the net proceeds from this offering, was
    reclassified as debt as of the second quarter of fiscal 2003, in
    accordance with SFAS&nbsp;No.&nbsp;150.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">18
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <A name='107'></A></TD>
</TR>

</TABLE>

<!-- link1 "Dilution" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dilution</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our net tangible book value as of October&nbsp;30, 2004 was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. &#147;Net tangible book value&#148; is
our total assets minus the sum of our liabilities and intangible
assets. &#147;Net tangible book value per share of common
stock&#148; is our net tangible book value divided by the total
number of our shares of common stock outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After giving effect to adjustments related to this offering, our
pro forma net tangible book value on October&nbsp;30, 2004 would
have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. Adjustments to net tangible book value to
arrive at pro forma net tangible book value per share include:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    an increase in our total assets to reflect the net proceeds from
    this offering (assuming an initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the issuance of an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table illustrates the pro forma increase in our
net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock and the dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock (the difference between the offering price
per share and the net tangible book value per share after giving
effect to this offering) to new investors:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial public offering price per share of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share of common stock as
    of October&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in net tangible book value per share of common stock
    attributable to this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share of common stock as
    of October&nbsp;30, 2004 after giving effect to adjustments
    related to this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share of common stock to new investors in this
    offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Assuming exercise of all exercisable options to purchase common
    stock outstanding as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, the dilution per share of common stock to new investors in
    this offering would be
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes, on a pro forma basis as of
October&nbsp;30, 2004, the differences between the existing
stockholders and new investors with respect to the number of
shares of common stock sold by us, the total consideration paid
to us and the average price paid per share. The table assumes
that the initial public offering price will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Share Purchased</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Total Consideration</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Average Price</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Per Share</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing
    stockholders<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Totals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD align="left">
    Does not give effect to sales of shares by the selling
    stockholders in this offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">19
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "Selected Financial and Operating Data" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Financial and Operating Data</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides selected financial and operating
data for each of the fiscal years in the five-year period ended
January&nbsp;31, 2004 and for each of the 39-week periods ended
November&nbsp;1, 2003 and October&nbsp;30, 2004, including:
(a)&nbsp;our statement of operations data for each such period,
(b)&nbsp;additional operating data for each such period and
(c)&nbsp;our balance sheet data as of the end of each such
period. The statement of operations data for fiscal 2002 and
fiscal 2003, and the balance sheet data as of February&nbsp;1,
2003 and January&nbsp;31, 2004 are derived from financial
statements included elsewhere in this prospectus that have been
audited by KPMG LLP, independent registered public accountants.
The statement of operations data for fiscal 2001 and the balance
sheet data as of February&nbsp;2, 2002 are derived from our
audited financial statements included elsewhere in this
prospectus. The statement of operations data for fiscal 1999 and
fiscal 2000 and the balance sheet data as of January&nbsp;29,
2000 and February&nbsp;3, 2001 are derived from our audited
financial statements that are not included in this prospectus.
The statement of operations data for the 39-week periods ended
November&nbsp;1, 2003 and October&nbsp;30, 2004 and the balance
sheet data as of November&nbsp;1, 2003 and October&nbsp;30, 2004
are derived from our unaudited condensed interim financial
statements included elsewhere in this prospectus. In the opinion
of management, these unaudited condensed interim financial
statements have been prepared on the same basis as the audited
financial statements and reflect all adjustments (consisting
only of normal recurring adjustments) and fairly present the
financial information for these periods. The selected financial
and operating data set forth below should be read in conjunction
with, and are qualified in their entirety by reference to, the
section of this prospectus entitled &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and our financial statements and related notes
included elsewhere in this prospectus. Historical results are
not necessarily indicative of results to be expected for any
future period.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap><B>Fiscal Year Ended<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>39 Weeks Ended</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;3,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>November&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October&nbsp;30,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2000<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27" align="center" nowrap>(dollars in thousands, except per share data amounts)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,841</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(472</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense
    <SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(645</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,269</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,644</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(664</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income per common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares used to compute net income per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 10pt;">
<I>(footnotes on following page)</I>
</DIV>

<P align="center" style="font-size: 10pt;">20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap><B>Fiscal Year Ended<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>39 Weeks Ended</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;3,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>November&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October&nbsp;30,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2000<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27" align="center" nowrap>(dollars in thousands, except per share data amounts)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Additional Operating Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of stores:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Opened during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales
    increase<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,908</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,121</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD align="left">
    Our fiscal year ends on the Saturday closest to January&nbsp;31
    of each year. Fiscal years 2001, 2002 and 2003 comprise
    52&nbsp;weeks. Fiscal year 2000 comprises 53&nbsp;weeks.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD align="left">
    The fiscal year ended January&nbsp;29, 2000 consists only of the
    period from April&nbsp;13, 1999 (the date we were acquired by
    Hampshire Equity Partners) to January&nbsp;29, 2000. The period
    contained 41&nbsp;weeks and five&nbsp;days.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD align="left">
    Our Series&nbsp;A Preferred Stock, which will be redeemed using
    a portion of the net proceeds from this offering, was
    reclassified as debt as of the second quarter of fiscal 2003, in
    accordance with SFAS No.&nbsp;150, <I>Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity</I>. The amount of dividends treated as interest
    expense in fiscal 2003 was $189,000 and none in fiscal 2002. For
    the 39-week periods ended October&nbsp;30, 2004 and
    November&nbsp;1, 2003, the amount of dividends treated as
    interest expense was $243,000 and $108,000, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD align="left">
    Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>You should read the following discussion and analysis of our
financial condition and results of operations in conjunction
with the section entitled &#147;Selected Financial and Operating
Data&#148; and our financial statements and related notes
included elsewhere in this prospectus. This discussion may
contain forward-looking statements that involve risks and
uncertainties. As a result of many factors, such as those set
forth under the sections entitled &#147;Risk Factors&#148; and
&#147;Special Note Regarding Forward-Looking Statements&#148;
and elsewhere in this prospectus, our actual results may differ
materially from those anticipated in these forward-looking
statements.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. Our merchandise
offerings are designed to appeal to the preferences of fashion
conscious consumers, particularly African-Americans. Originally
our stores were located in the Southeast, and we have recently
expanded into the Mid-Atlantic region and Texas. We currently
operate 200 stores in both urban and rural markets in
12&nbsp;states.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners, a private equity firm.
Since the acquisition, our management team has implemented a
focused merchandising and operating model to differentiate our
stores and serve our core customers more effectively.
Specifically, we concentrated the merchandise offerings on more
urban fashion apparel for the entire family and increased the
offering of nationally recognized brands. We also accelerated a
remodeling campaign to upgrade the acquired store base and
create a more appealing shopping environment in our stores. By
the end of fiscal 2003, virtually all of the acquired stores had
been remodeled and, in some cases, expanded. These initiatives
resulted in gains in comparable store sales. More recently, the
pace of our comparable store sales gains has moderated as the
revamping of our existing store base has been substantially
completed. We expect that the impact of our remodel, relocate
and expansion initiatives will be far less significant in the
future and that the primary causes of any increased comparable
store sales will result from merchandising enhancements or the
expansion of certain product categories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have implemented an aggressive store growth strategy and
believe that the addition of new stores will be the primary
source of future growth. In fiscal 2003 and 2004, we opened 25
and 40&nbsp;stores, respectively. During this period, we entered
Houston, Norfolk and, most recently, the Baltimore and
Washington,&nbsp;D.C. markets, where we opened a total of 15 new
stores. In each of fiscal 2005 and 2006, we intend to open 40
new stores, approximately 70% of which are expected to be
located in states that we currently serve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our new store expansion is fueled by store economics that we
believe to be very attractive. From an investment perspective,
our stores are designed to be inviting and easy to shop, but we
do not spend large sums of money to outfit and open new stores.
We have relatively low store operating costs. Our real estate
approach is focused on strip shopping center sites within low to
moderate income neighborhoods, and we generally utilize
previously occupied store sites rather than newly constructed
sites. As a result, we are usually able to secure sites with
substantial customer traffic at attractive lease terms. Our
ongoing advertising expenses are also low, with a significant
amount of advertising focused on new store openings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our stores generate rapid payback of investment. The average
investment for the 41&nbsp;stores opened in fiscal 2002 and
fiscal 2003, including leasehold improvements, equipment,
fixturing, cost of inventory to stock the store (net of accounts
payables), and pre-opening store expenses, was approximately
$240,000. These&nbsp;41 stores generated average sales of
$1.2&nbsp;million and average store level cash flow (defined as
store operating profit before pre-opening expenses, depreciation
and amortization and allocated corporate overhead and interest
expense) of approximately $240,000 during their first
12&nbsp;months of operation. Our average investment for the
40&nbsp;stores opened in fiscal 2004 was approximately $280,000.
This investment represents an increase over prior years as the
size of our stores has increased and we have assumed a larger
portion of the costs associated with leasehold improvements in
our stores, which we expect to recover over time. We expect that
the stores opened in fiscal 2004 will achieve similar levels of
return on investment.
</DIV>

<P align="center" style="font-size: 10pt;">22
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We measure our performance using key operating statistics. One
of our main performance measures is comparable store sales
growth. We define a comparable store as a store that has been
open for an entire fiscal year. Therefore, a store will not be
considered a comparable store until its
13<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
month of operation at the earliest or its
24<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
month at the latest. As an example, all stores opened in fiscal
2002 and fiscal 2003 were not considered comparable stores in
fiscal 2003. Relocated and expanded stores are included in the
comparable store sales results. We also use other operating
statistics including customer counts, items purchased per
customer and average item price. Beyond sales, we measure gross
margin percentage and store operating expenses, with a
particular focus on labor as a percentage of sales. These
results translate into store contribution, which we use to
evaluate overall performance of each individual store. Finally,
we monitor corporate expenses in absolute amounts. We measure
the performance of our distribution centers based on employee
cost per item shipped and items shipped per employee hour.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The new distribution center we opened in November 2004 increased
our receiving and shipping capabilities in order to support the
growth of our store base. The new center is located in the
greater Savannah area and increases our total distribution space
by approximately 60,000&nbsp;square feet and our office space by
approximately 10,000&nbsp;square feet. We are leasing the center
through September 2006 with options to renew for up to four
additional years. We currently intend to acquire or design and
construct a new distribution center in southeastern Georgia in
fiscal 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our cash requirements are primarily for working capital,
construction of new stores, remodeling of existing stores and
improvements to our information systems. Historically we have
met these cash requirements from cash flow from operations,
short-term trade credit and borrowings under our revolving lines
of credit, long-term debt and capital leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may be affected by the phase out of quotas on textiles and
clothing under the WTO Agreement on Textiles and Clothing as
implemented on January&nbsp;1, 1995. Under this agreement, the
import quotas on textiles and clothing manufactured by countries
that are members of the WTO were eliminated. While the impact of
the quota removal is uncertain, the increased access to foreign
textile markets could create logistical delays arising from a
surge of imported goods from countries that benefit from the
removal of the quotas. In addition, the quota removal may alter
the cost differential between vendors that source primarily
domestically and vendors that source more extensively from
overseas. We believe this could significantly reduce the cost of
apparel products and thereby reduce the average dollar amount of
sales per customer spent in our stores. Various actions have
been taken or threatened by parties affected by the removal of
the quotas. However, the effect of these actions, and the
removal of the quotas, cannot be accurately assessed at this
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net sales consists of store sales, net of returns by customers,
and layaway fees. Cost of sales consist of the cost of the
products we sell and associated freight costs. Selling, general
and administrative expense is comprised of store costs,
including salaries and store occupancy costs, handling costs,
corporate and distribution center costs and advertising costs.
We operate on a 52- or 53-week fiscal year, which ends on the
Saturday closest to January&nbsp;31. Each of our fiscal quarters
consists of four 13-week periods, with an extra week added on to
the fourth quarter every five or six&nbsp;years. Our last three
fiscal years ended on February&nbsp;2, 2002, February&nbsp;1,
2003 and January&nbsp;31, 2004 and each included 52&nbsp;weeks.
</DIV>

<P align="center" style="font-size: 10pt;">23

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales and Additional Operating Data.</I> The following
table sets forth, for the periods indicated, selected statement
of income data expressed both in dollars and as a percent of net
sales:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="center" nowrap><B>Fiscal Year Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>39 Weeks Ended</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>February&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>February&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>January&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>November&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>October&nbsp;30,</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>



<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="39" align="center" nowrap>(dollars in thousands)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statements of Income Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides information, for the periods
indicated, about the number of total stores open at the
beginning of the period, stores opened and closed during each
period and the total stores open at the end of each period and
comparable store sales for the periods:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Fiscal Year Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>39 Weeks Ended</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>November&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October&nbsp;30,</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stores open, beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New stores</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed stores</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stores open, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>39 Weeks Ended October&nbsp;30, 2004 Compared to 39 Weeks
Ended November&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales.</I> Net sales increased $29.2&nbsp;million, or
27.0%, to $137.1&nbsp;million for the 39-week period ended
October&nbsp;30, 2004 from $108.0&nbsp;million for the 39-week
period ended November&nbsp;1, 2003. The increase resulted
primarily from net sales of $39.5&nbsp;million during the
39-week period ended October&nbsp;30, 2004 from stores opened in
the 39-week period ended October&nbsp;30, 2004 and stores opened
in fiscal 2003 as compared to net sales of $11.4&nbsp;million
during the 39-week period ended November&nbsp;1, 2003 from
stores opened in the 39-week period ended November&nbsp;1, 2003.
In addition, the increase was due to a comparable store sales
increase of $2.2&nbsp;million, or 2.3%. The increase in
comparable store sales was caused primarily by an increase in
the number of customer transactions and items sold per customer,
partially offset by a decrease in the average price of an item
sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gross Profit.</I> Gross profit increased $10.4&nbsp;million,
or 25.6%, to $50.8&nbsp;million for the 39-week period ended
October&nbsp;30, 2004 from $40.5&nbsp;million for the 39-week
period ended November&nbsp;1, 2003. The increase resulted
primarily from the operation of new stores opened in the 39-week
period ended October&nbsp;30, 2004 and the full period impact of
new stores opened during fiscal 2003, partially offset by a
decrease in gross profit margin. Gross profit as a percentage of
net sales was 37.1% for the 39-week period ended
October&nbsp;30, 2004, compared to 37.5% for the 39-week period
ended November&nbsp;&nbsp;1, 2003. Gross profit margin decreased
primarily as a result of a shift in sales mix towards more
nationally recognized branded merchandise that carries lower
profit margins than non-branded merchandise. Gross margins also
decreased as a result of higher freight costs to ship products
to stores primarily due to fuel surcharges.
</DIV>

<P align="center" style="font-size: 10pt;">24
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, General and Administrative Expenses.</I> Selling,
general and administrative expenses increased
$10.1&nbsp;million, or 28.1%, to $46.0&nbsp;million for the
39-week period ended October&nbsp;30, 2004 from
$35.9&nbsp;million for the 39-week period ended November&nbsp;1,
2003. This increase was caused primarily by store level,
distribution and corporate costs associated with the growing
store base and the full period impact of new stores opened
during the 39-week period ended November&nbsp;1, 2003. As a
percentage of net sales, selling, general and administrative
expenses increased to 33.6% for the 39-week period ended
October&nbsp;30, 2004 from 33.3% for the 39-week period ended
November&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest Expense.</I> Interest expense increased
approximately $243,000 for the 39-week period ended
October&nbsp;30, 2004 to $558,000 compared to approximately
$315,000 for the 39-week period ended November&nbsp;1, 2003. The
increase was primarily the result of the adoption of SFAS
No.&nbsp;150, which increased interest expense by the inclusion
of dividends on mandatory redeemable obligations that were
previously deducted from equity as dividends, and increased
borrowings related to the cost of new stores during the period,
inclusive of inventory. We adopted SFAS No.&nbsp;150 on
July&nbsp;6, 2003 and dividends treated as interest expense in
the 39-week period ended October&nbsp;30, 2004 and
November&nbsp;1, 2003 were approximately $243,000 and
approximately $108,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Tax Expense.</I> Income tax expense was
$1.6&nbsp;million for both the 39-week period ended
October&nbsp;30, 2004 and 39-week period ended November&nbsp;1,
2003. Our effective tax rate was 38.5% and 38.6% for the 39-week
period ended October&nbsp;30, 2004 and November&nbsp;1, 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Income.</I> Net income was $2.6&nbsp;million for both the
39-week period ended October&nbsp;30, 2004 and the 39-week
period ended November&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fiscal 2003 Compared to Fiscal 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales.</I> Net sales increased $32.2&nbsp;million, or
25.8%, to $157.2&nbsp;million for fiscal 2003 from
$125.0&nbsp;million for fiscal 2002. The increase resulted
primarily from net sales of $38.6&nbsp;million in fiscal 2003
from stores opened during fiscal 2003 and fiscal 2002 as
compared to net sales of $10.8&nbsp;million in fiscal 2002 from
stores opened in fiscal 2002. In addition, the increase was due
to a comparable store sales increase of $6.1&nbsp;million, or
5.5%. The increase in comparable store sales resulted, in part,
from an increase in the number of customer transactions and
average items per sale and the full period impact of new stores
opened during the fiscal year, partially offset by a decrease in
the average price of an item sold. In addition, in fiscal 2002,
we took over shoe operations in our stores from a third party
licensee that had previously managed the shoe merchandise and
paid us a commission on sales. As a result of this purchase, we
recognized shoe sales as part of net sales (amounting to
$3.8&nbsp;million in fiscal 2003) instead of recognizing only
the commissions as an increase to operating income. The increase
in comparable store sales in fiscal 2003 benefited from the full
year impact of this change. The increase was also caused by the
impact of increased sales from stores that were relocated,
remodeled or expanded during the two year period, with these
stores accounting for approximately one-third of the 5.5%
comparable store sales increase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gross Profit.</I> Gross profit increased $11.9&nbsp;million,
or 25.3%, to $59.1&nbsp;million for fiscal 2003 from
$47.1&nbsp;million for fiscal 2002. The increase resulted
primarily from the operation of 25 new stores opened in fiscal
2003 and the full year impact of 16 new stores opened during
fiscal 2002. Gross margin was 37.6% for fiscal 2003 compared to
37.7% for fiscal 2002. The decrease resulted from higher freight
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, General and Administrative Expenses.</I> Selling,
general and administrative expenses increased
$10.1&nbsp;million, or 26.0%, to $48.8&nbsp;million for fiscal
2003 from $38.8&nbsp;million for fiscal 2002. As a percentage of
net sales, selling, general and administrative expenses
increased slightly to 31.1% for fiscal 2003 from 31.0% for
fiscal 2002. The dollar increase was caused primarily by
increases in store level expenses, distribution costs and
corporate costs associated with the growing store base and the
full period impact of new stores opened during fiscal 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest Expense.</I> Interest expense increased
approximately $307,000 for fiscal 2003 to approximately
$563,000, compared to approximately $256,000 for fiscal 2002.
The increase was primarily the result of our adoption of SFAS
No.&nbsp;150, which increased interest expense by the inclusion
of dividends on mandatory redeemable obligations that were
previously deducted from equity as dividends, increased
borrowings related to the costs of opening new stores during the
year, and the full year impact of the purchase of, and mortgage
on, the office and
</DIV>

<P align="center" style="font-size: 10pt;">25

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<DIV align="left" style="font-size: 10pt;">
distribution facility in Savannah, Georgia. The amount of
dividends treated as interest expense in fiscal 2003 was
approximately $189,000 and none in fiscal 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Tax Expense.</I> Income tax expense increased
approximately $626,000 for fiscal 2003 to $3.7&nbsp;million
compared to $3.1&nbsp;million for fiscal 2002. Our effective tax
rate was 38.6% and 38.1% for fiscal 2003 and fiscal 2002
respectively. The rate increased in fiscal 2003 due to
reclassifying nondeductible preferred stock dividends as
interest expense with the adoption of SFAS No.&nbsp;150 in July
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Income.</I> Net income increased to $5.9&nbsp;million for
fiscal 2003 from $5.0&nbsp;million in fiscal 2002 as a result of
the factors discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fiscal 2002 Compared to Fiscal 2001</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Sales.</I> Net sales increased $27.1&nbsp;million, or
27.6%, to $125.0&nbsp;million for fiscal 2002 from
$97.9&nbsp;million for fiscal 2001. The increase resulted
primarily from net sales of $24.8&nbsp;million during fiscal
2002 from stores opened during fiscal 2002 and fiscal 2001 as
compared to net sales of $9.1&nbsp;million from stores opened in
fiscal 2001. In addition, the increase was due to a comparable
store sales increase of $13.0&nbsp;million, or 14.6%. The
increase in comparable store sales was caused in part by an
increase in the number of customer transactions and average
items per sale and to a lesser extent the relocating and
remodeling of a number of stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gross Profit.</I> Gross profit increased $11.3&nbsp;million,
or 31.4%, to $47.1&nbsp;million for fiscal 2002 from
$35.9&nbsp;million for fiscal 2001. The increase resulted
primarily from the operation of 16 new stores opened in fiscal
2002 and the full year impact of 12 new stores opened during
fiscal 2001. Gross margin was 37.7% for fiscal 2002 compared to
36.6% for fiscal 2001. The increase resulted from lower
markdowns and inventory shrinkage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, General and Administrative Expenses.</I> Selling,
general and administrative expenses increased $7.4&nbsp;million,
or 23.4%, to $38.8&nbsp;million for fiscal 2002 from
$31.4&nbsp;million for fiscal 2001. As a percentage of net
sales, selling, general and administrative expenses decreased to
31.0% for fiscal 2002 from 32.1% for fiscal 2001. This decrease
as a percentage of sales was caused primarily by benefits
realized from higher comparable stores sales which provided
greater operating efficiencies at store level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest Expense.</I> Interest expense decreased
approximately $199,000 for fiscal 2002 to approximately
$256,000, compared to approximately $455,000 for fiscal 2001.
The decrease was primarily the result of improved results from
operations and cash flow resulting in significantly lower
monthly average line of credit balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Income Tax Expense.</I> Income tax expense increased
$1.5&nbsp;million for fiscal 2002 to $3.1&nbsp;million, compared
to $1.6&nbsp;million for fiscal 2001, as a result of improved
profitability. Our effective tax rate was 38.1% and 38.9% for
fiscal 2002 and fiscal 2001, respectively. The rate decreased in
fiscal 2002 due to larger state and local tax credits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net Income.</I> Net income increased to $5.0&nbsp;million in
fiscal 2002 from $2.5&nbsp;million in fiscal 2001 as a result of
the factors discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quarterly Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth our unaudited quarterly results
of operations for fiscal 2003 and 2004. Each quarterly period
presented below consists of 13&nbsp;weeks and the information
includes our statement of operations data for each such period
and additional operating data for each such period. In the
opinion of management, this unaudited interim financial data has
been prepared on the same basis as the audited financial
statements and reflect all adjustments (consisting only of
normal recurring adjustments) and fairly present the financial
information disclosed for these periods. The interim financial
data set forth below should be read in conjunction with, and are
qualified in their entirety by reference to, the audited
financial statements and related notes included elsewhere in
this prospectus. The results of operations for historical
periods are not necessarily indicative of results for any future
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Due to the importance of the spring selling season, which
includes Easter, and the fall selling season, which includes
Christmas, the first and fourth fiscal quarters have
historically contributed, and we expect they will continue to
contribute, disproportionately to our profitability for our
entire fiscal year. As a result, any factors negatively
affecting us in any year during the first and fourth fiscal
quarters, including adverse weather and unfavorable economic
conditions, could have a material adverse effect on our
financial condition and results of operations for the entire
year.
</DIV>

<P align="center" style="font-size: 10pt;">26

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our quarterly results of operations also may fluctuate based
upon such factors as the timing of holiday seasons, the number
and timing of new store openings, the amount of associated store
preopening expenses, the amount of net sales contributed by new
and existing stores, the mix of products sold, the timing and
level of markdowns, store closings, remodels and relocations,
competitive factors, weather and general economic conditions.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="43" align="center" nowrap><B>Quarter Ended</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="43" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>May&nbsp;4,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Aug.&nbsp;3,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Nov.&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Feb.&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>May&nbsp;3,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Aug.&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Nov.&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Jan.&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>May&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>July&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Oct.&nbsp;30,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="43" align="center" nowrap>(dollars in thousands)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,049</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,890</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>427</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>262</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Additional Operating Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of Stores:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open, beginning of quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Opened during quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed during quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total open at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our cash requirements are primarily for working capital,
construction of new stores, remodeling of existing stores and
improvements to our information systems. Historically, we have
met these cash requirements from cash flow from operations,
short-term trade credit and borrowings under our revolving lines
of credit, long-term debt and capital leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Discussion of Cash Flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the 39-week period ended October&nbsp;30, 2004, cash and
cash equivalents decreased by $7.8&nbsp;million to
$2.2&nbsp;million from $10.0&nbsp;million at the end of fiscal
2003. The primary contributor to the decrease in cash and cash
equivalents was $6.2&nbsp;million of cash used in investing
activities, primarily for new stores, and $5.3&nbsp;million of
cash used in operating activities, primarily an increase in
inventory levels, partially offset by $3.8&nbsp;million of cash
from financing activities, primarily borrowings under our
revolving lines of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For fiscal 2003, cash and cash equivalents increased by
$4.2&nbsp;million to $10.0&nbsp;million from $5.8&nbsp;million
at the end of fiscal 2002. The primary contributor to the
increase in cash and cash equivalents was $11.3&nbsp;million of
cash provided by operations, partially offset by
$6.2&nbsp;million used in investing activities, primarily to
construct new stores. For fiscal 2002, cash and cash equivalents
increased by $1.7&nbsp;million to $5.8&nbsp;million from
$4.1&nbsp;million at the end of fiscal 2001. The primary
contributor to the increase in cash and cash equivalents was
$10.5&nbsp;million of cash provided by operations, partially
offset by $5.9&nbsp;million used in investing activities,
primarily to construct new stores and $2.8&nbsp;million from
cash used in financing activities, primarily to pay down our
revolving lines of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash provided by operating activities decreased in the
39-week period ended October&nbsp;30, 2004 compared to the
39-week period ended November&nbsp;1, 2003 primarily because of
increased investments in inventory totaling $14.7&nbsp;million
compared to $10.8&nbsp;million in the prior 39-week period. This
change related to the timing of the flow of goods for the
Christmas season and the funding of 35 new store inventories in
the fiscal 2004 period
</DIV>

<P align="center" style="font-size: 10pt;">27

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
compared to 22 in the prior period. Net cash provided by
operating activities was $11.3&nbsp;million for fiscal 2003 and
$10.5&nbsp;million for fiscal 2002. Net cash provided by
operating activities increased in fiscal 2003 compared to fiscal
2002 primarily because net income increased. Net cash provided
by (used in) operating activities was $(5.3)&nbsp;million for
the 39-week period ended October&nbsp;30, 2004 and approximately
$(84,000) for the 39-week period ended November&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash used in investing activities was $6.2&nbsp;million for
the 39-week period ended October&nbsp;30, 2004 and
$5.1&nbsp;million for the 39-week period ended November&nbsp;1,
2003. Net cash used in investing activities increased in the
39-week period ended October&nbsp;30, 2004 compared to the
39-week period ended November&nbsp;1, 2003 because we purchased
additional property and equipment to open 35 new stores compared
to 22 new stores in the prior period. Net cash used in investing
activities was $6.2&nbsp;million for fiscal 2003 and
$5.9&nbsp;million for fiscal 2002. Net cash used in investing
activities increased in fiscal 2003 compared to fiscal 2002
because we purchased additional property and equipment to open
25 new stores compared to 16 new stores in the prior year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We anticipate that our capital expenditures will increase to
approximately $10&nbsp;million in fiscal 2005 and
$26&nbsp;million in fiscal 2006. Fiscal 2005 spending relates to
the purchase of property and equipment for the 40&nbsp;stores we
plan to open in 2005. The increase in fiscal 2006 relates to the
planned purchase or construction of a new distribution center
and the purchase of property and equipment for the 40 stores we
plan to open in fiscal 2006. We plan to finance these capital
expenditures over the next two fiscal years with cash flow from
operations and a portion of the net proceeds from this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash provided by financing activities was $3.8&nbsp;million
for the 39-week period ended October&nbsp;30, 2004 and
$2.3&nbsp;million for the 39-week period ended November&nbsp;1,
2003. Net cash provided by financing activities for the 39-week
period ended October&nbsp;30, 2004 was primarily attributable to
borrowings of $5.4&nbsp;million on our secured line of credit,
partially offset by $1.0&nbsp;million in preferred stock
dividend payments and approximately $623,000 in capital lease
and mortgage payments. Net cash provided by financing activities
for the 39-week period ended November&nbsp;1, 2003 was primarily
attributable to borrowings on our secured line of credit. Net
cash used in financing activities was approximately $942,000 for
fiscal 2003 and $2.8&nbsp;million for fiscal 2002. Net cash used
in financing activities for fiscal 2003 was attributable to
payments on capital lease obligations and mortgage payments on
our Fahm Street facility. Net cash used in financing activities
for fiscal 2002 was primarily attributable to $3.7&nbsp;million
in repayments of our secured line of credit and approximately
$742,000 in payments on capital lease obligations, partially
offset by $1.7&nbsp;million in proceeds from the mortgage on our
Fahm Street facility. Until required for other purposes, we
maintain our cash and cash equivalents in deposit accounts or
highly liquid investments with remaining maturities of
90&nbsp;days or less at the time of purchase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity Sources, Requirements and Contractual Cash
Requirements and Commitments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our principal sources of liquidity will consist of:
(i)&nbsp;cash and cash equivalents (which equaled
$2.2&nbsp;million as of October&nbsp;30, 2004); (ii)&nbsp;a
secured line of credit with a maximum available borrowing of
$25.0&nbsp;million subject to our inventory levels (with
availability of $21.0&nbsp;million and $4.0&nbsp;million drawn
down as of October&nbsp;30, 2004); (iii)&nbsp;an unsecured line
of credit with a maximum available borrowing of
$3.0&nbsp;million subject to our inventory levels (with
availability of $1.6&nbsp;million and $1.4&nbsp;million drawn
down as of October&nbsp;30, 2004); (iv)&nbsp;cash generated from
operations on an ongoing basis as we sell our merchandise
inventory; (v)&nbsp;trade credit; and (vi)&nbsp;the remainder of
the net proceeds from this offering after the redemption of our
Series&nbsp;A Preferred Stock and the repayment of outstanding
indebtedness. Short-term trade credit represents a significant
source of financing for our inventory purchases. Trade credit
arises from customary payment terms and trade practices with our
vendors. Our management regularly reviews the adequacy of credit
available to us from our vendors. Historically, our principal
liquidity requirements have been to meet our working capital and
capital expenditure needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that our sources of liquidity will be sufficient to
fund our operations and anticipated capital expenditures for at
least the next 24&nbsp;months. Our ability to fund these
requirements and comply with the financial covenants under our
secured lines of credit will depend on our cash flow, which in
turn is subject to prevailing economic conditions and financial,
business and other factors, some of which are beyond our
control. In addition, as part of our strategy, we intend to
continue to open new stores, which will require additional
capital. We cannot assure you that additional capital or other
sources of liquidity will be available on terms acceptable to
us, or at all.
</DIV>

<P align="center" style="font-size: 10pt;">28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table discloses aggregate information about our
contractual obligations as of October&nbsp;30, 2004 and the
periods in which payments are due:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap><B>Payments Due by Period</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Less than</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>More than</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>1&nbsp;Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>1-3&nbsp;Years</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>3-5&nbsp;Years</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>5&nbsp;Years</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap>(in thousands)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contractual obligations:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A Preferred
    Stock<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt maturing within one
    year<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term
    debt<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating
    leases<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consulting
    fee<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total contractual cash obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Includes Series&nbsp;A Preferred Stock of $3.6&nbsp;million,
    accrued dividends of approximately $799,000 as of
    October&nbsp;30, 2004 and dividends of $1.5&nbsp;million
    accruing through maturity in April 2009. The board of directors
    approved a resolution whereby we began making payments of
    approximately $500,000 per quarter beginning in the second
    quarter of fiscal 2004. Our Series A Preferred Stock will be
    redeemed using a portion of the net proceeds from this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    Does not include interest on our revolving lines of credit,
    which is variable. Upon consummation of this offering, we intend
    to repay any outstanding balance.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    Our outstanding long-term debt will be repaid using a portion of
    the net proceeds from this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD align="left">
    Represents fixed minimum rentals in stores and does not include
    rentals which are computed as a percentage of net sales.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP>&nbsp;</TD>
    <TD align="left">
    Represents minimum payments for the four year term of a
    management consulting agreement that is subject to automatic
    annual renewals unless terminated with 60&nbsp;days notice by
    either party. Upon consummation of this offering, the parties
    shall terminate the consulting agreement and we will pay the
    consultant a termination fee of $1.2&nbsp;million.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Indebtedness.</I>&nbsp;We have a revolving line of credit
secured by substantially all of our assets pursuant to which we
pay customary fees. This secured line of credit expires in April
2007. This secured line of credit provides for aggregate cash
borrowings and the issuance of letters of credit up to the
lesser of $25.0&nbsp;million or our borrowing base (which was
approximately $24.0&nbsp;million at October&nbsp;30, 2004), with
a letter of credit sub-limit of $2.0&nbsp;million. Borrowings
under this secured line of credit bear interest at the prime
rate plus a spread or LIBOR plus a spread, at our election,
based on conditions in the credit agreement. As of
October&nbsp;30, 2004, outstanding borrowings on the line of
credit totaled $4.0&nbsp;million at an interest rate of 4.75%,
and there were no outstanding letters of credit as of that date.
Under the terms of the credit agreement, we are required to
maintain a minimum tangible net worth of $3.9&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In September 2003, we entered into an annual unsecured revolving
line of credit with Bank of America that was renewed in June
2004. The line of credit provides for aggregate cash borrowings
up to $3.0&nbsp;million to be used for general operating
purposes. Borrowings under the credit agreement bear interest at
LIBOR plus a spread, and the interest rate was 3.96% as of
October&nbsp;30, 2004. At October&nbsp;30, 2004,
$1.4&nbsp;million was outstanding under this revolving line of
credit. We intend to pay down any outstanding balance on this
unsecured line of credit with a portion of the net proceeds from
this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We borrow funds under these revolving lines of credit from time
to time and subsequently repay such borrowings with available
cash generated from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Capital Leases.</I>&nbsp;We have capital lease obligations
that financed the purchase of our computer equipment. At
October&nbsp;30, 2004, our capital lease obligations were
$1.3&nbsp;million. These obligations have maturity dates ranging
from May 2004 to October 2007. The interest rates on these
obligations range from 0.6% to 11.5%. All of these obligations
are secured by the computer equipment.
</DIV>

<P align="center" style="font-size: 10pt;">29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Operating Leases.</I>&nbsp;We lease our stores under
operating leases, which generally have an initial term of
five&nbsp;years with one five-year renewal option. Some
operating leases provide for fixed monthly rentals while others
provide for rentals computed as a percentage of net sales. Some
operating leases provide for a combination of both fixed monthly
rental and rentals computed as a percentage of net sales. Rental
expense was $6.4&nbsp;million for fiscal 2003 and
$4.8&nbsp;million for fiscal 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Purchase Obligations.</I>&nbsp;As of October&nbsp;30, 2004,
we had purchase obligations of $31.5&nbsp;million, all of which
were for less than one year. These purchase obligations
primarily consist of outstanding merchandise orders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. We believe the following critical
accounting policies describe the more significant judgments and
estimates used in the preparation of our financial statements:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue Recognition</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. Revenue from layaway
sales is recognized when the customer has paid for and received
the merchandise. If the merchandise is not fully paid for within
60&nbsp;days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program service charges, which are
non-refundable, are recognized in revenue when collected. All
sales are from cash, check or major credit card company
transactions. We do not offer company-sponsored customer credit
accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. We believe the
first-in first-out retail inventory method results in an
inventory valuation that is fairly stated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and Equipment, net</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (primarily three to five years for computer equipment and
furniture, fixtures and equipment, five years for leasehold
improvements, and 15&nbsp;years for buildings) of the related
assets or the relevant lease term, whichever is shorter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Goodwill represents the excess of the purchase price over the
fair value of assets acquired. We adopted the provisions of
SFAS&nbsp;No.&nbsp;142, <I>Goodwill and Other Intangible
Assets</I>, as of February&nbsp;3, 2002. Pursuant to SFAS
No.&nbsp;142, goodwill acquired in a purchase business
combination and determined to have an indefinite useful life is
not amortized, but instead tested for impairment at least
annually. We performed this analysis at the end of fiscal 2003
and no impairment was indicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of Long-Lived
Assets</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value is reviewed. If this review indicates that the carrying
value of the asset will not be recovered as determined based on
projected undiscounted cash flows related to the asset over its
remaining life, the carrying value of the asset is reduced to
its estimated fair value. Impairment losses in the future are
dependent on a number of factors such as site selection and
general economic trends, and thus could be significantly
different from historical results. To the extent our estimates
for net sales, gross profit and store expenses are not realized,
future assessments of recoverability could result in impairment
charges.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-Based Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We apply the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB)&nbsp;Opinion
No.&nbsp;25, <I>Accounting for Stock Issued to Employees</I>,
and related interpretations including FASB interpretation
(FIN)&nbsp;No.&nbsp;44, <I>Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion
No.&nbsp;25</I>, to account for our fixed-plan stock options.
Under this method, compensation expense is recorded on the date
of grant only if the current fair value of the underlying stock
exceeds the exercise price. We recognize the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS&nbsp;No.&nbsp;123, <I>Accounting for
Stock-Based Compensation, </I>and SFAS&nbsp;No.&nbsp;148,
<I>Accounting for Stock-Based Compensation&nbsp;&#150;
Transition and Disclosure, an amendment of FASB Statement
No.&nbsp;123</I>, establishes accounting and disclosure
requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. As permitted by
existing accounting standards, we have elected to continue to
apply the intrinsic-value-based method of accounting described
above, and we have adopted only the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, as amended. Pro forma information
regarding net income and net income per share is required in
order to show our net income as if we had accounted for employee
stock options under the fair value method of
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation</I>, as amended by SFAS&nbsp;No.&nbsp;148,
<I>Accounting for Stock-Based Compensation&#151; Transition
Disclosure</I>. This information is contained in notes&nbsp;2
and 8 to our financial statements. The fair values of options
and shares issued pursuant to our option plan at each grant date
were estimated using the Black-Scholes option pricing model.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Store Opening and Closing
Costs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
New and relocated store opening costs are charged directly to
expense when incurred. When we decide to close or relocate a
store, we record an expense for the present value of expected
future rent payments net of sublease income in the period that a
store closes or relocates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounting for Income Taxes</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The above listing is not intended to be a comprehensive list of
all our accounting policies. In many cases the accounting
treatment of a particular transaction is specifically dictated
by generally accepted accounting principles, with no need for
management&#146;s judgment in their application. There are also
areas in which management&#146;s judgment in selecting any
available alternative would not produce a materially different
result.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and Qualitative Disclosure about Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are exposed to financial market risks related to changes in
interest rates connected with our revolving lines of credit
which bear interest at variable rates. We cannot predict market
fluctuations in interest rates. As a result, future results may
differ materially from estimated results due to adverse changes
in interest rates or debt availability. A hypothetical
100&nbsp;basis point increase in prevailing market interest
rates would not have materially impacted our financial position,
results of operations, cash flows for fiscal 2004. We do not
engage in financial transactions for trading or speculative
purposes, and we have not entered into any interest rate hedging
contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We source all of our product from apparel markets in the United
States and, therefore, are not subject to fluctuations in
foreign currency exchange rates. We have not entered into
forward contracts to hedge against fluctuations in foreign
currency prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If we were to begin sourcing product directly from overseas, our
risk management policy would allow us to utilize foreign
currency forward and option contracts to manage currency
exposures. If we were to enter into hedging contracts, we
anticipate that the contracts would have maturities of less than
three months and would settle before
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the end of each quarterly period. Additionally, we do not expect
to enter into any hedging contracts for trading or speculative
purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We had cash and cash equivalents totaling $2.2&nbsp;million at
October&nbsp;30, 2004. These amounts were maintained in deposit
accounts or highly liquid investments with remaining maturities
of 90&nbsp;days or less at the time of purchase. Due to the
short-term nature of these investments, we believe that we do
not have material exposure to changes in the fair value of our
investments as a result of changes in interest rates. Declines
in interest rates, however, will reduce future investment
income. We do not enter into investments for trading or
speculative purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recently Issued Accounting Standards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the FASB issued SFAS No.&nbsp;153,
<I>Exchanges of Nonmonetary Assets</I>. SFAS No.&nbsp;153 amends
APB Opinion No.&nbsp;29, <I>Accounting for Nonmonetary
Transactions</I>, which requires that exchanges of nonmonetary
assets be measured based on the fair value of the assets
exchanged, but which includes certain exceptions to that
principle. SFAS No.&nbsp;153 eliminates the exception from APB
Opinion No.&nbsp;29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have a commercial
substance. SFAS No.&nbsp;153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after
June&nbsp;15, 2005. The adoption of SFAS No.&nbsp;153 is not
expected to have a material impact on our consolidated financial
position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the FASB issued a revision to
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation</I>. SFAS No.&nbsp;123R replaces SFAS No.&nbsp;123
and supersedes APB Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>, and establishes standards for the
accounting for transactions in which an entity exchanges its
equity instruments for goods or services. SFAS No.&nbsp;123R
focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment
transactions and is effective as of the beginning of the first
reporting period that begins after June&nbsp;15, 2005 for public
entities that do not file as small business issuers. We have
illustrated the effect on our earnings as if we had adopted the
fair value method of accounting for stock-based compensation
under SFAS No.&nbsp;123. This information is contained in
notes&nbsp;2 and 8 to our financial statements. The fair values
of options and shares issued pursuant to our option plan at each
grant date were estimated using the Black-Scholes option pricing
model. The fair value-based method of SFAS No.&nbsp;123 is
similar in most respects to the fair value-based method under
SFAS No.&nbsp;123R, although the election of certain methods
within the applicable transition rules of SFAS No.&nbsp;123R may
affect the impact on our consolidated financial position or
results of operations. Such impact, if any, on our consolidated
financial position or results of operations has not been
determined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2003, the FASB issued FIN&nbsp;46R, <I>Consolidation
of Variable Interest Entities</I>, which is an interpretation of
Accounting Research Bulletin&nbsp;No.&nbsp;51, <I>Consolidated
Financial Statements</I>. FIN&nbsp;46R requires that if an
entity has a controlling interest in a variable interest entity,
the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated
financial statements of the entity. FIN&nbsp;46R is effective
immediately for all new variable interest entities created or
acquired after December&nbsp;31, 2003. The adoption of
FIN&nbsp;46R is not expected to have an impact on our
consolidated financial position or results of operations.
</DIV>

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<A name='110'></A>
</DIV>

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<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. We offer quality,
branded products from nationally recognized brands, as well as
private label products and a limited assortment of home
d&#233;cor items. Our merchandise offerings are designed to
appeal to the preferences of fashion conscious consumers,
particularly African-Americans. We provide this offering at
compelling values with nationally recognized branded merchandise
offered at 20% to 60% discounts to department and specialty
stores&#146; regular prices. Our stores average approximately
8,500&nbsp;square feet of selling space and are typically
located in neighborhood shopping centers that are convenient to
low to moderate income customers. Originally our stores were
located in the Southeast, and we have recently expanded into the
Mid-Atlantic region and Texas. We currently operate 200 stores
in both urban and rural markets in twelve&nbsp;states. In each
of fiscal 2005 and fiscal 2006, we intend to open 40 new stores,
approximately 70% of which are expected to be located in states
that we currently serve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners, a private equity firm.
Our management team has implemented several strategies designed
to differentiate our stores, improve our operating and financial
performance and position us for growth, including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    focusing our merchandise offerings on more urban fashion apparel
    for the entire family, with greater emphasis on nationally
    recognized brands;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    accelerating and completing the remodeling of virtually all of
    the 85 stores acquired in 1999 to create a more appealing
    shopping environment;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    refining our new store model and implementing a real estate
    approach focused on locating stores in low to moderate income
    neighborhoods close to our core customers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    rebranding our stores and our company to Citi Trends in order to
    convey more effectively our positioning to consumers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    investing in infrastructure to support growth, including opening
    an additional distribution center and installing new point of
    sale systems in all of our stores;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    implementing an aggressive growth strategy, including entering
    several new markets such as Houston, Norfolk and, most recently,
    Baltimore and Washington,&nbsp;D.C.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
According to a nationally recognized firm that specializes in
apparel research, retail sales of off-price apparel totaled
$16.5&nbsp;billion in the U.S. in 2004, up more than 15% from
2003. The popularity of this segment continues to grow, with
off-price retailers accounting for 9.5% of overall retail
apparel sales in the U.S. in 2004, versus 8.6% in 2003 and 8.2%
in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The off-price apparel market is dominated by large format,
national apparel companies, such as The TJX Companies,
Burlington Coat Factory and Ross Stores. These retailers
generally target more affluent consumers and seek to achieve
high volumes by serving the fashion needs of a broad segment of
the population. Mass merchants and general merchandise discount
retailers, such as Wal-Mart Stores, Inc. and Kmart Corp., also
offer apparel at reduced prices, but generally focus on basic
apparel and are less fashion oriented. As a result, we believe
there is significant demand for a value retailer that addresses
the market of low to moderate income consumers generally and,
particularly, African-American and other minority consumers who
seek value-priced, urban fashion apparel and accessories. We
believe this market benefits from several favorable
characteristics, including:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Growing Market with Favorable Demographics.</I>&nbsp;Based on
U.S.&nbsp;Census Bureau data, approximately 31% of the
U.S.&nbsp;population was non-white in 2000 versus approximately
20% in 1980. This percentage is estimated to increase to
approximately 35% by 2010. Within this market, African-Americans
represented 12.7% of the population as of 2000, which is
expected to increase to 13.1% in 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Significant Spending on Apparel.</I>&nbsp;Minority consumers
possess significant spending power. According to the Selig
Center for Economic Growth at The University of Georgia, or the
Selig Center, the combined U.S.&nbsp;buying power
</DIV>

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of non-whites grew from $540.8&nbsp;billion in 1990 to
approximately $1.2 trillion in 2000. During that period, buying
power for African-Americans grew from $318.3&nbsp;billion to
$584.9&nbsp;billion and is estimated by the Selig Center to grow
approximately 65% to $964.6&nbsp;billion in 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe our core customers are more fashion oriented, which
results in a greater propensity to purchase apparel. According
to the U.S.&nbsp;Department of Labor, African-Americans spend
4.7% of their annual income on apparel and related products and
services, compared to 3.5% for the U.S.&nbsp;population as a
whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Expansion of Urban Apparel Brands.</I>&nbsp;In recent years,
a series of nationally recognized urban brands, often associated
with hip-hop and rap musicians, has emerged and gained
significant popularity. These brands offer distinctive, urban
apparel designed to appeal to African-American consumers, as
well as to the broader population. Sales from 13 national urban
apparel brands tracked by a nationally recognized firm that
specializes in apparel research totaled approximately
$1.9&nbsp;billion in 2004, an increase of approximately 46% from
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our goal is to be the leading value-priced retailer of urban
fashion apparel and accessories. We believe the following
business strengths differentiate us from our competitors and are
important to our success:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Focus on Urban Fashion Mix.</I>&nbsp;We focus our merchandise
on urban fashions, which we believe appeals to our core
customers. We do not attempt to dictate trends, but rather
devote considerable effort to identifying emerging trends and
ensuring that our apparel assortment is considered timely and
fashionable in the urban market. Our merchandising staff tests
new merchandise before reordering and actively manages the mix
of brands and products in our stores to keep our offering fresh
and minimize markdowns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Superior Value Proposition.</I>&nbsp;As a value-priced
retailer, we seek to offer first quality, fashionable
merchandise at compelling prices. Our assortment includes
nationally recognized brands offered at 20% to 60% discounts to
department and specialty stores&#146; regular prices. We also
offer products under our proprietary brands such as Citi Steps,
Diva Blue and Urban Sophistication. These private labels enable
us to expand product selection, offer fashion merchandise at
lower prices and enhances our product offerings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Merchandise Mix that Appeals to the Entire
Family.</I>&nbsp;We merchandise our stores to create a
destination environment capable of meeting the fashion needs of
the entire value-conscious family. Each store offers a wide
variety of products for men and women, as well as infants,
toddlers, boys and girls. Our stores feature sportswear,
dresses, plus-sized apparel, outerwear, footwear and
accessories, as well as a limited assortment of home d&#233;cor
items. We believe that the breadth of our merchandise
distinguishes our stores from many competitors that offer urban
apparel primarily for women, and reduces our exposure to fashion
trends and demand cycles in any single category.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Strong and Flexible Sourcing Relationships.</I>&nbsp;We
maintain strong sourcing relationships with a large group of
suppliers. We have purchased merchandise from more than 1,000
vendors in the past twelve months. Purchasing is controlled by
our 20-member buying team located at our Savannah, Georgia
headquarters and in New York, New York, and our buyers have an
average of more than 20&nbsp;years of retail experience. We
purchase merchandise through planned programs with vendors at
reduced prices and opportunistically through close-outs, with
the majority of our merchandise purchased for the current season
and a limited quantity held for sale in future seasons. To
foster our vendor relationships, we pay vendors promptly and do
not ask for typical retail concessions such as promotional and
markdown allowances or delivery concessions such as drop
shipments to stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Attractive Fashion Presentation and Store
Environment.</I>&nbsp;We seek to provide a fashion-focused
shopping environment that is similar to a specialty apparel
retailer, rather than a typical off-price store. Products from
nationally recognized brands are prominently displayed by brand,
rather than by size, on dedicated, four-way fixtures featuring
multiple sizes and styles. The remaining merchandise is arranged
on hanging racks. All stores are carpeted and well-lit, with
most featuring a sound system that plays urban adult and urban
contemporary music throughout the store. Nearly all of our
stores have either been opened or remodeled in the past six
years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Highly Profitable Store Model.</I>&nbsp;We operate a proven
and efficient store model that delivers strong cash flow and
store level return on investment. We locate stores in high
traffic strip shopping centers that are convenient to low and
moderate income neighborhoods. We generally utilize previously
occupied store sites. This approach enables
</DIV>

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us to generate substantial traffic at attractive rents.
Similarly, our advertising expenses are low as we do not rely on
promotion-driven sales but rather seek to build our reputation
for value through everyday low prices. At the same time, our
unit investment is limited, as we do not spend large sums on
fixturing, leasehold improvements, equipment or other startup
costs. As a result, our stores generate rapid payback of
investments, typically within 12 to 14&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Growth Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our growth strategy is to open stores in new and existing
markets, as well as to increase sales in existing stores. Adding
stores in the markets we currently serve often enables us to
benefit from enhanced name recognition and achieve advertising
and operating synergies. In fiscal 2003 and fiscal 2004, we
opened 25 and 40 stores, respectively, and entered the Houston,
Norfolk, Baltimore and Washington,&nbsp;D.C. markets. Of the
25&nbsp;stores opened in fiscal 2003, the average sales of the
23 stores open for the twelve months ended October&nbsp;31, 2004
was $1.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In each of fiscal 2005 and fiscal 2006, we intend to open 40 new
stores, approximately 70% of which we expect to locate in states
we currently serve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to increase comparable store sales through
merchandising enhancements and the expansion of adjacent product
categories. We have recently added a dedicated buyer in home
d&#233;cor and upgraded our buying capabilities and focus within
the intimate apparel category.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Store Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Store Format.</I> Our existing 200 stores&#146; average
selling space is approximately 8,500&nbsp;square feet, which
allows us space and flexibility to departmentalize our stores
and provide directed traffic patterns. New stores added in
fiscal 2004 averaged approximately 10,700&nbsp;square feet,
which is larger than the stores added in fiscal 2003 and
significantly larger than our historical store base. As a result
of these new stores, as well as due to the remodeling and
expansion of existing stores in fiscal 2003, our average square
footage of selling space per store has increased from
approximately 7,500 at the end of fiscal 2002 to its current
level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We arrange our stores in a racetrack format with women&#146;s
sportswear, our most attractive and fashion current merchandise,
in the center of each store, and complementary categories
adjacent to those items. Men&#146;s and boy&#146;s apparel is
displayed on one side of the store while dresses, footwear and
accessories are displayed on the other side. Merchandise for
infants, toddlers and girls is displayed along the back of the
store. Impulse items, such as jewelry and sunglasses, are
featured near the checkout area. Products from nationally
recognized brands are prominently displayed on four way racks at
the front of each department. The remaining merchandise is
displayed on hanging racks and occasionally on table displays.
Large hanging signs identify each category location. The
unobstructed floor plan allows the customer to see virtually all
of the different product areas from the store entrance and
provides us the flexibility easily to expand and contract
departments in response to consumer demand, seasonality and
merchandise availability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Virtually all of our inventory is displayed on the selling
floor. Our prices are clearly marked and often have the
comparative retail-selling price noted on the price tag.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Store Management.</I>&nbsp;Store operations are managed by
our Vice President of Store Operations, three regional managers
and 21 district managers, each of whom typically manages eight
to ten stores. Our typical store is staffed with a store
manager, two or three assistant managers and seven to eight part
time sales associates, all of whom rotate work days on a shift
basis. District managers and store managers participate in a
bonus program based on achieving predetermined levels of sales
and profits. The district managers also participate in bonus
programs based on achieving targeted payroll costs. Our regional
managers participate in a bonus program based on a rollup of the
district managers&#146; bonuses. The assistant managers and
sales associates are compensated on an hourly basis with
incentives. Moreover, we recognize individual performance
through internal promotions and provide extensive opportunities
for advancement, particularly given our rapid growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We place significant emphasis on loss prevention in order to
control inventory shrinkage. Our initiatives include electronic
tags on all of our products, training and education of store
personnel on loss prevention issues, digital video camera
systems, alarm systems and motion detectors in the stores. We
also capture extensive point-of-sale
</DIV>

<P align="center" style="font-size: 10pt;">35

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<DIV align="left" style="font-size: 10pt;">
data and maintain systems that monitor returns, voids and
employee sales, and produce trend and exception reports to
assist us in identifying shrinkage issues. We have a centralized
loss prevention team that focuses exclusively on implementation
of our initiatives and specifically on stores that have
experienced above average levels of shrinkage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Employee Training.</I>&nbsp;Our employees are critical to
achieving our goals, and we strive to hire employees with high
energy levels and motivation. We have well-established store
operating policies and procedures and an extensive 90-day
in-store training program for new store managers and assistant
managers. Our sales associates also participate in a 30-day
customer service and store procedures training program, which is
designed to enable them to assist customers in a friendly,
helpful manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Layaway Program.</I>&nbsp;We offer a layaway program that
allows customers to purchase merchandise by initially paying a
20% deposit together with a $2.00 service charge. The customer
then makes additional payments every two weeks and has
60&nbsp;days within which to complete the purchase. If the
purchase is not completed, the customer receives a merchandise
credit for amounts paid less a re-stocking fee and the service
charge. Sales under our layaway program accounted for
approximately 13% of our total sales in fiscal 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Store Economics.</I>&nbsp;We believe we benefit from
attractive store-level economics. The average investment for the
41&nbsp;stores we opened in fiscal 2002 and fiscal 2003,
including leasehold improvements, equipment, cost of inventory
to stock the store (net of accounts payable) and preopening
store expenses, was approximately $240,000. These 41 stores
generated average sales of $1.2&nbsp;million and average store
level cash flow (exclusive of pre-opening expense) of $240,000
during their first twelve months of operation. Our average
investment for the 40&nbsp;stores opened in fiscal 2004 was
approximately $280,000. This investment represents an increase
over prior years as the size of our stores has increased and, in
some instances, we have paid for leasehold improvements that we
expect to recover over time. We expect these stores to generate
similar levels of return on investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Store Locations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of January&nbsp;29, 2005, we operated 200 stores located in
twelve states. Our stores are primarily located in strip
shopping centers and downtown business districts. We have no
franchising relationships as all of our stores are
company-operated. The table below sets forth the number of
stores in each of these twelve states and the specific markets
within each such state in which we operated at least two stores
as of January&nbsp;29, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Alabama&#151;17</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>&nbsp;Louisiana&#151;23</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>&nbsp;South Carolina&#151;32</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Birmingham&#151;4</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Shreveport&#151;3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Charleston&#151;2</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Montgomery&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Baton Rouge&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Columbia&#151;2</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mobile&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Monroe&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Orangeburg&#151;2</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Single store locations&#151;9</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;New Orleans&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;26</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Arkansas&#151;4</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<B>Tennessee&#151;9</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Little Rock&#151;3</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>&nbsp;Maryland&#151;3</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Memphis&#151;6</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Single store locations&#151;1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Baltimore&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Nashville&#151;2</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Florida&#151;13</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;1</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jacksonville&#151;3</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>&nbsp;Mississippi&#151;15</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>&nbsp;Texas&#151;6</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tampa&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Jackson&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Houston&#151;6</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Single store locations&#151;8</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>Virginia&#151;11</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Georgia&#151;41</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>&nbsp;North Carolina&#151;26</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Norfolk&#151;6</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Atlanta&#151;9</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Durham&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Richmond&#151;4</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Albany&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Fayetteville&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;1</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Augusta&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Greensboro&#151;2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Macon&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;Single store locations&#151;20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Savannah&#151;2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Single store locations&#151;24</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">36
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Site Selection.</I>&nbsp;Cost-effective store locations are
an important part of our profitability model. Accordingly, we
look for second and third use store locations that offer
attractive rents, but also meet our demographic and economic
criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In selecting a location, we target both urban and rural markets.
Demographic criteria used in site selection include
concentrations of our core consumers. In addition, we require
convenient site accessibility, as well as strong co-tenants,
such as food stores, dollar stores, rent-to-own stores and other
apparel stores. We prepare detailed demographic studies and pro
forma financial statements for each prospective store location.
Our economic criteria for a site include specific store-level
profitability and return on capital invested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have a dedicated real estate management team responsible for
new store site selection. Our group has identified a significant
number of target sites in existing strip shopping centers and
off-mall locations with appropriate market characteristics in
both new and existing markets. We opened a total of 65 new
stores in fiscal 2003 and fiscal 2004. In each of fiscal 2005
and fiscal 2006, we intend to open an additional 40 stores. We
expect to fund our store openings with a portion of the net
proceeds from this offering and cash flow from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Shortly after we sign a new store lease, our store construction
department prepares the store by installing fixtures, signs,
dressing rooms, checkout counters, cash register systems and
other items. Once we take possession of a store site, we can
open the store within approximately three to four weeks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Product Merchandising and Pricing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Merchandising.</I>&nbsp;Our merchandising policy is to offer
high quality, branded products at attractive prices for the
entire value-conscious family. We seek to maintain a diverse
assortment of first quality, in-season merchandise that appeals
to the distinctive tastes and preferences of our core customers.
Approximately 30% of our sales are typically represented by
nationally recognized brands. We also offer a wide variety of
products from less recognized brands that represent
approximately 60% of sales. The remaining 10% of sales represent
private label products under our proprietary brands such as Citi
Steps, Diva Blue and Urban Sophistication. Our private label
products enable us to expand product selection, offer
merchandise at lower prices and enhances our product offerings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our merchandise includes apparel, accessories and home
d&#233;cor. Within apparel, we offer men&#146;s, women&#146;s,
which includes dresses, sportswear and plus size offerings, and
children&#146;s, which includes offerings for infants, toddlers,
boys and girls. We also offer accessories, which includes
intimate apparel, handbags, hats, jewelry, footwear, toys, belts
and sleepwear, as well as a limited assortment of home
d&#233;cor, which includes giftware, lamps, pictures, mirrors
and figurines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth our merchandise assortment by
classification as a percentage of net sales for fiscal 2003.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Percentage of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Net Sales</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Women&#146;s</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    38%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Children&#146;s</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    27%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Men&#146;s</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    21%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accessories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    13%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Home d&#233;cor</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    &nbsp;1%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Pricing.</I>&nbsp;We purchase our merchandise at low prices
and mark prices up less than department or specialty stores. Our
nationally recognized brands are offered at prices 20% to 60%
below regular retail prices available in department stores and
specialty stores, and that product offering validates both our
value and fashion positioning to our consumers. We also consider
the price-to-value relationships of our non-branded products to
be strong. Our basic pricing strategy is everyday low prices.
Our discount from the suggested retail price is usually
reflected on the price tag. We review each department in our
stores at least monthly for possible markdowns based on sales
rates and fashion seasons to promote faster turnover of
inventory and to accelerate the flow of current merchandise.
</DIV>

<P align="center" style="font-size: 10pt;">37

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sourcing and Allocation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our merchandising department oversees the sourcing and
allocation of merchandise to our stores, which allows us to
utilize volume purchase discounts and maintain control over our
inventory. We source our merchandise from over
1,000&nbsp;vendors, consisting of domestic manufacturers and
importers. For fiscal 2004, no vendor represented over 6% of our
net sales. Our President and Chief Merchandising Officer
supervises our 13&nbsp;member planning and allocation team, as
well as our buying team which is comprised of five merchandise
managers and 14&nbsp;buyers. Consistent with our plan to grow
the intimate apparel and home d&#233;cor categories, we recently
added a dedicated buyer in home d&#233;cor and upgraded our
buying capabilities and focus in intimate apparel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our buyers have an average of 20&nbsp;years of experience in the
retail business and have developed long-standing relationships
with many of our vendors, including those controlling the
distribution of branded apparel. These buyers are responsible
for maintaining vendor relationships, securing high quality,
fashionable merchandise that meets our margin requirements and
identifying and responding to emerging fashion trends. Our
buyers, who are based in Savannah and New York, accomplish this
by traveling to the major United States apparel markets
regularly, visiting our major manufacturers and attending
national and regional apparel trade shows, including
urban-focused trade shows. We also retain the services of two
independent fashion consulting firms that monitor market trends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our buyers purchase merchandise in styles, sizes and quantities
to meet inventory levels developed by our planning staff. We
work closely with our suppliers and are able to differentiate
ourselves by our willingness to purchase less than a full
assortment of styles, colors and sizes and by our policy of
paying promptly and not asking for typical retail concessions
such as promotional and markdown allowances. Our purchasing
department utilizes several buying techniques that enable us to
offer to consumers branded and other merchandise at everyday low
prices. The majority of the nationally recognized branded
products we sell are purchased in-season and represent our
vendors&#146; excess inventories resulting from production or
retailer order cancellations. We generally purchase later in the
merchandising buying cycle than department and specialty stores.
This allows us to take advantage of imbalances between
retailers&#146; demands for specific merchandise and
manufacturers&#146; supply of that merchandise. We also purchase
merchandise from some vendors in advance of the selling season
at reduced prices. Occasionally, we purchase merchandise on an
opportunistic basis, which we then &#147;pack and hold&#148; for
sale three to nine&nbsp;months later. Where possible, we seek to
purchase items based on style or color in limited quantities on
a test basis with the right to reorder as needed. Finally, we
purchase private label merchandise that we source to our
specifications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As is customary in the industry, we do not enter into long-term
contracts with any of our suppliers. While we believe we may
encounter delays if we change suppliers, we believe alternate
sources of merchandise for all product categories are available
at comparable prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We allocate merchandise across our store base according to
store-level demand. Our merchandising staff utilizes a
centralized management system to monitor merchandise purchasing,
allocation and sales in order to maximize inventory turnover,
identify and respond to changing product demands and determine
the timing of mark-downs to our merchandise. Our buyers also
regularly review the age and condition of our merchandise and
manage both the reordering and clearance processes. In addition,
our merchandising team communicates with our regional, district
and store managers to ascertain regional and store-level
conditions and to better ensure that our product mix meets our
consumers&#146; demands in terms of quality, fashion, price and
availability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Advertising and Marketing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our advertising goal is to build the &#147;Citi Trends&#148;
brand and promote consumers&#146; association of our brand with
value, quality, fashion and everyday low prices. We generally
focus our advertising efforts during the Easter, back-to-school
and Christmas seasons. This advertising consists of radio
commercials on local hip-hop radio stations that highlight our
brands, our value and our everyday low prices. We also do
in-store advertising that includes window signs designated for
special purposes, such as seasonal events and clearance periods,
and taped audio advertisements co-mingled with our in-store
music programs. Signs change in color, quantity and theme every
three to six&nbsp;weeks. For store grand openings, we typically
seek to create community awareness and consumer excitement
through radio advertising preceding and during the grand opening
and by creating an on-site
</DIV>

<P align="center" style="font-size: 10pt;">38

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<DIV align="left" style="font-size: 10pt;">
event with local radio personalities broadcasting from the new
location. We also distribute promotional items such as gift
certificates and shopping sprees in connection with our grand
openings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our marketing efforts center on promoting our everyday low
prices and on demonstrating the strong price-to-value
relationship of our products to our consumers. We do not utilize
promotional advertising. Our merchandise is priced so that our
competition rarely has lower prices. In the limited situations
where our competition offers the same merchandise at a lower
price, we will match the price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Distribution</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All merchandise sold in our stores is shipped directly from our
distribution centers in Savannah, Georgia. In November 2004, we
opened our second distribution center located on Coleman
Boulevard, approximately 10&nbsp;miles from our primary
distribution center, the Fahm Street facility. The Coleman
facility is used to process all receipts, as well as to
warehouse &#147;pack and hold&#148; merchandise and merchandise
held for new store openings. After merchandise is received and
quality control functions are performed, the merchandise is
moved to the Fahm Street facility for processing and shipping to
the stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All work necessary to prepare the merchandise to be sales-floor
ready is performed in our distribution centers. Some of our
merchandise comes from vendors pre-ticketed and pre-packed and
can be shipped directly from the distribution centers to our
stores without repacking. However, most merchandise has to be
price ticketed and repacked in store shipping units before being
shipped to the stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We generally ship merchandise from Savannah to stores daily, but
approximately 40 of our smaller volume stores receive
merchandise every other day. Savannah is centrally located to
our store base, and most of our stores are within a two-day
drive from our distribution centers. We use United Parcel
Service, Inc. and FedEx Corporation to ship merchandise to our
stores. Our distribution centers have a combined
240,000&nbsp;square feet, including approximately
20,000&nbsp;square feet of office space. We expect these
facilities to support our distribution and office capacity needs
for at least the next two years. We intend to use a portion of
the net proceeds from this offering to acquire or construct and
design a new distribution center in fiscal 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Quality control reviews of every merchandise receipt are
performed by a dedicated team at the Coleman facility. This team
is also responsible for working with our vendors and
manufacturers to ensure consistent and superior quality across
our private label merchandise, which accounts for approximately
10% of our net sales. Nearly all of our merchandise is purchased
from recognized domestic manufacturers and importers, which
reduces our risk of inadvertently handling counterfeit items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Information Technology and Systems</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have information systems in place to support each of our
business functions. We purchased our enterprise software from
Island Pacific, a primary software provider to the retail
industry. Our computer platform is an IBM&nbsp;AS400. The Island
Pacific software supports the following business functions:
purchasing, purchase order management, price and markdown
management, distribution, merchandise allocation, general
ledger, accounts payable and sales audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Island Pacific merchandise system captures and reports sales
and inventory by item, by store and by day. This information
allows our merchandising team to evaluate merchandise
performance in considerable detail with high levels of
precision. Over the last four&nbsp;years we have enhanced the
Island Pacific software, particularly to enhance merchandise
allocation and distribution functions. In 2004, we purchased and
installed Buyers Toolbox software to aid our merchandise
planning and allocation functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our stores use point-of-sale software from DataVantage, a
division of MICROS Systems, Inc., to run our store cash
registers. The system uses bar code scanners at checkout to
capture item sales. It also supports end-of-day processing and
automatically transmits sales and transaction data to Savannah
each night. Additionally, the software supports store time clock
and payroll functions. To facilitate marking down and
re-ticketing merchandise, employees in our stores use hand-held
scanners that read the correct item price and prepare new price
tickets for merchandise. Our DataVantage software also enables
us to sort and review transaction data, generate exception and
other database reporting to assist in loss prevention.
</DIV>

<P align="center" style="font-size: 10pt;">39

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2005, we plan to complete installation of the latest upgrade
to the DataVantage software. The new software will enable
improved and less costly telecommunications between stores and
our Fahm Street facility. The upgrade will also provide improved
credit and debit card processing, gift card capability, store
e-mail and more reliable data transmissions to our home office
systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that our information systems, with upgrades and
updates over time, are adequate to support our operations for
the foreseeable future. Additionally, we are upgrading our
website to enable Internet sales of selected urban branded
apparel provided by third parties. We will earn commissions on
these sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The markets we serve are highly competitive. We compete against
a diverse group of retailers including national off-price
retailers, mass merchants, smaller specialty retailers and
dollar stores. The off-price retail companies that we compete
with include The TJX Companies, Burlington Coat Factory and Ross
Stores. In particular, TJX&#146;s A.J.&nbsp;Wright stores target
moderate income consumers. Ross Stores, Inc. has recently
launched a similar concept targeting lower income consumers,
called dd&#146;s DISCOUNTS. We believe our strategy of appealing
to African-American consumers and offering urban apparel
products allows us to compete successfully with these retailers.
We also believe we offer a more inviting store format than the
off-price retailers with carpeted floors and more prominently
displayed brands. We also compete with a group of smaller
specialty retailers that only sell women&#146;s products, such
as Rainbow, Dots, Fashion Cents, It&#146;s Fashions and Simply
Fashions. Our mass merchant competitors include Wal-Mart and
Kmart. These chains do not focus on fashion apparel and, within
their apparel offering, lack the urban focus that we believe
differentiates our offering and appeals to our core customers.
Similarly, while some of the dollar store chains offer apparel,
they typically offer a more limited selection focused on basic
apparel needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We regard our trademarks and service marks as having significant
value and as being important to our marketing efforts. We have
registered the &#147;Citi Trends&#148; trademark with the
U.S.&nbsp;Patent and Trademark Office on the Principal Register
as both a trademark for retail department store services and as
a trademark for clothing. We have also registered the following
trademarks with the U.S.&nbsp;Patent and Trademark Office on the
Principal Register: &#147;Citi Club,&#148; &#147;Citi
Knights,&#148; &#147;Citi Nite,&#148; &#147;Citi Steps,&#148;
&#147;Citi Trends Fashion for Less,&#148; &#147;Citi
Women,&#148; &#147;CT Sport,&#148; &#147;Univer Soul&#148; and
&#147;Vintage Harlem.&#148; We also have applications pending
with the U.S.&nbsp;Patent and Trademark Office on the Principal
Register for the following trademarks: &#147;Citi Express,&#148;
&#147;Diva Blue,&#148; &#147;Lil&nbsp;Citi&nbsp;Man,&#148;
&#147;Lil Ms Hollywood&#148; and &#147;Urban
Sophistication.&#148; Our policy is
to&nbsp;pursue&nbsp;registration of our marks and to oppose
vigorously infringement of our marks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Properties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All our existing 200 stores, totaling approximately
2.1&nbsp;million gross square feet, are leased under operating
leases. Additionally, as of February&nbsp;10, 2005, we have
signed leases for eleven new stores to be opened during fiscal
2005 aggregating approximately 148,320 total gross square feet.
Our typical store lease is for five&nbsp;years with an option to
extend our lease term for an additional five-year period, and
requires us to pay percentage rent and increases in specified
site-related charges. Nearly all of our store leases provide us
the right to cancel following an initial three-year period in
the event the store does not meet pre-determined sales levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We own an approximately 170,000&nbsp;square foot facility
located on Fahm Street in Savannah, Georgia, that serves as our
headquarters and one of our two distribution centers. This
facility is financed under a mortgage with a remaining principal
balance of $1.5&nbsp;million that is due in July 2007. We intend
to repay this mortgage with a portion of the proceeds from this
offering. We currently lease the land and building for our other
distribution center located on Coleman Boulevard. The lease for
this distribution center expires in September 2006, with options
to renew for up to three more years. In addition, we currently
lease 1,200&nbsp;square feet in New York City, which is used for
buyer operations and meetings with vendors.
</DIV>

<P align="center" style="font-size: 10pt;">40

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of January&nbsp;29, 2005, we had approximately
800&nbsp;full-time and approximately 1,000&nbsp;part-time
employees. Of these employees, approximately 1,500 are employed
in our stores and the remainder are employed in our distribution
centers and corporate offices. We are not a party to any
collective bargaining agreements, and none of our employees is
represented by a labor union.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are from time to time involved in various legal proceedings
incidental to the conduct of our business, including claims by
our customers, employees or former employees. We are currently
the defendant in two putative collective action lawsuits
commenced by former employees under the Fair Labor Standards
Act. The plaintiff in each of the lawsuits is represented by the
same law firm, and both suits are pending in District Court of
the United States for the Middle District of Alabama, Northern
Division. Each of the cases is in its early stages, and we are
in the process of evaluating the claims made. While our review
of the allegations is preliminary, we believe that our business
practices are, and were during the relevant periods, in
compliance with the law. We plan to defend these suits
vigorously.
</DIV>

<P align="center" style="font-size: 10pt;">41

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<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

<!-- link1 "Management" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Officers and Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth information regarding our
executive officers and directors, as well as our nominees for
our board of directors pending the closing of this offering, and
their ages:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Merchandising Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President of Store Operations</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gregory P. Flynn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board of Directors</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Laurens M. Goff*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John S. Lupo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tracy L. Noll</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director Nominee</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*&nbsp;</TD>
    <TD align="left">
    Will resign from our board of directors upon the consummation of
    this offering.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>**&nbsp;</TD>
    <TD align="left">
    Will join our board of directors upon the consummation of this
    offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the consummation of this offering, our board of directors
will consist of five members. After this offering we expect to
restructure our board of directors and
appoint &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as
an independent director. In connection with this restructuring,
we expect that two of our current directors,
Messrs.&nbsp;Bellino and Goff, will resign upon the consummation
of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>R.&nbsp;Edward Anderson.</I>&nbsp;Mr.&nbsp;Anderson has
served as our Chief Executive Officer and as a director since
December 2001. Prior to his current responsibilities,
Mr.&nbsp;Anderson served as Executive Vice President and Chief
Financial Officer of Variety Wholesalers, our previous owner,
from December 1997 to December 2001. From 1978 to 1994,
Mr.&nbsp;Anderson served as Chief Financial Officer of
Rose&#146;s Stores, Inc., a discount retailer. In August 1994,
Mr.&nbsp;Anderson was promoted to Chief Executive Officer and
served in this position until December 1997. Mr.&nbsp;Anderson
also served as the Chairman of the Board of Directors of
Rose&#146;s Stores, Inc. from August 1994 to December 1997.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>George A. Bellino.</I>&nbsp;Mr.&nbsp;Bellino has served as
our President and Chief Merchandising Officer since January 1997
and has served as a director since April 1999. From June 1992 to
December 1996, Mr.&nbsp;Bellino served as the Vice President of
Merchandising at Pennsylvania Fashions, a privately held
off-price apparel chain. From June 1990 to October 1991,
Mr.&nbsp;Bellino served as President of General Textiles/ Family
Bargain Center, a retail apparel chain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Thomas W. Stoltz.</I>&nbsp;Mr.&nbsp;Stoltz has served as our
Chief Financial Officer since September 2000. From January 1999
to August 2000, Mr.&nbsp;Stoltz served as Chief Financial
Officer of Sharon Luggage and Gifts, a privately held retailer.
From August 1996 to December 1998, Mr.&nbsp;Stoltz served as the
Chief Financial Officer and Vice President of Finance of Factory
Card Outlet, a greeting card retailer. Mr.&nbsp;Stoltz is a
certified public accountant licensed in North Carolina and a
member of the American Institute of Certified Public Accountants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>James A. Dunn.</I>&nbsp;Mr.&nbsp;Dunn has served as our Vice
President of Store Operations since April 2001. From January to
April 2001, Mr.&nbsp;Dunn was our Director of Training and
Development and from January 2000 to January 2001 was one of our
Regional Managers. Prior to joining us, Mr.&nbsp;Dunn was a
Store Manager at Staples from January 1999 to December 2000.
Prior to that Mr.&nbsp;Dunn was a Regional Manager at Dress Barn
where he supervised 77 stores and 10 district sales managers
with an annualized sales volume of $63.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gregory P. Flynn.</I>&nbsp;Mr.&nbsp;Flynn has served as our
Chairman of the board of directors since 2001 and as a member of
the compensation committee since 2001. Mr.&nbsp;Flynn is
currently a Managing Partner of Hampshire Equity
Partners&nbsp;II, L.P. and Hampshire Equity Partners&nbsp;III,
L.P. and has been associated with Hampshire since 1996.
</DIV>

<P align="center" style="font-size: 10pt;">42

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<DIV align="left" style="font-size: 10pt;">
Hampshire Equity Partners and certain of its affiliates are
selling stockholders in this offering. From 1994 to 1996,
Mr.&nbsp;Flynn served as a Managing Partner of ING Equity
Partners, L.P.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Laurens M. Goff.</I>&nbsp;Mr.&nbsp;Goff has served as a
director since September 2003 and as a member of the audit
committee. Mr.&nbsp;Goff is currently a Principal of Hampshire
Equity Partners&nbsp;II, L.P. and Hampshire Equity
Partners&nbsp;III, L.P. and has been associated with Hampshire
since August 1998. From 1996 to 1998, Mr.&nbsp;Goff served as an
analyst of Furman Selz LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>John S. Lupo.</I>&nbsp;Mr. Lupo has served as a director
since May 2003, and is the Chairman of the compensation
committee. Mr. Lupo is a principal in the consulting firm
Renaissance Partners, LLC, which he joined in February 2000.
From November 1998 until December 1999, Mr. Lupo served as
Executive Vice President of Basset Furniture. From October 1996
until October 1998, Mr. Lupo served as the Chief Operating
Officer of the International Division of Wal-Mart Stores Inc.,
and from September 1990 until September 1996, Mr. Lupo served as
Senior Vice President and General Merchandise Manager of
Wal-Mart Stores Inc. Mr. Lupo is a director for Rayovac Corp, a
public reporting company, and serves on their Compensation and
Corporate Governance and Nominating Committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Tracy L. Noll.</I>&nbsp;Mr.&nbsp;Noll has served as a
director since July 2000 and is the current Chairman of the
audit committee. Mr. Noll is currently a private investor based
in Dallas, Texas. He served as President and Chief Operating
Officer of National Dairy Holdings, L.P. from April 2001 to
September 2003. He served as Executive Vice President of Suiza
Foods Corporation, a public reporting company, from September
1994 until March 2001, including serving as Chief Financial
Officer from September 1994 until July 1997. He served as Vice
President and Chief Financial Officer of Morningstar Foods Inc.,
a public reporting company, from April 1988 until June 1994. Mr.
Noll currently serves as a Director and is Chairman of the Audit
Committee of Reddy Ice Group, Inc., a public reporting company.
Mr. Noll also serves as a Director of Lakeview Farms Inc., a
privately held company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each of our executive officers serves at the discretion of the
board of directors and holds office until his successor is
elected and qualified or until his earlier resignation or
removal. There are no family relationships among any of our
directors or executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board of Directors Composition After the Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors currently consists of six&nbsp;directors.
Following this offering, our board of directors will be divided
into three classes and will consist of five&nbsp;directors,
three of which will be &#147;independent&#148; under the rules
of the Nasdaq National Market. We intend to avail ourselves of
the transition periods provided for under the applicable rules
of the Nasdaq National Market for issuers listing in conjunction
with their initial public offering. Additionally, we intend to
avail ourselves of the Nasdaq rule&nbsp;4350(c) &#147;controlled
company&#148; exception that applies to companies where more
than 50% of the stockholder voting power is held by an
individual, a group or another company, thereby eliminating the
requirements that we have a majority of independent directors on
our board of directors and that our compensation and nominating
and corporate governance committees be entirely comprised of
independent directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our second amended and restated certificate of incorporation
will divide our board into three classes having staggered terms,
with one of such classes being elected each year for a new
three-year term. Class&nbsp;I directors will have an initial
term expiring in 2006, Class&nbsp;II directors will have an
initial term expiring in 2007 and Class&nbsp;III directors will
have an initial term expiring in 2008. Class&nbsp;I will be
comprised of
Messrs.&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.
Class&nbsp;II will be comprised of Messrs.&nbsp;Noll and Lupo.
Class&nbsp;III will be comprised of Messrs. Flynn and Anderson.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this offering, we will enter into a
nominating agreement with Hampshire Equity Partners pursuant to
which we, acting through our nominating and corporate governance
committee, will agree, subject to the requirements of our
directors&#146; fiduciary duties, that (i)&nbsp;Hampshire Equity
Partners will be entitled to designate two directors to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate at least 40% of
the shares of our common stock which it owned immediately prior
to the consummation of this offering or (ii)&nbsp;Hampshire
Equity Partners will be entitled to designate one director to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate less than 40%
and at least 15% of the shares of our common stock which it
owned immediately prior to the
</DIV>

<P align="center" style="font-size: 10pt;">43

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<DIV align="left" style="font-size: 10pt;">
consummation of this offering. If at any time Hampshire Equity
Partners owns less than 15% of the shares of our common stock
which it owned immediately prior to the consummation of this
offering, it will not have the right to nominate any directors
for election to our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board of Director Committees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors has established an audit committee and a
compensation committee. Upon completion of this offering, we
will create a nominating and corporate governance committee.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Audit Committee</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The audit committee, currently consisting of Messrs.&nbsp;Noll
and Goff, reviews our internal accounting procedures and
consults with and reviews the services provided by our
independent registered public accountants. Mr.&nbsp;Noll is the
current Chairman of the audit committee and qualifies as an
&#147;audit committee financial expert&#148; for purposes of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act. Upon the consummation of this offering and after
Mr.&nbsp;Goff&#146;s anticipated resignation, we anticipate that
our audit committee will consist of two independent directors,
with Mr.&nbsp;Noll as the chairman. Following this offering, the
principal duties and responsibilities of our audit committee
will be to:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    have direct responsibility for the selection, compensation,
    retention, replacement and oversight of the work of our
    independent auditors, including prescribing what services are
    allowable and approve in advance all services provided by the
    auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    set clear hiring policies for employees or former employees of
    the independent auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review all proposed company hires formerly employed by the
    independent auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    have direct responsibility for ensuring its receipt from the
    independent auditors at least annually of a formal written
    statement delineating all relationships between the auditor and
    us, consistent with Independence Standards Board Standard
    No.&nbsp;1;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    discuss with the independent directors any disclosed
    relationships or services that may impact the objectivity and
    independence of the auditor and for taking, or recommending that
    the full board of directors take, appropriate action to oversee
    the independence of the independent auditor;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    discuss with the internal auditors and the independent auditors
    the overall scope and plans for their respective audits
    including the adequacy of staffing, compensation and resources;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review, at least annually, the results and scope of the audit
    and other services provided by our independent auditors and
    discuss any audit problems or difficulties and management&#146;s
    response;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review our annual audited financial statement and quarterly
    financial statements and discuss the statements with management
    and the independent auditors (including disclosures in our
    Exchange Act reports in response to Item&nbsp;303,
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; of
    Regulation&nbsp;S-K);</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss with management, the internal auditors and
    the independent auditors the adequacy and effectiveness of our
    internal controls, including our ability to monitor and manage
    business risk, legal and ethical compliance programs and
    financial reporting;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss separately with the internal auditors and the
    independent auditors, with and without management present, the
    results of their examinations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review our compliance with legal and regulatory independence;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss our interim financial statements and the
    earnings press releases prior to the filing of our quarterly
    reports on Form&nbsp;10-Q, as well as financial information and
    earnings guidance provided to analysts and rating agencies;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss our risk assessment and risk management
    policies;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    prepare an audit committee report required by the Securities and
    Exchange Commission to be included in our annual proxy statement;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    engage independent counsel and other advisors to assist the
    audit committee in carrying out its duties;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">44
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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and approve all related party transactions consistent
    with the rules applied to companies listed on the Nasdaq
    National Market;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    establish procedures regarding complaints received by us or our
    employees regarding accounting, accounting controls or
    accounting matters.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The audit committee will be required to report regularly to our
board of directors to discuss any issues that arise with respect
to the quality or integrity of our financial statements, our
compliance with legal or regulatory requirements, the
performance and independence of our independent auditors, or the
performance of the internal audit function.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation Committee</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The compensation committee, consisting of Messrs.&nbsp;Lupo and
Flynn, reviews and determines the compensation and benefits of
all of our officers, establishes and reviews general policies
relating to the compensation and benefits of all of our
employees, and administers our long-term incentive plan. Upon
the consummation of this offering, we anticipate that our
compensation committee will consist of two independent
directors, with Mr.&nbsp;Lupo as the chairman. Following this
offering the principal duties and responsibilities of our
compensation committee will be to:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and approve corporate goals and objectives relevant to
    our Chief Executive Officer&#146;s and other named executive
    officers&#146; compensation;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    evaluate the Chief Executive Officer&#146;s performance in light
    of these goals and objectives;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    either as a committee, or together with the other independent
    directors, determine and approve the Chief Executive
    Officer&#146;s compensation;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    make recommendations to our board of directors regarding the
    salaries, incentive compensation plans and equity-based plans
    for our employees;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    produce a compensation committee report on executive
    compensation as required by the Commission to be included in our
    annual proxy statements or annual reports on Form&nbsp;10-K
    filed with the Commission.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation Committee Interlocks and Insider
    Participation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to establishing the compensation committee, the board of
directors as a whole performed the functions delegated to the
compensation committee. No member of our current compensation
committee serves or has ever served as one of our officers or
employees. None of our executive officers serves or has ever
served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers
serving on our board of directors or compensation committee.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Nominating and Corporate Governance Committee</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the consummation of this offering, we will create a
nominating and corporate governance committee. We anticipate
that our nominating and corporate governance committee will
consist of two independent directors. After this offering, the
principal duties and responsibilities of our nominating and
corporate governance committee will be to:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    identify individuals qualified to become board members,
    consistent with criteria approved by the board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    recommend the individuals identified be selected as nominees at
    annual meetings of our stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    develop and recommend to the board of directors a set of
    corporate governance principles applicable to us;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    oversee the evaluation of the board of directors and management.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">45

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Code of Ethics</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the consummation of this offering, we will adopt a written
code of ethics applicable to our directors, officers and
employees in accordance with the rules of the Nasdaq National
Market and the Commission. Our code of ethics will be designed
to deter wrongdoing and to promote:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    honest and ethical conduct;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    full, fair, accurate, timely and understandable disclosure in
    reports and documents that we file with the Commission and in
    our other public communications;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    compliance with applicable laws, rules and regulations,
    including insider trading compliance;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    accountability for adherence to the code and prompt internal
    reporting of violations of the code, including illegal or
    unethical behavior regarding accounting or auditing practices.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After this offering, we will make our code available on our
website at www.cititrends.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Director Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our independent directors currently receive a $20,000 annual
retainer and an annual award of options as compensation from us
for their services as members of the board of directors. We
reimburse all of our directors for out-of-pocket expenses in
connection with attendance at board of directors and committee
meetings. After this offering, we expect that our independent
directors will receive an annual fee of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
serving as directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth a summary of the compensation
paid during fiscal 2003 to our Chief Executive Officer and our
four most highly compensated executive officers, together
referred to as our named executive officers:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Long-Term</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Annual Compensation(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Securities</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Underlying&nbsp;Options</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>231,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>90,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Merchandising Officer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James&nbsp;A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>116,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President of Store Operations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Excludes perquisites and other benefits, which for each named
    individual are less than 10% of the sum of such
    individual&#146;s annual salary and bonus.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">46

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Option Grants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table contains summary information regarding stock
option grants made during fiscal 2003 by us to the named
executive officers. We also granted stock options to purchase
shares of common stock to certain of our employees and to our
current stockholders, including Hampshire Equity Partners. All
options were granted at fair market value of our common stock,
as determine by our board of directors, on the grant date.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option Grants In Last Fiscal Year</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Potential</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Realizable Value</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>at Assumed</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Rates of Stock</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Price</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>% of Total Options</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Appreciation for</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Granted to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Option Term<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Underlying Options</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Employees in</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Price Per</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Granted</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Share</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>5%</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>10%</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10/30/14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10/30/14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas&nbsp;W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James&nbsp;A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Potential realizable value is based upon the assumed initial
    public offering price of our common stock of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
    Potential realizable values are net of exercise price, but
    before taxes associated with exercise. Amounts representing
    hypothetical gains are those that could be achieved if options
    are exercised at the end of the option term. The assumed 5% and
    10% rates of stock price appreciation are provided in accordance
    with rules of the Commission, based on the assumed initial
    public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share and
    do not represent our estimate or projection of the future stock
    price.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Year-End Option Values</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides information about the number and
value of unexercised options to purchase common stock held on
January&nbsp;31, 2004 by the named executive officers. There was
no public market for our common stock on January&nbsp;31, 2004.
Accordingly, we have calculated the values of the unexercised
options on the basis of an assumed initial public offering price
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, less the applicable exercise price, multiplied by the
number of shares acquired upon exercise. None of the named
executive officers exercised any stock options in 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fiscal Year End Option Values</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Value of Unexercised</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Underlying Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>In-the-Money Options</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Options at Fiscal Year End</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>at Fiscal Year End<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unexercisable</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,017,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>672,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,217,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>480,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>316,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,000</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    The options were granted under our Amended and Restated
    1999&nbsp;Stock Option Plan. These options generally vest in
    equal installments over four years from the date of grant and
    are generally exercisable up to ten years from the date of
    grant. The fair value of the options granted during the year
    ended January&nbsp;31, 2004 was $34.18 using the Black-Scholes
    option-pricing model, with weighted average assumptions: no
    dividend yield; 50% expected volatility; 2.50% risk-free
    interest rate; ten year expected life and a 10% forfeiture rate.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2005 Long-Term Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to the consummation of the offering, we anticipate that
our board of directors and stockholders will adopt the 2005
Long-Term Incentive Plan to replace our Amended and Restated
1999 Stock Option Plan. The 2005 Long-Term Incentive Plan will
enable our key employees and directors to acquire and maintain
stock ownership, thereby strengthening their commitment to our
success and their desire to remain with us, focusing their
attention on managing as an equity owner and aligning their
interests with those of our stockholders. In addition, the plan
</DIV>

<P align="center" style="font-size: 10pt;">47
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
is intended to attract and retain key employees, which, together
with the key directors, we refer to collectively as eligible
persons, and to provide incentives and rewards for superior
performance that will ultimately lead to our profitable growth.
The plan will be approved by our stockholders prior to the
completion of this offering. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, options to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock remain outstanding under the option plan.
Upon adoption of the new plan, the Amended and Restated 1999
Stock Option Plan will be terminated and no additional options
will be granted under that plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The principal features of our incentive plan are described in
summary form below.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Shares Subject to the Plan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The incentive plan provides that no more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock may be issued pursuant to awards under the
incentive plan; provided that, in the aggregate, no more than
50% of the total shares of our common stock can be made the
subject of an award other than as options under the incentive
plan. These shares of our common stock will be authorized but
unissued shares in such amounts as determined by the board of
directors. However, the amount of shares of our common stock
granted to an individual in any calendar year period can not
exceed 5% of the total number of reserved shares of common
stock. Also, in any calendar year period, the maximum dollar
amount of cash or the fair market value of common stock that any
individual can receive in connection with performance units can
not exceed $2.5&nbsp;million. The number of shares of our common
stock available for awards, as well as the terms of outstanding
awards, are subject to adjustment as provided in the incentive
plan for stock splits, stock dividends, recapitalizations,
mergers, consolidations, liquidations, changes in corporate
structure and other similar events. Awards that may be granted
under the incentive plan include stock options, stock
appreciation rights (SARs), restricted shares, performance
units, performance shares and director&#146;s shares. Upon the
granting of an award to an individual, the number of shares of
common stock available shall be reduced depending on the type of
award granted, as provided in the incentive plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The shares of our common stock subject to any award that
expires, terminates or is cancelled, is settled in cash, or is
forfeited or becomes unexercisable, will again be available for
subsequent awards, except as prohibited by law.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Administration</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Either our board of directors or a committee appointed by our
board directors may administer the incentive plan. We refer to
our board of directors and any committee exercising discretion
under the incentive plan from time to time as the committee.
With respect to decisions involving an award to a reporting
person within the meaning of Rule&nbsp;16a-2 under the Exchange
Act, the committee is to consist of two or more directors who
are disinterested within the meaning of Rule&nbsp;16b-3 under
the Exchange Act. With respect to decisions involving an award
intended to satisfy the requirements of section&nbsp;162(m) of
the Internal Revenue Code, the committee is to consist solely of
two or more directors who are &#147;outside directors&#148; for
purposes of that code section. We currently expect that our
compensation committee will administer the incentive plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Subject to the terms of the incentive plan, the committee has
express authority to determine the eligible persons who will
receive awards, when such awards will be granted, the number of
shares of our common stock, units, or SARs to be covered by each
award, the relationship between awards and the terms and
conditions of awards. The committee has broad discretion to
prescribe, amend, and rescind rules relating to the incentive
plan and its administration, to interpret and construe the
incentive plan and the terms of all award agreements, and to
take all actions necessary or advisable to administer the
incentive plan. Within the limits of the incentive plan, the
committee may accelerate the vesting of any awards, allow the
exercise of unvested awards, and may modify, replace, cancel, or
renew them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The incentive plan provides that the determination of the
committee on all matters relating to awards and the incentive
plan are final. The incentive plan also releases members of the
committee from liability for good faith actions associated with
the administration of the incentive plan.
</DIV>

<P align="center" style="font-size: 10pt;">48
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Eligibility</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The committee may grant options that are intended to qualify as
incentive stock options, which we refer to as ISOs, only to
employees, and may grant all other awards to employees or any
nonemployee director. The incentive plan and the discussion
below use the term &#147;grantee&#148; to refer to an eligible
person who has received an award under the incentive plan.
Although the incentive plan provides the general provisions of
our available awards, upon the determination by the committee of
the type and amount of award to be granted to a grantee, the
eligible grantee will enter into an agreement with us specifying
the specific terms of the award to be granted. Each type of
award (i.e., stock option, restricted share, performance units
and performance shares) is governed by a separate agreement that
describes the respective terms governing such award, such as the
exercise date, term and expiration, restrictions, value, form
and timing of payment.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Stock Options</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Stock options granted under the incentive plan provide grantees
with the right to purchase shares of our common stock at a
predetermined exercise price. The committee may grant stock
options that are intended to qualify as ISOs, or stock options
that are not intended to so qualify, which we refer to as
non-ISOs. The incentive plan also provides that ISO treatment
may not be available for stock options that become first
exercisable in any calendar year to the extent the value of the
underlying shares that are the subject of the stock option
exceed $100,000, based upon the fair market value of the shares
of our common stock on the stock option grant date. Any ISO
shall be granted within ten&nbsp;years from the earlier of the
date the incentive plan is adopted by our board of directors or
the date the incentive plan is approved by our stockholders.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Stock Appreciation Rights (SARs)</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A SAR generally permits a grantee to receive, upon exercise,
shares of our common stock equal in value to the excess of
(i)&nbsp;the fair market value, on the date of exercise, of the
shares of our common stock with respect to which the SAR is
being exercised, over (ii)&nbsp;the exercise price of the SAR
for such shares. The committee may grant SARs in tandem with
stock options, or independently of them. The committee has the
discretion to grant SARs to any eligible employee or nonemployee
director.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Exercise Price for Stock Options and SARs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The exercise price of non-ISOs and SARs may not be less than
100% of the fair market value of our common stock on the grant
date of the award. The exercise price of ISOs may not be less
than 110% of the fair market value of our common stock on the
grant date of the award for owners who own more than 10% of our
shares of common stock on the grant date. For ISOs granted to
other participants and for options intended to be exempt from
Internal Revenue Code Section&nbsp;162(m) limitations, the
exercise price may not be less than 100% of the fair market
value of our common stock on the grant date. With respect to
stock options and SARs, payment of the exercise price may be
made in any of the following forms, or combination of them:
shares of unrestricted stock held by the grantee for at least
six&nbsp;months (or a lesser period as determined by the
committee) prior to the exercise of the option or SAR, based
upon its fair market value on the day preceding the date of
exercise, or through simultaneous sale through a broker of
unrestricted stock acquired on exercise. The exercise price of
any option and SAR must be determined by the committee no later
than the date of grant of such option or SAR and the exercise
price shall be paid in full at the time of the exercise.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Exercise and Term of Options and SARs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The committee will determine the times, circumstances and
conditions under which a stock option or SAR may be exercisable.
Unless provided otherwise in the applicable award agreement,
each option or SAR shall be exercisable in one or more
installments commencing on or after the first anniversary of the
grant date; provided, however, that all options or SARs shall
become fully vested and exercisable upon a change of control, as
defined in the incentive plan. To the extent exercisable in
accordance with the agreement granting them, a stock option or
SAR may be exercised in whole or in part, and from time to time
during its term, subject to earlier termination relating to a
holder&#146;s termination of employment or service as may be
determined by the committee at the time of the grant. The term
during which grantees may exercise stock options and SARs may
not exceed ten&nbsp;years from the date of grant or five years
in the case of ISOs granted to employees who, at the time of
grant, own more than 10% of our outstanding shares of common
stock; provided that, an option (excluding ISOs) may, upon the
death
</DIV>

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<DIV align="left" style="font-size: 10pt;">
of the holder of such option, be exercised for up to one year
following the date of the holder&#146;s death, even if the
period extends beyond the ten&nbsp;year limit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Options and SARs granted to nonemployee directors will be
exercisable with respect to one-third of the underlying shares
on each of the first, second and third anniversaries of the
grant date and will have a term of not more than ten&nbsp;years.
If a nonemployee director ceases to serve as a director, any
option or SAR granted to such director shall be exercisable
during its remaining term, to the extent that the option or SAR
was exercisable on the date the nonemployee director ceased to
be a director.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Restricted Shares</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the incentive plan, the committee may grant restricted
shares that are forfeitable until certain vesting requirements
are met. For restricted shares, the incentive plan provides the
committee with discretion to determine the per share purchase
price of such shares, which can not be less than the minimum
consideration (as defined in the incentive plan generally as the
par value of a share of common stock), and the terms and
conditions under which a grantee&#146;s interests in such awards
become vested. The incentive plan also provides the committee
with discretion to determine whether the payment of dividends
declared on the shares should be deferred and held by us until
restrictions on the shares lapse, whether dividends should be
reinveseted in additional shares of restricted shares subject to
certain restrictions and terms, whether interest will be
credited to the account of such holder for dividends not
reinvested and whether dividends issued on the restricted shares
should be treated as additional restricted shares. Payment of
the purchase price for shares of restricted stock shall be made
in full by the grantee before the delivery of such shares and,
in any event, no later than ten&nbsp;days after the grant date
for such shares. This payment may be made in cash or, with prior
approval of the committee and subject to certain conditions,
shares of restricted or unrestricted stock owned by the grantee.
Under the incentive plan, the committee has discretion to
provide in the award agreement that all or any portion of a
grantee&#146;s award of restricted shares shall be forfeited
(a)&nbsp;upon the grantee&#146;s termination of employment
within a specified time period, (b)&nbsp;if specified
performance goals are not satisfied by us or the grantee within
a specified time period or (c)&nbsp;if any other listed
restriction in the governing award agreement is not satisfied.
If a share of restricted stock is forfeited, then the grantee
shall be deemed to have resold such share to us at a specified
price, we shall pay the grantee the amount due as soon as
possible, but no later than 90&nbsp;days after forfeiture, and
the share of restricted stock shall cease to be outstanding.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Performance Awards</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The incentive plan authorizes the committee to grant
performance-based awards in the form of performance units and
performance shares that are &#147;performance compensation
awards&#148; that are intended to be exempt from Internal
Revenue Code Section&nbsp;162(m) limitations unless otherwise
designated in the applicable award agreement. In either case,
unless otherwise specified in the award agreement, upon the
achievement, within the specified period of time, of the
performance objectives, a performance unit shall be deemed
exercised on the date on which it first becomes exercisable.
Performance units are payable in cash or restricted stock,
except that the committee may decide to pay benefits wholly or
partly in stock delivered to the grantee or credited to a
specified brokerage account. For performance shares, unless
otherwise specified in the award agreement or by the committee,
upon the achievement within the specified period of time of the
performance objectives, grantees shall be awarded shares of
restricted stock or common stock, unless the committee decides
to pay cash in lieu of stock, based upon the number of
percentage shares specified in the award agreement multiplied by
the performance percentage achieved. The committee decides the
length of performance periods, but the periods may not be less
than one year nor more than 5&nbsp;years. Any performance shares
with respect to which the performance goals have not been
achieved at the end of the performance period shall expire.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
With respect to performance compensation awards, the incentive
plan requires that the committee specify in writing the
performance period to which the award relates, and an objective
formula by which to measure whether and the extent to which the
award is earned on the basis of the level of performance
achieved with respect to one or more performance measures. Once
established for a performance period, the performance measures
and performance formula applicable to the award may not be
amended or modified in a manner that would cause the
compensation payable under the award to fail to constitute
performance-based compensation under Internal Revenue Code
Section&nbsp;162(m).
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the incentive plan, the possible performance measures to
be used by the committee for performance compensation awards
include stock price, basic, earnings per share, operating
income, return on equity or assets, cash flow, earnings before
interest, taxes, depreciation and amortization, revenues,
overall revenues or sales growth, expense reduction or
management, market position, total income, return on net assets,
economic value added, stockholder value added, cash flow return
on investment, net operating profit, net operating profit after
tax, return on capital and return on invested capital. Each
measure will be, to the extent applicable, determined in
accordance with generally accepted accounting principles as
consistently applied by us, or such other standard applied by
the committee and, if so determined by the committee, and in the
case of a performance compensation award, to the extent
permitted under Internal Revenue Code Section&nbsp;162(m),
adjusted to reflect the impact of specified corporate
transactions, special charges, foreign currency effects,
accounting or tax law changes and other extraordinary or
nonrecurring events. Performance measures may vary from
performance period to performance period, and from grantee to
grantee, and may be established on a stand-alone basis, in
tandem or in the alternative.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Tandem Awards</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The committee may grant and identify any award with another
award granted under the incentive plan, on terms and conditions
set forth by the committee.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Income Tax Withholding</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a condition for the issuance of shares of our common stock
pursuant to awards, the incentive plan requires satisfaction of
any applicable federal, state, local, or foreign withholding tax
obligations that may arise in connection with the award or the
issuance of shares of our common stock.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Transferability</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Unless set forth in the agreement evidencing the award, awards
(other than an award of restricted stock) may not be assigned or
transferred except by will or the laws of descent and
distribution or, in the case of an option other than an ISO,
pursuant to a domestic relations order as defined under
Rule&nbsp;16a-12 under the Exchange Act. An option may be
exercised during the lifetime of the grantee only by that
grantee or his or her guardian, legal representatives or, except
as would cause an ISO to lose such status, by a bankruptcy
trustee. Notwithstanding the foregoing, the committee may set
forth in the agreement evidencing the award (other than an ISO)
that the award may be transferred to an immediate family member,
or related trust or related partnership. The terms of an award
shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the grantee.
Each share of restricted stock shall be non-transferable until
such share becomes non-forfeitable.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Certain Corporate Transactions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
With respect to any award which relates to stock, in the event
of our liquidation or dissolution or merger or consolidation
with another entity, the incentive plan and awards issued
thereunder shall continue in effect in accordance with their
terms, except that following any of these events either
(a)&nbsp;each outstanding award shall be treated as provided for
in the agreement entered into in connection with the event or
(b)&nbsp;if not so provided in the agreement entered into in
connection with the event, a grantee shall be entitled to
receive with respect to each share of stock subject to the
outstanding award, upon the vesting, payment or exercise of the
award the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a share of
stock was entitled to receive in connection with that certain
event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The applicable award agreement pertaining to each award shall
set forth the terms and conditions applicable to such award upon
a termination of employment of any grantee by us, which, except
for awards granted to nonemployee directors, shall be as the
committee may, in its discretion, determine at the time the
award is granted or thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Term of Plan; Amendments and
Termination</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The term of the incentive plan is ten years
from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, the date it was approved by our board of directors and
stockholders, or at such earlier time as our board of directors
may determine. Our board of directors may from time to time,
amend or modify the incentive plan without the approval of our
stockholders, unless stockholder approval is required
(a)&nbsp;to retain ISO treatment under the Internal Revenue
Code, (b)&nbsp;to permit
</DIV>

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<DIV align="left" style="font-size: 10pt;">
transactions in stock under the incentive plan to be exempt from
liability under Section&nbsp;16(b) of the Exchange Act or
(c)&nbsp;under the listing requirements of any securities
exchange on which any of our equity securities are listed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Governing Law</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Except where preempted by federal law, the law of the State of
Georgia shall be controlling in all matters relating to the
incentive plan, without giving effect to the conflicts of law
principles thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Set forth below are summaries of all of our employment
agreements and arrangements with our named executive officers.
The following summaries does not contain all of the terms of the
agreements they summarize, and we refer you to the agreements,
which are included as exhibits to the registration statement of
which this prospectus forms a part, for a complete understanding
of the terms thereof. See &#147;Where You Can Find More
Information.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Letter Agreement with R. Edward Anderson</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In November 2001, we entered into a letter agreement with
Mr.&nbsp;Anderson, pursuant to which Mr.&nbsp;Anderson was
appointed our Chief Executive Officer and member of our board of
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The letter agreement provides that Mr.&nbsp;Anderson will
receive an annual base salary of $300,000 (not including
perquisites) and will be eligible to earn a bonus of up to 50%
of his base salary. Mr.&nbsp;Anderson&#146;s bonus is contingent
upon our obtaining certain financial goals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At the time he was hired, we granted Mr.&nbsp;Anderson options
to purchase shares of our common stock. These options vest in
equal amounts over four years, subject to accelerated vesting in
the event that we reach targeted financial goals. In the event
that Mr.&nbsp;Anderson is terminated for a reason other than
&#147;cause&#148; (which term is not defined in the agreement),
we may repurchase any or all of his vested options at &#147;fair
market value&#148; as determined by our board of directors. In
the event that Mr.&nbsp;Anderson is terminated for
&#147;cause&#148;, any and all of his vested options will be
cancelled. The agreement does not have a definite term, does not
contain a noncompetition provision and does not provide for the
treatment of unvested options held by Mr.&nbsp;Anderson at the
time of his termination. The agreement provides that all of
Mr.&nbsp;Anderson&#146;s unvested options will vest upon a
&#147;change of control&#148; (which term is not defined in the
agreement).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Severance</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The letter agreement provides that in the event that
Mr.&nbsp;Anderson is terminated for any reason other than for
&#147;cause,&#148; he is entitled to severance pay of $150,000
to be paid in arrears over a period of six months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Amended Employment and Non-Interference Agreement with
George A. Bellino</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Term and Termination</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In April 1999, we entered into an employment and
non-interference agreement with Mr.&nbsp;Bellino, pursuant to
which Mr.&nbsp;Bellino was appointed our Chief Executive Officer
and President for a period of two years. In December 2001, we
amended certain terms of this employment and non-interference
agreement, one of which was to change Mr.&nbsp;Bellino&#146;s
position to Chief Merchandising Officer and President.
Mr.&nbsp;Bellino&#146;s amended agreement has a one year term
and is automatically renewed for subsequent twelve-month periods
subject to 90&nbsp;days prior notice by either party.
Mr.&nbsp;Bellino&#146;s amended agreement provides that his
employment may be terminated: (a)&nbsp;upon his death or
disability, (b)&nbsp;by us for &#147;cause&#148; (described
below), (d)&nbsp;by us for any reason other than those set forth
in (a)&nbsp;or (b)&nbsp;or no reason, which the agreement
defines as &#147;no reason&#148;, (e)&nbsp;by Mr.&nbsp;Bellino
at will or (f)&nbsp;by Mr.&nbsp;Bellino if we do not satisfy our
obligations under the agreement or materially reduce
Mr.&nbsp;Bellino&#146;s duties or change his title without
consent, which the agreement defines as &#147;reason.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&#147;Cause,&#148; as defined in the agreement includes:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    conviction or guilty plea to a serious felony, a crime of moral
    turpitude or other specified financial offenses,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    a board determination that Mr.&nbsp;Bellino has committed a
    crime of moral turpitude,</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    a board determination that Mr.&nbsp;Bellino knowingly breach his
    fiduciary obligations to us, subject to notice and a cure period,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Bellino&#146;s failure to discharge his duties under
    the agreement or substance abuse which materially interferes
    with the discharge of his duties, subject to notice and a cure
    period,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Bellino&#146;s material violation of any
    non-competition or confidentiality agreement with us,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Bellino&#146;s material violation of any other personal
    obligations under his agreement, subject to notice and a cure
    period,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any other violation of law by Mr.&nbsp;Bellino that could have a
    material adverse effect on us, subject to notice and a cure
    period.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Bellino&#146;s agreement provides that if he is
terminated for any reason, he is entitled to receive all accrued
and unpaid salary and benefits, reimbursement of expenses and
continued medical coverage as legally required. In addition, in
the event that Mr.&nbsp;Bellino is terminated (a)&nbsp;upon his
death or disability, (b)&nbsp;by us for &#147;no reason&#148; or
(c)&nbsp;by him with &#147;reason,&#148; then Mr.&nbsp;Bellino
is entitled to receive payments, payable over a twelve-month
period, equal to twelve&nbsp;months of his base salary on his
termination date, subject to reduction for any compensation from
other employment during such twelve-month period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the agreement, Mr.&nbsp;Bellino receives an annual base
salary of $215,000 (excluding perquisites), subject to review by
the board, and is eligible for a bonus based on our performance.
As provided in the agreement, Mr.&nbsp;Bellino&#146;s bonus may
be an amount equal to 35% of his base salary if we reach
targeted financial goals. The agreement also provides for
reimbursement of Mr.&nbsp;Bellino&#146;s employment related
expenses by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Interference and
Non-Solicitation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the term of his agreement and for a twelve-month period
after his termination date, Mr.&nbsp;Bellino has agreed not to,
without our consent:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    own, manage, operate, control, invest or acquire an interest in,
    or otherwise engage or participate in, whether as a proprietor,
    partner, stockholder, lender, director, officer, employee, joint
    venturer, investor, lessor, agent, representative or other
    participant, in any business which competes with us in any state
    where we operate.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Recruit, solicit or otherwise induce or influence any
    proprietor, partner, stockholder, lender, director, officer,
    employee, sales agent, joint venturer, investor, lessor,
    customer, agent, representative or any other person with a
    business relationship with us to discontinue, reduce or modify
    their relationship with us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Limitation of Liability and Indemnification of Officers and
Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our second amended and restated
certificate of incorporation and our amended and restated bylaws
that limit or eliminate the personal liability of our directors
for a breach of their fiduciary duty of care as a director. The
duty of care generally requires that, when acting on behalf of
the corporation, directors exercise an informed business
judgment based on all material information reasonably available
to them. Consequently, a director will not be personally liable
to us or our stockholders for monetary damages or breach of
fiduciary duty as a director, except for liability for:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the full extent permitted under Delaware law.
</DIV>

<P align="center" style="font-size: 10pt;">53

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As permitted by the Delaware General Corporation Law, our
amended and restated bylaws provide that:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the rights provided in our bylaws are not exclusive.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employees or agents in
which indemnification by us is sought, nor are we aware of any
threatened litigation or proceeding that may result in a claim
for indemnification.
</DIV>

<P align="center" style="font-size: 10pt;">54
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<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

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<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Related Party Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management Consulting Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a party to an Amended and Restated Management Consulting
Agreement, or the consulting agreement, effective as of
February&nbsp;1, 2004 with Hampshire Management Company LLC, or
the consultant, which is an affiliate of the selling
stockholders, pursuant to which it provides us with certain
consulting services related to, but not limited to, our
financial affairs, relationships with our lenders, stockholders
and other third-party associates or affiliates, and the
expansion of our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Term and Termination</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consulting agreement has a four year term and is subject to
automatic one year renewals each February&nbsp;1, subject to
60&nbsp;days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90&nbsp;days prior notice in the event of
(a)&nbsp;a sale of all or substantially all of our common stock
or assets, (b)&nbsp;a merger or consolidation in which we are
not the surviving corporation or (c)&nbsp;a registered public
offering of our common stock, which includes this offering. It
is expected that both parties to the consulting agreement will
waive any notice requirement for termination upon consummation
of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the consulting agreement, we pay the consultant an annual
management fee of $240,000, payable in monthly installments. We
have also agreed to indemnify the consultant, its affiliates and
associates, and each of the respective owners, partners,
officers, directors, members, employees and agents of each, from
and against any loss, liability, damage, claim or expenses
(including the fees and expenses of counsel) relating to their
performance under the consulting agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the consummation of this offering, the parties shall
terminate the consulting agreement and we will pay the
consultant a termination fee of $1.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stockholders Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are party to a Stockholders Agreement, dated as of
April&nbsp;13, 1999, or the stockholders agreement, with
Hampshire Equity Partners&nbsp;II, L.P., George Bellino and
certain management stockholders. Pursuant to the stockholders
agreement:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="97%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    four members of our board of directors may be designated by the
    owners of the majority of the voting stock beneficially owned by
    Hampshire Equity Partners and its affiliates,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our stockholders have agreed generally not to transfer their
    shares,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our management stockholders have been granted tag-along rights
    in the event of the sale of more than 50% of our common stock,</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our management stockholders have agreed to cooperate in any sale
    of the company by Hampshire Equity Partners, and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we have agreed to register shares of our common stock held by
    the stockholder parties in the event that we register additional
    shares of our common stock under the Securities Act, other than
    on a registration statement on Form&nbsp;S-4 or S-8, or in
    connection with an exchange offer, merger, acquisition, dividend
    reinvestment plan, stock option or other employee benefit plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to these rights under the stockholders agreement,
Hampshire Equity Partners is entitled to include its shares of
common stock in this registration statement, subject to the
ability of the underwriters to limit the number of shares
included in this offering. We expect to terminate the
stockholders agreement upon consummation of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Registration Rights Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to enter into a new registration rights agreement with
Hampshire Equity Partners, who will
hold &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our shares of common stock on a fully diluted basis following
the consummation of this offering. Pursuant to the terms and
provisions of the new registration rights agreement, Hampshire
Equity Partners will have the right from time to time, subject
to certain
</DIV>

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<DIV align="left" style="font-size: 10pt;">
restrictions, to cause us to register its shares of common stock
for sale under the Securities Act on Form&nbsp;S-1 or, if
available, on Form&nbsp;S-2, Form&nbsp;S-3 or any similar
short-form registration statement. In addition, if at any time
we register additional shares of common stock, Hampshire Equity
Partners will be entitled to include its shares of common stock
in the registration statement relating to that offering. If our
subsequent registration is made pursuant to an underwritten
offering, Hampshire Equity Partners must sell its registrable
securities to the underwriters selected by us if they choose to
participate in that registration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Nominating Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this offering, we will enter into a
nominating agreement with Hampshire Equity Partners pursuant to
which we, acting through our nominating and corporate governance
committee, will agree, subject to the requirements of our
directors&#146; fiduciary duties, that (i)&nbsp;Hampshire Equity
Partners will be entitled to designate two directors to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate at least 40% of
the shares of our common stock which it owned immediately prior
to the consummation of this offering or (ii)&nbsp;Hampshire
Equity Partners will be entitled to designate one director to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate less than 40%
and at least 15% of the shares of our common stock which it
owned immediately prior to the consummation of this offering. If
at any time Hampshire Equity Partners owns less than 15%, it
will not have the right to nominate any directors for election
to our board of directors.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "Principal and Selling Stockholders" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Principal and Selling Stockholders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth information known to us with
respect to the beneficial ownership of our common stock as of
October&nbsp;30, 2004, and as adjusted to reflect the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock by selling stockholders, by the following
persons:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    each stockholder known by us to own beneficially more than 5% of
    our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    each of our directors and named executive officers;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    all directors and executive officers as a group;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    each of the selling stockholders.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This table lists applicable percentage ownership based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding as of October&nbsp;30, 2004
(including options exercisable within 60&nbsp;days of
October&nbsp;30, 2004), and also lists applicable percentage
ownership based on shares of common stock outstanding after
completion of this offering. The information in the table is not
adjusted for
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-for-one stock
split of our common stock, which will occur simultaneously with
the completion of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have determined beneficial ownership in the table in
accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, we have
deemed shares of common stock subject to options held by that
person that are currently exercisable or will become exercisable
within 60&nbsp;days of October&nbsp;30, 2004 to be outstanding,
but we have not deemed these shares to be outstanding for
computing the percentage ownership of any other person. To our
knowledge, except as set forth in the footnotes below, each
stockholder identified in the table possesses sole voting and
investment power with respect to all shares of common stock
shown as beneficially owned by that stockholder. Unless
otherwise indicated, the address of all listed stockholders is
c/o&nbsp;Citi Trends, Inc., 102 Fahm Street, Savannah, Georgia
31401.
</DIV>

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</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percentage of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Owned Prior</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares Being</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>After the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Before the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding After</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>to the Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offered</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>the Offering</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <B>Directors and Named Executive Officers:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James&nbsp;A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tracy L. Noll</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John S. Lupo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gregory P. Flynn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Laurens Goff</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Directors and executive officers as a group (eight persons)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>5% Stockholder:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hampshire Equity Partners II, L.P.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">57

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "Description of Capital Stock" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Description of Capital Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the completion of this offering, we will be authorized to
issue &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, $0.01&nbsp;par value per share, and shares
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;undesignated
preferred stock, $0.01&nbsp;par value per share. The following
description of our capital stock does not purport to be complete
and is subject to, and qualified in its entirety by, our second
amended and restated certificate of incorporation and amended
and restated by-laws, which we have included as exhibits to the
registration statement of which this prospectus forms a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Dividend Rights.</I>&nbsp;Subject to preferences that may
apply to shares of preferred stock outstanding at the time, the
holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available at the time
and in the amounts as our board of directors may from time to
time determine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Voting Rights.</I>&nbsp;Each common stockholder is entitled
to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the
election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for
election.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>No Preemptive or Similar Rights.</I>&nbsp;No holder of our
common stock is entitled to preemptive rights to subscribe for
any shares of capital stock and our common stock is not subject
to conversion or redemption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Right to Receive Liquidation Distributions.</I>&nbsp;Upon our
liquidation, dissolution or winding-up, the assets legally
available for distribution to our stockholders are distributable
ratably among the holders of our common stock and any
participating preferred stock outstanding at that time, after
payment of liquidation preferences, if any, on any outstanding
preferred stock and payment of other claims of creditors. Each
outstanding share of common stock is, and all shares of common
stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Preferred Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the closing of this offering, no shares of, and no
securities convertible into, our preferred stock will be
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon the closing of this offering, under our second amended and
restated certificate of incorporation our board of directors
will be authorized, subject to the limits imposed by the
Delaware General Corporation Law, but without further action by
our stockholders to issue shares of preferred stock in one or
more series, to establish from time to time the number of shares
to be included in each series, to fix the rights, preferences
and privileges of the shares of each wholly unissued series and
any of its qualifications, limitations and restrictions. Our
board of directors can also increase or decrease the number of
any series, but not below the number of shares of that series
then outstanding, without any further vote or action by our
stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors may authorize the issuance of preferred
stock with voting or conversion rights that adversely affect the
voting power or other rights of our common stockholders. The
issuance of preferred stock, while providing flexibility in
connection with possible acquisitions, financings and other
corporate purposes, could have the effect of delaying, deferring
or preventing our change in control and may cause the market
price of our common stock to decline or impair the voting and
other rights of the holders of our common stock. We have no
current plans to issue any shares of preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Anti-Takeover Effects of Various Provisions of the Delaware
General Corporation Law and Our Second Amended and Restated
Certificate of Incorporation and Our Amended and Restated
By-laws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Provisions of the Delaware General Corporation Law, our second
amended and restated certificate of incorporation and our
amended and restated by-laws contain provisions that may have
some anti-takeover effects and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that
might result in a premium over the market price for the shares
held by stockholders.
</DIV>

<P align="center" style="font-size: 10pt;">58

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delaware Anti-Takeover
Statute</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are subject to Section&nbsp;203 of the Delaware General
Corporation Law. Subject to specific exceptions,
Section&nbsp;203 prohibits a publicly held Delaware corporation
from engaging in a &#147;business combination&#148; with an
&#147;interested stockholder&#148; for a period of three years
after the time the person became an interested stockholder,
unless:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the business combination, or the transaction in which the
    stockholder became an interested stockholder, is approved by our
    board of directors prior to the time the interested stockholder
    attained that status;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    upon consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding those shares owned by persons who are directors and
    also officers and by employee stock plans in which employee
    participants do not have the right to determine confidentially
    whether shares held subject to the plan will be tendered in a
    tender or exchange offer;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    at or after the time a person became an interested stockholder,
    the business combination is approved by our board of directors
    and authorized at an annual or special meeting of stockholders
    by the affirmative vote of at least two-thirds of the
    outstanding voting stock that is not owned by the interested
    stockholder.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&#147;Business combinations&#148; include mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder. Subject to various exceptions, in
general an &#147;interested stockholder&#148; is a person who,
together with his or her affiliates and associates, owns, or
within three years did own, 15% or more of the shares of the
corporation&#146;s outstanding voting stock. These restrictions
could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, provisions of our second amended and restated
certificate of incorporation and amended and restated by-laws,
which are summarized in the following paragraphs, may have an
anti-takeover effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Classified Board of Directors.</I>&nbsp;Our amended and
restated charter will divide our board into three classes having
staggered terms, with one of such classes being elected each
year for a new three-year term. Class&nbsp;I directors will have
an initial term expiring in 2006, Class&nbsp;II directors will
have an initial term expiring in 2007 and Class&nbsp;III
directors will have an initial term expiring in 2008.
Class&nbsp;I will be comprised of
Mr.&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.
Class&nbsp;II will be comprised of Messrs.&nbsp;Noll and Lupo.
Class&nbsp;III will be comprised of Messrs.&nbsp;Flynn and
Anderson.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Quorum Requirements; Removal of Directors.</I>&nbsp;Our
second amended and restated certificate of incorporation
provides for a minimum quorum of one-third in voting power of
the outstanding shares of our capital stock entitled to vote,
except that a minimum quorum of a majority in voting power of
the outstanding shares of our capital stock entitled to vote is
necessary to hold a vote for any director in a contested
election, the removal of a director or the filling of a vacancy
on our board of directors. Directors may be removed only for
cause by the affirmative vote of at least a majority in voting
power of the outstanding shares of our capital stock entitled to
vote generally in the election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>No Cumulative Voting.</I>&nbsp;The Delaware General
Corporation Law provides that stockholders are not entitled to
cumulate votes in the election of directors unless provided for
otherwise in a company&#146;s certificate of incorporation. Our
second amended and restated certificate of incorporation does
not grant our stockholder cumulative voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>No Stockholder Action by Written Consent; Calling of Special
Meeting of Stockholders.</I>&nbsp;Our second amended and
restated certificate of incorporation generally prohibits
stockholder action by written consent. It and our amended and
restated by-laws also provide that special meetings of our
stockholders may be called only by (1)&nbsp;the chairman of our
board of directors or (2)&nbsp;our board of directors pursuant
to a resolution approved by our board of directors or
(3)&nbsp;our board of directors upon a request by holders of at
least 50% in voting power of all the outstanding shares entitled
to vote at that meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Advance Notice Requirements for Stockholder Proposals and
Director Nominations.</I>&nbsp;Our amended and restated by-laws
provide that stockholders seeking to bring business before or to
nominate candidates for election as directors at an annual
meeting of stockholders must provide timely notice of their
proposal in writing to the corporate
</DIV>

<P align="center" style="font-size: 10pt;">59

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<DIV align="left" style="font-size: 10pt;">
secretary. To be timely, a stockholder&#146;s notice must be
delivered or mailed and received at our principal executive
offices not less than 90 nor more than 120&nbsp;days in advance
of the anniversary date of the immediately preceding annual
meeting of stockholders. Our amended and restated by-laws also
specify requirements as to the form and content of a
stockholder&#146;s notice. These provisions may impede
stockholders&#146; ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders. Stockholder nominations for the
election of directors at a special meeting must be received by
our corporate secretary by the later of ten days following the
day on which notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting
was made or 90&nbsp;days prior to the date that meeting is
proposed to be held and not more than 120&nbsp;days prior to
such meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Limitations on Liability and Indemnification of Officers and
Directors.</I> The Delaware General Corporation Law authorizes
corporations to limit or eliminate the personal liability of
directors to corporations and their stockholders for monetary
damages for breaches of directors&#146; fiduciary duties as
directors. Our second amended and restated certificate of
incorporation includes a provision that eliminates the personal
liability of directors for monetary damages for actions taken as
a director, except for liability:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    for breach of duty of loyalty;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    under Section&nbsp;174 of the Delaware General Corporation Law
    (unlawful dividends or stock repurchases);&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    for transactions from which the director derived improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our amended and restated by-laws provide that we must indemnify
and advance expenses to our directors and officers to the
fullest extent authorized by the Delaware General Corporation
Law. We are also expressly authorized to, and do, carry
directors&#146; and officers&#146; insurance for our directors,
officers and certain employees for some liabilities. We believe
that these indemnification provisions and insurance are useful
to attract and retain qualified directors and executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The limitation of liability and indemnification provisions in
our amended and restated by-laws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent that, in a class action or direct suit, we pay the costs
of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Authorized but Unissued Shares.</I>&nbsp;Our authorized but
unissued shares of common stock and preferred stock will be
available for future issuance without your approval. We may use
additional shares for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred
stock could render more difficult or discourage an attempt to
obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Supermajority Provisions.</I>&nbsp;The Delaware General
Corporation Law provides generally that the affirmative vote of
a majority in voting power of the outstanding shares entitled to
vote is required to amend a corporation&#146;s certificate of
incorporation, unless the certificate of incorporation requires
a greater percentage. Our second amended and restated
certificate of incorporation provides that the following
provisions in the second amended and restated certificate of
incorporation may be amended only by a vote of two-thirds or
more in voting power of all the outstanding shares of our
capital stock entitled to vote:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the prohibition on stockholder action by written consent;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the ability to call a special meeting of stockholders being
    vested solely in (1)&nbsp;the chairman of our board of
    directors, (2)&nbsp;our board of directors pursuant to a
    resolution adopted by our board of directors and (3)&nbsp;our
    board of directors upon a request by holders of at least 50% in
    voting power of all the outstanding shares entitled to vote at
    that meeting;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions relating to the classification of our board of
    directors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions relating to the size of our board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions relating to the quorum requirements for
    stockholder action and the removal of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the limitation on the liability of our directors to us and our
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions granting authority to our board of directors to
    amend or repeal our by-laws without a stockholder vote, as
    described in more detail in the next succeeding
    paragraph;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the supermajority voting requirements listed above.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our second amended and restated certificate of incorporation
grants our board of directors the authority to amend and repeal
our by-laws without a stockholder vote in any manner not
inconsistent with the laws of the State of Delaware or our
second amended and restated certificate of incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, our second amended and restated certificate of
incorporation and our amended and restated by-laws provide that
the same provisions listed above and found in our amended and
restated by-laws may be amended by stockholders representing no
less than two-thirds of the voting power of all the outstanding
shares of our capital stock entitled to vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to list our common stock on the Nasdaq National Market
under the trading symbol &#147;CTRN.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transfer Agent and Registrar</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon consummation of this offering, the transfer agent and
registrar for the common stock will be American Stock Transfer
and Trust Company. The transfer agent&#146;s address is
59&nbsp;Maiden Lane, New York, New York 10038.
</DIV>

<P align="center" style="font-size: 10pt;">61

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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "Shares Eligible for Future Sale" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Shares Eligible for Future Sale</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Immediately prior to this offering, there has been no public
market for our common stock. Future sales of substantial amounts
of common stock in the public market could adversely affect
prevailing market prices. Furthermore, since only a limited
number of shares will be available for sale shortly after the
offering because of contractual and legal restrictions on resale
described below, sales of substantial amounts of common stock in
the public market after the restrictions lapse could adversely
affect the prevailing market price and our ability to raise
equity capital in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be outstanding, assuming no exercise of
currently outstanding and exercisable options. Of these shares,
the shares sold in this offering, plus any additional shares
sold upon exercise of the underwriters&#146; over-allotment
option, will be freely transferable without restriction under
the Securities Act of 1933, as amended, unless they are held by
our &#147;affiliates&#148; as that term is used under the
Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock held by existing stockholders are restricted
shares. Restricted shares may be sold in the public market only
if registered or if they qualify for an exemption from
registration under Rules&nbsp;144 or 701 promulgated under the
Securities Act of 1933, as amended, which rules are summarized
below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, under Rule&nbsp;144 as in effect on the date of this
prospectus, beginning 90&nbsp;days after the effective date of
this offering, our affiliates, or a person (or persons whose
shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule&nbsp;144) for at least one year,
are entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the
then outstanding shares of common stock or the average weekly
trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales under Rule&nbsp;144 are subject to requirements relating
to the manner of sale, notice and the availability of current
public information about us. A person (or persons whose shares
are aggregated) who was not our affiliate at any time during the
90&nbsp;days immediately preceding the sale and who has
beneficially owned restricted shares for at least two years is
entitled to sell such shares under Rule&nbsp;144(k) without
regard to the limitations described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our employees, officers, directors or consultants who purchased
or were awarded shares or options to purchase shares under a
written compensatory plan or contract are entitled to rely on
the resale provisions of Rule&nbsp;701 under the Securities Act
of 1933, as amended, which permits affiliates and non-affiliates
to sell their Rule&nbsp;701&nbsp;shares without having to comply
with the Rule&nbsp;144 holding period restrictions, in each case
commencing 90&nbsp;days after the effective date of this
offering. In addition, non-affiliates may sell
Rule&nbsp;701&nbsp;shares without complying with the public
information, volume and notice provisions of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, we expect to file a registration statement on
Form&nbsp;S-8 registering shares of common stock subject to
outstanding stock options or reserved for issuance under our
Amended and Restated 1999 Stock Option Plan and 2005 Long-Term
Incentive Plan. We expect to file this registration statement as
soon as practicable after the consummation of this offering.
Shares registered under this registration statement will,
subject to Rule&nbsp;144 volume limitations applicable to
affiliates, be available for sale in the open market, unless
such shares are subject to vesting restrictions with us or the
lock-up agreements described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lock-Up Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each of our officers and directors and substantially all other
stockholders have agreed to a 180-day &#147;lock up&#148; with
respect
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and other of our securities that they
beneficially own, including securities that are convertible into
shares of common stock and securities that are exchangeable or
exercisable for shares of common stock. We have also agreed to
such a restriction. This means that, for a period of
180&nbsp;days following the date of this prospectus (the
&#147;lock-up period&#148;), subject to specified exceptions, we
and such persons may not, directly or indirectly, offer, sell,
pledge or otherwise dispose of these securities without the
prior written consent of CIBC World Markets Corp. In addition,
the lock-up period may be extended in the event that we release
earnings or announce certain material news within specified time
periods prior to the termination of the lock-up period. The
restrictions in the lock-up agreements will not prevent such
persons from transferring their
</DIV>

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<DIV align="left" style="font-size: 10pt;">
shares or other securities as gifts, to members of their
immediate family or to a trust for the benefit of themselves of
member of their family or by will or intestacy, provided, in
each case, that the transferee of such shares of other
securities agrees to be locked-up to the same extent as the
person from whom they received the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Registration Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the registration rights agreement to be executed
upon consummation of this offering, Hampshire Equity Partners
has the right to demand registration of its shares and to
include its shares in registration statements that we file after
the consummation of this offering, subject to certain
exceptions. See &#147;Related Party
Transactions&#151;Registration Rights Agreement.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">63
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<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

<!-- link1 "Underwriting" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We and the selling stockholders will enter into an underwriting
agreement with the underwriters named below. CIBC World Markets
Corp., Wachovia Capital Markets, LLC, SG Cowen&nbsp;&#38; Co.,
LLC and Piper Jaffray&nbsp;&#38; Co. are acting as the
representatives of the underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriting agreement provides for the purchase of a
specific number of shares of common stock by each of the
underwriters. The underwriters&#146; obligations are several,
which means that each underwriter is required to purchase a
specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject
to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of
shares of common stock set forth opposite its name below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of Shares</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CIBC World Markets Corp.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Piper Jaffray&nbsp;&#38; Co.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SG Cowen&nbsp;&#38; Co.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wachovia Capital Markets, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters have agreed to purchase all of the shares
offered by this prospectus (other than those covered by the
over-allotment option described below) if any are purchased.
Under the underwriting agreement, if an underwriter defaults in
its commitment to purchase shares, the commitments of
non-defaulting underwriters may be increased or the underwriting
agreement may be terminated, depending on the circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The shares should be ready for delivery on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 against payment in immediately available funds. The
underwriters are offering the shares subject to various
conditions and may reject all or part of any order. The
representatives have advised us and the selling stockholders
that the underwriters propose to offer the shares directly to
the public at the initial public offering price that appears on
the cover page of this prospectus. In addition, the
representatives may offer some of the shares to other securities
dealers at such price less a concession of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The underwriters may also allow, and such dealers may
reallow, a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to other dealers. After the shares are released for sale
to the public, the representatives may change the offering price
and other selling terms at various times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We and the selling stockholders have granted the underwriters an
over-allotment option. The underwriters may purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
these additional shares from us and up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
these additional shares from the selling stockholders. This
option, which is exercisable for up to 30&nbsp;days after the
date of this prospectus, permits the underwriters to purchase a
maximum
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares to cover over-allotments. If the underwriters exercise
all or part of this option, they will purchase shares covered by
the option at the initial public offering price that appears on
the cover page of this prospectus, less the underwriting
discount. If this option is exercised in full, the total price
to the public will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
the total proceeds to us will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
the total proceeds to the selling stockholders will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The underwriters have severally agreed that, to the extent the
over-allotment option is exercised, they will each purchase a
number of additional shares proportionate to the
underwriter&#146;s initial amount reflected in the foregoing
table.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides information regarding the amount of
the discount to be paid to the underwriters by us and the
selling stockholders:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total Without</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total With Full</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise of Over-</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise of Over-</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Per Share</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Allotment Option</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Allotment Option</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Citi Trends, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling Stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that the total expenses of the offering for us and
the selling stockholders, excluding the underwriting discount,
will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We have agreed to bear the expenses (other than underwriting
discounts and commissions) of the selling stockholders in
connection with this offering.
</DIV>

<P align="center" style="font-size: 10pt;">64

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each of our officers and directors and substantially all other
stockholders have agreed to a 180-day &#147;lock up&#148; with
respect
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and other of our securities that they
beneficially own, including securities that are convertible into
shares of common stock and securities that are exchangeable or
exercisable for shares of common stock. We have also agreed to
such a restriction. This means that for a period of
180&nbsp;days following the date of this prospectus, (the
&#147;lock-up period&#148;) subject to specified exceptions, we
and such persons may not, directly or indirectly, offer, sell,
pledge or otherwise dispose of these securities without the
prior written consent of CIBC World Markets Corp. In addition,
the lock-up period may be extended in the event that we release
earnings or announce certain material news within specified time
periods prior to the termination of the lock-up period. The
restrictions in the lock-up agreements will not prevent such
persons from transferring their shares or other securities as
gifts, to members of their immediate family or to a trust for
the benefit of themselves of member of their family or by will
or intestacy, provided in each case, that the transferee of such
shares of other securities agree to be locked-up to the same
extent as the person from whom they received the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have agreed not to issue, sell or register (other than
pursuant to a registration statement on Form&nbsp;S-8), or
otherwise dispose of, directly or indirectly, any of our equity
securities (or any securities convertible into, exercisable for
or exchangeable for our equity securities), except for this
offering and the issuance of equity securities pursuant to our
Amended and Restated 1999 Stock Option Plan or our 2005
Long-Term Incentive Plan, during the lock-up period without the
consent of CIBC World Markets Corp. In the event that during the
lock-up period, (A)&nbsp;any shares are issued pursuant to our
Amended and Restated 1999 Stock Option Plan or our 2005 Long
Term Incentive Plan that are exercisable during the lock-up
period or (B)&nbsp;any registration is effected pursuant to a
registration statement on Form&nbsp;S-8 relating to shares that
are exercisable during the lock-up period, we have agreed to
obtain the written agreement of such grantee or purchaser or
holder of such registered securities that, during the lock-up
period, such person will not, without the prior written consent
of CIBC World Markets Corp., offer for sale, sell, distribute,
grant any option for the sale of, or otherwise dispose of,
directly or indirectly, or exercise any registration rights with
respect to, any shares of our common stock (or any securities
convertible into, exercisable for, or exchangeable for any
shares of our common stock) owned by such person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The representatives have informed us that it does not expect
discretionary sales by the underwriters to exceed
five&nbsp;percent of the shares offered by this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There is no established trading market for the shares. The
offering price for the shares has been determined by us, the
selling stockholders and the representative, based on the
following factors:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the history and prospects for the industry in which we compete;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our past and present operations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our historical results of operations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our prospects for future business and earning potential;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our management;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the general condition of the securities markets at the time of
    this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the recent market prices of securities of generally comparable
    companies;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the market capitalization and stages of development of other
    companies which we and the representative believe to be
    comparable to us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Rules of the Commission may limit the ability of the
underwriters to bid for or purchase shares before the
distribution of the shares is completed. However, the
underwriters may engage in the following activities in
accordance with the rules:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Stabilizing transactions&#151;The representative may make bids
    or purchases for the purpose of pegging, fixing or maintaining
    the price of the shares, so long as stabilizing bids do not
    exceed a specified maximum.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Over-allotments and syndicate covering transactions&#151;The
    underwriters may sell more shares of our common stock in
    connection with this offering than the number of shares than
    they have committed to purchase. This over-allotment creates a
    short position for the underwriters. This short sales position
    may involve either</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">65

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    &#147;covered&#148; short sales or &#147;naked&#148; short
    sales. Covered short sales are short sales made in an amount not
    greater than the underwriters&#146; over-allotment option to
    purchase additional shares in this offering described above. The
    underwriters may close out any covered short position either by
    exercising their over-allotment option or by purchasing shares
    in the open market. To determine how they will close the covered
    short position, the underwriters will consider, among other
    things, the price of shares available for purchase in the open
    market, as compared to the price at which they may purchase
    shares through the over-allotment option. Naked short sales are
    short sales in excess of the over-allotment option. The
    underwriters must close out any naked short position by
    purchasing shares in the open market. A naked short position is
    more likely to be created if the underwriters are concerned
    that, in the open market after pricing, there may be downward
    pressure on the price of the shares that could adversely affect
    investors who purchase shares in this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Penalty bids&#151;If the representative purchases shares in the
    open market in a stabilizing transaction or syndicate covering
    transaction, they may reclaim a selling concession from the
    underwriters and selling group members who sold those shares as
    part of this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Similar to other purchase transactions, the underwriters&#146;
purchases to cover the syndicate short sales or to stabilize the
market price of our common stock may have the effect of raising
or maintaining the market price of our common stock or
preventing or mitigating a decline in the market price of our
common stock. As a result, the price of the shares of our common
stock may be higher than the price that might otherwise exist in
the open market. The imposition of a penalty bid might also have
an effect on the price of the shares if it discourages resales
of the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Neither we nor the underwriters makes any representation or
prediction as to the effect that the transactions described
above may have on the price of the shares. These transactions
may occur on the Nasdaq National Market or otherwise. If such
transactions are commenced, they may be discontinued without
notice at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Congress Financial Corporation (Southwest), an affiliate of
Wachovia Capital Markets, LLC, is the lender under our credit
agreement and Wachovia Capital Markets, LLC is acting as an
underwriter in this offering. As such, Congress Financial
Corporation (Southwest) has received and will continue to
receive customary fees in connection with the credit agreement.
In addition, in the future, certain of the underwriters or their
affiliates, may provide us, from time to time, with other
financial advisory or commercial or investment banking services,
for which we expect they will receive customary fees and
commissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, an affiliate of CIBC World Markets Corp. has an
indirect interest in our Series&nbsp;A Preferred Stock and our
common stock, through ownership of a limited partnership
interest in Hampshire Equity Partners&nbsp;II, L.P. This
affiliate may be deemed to have received a portion of the net
proceeds of this offering upon the redemption of our
Series&nbsp;A Preferred Stock held by Hampshire Equity
Partners&nbsp;II, L.P. with a portion of the net proceeds of
this offering and its sale of common stock in this offering and
receipt of the net proceeds therefrom. We do not expect these
proceeds to exceed
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in
the aggregate.
</DIV>

<P align="center" style="font-size: 10pt;">66
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<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Matters</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The validity of the common stock offered hereby will be passed
upon for us by Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP,
New York, New York. DLA Piper Rudnick Gray Cary US LLP,
Baltimore, Maryland, has represented the underwriters in this
offering.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

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<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Experts</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The financial statements of Citi Trends, Inc. as of
January&nbsp;31, 2004 and February&nbsp;1, 2003 and for the
years then ended have been included herein in reliance upon the
report of KPMG LLP, independent registered public accounting
firm, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing. The audit report
covering the January&nbsp;31, 2004 financial statements refers
to the adoption of Statement of Financial Accounting Standards
No.&nbsp;150, &#147;Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Where You Can Find More Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have filed with the Securities and Exchange Commission a
registration statement on Form&nbsp;S-1 under the Securities Act
of 1933, as amended, for the common stock offered in this
offering. In addition, upon completion of this offering, we will
be required to file annual, quarterly and current reports, proxy
statements and other information with the Securities and
Exchange Commission. You may read and copy our registration
statement and the attached exhibits and schedules without charge
at the public reference room maintained by the Securities and
Exchange Commission at 450&nbsp;Fifth Street, N.W.,
Washington,&nbsp;D.C. 20549. Please call the Securities and
Exchange Commission at 1&nbsp;(800)&nbsp;SEC-0330 for further
information on the public reference room. You may also inspect
reports, proxy and information statements and other information
that we file electronically with the Securities and Exchange
Commission without charge at its Internet site,
http://www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This prospectus constitutes part of the registration and does
not contain all of the information set forth in the registration
statement. Whenever a reference is made in this prospectus to
any of our contracts or other documents, the reference may not
be complete and, for a copy of the contract or document, you
should refer to the exhibits that are part of the registration
statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After the offering, we intend to furnish our stockholders with
annual reports containing financial statements audited by our
independent registered public accountants.
</DIV>

<P align="center" style="font-size: 10pt;">67

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<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='120'></A>
</DIV>

<!-- link1 "Index to Financial Statements" -->

<DIV align="center" style="font-size: 12pt;">
<B>Index to Financial Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="91%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
    JANUARY&nbsp;31, 2004 AND<BR>
    FEBRUARY&nbsp;1, 2003</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#302'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-2</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#303'>Balance Sheets as of January&nbsp;31, 2004
    and February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-3</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#306'>Statements of Income for the Years Ended
    January&nbsp;31, 2004 and February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-4</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#304'>Statements of Cash Flows for the Years
    Ended January&nbsp;31, 2004 and February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-5</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#305'>Statements of Stockholders&#146; Equity for
    the Years Ended January&nbsp;31, 2004 and February&nbsp;1,
    2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-6</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#307'>Notes to Financial Statements for the Years
    Ended January&nbsp;31, 2004 and February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-7</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
    FEBRUARY&nbsp;2, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#314'>Balance Sheet as of February&nbsp;2,
    2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-17</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#315'>Statement of Income for the Year Ended
    February&nbsp;2, 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-18</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#316'>Statement of Cash Flows for the Year Ended
    February&nbsp;2, 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-19</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#317'>Statement of Stockholders&#146; Equity for
    the Year Ended February&nbsp;2, 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-20</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#318'>Notes to Financial Statements for the Year
    Ended February&nbsp;2, 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-21</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CONDENSED FINANCIAL STATEMENTS AS OF AND FOR THE 39 WEEKS ENDED
    OCTOBER&nbsp;30, 2004 AND NOVEMBER&nbsp;1, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#309'>Condensed Balance Sheets as of
    October&nbsp;30, 2004 and November&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-29</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#312'>Condensed Statements of Income for 39 Weeks
    Ended October&nbsp;30, 2004 and November&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-30</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#310'>Condensed Statements of Cash Flows for the
    39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
    2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-31</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#313'>Notes to Condensed Financial Statements for
    the 39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
    2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-32</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='302'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
Citi Trends, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying balance sheets of Citi Trends,
Inc. (the &#147;Company&#148;) as of January&nbsp;31, 2004 and
February&nbsp;1, 2003, and the related statements of income,
stockholders&#146; equity, and cash flows for the fiscal years
ended January&nbsp;31, 2004 and February&nbsp;1, 2003. These
financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Citi Trends, Inc. as of January&nbsp;31, 2004 and
February&nbsp;1, 2003, and the results of its operations and its
cash flows for the fiscal years ended January&nbsp;1, 2004 and
February&nbsp;1, 2003 in conformity with U.S. generally accepted
accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As discussed in Note&nbsp;2 to the financial statements,
effective July&nbsp;6, 2003 the Company adopted the provisions
of the Statement of Financial Accounting Standards No.&nbsp;150,
&#147;Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
KPMG LLP
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Jacksonville, Florida
</DIV>

<DIV align="left" style="font-size: 10pt;">
April&nbsp;15, 2004
</DIV>

<P align="center" style="font-size: 10pt;">F-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='303'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February&nbsp;1,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,824,847</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,712,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,042,512</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,770,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,193,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195,068</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>530,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>374,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,968,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,630,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,749,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,995,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,118</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,213,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,126,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>Liabilities and Stockholders&#146; Equity</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under revolving lines of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,577,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,469,260</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,121,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,642,493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,669,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,917,368</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,440</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>774,052</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,474,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,036,402</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt , less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,494,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>490,208</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,160,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,562</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>584,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,709,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,692,857</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A preferred stock, $0.01&nbsp;par value. Liquidation
    preference of $1,000&nbsp;per share. Authorized
    5,000&nbsp;shares; issued and outstanding 3,605&nbsp;shares in
    2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,835,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value. Authorized
    500,000&nbsp;shares; 363,275&nbsp;shares issued in 2004 and 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in-capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,011,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,888,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,571,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,788,625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock, at cost; 5,775&nbsp;shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,503,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,597,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (note&nbsp;9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,213,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,126,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='306'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Years Ended January&nbsp;31, 2004 and February&nbsp;1,
2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,950,935</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,806,541</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144,394</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,844,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,759,624</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,384,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, including redeemable preferred stock dividend</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,644,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129,062</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,726,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.95</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419,510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='304'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Years Ended January&nbsp;31, 2004 and February&nbsp;1,
2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,032,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,014,549</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>541,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,189</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,882</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,669,857</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,110,472</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(577,991</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>374,919</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,795</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,020</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,108,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,956,945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>647,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>576,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(247,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,761</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82,278</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,189,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,456,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,117,954</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,926,622</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fee paid for continuance of revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net repayments under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,689,938</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on long-term debt and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(942,054</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(742,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,680,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of treasury stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(942,054</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,802,907</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,129,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,727,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,824,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,097,718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    End of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,824,847</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of cash flow information:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>352,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,036,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,498,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of noncash activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends accrued on redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327,713</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment financed by entering into
    capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>660,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance settlement not yet received related to loss of fixed
    assets and inventory related to store fire</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>192,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='305'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Statements of Stockholders&#146; Equity</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Years Ended January&nbsp;31, 2004 and February&nbsp;1,
2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Treasury Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Subscription</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Receivable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; February&nbsp;2, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,726,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,088,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,735,842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense recorded in connection with issuance of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,882</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(327,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(327,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; February&nbsp;1, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,888,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,788,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,597,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense recorded in connection with issuance of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135,187</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135,187</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; January&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,011,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,571,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,503,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='307'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Organization and Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Citi Trends, Inc. (the &#147;Company&#148;) is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of January&nbsp;31, 2004,
the Company operated 161 stores in Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee, Texas, and Virginia.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></TD>
    <TD>
    <I>Fiscal Year</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s fiscal year ends on the Saturday closest to
January&nbsp;31 of each year. Fiscal years 2003 and 2002
comprise 52&nbsp;weeks. The years ended January&nbsp;31, 2004
and February&nbsp;1, 2003 are referred to as fiscal 2003 and
2002, respectively, in the accompanying financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></TD>
    <TD>
    <I>Cash and Cash Equivalents</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For purposes of the balance sheets and statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three&nbsp;months or less to be cash
equivalents.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></TD>
    <TD>
    <I>Inventory</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. The Company
believes the first-in first-out retail inventory method results
in an inventory valuation that is fairly stated.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></TD>
    <TD>
    <I>Property and Equipment, net</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (principally three to five&nbsp;years for computer
equipment and furniture, fixtures and equipment, five&nbsp;years
for leasehold improvements, and 15&nbsp;years for buildings) of
the related assets or the relevant lease term, whichever is
shorter.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</I></TD>
    <TD>
    <I>Goodwill</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Goodwill represents the excess of the purchase price over the
fair value of assets acquired. The Company adopted the
provisions of Statement of Financial Accounting Standards
(&#147;SFAS&#148;)&nbsp;No.&nbsp;142, <I>Goodwill and Other
Intangible Assets</I>, as of February&nbsp;3, 2002. Pursuant to
SFAS&nbsp;No.&nbsp;142, goodwill acquired in a purchase business
combination and determined to have an indefinite useful life is
not amortized, but instead tested for impairment at least
annually. The Company performed this analysis at the end of
fiscal 2003 and no impairment was indicated.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</I></TD>
    <TD>
    <I>Impairment of Long-Lived Assets</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value of long-lived assets is reviewed. If this review indicates
that the carrying value of the asset will not be recovered as
determined based on projected undiscounted cash flows related to
the asset over its remaining life, the carrying value of the
asset is reduced to its estimated fair value. Impairment losses
in the future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
the Company&#146;s estimates for net sales, gross profit and
store expenses are not realized, future assessments of
recoverability could result in impairment charges.
</DIV>

<P align="center" style="font-size: 10pt;">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</I></TD>
    <TD>
    <I>Stock-Based Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company applies the intrinsic-value-based method of
accounting prescribed by Accounting Principles Board
(&#147;APB&#148;)&nbsp;Opinion No.&nbsp;25, <I>Accounting for
Stock Issued to Employees</I>, and related interpretations
including Financial Accounting Standards Board
(&#147;FASB&#148;) interpretation (FIN)&nbsp;No.&nbsp;44,
<I>Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No.&nbsp;25</I>,
to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if
the current fair value of the underlying stock exceeds the
exercise price. The Company recognizes the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS&nbsp;No.&nbsp;123, <I>Accounting for
Stock-Based Compensation</I>, and SFAS&nbsp;No.&nbsp;148,
<I>Accounting for Stock-Based Compensation&#151; Transition and
Disclosure, an amendment of FASB Statement No.&nbsp;123</I>,
establishes accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, as amended. The following table
illustrates the effect on net income for fiscal 2003 and 2002 if
the fair-value-based method had been applied to all outstanding
and unvested awards in the period. Pro forma information
regarding net income and net income per share is required in
order to show our net income as if we had accounted for employee
stock options under the fair value method of
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation</I>, as amended by SFAS&nbsp;No.&nbsp;148,
<I>Accounting for Stock-Based Compensation&#151; Transition
Disclosure</I>. The fair values of options and shares issued
pursuant to our option plan at each grant date were estimated
using the Black-Scholes option pricing model.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add stock-based employee compensation expense included in
    reported net income, net of tax of $45,855 and $62,729,
    respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $68,120 and $47,157, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,997</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,538</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,880,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,052,440</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma Basic Income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma Diluted Income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</I></TD>
    <TD>
    <I>Revenue Recognition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. Revenue from layaway
sales is recognized when the customer has paid for and received
the merchandise. If the merchandise is not fully paid for within
60&nbsp;days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program service charges, which are
non-refundable, are recognized in revenue when collected. All
sales are from cash, check or major credit card company
transactions. The Company does not offer company-sponsored
customer credit accounts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</I></TD>
    <TD>
    <I>Certain Financial Instruments with Characteristics of
    Liabilities and Equity</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company prospectively adopted SFAS&nbsp;No.&nbsp;150,
<I>Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity</I>.
SFAS&nbsp;No.&nbsp;150 establishes standards for the
classification and measurement of certain financial instruments
with characteristics of both liabilities and equity.
SFAS&nbsp;No.&nbsp;150 also includes required disclosures for
financial instruments within its scope. For the Company,
SFAS&nbsp;No.&nbsp;150 was
</DIV>

<P align="center" style="font-size: 10pt;">F-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
effective for instruments entered into or modified after
May&nbsp;1, 2003 and otherwise effective as of February&nbsp;1,
2004, except for mandatorily redeemable financial instruments.
As such, the Company adopted the provisions of
SFAS&nbsp;No.&nbsp;150 for our Series&nbsp;A Preferred Stock on
July&nbsp;6, 2003 which required the Company to classify the
Series&nbsp;A Preferred Stock as a liability on our balance
sheet. The effective date of SFAS&nbsp;No.&nbsp;150 has been
deferred indefinitely for certain other types of mandatorily
redeemable financial instruments. To illustrate the effect of
SFAS No.&nbsp;150 the following table shows net income if
SFAS&nbsp;No.&nbsp;150 had not been adopted for fiscal 2003 and
2002.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,107,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</I></TD>
    <TD>
    <I>Earnings per Share</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides a reconciliation of the earnings
figures used to calculate earning per share and used in
calculating diluted earnings per share for fiscal 2003 and 2002:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtract dividends on preferred shares subject to mandatory
    redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>324,450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Numerator for EPS Calculation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,782,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,703,375</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earning per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for fiscal 2003 and 2002:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incremental shares from assumed exercises of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares and common stock equivalents
    outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419,510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For fiscal 2003, there was an immaterial number of options
outstanding to purchase shares of common stock excluded from the
calculation of diluted earnings per share because of
antidilution. For fiscal 2002 there were no options outstanding
to purchase shares of common stock excluded from the calculation
of diluted earnings per share because of antidilution.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</I></TD>
    <TD>
    <I>Advertising</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company expenses all advertising expenditures as incurred.
Advertising expense for fiscal 2003 and 2002 was $905,872 and
$618,051, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</I></TD>
    <TD>
    <I>Store Opening and Closing Costs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
New and relocated store opening costs are charged directly to
expense when incurred. When the Company decides to close or
relocate a store, the Company records an expense for the present
value of expected future rent payments, net of sublease income,
in the period that a store closes or relocates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</I></TD>
    <TD>
    <I>Income Taxes</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</I></TD>
    <TD>
    <I>Use of Estimates</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</I></TD>
    <TD>
    <I>Business Reporting Segments</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is a rapidly growing, value-priced retailer of urban
fashion apparel and accessories for the entire family and has
determined that its operations are within one reportable
segment. Accordingly, financial information on industry segments
is omitted. All sales are to customers and assets are located
within the United States.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)</I></TD>
    <TD>
    <I>Other Comprehensive Income</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company did not have any components of other comprehensive
income for fiscal 2003 and 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Property and Equipment, Net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The components of property and equipment at January&nbsp;31,
2004 and February&nbsp;1, 2003 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>810,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>810,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Building</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,340,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,340,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,885,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,134,865</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture, fixtures, and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,000,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,779,811</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,823,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,126,003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,859,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,190,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,109,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,194,683</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,749,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,995,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Depreciation expense for fiscal 2003 and 2002 was $4,011,456 and
$2,999,666, respectively. Computer equipment held under capital
leases and related accumulated depreciation was $3,373,409 and
$2,448,245, respectively, at January&nbsp;31, 2004, and
$2,780,098 and $1,681,477, respectively, at February&nbsp;1,
2003.
</DIV>

<P align="center" style="font-size: 10pt;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Revolving Lines of Credit</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has a revolving line of credit secured by
substantially all of the Company&#146;s assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2005. At January&nbsp;31, 2004, the line of
credit provided for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $20,000,000 or the
Company&#146;s borrowing base ($14,569,838 at January&nbsp;31,
2004), as defined in the credit agreement. The maximum credit
available under the credit agreement increased to $25,000,000
effective April&nbsp;13, 2004. Borrowings under this secured
line of credit bear interest at either the prime rate plus 0.25%
or the Eurodollar rate plus 2.75%, at the Company&#146;s
election, based on conditions in the credit agreement.
Additionally, there is a letter of credit fee of 1.25%&nbsp;per
annum on the outstanding balance of letters of credit. The
interest rate on borrowings at January&nbsp;31, 2004 was 4.00%.
At January&nbsp;31, 2004, there were no outstanding borrowings
on the revolving line of credit, nor were there any outstanding
letters of credit. Under the terms of the credit agreement, the
Company is required to maintain a minimum tangible net worth.
The Company was in compliance with this requirement at
January&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that expires in
June 2005. At January&nbsp;31, 2004, the line of credit provided
for aggregate cash borrowings up to $3,000,000. Borrowings under
the credit agreement bear interest at the London Interbank
Offered Rate (&#147;LIBOR&#148;)&nbsp;plus 2.00%. The interest
rate on borrowings at January&nbsp;31, 2004 was 3.10%. At
January&nbsp;31, 2004, there were no outstanding borrowings on
the unsecured revolving line of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company borrows funds under these revolving lines of credit
from time to time and subsequently repays such borrowings with
available cash generated from operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Long-term Debt and Capital Lease Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Capital Leases.</I> The Company has capital lease obligations
that finance the purchase of its computer equipment. These
obligations have maturity dates ranging from May 2004 to October
2007. The interest rates on these obligations range from 0.6% to
11.5%. All of these obligations are secured by the computer
equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of January&nbsp;31, 2004 and February&nbsp;1, 2003, long-term
debt and capital lease obligations consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage payable issued to finance purchase of land and
    building; payable in monthly installments of $14,913, including
    interest, through April 2007 with a balloon payment of
    $1,303,412 due May 2007; interest at a fixed rate of 6.80%;
    secured by land and building</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,569,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,637,569</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations issued to finance purchase of computer
    equipment; payable in monthly installments averaging
    approximately $53,123, $32,101 and $11,106 in 2004, 2005 and
    2006, with maturity dates ranging from August 2003 to October
    2006; interest at rates ranging from 0.6% to 11.5%; secured by
    computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,061,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,264,260</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,630,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,901,829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion of long-term debt and capital lease
    obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>641,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>845,492</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,988,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,056,337</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of January&nbsp;31, 2004, annual long-term debt and capital
lease obligation maturities are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Long-term</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Capital Lease</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Debt</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Obligations</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>637,482</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,277</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,328,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,569,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,155,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less portion attributable to future interest payments (at rates
    ranging from 0.6% to 11.5%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,762</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,569,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,061,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The provision for income taxes for fiscal 2003 and 2002 consists
of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,987,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,136,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>577,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,565,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,559,495</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>465,423</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,319</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>541,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,726,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income tax expense computed using the federal statutory rate is
reconciled to the reported income tax expense as follows for
fiscal 2003 and 2002:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statutory rate applied to income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,279,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,763,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income taxes, net of federal benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General business credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(117,004</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,776</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,726,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The components of deferred tax assets and liabilities at
January&nbsp;31, 2004 and February&nbsp;1, 2003 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book and tax depreciation differences</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred rent amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>572,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361,057</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vacation liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,848</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,884</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>969,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>815,267</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book and tax depreciation differences</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(188,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(309,464</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(286,292</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(129,612</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88,572</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(143,902</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81,361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(771,859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(456,225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>197,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>359,042</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon
the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these
deductible differences. As such, a valuation allowance for
deferred tax assets was not considered necessary at
January&nbsp;31, 2004 and February&nbsp;1, 2003.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Preferred Shares Subject to Mandatory Redemption</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s Series&nbsp;A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series&nbsp;A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or the liquidation of the Company, at a price
of $1,000&nbsp;per share, plus accrued dividends. Dividends on
Series&nbsp;A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors or a change in control or liquidation of the Company.
At January&nbsp;31, 2004 and February&nbsp;1, 2003 the Company
had accrued dividends payable of $1,555,313 and $1,230,863,
respectively. During fiscal 2003, the Company&#146;s board of
directors adopted a resolution whereby the Company intends to
begin repaying its Series&nbsp;A Preferred Stock and all
dividends accrued thereon at a rate of $500,000&nbsp;per
quarter, beginning in the second quarter of fiscal 2004.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Stockholders&#146; Equity</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></TD>
    <TD>
    <I>Stockholders Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is party to a Stockholders Agreement dated
April&nbsp;13, 1999 (the &#147;Stockholders Agreement&#148;)
with Hampshire Equity Partners&nbsp;II, L.P., George Bellino and
certain management stockholders. Pursuant to the stockholders
agreement, four members of the Company&#146;s board of directors
may be designated by the owners of the majority of the voting
stock beneficially owned by Hampshire Equity Partners and its
affiliates; the Company&#146;s
</DIV>

<P align="center" style="font-size: 10pt;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
stockholders have agreed generally not to transfer their shares;
the Company&#146;s management stockholders have been granted
tag-along rights in the event of the sale of more than 50% of
our common stock; the Company&#146;s management stockholders
have agreed to cooperate in any sale of the company by Hampshire
Equity Partners and the Company has agreed to register shares of
the Company&#146;s common stock held by the stockholder parties
in the event that the Company registers additional shares of the
Company&#146;s common stock under the Securities Act, other than
on a registration statement on Form&nbsp;S-4 or S-8, or in
connection with an exchange offer, merger, acquisition, dividend
reinvestment plan, stock option or other employee benefit plan.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></TD>
    <TD>
    <I>Equity Transactions with Officer</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2001, the Company issued options to an officer for
16,800&nbsp;shares of common stock. Since the estimated fair
market value of the Company&#146;s common stock issued exceeded
the exercise price of these options on the date of grant, the
Company recognized charges to earnings during fiscal 2003 and
2002 of $84,441 and $161,882, respectively. The Company will
recognize additional charges related to these options of $44,627
and $17,721 in fiscal 2004 and 2005, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></TD>
    <TD>
    <I>Equity Transactions with Majority Stockholder</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In August 2003, the Company&#146;s board of directors adopted a
plan whereby stock options are to be issued to the
Company&#146;s majority stockholder, as well as certain defined
members of management, in amounts necessary to prevent the
dilution of their ownership percentage as a result of the
issuance of stock options to other employees of the Company.
Options granted under this anti-dilution plan are to be issued
at the estimated fair market value of the Company&#146;s common
stock on the date of grant and vest immediately. During fiscal
2003, the Company issued stock options for 1,503&nbsp;shares of
common stock under this anti-dilution plan, 1,425 of which were
issued to its majority stockholder. Because the majority
stockholder does not qualify as an employee, FASB Interpretation
No.&nbsp;44, &#147;Accounting for Certain Transactions Involving
Stock Compensation,&#148; required the Company to recognize a
charge to earnings during the year ended January&nbsp;31, 2004
of $38,832. The fair value of the vested options was determined
using the Black-Scholes option-pricing model.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></TD>
    <TD>
    <I>Stock Options</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 1999, the Company established the 1999 Citi Trends, Inc.
Stock Option Plan (the &#147;Plan&#148;). The Plan provides for
the grant of incentive and nonqualified options to key employees
and directors. The board of directors determines the exercise
price of option grants. Option grants generally vest in equal
installments over four years from the date of grant and are
generally exercisable up to ten&nbsp;years from the date of
grant. The Company has authorized up to 75,000&nbsp;shares of
common stock for issuance under the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A summary of option activity in the Plan for fiscal 2003 and
2002 is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Wtd Avg</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Wtd Avg</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Price</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,400</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercisable end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At January&nbsp;31, 2004 the range of exercise prices and
weighted-average remaining contractual life of outstanding
options was $10 to $116 and 7.7&nbsp;years, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes the status of Company options
exercisable at January&nbsp;31, 2004 by exercise price:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Contractual Life</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $&nbsp;10</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $&nbsp;50</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $&nbsp;70</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $&nbsp;94</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $&nbsp;99</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $116</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The fair value of options granted during the years ended
January&nbsp;31, 2004 and February&nbsp;1, 2003 was $34.18 and
$20.85, respectively, using the Black-Scholes option-pricing
model, with the following weighted average assumptions:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.50%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.60%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected life, in years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10&nbsp; years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10&nbsp; years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeiture rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.00%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases its stores under operating leases, which
generally have an initial term of five years with a five-year
renewal option. Future minimum rental payments under operating
leases having noncancelable lease terms at January&nbsp;31, 2004
are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Fiscal Year Ending:</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,919,819</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,903,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,025,774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,073,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,942,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,109,233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total future minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,973,513</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain operating leases provide for fixed monthly rentals while
others provide for rentals computed as a percentage of net
sales. Certain operating leases provide for a combination of
both fixed monthly rental and rentals computed as a percentage
of net sales. Rental expense was $6,363,257 and $4,787,768 for
the fiscal 2003 and 2002 (including $794,444 and $539,090 of
percentage rent), respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>January&nbsp;31, 2004 and February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is involved in certain legal matters arising in the
normal course of business. In the opinion of management, the
outcome of these matters will not materially affect its
financial condition, results of operations, or liquidity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(10)</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is a party to a consulting agreement with an
affiliate of its majority stockholder for management consulting
services. Included in operating expenses are management fees of
$240,000 and $190,000 for fiscal 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consulting agreement has a four year term and is subject to
automatic one year renewals each February&nbsp;1, subject to
60&nbsp;days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90&nbsp;days prior notice in the event of
(a)&nbsp;a sale of all or substantially all of our common stock
or assets, (b)&nbsp;a merger or consolidation in which we are
the surviving corporation or (c)&nbsp;a registered public
offering of our common stock.
</DIV>

<P align="center" style="font-size: 10pt;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='314'></A>
</DIV>

<!-- link1 "Balance Sheet" -->

<DIV align="center" style="font-size: 12pt;">
<B>Balance Sheet</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,097,717</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,932,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,525,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>352,146</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,163,634</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,544,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill, net of accumulated amortization of $197,196</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>548,638</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,732,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="center" valign="top">
    <B>Liabilities and Stockholders&#146; Equity</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowing under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,689,938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,512,314</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,198,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>932,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital lease obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>814,053</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244,067</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,390,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term capital lease obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>490,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>607,146</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,488,666</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A preferred stock, $0.01&nbsp;par value. Liquidation
    preference of $1,000&nbsp;per share. Authorized
    5,000&nbsp;shares; issued and outstanding 3,605&nbsp;shares in
    2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,508,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value. Authorized
    500,000&nbsp;shares; 363,275&nbsp;shares issued in 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in-capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,726,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,088,513</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock, at cost; 5,775&nbsp;shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,735,842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (note&nbsp;8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,732,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='315'></A>
</DIV>

<!-- link1 "Statement of Income" -->

<DIV align="center" style="font-size: 12pt;">
<B>Statement of Income</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Year Ended February 2, 2002</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,933,306</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,050,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,882,983</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,405,480</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,477,503</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>454,597</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,022,906</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,565,566</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.59</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>360,158</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>382,190</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='316'></A>
</DIV>

<!-- link1 "Statement of Cash Flows" -->

<DIV align="center" style="font-size: 12pt;">
<B>Statement of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Year Ended February&nbsp;2, 2002</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,737,797</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(442,228</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96,430</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,928,967</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(633,385</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,351</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,048</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,883,165</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,124,820</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net repayment under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,223,850</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments under capital lease</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(769,163</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of treasury stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,923,013</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net decrease in cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,164,668</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,262,386</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    End of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,097,718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of cash flow information:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>454,597</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,801,443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of noncash activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends accrued on redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>324,450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment financed by entering into
    capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,200</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='317'></A>
</DIV>

<!-- link1 "Statements of Stockholders&#146; Equity" -->

<DIV align="center" style="font-size: 12pt;">
<B>Statements of Stockholders&#146; Equity</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Year ended February&nbsp;2, 2002</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Treasury Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Subscription</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>receivable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&nbsp;&#151; February&nbsp;3, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,582,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(45,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,470,623</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of 1,200&nbsp;shares of common stock for cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 3,500 and 35&nbsp;shares of preferred and common
    stock, respectively, for cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense recorded in connection with issuance of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(324,450</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(324,450</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,457,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,457,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&nbsp;&#151; February&nbsp;2, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,726,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,088,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,735,842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='318'></A>
</DIV>

<!-- link1 "Notes to Financial Statements" -->

<DIV align="center" style="font-size: 12pt;">
<B>Notes to Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Organization and Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Citi Trends, Inc. (the &#147;Company&#148;) is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of February&nbsp;2, 2002,
the Company operated 123&nbsp;stores in Alabama, Florida,
Georgia, Louisiana, Mississippi, North Carolina, South Carolina,
and Tennessee.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></TD>
    <TD>
    <I>Fiscal Year</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s fiscal year ends on the Saturday closest to
January&nbsp;31 of each year. Fiscal year 2001 comprises
52&nbsp;weeks. The year ended February&nbsp;2, 2002 is referred
to as fiscal 2001 in the accompanying financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></TD>
    <TD>
    <I>Cash and Cash Equivalents</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For purposes of the balance sheet and statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></TD>
    <TD>
    <I>Inventory</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retailer
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. The Company
believes the first-in first-out retail inventory method results
in an inventory valuation that is fairly stated.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></TD>
    <TD>
    <I>Property and Equipment, net</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (principally three to five years for computer equipment
and furniture, fixtures and equipment, five years for leasehold
improvements and 15&nbsp;years for buildings) of the related
assets or the relevant lease term, whichever is shorter.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</I></TD>
    <TD>
    <I>Goodwill</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Goodwill represents the excess of the purchase price over the
fair value of assets acquired and, until February&nbsp;3, 2002,
was being amortized over a 20-year period. During the year ended
February&nbsp;2, 2002 the Company recorded $76,950 for goodwill
amortization.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</I></TD>
    <TD>
    <I>Impairment of Long-Lived Assets</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value of long-lived assets is reviewed. If this review indicates
that the carrying value of the asset will not be recovered as
determined based on projected undiscounted cash flows related to
the asset over its remaining life, the carrying value of the
asset is reduced to its estimated fair value. Impairment losses
in the future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
the Company&#146;s estimates for nets sales, gross profit and
store expenses are not realized, future assessments of
recoverability could result in impairment charges.
</DIV>

<P align="center" style="font-size: 10pt;">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</I></TD>
    <TD>
    <I>Stock-Based Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company applies the intrinsic-value-based method of
accounting prescribed by Accounting Principles Board
(APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock Issued
to Employees</I>, and related interpretations including
Financial Accounting Standards Board (&#147;FASB&#148;)
interpretation (FIN)&nbsp;No.&nbsp;44, <I>Accounting for Certain
Transactions involving Stock Compensation, an interpretation of
APB&nbsp;Opinion No.&nbsp;25</I>, to account for its fixed-plan
stock options. Under this method, compensation expense is
recorded on the date of grant only if the current fair value of
the underlying stock exceeds the exercise price. The Company
recognizes the fair value of stock rights granted to
nonemployees in the accompanying financial statements.
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation</I>, and SFAS&nbsp;No.&nbsp;148, <I>Accounting for
Stock-Based Compensation&#151; Transition and Disclosure, an
amendment of FASB Statement No.&nbsp;123</I>, establishes
accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation
plans. As permitted by existing accounting standards, the
Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, as amended. The following table
illustrates the effect on net income if the fair-value-based
method had been applied to all outstanding and unvested awards
in the period. Pro forma information regarding net income and
net income per share is required in order to show our net income
as if we had accounted for employee stock options under the fair
value method of SFAS&nbsp;No.&nbsp;123, as amended. The fair
values of options and shares issued pursuant to our option plan
at each grant date were estimated using the Black-Scholes option
pricing model.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add stock-based employee compensation expense included in
    reported net income, net of tax of $37,877</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $47,359</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,336</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,442,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma Basic Income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma Diluted Income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</I></TD>
    <TD>
    <I>Revenue Recognition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. Revenue from layaway
sales is recognized when the customer has paid for and received
the merchandise. If the merchandise is not fully paid for within
60&nbsp;days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program services charges are recognized in
revenue when collected. All sales are from cash, check or major
credit card company transactions. The Company does not offer
company-sponsored customer credit accounts. Net sales also
include $726,823 of rental income from a leased department for
fiscal 2001.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</I></TD>
    <TD>
    <I>Earnings Per Share</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
</DIV>

<P align="center" style="font-size: 10pt;">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides a reconciliation of the earnings
figure used to calculate earnings per share and used in
calculating diluted earnings per share for fiscal 2001:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtract dividends on preferred shares subject to mandatory
    redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>321,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Numerator for EPS Calculation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,135,777</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earning per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for fiscal 2001:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>360,158</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incremental shares from assumed exercises of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares and common stock equivalents
    outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>382,190</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the fiscal year ended 2001 there were no options outstanding
to purchase shares of common stock excluded from the calculation
of diluted earnings per share because of antidilution.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</I></TD>
    <TD>
    <I>Advertising</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company expenses all advertising expenditures as incurred.
Advertising expense for fiscal 2001 was $680,675.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</I></TD>
    <TD>
    <I>Store Opening and Closing Costs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
New and relocated store opening costs are charged directly to
expense when incurred. When the Company decides to close or
relocate a store, the Company records an expense for the present
value of expected future rent payments net of sublease income in
the period that a store closes or relocates.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</I></TD>
    <TD>
    <I>Income Taxes</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</I></TD>
    <TD>
    <I>Use of Estimates</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</I></TD>
    <TD>
    <I>Business Reporting Segments</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is a rapidly growing, value-priced retailer of urban
fashion apparel and accessories for the entire family and has
determined that its operations are within one reportable
segment. Accordingly, financial information on industry segments
is omitted. All sales are to customers and assets are located
within the United States.
</DIV>

<P align="center" style="font-size: 10pt;">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</I></TD>
    <TD>
    <I>Derivative Financial Instruments and Hedging Activities</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The FASB issued SFAS No.&nbsp;133, <I>Accounting for Derivative
Instruments and Hedging Activities.</I> This statement, as
amended, established accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activity. The
Company adopted SFAS&nbsp;No.&nbsp;133, as amended, on
February&nbsp;4, 2001. The adoption of SFAS&nbsp;No.&nbsp;133
had no effect on the Company&#146;s financial statements as the
Company does not use derivatives.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The components of property and equipment at February&nbsp;2,
2002 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,277,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture, fixtures, and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,421,121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,063,516</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,761,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,217,491</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,544,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Property and equipment held under capital leases and related
accumulated depreciation is $2,109,576 and $850,019,
respectively, at February&nbsp;2, 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Revolving Line of Credit</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has a revolving line of credit secured by
substantially all of the Company&#146;s assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2003. At February&nbsp;2, 2002, the line of
credit provides for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $15,000,000 or the
Company&#146;s borrowing base, as defined in the credit
agreement. Borrowings under this secured line of credit bear
interest at either the prime rate plus 0.25% or the Eurodollar
rate plus 2.75%, at the Company&#146;s election, based on
conditions in the credit agreement. Additionally, there is a
letter of credit fee of 1.25%&nbsp;per annum on the outstanding
balance of letters of credit. The interest rate on borrowings at
February&nbsp;2, 2002 was 5.00%. There were no letters of credit
outstanding at February&nbsp;2, 2002. Under the terms of the
credit agreement, the Company is required to maintain a minimum
tangible net worth. The Company was in compliance with this
requirement at February&nbsp;2, 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Long-term Debt and Capital Lease Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of February&nbsp;2, 2002, long-term debt and capital lease
obligations consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations issued to finance purchase of computer
    equipment; payable in monthly installments averaging
    approximately $73,718, and $41,579 in 2002, and 2003, with
    maturity dates ranging from August 2003 to December 2003;
    interest at rates ranging from 2.5% to 13.1%; secured by
    computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,304,786</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,304,786</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion of long-term debt and capital lease
    obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(814,053</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>490,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of February&nbsp;2, 2002, capital lease obligation maturities
are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>884,621</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>498,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,383,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less portion attributable to future interest payments (at rates
    ranging from 2.5% to 13.1%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(78,788</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,304,786</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the year ended February&nbsp;3, 2001, the Company entered
into a sale and leaseback agreement for certain store equipment.
The transaction resulted in a $163,236 gain on sale of the
assets which has been deferred and is being amortized over the
life of the lease (36&nbsp;months).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The provision for income taxes for fiscal 2001 consists of the
following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,694,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>313,472</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,007,794</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(372,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(69,899</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(442,228</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,565,566</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income tax expense computed using the federal statutory rate is
reconciled to the reported income tax expense as follows for
fiscal 2001:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statutory rate applied to income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,367,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income taxes, net of federal benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160,578</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,565,566</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The components of deferred tax assets and liabilities at
February&nbsp;2, 2002 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book and tax depreciation differences</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>621,354</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred rent amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,234</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>427,852</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vacation liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,272,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(293,540</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77,916</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(371,456</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>900,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of February&nbsp;2, 2002, a valuation allowance for deferred
tax assets is not considered necessary because it is more likely
than not the deferred tax asset will be fully realized.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Stockholders&#146; Equity</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></B></TD>
    <TD>
    <B><I>Preferred Shares Subject to Mandatory Redemption</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s Series&nbsp;A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series&nbsp;A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or liquidation of the Company, at a price of
$1,000&nbsp;per share, plus accrued dividends. Dividends on
Series&nbsp;A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors, a change in control or liquidation of the Company. At
February&nbsp;2, 2002 the Company had accrued dividends payable
of $903,150.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></B></TD>
    <TD>
    <B><I>Stockholders Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is party to a Stockholders Agreement dated
April&nbsp;13, 1999 (the &#147;Stockholders Agreement&#148;)
with Hampshire Equity Partners&nbsp;II, L.P., George Bellino and
certain management stockholders. Pursuant to the stockholders
agreement, four members of the Company&#146;s board of directors
may be designated by the owners of the majority of the voting
stock beneficially owned by Hampshire Equity Partners and its
affiliates; the Company&#146;s stockholders have agreed
generally not to transfer their shares; the Company&#146;s
management stockholders have been granted tag-along rights in
the event of the sale of more than 50% of the Company&#146;s
common stock; the Company&#146;s management stockholders have
agreed to cooperate in any sale of the Company by Hampshire
Equity Partners and the Company has agreed to register shares of
the Company&#146;s common stock held by the stockholder parties
in the event that the Company registers additional shares of the
Company&#146;s common stock under the Securities Act, other than
on a registration statement on Form&nbsp;S-4 or S-8, or in
connection with an exchange offer, merger, acquisition, dividend
reinvestment plan, stock option or other employee benefit plan.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></B></TD>
    <TD>
    <B><I>Equity Transactions with New Officer</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2001, the Company issued options to an officer for
16,800&nbsp;shares of common stock. Since the estimated fair
market value of the Company&#146;s common stock issued exceeded
the exercise price of these options on the date of grant, the
Company recognized a charge to earnings during fiscal 2001 of
$27,329. The Company will recognize additional charges related
to these options totaling $308,671 through December 2005.
</DIV>

<P align="center" style="font-size: 10pt;">F-26
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></B></TD>
    <TD>
    <B><I>Stock Options</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 1999, the Company established the 1999 Citi Trends, Inc.
Stock Option Plan (the &#147;Plan&#148;). The Plan provides for
the grant of incentive and nonqualified options to key employees
and directors. The board of directors determines the exercise
price of option grants. Options grants generally vest in equal
installments over four years from the date of grant and are
generally exercisable up to 10&nbsp;years from the date of
grant. The Company has authorized up to 75,000&nbsp;shares of
common stock for issuance under the Plan. During the year ended
February&nbsp;2, 2002, the Company granted options to employees
and outside directors to acquire shares of its common stock at
an exercise price of $10&nbsp;per share. Since the estimated
fair market value of the Company&#146;s common stock issued
exceeded the exercise price of certain of these options on the
date of grant, the Company recognized a charge to earnings
during the year ended February&nbsp;2, 2002 of $27,329. The
Company will recognize additional charges to earnings totaling
$308,671 through December 2005 relating to these options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A summary of option activity in the Plan for fiscal 2001 is as
follows (all options outstanding have an exercise price of
$10&nbsp;per share):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,646</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,850</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,200</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercisable at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,023</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The fair value of options granted during fiscal 2001 was $24.18,
using the Black-Scholes option-pricing model, with the following
weighted average assumptions.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.35</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected life, in years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10 years</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Commitments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases its stores under operating leases, the
majority of which expire at various times during the next five
years. Future minimum rental payments under capital and
operating leases having noncancelable lease terms at
February&nbsp;2, 2002 as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fiscal year ending:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,756,180</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,524,248</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,710,859</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,428,603</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,465,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total future minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,539,824</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain leases contain renewal options. Certain leases provide
for fixed monthly rentals and others provide that rent is
computed as a percentage of net sales in addition to fixed
rentals. Rental expense was $4,065,638 for fiscal 2001
(including $273,727 of percentage rent).
</DIV>

<P align="center" style="font-size: 10pt;">F-27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Financial Statements&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>February&nbsp;2, 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is involved in certain legal matters arising in the
normal course of business. In the opinion of management, the
outcome of these matters will not materially affect its
financial condition, results of operations, or liquidity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is a party to a consulting agreement with an
affiliate of its majority stockholder for management consulting
services. Included in operating expenses are management fees of
$120,000 for fiscal 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consulting agreement has a four year term and is subject to
automatic one year renewals each February&nbsp;1, subject to
60&nbsp;days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90&nbsp;days prior notice in the event of
(a)&nbsp;a sale of all or substantially all of our common stock
or assets, (b)&nbsp;a merger or consolidation in which we are
the surviving corporation or (c)&nbsp;a registered public
offering of our common stock.
</DIV>

<P align="center" style="font-size: 10pt;">F-28
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='309'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Condensed Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>October&nbsp;30, 2004 and January&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>10/30/04</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>1/31/04</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,439,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,712,369</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,494,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,770,998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>579,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>668,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>530,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,338,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,968,203</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,078,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,749,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,992</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,908,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,213,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>Liabilities and Stockholders&#146; Equity</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under revolving lines of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,388,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,615,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,577,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,923,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,121,520</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,655,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,669,462</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,762</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,342</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,141,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,028</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,416,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,474,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,442,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,494,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>646,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,403,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,160,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>471,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,406,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,786,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,709,332</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value. Authorized
    500,000&nbsp;shares; 363,875 and 363,275&nbsp;shares issued in
    2004 and 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in-capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,109,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,011,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,196,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,571,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock, at cost; 6,375 and 5,775&nbsp;shares in 2004 and
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,121,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,503,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (note&nbsp;10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,908,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,213,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='312'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Condensed Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
2003</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,128,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,952,093</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,466,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,840,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,485,740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,013,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,931,919</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,826,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,553,821</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, including redeemable preferred stock dividend</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>315,048</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,269,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,238,773</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,643,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,637,924</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,600,849</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.79</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>418,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='310'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Condensed Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
2003</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600,849</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>243,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,569,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,004,906</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,727,389</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,835,495</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(723,552</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(910,729</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,780</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,038,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,939,674</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,455,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>985,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70,322</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,008,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>938,281</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,338,239</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(84,477</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,230,583</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,094,521</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Borrowing (repayments)&nbsp;under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,388,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,043,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on long-term debt and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(623,458</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(780,013</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment of dividends on preferred shares subject to mandatory
    redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,000,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of Capital Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,770,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,263,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net decrease in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,798,213</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,915,117</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,824,847</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    End of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,909,730</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of cash flow information:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>296,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,559,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,663,704</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of noncash activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends accrued on redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>243,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>243,338</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment financed by entering into
    capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>660,012</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='313'></A>
</DIV>

<!-- link1 "" -->

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Condensed Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
2003</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consolidated financial statements included herein have been
prepared by management without audit and should be read in
conjunction with the consolidated financial statements and notes
thereto for fiscal 2003 included in this document. Due to the
seasonality of the Company&#146;s business, the results for the
interim periods are not necessarily indicative of the results
for the year. Certain information and note disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted,
although management believes that the disclosures are adequate
to fairly present the information. The accompanying consolidated
financial statements reflect, in the opinion of management, all
such adjustments necessary for a fair presentation of the
interim financial statements. In the opinion of management, all
such adjustments are of a normal recurring nature, except for
the adjustments resulting from the adoption of
FAS&nbsp;No.&nbsp;150. See Note (7).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Organization and Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Citi Trends, Inc. (the &#147;Company&#148;) is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of October&nbsp;30, 2004,
the Company operated 195 stores in Alabama, Arkansas, Florida,
Georgia, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, and Virginia.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Use of Estimates</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Recently Adopted Accounting Standards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2003, the FASB issued FIN&nbsp;46R, <I>Consolidation
of Variable Interest Entities</I>, which is an interpretation of
Accounting Research Bulletin&nbsp;No.&nbsp;51, <I>Consolidated
Financial Statements</I>. FIN&nbsp;46R requires that if an
entity has a controlling interest in a variable interest entity,
the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated
financial statements of the entity. FIN&nbsp;46R is effective
immediately for all new variable interest entities created or
acquired after December&nbsp;31, 2003. The adoption of
FIN&nbsp;46R did not have an impact on the Company&#146;s
consolidated financial position or results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Revolving Lines of Credit</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has a revolving line of credit secured by
substantially all of the Company&#146;s assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2007. At October&nbsp;30, 2004, the line of
credit provides for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $25,000,000 or the
Company&#146;s borrowing base, as defined in the credit
agreement. Borrowings under this secured line of credit bear
interest at either the prime rate plus 0.25% or the Eurodollar
rate plus 2.75%, at the Company&#146;s election, based on
conditions in the credit agreement. Additionally, there is a
letter of credit fee of 1.25%&nbsp;per annum on the outstanding
balance of letters of credit. The interest rate on borrowings at
October&nbsp;30, 2004 was 4.75%. At October&nbsp;30, 2004, there
was $4.0&nbsp;million in outstanding borrowings on the revolving
line of credit, there were no outstanding letters of credit.
Under the terms of the
</DIV>

<P align="center" style="font-size: 10pt;">F-32
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Condensed Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
credit agreement the Company is required to maintain a minimum
tangible net worth of $3.9&nbsp;million. The Company was in
compliance with this requirement at October&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that was renewed
in June 2004. The line of credit provides for aggregate cash
borrowings up to $3,000,000 to be used for general operating
purposes. Borrowings under the credit agreement bear interest at
LIBOR&nbsp;plus 2.00% and the interest rate was 3.96% as of
October&nbsp;30, 2004. At October&nbsp;30, 2004, there was
$1.4&nbsp;million in outstanding borrowings on the unsecured
revolving line of credit.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Preferred Shares Subject to Mandatory Redemption</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s Series&nbsp;A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series&nbsp;A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or the liquidation of the Company, at a price
of $1,000&nbsp;per share, plus accrued dividends. Dividends on
Series&nbsp;A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors or a change in control or liquidation of the Company.
At October&nbsp;30, 2004 and November&nbsp;1, 2003 the Company
had accrued dividends payable of $798,651 and $1,474,201,
respectively. During fiscal 2003, the Company&#146;s board of
directors adopted a resolution whereby the Company has begun
repaying its Series&nbsp;A Preferred Stock and all dividends
accrued thereon at a rate of $500,000&nbsp;per quarter beginning
in the second quarter of fiscal 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Certain Financial Instruments with Characteristics of
    Liabilities and Equity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company prospectively adopted SFAS&nbsp;No.&nbsp;150, which
establishes standards for the classification and measurement of
certain financial instruments with characteristics of both
liabilities and equity. SFAS&nbsp;No.&nbsp;150 also includes
required disclosures for financial instruments within its scope.
For the Company, SFAS&nbsp;No.&nbsp;150 was effective for
instruments entered into or modified after May&nbsp;1, 2003 and
otherwise effective as of February&nbsp;1, 2004, except for
mandatorily redeemable financial instruments. As such, the
Company adopted the provisions of SFAS&nbsp;No.&nbsp;150 for our
Series&nbsp;A Preferred Stock on July&nbsp;6, 2003 which
required the Company to classify the Series&nbsp;A Preferred
Stock as a liability on our balance sheet. The effective date of
SFAS&nbsp;No.&nbsp;150 has been deferred indefinitely for
certain other types of mandatorily redeemable financial
instruments. To illustrate the effect of SFAS&nbsp;150 the
following table shows net income if SFAS&nbsp;No.&nbsp;150 had
not been adopted in the two 39-week periods ending
October&nbsp;30, 2004 and November&nbsp;1, 2003.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600,848</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>243,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,868,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,708,998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Stock-Based Compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company applies the intrinsic-value-based method of
accounting prescribed by APB Opinion No.&nbsp;25, <I>Accounting
for Stock Issued to Employees,</I> and related interpretations
including FASB interpretation (FIN)&nbsp;No.&nbsp;44,
<I>Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No.&nbsp;25</I>,
to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if
the current fair value of the underlying stock exceeds the
exercise price. The Company recognizes the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS&nbsp;No.&nbsp;123, <I>Accounting for
Stock-Based Compensation,</I> and SFAS&nbsp;No.&nbsp;148,
</DIV>

<P align="center" style="font-size: 10pt;">F-33

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Condensed Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Accounting for Stock-Based Compensation&#151; Transition and
Disclosure, an amendment of FASB Statement No.&nbsp;123</I>,
establishes accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, as amended. The following table
illustrates the effect on net income if the fair-value-based
method had been applied to all outstanding and unvested awards
in the period. Pro forma information regarding net income and
net income per share is required in order to show our net income
as if we had accounted for employee stock options under the fair
value method of SFAS&nbsp;No.&nbsp;123, <I>Accounting for
Stock-Based Compensation</I>, as amended by
SFAS&nbsp;No.&nbsp;148, <I>Accounting for Stock-Based
Compensation&#151; Transition Disclosure</I>. The fair values of
options and shares issued pursuant to our option plan at each
grant date were estimated using the Black-Scholes option pricing
model.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,625,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600,849</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add stock-based employee compensation expense included in
    reported net income, net of tax of $48,224 and $60,220,
    respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,662</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of 73,626 and $50,492, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,580</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85,239</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,585,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,617,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma Basic Income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma Diluted Income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is a party to a consulting agreement with an
affiliate of its majority stockholder for management consulting
services. Included in operating expenses are management fees of
$180,000 and $180,000 for the 39&nbsp;weeks ended
October&nbsp;30, 2004 and November&nbsp;1, 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consulting agreement has a four year term and is subject to
automatic one year renewals each February&nbsp;1, subject to
60&nbsp;days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90&nbsp;days prior notice in the event of
(a)&nbsp;a sale of all or substantially all of our common stock
or assets, (b)&nbsp;a merger or consolidation in which we are
not the surviving corporation or (c)&nbsp;a registered public
offering of our common stock, which includes this offering. It
is expected that both parties to the consulting agreement will
waive any notice requirement for termination upon consummation
of this offering.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(10)</B></TD>
    <TD>
    <B>Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is from time to time involved in various legal
proceedings incidental to the conduct of its business, including
claims by its customers, employees or former employees. The
Company is currently the defendant in two putative collective
action lawsuits commenced after August, 2004 by former employees
under the Fair Labor Standards Act. The plaintiff in each of the
lawsuits is represented by the same law firm, and both suits are
pending in District Court of the United States for the Middle
District of Alabama, Northern Division. Each of the cases is in
its early stages, and the Company is in the process of
evaluating the claims made. While its review of the allegations
is preliminary, the Company believes that its business practices
are, and were during the relevant periods, in compliance with
the law. While the Company is unable to predict the outcome of
these matters, it plans to defend these suits vigorously.
</DIV>

<P align="center" style="font-size: 10pt;">F-34

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<DIV align="center" style="font-size: 12pt;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Condensed Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>39 Weeks Ended October&nbsp;30, 2004 and November&nbsp;1,
2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(11)</B></TD>
    <TD>
    <B>Recently Issued Accounting Standards Not Currently
    Effective</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the FASB issued SFAS No.&nbsp;123 (revised
2004), <I>Share-Based Payment</I>. SFAS&nbsp;No.&nbsp;123R
establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods and
services. SFAS&nbsp;No.&nbsp;123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in share-based payment transactions. Under
SFAS&nbsp;No.&nbsp;123R, the Company, beginning in the third
quarter of 2005, will be required to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant date fair value of the award
(with limited exceptions). The cost will be recognized over the
period during which an employee is required to provide services
in exchange for the award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Currently, the Company discloses the estimated effect on net
income of these share-based payments in the footnotes to the
financial statements. The estimated fair value (cost) of the
share-based payments has historically been determined using the
Black-Scholes pricing model. As of the date of this report, the
Company had not calculated the cost of share-based payments
using the various other methods allowed by
SFAS&nbsp;No.&nbsp;123R and has not yet decided on the method to
be used upon implementation of this standard. The actual
compensation cost resulting from share-based payments to be
included in the Company&#146;s future results of operations may
vary significantly from the amounts currently disclosed in the
footnotes to the financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-35
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<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>[Pictures of the outside and inside of various stores]</B>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<DIV align="center" style="font-size: 16pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y05802y0580200.gif" alt="(CITITRENDS LOGO)">
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 0pt; margin-top: 60pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 56%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B><FONT color="#A32638">PROSPECTUS</FONT></B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<DIV style="width: 56%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 56pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 56pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CIBC World Markets</B>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 41pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Piper Jaffray</B>
</DIV>

<DIV align="center" style="font-size: 16pt;">
<B>SG Cowen &#38; Co.</B>
</DIV>

<DIV align="right" style="font-size: 16pt;">
<B>Wachovia Securities</B>
</DIV>

<DIV align="left" style="font-size: 18pt;">
<DIV style="width: 100%; border-top: 1.5pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>You should rely only on information contained in this
prospectus. No dealer, salesperson or other person is authorized
to give information that is not contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in
this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (25&nbsp;days after the commencement of the offering), all
dealers that buy, sell or trade the common stock may be required
to deliver a prospectus, regardless of whether they are
participating in the offering. This is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Part&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Information Not Required in Prospectus</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by the
registrant in connection with the sale of the securities being
registered. All amounts are estimates except the SEC
registration fee, the NASD fee and the Nasdaq National Market
listing fee.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="85%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SEC Registration fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,767.75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,250.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nasdaq national market listing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer agent and registrar fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be provided by amendment</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As permitted by Section&nbsp;102(b)(7) of the Delaware General
Corporation Law, we have adopted provisions in our second
amended and restated certificate of incorporation and amended
and restated by-laws that limit or eliminate the personal
liability of our directors for a breach of their fiduciary duty
of care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information
reasonable available to them. Consequently, a director will not
be personally liable to us or our stockholders for monetary
damages or breach of fiduciary duty as a director except for:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the fullest extent permitted under Delaware law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As permitted by Section&nbsp;145 of the Delaware General
Corporation Law, our amended and restated by-laws provide that:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the rights provided in our amended and restated by-laws are not
    exclusive.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our second amended and restated certificate of incorporation,
attached as Exhibit&nbsp;3.1 hereto, and our amended and
restated by-laws, attached as Exhibit&nbsp;3.2 hereto, provide
for the indemnification provisions described above and elsewhere
herein. In addition, we have purchased a policy of
directors&#146; and officers&#146;
</DIV>

<P align="center" style="font-size: 10pt;">II-1

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
liability insurance that insures our directors and officers
against the cost of defense, settlement or payment of a judgment
in some circumstances. These indemnification provisions may be
sufficiently broad to permit indemnification of our officers and
directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The form of Underwriting Agreement, attached as Exhibit&nbsp;1.1
hereto, provides for indemnification by the underwriters of us
and our officers and directors for specified liabilities,
including matters arising under the Securities Act of 1933, as
amended.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Set forth below in reverse chronological order is information
regarding the number of shares of capital stock and options
issued by us
since &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2002. Also included is the consideration if any received by us
for the securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There was no public offering in any such transaction and we
believe that each transaction was exempt from the registration
requirements of the Securities Act of 1933, as amended, by
reason of Regulation&nbsp;D and Section&nbsp;4(2) of the
1933&nbsp;Act, based on the private nature of the transactions
and the financial sophistication of the purchasers, all of whom
had access to complete information concerning us and acquired
the securities for investment and not with a view to the
distribution thereof. In addition, we believe that the
transactions described below with respect to the issuance of
option grants and warrants to our employees and directors were
exempt from registration requirements of the 1933&nbsp;Act by
reason of Rule&nbsp;701 promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Common Stock</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2004, a former employee of ours, resigned with
600&nbsp;shares of vested stock options. The employee exercised
his options in March 2004 pursuant to the provisions of our
Amended and Restated 1999 Stock Option Plan and we issued to him
shares of our common stock. In September 2004, pursuant to the
terms and conditions of our Amended and Restated 1999 Stock
Option Plan, we repurchased the 600&nbsp;shares of common stock
from him for the then fair market value of the common stock. As
consideration we issued him a non-negotiable three year junior
subordinated note in the amount of $106,800. The common shares
we repurchased are currently held by us in treasury stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>Options</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In August 2003, our board of directors adopted a plan whereby
stock options are to be issued to Hampshire Equity Partners, as
well as other common stockholders, in amounts necessary to
prevent the dilution of their ownership percentage as a result
of the issuance of stock options to our other employees. Options
granted under this anti-dilution plan are to be issued at the
estimated fair market value of our common stock on the date of
grant and vest immediately. During fiscal 2003, we issued stock
options for 1,503&nbsp;shares of common stock under this
anti-dilution plan, 1,425 of which were issued to Hampshire
Equity Partners. Because Hampshire Equity Partners does not
qualify as an employee, FIN&nbsp;No.&nbsp;44 required us to
recognize a charge to earnings during fiscal 2004 of $38,832.
The fair value of the vested options was determined using the
Black-Scholes option-pricing model.
</DIV>

<P align="center" style="font-size: 10pt;">II-2

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exhibits.</I>&nbsp;The
following exhibits are filed as part of this registration
statement:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Certificate of Incorporation</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated By-laws</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen certificate for shares of common stock, $.01&nbsp;par
    value*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement by and between R.&nbsp;Edward Anderson and Citi
    Trends, Inc., dated November&nbsp;16, 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment and Non-Interference Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of April&nbsp;13, 1999</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to the Employment and Non-Interference
    Agreement by and between George Bellino and Citi Trends, Inc.,
    dated as of December 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Loan and Security Agreement, dated as of April&nbsp;2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Loan and Security Agreement, dated as of
    June&nbsp;28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Loan and Security Agreement, dated as of
    November&nbsp;30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Loan and Security Agreement, dated as of
    February&nbsp;9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated as of September&nbsp;30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $3.0&nbsp;Million Promissory Note of Citi Trends, Inc. payable
    to Bank of America issued on June&nbsp;21, 2004</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of 2005 Long Term Incentive Plan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nominating Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners&nbsp;II, L.P.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners&nbsp;II, L.P.*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Termination Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and between Citi Trends, Inc. and Hampshire Management
    Company LLC*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Citi Trends, Inc. Code of Business Conduct and Ethics*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Paul Hastings, Janofsky&nbsp;&#38; Walker LLP
    (included in Exhibit&nbsp;5.1)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on the signature page hereto)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 33%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;">
*&nbsp;To be filed by amendment.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of determining any
    liability under the Securities Act of 1933, as amended, the
    information omitted from the form of prospectus filed as part of
    this registration statement in reliance upon Rule&nbsp;430A and
    contained in a form of prospectus filed by the registrant
    pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the
    Securities Act of 1933, as amended, shall be deemed to be part
    of this registration statement as of the time it was declared
    effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purpose of determining
    any liability under the Securities Act of 1933, as amended, each
    post-effective amendment that contains a form of prospectus
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-4
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Signatures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New
York, on the 28th&nbsp;of February, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    CITI TRENDS, INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">R. Edward Anderson
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R. Edward Anderson</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Chief Executive
    Officer</I></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Power of Attorney</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Each person whose signature appears below in so signing also
makes, constitutes and appoints R.&nbsp;Edward Anderson and
Thomas W. Stoltz, and each of them, his or her true and lawful
attorney-in-fact, with full power of substitution, for him or
her in any and all capacities, to execute and cause to be filed
with the Securities and Exchange Commission any and all
amendments and post-effective amendments to this Registration
Statement, with exhibits thereto and other documents in
connection therewith, and ratifies and confirms all that said
attorney-in-fact or his substitute or substitutes may do or
cause to be done.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">R. Edward Anderson<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>R.
    Edward Anderson</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer (Principal Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Thomas W. Stoltz<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Thomas
    W. Stoltz</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer (Principal Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">George A. Bellino<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>George
    A. Bellino</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Gregory P. Flynn<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Gregory
    P. Flynn</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Laurens M. Goff<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Laurens
    M. Goff</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">John S. Lupo<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>John
    S. Lupo</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Tracy L. Noll<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Tracy
    L. Noll</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibit&nbsp;Index</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Certificate of Incorporation</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated By-laws</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen certificate for shares of common stock, $.01&nbsp;par
    value*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement by and between R.&nbsp;Edward Anderson and Citi
    Trends, Inc., dated November&nbsp;16, 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment and Non-Interference Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of April&nbsp;13, 1999</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 to the Employment and Non-Interference
    Agreement by and between George Bellino and Citi Trends, Inc.,
    dated as of December 2001</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Loan and Security Agreement, dated as of April&nbsp;2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Loan and Security Agreement, dated as of
    June&nbsp;28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Loan and Security Agreement, dated as of
    November&nbsp;30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Loan and Security Agreement, dated as of
    February&nbsp;9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated as of September&nbsp;30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $3.0&nbsp;Million Promissory Note of Citi Trends, Inc. payable
    to Bank of America issued on June&nbsp;21, 2004</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of 2005 Long Term Incentive Plan</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nominating Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners&nbsp;II, L.P.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners&nbsp;II, L.P.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Termination Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and between Citi Trends, Inc. and Hampshire Management
    Company LLC*</TD>
</TR>

</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Citi Trends, Inc. Code of Business Conduct and Ethics*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Paul Hastings, Janofsky&nbsp;&#38; Walker LLP
    (included in Exhibit&nbsp;5.1)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
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    <TD>&nbsp;</TD>
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    Power of Attorney (included on the signature page hereto)</TD>
</TR>

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*&nbsp;To be filed by amendment.
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{"company-data": {"conformed-name": "Citi Trends Inc", "cik": "0001318484", "irs-number": "522150697"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-123028", "film-number": "05643119"}, "business-address": {"street1": "102 FAHM STREET", "city": "SAVANNAH", "state": "GA", "zip": "31401", "phone": "912-236-1561"}, "mail-address": {"street1": "102 FAHM STREET", "city": "SAVANNAH", "state": "GA", "zip": "31401"}}
CITI TRENDS, INC.
Table of Contents
As filed with the Securities and Exchange Commission on
February 28, 2005
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
CITI TRENDS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
5600
52-2150697
(State or other jurisdiction of
incorporation or organization)
(Primary standard industrial
classification code number)
(IRS employer
identification number)
102 Fahm Street
Savannah, Georgia 31401
(912) 236-1561
(Address, including zip code, and telephone number, including
area code, of
registrant's principal executive offices)
R. Edward Anderson
Chief Executive Officer
Citi Trends, Inc.
102 Fahm Street
Savannah, Georgia 31401
(912) 236-1561
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William F. Schwitter, Esq.
Richard C. Tilghman, Jr., Esq.
Paul, Hastings, Janofsky & Walker LLP
Wm. David Chalk, Esq.
75 East 55th Street
DLA Piper Rudnick Gray Cary US LLP
New York, New York 10022
6225 Smith Avenue
(212) 318-6000
Baltimore, Maryland 21209
(212) 319-4090 (fax)
(410) 580-3000
(410) 580-3001 (fax)
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this Form is a post effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum
Amount of
Securities to be Registered
Aggregate Offering Price(1)(2)
Registration Fee
Common Stock, par value $.01 per share
$57,500,000
$6,767.75
(1)
Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule 457(o) under the Securities Act of
    1933, as amended.
(2)
Includes shares of common stock subject to the
    underwriters' over-allotment option.
The Registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended or until the
registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Table of Contents
The information
in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and we
are not soliciting offers to buy these securities in any state
where the offer or sale is not
permitted.
Subject To Completion, Dated
February 28, 2005
Preliminary Prospectus
Shares
Common Stock
$             per
share
This is an initial public offering of shares of common stock of
Citi Trends, Inc. Citi Trends is
offering                      shares
of common stock and the selling stockholders identified in this
prospectus are
offering                      shares
of common stock.
We anticipate that the initial public offering price will be
between
$          and
$           per
share. The market price of the shares after the offering may be
higher or lower than the offering price.
We intend to list our common stock on the Nasdaq National Market
under the symbol "CTRN."
Investing in the common stock involves
risks. See "Risk Factors" beginning on
page 6.
Per Share
Total
Price to the public
$
$
Underwriting discount
$
$
Proceeds to Citi Trends, Inc.
$
$
Proceeds to the selling stockholders
$
$
We and the selling stockholders have granted an option to the
underwriters to purchase up to a maximum
of                     additional
shares of our common stock within 30 days following the
date of this prospectus to cover over-allotments, if any. The
underwriters may purchase up to  of the additional shares
from us and up
to                of
the additional shares from the selling stockholders.
The underwriters expect to deliver the shares of common stock to
purchasers on or
about                     ,
2005.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a
criminal offense.
CIBC World Markets
Piper Jaffray
SG Cowen & Co.
Wachovia Securities
The date of this prospectus
is                     ,
2005
Table of Contents
Table of Contents
[Pictures of the outside and inside of various stores]
Table of Contents
Page
Prospectus Summary
1
Risk Factors
6
Special Note Regarding Forward-Looking
    Statements
16
Use of Proceeds
17
Dividend Policy
17
Capitalization
18
Dilution
19
Selected Financial and Operating Data
20
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
22
Business
33
Management
42
Related Party Transactions
55
Principal and Selling Stockholders
57
Description of Capital Stock
58
Shares Eligible for Future Sale
62
Underwriting
64
Legal Matters
67
Experts
67
Where You Can Find More Information
67
Index to Financial Statements
F-1
FORM OF UNDERWRITING AGREEMENT
FORM OF SECOND AMENDED & RESTATED CERTIFICATE OF INCORPORATION
FORM OF AMENDED & RESTATED BY-LAWS
LETTER AGREEMENT
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
AMENDED EMPLOYMENT & NON-INTERFERENCE AGREEMENT
LOAN AND SECURITY AGREEMENT
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
LEASE AGREEMENT
BANK OF AMERICA REVOLVING LINE OF CREDIT
FORM OF 2005 LONG TERM STOCK INCENTIVE PLAN
CONSENT OF KPMG LLP
You should rely only on the information contained in this
prospectus. Neither we, the selling stockholders nor the
underwriters have authorized anyone to provide you with
information different from, or in addition to, that contained in
this prospectus. We and the selling stockholders are offering to
sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our common stock.
"Citi Trends," "Citi Club," "Citi
Knights," "Citi Nite," "Citi Steps,"
"Citi Trends Fashion for Less," "Citi
Women," "CT Sport," "Vintage Harlem"
and "Univer Soul" are registered trademarks of Citi
Trends, Inc. We also have applications pending with the U.S.
Patent and Trademark Office for additional trademarks. All
rights are reserved. All other trademarks, service marks or
trade names referred to in this prospectus are the property of
their respective owners.
Table of Contents
Prospectus Summary
This summary highlights information contained in other parts
of this prospectus, and because it is only a summary, it does
not contain all of the information that you should consider
before buying shares. You should read the entire prospectus
carefully. All share numbers in this prospectus reflect
a                     -for-one
stock split of our common stock, which will occur simultaneously
with the closing of this offering. Our fiscal year ends on the
Saturday closest to January 31, and, except as otherwise
provided, references in this prospectus to a fiscal year mean
the 52- or 53-week period ended on the Saturday closest to
January 31 of the succeeding year. Fiscal 2004, for example,
refers to the fiscal year ending January 29, 2005.
Citi Trends, Inc.
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. We offer quality,
branded merchandise for men, women and children, including
products from nationally recognized brands, as well as private
label products and a limited assortment of home décor
items. Our merchandise offerings are designed to appeal to the
preferences of fashion conscious consumers, particularly
African-Americans. Through strong relationships with our
suppliers, we are able to offer our products at compelling
values, with nationally recognized branded merchandise offered
at 20% to 60% discounts to department and specialty stores'
regular prices.
We currently operate 200 stores in both urban and rural markets
in 12 states. Originally our stores were located in the
Southeast, and we have recently expanded into the Mid-Atlantic
region and Texas. Our stores average approximately
8,500 square feet of selling space, and our stores opened
since the beginning of fiscal 2003 average approximately
10,300 square feet of selling space. Our stores are
typically located in neighborhood strip shopping centers that
are convenient to low and moderate income consumers. These store
locations typically have attractive lease terms, and along with
our differentiated merchandise assortment, compelling value
proposition and efficient operating model, generate strong
returns on store investments. Our new stores typically pay back
our unit investment within 12 to 14 months.
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners II, L.P., or
Hampshire Equity Partners, a private equity firm. Our management
team has implemented several strategies designed to
differentiate our stores, improve our operating and financial
performance and position us for growth, including:
•
focusing our merchandise offerings on more urban fashion apparel
    for the entire family, with a greater emphasis on nationally
    recognized brands;
•
accelerating and completing the remodeling of virtually all of
    the 85 stores acquired in 1999;
•
refining our new store model and implementing a real estate
    approach focused on locating stores in low to moderate income
    neighborhoods close to our core customers;
•
rebranding our stores and our company to Citi Trends;
•
investing in infrastructure to support growth; and
•
implementing an aggressive growth strategy, including entering
    several new markets such as Houston, Norfolk and, most recently,
    Baltimore and Washington, D.C.
These strategies have enabled us to grow from 85 stores at the
time of the acquisition to 200 stores as of January 29,
2005 and generate comparable store sales increases in each of
the past four fiscal years. Our net sales increased from
$80.9 million in fiscal 2000 to $157.2 million in
fiscal 2003, representing a compound annual growth rate of
approximately 25%, and from $108.0 million in the 39-week
period ended November 1, 2003 to $137.1 million in the
39-week period ended October 30, 2004. Net income has
increased from $1.2 million in fiscal 2000 to
$5.9 million in fiscal 2003.
1
Table of Contents
Our goal is to be the leading value-priced retailer of urban
fashion apparel and accessories. We believe the following
business strengths differentiate us from our competitors and are
important to our success:
•
focus on providing a timely and fashionable assortment of urban
    apparel and accessories;
•
superior value proposition, with nationally recognized brands
    offered at 20% to 60% discounts to department and specialty
    stores' regular prices;
•
merchandise mix that appeals to the entire family,
    distinguishing our stores from many competitors that focus only
    on women and reducing our exposure to fashion trends and demand
    cycles in any single category;
•
strong and flexible sourcing relationships managed by our
    20-member buying team, staffed by individuals with an average of
    more than 20 years of retail experience;
•
attractive fashion presentation and store environment similar to
    a specialty apparel retailer, rather than a typical off-price
    store; and
•
highly profitable store model.
Our growth strategy is to open stores in new and existing
markets, as well as to increase sales in existing stores. Adding
stores in the markets we currently serve enables us to benefit
from enhanced name recognition and achieve advertising and
operating synergies, and entering new markets opens additional
growth opportunities. We believe that we benefit from attractive
store level economics. Our new stores opened in fiscal 2002 and
fiscal 2003 generated average first full year cash return on
investment of approximately 100%, and we expect for stores
opened in fiscal 2004 to produce similar results. In each of
fiscal 2005 and fiscal 2006, we intend to open an additional 40
stores, approximately 70% of which will be located in states we
currently serve. We intend to increase comparable store sales
primarily through merchandising enhancements and the expansion
of product categories such as home décor and intimate
apparel.
Industry
We seek to serve low to moderate income consumers generally and,
particularly, to appeal to the preferences of those
African-American and other consumers who want a differentiated,
urban merchandise mix. We believe this market is underserved by
existing retailers and benefits from several favorable
characteristics including:
•
a growing market with favorable demographics;
•
our core consumers' significant spending on
    apparel; and
•
the expanding appeal of urban apparel brands.
As a result of these characteristics, we believe there is
significant consumer demand for a value-priced retailer that
combines the operating efficiencies of a large retail chain with
fashion and sourcing expertise and is focused on meeting the
needs of low to moderate income consumers generally and
African-American consumers specifically.
Corporate Information
We are incorporated in Delaware, and our principal executive
offices are located at 102 Fahm Street, Savannah, Georgia 31401,
and our telephone number is (912) 236-1561. Our website
address is www.cititrends.com. Information contained in, or
accessible through, our website does not constitute part of this
prospectus.
2
Table of Contents
The Offering
Common stock offered by Citi Trends, Inc.
shares
Common stock offered by the selling stockholders
shares
Common stock to be outstanding after the offering
shares
Use of proceeds
We estimate that the net proceeds to be received by us from this
    offering will be approximately
    $           million,
    after deducting underwriting discounts and commissions and
    offering expenses payable by us. Approximately
    $           million
    of these net proceeds will be used to redeem all of our
    outstanding Series A preferred stock, $.01 par value per
    share, or Series A Preferred Stock, and to pay all accrued
    and unpaid dividends thereon, and
    $           million
    will be used to repay outstanding indebtedness. We expect that
    the remainder of our net proceeds will be used for new store
    openings, the acquisition or design and construction of a new
    distribution center in fiscal 2006 and general corporate
    purposes. We will not receive any of the proceeds from the sale
    of shares of common stock offered by the selling stockholders.
Proposed Nasdaq National Market Symbol
"CTRN"
Unless otherwise stated, information in this prospectus assumes:
•
a                     for-one
    stock split of our common stock, which will occur simultaneously
    with the completion of this offering;
•
no exercise of outstanding options to
    purchase                      shares
    of common stock outstanding as
    of                     ,
    2005; and
•
no exercise of the underwriters' over-allotment option.
3
Table of Contents
Summary Financial and Operating Data
The following table provides summary financial and operating
data for each of the fiscal years in the five-year period ended
January 31, 2004 and for each of the 39-week periods ended
November 1, 2003 and October 30, 2004, including:
(a) our statement of operations data for each such period,
(b) additional operating data for each such period and
(c) our balance sheet data as of October 30, 2004, on
an actual basis and as adjusted to give effect to the receipt
and application of the net proceeds from this offering. The
statement of operations data for fiscal 2002 and fiscal 2003 are
derived from financial statements included elsewhere in this
prospectus that have been audited by KPMG LLP, independent
registered public accountants. The statement of operations data
for fiscal 2001 are derived from our audited financial
statements included elsewhere in this prospectus. The statement
of operations data for fiscal 1999 and fiscal 2000 are derived
from our audited financial statements that are not included in
this prospectus. The statement of operations data for the
39-week periods ended November 1, 2003 and October 30,
2004 and the balance sheet data as of October 30, 2004 are
derived from our unaudited condensed interim financial
statements included elsewhere in this prospectus. In the opinion
of management, these unaudited condensed interim financial
statements have been prepared on the same basis as the audited
financial statements and reflect all adjustments (consisting
only of normal recurring adjustments) and fairly present the
financial information for these periods. The summary financial
and operating data set forth below should be read in conjunction
with, and are qualified in their entirety by reference to, the
sections of this prospectus entitled "Selected Financial
and Operating Data" and "Management's Discussion
and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes
included elsewhere in this prospectus. Historical results are
not necessarily indicative of results to be expected for any
future period.
Fiscal Year Ended
(1)
39 Weeks Ended
January 29,
February 3,
February 2,
February 1,
January 31,
November 1,
October 30,
2000
(2)
2001
2002
2003
2004
2003
2004
(dollars in thousands, except per share data amounts and additional operating data)
Statement of Operations Data:
Net sales
$
42,220
$
80,939
$
97,933
$
124,951
$
157,198
$
107,952
$
137,129
Cost of sales
27,717
51,762
62,050
77,807
98,145
67,466
86,288
Gross profit
14,503
29,177
35,883
47,144
59,053
40,486
50,841
Selling, general and administrative
expenses
14,976
26,834
31,405
38,760
48,845
35,932
46,014
Income (loss) from operations
(472
)
2,343
4,478
8,385
10,208
4,554
4,827
Interest
    expense
(3)
172
787
455
256
563
315
558
Income (loss) before
income taxes
(645
)
1,556
4,023
8,129
9,645
4,239
4,269
Income tax expense
19
358
1,566
3,101
3,727
1,638
1,644
Net income (loss)
$
(664
)
$
1,198
$
2,457
$
5,028
$
5,918
$
2,601
$
2,625
Net income per
common share:
Basic
$
$
$
$
$
$
$
Diluted
$
$
$
$
$
$
$
Weighted average shares used to compute net income per share:
Basic
Diluted
Additional Operating Data:
Number of stores:
Opened during period
-
23
12
16
25
23
35
Closed during period
-
0
4
2
1
1
1
Open at end of period
92
115
123
137
161
159
195
Comparable store sales
    increase
(4)
-
17.6%
6.5%
14.6%
5.5%
5.9%
2.3%
(footnotes on following page)
4
Table of Contents
As of October 30, 2004
Actual
As Adjusted
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
2,156
$
Total assets
60,908
Total liabilities
41,787
Total stockholders' equity
19,121
(1)
Our fiscal year ends on the Saturday closest to January 31 of
    each year. Fiscal years 2001, 2002 and 2003 comprise
    52 weeks. Fiscal year 2000 comprises 53 weeks.
(2)
The fiscal year ended January 29, 2000 consists only of the
    period from April 13, 1999 (the date we were acquired by
    Hampshire Equity Partners) to January 29, 2000. The period
    contained 41 weeks and five days.
(3)
Our Series A Preferred Stock, which will be redeemed using
    a portion of the net proceeds from this offering, was
    reclassified as debt as of the second quarter of fiscal 2003, in
    accordance with the Financial Accounting Standards Board's
    ("FASB") Statement of Financial Accounting Standards
    ("SFAS") No. 150,
Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity
. The amount of dividends treated as interest
    expense in fiscal 2003 was $189,000 and none in fiscal 2002. For
    the 39-week periods ended October 30, 2004 and
    November 1, 2003, the amount of dividends treated as
    interest expense was $243,000 and $108,000, respectively.
(4)
Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.
5
Table of Contents
Risk Factors
An investment in shares of our common stock involves a high
degree of risk. You should consider carefully the following
information about these risks, together with the other
information contained in this prospectus, before you decide
whether to buy our common stock. The occurrence of any of the
following risks could have a material adverse effect on our
business, financial condition and results of operations.
Risks Relating to Citi Trends, Inc.
Our success depends on our ability to anticipate, identify
    and respond rapidly to changes in consumers' fashion
    tastes, and our failure to evaluate adequately fashion trends
    could have a material adverse effect on our business, financial
    condition and results of operations.
The apparel industry in general and our core customer market in
particular are subject to rapidly evolving fashion trends and
shifting consumer demands. Accordingly, our success is heavily
dependent on our ability to anticipate, identify and capitalize
on emerging fashion trends, including products, styles and
materials that will appeal to our target consumers. Our failure
to anticipate, identify or react appropriately to changes in
styles, trends, brand preferences or desired image preferences
is likely to lead to lower demand for our merchandise, which
could cause, among other things, sales declines, excess
inventories and higher markdowns. The inaccuracy of our
forecasts regarding fashion trends could have a material adverse
effect on our business, financial condition and results of
operations.
The success of our growth strategy depends on our ability to
    add a significant number of new stores, and we may be unable to
    do so. Also, the addition of a significant number of stores
    could strain our resources and cause the performance of our
    existing stores to suffer.
Our ability to continue to increase our net sales and earnings
depends, in large part, on opening new stores and operating our
new and existing stores profitably. We opened 40 new stores in
fiscal 2004 and 25 new stores in fiscal 2003, and we intend to
open 40 new stores in each of fiscal 2005 and fiscal 2006. If we
are unable to open all of these stores or operate them
profitability, we may not achieve our forecasted sales and
earnings growth targets. This could have a material adverse
effect on our financial condition and results of operation as
well as cause a significant decline in the market price of our
common stock.
The success of our growth strategy is dependent upon, among
other things:
•
identifying suitable markets and sites within those markets for
    new store locations;
•
negotiating acceptable lease terms for new store locations;
•
hiring, training and retaining competent sales and store
    management personnel;
•
obtaining adequate capital;
•
effectively managing higher levels of inventory to meet the
    needs of new and existing stores on a timely basis;
•
maintaining the appropriate proportion of new stores to existing
    stores in a particular market so that sales at existing stores
    do not decline due to a lack of new customers and a dispersion
    of existing customers;
•
fostering existing and new relationships with suppliers capable
    of providing us with a sufficient amount of merchandise to meet
    our growing needs as we increase the number of our stores;
•
successfully integrating the new stores into our existing
    operations and expanding our infrastructure to accommodate our
    growing number of stores; and
•
developing and operating additional distribution capacity as we
    increase the number of stores.
Growth of our store base will place increased demands on our
operating, managerial and administrative resources and may lead
to management and operating inefficiencies. These demands and
inefficiencies may cause deterioration in the financial
performance of our individual stores and, therefore, our entire
business.
6
Table of Contents
Expansion into new markets may present risks different from
    our existing markets, and we may have difficulty overcoming
    them.
Our growth strategy includes entry into new geographic markets,
which may:
•
present competitive and distribution challenges that are
    different from those we currently face;
•
require us to alter our merchandise to appeal to fashion
    preferences in new markets that are different from those in our
    existing markets;
•
require us to alter our merchandise selection to meet cultural
    and/or climate differences, such as colder winter weather than
    in the southeastern United States where most of our current
    stores are located;
•
result in higher costs, such as rent, distribution, labor and
    advertising; and
•
cause the stores we open in new markets to achieve lower sales
    because consumers are not familiar with the Citi Trends name and
    concept in new markets.
The opening of stores in new markets could have a material
adverse effect on our business, financial condition and results
of operations if the new stores do not perform at comparable
levels to our current stores or if we are unable to open new
stores on a timely basis.
Our net sales, inventory levels and earnings fluctuate on a
    seasonal basis, which makes our business more susceptible to
    adverse events that occur during those seasons.
Our net sales and earnings are disproportionately higher during
the first and fourth quarters each year due to the importance of
the spring selling season, which includes Easter, and the fall
selling season, which includes Christmas. Factors negatively
affecting us during the first and fourth quarters, including
adverse weather and unfavorable economic conditions, will have a
greater adverse effect on our financial condition than if our
business were less seasonal.
In order to prepare for the spring and fall selling seasons, we
must order and keep in stock significantly more merchandise than
during other parts of the year. This seasonality makes our
business more susceptible to the risk that our inventory will
not satisfy actual consumer demand. Any unanticipated demand
imbalances during these peak shopping seasons could require us
either to sell excess inventory at a substantial markdown or
fail to satisfy our consumers. In either event, our net sales
and gross margins may be lower than historical levels, which
could have a material adverse effect on our business, financial
condition and results of operations.
Our business and growth strategies depend on our ability to
    obtain a sufficient amount of merchandise, and our failure to
    meet current and increased merchandising needs could have a
    material adverse effect on our business, financial condition and
    results of operations.
Our relationships with our suppliers generally are not on a
contractual basis and do not guarantee us adequate supplies,
quality or acceptable pricing on a long-term basis. Most of our
suppliers could discontinue selling to us at any time. In
addition, our growth strategy presents potential supply problems
if our existing suppliers are unable to meet our increased needs
and we cannot locate alternative sources of supply. If we lose
the services of one or more of our significant suppliers or one
or more of them fail to meet our needs, we may be unable to
obtain replacement merchandise in a timely manner. Any such
unforeseen supply problems could have a material adverse effect
on our business, financial condition and results of operations.
It is important that we establish relationships with reputable
vendors to prevent the possibility that we inadvertently receive
counterfeit brands or unlicensed goods. Although we have a
quality assurance team to check merchandise in an effort to
assure that we purchase only authentic brands and licensed goods
and are careful in selecting our vendors, we may receive
products that we are prohibited from selling or incur liability
for selling counterfeit brands or unlicensed goods, which could
have a material adverse effect on our business, financial
condition and results of operations.
Additionally, some of our suppliers sell us products under
license agreements with other manufacturers or other owners of
the brand or trademark. If any of these licenses is terminated,
we may be unable to obtain replacement merchandise of comparable
fashion appeal or quality, in the same quantities or at the same
prices. This could have a material adverse effect on our
business, financial condition and results of operations.
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We rely on only two distribution centers, one of which also
serves as our corporate headquarters, and our stores are
concentrated in the southeastern United States. Therefore, any
significant disruption to our distribution process or
southeastern retail locations could have a material adverse
effect on our business, financial condition and results of
operations.
Our ability to distribute merchandise to our store locations in
a timely manner is essential to the efficient and profitable
operation of our business. At the center of our distribution
process are our two distribution centers located in Savannah,
Georgia, one of which also serves as our corporate headquarters.
Any natural disaster or other disruption to the operation of
either of these facilities due to fire, hurricane, other natural
disaster or any other cause could damage a significant portion
of our inventory or impair our ability to stock adequately our
stores and process product returns to suppliers.
In addition, Savannah, Georgia and the southeastern United
States are vulnerable to significant damage or destruction from
hurricanes and tropical storms. Although we maintain insurance
on our stores and other facilities, the economic effects of a
natural disaster that affects our distribution centers and/or a
significant number of our stores could have a material adverse
effect on our business, financial condition and results of
operations.
We will need additional distribution capacity in the next two to
three years to support our anticipated growth. Although we
currently intend to acquire or design and construct a new
distribution center in southeastern Georgia during this time
period, there is no assurance that we will be able to acquire or
design and construct such a center in a cost efficient manner.
In order to maintain the efficient operation of our business,
additional centers may need to be located in closer proximity to
the new markets that we enter. In addition, we may have
difficulty finding suitable locations for new distribution
centers, and, if we do, they may be more expensive to operate
than our existing facilities. Our failure to expand our
distribution capacity on a timely basis to keep pace with our
anticipated growth in stores could have a material adverse
effect on our business, financial condition and results of
operations.
Fluctuations in our comparable store sales and quarterly
results of operations could cause the market price of our common
stock to decline substantially.
Our comparable store sales and quarterly results have fluctuated
significantly in the past, and we expect them to continue to
fluctuate in the future. Our comparable store sales and
quarterly results of operations are affected by a variety of
factors, including:
•
fashion trends, including consumer response to new and existing
    styles;
•
seasonal demand for apparel;
•
calendar shifts of holidays;
•
our merchandise mix and the gross margins we achieve on the
    various merchandise we sell;
•
our ability to source, manage and distribute merchandise
    effectively;
•
changes in general economic conditions, the retail sales
    environment and consumer spending patterns;
•
weather conditions, natural disasters, acts of war or terrorism
    and other events outside of our control;
•
actions of our competitors or anchor tenants in the strip
    shopping centers where our stores are located;
•
the timing and effectiveness of our advertising and other
    marketing campaigns;
•
the level of pre-opening expenses associated with new
    stores; and
•
the timing of new store openings and the relative proportion of
    new stores to existing stores.
Since the beginning of fiscal 2003, our quarter-to-quarter
comparable store sales have ranged from an increase of 0.3% to
an increase of 9.6%. In addition, our comparable store sales in
the 39-week period ended October 30, 2004 were lower than
our historical average. We cannot assure you that we will be
able to maintain historical levels of comparable store sales as
we execute our growth strategy and expand our business.
If our comparable store sales and quarterly results fail to meet
the expectations of the market generally, the market price of
our common stock could decline substantially.
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We depend on the experience and expertise of our senior
management team, and the departure of one or more members of
that team could have a material adverse effect on our business,
financial condition and results of operations.
The success of our business is dependent upon the close
supervision of all aspects of our business by our senior
management, particularly the operation of our stores, the
selection of our merchandise and the site selection for new
stores. If we lose the services of R. Edward Anderson, our Chief
Executive Officer, or George Bellino, our President and Chief
Merchandising Officer, or another member of our senior
management team, our business could be adversely affected.
We experience significant employee turnover rates,
particularly among store sales associates and managers, and we
may be unable to hire and retain enough trained employees to
support our existing operations or our planned growth.
Like most retailers, we experience significant employee turnover
rates, particularly among store sales associates and managers,
and our continued growth will require us to hire and train even
more new personnel. We therefore must continually hire and train
new personnel to meet our staffing needs. We constantly compete
for qualified personnel with companies in our industry and in
other industries. A significant increase in the turnover rate
among our store sales associates and managers would increase our
recruiting and training costs and could decrease our operating
efficiency and productivity. If this were to occur, we may not
be able to service our customers as effectively, thus reducing
our ability to continue our growth and to operate our existing
stores as profitably as we have in the past. It is possible that
we will be unable to continue to recruit, hire, train and retain
a sufficient number of qualified store sales associates and
managers to execute our growth strategy or meet the needs of our
current business. Our continued success is dependent on our
ability to attract, retain and motivate quality employees,
including managers, and our failure to do so could have a
material adverse effect on our business, financial condition and
results of operations.
Increases in the minimum wage could have a material adverse
effect on our business, financial condition and results of
operations.
From time to time, legislative proposals are made to increase
the minimum wage in the United States, as well as certain
individual states. Wage rates for many of our employees are at
or slightly above the minimum wage. As federal and/or state
minimum wage rates increase, we may need to increase not only
the wage rates of our minimum wage employees but the wages paid
to our other hourly employees as well. Any increase in the cost
of our labor could have a material adverse effect on our
business, financial condition and results of operations.
Our failure to protect our trademarks could have a negative
effect on our brand image and limit our ability to penetrate new
markets.
We believe that our "Citi Trends" trademark is
integral to our store design and our success in building
consumer loyalty to our brand. We have registered this trademark
with the U.S. Patent and Trademark Office. We have also
registered, or applied for registration of, additional
trademarks with the U.S. Patent and Trademark Office that
we believe are important to our business. We cannot assure you
that these registrations will prevent imitation of our name,
merchandising concept, store design or private label merchandise
or the infringement of our other intellectual property rights by
others. Imitation of our name, concept, store design or
merchandise in a manner that projects lesser quality or carries
a negative connotation of our brand image could have a material
adverse effect on our business, financial condition and results
of operations.
In addition, we cannot assure you that others will not try to
block the manufacture or sale of our private label merchandise
by claiming that our merchandise violates their trademarks or
other proprietary rights. Other entities may have rights to
trademarks that contain the word "Citi" or may have
rights in similar or competing marks for apparel and/or
accessories. If these entities were to claim that we have
infringed on their rights, we may be unable to reach licensing
arrangements with these parties or otherwise reach agreements
for the continued manufacture and sale of our merchandise. This
could have a material adverse effect on our business, financial
condition and results of operations.
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We are subject to various legal proceedings, which could have
a material adverse effect on our business, financial condition
and results of operations, if the outcome of such proceedings
are adverse to us.
We are from time to time involved in various legal proceedings
incidental to the conduct of our business. Such claims may be
made by our customers, employees or former employees. We are
currently the defendant in two putative collective action
lawsuits commenced by former employees under the Fair Labor
Standards Act. The plaintiff in each of the lawsuits is
represented by the same law firm, and both suits are pending in
District Court of the United States for the Middle District of
Alabama, Northern Division. Each of the cases is in its early
stages, and we are in the process of evaluating the claims made.
Our review of the allegations is preliminary, and we plan to
defend these suits vigorously. No assurance can be given about
the outcome of these cases, and if they are adversely decided
they could have a material adverse effect on our business,
financial condition and results of operations.
Our ability to attract consumers to our stores depends on the
success of the strip shopping centers and downtown business
districts where our stores are located.
We locate our stores in strip shopping centers, street front
locations and downtown business districts where we believe our
consumers and potential consumers shop. The success of an
individual store can depend on favorable placement within a
given strip shopping center or business district. We cannot
control the development of alternative shopping destinations
near our existing stores or the availability or cost of real
estate within existing or new shopping destinations. If our
store locations fail to attract sufficient consumer traffic or
we are unable to locate replacement locations on terms
acceptable to us, our business, results of operations, and
financial condition could suffer. If one or more of the anchor
tenants located in the strip shopping centers or business
districts where our stores are located close or leave, or if
there is significant deterioration of the surrounding areas in
which our stores are located, our business, results of
operations and financial condition may be adversely affected.
A key part of our operating policy is to offer merchandise
from nationally recognized brands, and our inability to obtain
this branded merchandise could have a material adverse effect on
our business, financial condition and results of operations.
Approximately 30% of our net sales consist of merchandise of
nationally recognized brands. These brands are also offered by a
number of the major department stores, specialty retailers and
other off-price apparel chains such as The TJX Companies, Inc.,
or TJX Companies, Burlington Coat Factory Warehouse Corp., or
Burlington Coat Factory and Ross Stores, Inc., or Ross Stores.
Many of these retailers have better name recognition among
consumers than we have and purchase significantly more
merchandise from vendors. As a result, these retailers may be
able to purchase branded merchandise that we cannot purchase
because of their name recognition and relationships with
suppliers, or they may be able to purchase branded merchandise
with better pricing concessions than we receive. As a result, we
cannot be certain that we can continue to obtain sufficient
quantities of the most popular items of the nationally
recognized brands at attractive prices. If we cannot, our
business, financial condition and results of operations may be
adversely affected.
The retail apparel market is highly competitive, and our
failure to meet the challenges of our competitors could have a
material adverse effect on our business, financial condition and
results of operations.
The retail apparel market is highly competitive, with few
barriers to entry. We compete against a diverse group of
retailers, including national and local off-price and specialty
retail stores, regional retail chains, traditional department
stores, Internet and other direct retailers, and, to a lesser
extent, mass merchandisers. Our competitors include national
off-price apparel chains such as TJX Companies, Burlington Coat
Factory and Ross Stores. We also compete with mass merchants
such as Wal-Mart and Kmart, general merchandise discount stores
and dollar stores, which offer a variety of products, including
apparel, for the value-conscious consumer. Finally, we compete
with a variety of smaller discount retail chains that only sell
women's products, such as Rainbow, Dots, Fashion Cents, and
Simply Fashions. The level of competition we face from these
retailers varies depending on the product segment, as many of
our competitors do not offer apparel for the entire family. Our
greatest competition is generally in women's apparel. Many
of our competitors are larger than we are and have substantially
greater resources than we do and, as a result, may be able to
adapt better to changing market conditions, exploit new
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opportunities, exert greater pricing pressures on suppliers and
open new stores more quickly and effectively than we can. Our
local and regional competitors have extensive knowledge of the
consumer base and may be able to garner more loyalty from the
consumer than we can. If the consumer base we serve is satisfied
with the selection, quality and price of our competitors'
products, consumers may decide not to shop in our stores.
Additionally, if our existing competitors or other retailers
decide to focus more on our core customers, particularly
African-Americans consumers, we may have greater difficulty in
competing effectively and our business, financial condition and
results of operations could be adversely affected.
The retail industry periodically has experienced consolidation
and other ownership changes. In the future, other United States
or foreign retailers may consolidate, undergo restructurings or
reorganizations, or realign their affiliations. Any of these
developments could result in our competitors increasing their
buying power or market visibility. These developments may cause
us to lose market share and could have a material adverse effect
on our business, financial condition and results of operations.
We are in the process of upgrading our website to enable
Internet sales of selected urban branded apparel provided by
third parties. While we are performing our upgrade, the loss of
consumers to online competitors could have a material adverse
effect on our business, financial condition and results of
operations.
Changes in the regulatory environment governing our business
could have a material adverse effect on our business, financial
condition and results of operations.
We are subject to a wide range of laws and regulations related
to the operation of our business. These include
truth-in-advertising, customs, consumer protection, zoning,
occupancy and other laws that regulate retailers generally
and/or govern the importation, promotion and sale of
merchandise, and the operation of retail stores and warehouse
facilities. Although we monitor changes in these laws,
violations by our employees, importers, buying agents,
manufacturers or distributors could result in delays in
shipments and receipt of goods and could subject us to fines or
other penalties, any of which could have a material adverse
effect on our business, financial condition and results of
operations.
Our business is sensitive to general economic conditions and
consumer spending patterns, and adverse changes in these
conditions or spending patterns could have a material adverse
effect on our business, financial condition and results of
operations.
Downturns, or the expectation of a downturn, in general economic
conditions could adversely affect consumer spending patterns and
our sales and results of operations. Because apparel generally
is a discretionary purchase, declines in consumer spending
patterns may have a more negative effect on apparel retailers
than some other retailers. Therefore, we may not be able to
maintain our historical rate of growth in revenues and earnings,
or remain as profitable, if there is a decline in consumer
spending patterns. In addition, since the majority of our stores
are located in the southeastern United States, our operations
are more susceptible to regional factors than the operations of
our more geographically diversified competitors. Therefore, any
adverse economic conditions that have a disproportionate effect
on the southeastern United States could have a greater negative
effect on our business, financial condition and results of
operations than on retailers with a more geographically
diversified store base.
We depend on our management information systems to operate
our business efficiently, and we rely on third parties for
upgrading and maintaining these systems. Any failure of these
systems or the inability of third parties to continue to upgrade
and maintain the systems could have a material adverse effect on
our business, financial condition and results of operations.
We depend on the accuracy, reliability and proper functioning of
our management information systems, including systems used to
track our sales and facilitate inventory management. We also
rely on our management information systems for merchandise
planning, replenishment and markdowns, and other key business
functions. These functions enhance our ability to optimize sales
while limiting markdowns and reducing inventory risk through
properly marking down slow-selling styles, reordering existing
styles and effectively distributing new inventory to our stores.
We do not currently have redundant systems for all functions
performed by our management information systems. Any
interruption in these systems could impair our ability to manage
our inventory
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effectively, which could have a material adverse effect on our
business, financial condition and results of operations. To
support our growth, we will need to expand our management
information systems, and our failure to link and maintain these
systems adequately could have a material adverse effect on our
business, financial condition and results of operations.
We depend on third-party suppliers to maintain and periodically
upgrade our management information systems, including the
software programs supporting our inventory management functions.
This software is licensed to us by third-party suppliers. If any
of these suppliers is unable to continue to maintain and upgrade
these software programs and if we are unable to convert to
alternate systems in an efficient and timely manner, it could
result in a material adverse effect on our business, financial
condition and results of operations.
Our failure to implement and maintain effective internal
controls in our business could have a material adverse effect on
our business, financial condition, results of operations and
stock price.
We are in the process of documenting and testing our internal
control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002.
Section 404 requires annual management assessments of the
effectiveness of our internal controls over financial reporting
and a report by our independent auditors addressing these
assessments. We will be required to comply with Section 404
no later than the time we file our annual report for fiscal 2005
with the Securities and Exchange Commission, or the Commission.
During the course of our testing, we may identify deficiencies
in our internal controls, which we may be unable to correct in
time to meet the deadline imposed by the Sarbanes-Oxley Act of
2002. If we fail to achieve and maintain the adequacy of our
internal controls in accordance with applicable standards as
then in effect supplemented or amended from time to time, we may
be unable to conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with
Section 404. Moreover, effective internal controls,
particularly those related to revenue recognition, are necessary
for us to produce reliable financial reports and are important
in our effort to prevent financial fraud. If we cannot produce
reliable financial reports or prevent fraud, our business,
financial condition and results of operations could be harmed,
investors could lose confidence in our reported financial
information, the market price of our stock could decline
significantly and we may be unable to obtain additional
financing to operate and expand our business.
We may need additional capital to fund future growth and may
not be able to obtain it on acceptable terms or at all.
We may need to raise additional debt or equity capital in the
future to open new stores, to respond to competitive pressures
or to respond to unforeseen financial requirements. We may not
be able to obtain additional capital on commercially reasonable
terms or at all. If this were to occur, we could be forced to
incur indebtedness with above-market interest rates or with
substantial restrictive covenants, issue equity securities that
dilute the ownership interests of existing stockholders or scale
back our operations and/or store growth strategy. If we cannot
find adequate capital on acceptable terms, we could be forced to
curtail our growth plans and/ or our existing operations, which
could have a material adverse effect on our business, financial
condition and our results of operations.
Adverse trade restrictions may disrupt our supply of
merchandise. We also face various risks because much of our
merchandise is imported from abroad.
We cannot predict whether any of the countries in which our
merchandise currently is manufactured or may be manufactured in
the future will be subject to new trade restrictions imposed by
the United States or other foreign governments, including the
likelihood, type or effect of any such restrictions. Trade
restrictions, including increased tariffs or quotas, embargoes,
and customs restrictions, against apparel items, as well as
United States or foreign labor strikes, work stoppages or
boycotts, could increase the cost or reduce the supply of
apparel available to us and have a material adverse effect on
our business, financial condition and results of operations.
We purchase the products we sell directly from over 1,000
vendors, and a substantial portion of this merchandise is
manufactured outside of the United States and imported by our
vendors. Our vendors' imports may be subject to existing or
future duties and quotas, and they may face competition from
other companies for production facilities, import quota capacity
and shipping capacity. We also face a variety of other risks
generally associated
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with relying on vendors that do business in foreign markets and
import merchandise from abroad, such as: (i) political
instability; (ii) enhanced security measures at United
States ports, which could delay delivery of imports;
(iii) imposition of new or supplemental duties, taxes, and
other charges on imports; (iv) delayed receipt or
non-delivery of goods due to the failure of foreign-source
suppliers to comply with applicable import regulations;
(v) delayed receipt or non-delivery of goods due to
organized labor strikes or unexpected or significant port
congestion at United States ports; and (vi) local business
practice and political issues, including issues relating to
compliance with domestic or international labor standards which
may result in adverse publicity. The United States may impose
new initiatives that adversely affect the trading status of
countries where apparel is manufactured. These initiatives may
include retaliatory duties or other trade sanctions that, if
enacted, would increase the cost of products imported from
countries where our vendors acquire merchandise. Any of these
factors could have a material adverse effect on our business,
financial condition and result of operations.
The removal of import quotas may adversely affect our
business.
On January 1, 2005, in accordance with the World Trade
Organization, or the WTO, Agreement on Textiles and Clothing,
the import quotas on textiles and clothing manufactured by
countries that are members of the WTO were eliminated. While the
exact impact of this quota removal is uncertain, the increased
access to foreign textile markets could result in a surge of
imported goods from countries that benefit from the removal of
the quotas which, in turn, could create logistical delays in our
ability to maintain required inventory levels. In addition, the
quota removal may alter the cost differential between vendors
that source domestically and vendors that source more
extensively from overseas. We believe this could lower the cost
of apparel products and thereby reduce our average dollar amount
of sales per customer in our stores. Further, a number of
actions have been taken or threatened by parties affected by the
removal of the quotas, including domestic producers and foreign
countries that allege they will be unfairly competitively harmed
by the removal of the quotas on goods manufactured in larger
countries. These may include legal actions challenging the
removal of the quotas as well as retaliatory actions, which may
disrupt the supply chain of products from foreign markets or
make it difficult to predict accurately the prices of
merchandise to be imported from a particular country. The
outcome of these actions or other trade disruptions may have an
adverse effect on our business, financial condition or results
of operations.
Risks Relating to this Offering of Common Stock
Our stock price may be volatile, and you may lose all or a
part of your investment.
Prior to this offering, there has been no public market for our
common stock, and an active market for our shares may not
develop or be sustained after this offering. The initial public
offering price for our common stock will be determined by
negotiations between us and the underwriters and may not be
representative of the price that will prevail in the open
market. The market price of our common stock may be subject to
significant fluctuations after our initial public offering. It
is possible that in some future periods, our results of
operations may be below the expectations of investors and any
securities analysts that choose to follow our common stock. If
this occurs, our stock price may decline. Factors that could
affect our stock price include the following:
•
actual or anticipated fluctuations in our operating results;
•
changes in securities analysts' recommendations or
    estimates of our financial performance;
•
publication of research reports by analysts;
•
changes in market valuations of companies similar to ours;
•
announcements by us, our competitors or other retailers;
•
the trading volume of our common stock in the public market;
•
changes in economic conditions;
•
financial market conditions; and
•
the realization of some or all of the risks described in this
    section entitled "Risk Factors."
In addition, the stock markets have experienced significant
price and trading volume fluctuations from time to time, and the
market prices of the equity securities of retailers have been
extremely volatile and have recently experienced sharp price and
trading volume changes. These broad market fluctuations may
adversely affect the market price of our common stock.
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We will have broad discretion in how we use the proceeds of
this offering, and we may not use these proceeds effectively.
We will have considerable discretion in how we use the net
proceeds from this offering. We currently intend to use the net
proceeds to redeem all of our Series A Preferred Stock and
to pay all accrued and unpaid dividends thereon, to repay all
indebtedness under the mortgage on our Fahm Street facility and
under our existing revolving lines of credit, for new store
openings, for the acquisition or design and construction of a
new distribution center and for general corporate purposes. See
the information in the section entitled "Use of
Proceeds." We have not yet finalized the amount of net
proceeds that we will use specifically for each of these
purposes, other than the redemption of our Series A
Preferred Stock. We may use the net proceeds for purposes that
do not yield a significant return for our stockholders.
As a new investor, you will incur substantial dilution as a
result of this offering.
The initial public offering price will be substantially higher
than the pro forma net tangible book value per share of our
outstanding common stock. As a result, investors purchasing
common stock in this offering will incur immediate dilution of
$           per
share in pro forma net tangible book value. See the information
in the section entitled "Dilution." This dilution is
due primarily to earlier investors in our company having paid
substantially less than the initial public offering price when
they purchased their shares and to the deduction of the
$          in
underwriting discounts and commissions and estimated offering
expenses payable by us.
Securities analysts may not initiate coverage of our common
stock, or, if they do, they may issue negative reports that
adversely affect the price of our common stock.
The trading market for our common stock will depend in part on
the research and reports that industry or financial analysts
publish about us or our industry. In the event that our common
stock receives research coverage, public statements by these
securities analysts may affect our stock price. If any of the
analysts who cover our company downgrades the rating of our
common stock, our common stock price would likely decline. If
any of these analysts ceases coverage of our company, we could
lose visibility in the market, which in turn could cause our
common stock price to decline. Further, if no analysts choose to
cover our company, the lack of research coverage may depress the
market price of our common stock.
In addition, recently-adopted rules mandated by the
Sarbanes-Oxley Act of 2002 and a global settlement with the
Commission have caused a number of fundamental changes in how
securities analysts are reviewed and compensated. In particular,
many investment banking firms are now required to contract with
independent financial analysts for their stock research. In this
environment, it may be difficult for companies with smaller
market capitalizations, such as our company, to attract
independent financial analysts to cover them, which could have a
negative effect on the market price of our common stock.
After this offering, a significant amount of our common stock
will be concentrated in the hands of one of our existing
stockholders whose interests may not coincide with yours.
Upon the completion of this offering, Hampshire Equity Partners
will own approximately      % of our
common stock, or approximately      %
if the over-allotment option is exercised in full. As a result,
Hampshire Equity Partners will continue to have an ability to
exercise control over matters requiring stockholder approval.
These matters include the election of directors and the approval
of significant corporate transactions, including potential
mergers, consolidations or sales of all or substantially all of
our assets. Immediately following the consummation of this
offering, Hampshire Equity Partners will have one
representative, our current Chairman of the Board, on our five
member board of directors. In connection with this offering, we
will enter into a nominating agreement with Hampshire Equity
Partners pursuant to which we, acting through our nominating and
corporate governance committee, will agree, subject to the
requirements of our directors' fiduciary duties, that
(i) Hampshire Equity Partners will be entitled to designate
two directors to be nominated for election to our board of
directors as long as Hampshire Equity Partners owns in the
aggregate at least 40% of the shares of our common stock which
it owned immediately prior to the consummation of this offering
or (ii) Hampshire Equity Partners will be entitled to
designate one director to be nominated for election to our board
of directors as long as Hampshire Equity Partners owns in the
aggregate less than 40% and at least 15% of the shares of our
common stock which it owned
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immediately prior to the consummation of this offering. If at
any time Hampshire Equity Partners owns less than 15% of the
shares of our common stock which it owned immediately prior to
the consummation of this offering, it will not have the right to
nominate any directors for election to our board of directors.
Your interests as a holder of the common stock may differ from
the interests of Hampshire Equity Partners.
There may be sales of substantial amounts of our common stock
after this offering, which could cause our stock price to
fall.
Our current stockholders hold a substantial number of shares
that they will be able to sell in the public market in the near
future. Upon the consummation of this
offering,                      shares
of our common stock will be outstanding. As
of                     ,
2005,                      additional
shares of our common stock were subject to outstanding stock
options. All of the shares sold in this offering will be freely
tradable, except for any shares acquired by holders who are
subject to market stand-off provisions or lock-up agreements
entered into in connection with this offering, or by any of our
"affiliates," as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended, which
generally includes officers, directors and 10% or greater
stockholders. Sales of a significant portion of the shares of
our common stock outstanding after this offering will continue
to be restricted as a result of securities laws or contractual
arrangements, including lock-up agreements entered into between
our directors and officers and the representatives of the
underwriters in this offering. These lock-up agreements restrict
holders' ability to transfer their stock for 180 days
after the date of this prospectus. Of the outstanding restricted
shares,                     will
be available for sale in the public market beginning
90 days after the consummation of this offering,
and                     will
be available for sale in the public market 180 days after
the date of this prospectus. The managing underwriter may,
however, waive the lock-up period at any time for any
stockholder who is party to a lockup agreement. In addition,
following consummation of this offering, Hampshire Equity
Partners will have certain registration rights related to shares
of our common stock held by it. Sales of a substantial number of
shares of our common stock after this offering, or after the
expiration of applicable lock-up periods, could cause our stock
price to fall and/or impair our ability to raise capital through
the sale of additional stock.
Provisions in our certificate of incorporation and by-laws
and Delaware law may delay or prevent our acquisition by a third
party.
Our second amended and restated certificate of incorporation and
amended and restated by-laws contain several provisions that may
make it more difficult for a third party to acquire control of
us without the approval of our board of directors. These
provisions include, among other things, a classified board of
directors, advance notice for raising business or making
nominations at stockholder meetings and "blank check"
preferred stock. Blank check preferred stock enables our board
of directors, without stockholder approval, to designate and
issue additional series of preferred stock with such dividend,
liquidation, conversion, voting or other rights, including
convertible securities with no limitations on conversion, as our
board of directors may determine, including rights to dividends
and proceeds in a liquidation that are senior to the common
stock.
We are also subject to several provisions of the Delaware
General Corporation Law that could delay, prevent or deter a
merger, acquisition, tender offer, proxy contest or other
transaction that might otherwise result in our stockholders
receiving a premium over the market price for their common stock
or may otherwise be in the best interests of our stockholders.
You should refer to the section entitled "Description of
Capital Stock" for more information.
We do not currently intend to pay dividends on our common
stock.
We have never declared or paid any cash dividends on our common
stock and do not currently intend to do so for the foreseeable
future. We currently intend to invest our future earnings, if
any, to fund our growth. Therefore, you are not likely to
receive any dividends on your common stock for the foreseeable
future.
15
Table of Contents
Special Note Regarding Forward-Looking Statements
We have made forward-looking statements in this prospectus,
including in the sections entitled "Prospectus
Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of
Operation" and "Business." All statements other
than historical facts contained in this prospectus, including
statements regarding our future financial position, business
policy and plans and objectives of management for future
operations, are forward-looking statements. The words
"believe," "may," "could,"
"estimate," "continue,"
"anticipate," "intend," "expect"
and similar expressions, as they relate to us, are intended to
identify forward-looking statements. For example, our statements
to the effect that we intend to open a specified number of new
stores, that we intend to increase comparable store sales, and
that we intend to achieve a specified return on invested capital
constitute forward-looking statements. We have based these
forward-looking statements largely on our current expectations
and projections about future events, including, among other
things:
•
implementation of our growth strategy;
•
our ability to anticipate and respond to fashion trends;
•
competition in our markets;
•
consumer spending patterns;
•
actions of our competitors or anchor tenants in the strip
    shopping centers where our stores are located;
•
anticipated fluctuations in our operating results; and
•
economic conditions in general.
These forward-looking statements are subject to a number of
risks, uncertainties and assumptions described in the section
entitled "Risk Factors" and elsewhere in this
prospectus.
Because forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely upon forward-looking statements
as predictions of future events. The events and circumstances
reflected in the forward-looking statements may not be achieved
or occur and actual results could differ materially from those
projected in the forward-looking statements. Except as required
by applicable law, including the securities laws of the United
States and the rules and regulations of the Commission, we do
not plan to publicly update or revise any forward-looking
statements contained herein after we distribute this prospectus,
whether as a result of any new information, future events or
otherwise.
16
Table of Contents
Use of Proceeds
We estimate that we will receive net proceeds from this offering
of approximately
$           million,
at an assumed initial public offering price of
$           per
share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. If
the underwriters exercise their over-allotment option in full,
we estimate that we will receive additional net proceeds of
approximately
$           million.
We will not receive any of the proceeds from the sale of shares
of common stock offered by the selling stockholders.
We intend to use the net proceeds from this offering as follows:
•
$           million
    to redeem all of our outstanding Series A Preferred Stock
    and to pay all accrued and unpaid dividends thereon;
•
$           million
    to repay outstanding indebtedness under the loan from National
    Bank of Commerce to us, that is secured by our Savannah, Georgia
    headquarters, and bears interest at a fixed rate of 6.80% and
    matures on July 12, 2007;
•
to repay outstanding indebtedness under our $3.0 million
    revolving line of credit with Bank of America that, as of
    October 30, 2004, bears interest at a rate of 3.96% per
    annum;
•
to repay outstanding indebtedness under our $25.0 million
    revolving line of credit with Congress Financial that, as of
    October 31, 2004, bears interest at a rate of 4.75% per
    annum; and
•
any remaining net proceeds for new store openings, including the
    acquisition or design and construction of a new distribution
    center in fiscal 2006 and general corporate purposes.
Dividend Policy
We have never declared or paid any dividends on our common stock
and do not intend to pay any dividends on our common stock in
the foreseeable future. We currently intend to retain any future
earnings to finance the expansion of our business and for
general corporate purposes. Our board of directors has the
authority to declare and pay dividends on our common stock, in
its discretion, so long as there are funds legally available to
do so.
17
Table of Contents
Capitalization
The table below sets forth the following information as of
October 30, 2004:
•
on an actual basis; and
•
as adjusted to give effect to (a) the sale by us of shares of
    common stock in this offering, (b) the receipt and application
    of net proceeds of $      million,
    after deducting estimated underwriting discounts and commissions
    and estimated offering expenses payable by us, and the repayment
    of indebtedness described under the section entitled "Use
    of Proceeds" and (c) the filing of our second amended and
    restated certificate of incorporation upon consummation of this
    offering.
As of October 30, 2004
Actual
As Adjusted
(in thousands, except share and per
share amounts)
Cash and cash equivalents
$
2,156
$
Long-term debt (including current portion)
$
1,521
$
-
Capital lease obligations (including current portion)
$
1,261
$
Preferred shares subject to mandatory redemption:
Series A preferred stock, $.01 par value per share,
    3,500 shares authorized, issued and outstanding, actual;
    none authorized, issued or outstanding, as
    adjusted
(1)
4,404
-
Stockholders' equity:
Common stock, $.01 par value per
    share,            shares
    authorized,            issued
    and outstanding,
    actual;            issued
    or outstanding, as adjusted
4
Preferred stock, $.01 par value per share, none authorized,
    issued or outstanding,
    actual;      authorized, none issued or
    outstanding, as adjusted
-
-
Additional paid-in capital
4,110
Subscription receivable
(25
)
-
Retained earnings
15,197
Treasury stock
(165
)
Total stockholders' equity
19,121
Total capitalization
$
26,307
$
(1)
Our Series A Preferred Stock, which will be redeemed using
    a portion of the net proceeds from this offering, was
    reclassified as debt as of the second quarter of fiscal 2003, in
    accordance with SFAS No. 150.
18
Table of Contents
Dilution
Our net tangible book value as of October 30, 2004 was
$      million, or
$          per
share of common stock. "Net tangible book value" is
our total assets minus the sum of our liabilities and intangible
assets. "Net tangible book value per share of common
stock" is our net tangible book value divided by the total
number of our shares of common stock outstanding.
After giving effect to adjustments related to this offering, our
pro forma net tangible book value on October 30, 2004 would
have been
$           million,
or
$          per
share of common stock. Adjustments to net tangible book value to
arrive at pro forma net tangible book value per share include:
•
an increase in our total assets to reflect the net proceeds from
    this offering (assuming an initial public offering price of
    $          per
    share); and
•
the issuance of an
    additional                      shares
    of common stock in this offering.
The following table illustrates the pro forma increase in our
net tangible book value of
$           per
share of common stock and the dilution of
$           per
share of common stock (the difference between the offering price
per share and the net tangible book value per share after giving
effect to this offering) to new investors:
Assumed initial public offering price per share of common stock
$
Pro forma net tangible book value per share of common stock as
    of October 30, 2004
$
Increase in net tangible book value per share of common stock
    attributable to this offering
$
Pro forma net tangible book value per share of common stock as
    of October 30, 2004 after giving effect to adjustments
    related to this offering
$
Dilution per share of common stock to new investors in this
    offering
$
(1)
(1)
Assuming exercise of all exercisable options to purchase common
    stock outstanding as
    of             ,
    2005, the dilution per share of common stock to new investors in
    this offering would be
    $        .
The following table summarizes, on a pro forma basis as of
October 30, 2004, the differences between the existing
stockholders and new investors with respect to the number of
shares of common stock sold by us, the total consideration paid
to us and the average price paid per share. The table assumes
that the initial public offering price will be
$           per
share of common stock.
Share Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing
    stockholders
(1)
%
$
%
$
New investors
%
$
%
$
Totals
%
$
%
$
(1)
Does not give effect to sales of shares by the selling
    stockholders in this offering.
19
Table of Contents
Selected Financial and Operating Data
The following table provides selected financial and operating
data for each of the fiscal years in the five-year period ended
January 31, 2004 and for each of the 39-week periods ended
November 1, 2003 and October 30, 2004, including:
(a) our statement of operations data for each such period,
(b) additional operating data for each such period and
(c) our balance sheet data as of the end of each such
period. The statement of operations data for fiscal 2002 and
fiscal 2003, and the balance sheet data as of February 1,
2003 and January 31, 2004 are derived from financial
statements included elsewhere in this prospectus that have been
audited by KPMG LLP, independent registered public accountants.
The statement of operations data for fiscal 2001 and the balance
sheet data as of February 2, 2002 are derived from our
audited financial statements included elsewhere in this
prospectus. The statement of operations data for fiscal 1999 and
fiscal 2000 and the balance sheet data as of January 29,
2000 and February 3, 2001 are derived from our audited
financial statements that are not included in this prospectus.
The statement of operations data for the 39-week periods ended
November 1, 2003 and October 30, 2004 and the balance
sheet data as of November 1, 2003 and October 30, 2004
are derived from our unaudited condensed interim financial
statements included elsewhere in this prospectus. In the opinion
of management, these unaudited condensed interim financial
statements have been prepared on the same basis as the audited
financial statements and reflect all adjustments (consisting
only of normal recurring adjustments) and fairly present the
financial information for these periods. The selected financial
and operating data set forth below should be read in conjunction
with, and are qualified in their entirety by reference to, the
section of this prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes
included elsewhere in this prospectus. Historical results are
not necessarily indicative of results to be expected for any
future period.
Fiscal Year Ended
(1)
39 Weeks Ended
January 29,
February 3,
February 2,
February 1,
January 31,
November 1,
October 30,
2000
(2)
2001
2002
2003
2004
2003
2004
(dollars in thousands, except per share data amounts)
Statement of Operations Data:
Net sales
$
42,220
$
80,939
$
97,933
$
124,951
$
157,198
$
107,952
$
137,129
Cost of sales
27,717
51,762
62,050
77,807
98,145
67,466
86,288
Gross profit
14,503
29,177
35,883
47,144
59,053
40,486
50,841
Selling, general and administrative expenses
14,976
26,834
31,405
38,760
48,845
35,932
46,014
Income (loss) from operations
(472
)
2,343
4,478
8,385
10,208
4,554
4,827
Interest expense
(3)
172
787
455
256
563
315
558
Income (loss) before income taxes
(645
)
1,556
4,023
8,129
9,645
4,239
4,269
Income tax expense
19
358
1,566
3,101
3,727
1,638
1,644
Net income (loss)
$
(664
)
$
1,198
$
2,457
$
5,028
$
5,918
$
2,601
$
2,625
Net income per common share:
Basic
$
$
$
$
$
$
$
Diluted
$
$
$
$
$
$
$
Weighted average shares used to compute net income per share:
Basic
Diluted
(footnotes on following page)
20
Table of Contents
Fiscal Year Ended
(1)
39 Weeks Ended
January 29,
February 3,
February 2,
February 1,
January 31,
November 1,
October 30,
2000
(2)
2001
2002
2003
2004
2003
2004
(dollars in thousands, except per share data amounts)
Additional Operating Data:
Number of stores:
Opened during period
–
23
12
16
25
23
35
Closed during period
–
0
4
2
1
1
1
Open at end of period
92
115
123
137
161
159
195
Comparable store sales
    increase
(4)
–
17.6%
6.5%
14.6%
5.5%
5.9%
2.3%
Balance Sheet Data:
Cash and cash equivalents
$
1,857
$
1,496
$
4,098
$
5,825
$
9,954
$
2,910
$
2,156
Total assets
17,442
25,023
29,733
36,127
49,213
46,862
60,908
Total liabilities
11,001
17,404
19,489
20,693
32,709
33,696
41,787
Total stockholders' equity
2,614
3,471
5,736
10,598
16,504
13,166
19,121
(1)
Our fiscal year ends on the Saturday closest to January 31
    of each year. Fiscal years 2001, 2002 and 2003 comprise
    52 weeks. Fiscal year 2000 comprises 53 weeks.
(2)
The fiscal year ended January 29, 2000 consists only of the
    period from April 13, 1999 (the date we were acquired by
    Hampshire Equity Partners) to January 29, 2000. The period
    contained 41 weeks and five days.
(3)
Our Series A Preferred Stock, which will be redeemed using
    a portion of the net proceeds from this offering, was
    reclassified as debt as of the second quarter of fiscal 2003, in
    accordance with SFAS No. 150,
Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity
. The amount of dividends treated as interest
    expense in fiscal 2003 was $189,000 and none in fiscal 2002. For
    the 39-week periods ended October 30, 2004 and
    November 1, 2003, the amount of dividends treated as
    interest expense was $243,000 and $108,000, respectively.
(4)
Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.
21
Table of Contents
Management's Discussion and Analysis of Financial
Condition and Results of Operations
You should read the following discussion and analysis of our
financial condition and results of operations in conjunction
with the section entitled "Selected Financial and Operating
Data" and our financial statements and related notes
included elsewhere in this prospectus. This discussion may
contain forward-looking statements that involve risks and
uncertainties. As a result of many factors, such as those set
forth under the sections entitled "Risk Factors" and
"Special Note Regarding Forward-Looking Statements"
and elsewhere in this prospectus, our actual results may differ
materially from those anticipated in these forward-looking
statements.
Overview
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. Our merchandise
offerings are designed to appeal to the preferences of fashion
conscious consumers, particularly African-Americans. Originally
our stores were located in the Southeast, and we have recently
expanded into the Mid-Atlantic region and Texas. We currently
operate 200 stores in both urban and rural markets in
12 states.
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners, a private equity firm.
Since the acquisition, our management team has implemented a
focused merchandising and operating model to differentiate our
stores and serve our core customers more effectively.
Specifically, we concentrated the merchandise offerings on more
urban fashion apparel for the entire family and increased the
offering of nationally recognized brands. We also accelerated a
remodeling campaign to upgrade the acquired store base and
create a more appealing shopping environment in our stores. By
the end of fiscal 2003, virtually all of the acquired stores had
been remodeled and, in some cases, expanded. These initiatives
resulted in gains in comparable store sales. More recently, the
pace of our comparable store sales gains has moderated as the
revamping of our existing store base has been substantially
completed. We expect that the impact of our remodel, relocate
and expansion initiatives will be far less significant in the
future and that the primary causes of any increased comparable
store sales will result from merchandising enhancements or the
expansion of certain product categories.
We have implemented an aggressive store growth strategy and
believe that the addition of new stores will be the primary
source of future growth. In fiscal 2003 and 2004, we opened 25
and 40 stores, respectively. During this period, we entered
Houston, Norfolk and, most recently, the Baltimore and
Washington, D.C. markets, where we opened a total of 15 new
stores. In each of fiscal 2005 and 2006, we intend to open 40
new stores, approximately 70% of which are expected to be
located in states that we currently serve.
Our new store expansion is fueled by store economics that we
believe to be very attractive. From an investment perspective,
our stores are designed to be inviting and easy to shop, but we
do not spend large sums of money to outfit and open new stores.
We have relatively low store operating costs. Our real estate
approach is focused on strip shopping center sites within low to
moderate income neighborhoods, and we generally utilize
previously occupied store sites rather than newly constructed
sites. As a result, we are usually able to secure sites with
substantial customer traffic at attractive lease terms. Our
ongoing advertising expenses are also low, with a significant
amount of advertising focused on new store openings.
Our stores generate rapid payback of investment. The average
investment for the 41 stores opened in fiscal 2002 and
fiscal 2003, including leasehold improvements, equipment,
fixturing, cost of inventory to stock the store (net of accounts
payables), and pre-opening store expenses, was approximately
$240,000. These 41 stores generated average sales of
$1.2 million and average store level cash flow (defined as
store operating profit before pre-opening expenses, depreciation
and amortization and allocated corporate overhead and interest
expense) of approximately $240,000 during their first
12 months of operation. Our average investment for the
40 stores opened in fiscal 2004 was approximately $280,000.
This investment represents an increase over prior years as the
size of our stores has increased and we have assumed a larger
portion of the costs associated with leasehold improvements in
our stores, which we expect to recover over time. We expect that
the stores opened in fiscal 2004 will achieve similar levels of
return on investment.
22
Table of Contents
We measure our performance using key operating statistics. One
of our main performance measures is comparable store sales
growth. We define a comparable store as a store that has been
open for an entire fiscal year. Therefore, a store will not be
considered a comparable store until its
13
th
month of operation at the earliest or its
24
th
month at the latest. As an example, all stores opened in fiscal
2002 and fiscal 2003 were not considered comparable stores in
fiscal 2003. Relocated and expanded stores are included in the
comparable store sales results. We also use other operating
statistics including customer counts, items purchased per
customer and average item price. Beyond sales, we measure gross
margin percentage and store operating expenses, with a
particular focus on labor as a percentage of sales. These
results translate into store contribution, which we use to
evaluate overall performance of each individual store. Finally,
we monitor corporate expenses in absolute amounts. We measure
the performance of our distribution centers based on employee
cost per item shipped and items shipped per employee hour.
The new distribution center we opened in November 2004 increased
our receiving and shipping capabilities in order to support the
growth of our store base. The new center is located in the
greater Savannah area and increases our total distribution space
by approximately 60,000 square feet and our office space by
approximately 10,000 square feet. We are leasing the center
through September 2006 with options to renew for up to four
additional years. We currently intend to acquire or design and
construct a new distribution center in southeastern Georgia in
fiscal 2006.
Our cash requirements are primarily for working capital,
construction of new stores, remodeling of existing stores and
improvements to our information systems. Historically we have
met these cash requirements from cash flow from operations,
short-term trade credit and borrowings under our revolving lines
of credit, long-term debt and capital leases.
We may be affected by the phase out of quotas on textiles and
clothing under the WTO Agreement on Textiles and Clothing as
implemented on January 1, 1995. Under this agreement, the
import quotas on textiles and clothing manufactured by countries
that are members of the WTO were eliminated. While the impact of
the quota removal is uncertain, the increased access to foreign
textile markets could create logistical delays arising from a
surge of imported goods from countries that benefit from the
removal of the quotas. In addition, the quota removal may alter
the cost differential between vendors that source primarily
domestically and vendors that source more extensively from
overseas. We believe this could significantly reduce the cost of
apparel products and thereby reduce the average dollar amount of
sales per customer spent in our stores. Various actions have
been taken or threatened by parties affected by the removal of
the quotas. However, the effect of these actions, and the
removal of the quotas, cannot be accurately assessed at this
time.
Basis of Presentation
Net sales consists of store sales, net of returns by customers,
and layaway fees. Cost of sales consist of the cost of the
products we sell and associated freight costs. Selling, general
and administrative expense is comprised of store costs,
including salaries and store occupancy costs, handling costs,
corporate and distribution center costs and advertising costs.
We operate on a 52- or 53-week fiscal year, which ends on the
Saturday closest to January 31. Each of our fiscal quarters
consists of four 13-week periods, with an extra week added on to
the fourth quarter every five or six years. Our last three
fiscal years ended on February 2, 2002, February 1,
2003 and January 31, 2004 and each included 52 weeks.
23
Table of Contents
Results of Operations
Net Sales and Additional Operating Data.
The following
table sets forth, for the periods indicated, selected statement
of income data expressed both in dollars and as a percent of net
sales:
Fiscal Year Ended
39 Weeks Ended
February 2,
February 1,
January 31,
November 1,
October 30,
2002
2003
2004
2003
2004
(dollars in thousands)
Statements of Income Data
Net sales
$
97,933
100.0
%
$
124,951
100.0
%
$
157,198
100.0
%
$
107,952
100.0
%
$
137,129
100.0
%
Cost of sales
62,050
63.4
77,807
62.3
98,145
62.4
67,466
62.5
86,288
62.9
Gross profit
35,883
36.6
47,144
37.7
59,053
37.6
40,486
37.5
50,841
37.1
Selling, general and administrative expenses
31,405
32.1
38,760
31.0
48,845
31.1
35,932
33.3
46,014
33.6
Income from operations
4,478
4.6
8,385
6.7
10,208
6.5
4,554
4.2
4,827
3.5
Interest expense
455
0.5
256
0.2
563
0.4
315
0.3
558
0.4
Income before income taxes
4,023
4.1
8,129
6.5
9,645
6.1
4,239
3.9
4,269
3.1
Income tax expense
1,566
1.6
3,101
2.5
3,727
2.4
1,638
1.5
1,644
1.2
Net income
$
2,457
2.5
%
$
5,028
4.0
%
$
5,918
3.8
%
$
2,601
2.4
%
$
2,625
1.9
%
The following table provides information, for the periods
indicated, about the number of total stores open at the
beginning of the period, stores opened and closed during each
period and the total stores open at the end of each period and
comparable store sales for the periods:
Fiscal Year Ended
39 Weeks Ended
February 2,
February 1,
January 31,
November 1,
October 30,
2002
2003
2004
2003
2004
Total stores open, beginning of period
115
123
137
137
161
New stores
12
16
25
23
35
Closed stores
4
2
1
1
1
Total stores open, end of period
123
137
161
159
195
Comparable store sales increase
6.5
%
14.6
%
5.5
%
5.9
%
2.3
%
39 Weeks Ended October 30, 2004 Compared to 39 Weeks
Ended November 1, 2003
Net Sales.
Net sales increased $29.2 million, or
27.0%, to $137.1 million for the 39-week period ended
October 30, 2004 from $108.0 million for the 39-week
period ended November 1, 2003. The increase resulted
primarily from net sales of $39.5 million during the
39-week period ended October 30, 2004 from stores opened in
the 39-week period ended October 30, 2004 and stores opened
in fiscal 2003 as compared to net sales of $11.4 million
during the 39-week period ended November 1, 2003 from
stores opened in the 39-week period ended November 1, 2003.
In addition, the increase was due to a comparable store sales
increase of $2.2 million, or 2.3%. The increase in
comparable store sales was caused primarily by an increase in
the number of customer transactions and items sold per customer,
partially offset by a decrease in the average price of an item
sold.
Gross Profit.
Gross profit increased $10.4 million,
or 25.6%, to $50.8 million for the 39-week period ended
October 30, 2004 from $40.5 million for the 39-week
period ended November 1, 2003. The increase resulted
primarily from the operation of new stores opened in the 39-week
period ended October 30, 2004 and the full period impact of
new stores opened during fiscal 2003, partially offset by a
decrease in gross profit margin. Gross profit as a percentage of
net sales was 37.1% for the 39-week period ended
October 30, 2004, compared to 37.5% for the 39-week period
ended November  1, 2003. Gross profit margin decreased
primarily as a result of a shift in sales mix towards more
nationally recognized branded merchandise that carries lower
profit margins than non-branded merchandise. Gross margins also
decreased as a result of higher freight costs to ship products
to stores primarily due to fuel surcharges.
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Table of Contents
Selling, General and Administrative Expenses.
Selling,
general and administrative expenses increased
$10.1 million, or 28.1%, to $46.0 million for the
39-week period ended October 30, 2004 from
$35.9 million for the 39-week period ended November 1,
2003. This increase was caused primarily by store level,
distribution and corporate costs associated with the growing
store base and the full period impact of new stores opened
during the 39-week period ended November 1, 2003. As a
percentage of net sales, selling, general and administrative
expenses increased to 33.6% for the 39-week period ended
October 30, 2004 from 33.3% for the 39-week period ended
November 1, 2003.
Interest Expense.
Interest expense increased
approximately $243,000 for the 39-week period ended
October 30, 2004 to $558,000 compared to approximately
$315,000 for the 39-week period ended November 1, 2003. The
increase was primarily the result of the adoption of SFAS
No. 150, which increased interest expense by the inclusion
of dividends on mandatory redeemable obligations that were
previously deducted from equity as dividends, and increased
borrowings related to the cost of new stores during the period,
inclusive of inventory. We adopted SFAS No. 150 on
July 6, 2003 and dividends treated as interest expense in
the 39-week period ended October 30, 2004 and
November 1, 2003 were approximately $243,000 and
approximately $108,000, respectively.
Income Tax Expense.
Income tax expense was
$1.6 million for both the 39-week period ended
October 30, 2004 and 39-week period ended November 1,
2003. Our effective tax rate was 38.5% and 38.6% for the 39-week
period ended October 30, 2004 and November 1, 2003,
respectively.
Net Income.
Net income was $2.6 million for both the
39-week period ended October 30, 2004 and the 39-week
period ended November 1, 2003.
Fiscal 2003 Compared to Fiscal 2002
Net Sales.
Net sales increased $32.2 million, or
25.8%, to $157.2 million for fiscal 2003 from
$125.0 million for fiscal 2002. The increase resulted
primarily from net sales of $38.6 million in fiscal 2003
from stores opened during fiscal 2003 and fiscal 2002 as
compared to net sales of $10.8 million in fiscal 2002 from
stores opened in fiscal 2002. In addition, the increase was due
to a comparable store sales increase of $6.1 million, or
5.5%. The increase in comparable store sales resulted, in part,
from an increase in the number of customer transactions and
average items per sale and the full period impact of new stores
opened during the fiscal year, partially offset by a decrease in
the average price of an item sold. In addition, in fiscal 2002,
we took over shoe operations in our stores from a third party
licensee that had previously managed the shoe merchandise and
paid us a commission on sales. As a result of this purchase, we
recognized shoe sales as part of net sales (amounting to
$3.8 million in fiscal 2003) instead of recognizing only
the commissions as an increase to operating income. The increase
in comparable store sales in fiscal 2003 benefited from the full
year impact of this change. The increase was also caused by the
impact of increased sales from stores that were relocated,
remodeled or expanded during the two year period, with these
stores accounting for approximately one-third of the 5.5%
comparable store sales increase.
Gross Profit.
Gross profit increased $11.9 million,
or 25.3%, to $59.1 million for fiscal 2003 from
$47.1 million for fiscal 2002. The increase resulted
primarily from the operation of 25 new stores opened in fiscal
2003 and the full year impact of 16 new stores opened during
fiscal 2002. Gross margin was 37.6% for fiscal 2003 compared to
37.7% for fiscal 2002. The decrease resulted from higher freight
costs.
Selling, General and Administrative Expenses.
Selling,
general and administrative expenses increased
$10.1 million, or 26.0%, to $48.8 million for fiscal
2003 from $38.8 million for fiscal 2002. As a percentage of
net sales, selling, general and administrative expenses
increased slightly to 31.1% for fiscal 2003 from 31.0% for
fiscal 2002. The dollar increase was caused primarily by
increases in store level expenses, distribution costs and
corporate costs associated with the growing store base and the
full period impact of new stores opened during fiscal 2002.
Interest Expense.
Interest expense increased
approximately $307,000 for fiscal 2003 to approximately
$563,000, compared to approximately $256,000 for fiscal 2002.
The increase was primarily the result of our adoption of SFAS
No. 150, which increased interest expense by the inclusion
of dividends on mandatory redeemable obligations that were
previously deducted from equity as dividends, increased
borrowings related to the costs of opening new stores during the
year, and the full year impact of the purchase of, and mortgage
on, the office and
25
Table of Contents
distribution facility in Savannah, Georgia. The amount of
dividends treated as interest expense in fiscal 2003 was
approximately $189,000 and none in fiscal 2002.
Income Tax Expense.
Income tax expense increased
approximately $626,000 for fiscal 2003 to $3.7 million
compared to $3.1 million for fiscal 2002. Our effective tax
rate was 38.6% and 38.1% for fiscal 2003 and fiscal 2002
respectively. The rate increased in fiscal 2003 due to
reclassifying nondeductible preferred stock dividends as
interest expense with the adoption of SFAS No. 150 in July
2003.
Net Income.
Net income increased to $5.9 million for
fiscal 2003 from $5.0 million in fiscal 2002 as a result of
the factors discussed above.
Fiscal 2002 Compared to Fiscal 2001
Net Sales.
Net sales increased $27.1 million, or
27.6%, to $125.0 million for fiscal 2002 from
$97.9 million for fiscal 2001. The increase resulted
primarily from net sales of $24.8 million during fiscal
2002 from stores opened during fiscal 2002 and fiscal 2001 as
compared to net sales of $9.1 million from stores opened in
fiscal 2001. In addition, the increase was due to a comparable
store sales increase of $13.0 million, or 14.6%. The
increase in comparable store sales was caused in part by an
increase in the number of customer transactions and average
items per sale and to a lesser extent the relocating and
remodeling of a number of stores.
Gross Profit.
Gross profit increased $11.3 million,
or 31.4%, to $47.1 million for fiscal 2002 from
$35.9 million for fiscal 2001. The increase resulted
primarily from the operation of 16 new stores opened in fiscal
2002 and the full year impact of 12 new stores opened during
fiscal 2001. Gross margin was 37.7% for fiscal 2002 compared to
36.6% for fiscal 2001. The increase resulted from lower
markdowns and inventory shrinkage.
Selling, General and Administrative Expenses.
Selling,
general and administrative expenses increased $7.4 million,
or 23.4%, to $38.8 million for fiscal 2002 from
$31.4 million for fiscal 2001. As a percentage of net
sales, selling, general and administrative expenses decreased to
31.0% for fiscal 2002 from 32.1% for fiscal 2001. This decrease
as a percentage of sales was caused primarily by benefits
realized from higher comparable stores sales which provided
greater operating efficiencies at store level.
Interest Expense.
Interest expense decreased
approximately $199,000 for fiscal 2002 to approximately
$256,000, compared to approximately $455,000 for fiscal 2001.
The decrease was primarily the result of improved results from
operations and cash flow resulting in significantly lower
monthly average line of credit balances.
Income Tax Expense.
Income tax expense increased
$1.5 million for fiscal 2002 to $3.1 million, compared
to $1.6 million for fiscal 2001, as a result of improved
profitability. Our effective tax rate was 38.1% and 38.9% for
fiscal 2002 and fiscal 2001, respectively. The rate decreased in
fiscal 2002 due to larger state and local tax credits.
Net Income.
Net income increased to $5.0 million in
fiscal 2002 from $2.5 million in fiscal 2001 as a result of
the factors discussed above.
Quarterly Results of Operations
The following table sets forth our unaudited quarterly results
of operations for fiscal 2003 and 2004. Each quarterly period
presented below consists of 13 weeks and the information
includes our statement of operations data for each such period
and additional operating data for each such period. In the
opinion of management, this unaudited interim financial data has
been prepared on the same basis as the audited financial
statements and reflect all adjustments (consisting only of
normal recurring adjustments) and fairly present the financial
information disclosed for these periods. The interim financial
data set forth below should be read in conjunction with, and are
qualified in their entirety by reference to, the audited
financial statements and related notes included elsewhere in
this prospectus. The results of operations for historical
periods are not necessarily indicative of results for any future
period.
Due to the importance of the spring selling season, which
includes Easter, and the fall selling season, which includes
Christmas, the first and fourth fiscal quarters have
historically contributed, and we expect they will continue to
contribute, disproportionately to our profitability for our
entire fiscal year. As a result, any factors negatively
affecting us in any year during the first and fourth fiscal
quarters, including adverse weather and unfavorable economic
conditions, could have a material adverse effect on our
financial condition and results of operations for the entire
year.
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Table of Contents
Our quarterly results of operations also may fluctuate based
upon such factors as the timing of holiday seasons, the number
and timing of new store openings, the amount of associated store
preopening expenses, the amount of net sales contributed by new
and existing stores, the mix of products sold, the timing and
level of markdowns, store closings, remodels and relocations,
competitive factors, weather and general economic conditions.
Quarter Ended
May 4,
Aug. 3,
Nov. 2,
Feb. 1,
May 3,
Aug. 2,
Nov. 1,
Jan. 31,
May 1,
July 31,
Oct. 30,
2002
2002
2002
2003
2003
2003
2003
2004
2004
2004
2004
(dollars in thousands)
Statement of Operations Data:
Net sales
$
31,024
$
28,434
$
27,895
$
37,598
$
37,575
$
34,209
$
36,168
$
49,246
$
48,069
$
43,011
$
46,049
Cost of sales
18,706
17,935
17,687
23,479
22,023
22,452
22,991
30,679
29,034
28,095
29,159
Gross profit
12,318
10,499
10,208
14,119
15,552
11,757
13,177
18,567
19,035
14,916
16,890
Selling, general and administrative expenses
8,969
9,355
9,793
10,642
11,719
11,655
12,558
12,913
15,014
14,745
16,255
Income from operations
3,349
1,144
415
3,477
3,833
102
619
5,654
4,021
171
635
Interest expense
36
60
89
70
57
98
160
248
174
176
208
Earnings (loss) before income taxes
3,313
1,084
326
3,407
3,776
4
459
5,406
3,847
(5
)
427
Income tax expense (benefit)
1,264
413
124
1,300
1,459
2
177
2,089
1,481
(2
)
165
Net income (loss)
$
2,049
$
671
$
202
$
2,107
$
2,317
$
2
$
282
$
3,317
$
2,366
$
(3
)
$
262
Additional Operating Data:
Number of Stores:
Open, beginning of quarter
123
126
129
132
137
147
154
159
161
178
182
Opened during quarter
3
5
3
5
10
7
6
2
17
5
13
Closed during quarter
-
2
-
-
-
-
1
-
-
1
-
Total open at end of period
126
129
132
137
147
154
159
161
178
182
195
Comparable store sales increase
14.3%
18.6%
13.7%
12.6%
3.2%
5.6%
9.6%
4.3%
3.5%
0.3%
3.0%
Liquidity and Capital Resources
Our cash requirements are primarily for working capital,
construction of new stores, remodeling of existing stores and
improvements to our information systems. Historically, we have
met these cash requirements from cash flow from operations,
short-term trade credit and borrowings under our revolving lines
of credit, long-term debt and capital leases.
Discussion of Cash Flows
For the 39-week period ended October 30, 2004, cash and
cash equivalents decreased by $7.8 million to
$2.2 million from $10.0 million at the end of fiscal
2003. The primary contributor to the decrease in cash and cash
equivalents was $6.2 million of cash used in investing
activities, primarily for new stores, and $5.3 million of
cash used in operating activities, primarily an increase in
inventory levels, partially offset by $3.8 million of cash
from financing activities, primarily borrowings under our
revolving lines of credit.
For fiscal 2003, cash and cash equivalents increased by
$4.2 million to $10.0 million from $5.8 million
at the end of fiscal 2002. The primary contributor to the
increase in cash and cash equivalents was $11.3 million of
cash provided by operations, partially offset by
$6.2 million used in investing activities, primarily to
construct new stores. For fiscal 2002, cash and cash equivalents
increased by $1.7 million to $5.8 million from
$4.1 million at the end of fiscal 2001. The primary
contributor to the increase in cash and cash equivalents was
$10.5 million of cash provided by operations, partially
offset by $5.9 million used in investing activities,
primarily to construct new stores and $2.8 million from
cash used in financing activities, primarily to pay down our
revolving lines of credit.
Net cash provided by operating activities decreased in the
39-week period ended October 30, 2004 compared to the
39-week period ended November 1, 2003 primarily because of
increased investments in inventory totaling $14.7 million
compared to $10.8 million in the prior 39-week period. This
change related to the timing of the flow of goods for the
Christmas season and the funding of 35 new store inventories in
the fiscal 2004 period
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Table of Contents
compared to 22 in the prior period. Net cash provided by
operating activities was $11.3 million for fiscal 2003 and
$10.5 million for fiscal 2002. Net cash provided by
operating activities increased in fiscal 2003 compared to fiscal
2002 primarily because net income increased. Net cash provided
by (used in) operating activities was $(5.3) million for
the 39-week period ended October 30, 2004 and approximately
$(84,000) for the 39-week period ended November 1, 2003.
Net cash used in investing activities was $6.2 million for
the 39-week period ended October 30, 2004 and
$5.1 million for the 39-week period ended November 1,
2003. Net cash used in investing activities increased in the
39-week period ended October 30, 2004 compared to the
39-week period ended November 1, 2003 because we purchased
additional property and equipment to open 35 new stores compared
to 22 new stores in the prior period. Net cash used in investing
activities was $6.2 million for fiscal 2003 and
$5.9 million for fiscal 2002. Net cash used in investing
activities increased in fiscal 2003 compared to fiscal 2002
because we purchased additional property and equipment to open
25 new stores compared to 16 new stores in the prior year.
We anticipate that our capital expenditures will increase to
approximately $10 million in fiscal 2005 and
$26 million in fiscal 2006. Fiscal 2005 spending relates to
the purchase of property and equipment for the 40 stores we
plan to open in 2005. The increase in fiscal 2006 relates to the
planned purchase or construction of a new distribution center
and the purchase of property and equipment for the 40 stores we
plan to open in fiscal 2006. We plan to finance these capital
expenditures over the next two fiscal years with cash flow from
operations and a portion of the net proceeds from this offering.
Net cash provided by financing activities was $3.8 million
for the 39-week period ended October 30, 2004 and
$2.3 million for the 39-week period ended November 1,
2003. Net cash provided by financing activities for the 39-week
period ended October 30, 2004 was primarily attributable to
borrowings of $5.4 million on our secured line of credit,
partially offset by $1.0 million in preferred stock
dividend payments and approximately $623,000 in capital lease
and mortgage payments. Net cash provided by financing activities
for the 39-week period ended November 1, 2003 was primarily
attributable to borrowings on our secured line of credit. Net
cash used in financing activities was approximately $942,000 for
fiscal 2003 and $2.8 million for fiscal 2002. Net cash used
in financing activities for fiscal 2003 was attributable to
payments on capital lease obligations and mortgage payments on
our Fahm Street facility. Net cash used in financing activities
for fiscal 2002 was primarily attributable to $3.7 million
in repayments of our secured line of credit and approximately
$742,000 in payments on capital lease obligations, partially
offset by $1.7 million in proceeds from the mortgage on our
Fahm Street facility. Until required for other purposes, we
maintain our cash and cash equivalents in deposit accounts or
highly liquid investments with remaining maturities of
90 days or less at the time of purchase.
Liquidity Sources, Requirements and Contractual Cash
Requirements and Commitments
Our principal sources of liquidity will consist of:
(i) cash and cash equivalents (which equaled
$2.2 million as of October 30, 2004); (ii) a
secured line of credit with a maximum available borrowing of
$25.0 million subject to our inventory levels (with
availability of $21.0 million and $4.0 million drawn
down as of October 30, 2004); (iii) an unsecured line
of credit with a maximum available borrowing of
$3.0 million subject to our inventory levels (with
availability of $1.6 million and $1.4 million drawn
down as of October 30, 2004); (iv) cash generated from
operations on an ongoing basis as we sell our merchandise
inventory; (v) trade credit; and (vi) the remainder of
the net proceeds from this offering after the redemption of our
Series A Preferred Stock and the repayment of outstanding
indebtedness. Short-term trade credit represents a significant
source of financing for our inventory purchases. Trade credit
arises from customary payment terms and trade practices with our
vendors. Our management regularly reviews the adequacy of credit
available to us from our vendors. Historically, our principal
liquidity requirements have been to meet our working capital and
capital expenditure needs.
We believe that our sources of liquidity will be sufficient to
fund our operations and anticipated capital expenditures for at
least the next 24 months. Our ability to fund these
requirements and comply with the financial covenants under our
secured lines of credit will depend on our cash flow, which in
turn is subject to prevailing economic conditions and financial,
business and other factors, some of which are beyond our
control. In addition, as part of our strategy, we intend to
continue to open new stores, which will require additional
capital. We cannot assure you that additional capital or other
sources of liquidity will be available on terms acceptable to
us, or at all.
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Table of Contents
The following table discloses aggregate information about our
contractual obligations as of October 30, 2004 and the
periods in which payments are due:
Payments Due by Period
Less than
More than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in thousands)
Contractual obligations:
Series A Preferred
    Stock
(1)
$
5,864
$
-
$
-
$
5,864
$
-
Debt maturing within one
    year
(2)
5,388
5,388
-
-
-
Long-term
    debt
(3)
1,758
179
1,579
-
-
Capital leases
1,372
736
636
-
-
Operating
    leases
(4)
31,459
7,898
13,588
8,105
1,868
Purchase obligations
31,461
31,461
-
-
-
Consulting
    fee
(5)
780
240
480
60
-
Total contractual cash obligations
$
78,082
$
45,902
$
16,284
$
14,029
$
1,868
(1)
Includes Series A Preferred Stock of $3.6 million,
    accrued dividends of approximately $799,000 as of
    October 30, 2004 and dividends of $1.5 million
    accruing through maturity in April 2009. The board of directors
    approved a resolution whereby we began making payments of
    approximately $500,000 per quarter beginning in the second
    quarter of fiscal 2004. Our Series A Preferred Stock will be
    redeemed using a portion of the net proceeds from this offering.
(2)
Does not include interest on our revolving lines of credit,
    which is variable. Upon consummation of this offering, we intend
    to repay any outstanding balance.
(3)
Our outstanding long-term debt will be repaid using a portion of
    the net proceeds from this offering.
(4)
Represents fixed minimum rentals in stores and does not include
    rentals which are computed as a percentage of net sales.
(5)
Represents minimum payments for the four year term of a
    management consulting agreement that is subject to automatic
    annual renewals unless terminated with 60 days notice by
    either party. Upon consummation of this offering, the parties
    shall terminate the consulting agreement and we will pay the
    consultant a termination fee of $1.2 million.
Indebtedness.
We have a revolving line of credit
secured by substantially all of our assets pursuant to which we
pay customary fees. This secured line of credit expires in April
2007. This secured line of credit provides for aggregate cash
borrowings and the issuance of letters of credit up to the
lesser of $25.0 million or our borrowing base (which was
approximately $24.0 million at October 30, 2004), with
a letter of credit sub-limit of $2.0 million. Borrowings
under this secured line of credit bear interest at the prime
rate plus a spread or LIBOR plus a spread, at our election,
based on conditions in the credit agreement. As of
October 30, 2004, outstanding borrowings on the line of
credit totaled $4.0 million at an interest rate of 4.75%,
and there were no outstanding letters of credit as of that date.
Under the terms of the credit agreement, we are required to
maintain a minimum tangible net worth of $3.9 million.
In September 2003, we entered into an annual unsecured revolving
line of credit with Bank of America that was renewed in June
2004. The line of credit provides for aggregate cash borrowings
up to $3.0 million to be used for general operating
purposes. Borrowings under the credit agreement bear interest at
LIBOR plus a spread, and the interest rate was 3.96% as of
October 30, 2004. At October 30, 2004,
$1.4 million was outstanding under this revolving line of
credit. We intend to pay down any outstanding balance on this
unsecured line of credit with a portion of the net proceeds from
this offering.
We borrow funds under these revolving lines of credit from time
to time and subsequently repay such borrowings with available
cash generated from operations.
Capital Leases.
We have capital lease obligations
that financed the purchase of our computer equipment. At
October 30, 2004, our capital lease obligations were
$1.3 million. These obligations have maturity dates ranging
from May 2004 to October 2007. The interest rates on these
obligations range from 0.6% to 11.5%. All of these obligations
are secured by the computer equipment.
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Table of Contents
Operating Leases.
We lease our stores under
operating leases, which generally have an initial term of
five years with one five-year renewal option. Some
operating leases provide for fixed monthly rentals while others
provide for rentals computed as a percentage of net sales. Some
operating leases provide for a combination of both fixed monthly
rental and rentals computed as a percentage of net sales. Rental
expense was $6.4 million for fiscal 2003 and
$4.8 million for fiscal 2002.
Purchase Obligations.
As of October 30, 2004,
we had purchase obligations of $31.5 million, all of which
were for less than one year. These purchase obligations
primarily consist of outstanding merchandise orders.
Critical Accounting Policies
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. We believe the following critical
accounting policies describe the more significant judgments and
estimates used in the preparation of our financial statements:
Revenue Recognition
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. Revenue from layaway
sales is recognized when the customer has paid for and received
the merchandise. If the merchandise is not fully paid for within
60 days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program service charges, which are
non-refundable, are recognized in revenue when collected. All
sales are from cash, check or major credit card company
transactions. We do not offer company-sponsored customer credit
accounts.
Inventory
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. We believe the
first-in first-out retail inventory method results in an
inventory valuation that is fairly stated.
Property and Equipment, net
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (primarily three to five years for computer equipment and
furniture, fixtures and equipment, five years for leasehold
improvements, and 15 years for buildings) of the related
assets or the relevant lease term, whichever is shorter.
Goodwill
Goodwill represents the excess of the purchase price over the
fair value of assets acquired. We adopted the provisions of
SFAS No. 142,
Goodwill and Other Intangible
Assets
, as of February 3, 2002. Pursuant to SFAS
No. 142, goodwill acquired in a purchase business
combination and determined to have an indefinite useful life is
not amortized, but instead tested for impairment at least
annually. We performed this analysis at the end of fiscal 2003
and no impairment was indicated.
Impairment of Long-Lived
Assets
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value is reviewed. If this review indicates that the carrying
value of the asset will not be recovered as determined based on
projected undiscounted cash flows related to the asset over its
remaining life, the carrying value of the asset is reduced to
its estimated fair value. Impairment losses in the future are
dependent on a number of factors such as site selection and
general economic trends, and thus could be significantly
different from historical results. To the extent our estimates
for net sales, gross profit and store expenses are not realized,
future assessments of recoverability could result in impairment
charges.
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Table of Contents
Stock-Based Compensation
We apply the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion
No. 25,
Accounting for Stock Issued to Employees
,
and related interpretations including FASB interpretation
(FIN) No. 44,
Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion
No. 25
, to account for our fixed-plan stock options.
Under this method, compensation expense is recorded on the date
of grant only if the current fair value of the underlying stock
exceeds the exercise price. We recognize the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS No. 123,
Accounting for
Stock-Based Compensation,
and SFAS No. 148,
Accounting for Stock-Based Compensation –
Transition and Disclosure, an amendment of FASB Statement
No. 123
, establishes accounting and disclosure
requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. As permitted by
existing accounting standards, we have elected to continue to
apply the intrinsic-value-based method of accounting described
above, and we have adopted only the disclosure requirements of
SFAS No. 123, as amended. Pro forma information
regarding net income and net income per share is required in
order to show our net income as if we had accounted for employee
stock options under the fair value method of
SFAS No. 123,
Accounting for Stock-Based
Compensation
, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation— Transition
Disclosure
. This information is contained in notes 2
and 8 to our financial statements. The fair values of options
and shares issued pursuant to our option plan at each grant date
were estimated using the Black-Scholes option pricing model.
Store Opening and Closing
Costs
New and relocated store opening costs are charged directly to
expense when incurred. When we decide to close or relocate a
store, we record an expense for the present value of expected
future rent payments net of sublease income in the period that a
store closes or relocates.
Accounting for Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
The above listing is not intended to be a comprehensive list of
all our accounting policies. In many cases the accounting
treatment of a particular transaction is specifically dictated
by generally accepted accounting principles, with no need for
management's judgment in their application. There are also
areas in which management's judgment in selecting any
available alternative would not produce a materially different
result.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to financial market risks related to changes in
interest rates connected with our revolving lines of credit
which bear interest at variable rates. We cannot predict market
fluctuations in interest rates. As a result, future results may
differ materially from estimated results due to adverse changes
in interest rates or debt availability. A hypothetical
100 basis point increase in prevailing market interest
rates would not have materially impacted our financial position,
results of operations, cash flows for fiscal 2004. We do not
engage in financial transactions for trading or speculative
purposes, and we have not entered into any interest rate hedging
contracts.
We source all of our product from apparel markets in the United
States and, therefore, are not subject to fluctuations in
foreign currency exchange rates. We have not entered into
forward contracts to hedge against fluctuations in foreign
currency prices.
If we were to begin sourcing product directly from overseas, our
risk management policy would allow us to utilize foreign
currency forward and option contracts to manage currency
exposures. If we were to enter into hedging contracts, we
anticipate that the contracts would have maturities of less than
three months and would settle before
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the end of each quarterly period. Additionally, we do not expect
to enter into any hedging contracts for trading or speculative
purposes.
We had cash and cash equivalents totaling $2.2 million at
October 30, 2004. These amounts were maintained in deposit
accounts or highly liquid investments with remaining maturities
of 90 days or less at the time of purchase. Due to the
short-term nature of these investments, we believe that we do
not have material exposure to changes in the fair value of our
investments as a result of changes in interest rates. Declines
in interest rates, however, will reduce future investment
income. We do not enter into investments for trading or
speculative purposes.
Recently Issued Accounting Standards
In December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets
. SFAS No. 153 amends
APB Opinion No. 29,
Accounting for Nonmonetary
Transactions
, which requires that exchanges of nonmonetary
assets be measured based on the fair value of the assets
exchanged, but which includes certain exceptions to that
principle. SFAS No. 153 eliminates the exception from APB
Opinion No. 29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have a commercial
substance. SFAS No. 153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after
June 15, 2005. The adoption of SFAS No. 153 is not
expected to have a material impact on our consolidated financial
position or results of operations.
In December 2004, the FASB issued a revision to
SFAS No. 123,
Accounting for Stock-Based
Compensation
. SFAS No. 123R replaces SFAS No. 123
and supersedes APB Opinion No. 25,
Accounting for Stock
Issued to Employees
, and establishes standards for the
accounting for transactions in which an entity exchanges its
equity instruments for goods or services. SFAS No. 123R
focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment
transactions and is effective as of the beginning of the first
reporting period that begins after June 15, 2005 for public
entities that do not file as small business issuers. We have
illustrated the effect on our earnings as if we had adopted the
fair value method of accounting for stock-based compensation
under SFAS No. 123. This information is contained in
notes 2 and 8 to our financial statements. The fair values
of options and shares issued pursuant to our option plan at each
grant date were estimated using the Black-Scholes option pricing
model. The fair value-based method of SFAS No. 123 is
similar in most respects to the fair value-based method under
SFAS No. 123R, although the election of certain methods
within the applicable transition rules of SFAS No. 123R may
affect the impact on our consolidated financial position or
results of operations. Such impact, if any, on our consolidated
financial position or results of operations has not been
determined.
In December 2003, the FASB issued FIN 46R,
Consolidation
of Variable Interest Entities
, which is an interpretation of
Accounting Research Bulletin No. 51,
Consolidated
Financial Statements
. FIN 46R requires that if an
entity has a controlling interest in a variable interest entity,
the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated
financial statements of the entity. FIN 46R is effective
immediately for all new variable interest entities created or
acquired after December 31, 2003. The adoption of
FIN 46R is not expected to have an impact on our
consolidated financial position or results of operations.
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Business
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. We offer quality,
branded products from nationally recognized brands, as well as
private label products and a limited assortment of home
décor items. Our merchandise offerings are designed to
appeal to the preferences of fashion conscious consumers,
particularly African-Americans. We provide this offering at
compelling values with nationally recognized branded merchandise
offered at 20% to 60% discounts to department and specialty
stores' regular prices. Our stores average approximately
8,500 square feet of selling space and are typically
located in neighborhood shopping centers that are convenient to
low to moderate income customers. Originally our stores were
located in the Southeast, and we have recently expanded into the
Mid-Atlantic region and Texas. We currently operate 200 stores
in both urban and rural markets in twelve states. In each
of fiscal 2005 and fiscal 2006, we intend to open 40 new stores,
approximately 70% of which are expected to be located in states
that we currently serve.
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners, a private equity firm.
Our management team has implemented several strategies designed
to differentiate our stores, improve our operating and financial
performance and position us for growth, including:
•
focusing our merchandise offerings on more urban fashion apparel
    for the entire family, with greater emphasis on nationally
    recognized brands;
•
accelerating and completing the remodeling of virtually all of
    the 85 stores acquired in 1999 to create a more appealing
    shopping environment;
•
refining our new store model and implementing a real estate
    approach focused on locating stores in low to moderate income
    neighborhoods close to our core customers;
•
rebranding our stores and our company to Citi Trends in order to
    convey more effectively our positioning to consumers;
•
investing in infrastructure to support growth, including opening
    an additional distribution center and installing new point of
    sale systems in all of our stores; and
•
implementing an aggressive growth strategy, including entering
    several new markets such as Houston, Norfolk and, most recently,
    Baltimore and Washington, D.C.
Industry
According to a nationally recognized firm that specializes in
apparel research, retail sales of off-price apparel totaled
$16.5 billion in the U.S. in 2004, up more than 15% from
2003. The popularity of this segment continues to grow, with
off-price retailers accounting for 9.5% of overall retail
apparel sales in the U.S. in 2004, versus 8.6% in 2003 and 8.2%
in 2002.
The off-price apparel market is dominated by large format,
national apparel companies, such as The TJX Companies,
Burlington Coat Factory and Ross Stores. These retailers
generally target more affluent consumers and seek to achieve
high volumes by serving the fashion needs of a broad segment of
the population. Mass merchants and general merchandise discount
retailers, such as Wal-Mart Stores, Inc. and Kmart Corp., also
offer apparel at reduced prices, but generally focus on basic
apparel and are less fashion oriented. As a result, we believe
there is significant demand for a value retailer that addresses
the market of low to moderate income consumers generally and,
particularly, African-American and other minority consumers who
seek value-priced, urban fashion apparel and accessories. We
believe this market benefits from several favorable
characteristics, including:
Growing Market with Favorable Demographics.
Based on
U.S. Census Bureau data, approximately 31% of the
U.S. population was non-white in 2000 versus approximately
20% in 1980. This percentage is estimated to increase to
approximately 35% by 2010. Within this market, African-Americans
represented 12.7% of the population as of 2000, which is
expected to increase to 13.1% in 2010.
Significant Spending on Apparel.
Minority consumers
possess significant spending power. According to the Selig
Center for Economic Growth at The University of Georgia, or the
Selig Center, the combined U.S. buying power
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of non-whites grew from $540.8 billion in 1990 to
approximately $1.2 trillion in 2000. During that period, buying
power for African-Americans grew from $318.3 billion to
$584.9 billion and is estimated by the Selig Center to grow
approximately 65% to $964.6 billion in 2009.
We believe our core customers are more fashion oriented, which
results in a greater propensity to purchase apparel. According
to the U.S. Department of Labor, African-Americans spend
4.7% of their annual income on apparel and related products and
services, compared to 3.5% for the U.S. population as a
whole.
Expansion of Urban Apparel Brands.
In recent years,
a series of nationally recognized urban brands, often associated
with hip-hop and rap musicians, has emerged and gained
significant popularity. These brands offer distinctive, urban
apparel designed to appeal to African-American consumers, as
well as to the broader population. Sales from 13 national urban
apparel brands tracked by a nationally recognized firm that
specializes in apparel research totaled approximately
$1.9 billion in 2004, an increase of approximately 46% from
2003.
Business Strengths
Our goal is to be the leading value-priced retailer of urban
fashion apparel and accessories. We believe the following
business strengths differentiate us from our competitors and are
important to our success:
Focus on Urban Fashion Mix.
We focus our merchandise
on urban fashions, which we believe appeals to our core
customers. We do not attempt to dictate trends, but rather
devote considerable effort to identifying emerging trends and
ensuring that our apparel assortment is considered timely and
fashionable in the urban market. Our merchandising staff tests
new merchandise before reordering and actively manages the mix
of brands and products in our stores to keep our offering fresh
and minimize markdowns.
Superior Value Proposition.
As a value-priced
retailer, we seek to offer first quality, fashionable
merchandise at compelling prices. Our assortment includes
nationally recognized brands offered at 20% to 60% discounts to
department and specialty stores' regular prices. We also
offer products under our proprietary brands such as Citi Steps,
Diva Blue and Urban Sophistication. These private labels enable
us to expand product selection, offer fashion merchandise at
lower prices and enhances our product offerings.
Merchandise Mix that Appeals to the Entire
Family.
We merchandise our stores to create a
destination environment capable of meeting the fashion needs of
the entire value-conscious family. Each store offers a wide
variety of products for men and women, as well as infants,
toddlers, boys and girls. Our stores feature sportswear,
dresses, plus-sized apparel, outerwear, footwear and
accessories, as well as a limited assortment of home décor
items. We believe that the breadth of our merchandise
distinguishes our stores from many competitors that offer urban
apparel primarily for women, and reduces our exposure to fashion
trends and demand cycles in any single category.
Strong and Flexible Sourcing Relationships.
We
maintain strong sourcing relationships with a large group of
suppliers. We have purchased merchandise from more than 1,000
vendors in the past twelve months. Purchasing is controlled by
our 20-member buying team located at our Savannah, Georgia
headquarters and in New York, New York, and our buyers have an
average of more than 20 years of retail experience. We
purchase merchandise through planned programs with vendors at
reduced prices and opportunistically through close-outs, with
the majority of our merchandise purchased for the current season
and a limited quantity held for sale in future seasons. To
foster our vendor relationships, we pay vendors promptly and do
not ask for typical retail concessions such as promotional and
markdown allowances or delivery concessions such as drop
shipments to stores.
Attractive Fashion Presentation and Store
Environment.
We seek to provide a fashion-focused
shopping environment that is similar to a specialty apparel
retailer, rather than a typical off-price store. Products from
nationally recognized brands are prominently displayed by brand,
rather than by size, on dedicated, four-way fixtures featuring
multiple sizes and styles. The remaining merchandise is arranged
on hanging racks. All stores are carpeted and well-lit, with
most featuring a sound system that plays urban adult and urban
contemporary music throughout the store. Nearly all of our
stores have either been opened or remodeled in the past six
years.
Highly Profitable Store Model.
We operate a proven
and efficient store model that delivers strong cash flow and
store level return on investment. We locate stores in high
traffic strip shopping centers that are convenient to low and
moderate income neighborhoods. We generally utilize previously
occupied store sites. This approach enables
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us to generate substantial traffic at attractive rents.
Similarly, our advertising expenses are low as we do not rely on
promotion-driven sales but rather seek to build our reputation
for value through everyday low prices. At the same time, our
unit investment is limited, as we do not spend large sums on
fixturing, leasehold improvements, equipment or other startup
costs. As a result, our stores generate rapid payback of
investments, typically within 12 to 14 months.
Growth Strategy
Our growth strategy is to open stores in new and existing
markets, as well as to increase sales in existing stores. Adding
stores in the markets we currently serve often enables us to
benefit from enhanced name recognition and achieve advertising
and operating synergies. In fiscal 2003 and fiscal 2004, we
opened 25 and 40 stores, respectively, and entered the Houston,
Norfolk, Baltimore and Washington, D.C. markets. Of the
25 stores opened in fiscal 2003, the average sales of the
23 stores open for the twelve months ended October 31, 2004
was $1.2 million.
In each of fiscal 2005 and fiscal 2006, we intend to open 40 new
stores, approximately 70% of which we expect to locate in states
we currently serve.
We intend to increase comparable store sales through
merchandising enhancements and the expansion of adjacent product
categories. We have recently added a dedicated buyer in home
décor and upgraded our buying capabilities and focus within
the intimate apparel category.
Store Operations
Store Format.
Our existing 200 stores' average
selling space is approximately 8,500 square feet, which
allows us space and flexibility to departmentalize our stores
and provide directed traffic patterns. New stores added in
fiscal 2004 averaged approximately 10,700 square feet,
which is larger than the stores added in fiscal 2003 and
significantly larger than our historical store base. As a result
of these new stores, as well as due to the remodeling and
expansion of existing stores in fiscal 2003, our average square
footage of selling space per store has increased from
approximately 7,500 at the end of fiscal 2002 to its current
level.
We arrange our stores in a racetrack format with women's
sportswear, our most attractive and fashion current merchandise,
in the center of each store, and complementary categories
adjacent to those items. Men's and boy's apparel is
displayed on one side of the store while dresses, footwear and
accessories are displayed on the other side. Merchandise for
infants, toddlers and girls is displayed along the back of the
store. Impulse items, such as jewelry and sunglasses, are
featured near the checkout area. Products from nationally
recognized brands are prominently displayed on four way racks at
the front of each department. The remaining merchandise is
displayed on hanging racks and occasionally on table displays.
Large hanging signs identify each category location. The
unobstructed floor plan allows the customer to see virtually all
of the different product areas from the store entrance and
provides us the flexibility easily to expand and contract
departments in response to consumer demand, seasonality and
merchandise availability.
Virtually all of our inventory is displayed on the selling
floor. Our prices are clearly marked and often have the
comparative retail-selling price noted on the price tag.
Store Management.
Store operations are managed by
our Vice President of Store Operations, three regional managers
and 21 district managers, each of whom typically manages eight
to ten stores. Our typical store is staffed with a store
manager, two or three assistant managers and seven to eight part
time sales associates, all of whom rotate work days on a shift
basis. District managers and store managers participate in a
bonus program based on achieving predetermined levels of sales
and profits. The district managers also participate in bonus
programs based on achieving targeted payroll costs. Our regional
managers participate in a bonus program based on a rollup of the
district managers' bonuses. The assistant managers and
sales associates are compensated on an hourly basis with
incentives. Moreover, we recognize individual performance
through internal promotions and provide extensive opportunities
for advancement, particularly given our rapid growth.
We place significant emphasis on loss prevention in order to
control inventory shrinkage. Our initiatives include electronic
tags on all of our products, training and education of store
personnel on loss prevention issues, digital video camera
systems, alarm systems and motion detectors in the stores. We
also capture extensive point-of-sale
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data and maintain systems that monitor returns, voids and
employee sales, and produce trend and exception reports to
assist us in identifying shrinkage issues. We have a centralized
loss prevention team that focuses exclusively on implementation
of our initiatives and specifically on stores that have
experienced above average levels of shrinkage.
Employee Training.
Our employees are critical to
achieving our goals, and we strive to hire employees with high
energy levels and motivation. We have well-established store
operating policies and procedures and an extensive 90-day
in-store training program for new store managers and assistant
managers. Our sales associates also participate in a 30-day
customer service and store procedures training program, which is
designed to enable them to assist customers in a friendly,
helpful manner.
Layaway Program.
We offer a layaway program that
allows customers to purchase merchandise by initially paying a
20% deposit together with a $2.00 service charge. The customer
then makes additional payments every two weeks and has
60 days within which to complete the purchase. If the
purchase is not completed, the customer receives a merchandise
credit for amounts paid less a re-stocking fee and the service
charge. Sales under our layaway program accounted for
approximately 13% of our total sales in fiscal 2003.
Store Economics.
We believe we benefit from
attractive store-level economics. The average investment for the
41 stores we opened in fiscal 2002 and fiscal 2003,
including leasehold improvements, equipment, cost of inventory
to stock the store (net of accounts payable) and preopening
store expenses, was approximately $240,000. These 41 stores
generated average sales of $1.2 million and average store
level cash flow (exclusive of pre-opening expense) of $240,000
during their first twelve months of operation. Our average
investment for the 40 stores opened in fiscal 2004 was
approximately $280,000. This investment represents an increase
over prior years as the size of our stores has increased and, in
some instances, we have paid for leasehold improvements that we
expect to recover over time. We expect these stores to generate
similar levels of return on investment.
Store Locations
As of January 29, 2005, we operated 200 stores located in
twelve states. Our stores are primarily located in strip
shopping centers and downtown business districts. We have no
franchising relationships as all of our stores are
company-operated. The table below sets forth the number of
stores in each of these twelve states and the specific markets
within each such state in which we operated at least two stores
as of January 29, 2005:
Alabama—17
Louisiana—23
South Carolina—32
Birmingham—4
Shreveport—3
Charleston—2
Montgomery—2
Baton Rouge—2
Columbia—2
Mobile—2
Monroe—2
Orangeburg—2
Single store locations—9
New Orleans—2
Single store locations—26
Arkansas—4
Single store locations—14
Tennessee—9
Little Rock—3
Maryland—3
Memphis—6
Single store locations—1
Baltimore—2
Nashville—2
Florida—13
Single store locations—1
Single store locations—1
Jacksonville—3
Mississippi—15
Texas—6
Tampa—2
Jackson—2
Houston—6
Single store locations—8
Single store locations—13
Virginia—11
Georgia—41
North Carolina—26
Norfolk—6
Atlanta—9
Durham—2
Richmond—4
Albany—2
Fayetteville—2
Single store locations—1
Augusta—2
Greensboro—2
Macon—2
Single store locations—20
Savannah—2
Single store locations—24
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Site Selection.
Cost-effective store locations are
an important part of our profitability model. Accordingly, we
look for second and third use store locations that offer
attractive rents, but also meet our demographic and economic
criteria.
In selecting a location, we target both urban and rural markets.
Demographic criteria used in site selection include
concentrations of our core consumers. In addition, we require
convenient site accessibility, as well as strong co-tenants,
such as food stores, dollar stores, rent-to-own stores and other
apparel stores. We prepare detailed demographic studies and pro
forma financial statements for each prospective store location.
Our economic criteria for a site include specific store-level
profitability and return on capital invested.
We have a dedicated real estate management team responsible for
new store site selection. Our group has identified a significant
number of target sites in existing strip shopping centers and
off-mall locations with appropriate market characteristics in
both new and existing markets. We opened a total of 65 new
stores in fiscal 2003 and fiscal 2004. In each of fiscal 2005
and fiscal 2006, we intend to open an additional 40 stores. We
expect to fund our store openings with a portion of the net
proceeds from this offering and cash flow from operations.
Shortly after we sign a new store lease, our store construction
department prepares the store by installing fixtures, signs,
dressing rooms, checkout counters, cash register systems and
other items. Once we take possession of a store site, we can
open the store within approximately three to four weeks.
Product Merchandising and Pricing
Merchandising.
Our merchandising policy is to offer
high quality, branded products at attractive prices for the
entire value-conscious family. We seek to maintain a diverse
assortment of first quality, in-season merchandise that appeals
to the distinctive tastes and preferences of our core customers.
Approximately 30% of our sales are typically represented by
nationally recognized brands. We also offer a wide variety of
products from less recognized brands that represent
approximately 60% of sales. The remaining 10% of sales represent
private label products under our proprietary brands such as Citi
Steps, Diva Blue and Urban Sophistication. Our private label
products enable us to expand product selection, offer
merchandise at lower prices and enhances our product offerings.
Our merchandise includes apparel, accessories and home
décor. Within apparel, we offer men's, women's,
which includes dresses, sportswear and plus size offerings, and
children's, which includes offerings for infants, toddlers,
boys and girls. We also offer accessories, which includes
intimate apparel, handbags, hats, jewelry, footwear, toys, belts
and sleepwear, as well as a limited assortment of home
décor, which includes giftware, lamps, pictures, mirrors
and figurines.
The following table sets forth our merchandise assortment by
classification as a percentage of net sales for fiscal 2003.
Percentage of
Net Sales
Women's
38%
Children's
27%
Men's
21%
Accessories
13%
Home décor
1%
Pricing.
We purchase our merchandise at low prices
and mark prices up less than department or specialty stores. Our
nationally recognized brands are offered at prices 20% to 60%
below regular retail prices available in department stores and
specialty stores, and that product offering validates both our
value and fashion positioning to our consumers. We also consider
the price-to-value relationships of our non-branded products to
be strong. Our basic pricing strategy is everyday low prices.
Our discount from the suggested retail price is usually
reflected on the price tag. We review each department in our
stores at least monthly for possible markdowns based on sales
rates and fashion seasons to promote faster turnover of
inventory and to accelerate the flow of current merchandise.
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Sourcing and Allocation
Our merchandising department oversees the sourcing and
allocation of merchandise to our stores, which allows us to
utilize volume purchase discounts and maintain control over our
inventory. We source our merchandise from over
1,000 vendors, consisting of domestic manufacturers and
importers. For fiscal 2004, no vendor represented over 6% of our
net sales. Our President and Chief Merchandising Officer
supervises our 13 member planning and allocation team, as
well as our buying team which is comprised of five merchandise
managers and 14 buyers. Consistent with our plan to grow
the intimate apparel and home décor categories, we recently
added a dedicated buyer in home décor and upgraded our
buying capabilities and focus in intimate apparel.
Our buyers have an average of 20 years of experience in the
retail business and have developed long-standing relationships
with many of our vendors, including those controlling the
distribution of branded apparel. These buyers are responsible
for maintaining vendor relationships, securing high quality,
fashionable merchandise that meets our margin requirements and
identifying and responding to emerging fashion trends. Our
buyers, who are based in Savannah and New York, accomplish this
by traveling to the major United States apparel markets
regularly, visiting our major manufacturers and attending
national and regional apparel trade shows, including
urban-focused trade shows. We also retain the services of two
independent fashion consulting firms that monitor market trends.
Our buyers purchase merchandise in styles, sizes and quantities
to meet inventory levels developed by our planning staff. We
work closely with our suppliers and are able to differentiate
ourselves by our willingness to purchase less than a full
assortment of styles, colors and sizes and by our policy of
paying promptly and not asking for typical retail concessions
such as promotional and markdown allowances. Our purchasing
department utilizes several buying techniques that enable us to
offer to consumers branded and other merchandise at everyday low
prices. The majority of the nationally recognized branded
products we sell are purchased in-season and represent our
vendors' excess inventories resulting from production or
retailer order cancellations. We generally purchase later in the
merchandising buying cycle than department and specialty stores.
This allows us to take advantage of imbalances between
retailers' demands for specific merchandise and
manufacturers' supply of that merchandise. We also purchase
merchandise from some vendors in advance of the selling season
at reduced prices. Occasionally, we purchase merchandise on an
opportunistic basis, which we then "pack and hold" for
sale three to nine months later. Where possible, we seek to
purchase items based on style or color in limited quantities on
a test basis with the right to reorder as needed. Finally, we
purchase private label merchandise that we source to our
specifications.
As is customary in the industry, we do not enter into long-term
contracts with any of our suppliers. While we believe we may
encounter delays if we change suppliers, we believe alternate
sources of merchandise for all product categories are available
at comparable prices.
We allocate merchandise across our store base according to
store-level demand. Our merchandising staff utilizes a
centralized management system to monitor merchandise purchasing,
allocation and sales in order to maximize inventory turnover,
identify and respond to changing product demands and determine
the timing of mark-downs to our merchandise. Our buyers also
regularly review the age and condition of our merchandise and
manage both the reordering and clearance processes. In addition,
our merchandising team communicates with our regional, district
and store managers to ascertain regional and store-level
conditions and to better ensure that our product mix meets our
consumers' demands in terms of quality, fashion, price and
availability.
Advertising and Marketing
Our advertising goal is to build the "Citi Trends"
brand and promote consumers' association of our brand with
value, quality, fashion and everyday low prices. We generally
focus our advertising efforts during the Easter, back-to-school
and Christmas seasons. This advertising consists of radio
commercials on local hip-hop radio stations that highlight our
brands, our value and our everyday low prices. We also do
in-store advertising that includes window signs designated for
special purposes, such as seasonal events and clearance periods,
and taped audio advertisements co-mingled with our in-store
music programs. Signs change in color, quantity and theme every
three to six weeks. For store grand openings, we typically
seek to create community awareness and consumer excitement
through radio advertising preceding and during the grand opening
and by creating an on-site
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event with local radio personalities broadcasting from the new
location. We also distribute promotional items such as gift
certificates and shopping sprees in connection with our grand
openings.
Our marketing efforts center on promoting our everyday low
prices and on demonstrating the strong price-to-value
relationship of our products to our consumers. We do not utilize
promotional advertising. Our merchandise is priced so that our
competition rarely has lower prices. In the limited situations
where our competition offers the same merchandise at a lower
price, we will match the price.
Distribution
All merchandise sold in our stores is shipped directly from our
distribution centers in Savannah, Georgia. In November 2004, we
opened our second distribution center located on Coleman
Boulevard, approximately 10 miles from our primary
distribution center, the Fahm Street facility. The Coleman
facility is used to process all receipts, as well as to
warehouse "pack and hold" merchandise and merchandise
held for new store openings. After merchandise is received and
quality control functions are performed, the merchandise is
moved to the Fahm Street facility for processing and shipping to
the stores.
All work necessary to prepare the merchandise to be sales-floor
ready is performed in our distribution centers. Some of our
merchandise comes from vendors pre-ticketed and pre-packed and
can be shipped directly from the distribution centers to our
stores without repacking. However, most merchandise has to be
price ticketed and repacked in store shipping units before being
shipped to the stores.
We generally ship merchandise from Savannah to stores daily, but
approximately 40 of our smaller volume stores receive
merchandise every other day. Savannah is centrally located to
our store base, and most of our stores are within a two-day
drive from our distribution centers. We use United Parcel
Service, Inc. and FedEx Corporation to ship merchandise to our
stores. Our distribution centers have a combined
240,000 square feet, including approximately
20,000 square feet of office space. We expect these
facilities to support our distribution and office capacity needs
for at least the next two years. We intend to use a portion of
the net proceeds from this offering to acquire or construct and
design a new distribution center in fiscal 2006.
Quality control reviews of every merchandise receipt are
performed by a dedicated team at the Coleman facility. This team
is also responsible for working with our vendors and
manufacturers to ensure consistent and superior quality across
our private label merchandise, which accounts for approximately
10% of our net sales. Nearly all of our merchandise is purchased
from recognized domestic manufacturers and importers, which
reduces our risk of inadvertently handling counterfeit items.
Information Technology and Systems
We have information systems in place to support each of our
business functions. We purchased our enterprise software from
Island Pacific, a primary software provider to the retail
industry. Our computer platform is an IBM AS400. The Island
Pacific software supports the following business functions:
purchasing, purchase order management, price and markdown
management, distribution, merchandise allocation, general
ledger, accounts payable and sales audit.
The Island Pacific merchandise system captures and reports sales
and inventory by item, by store and by day. This information
allows our merchandising team to evaluate merchandise
performance in considerable detail with high levels of
precision. Over the last four years we have enhanced the
Island Pacific software, particularly to enhance merchandise
allocation and distribution functions. In 2004, we purchased and
installed Buyers Toolbox software to aid our merchandise
planning and allocation functions.
Our stores use point-of-sale software from DataVantage, a
division of MICROS Systems, Inc., to run our store cash
registers. The system uses bar code scanners at checkout to
capture item sales. It also supports end-of-day processing and
automatically transmits sales and transaction data to Savannah
each night. Additionally, the software supports store time clock
and payroll functions. To facilitate marking down and
re-ticketing merchandise, employees in our stores use hand-held
scanners that read the correct item price and prepare new price
tickets for merchandise. Our DataVantage software also enables
us to sort and review transaction data, generate exception and
other database reporting to assist in loss prevention.
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In 2005, we plan to complete installation of the latest upgrade
to the DataVantage software. The new software will enable
improved and less costly telecommunications between stores and
our Fahm Street facility. The upgrade will also provide improved
credit and debit card processing, gift card capability, store
e-mail and more reliable data transmissions to our home office
systems.
We believe that our information systems, with upgrades and
updates over time, are adequate to support our operations for
the foreseeable future. Additionally, we are upgrading our
website to enable Internet sales of selected urban branded
apparel provided by third parties. We will earn commissions on
these sales.
Competition
The markets we serve are highly competitive. We compete against
a diverse group of retailers including national off-price
retailers, mass merchants, smaller specialty retailers and
dollar stores. The off-price retail companies that we compete
with include The TJX Companies, Burlington Coat Factory and Ross
Stores. In particular, TJX's A.J. Wright stores target
moderate income consumers. Ross Stores, Inc. has recently
launched a similar concept targeting lower income consumers,
called dd's DISCOUNTS. We believe our strategy of appealing
to African-American consumers and offering urban apparel
products allows us to compete successfully with these retailers.
We also believe we offer a more inviting store format than the
off-price retailers with carpeted floors and more prominently
displayed brands. We also compete with a group of smaller
specialty retailers that only sell women's products, such
as Rainbow, Dots, Fashion Cents, It's Fashions and Simply
Fashions. Our mass merchant competitors include Wal-Mart and
Kmart. These chains do not focus on fashion apparel and, within
their apparel offering, lack the urban focus that we believe
differentiates our offering and appeals to our core customers.
Similarly, while some of the dollar store chains offer apparel,
they typically offer a more limited selection focused on basic
apparel needs.
Intellectual Property
We regard our trademarks and service marks as having significant
value and as being important to our marketing efforts. We have
registered the "Citi Trends" trademark with the
U.S. Patent and Trademark Office on the Principal Register
as both a trademark for retail department store services and as
a trademark for clothing. We have also registered the following
trademarks with the U.S. Patent and Trademark Office on the
Principal Register: "Citi Club," "Citi
Knights," "Citi Nite," "Citi Steps,"
"Citi Trends Fashion for Less," "Citi
Women," "CT Sport," "Univer Soul" and
"Vintage Harlem." We also have applications pending
with the U.S. Patent and Trademark Office on the Principal
Register for the following trademarks: "Citi Express,"
"Diva Blue," "Lil Citi Man,"
"Lil Ms Hollywood" and "Urban
Sophistication." Our policy is
to pursue registration of our marks and to oppose
vigorously infringement of our marks.
Properties
All our existing 200 stores, totaling approximately
2.1 million gross square feet, are leased under operating
leases. Additionally, as of February 10, 2005, we have
signed leases for eleven new stores to be opened during fiscal
2005 aggregating approximately 148,320 total gross square feet.
Our typical store lease is for five years with an option to
extend our lease term for an additional five-year period, and
requires us to pay percentage rent and increases in specified
site-related charges. Nearly all of our store leases provide us
the right to cancel following an initial three-year period in
the event the store does not meet pre-determined sales levels.
We own an approximately 170,000 square foot facility
located on Fahm Street in Savannah, Georgia, that serves as our
headquarters and one of our two distribution centers. This
facility is financed under a mortgage with a remaining principal
balance of $1.5 million that is due in July 2007. We intend
to repay this mortgage with a portion of the proceeds from this
offering. We currently lease the land and building for our other
distribution center located on Coleman Boulevard. The lease for
this distribution center expires in September 2006, with options
to renew for up to three more years. In addition, we currently
lease 1,200 square feet in New York City, which is used for
buyer operations and meetings with vendors.
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Employees
As of January 29, 2005, we had approximately
800 full-time and approximately 1,000 part-time
employees. Of these employees, approximately 1,500 are employed
in our stores and the remainder are employed in our distribution
centers and corporate offices. We are not a party to any
collective bargaining agreements, and none of our employees is
represented by a labor union.
Legal Proceedings
We are from time to time involved in various legal proceedings
incidental to the conduct of our business, including claims by
our customers, employees or former employees. We are currently
the defendant in two putative collective action lawsuits
commenced by former employees under the Fair Labor Standards
Act. The plaintiff in each of the lawsuits is represented by the
same law firm, and both suits are pending in District Court of
the United States for the Middle District of Alabama, Northern
Division. Each of the cases is in its early stages, and we are
in the process of evaluating the claims made. While our review
of the allegations is preliminary, we believe that our business
practices are, and were during the relevant periods, in
compliance with the law. We plan to defend these suits
vigorously.
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Management
Executive Officers and Directors
The following table sets forth information regarding our
executive officers and directors, as well as our nominees for
our board of directors pending the closing of this offering, and
their ages:
Name
Age
Position
R. Edward Anderson
55
Chief Executive Officer and Director
George A. Bellino*
57
President, Chief Merchandising Officer and Director
Thomas W. Stoltz
44
Chief Financial Officer
James A. Dunn
48
Vice President of Store Operations
Gregory P. Flynn
48
Chairman of the Board of Directors
Laurens M. Goff*
32
Director
John S. Lupo
58
Director
Tracy L. Noll
56
Director
**
Director Nominee
*
Will resign from our board of directors upon the consummation of
    this offering.
**
Will join our board of directors upon the consummation of this
    offering.
Upon the consummation of this offering, our board of directors
will consist of five members. After this offering we expect to
restructure our board of directors and
appoint                     as
an independent director. In connection with this restructuring,
we expect that two of our current directors,
Messrs. Bellino and Goff, will resign upon the consummation
of this offering.
R. Edward Anderson.
Mr. Anderson has
served as our Chief Executive Officer and as a director since
December 2001. Prior to his current responsibilities,
Mr. Anderson served as Executive Vice President and Chief
Financial Officer of Variety Wholesalers, our previous owner,
from December 1997 to December 2001. From 1978 to 1994,
Mr. Anderson served as Chief Financial Officer of
Rose's Stores, Inc., a discount retailer. In August 1994,
Mr. Anderson was promoted to Chief Executive Officer and
served in this position until December 1997. Mr. Anderson
also served as the Chairman of the Board of Directors of
Rose's Stores, Inc. from August 1994 to December 1997.
George A. Bellino.
Mr. Bellino has served as
our President and Chief Merchandising Officer since January 1997
and has served as a director since April 1999. From June 1992 to
December 1996, Mr. Bellino served as the Vice President of
Merchandising at Pennsylvania Fashions, a privately held
off-price apparel chain. From June 1990 to October 1991,
Mr. Bellino served as President of General Textiles/ Family
Bargain Center, a retail apparel chain.
Thomas W. Stoltz.
Mr. Stoltz has served as our
Chief Financial Officer since September 2000. From January 1999
to August 2000, Mr. Stoltz served as Chief Financial
Officer of Sharon Luggage and Gifts, a privately held retailer.
From August 1996 to December 1998, Mr. Stoltz served as the
Chief Financial Officer and Vice President of Finance of Factory
Card Outlet, a greeting card retailer. Mr. Stoltz is a
certified public accountant licensed in North Carolina and a
member of the American Institute of Certified Public Accountants.
James A. Dunn.
Mr. Dunn has served as our Vice
President of Store Operations since April 2001. From January to
April 2001, Mr. Dunn was our Director of Training and
Development and from January 2000 to January 2001 was one of our
Regional Managers. Prior to joining us, Mr. Dunn was a
Store Manager at Staples from January 1999 to December 2000.
Prior to that Mr. Dunn was a Regional Manager at Dress Barn
where he supervised 77 stores and 10 district sales managers
with an annualized sales volume of $63.0 million.
Gregory P. Flynn.
Mr. Flynn has served as our
Chairman of the board of directors since 2001 and as a member of
the compensation committee since 2001. Mr. Flynn is
currently a Managing Partner of Hampshire Equity
Partners II, L.P. and Hampshire Equity Partners III,
L.P. and has been associated with Hampshire since 1996.
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Hampshire Equity Partners and certain of its affiliates are
selling stockholders in this offering. From 1994 to 1996,
Mr. Flynn served as a Managing Partner of ING Equity
Partners, L.P.
Laurens M. Goff.
Mr. Goff has served as a
director since September 2003 and as a member of the audit
committee. Mr. Goff is currently a Principal of Hampshire
Equity Partners II, L.P. and Hampshire Equity
Partners III, L.P. and has been associated with Hampshire
since August 1998. From 1996 to 1998, Mr. Goff served as an
analyst of Furman Selz LLC.
John S. Lupo.
Mr. Lupo has served as a director
since May 2003, and is the Chairman of the compensation
committee. Mr. Lupo is a principal in the consulting firm
Renaissance Partners, LLC, which he joined in February 2000.
From November 1998 until December 1999, Mr. Lupo served as
Executive Vice President of Basset Furniture. From October 1996
until October 1998, Mr. Lupo served as the Chief Operating
Officer of the International Division of Wal-Mart Stores Inc.,
and from September 1990 until September 1996, Mr. Lupo served as
Senior Vice President and General Merchandise Manager of
Wal-Mart Stores Inc. Mr. Lupo is a director for Rayovac Corp, a
public reporting company, and serves on their Compensation and
Corporate Governance and Nominating Committees.
Tracy L. Noll.
Mr. Noll has served as a
director since July 2000 and is the current Chairman of the
audit committee. Mr. Noll is currently a private investor based
in Dallas, Texas. He served as President and Chief Operating
Officer of National Dairy Holdings, L.P. from April 2001 to
September 2003. He served as Executive Vice President of Suiza
Foods Corporation, a public reporting company, from September
1994 until March 2001, including serving as Chief Financial
Officer from September 1994 until July 1997. He served as Vice
President and Chief Financial Officer of Morningstar Foods Inc.,
a public reporting company, from April 1988 until June 1994. Mr.
Noll currently serves as a Director and is Chairman of the Audit
Committee of Reddy Ice Group, Inc., a public reporting company.
Mr. Noll also serves as a Director of Lakeview Farms Inc., a
privately held company.
Each of our executive officers serves at the discretion of the
board of directors and holds office until his successor is
elected and qualified or until his earlier resignation or
removal. There are no family relationships among any of our
directors or executive officers.
Board of Directors Composition After the Offering
Our board of directors currently consists of six directors.
Following this offering, our board of directors will be divided
into three classes and will consist of five directors,
three of which will be "independent" under the rules
of the Nasdaq National Market. We intend to avail ourselves of
the transition periods provided for under the applicable rules
of the Nasdaq National Market for issuers listing in conjunction
with their initial public offering. Additionally, we intend to
avail ourselves of the Nasdaq rule 4350(c) "controlled
company" exception that applies to companies where more
than 50% of the stockholder voting power is held by an
individual, a group or another company, thereby eliminating the
requirements that we have a majority of independent directors on
our board of directors and that our compensation and nominating
and corporate governance committees be entirely comprised of
independent directors.
Our second amended and restated certificate of incorporation
will divide our board into three classes having staggered terms,
with one of such classes being elected each year for a new
three-year term. Class I directors will have an initial
term expiring in 2006, Class II directors will have an
initial term expiring in 2007 and Class III directors will
have an initial term expiring in 2008. Class I will be
comprised of
Messrs.
.
Class II will be comprised of Messrs. Noll and Lupo.
Class III will be comprised of Messrs. Flynn and Anderson.
In connection with this offering, we will enter into a
nominating agreement with Hampshire Equity Partners pursuant to
which we, acting through our nominating and corporate governance
committee, will agree, subject to the requirements of our
directors' fiduciary duties, that (i) Hampshire Equity
Partners will be entitled to designate two directors to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate at least 40% of
the shares of our common stock which it owned immediately prior
to the consummation of this offering or (ii) Hampshire
Equity Partners will be entitled to designate one director to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate less than 40%
and at least 15% of the shares of our common stock which it
owned immediately prior to the
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consummation of this offering. If at any time Hampshire Equity
Partners owns less than 15% of the shares of our common stock
which it owned immediately prior to the consummation of this
offering, it will not have the right to nominate any directors
for election to our board of directors.
Board of Director Committees
Our board of directors has established an audit committee and a
compensation committee. Upon completion of this offering, we
will create a nominating and corporate governance committee.
Audit Committee
The audit committee, currently consisting of Messrs. Noll
and Goff, reviews our internal accounting procedures and
consults with and reviews the services provided by our
independent registered public accountants. Mr. Noll is the
current Chairman of the audit committee and qualifies as an
"audit committee financial expert" for purposes of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act. Upon the consummation of this offering and after
Mr. Goff's anticipated resignation, we anticipate that
our audit committee will consist of two independent directors,
with Mr. Noll as the chairman. Following this offering, the
principal duties and responsibilities of our audit committee
will be to:
•
have direct responsibility for the selection, compensation,
    retention, replacement and oversight of the work of our
    independent auditors, including prescribing what services are
    allowable and approve in advance all services provided by the
    auditors;
•
set clear hiring policies for employees or former employees of
    the independent auditors;
•
review all proposed company hires formerly employed by the
    independent auditors;
•
have direct responsibility for ensuring its receipt from the
    independent auditors at least annually of a formal written
    statement delineating all relationships between the auditor and
    us, consistent with Independence Standards Board Standard
    No. 1;
•
discuss with the independent directors any disclosed
    relationships or services that may impact the objectivity and
    independence of the auditor and for taking, or recommending that
    the full board of directors take, appropriate action to oversee
    the independence of the independent auditor;
•
discuss with the internal auditors and the independent auditors
    the overall scope and plans for their respective audits
    including the adequacy of staffing, compensation and resources;
•
review, at least annually, the results and scope of the audit
    and other services provided by our independent auditors and
    discuss any audit problems or difficulties and management's
    response;
•
review our annual audited financial statement and quarterly
    financial statements and discuss the statements with management
    and the independent auditors (including disclosures in our
    Exchange Act reports in response to Item 303,
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" of
    Regulation S-K);
•
review and discuss with management, the internal auditors and
    the independent auditors the adequacy and effectiveness of our
    internal controls, including our ability to monitor and manage
    business risk, legal and ethical compliance programs and
    financial reporting;
•
review and discuss separately with the internal auditors and the
    independent auditors, with and without management present, the
    results of their examinations;
•
review our compliance with legal and regulatory independence;
•
review and discuss our interim financial statements and the
    earnings press releases prior to the filing of our quarterly
    reports on Form 10-Q, as well as financial information and
    earnings guidance provided to analysts and rating agencies;
•
review and discuss our risk assessment and risk management
    policies;
•
prepare an audit committee report required by the Securities and
    Exchange Commission to be included in our annual proxy statement;
•
engage independent counsel and other advisors to assist the
    audit committee in carrying out its duties;
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•
review and approve all related party transactions consistent
    with the rules applied to companies listed on the Nasdaq
    National Market; and
•
establish procedures regarding complaints received by us or our
    employees regarding accounting, accounting controls or
    accounting matters.
The audit committee will be required to report regularly to our
board of directors to discuss any issues that arise with respect
to the quality or integrity of our financial statements, our
compliance with legal or regulatory requirements, the
performance and independence of our independent auditors, or the
performance of the internal audit function.
Compensation Committee
The compensation committee, consisting of Messrs. Lupo and
Flynn, reviews and determines the compensation and benefits of
all of our officers, establishes and reviews general policies
relating to the compensation and benefits of all of our
employees, and administers our long-term incentive plan. Upon
the consummation of this offering, we anticipate that our
compensation committee will consist of two independent
directors, with Mr. Lupo as the chairman. Following this
offering the principal duties and responsibilities of our
compensation committee will be to:
•
review and approve corporate goals and objectives relevant to
    our Chief Executive Officer's and other named executive
    officers' compensation;
•
evaluate the Chief Executive Officer's performance in light
    of these goals and objectives;
•
either as a committee, or together with the other independent
    directors, determine and approve the Chief Executive
    Officer's compensation;
•
make recommendations to our board of directors regarding the
    salaries, incentive compensation plans and equity-based plans
    for our employees; and
•
produce a compensation committee report on executive
    compensation as required by the Commission to be included in our
    annual proxy statements or annual reports on Form 10-K
    filed with the Commission.
Compensation Committee Interlocks and Insider
    Participation
Prior to establishing the compensation committee, the board of
directors as a whole performed the functions delegated to the
compensation committee. No member of our current compensation
committee serves or has ever served as one of our officers or
employees. None of our executive officers serves or has ever
served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers
serving on our board of directors or compensation committee.
Nominating and Corporate Governance Committee
Upon the consummation of this offering, we will create a
nominating and corporate governance committee. We anticipate
that our nominating and corporate governance committee will
consist of two independent directors. After this offering, the
principal duties and responsibilities of our nominating and
corporate governance committee will be to:
•
identify individuals qualified to become board members,
    consistent with criteria approved by the board of directors;
•
recommend the individuals identified be selected as nominees at
    annual meetings of our stockholders;
•
develop and recommend to the board of directors a set of
    corporate governance principles applicable to us; and
•
oversee the evaluation of the board of directors and management.
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Code of Ethics
Upon the consummation of this offering, we will adopt a written
code of ethics applicable to our directors, officers and
employees in accordance with the rules of the Nasdaq National
Market and the Commission. Our code of ethics will be designed
to deter wrongdoing and to promote:
•
honest and ethical conduct;
•
full, fair, accurate, timely and understandable disclosure in
    reports and documents that we file with the Commission and in
    our other public communications;
•
compliance with applicable laws, rules and regulations,
    including insider trading compliance; and
•
accountability for adherence to the code and prompt internal
    reporting of violations of the code, including illegal or
    unethical behavior regarding accounting or auditing practices.
After this offering, we will make our code available on our
website at www.cititrends.com.
Director Compensation
Our independent directors currently receive a $20,000 annual
retainer and an annual award of options as compensation from us
for their services as members of the board of directors. We
reimburse all of our directors for out-of-pocket expenses in
connection with attendance at board of directors and committee
meetings. After this offering, we expect that our independent
directors will receive an annual fee of
$          for
serving as directors.
Executive Compensation
The following table sets forth a summary of the compensation
paid during fiscal 2003 to our Chief Executive Officer and our
four most highly compensated executive officers, together
referred to as our named executive officers:
Summary Compensation Table
Long-Term
Annual Compensation(1)
Compensation
Securities
Name and Principal Position
Fiscal Year
Salary
Bonus
Underlying Options
R. Edward Anderson
2003
$
300,000
$
78,000
Chief Executive Officer
George A. Bellino
2003
$
231,923
$
90,476
President and Chief
Merchandising Officer
Thomas W. Stoltz
2003
$
165,000
$
21,780
Chief Financial Officer
James A. Dunn
2003
$
116,923
$
24,968
Vice President of Store Operations
(1)
Excludes perquisites and other benefits, which for each named
    individual are less than 10% of the sum of such
    individual's annual salary and bonus.
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Stock Option Grants
The following table contains summary information regarding stock
option grants made during fiscal 2003 by us to the named
executive officers. We also granted stock options to purchase
shares of common stock to certain of our employees and to our
current stockholders, including Hampshire Equity Partners. All
options were granted at fair market value of our common stock,
as determine by our board of directors, on the grant date.
Option Grants In Last Fiscal Year
Potential
Realizable Value
at Assumed
Rates of Stock
Price
% of Total Options
Appreciation for
Number of Securities
Granted to
Exercise
Option Term
(1)
Underlying Options
Employees in
Price Per
Expiration
Name
Granted
Fiscal Year
Share
Date
5%
10%
R. Edward Anderson
0.3
%
10/30/14
George A. Bellino
0.7
%
10/30/14
Thomas W. Stoltz
–
James A. Dunn
–
(1)
Potential realizable value is based upon the assumed initial
    public offering price of our common stock of
    $            .
    Potential realizable values are net of exercise price, but
    before taxes associated with exercise. Amounts representing
    hypothetical gains are those that could be achieved if options
    are exercised at the end of the option term. The assumed 5% and
    10% rates of stock price appreciation are provided in accordance
    with rules of the Commission, based on the assumed initial
    public offering price of
    $        per share and
    do not represent our estimate or projection of the future stock
    price.
Year-End Option Values
The following table provides information about the number and
value of unexercised options to purchase common stock held on
January 31, 2004 by the named executive officers. There was
no public market for our common stock on January 31, 2004.
Accordingly, we have calculated the values of the unexercised
options on the basis of an assumed initial public offering price
of
$           per
share, less the applicable exercise price, multiplied by the
number of shares acquired upon exercise. None of the named
executive officers exercised any stock options in 2004.
Fiscal Year End Option Values
Number of Securities
Value of Unexercised
Underlying Unexercised
In-the-Money Options
Options at Fiscal Year End
at Fiscal Year End
(1)
Name
Exercisable
Unexercisable
Exercisable
Unexercisable
R. Edward Anderson
$
2,017,140
$
672,000
George A. Bellino
2,217,792
—
Thomas W. Stoltz
480,000
—
James A. Dunn
316,000
84,000
(1)
The options were granted under our Amended and Restated
    1999 Stock Option Plan. These options generally vest in
    equal installments over four years from the date of grant and
    are generally exercisable up to ten years from the date of
    grant. The fair value of the options granted during the year
    ended January 31, 2004 was $34.18 using the Black-Scholes
    option-pricing model, with weighted average assumptions: no
    dividend yield; 50% expected volatility; 2.50% risk-free
    interest rate; ten year expected life and a 10% forfeiture rate.
2005 Long-Term Incentive Plan
Prior to the consummation of the offering, we anticipate that
our board of directors and stockholders will adopt the 2005
Long-Term Incentive Plan to replace our Amended and Restated
1999 Stock Option Plan. The 2005 Long-Term Incentive Plan will
enable our key employees and directors to acquire and maintain
stock ownership, thereby strengthening their commitment to our
success and their desire to remain with us, focusing their
attention on managing as an equity owner and aligning their
interests with those of our stockholders. In addition, the plan
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is intended to attract and retain key employees, which, together
with the key directors, we refer to collectively as eligible
persons, and to provide incentives and rewards for superior
performance that will ultimately lead to our profitable growth.
The plan will be approved by our stockholders prior to the
completion of this offering. As
of                     ,
2005, options to purchase up
to            shares
of our common stock remain outstanding under the option plan.
Upon adoption of the new plan, the Amended and Restated 1999
Stock Option Plan will be terminated and no additional options
will be granted under that plan.
The principal features of our incentive plan are described in
summary form below.
Shares Subject to the Plan
The incentive plan provides that no more
than                 shares
of our common stock may be issued pursuant to awards under the
incentive plan; provided that, in the aggregate, no more than
50% of the total shares of our common stock can be made the
subject of an award other than as options under the incentive
plan. These shares of our common stock will be authorized but
unissued shares in such amounts as determined by the board of
directors. However, the amount of shares of our common stock
granted to an individual in any calendar year period can not
exceed 5% of the total number of reserved shares of common
stock. Also, in any calendar year period, the maximum dollar
amount of cash or the fair market value of common stock that any
individual can receive in connection with performance units can
not exceed $2.5 million. The number of shares of our common
stock available for awards, as well as the terms of outstanding
awards, are subject to adjustment as provided in the incentive
plan for stock splits, stock dividends, recapitalizations,
mergers, consolidations, liquidations, changes in corporate
structure and other similar events. Awards that may be granted
under the incentive plan include stock options, stock
appreciation rights (SARs), restricted shares, performance
units, performance shares and director's shares. Upon the
granting of an award to an individual, the number of shares of
common stock available shall be reduced depending on the type of
award granted, as provided in the incentive plan.
The shares of our common stock subject to any award that
expires, terminates or is cancelled, is settled in cash, or is
forfeited or becomes unexercisable, will again be available for
subsequent awards, except as prohibited by law.
Administration
Either our board of directors or a committee appointed by our
board directors may administer the incentive plan. We refer to
our board of directors and any committee exercising discretion
under the incentive plan from time to time as the committee.
With respect to decisions involving an award to a reporting
person within the meaning of Rule 16a-2 under the Exchange
Act, the committee is to consist of two or more directors who
are disinterested within the meaning of Rule 16b-3 under
the Exchange Act. With respect to decisions involving an award
intended to satisfy the requirements of section 162(m) of
the Internal Revenue Code, the committee is to consist solely of
two or more directors who are "outside directors" for
purposes of that code section. We currently expect that our
compensation committee will administer the incentive plan.
Subject to the terms of the incentive plan, the committee has
express authority to determine the eligible persons who will
receive awards, when such awards will be granted, the number of
shares of our common stock, units, or SARs to be covered by each
award, the relationship between awards and the terms and
conditions of awards. The committee has broad discretion to
prescribe, amend, and rescind rules relating to the incentive
plan and its administration, to interpret and construe the
incentive plan and the terms of all award agreements, and to
take all actions necessary or advisable to administer the
incentive plan. Within the limits of the incentive plan, the
committee may accelerate the vesting of any awards, allow the
exercise of unvested awards, and may modify, replace, cancel, or
renew them.
The incentive plan provides that the determination of the
committee on all matters relating to awards and the incentive
plan are final. The incentive plan also releases members of the
committee from liability for good faith actions associated with
the administration of the incentive plan.
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Eligibility
The committee may grant options that are intended to qualify as
incentive stock options, which we refer to as ISOs, only to
employees, and may grant all other awards to employees or any
nonemployee director. The incentive plan and the discussion
below use the term "grantee" to refer to an eligible
person who has received an award under the incentive plan.
Although the incentive plan provides the general provisions of
our available awards, upon the determination by the committee of
the type and amount of award to be granted to a grantee, the
eligible grantee will enter into an agreement with us specifying
the specific terms of the award to be granted. Each type of
award (i.e., stock option, restricted share, performance units
and performance shares) is governed by a separate agreement that
describes the respective terms governing such award, such as the
exercise date, term and expiration, restrictions, value, form
and timing of payment.
Stock Options
Stock options granted under the incentive plan provide grantees
with the right to purchase shares of our common stock at a
predetermined exercise price. The committee may grant stock
options that are intended to qualify as ISOs, or stock options
that are not intended to so qualify, which we refer to as
non-ISOs. The incentive plan also provides that ISO treatment
may not be available for stock options that become first
exercisable in any calendar year to the extent the value of the
underlying shares that are the subject of the stock option
exceed $100,000, based upon the fair market value of the shares
of our common stock on the stock option grant date. Any ISO
shall be granted within ten years from the earlier of the
date the incentive plan is adopted by our board of directors or
the date the incentive plan is approved by our stockholders.
Stock Appreciation Rights (SARs)
A SAR generally permits a grantee to receive, upon exercise,
shares of our common stock equal in value to the excess of
(i) the fair market value, on the date of exercise, of the
shares of our common stock with respect to which the SAR is
being exercised, over (ii) the exercise price of the SAR
for such shares. The committee may grant SARs in tandem with
stock options, or independently of them. The committee has the
discretion to grant SARs to any eligible employee or nonemployee
director.
Exercise Price for Stock Options and SARs
The exercise price of non-ISOs and SARs may not be less than
100% of the fair market value of our common stock on the grant
date of the award. The exercise price of ISOs may not be less
than 110% of the fair market value of our common stock on the
grant date of the award for owners who own more than 10% of our
shares of common stock on the grant date. For ISOs granted to
other participants and for options intended to be exempt from
Internal Revenue Code Section 162(m) limitations, the
exercise price may not be less than 100% of the fair market
value of our common stock on the grant date. With respect to
stock options and SARs, payment of the exercise price may be
made in any of the following forms, or combination of them:
shares of unrestricted stock held by the grantee for at least
six months (or a lesser period as determined by the
committee) prior to the exercise of the option or SAR, based
upon its fair market value on the day preceding the date of
exercise, or through simultaneous sale through a broker of
unrestricted stock acquired on exercise. The exercise price of
any option and SAR must be determined by the committee no later
than the date of grant of such option or SAR and the exercise
price shall be paid in full at the time of the exercise.
Exercise and Term of Options and SARs
The committee will determine the times, circumstances and
conditions under which a stock option or SAR may be exercisable.
Unless provided otherwise in the applicable award agreement,
each option or SAR shall be exercisable in one or more
installments commencing on or after the first anniversary of the
grant date; provided, however, that all options or SARs shall
become fully vested and exercisable upon a change of control, as
defined in the incentive plan. To the extent exercisable in
accordance with the agreement granting them, a stock option or
SAR may be exercised in whole or in part, and from time to time
during its term, subject to earlier termination relating to a
holder's termination of employment or service as may be
determined by the committee at the time of the grant. The term
during which grantees may exercise stock options and SARs may
not exceed ten years from the date of grant or five years
in the case of ISOs granted to employees who, at the time of
grant, own more than 10% of our outstanding shares of common
stock; provided that, an option (excluding ISOs) may, upon the
death
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of the holder of such option, be exercised for up to one year
following the date of the holder's death, even if the
period extends beyond the ten year limit.
Options and SARs granted to nonemployee directors will be
exercisable with respect to one-third of the underlying shares
on each of the first, second and third anniversaries of the
grant date and will have a term of not more than ten years.
If a nonemployee director ceases to serve as a director, any
option or SAR granted to such director shall be exercisable
during its remaining term, to the extent that the option or SAR
was exercisable on the date the nonemployee director ceased to
be a director.
Restricted Shares
Under the incentive plan, the committee may grant restricted
shares that are forfeitable until certain vesting requirements
are met. For restricted shares, the incentive plan provides the
committee with discretion to determine the per share purchase
price of such shares, which can not be less than the minimum
consideration (as defined in the incentive plan generally as the
par value of a share of common stock), and the terms and
conditions under which a grantee's interests in such awards
become vested. The incentive plan also provides the committee
with discretion to determine whether the payment of dividends
declared on the shares should be deferred and held by us until
restrictions on the shares lapse, whether dividends should be
reinveseted in additional shares of restricted shares subject to
certain restrictions and terms, whether interest will be
credited to the account of such holder for dividends not
reinvested and whether dividends issued on the restricted shares
should be treated as additional restricted shares. Payment of
the purchase price for shares of restricted stock shall be made
in full by the grantee before the delivery of such shares and,
in any event, no later than ten days after the grant date
for such shares. This payment may be made in cash or, with prior
approval of the committee and subject to certain conditions,
shares of restricted or unrestricted stock owned by the grantee.
Under the incentive plan, the committee has discretion to
provide in the award agreement that all or any portion of a
grantee's award of restricted shares shall be forfeited
(a) upon the grantee's termination of employment
within a specified time period, (b) if specified
performance goals are not satisfied by us or the grantee within
a specified time period or (c) if any other listed
restriction in the governing award agreement is not satisfied.
If a share of restricted stock is forfeited, then the grantee
shall be deemed to have resold such share to us at a specified
price, we shall pay the grantee the amount due as soon as
possible, but no later than 90 days after forfeiture, and
the share of restricted stock shall cease to be outstanding.
Performance Awards
The incentive plan authorizes the committee to grant
performance-based awards in the form of performance units and
performance shares that are "performance compensation
awards" that are intended to be exempt from Internal
Revenue Code Section 162(m) limitations unless otherwise
designated in the applicable award agreement. In either case,
unless otherwise specified in the award agreement, upon the
achievement, within the specified period of time, of the
performance objectives, a performance unit shall be deemed
exercised on the date on which it first becomes exercisable.
Performance units are payable in cash or restricted stock,
except that the committee may decide to pay benefits wholly or
partly in stock delivered to the grantee or credited to a
specified brokerage account. For performance shares, unless
otherwise specified in the award agreement or by the committee,
upon the achievement within the specified period of time of the
performance objectives, grantees shall be awarded shares of
restricted stock or common stock, unless the committee decides
to pay cash in lieu of stock, based upon the number of
percentage shares specified in the award agreement multiplied by
the performance percentage achieved. The committee decides the
length of performance periods, but the periods may not be less
than one year nor more than 5 years. Any performance shares
with respect to which the performance goals have not been
achieved at the end of the performance period shall expire.
With respect to performance compensation awards, the incentive
plan requires that the committee specify in writing the
performance period to which the award relates, and an objective
formula by which to measure whether and the extent to which the
award is earned on the basis of the level of performance
achieved with respect to one or more performance measures. Once
established for a performance period, the performance measures
and performance formula applicable to the award may not be
amended or modified in a manner that would cause the
compensation payable under the award to fail to constitute
performance-based compensation under Internal Revenue Code
Section 162(m).
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Under the incentive plan, the possible performance measures to
be used by the committee for performance compensation awards
include stock price, basic, earnings per share, operating
income, return on equity or assets, cash flow, earnings before
interest, taxes, depreciation and amortization, revenues,
overall revenues or sales growth, expense reduction or
management, market position, total income, return on net assets,
economic value added, stockholder value added, cash flow return
on investment, net operating profit, net operating profit after
tax, return on capital and return on invested capital. Each
measure will be, to the extent applicable, determined in
accordance with generally accepted accounting principles as
consistently applied by us, or such other standard applied by
the committee and, if so determined by the committee, and in the
case of a performance compensation award, to the extent
permitted under Internal Revenue Code Section 162(m),
adjusted to reflect the impact of specified corporate
transactions, special charges, foreign currency effects,
accounting or tax law changes and other extraordinary or
nonrecurring events. Performance measures may vary from
performance period to performance period, and from grantee to
grantee, and may be established on a stand-alone basis, in
tandem or in the alternative.
Tandem Awards
The committee may grant and identify any award with another
award granted under the incentive plan, on terms and conditions
set forth by the committee.
Income Tax Withholding
As a condition for the issuance of shares of our common stock
pursuant to awards, the incentive plan requires satisfaction of
any applicable federal, state, local, or foreign withholding tax
obligations that may arise in connection with the award or the
issuance of shares of our common stock.
Transferability
Unless set forth in the agreement evidencing the award, awards
(other than an award of restricted stock) may not be assigned or
transferred except by will or the laws of descent and
distribution or, in the case of an option other than an ISO,
pursuant to a domestic relations order as defined under
Rule 16a-12 under the Exchange Act. An option may be
exercised during the lifetime of the grantee only by that
grantee or his or her guardian, legal representatives or, except
as would cause an ISO to lose such status, by a bankruptcy
trustee. Notwithstanding the foregoing, the committee may set
forth in the agreement evidencing the award (other than an ISO)
that the award may be transferred to an immediate family member,
or related trust or related partnership. The terms of an award
shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the grantee.
Each share of restricted stock shall be non-transferable until
such share becomes non-forfeitable.
Certain Corporate Transactions
With respect to any award which relates to stock, in the event
of our liquidation or dissolution or merger or consolidation
with another entity, the incentive plan and awards issued
thereunder shall continue in effect in accordance with their
terms, except that following any of these events either
(a) each outstanding award shall be treated as provided for
in the agreement entered into in connection with the event or
(b) if not so provided in the agreement entered into in
connection with the event, a grantee shall be entitled to
receive with respect to each share of stock subject to the
outstanding award, upon the vesting, payment or exercise of the
award the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a share of
stock was entitled to receive in connection with that certain
event.
The applicable award agreement pertaining to each award shall
set forth the terms and conditions applicable to such award upon
a termination of employment of any grantee by us, which, except
for awards granted to nonemployee directors, shall be as the
committee may, in its discretion, determine at the time the
award is granted or thereafter.
Term of Plan; Amendments and
Termination
The term of the incentive plan is ten years
from                     ,
2005, the date it was approved by our board of directors and
stockholders, or at such earlier time as our board of directors
may determine. Our board of directors may from time to time,
amend or modify the incentive plan without the approval of our
stockholders, unless stockholder approval is required
(a) to retain ISO treatment under the Internal Revenue
Code, (b) to permit
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transactions in stock under the incentive plan to be exempt from
liability under Section 16(b) of the Exchange Act or
(c) under the listing requirements of any securities
exchange on which any of our equity securities are listed.
Governing Law
Except where preempted by federal law, the law of the State of
Georgia shall be controlling in all matters relating to the
incentive plan, without giving effect to the conflicts of law
principles thereof.
Employment Agreements
Set forth below are summaries of all of our employment
agreements and arrangements with our named executive officers.
The following summaries does not contain all of the terms of the
agreements they summarize, and we refer you to the agreements,
which are included as exhibits to the registration statement of
which this prospectus forms a part, for a complete understanding
of the terms thereof. See "Where You Can Find More
Information."
Letter Agreement with R. Edward Anderson
In November 2001, we entered into a letter agreement with
Mr. Anderson, pursuant to which Mr. Anderson was
appointed our Chief Executive Officer and member of our board of
directors.
Compensation
The letter agreement provides that Mr. Anderson will
receive an annual base salary of $300,000 (not including
perquisites) and will be eligible to earn a bonus of up to 50%
of his base salary. Mr. Anderson's bonus is contingent
upon our obtaining certain financial goals.
At the time he was hired, we granted Mr. Anderson options
to purchase shares of our common stock. These options vest in
equal amounts over four years, subject to accelerated vesting in
the event that we reach targeted financial goals. In the event
that Mr. Anderson is terminated for a reason other than
"cause" (which term is not defined in the agreement),
we may repurchase any or all of his vested options at "fair
market value" as determined by our board of directors. In
the event that Mr. Anderson is terminated for
"cause", any and all of his vested options will be
cancelled. The agreement does not have a definite term, does not
contain a noncompetition provision and does not provide for the
treatment of unvested options held by Mr. Anderson at the
time of his termination. The agreement provides that all of
Mr. Anderson's unvested options will vest upon a
"change of control" (which term is not defined in the
agreement).
Severance
The letter agreement provides that in the event that
Mr. Anderson is terminated for any reason other than for
"cause," he is entitled to severance pay of $150,000
to be paid in arrears over a period of six months.
Amended Employment and Non-Interference Agreement with
George A. Bellino
Term and Termination
In April 1999, we entered into an employment and
non-interference agreement with Mr. Bellino, pursuant to
which Mr. Bellino was appointed our Chief Executive Officer
and President for a period of two years. In December 2001, we
amended certain terms of this employment and non-interference
agreement, one of which was to change Mr. Bellino's
position to Chief Merchandising Officer and President.
Mr. Bellino's amended agreement has a one year term
and is automatically renewed for subsequent twelve-month periods
subject to 90 days prior notice by either party.
Mr. Bellino's amended agreement provides that his
employment may be terminated: (a) upon his death or
disability, (b) by us for "cause" (described
below), (d) by us for any reason other than those set forth
in (a) or (b) or no reason, which the agreement
defines as "no reason", (e) by Mr. Bellino
at will or (f) by Mr. Bellino if we do not satisfy our
obligations under the agreement or materially reduce
Mr. Bellino's duties or change his title without
consent, which the agreement defines as "reason."
"Cause," as defined in the agreement includes:
•
conviction or guilty plea to a serious felony, a crime of moral
    turpitude or other specified financial offenses,
•
a board determination that Mr. Bellino has committed a
    crime of moral turpitude,
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•
a board determination that Mr. Bellino knowingly breach his
    fiduciary obligations to us, subject to notice and a cure period,
•
Mr. Bellino's failure to discharge his duties under
    the agreement or substance abuse which materially interferes
    with the discharge of his duties, subject to notice and a cure
    period,
•
Mr. Bellino's material violation of any
    non-competition or confidentiality agreement with us,
•
Mr. Bellino's material violation of any other personal
    obligations under his agreement, subject to notice and a cure
    period, and
•
any other violation of law by Mr. Bellino that could have a
    material adverse effect on us, subject to notice and a cure
    period.
Mr. Bellino's agreement provides that if he is
terminated for any reason, he is entitled to receive all accrued
and unpaid salary and benefits, reimbursement of expenses and
continued medical coverage as legally required. In addition, in
the event that Mr. Bellino is terminated (a) upon his
death or disability, (b) by us for "no reason" or
(c) by him with "reason," then Mr. Bellino
is entitled to receive payments, payable over a twelve-month
period, equal to twelve months of his base salary on his
termination date, subject to reduction for any compensation from
other employment during such twelve-month period.
Compensation
Under the agreement, Mr. Bellino receives an annual base
salary of $215,000 (excluding perquisites), subject to review by
the board, and is eligible for a bonus based on our performance.
As provided in the agreement, Mr. Bellino's bonus may
be an amount equal to 35% of his base salary if we reach
targeted financial goals. The agreement also provides for
reimbursement of Mr. Bellino's employment related
expenses by us.
Non-Interference and
Non-Solicitation
During the term of his agreement and for a twelve-month period
after his termination date, Mr. Bellino has agreed not to,
without our consent:
•
own, manage, operate, control, invest or acquire an interest in,
    or otherwise engage or participate in, whether as a proprietor,
    partner, stockholder, lender, director, officer, employee, joint
    venturer, investor, lessor, agent, representative or other
    participant, in any business which competes with us in any state
    where we operate.
•
Recruit, solicit or otherwise induce or influence any
    proprietor, partner, stockholder, lender, director, officer,
    employee, sales agent, joint venturer, investor, lessor,
    customer, agent, representative or any other person with a
    business relationship with us to discontinue, reduce or modify
    their relationship with us.
Limitation of Liability and Indemnification of Officers and
Directors
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our second amended and restated
certificate of incorporation and our amended and restated bylaws
that limit or eliminate the personal liability of our directors
for a breach of their fiduciary duty of care as a director. The
duty of care generally requires that, when acting on behalf of
the corporation, directors exercise an informed business
judgment based on all material information reasonably available
to them. Consequently, a director will not be personally liable
to us or our stockholders for monetary damages or breach of
fiduciary duty as a director, except for liability for:
•
any breach of the director's duty of loyalty to us or our
    stockholders;
•
any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends; or
•
any transaction from which the director derived an improper
    personal benefit.
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the full extent permitted under Delaware law.
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As permitted by the Delaware General Corporation Law, our
amended and restated bylaws provide that:
•
we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;
•
we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions; and
•
the rights provided in our bylaws are not exclusive.
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employees or agents in
which indemnification by us is sought, nor are we aware of any
threatened litigation or proceeding that may result in a claim
for indemnification.
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Related Party Transactions
Management Consulting Agreement
We are a party to an Amended and Restated Management Consulting
Agreement, or the consulting agreement, effective as of
February 1, 2004 with Hampshire Management Company LLC, or
the consultant, which is an affiliate of the selling
stockholders, pursuant to which it provides us with certain
consulting services related to, but not limited to, our
financial affairs, relationships with our lenders, stockholders
and other third-party associates or affiliates, and the
expansion of our business.
Term and Termination
The consulting agreement has a four year term and is subject to
automatic one year renewals each February 1, subject to
60 days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90 days prior notice in the event of
(a) a sale of all or substantially all of our common stock
or assets, (b) a merger or consolidation in which we are
not the surviving corporation or (c) a registered public
offering of our common stock, which includes this offering. It
is expected that both parties to the consulting agreement will
waive any notice requirement for termination upon consummation
of this offering.
Compensation
Under the consulting agreement, we pay the consultant an annual
management fee of $240,000, payable in monthly installments. We
have also agreed to indemnify the consultant, its affiliates and
associates, and each of the respective owners, partners,
officers, directors, members, employees and agents of each, from
and against any loss, liability, damage, claim or expenses
(including the fees and expenses of counsel) relating to their
performance under the consulting agreement.
Upon the consummation of this offering, the parties shall
terminate the consulting agreement and we will pay the
consultant a termination fee of $1.2 million.
Stockholders Agreement
We are party to a Stockholders Agreement, dated as of
April 13, 1999, or the stockholders agreement, with
Hampshire Equity Partners II, L.P., George Bellino and
certain management stockholders. Pursuant to the stockholders
agreement:
•
four members of our board of directors may be designated by the
    owners of the majority of the voting stock beneficially owned by
    Hampshire Equity Partners and its affiliates,
•
our stockholders have agreed generally not to transfer their
    shares,
•
our management stockholders have been granted tag-along rights
    in the event of the sale of more than 50% of our common stock,
•
our management stockholders have agreed to cooperate in any sale
    of the company by Hampshire Equity Partners, and
•
we have agreed to register shares of our common stock held by
    the stockholder parties in the event that we register additional
    shares of our common stock under the Securities Act, other than
    on a registration statement on Form S-4 or S-8, or in
    connection with an exchange offer, merger, acquisition, dividend
    reinvestment plan, stock option or other employee benefit plan.
Pursuant to these rights under the stockholders agreement,
Hampshire Equity Partners is entitled to include its shares of
common stock in this registration statement, subject to the
ability of the underwriters to limit the number of shares
included in this offering. We expect to terminate the
stockholders agreement upon consummation of this offering.
Registration Rights Agreement
We expect to enter into a new registration rights agreement with
Hampshire Equity Partners, who will
hold                      shares
of our common stock, or
approximately           %
of our shares of common stock on a fully diluted basis following
the consummation of this offering. Pursuant to the terms and
provisions of the new registration rights agreement, Hampshire
Equity Partners will have the right from time to time, subject
to certain
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restrictions, to cause us to register its shares of common stock
for sale under the Securities Act on Form S-1 or, if
available, on Form S-2, Form S-3 or any similar
short-form registration statement. In addition, if at any time
we register additional shares of common stock, Hampshire Equity
Partners will be entitled to include its shares of common stock
in the registration statement relating to that offering. If our
subsequent registration is made pursuant to an underwritten
offering, Hampshire Equity Partners must sell its registrable
securities to the underwriters selected by us if they choose to
participate in that registration.
Nominating Agreement
In connection with this offering, we will enter into a
nominating agreement with Hampshire Equity Partners pursuant to
which we, acting through our nominating and corporate governance
committee, will agree, subject to the requirements of our
directors' fiduciary duties, that (i) Hampshire Equity
Partners will be entitled to designate two directors to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate at least 40% of
the shares of our common stock which it owned immediately prior
to the consummation of this offering or (ii) Hampshire
Equity Partners will be entitled to designate one director to be
nominated for election to our board of directors as long as
Hampshire Equity Partners owns in the aggregate less than 40%
and at least 15% of the shares of our common stock which it
owned immediately prior to the consummation of this offering. If
at any time Hampshire Equity Partners owns less than 15%, it
will not have the right to nominate any directors for election
to our board of directors.
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Principal and Selling Stockholders
The following table sets forth information known to us with
respect to the beneficial ownership of our common stock as of
October 30, 2004, and as adjusted to reflect the sale
of                      shares
of common stock by selling stockholders, by the following
persons:
•
each stockholder known by us to own beneficially more than 5% of
    our common stock;
•
each of our directors and named executive officers;
•
all directors and executive officers as a group; and
•
each of the selling stockholders.
This table lists applicable percentage ownership based
on                      shares
of common stock outstanding as of October 30, 2004
(including options exercisable within 60 days of
October 30, 2004), and also lists applicable percentage
ownership based on shares of common stock outstanding after
completion of this offering. The information in the table is not
adjusted for
the        -for-one stock
split of our common stock, which will occur simultaneously with
the completion of this offering.
We have determined beneficial ownership in the table in
accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, we have
deemed shares of common stock subject to options held by that
person that are currently exercisable or will become exercisable
within 60 days of October 30, 2004 to be outstanding,
but we have not deemed these shares to be outstanding for
computing the percentage ownership of any other person. To our
knowledge, except as set forth in the footnotes below, each
stockholder identified in the table possesses sole voting and
investment power with respect to all shares of common stock
shown as beneficially owned by that stockholder. Unless
otherwise indicated, the address of all listed stockholders is
c/o Citi Trends, Inc., 102 Fahm Street, Savannah, Georgia
31401.
Number of
Number of
Shares
Percentage
Shares
Beneficially
of Shares
Percentage of
Beneficially
Number of
Owned
Outstanding
Shares
Owned Prior
Shares Being
After the
Before the
Outstanding After
Name of Beneficial Owner
to the Offering
Offered
Offering
Offering
the Offering
Directors and Named Executive Officers:
R. Edward Anderson
George A. Bellino
Thomas W. Stoltz
James A. Dunn
Tracy L. Noll
John S. Lupo
Gregory P. Flynn
Laurens Goff
Directors and executive officers as a group (eight persons)
5% Stockholder:
Hampshire Equity Partners II, L.P.
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Description of Capital Stock
General
Upon the completion of this offering, we will be authorized to
issue                      shares
of common stock, $0.01 par value per share, and shares
of                     undesignated
preferred stock, $0.01 par value per share. The following
description of our capital stock does not purport to be complete
and is subject to, and qualified in its entirety by, our second
amended and restated certificate of incorporation and amended
and restated by-laws, which we have included as exhibits to the
registration statement of which this prospectus forms a part.
Common Stock
Dividend Rights.
Subject to preferences that may
apply to shares of preferred stock outstanding at the time, the
holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available at the time
and in the amounts as our board of directors may from time to
time determine.
Voting Rights.
Each common stockholder is entitled
to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the
election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for
election.
No Preemptive or Similar Rights.
No holder of our
common stock is entitled to preemptive rights to subscribe for
any shares of capital stock and our common stock is not subject
to conversion or redemption.
Right to Receive Liquidation Distributions.
Upon our
liquidation, dissolution or winding-up, the assets legally
available for distribution to our stockholders are distributable
ratably among the holders of our common stock and any
participating preferred stock outstanding at that time, after
payment of liquidation preferences, if any, on any outstanding
preferred stock and payment of other claims of creditors. Each
outstanding share of common stock is, and all shares of common
stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, no shares of, and no
securities convertible into, our preferred stock will be
outstanding.
Upon the closing of this offering, under our second amended and
restated certificate of incorporation our board of directors
will be authorized, subject to the limits imposed by the
Delaware General Corporation Law, but without further action by
our stockholders to issue shares of preferred stock in one or
more series, to establish from time to time the number of shares
to be included in each series, to fix the rights, preferences
and privileges of the shares of each wholly unissued series and
any of its qualifications, limitations and restrictions. Our
board of directors can also increase or decrease the number of
any series, but not below the number of shares of that series
then outstanding, without any further vote or action by our
stockholders.
Our board of directors may authorize the issuance of preferred
stock with voting or conversion rights that adversely affect the
voting power or other rights of our common stockholders. The
issuance of preferred stock, while providing flexibility in
connection with possible acquisitions, financings and other
corporate purposes, could have the effect of delaying, deferring
or preventing our change in control and may cause the market
price of our common stock to decline or impair the voting and
other rights of the holders of our common stock. We have no
current plans to issue any shares of preferred stock.
Anti-Takeover Effects of Various Provisions of the Delaware
General Corporation Law and Our Second Amended and Restated
Certificate of Incorporation and Our Amended and Restated
By-laws
Provisions of the Delaware General Corporation Law, our second
amended and restated certificate of incorporation and our
amended and restated by-laws contain provisions that may have
some anti-takeover effects and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that
might result in a premium over the market price for the shares
held by stockholders.
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Delaware Anti-Takeover
Statute
We are subject to Section 203 of the Delaware General
Corporation Law. Subject to specific exceptions,
Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an
"interested stockholder" for a period of three years
after the time the person became an interested stockholder,
unless:
•
the business combination, or the transaction in which the
    stockholder became an interested stockholder, is approved by our
    board of directors prior to the time the interested stockholder
    attained that status;
•
upon consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding those shares owned by persons who are directors and
    also officers and by employee stock plans in which employee
    participants do not have the right to determine confidentially
    whether shares held subject to the plan will be tendered in a
    tender or exchange offer; or
•
at or after the time a person became an interested stockholder,
    the business combination is approved by our board of directors
    and authorized at an annual or special meeting of stockholders
    by the affirmative vote of at least two-thirds of the
    outstanding voting stock that is not owned by the interested
    stockholder.
"Business combinations" include mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder. Subject to various exceptions, in
general an "interested stockholder" is a person who,
together with his or her affiliates and associates, owns, or
within three years did own, 15% or more of the shares of the
corporation's outstanding voting stock. These restrictions
could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
In addition, provisions of our second amended and restated
certificate of incorporation and amended and restated by-laws,
which are summarized in the following paragraphs, may have an
anti-takeover effect.
Classified Board of Directors.
Our amended and
restated charter will divide our board into three classes having
staggered terms, with one of such classes being elected each
year for a new three-year term. Class I directors will have
an initial term expiring in 2006, Class II directors will
have an initial term expiring in 2007 and Class III
directors will have an initial term expiring in 2008.
Class I will be comprised of
Mr.
.
Class II will be comprised of Messrs. Noll and Lupo.
Class III will be comprised of Messrs. Flynn and
Anderson.
Quorum Requirements; Removal of Directors.
Our
second amended and restated certificate of incorporation
provides for a minimum quorum of one-third in voting power of
the outstanding shares of our capital stock entitled to vote,
except that a minimum quorum of a majority in voting power of
the outstanding shares of our capital stock entitled to vote is
necessary to hold a vote for any director in a contested
election, the removal of a director or the filling of a vacancy
on our board of directors. Directors may be removed only for
cause by the affirmative vote of at least a majority in voting
power of the outstanding shares of our capital stock entitled to
vote generally in the election of directors.
No Cumulative Voting.
The Delaware General
Corporation Law provides that stockholders are not entitled to
cumulate votes in the election of directors unless provided for
otherwise in a company's certificate of incorporation. Our
second amended and restated certificate of incorporation does
not grant our stockholder cumulative voting rights.
No Stockholder Action by Written Consent; Calling of Special
Meeting of Stockholders.
Our second amended and
restated certificate of incorporation generally prohibits
stockholder action by written consent. It and our amended and
restated by-laws also provide that special meetings of our
stockholders may be called only by (1) the chairman of our
board of directors or (2) our board of directors pursuant
to a resolution approved by our board of directors or
(3) our board of directors upon a request by holders of at
least 50% in voting power of all the outstanding shares entitled
to vote at that meeting.
Advance Notice Requirements for Stockholder Proposals and
Director Nominations.
Our amended and restated by-laws
provide that stockholders seeking to bring business before or to
nominate candidates for election as directors at an annual
meeting of stockholders must provide timely notice of their
proposal in writing to the corporate
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secretary. To be timely, a stockholder's notice must be
delivered or mailed and received at our principal executive
offices not less than 90 nor more than 120 days in advance
of the anniversary date of the immediately preceding annual
meeting of stockholders. Our amended and restated by-laws also
specify requirements as to the form and content of a
stockholder's notice. These provisions may impede
stockholders' ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders. Stockholder nominations for the
election of directors at a special meeting must be received by
our corporate secretary by the later of ten days following the
day on which notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting
was made or 90 days prior to the date that meeting is
proposed to be held and not more than 120 days prior to
such meeting.
Limitations on Liability and Indemnification of Officers and
Directors.
The Delaware General Corporation Law authorizes
corporations to limit or eliminate the personal liability of
directors to corporations and their stockholders for monetary
damages for breaches of directors' fiduciary duties as
directors. Our second amended and restated certificate of
incorporation includes a provision that eliminates the personal
liability of directors for monetary damages for actions taken as
a director, except for liability:
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;
•
under Section 174 of the Delaware General Corporation Law
    (unlawful dividends or stock repurchases); or
•
for transactions from which the director derived improper
    personal benefit.
Our amended and restated by-laws provide that we must indemnify
and advance expenses to our directors and officers to the
fullest extent authorized by the Delaware General Corporation
Law. We are also expressly authorized to, and do, carry
directors' and officers' insurance for our directors,
officers and certain employees for some liabilities. We believe
that these indemnification provisions and insurance are useful
to attract and retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in
our amended and restated by-laws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent that, in a class action or direct suit, we pay the costs
of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
Authorized but Unissued Shares.
Our authorized but
unissued shares of common stock and preferred stock will be
available for future issuance without your approval. We may use
additional shares for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred
stock could render more difficult or discourage an attempt to
obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
Supermajority Provisions.
The Delaware General
Corporation Law provides generally that the affirmative vote of
a majority in voting power of the outstanding shares entitled to
vote is required to amend a corporation's certificate of
incorporation, unless the certificate of incorporation requires
a greater percentage. Our second amended and restated
certificate of incorporation provides that the following
provisions in the second amended and restated certificate of
incorporation may be amended only by a vote of two-thirds or
more in voting power of all the outstanding shares of our
capital stock entitled to vote:
•
the prohibition on stockholder action by written consent;
•
the ability to call a special meeting of stockholders being
    vested solely in (1) the chairman of our board of
    directors, (2) our board of directors pursuant to a
    resolution adopted by our board of directors and (3) our
    board of directors upon a request by holders of at least 50% in
    voting power of all the outstanding shares entitled to vote at
    that meeting;
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•
the provisions relating to the classification of our board of
    directors;
•
the provisions relating to the size of our board of directors;
•
the provisions relating to the quorum requirements for
    stockholder action and the removal of directors;
•
the limitation on the liability of our directors to us and our
    stockholders;
•
the provisions granting authority to our board of directors to
    amend or repeal our by-laws without a stockholder vote, as
    described in more detail in the next succeeding
    paragraph; and
•
the supermajority voting requirements listed above.
Our second amended and restated certificate of incorporation
grants our board of directors the authority to amend and repeal
our by-laws without a stockholder vote in any manner not
inconsistent with the laws of the State of Delaware or our
second amended and restated certificate of incorporation.
In addition, our second amended and restated certificate of
incorporation and our amended and restated by-laws provide that
the same provisions listed above and found in our amended and
restated by-laws may be amended by stockholders representing no
less than two-thirds of the voting power of all the outstanding
shares of our capital stock entitled to vote.
Listing
We intend to list our common stock on the Nasdaq National Market
under the trading symbol "CTRN."
Transfer Agent and Registrar
Upon consummation of this offering, the transfer agent and
registrar for the common stock will be American Stock Transfer
and Trust Company. The transfer agent's address is
59 Maiden Lane, New York, New York 10038.
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Shares Eligible for Future Sale
Immediately prior to this offering, there has been no public
market for our common stock. Future sales of substantial amounts
of common stock in the public market could adversely affect
prevailing market prices. Furthermore, since only a limited
number of shares will be available for sale shortly after the
offering because of contractual and legal restrictions on resale
described below, sales of substantial amounts of common stock in
the public market after the restrictions lapse could adversely
affect the prevailing market price and our ability to raise
equity capital in the future.
Upon completion of this
offering,         shares
of common stock will be outstanding, assuming no exercise of
currently outstanding and exercisable options. Of these shares,
the shares sold in this offering, plus any additional shares
sold upon exercise of the underwriters' over-allotment
option, will be freely transferable without restriction under
the Securities Act of 1933, as amended, unless they are held by
our "affiliates" as that term is used under the
Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. The
remaining                      shares
of common stock held by existing stockholders are restricted
shares. Restricted shares may be sold in the public market only
if registered or if they qualify for an exemption from
registration under Rules 144 or 701 promulgated under the
Securities Act of 1933, as amended, which rules are summarized
below.
In general, under Rule 144 as in effect on the date of this
prospectus, beginning 90 days after the effective date of
this offering, our affiliates, or a person (or persons whose
shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule 144) for at least one year,
are entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the
then outstanding shares of common stock or the average weekly
trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Commission.
Sales under Rule 144 are subject to requirements relating
to the manner of sale, notice and the availability of current
public information about us. A person (or persons whose shares
are aggregated) who was not our affiliate at any time during the
90 days immediately preceding the sale and who has
beneficially owned restricted shares for at least two years is
entitled to sell such shares under Rule 144(k) without
regard to the limitations described above.
Our employees, officers, directors or consultants who purchased
or were awarded shares or options to purchase shares under a
written compensatory plan or contract are entitled to rely on
the resale provisions of Rule 701 under the Securities Act
of 1933, as amended, which permits affiliates and non-affiliates
to sell their Rule 701 shares without having to comply
with the Rule 144 holding period restrictions, in each case
commencing 90 days after the effective date of this
offering. In addition, non-affiliates may sell
Rule 701 shares without complying with the public
information, volume and notice provisions of Rule 144.
In addition, we expect to file a registration statement on
Form S-8 registering shares of common stock subject to
outstanding stock options or reserved for issuance under our
Amended and Restated 1999 Stock Option Plan and 2005 Long-Term
Incentive Plan. We expect to file this registration statement as
soon as practicable after the consummation of this offering.
Shares registered under this registration statement will,
subject to Rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, unless
such shares are subject to vesting restrictions with us or the
lock-up agreements described below.
Lock-Up Agreements
Each of our officers and directors and substantially all other
stockholders have agreed to a 180-day "lock up" with
respect
to                      shares
of common stock and other of our securities that they
beneficially own, including securities that are convertible into
shares of common stock and securities that are exchangeable or
exercisable for shares of common stock. We have also agreed to
such a restriction. This means that, for a period of
180 days following the date of this prospectus (the
"lock-up period"), subject to specified exceptions, we
and such persons may not, directly or indirectly, offer, sell,
pledge or otherwise dispose of these securities without the
prior written consent of CIBC World Markets Corp. In addition,
the lock-up period may be extended in the event that we release
earnings or announce certain material news within specified time
periods prior to the termination of the lock-up period. The
restrictions in the lock-up agreements will not prevent such
persons from transferring their
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shares or other securities as gifts, to members of their
immediate family or to a trust for the benefit of themselves of
member of their family or by will or intestacy, provided, in
each case, that the transferee of such shares of other
securities agrees to be locked-up to the same extent as the
person from whom they received the shares.
Registration Rights
Pursuant to the registration rights agreement to be executed
upon consummation of this offering, Hampshire Equity Partners
has the right to demand registration of its shares and to
include its shares in registration statements that we file after
the consummation of this offering, subject to certain
exceptions. See "Related Party
Transactions—Registration Rights Agreement."
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Underwriting
We and the selling stockholders will enter into an underwriting
agreement with the underwriters named below. CIBC World Markets
Corp., Wachovia Capital Markets, LLC, SG Cowen & Co.,
LLC and Piper Jaffray & Co. are acting as the
representatives of the underwriters.
The underwriting agreement provides for the purchase of a
specific number of shares of common stock by each of the
underwriters. The underwriters' obligations are several,
which means that each underwriter is required to purchase a
specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject
to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of
shares of common stock set forth opposite its name below:
Underwriters
Number of Shares
CIBC World Markets Corp.
Piper Jaffray & Co.
SG Cowen & Co.
Wachovia Capital Markets, LLC
Total
The underwriters have agreed to purchase all of the shares
offered by this prospectus (other than those covered by the
over-allotment option described below) if any are purchased.
Under the underwriting agreement, if an underwriter defaults in
its commitment to purchase shares, the commitments of
non-defaulting underwriters may be increased or the underwriting
agreement may be terminated, depending on the circumstances.
The shares should be ready for delivery on or
about                     ,
2005 against payment in immediately available funds. The
underwriters are offering the shares subject to various
conditions and may reject all or part of any order. The
representatives have advised us and the selling stockholders
that the underwriters propose to offer the shares directly to
the public at the initial public offering price that appears on
the cover page of this prospectus. In addition, the
representatives may offer some of the shares to other securities
dealers at such price less a concession of
$           per
share. The underwriters may also allow, and such dealers may
reallow, a concession not in excess of
$           per
share to other dealers. After the shares are released for sale
to the public, the representatives may change the offering price
and other selling terms at various times.
We and the selling stockholders have granted the underwriters an
over-allotment option. The underwriters may purchase up
to                     of
these additional shares from us and up
to                     of
these additional shares from the selling stockholders. This
option, which is exercisable for up to 30 days after the
date of this prospectus, permits the underwriters to purchase a
maximum
of                     additional
shares to cover over-allotments. If the underwriters exercise
all or part of this option, they will purchase shares covered by
the option at the initial public offering price that appears on
the cover page of this prospectus, less the underwriting
discount. If this option is exercised in full, the total price
to the public will be
$          ,
the total proceeds to us will be
$          and
the total proceeds to the selling stockholders will be
$          .
The underwriters have severally agreed that, to the extent the
over-allotment option is exercised, they will each purchase a
number of additional shares proportionate to the
underwriter's initial amount reflected in the foregoing
table.
The following table provides information regarding the amount of
the discount to be paid to the underwriters by us and the
selling stockholders:
Total Without
Total With Full
Exercise of Over-
Exercise of Over-
Per Share
Allotment Option
Allotment Option
Citi Trends, Inc.
$
$
Selling Stockholders
We estimate that the total expenses of the offering for us and
the selling stockholders, excluding the underwriting discount,
will be approximately
$          .
We have agreed to bear the expenses (other than underwriting
discounts and commissions) of the selling stockholders in
connection with this offering.
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We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Each of our officers and directors and substantially all other
stockholders have agreed to a 180-day "lock up" with
respect
to                      shares
of common stock and other of our securities that they
beneficially own, including securities that are convertible into
shares of common stock and securities that are exchangeable or
exercisable for shares of common stock. We have also agreed to
such a restriction. This means that for a period of
180 days following the date of this prospectus, (the
"lock-up period") subject to specified exceptions, we
and such persons may not, directly or indirectly, offer, sell,
pledge or otherwise dispose of these securities without the
prior written consent of CIBC World Markets Corp. In addition,
the lock-up period may be extended in the event that we release
earnings or announce certain material news within specified time
periods prior to the termination of the lock-up period. The
restrictions in the lock-up agreements will not prevent such
persons from transferring their shares or other securities as
gifts, to members of their immediate family or to a trust for
the benefit of themselves of member of their family or by will
or intestacy, provided in each case, that the transferee of such
shares of other securities agree to be locked-up to the same
extent as the person from whom they received the shares.
We have agreed not to issue, sell or register (other than
pursuant to a registration statement on Form S-8), or
otherwise dispose of, directly or indirectly, any of our equity
securities (or any securities convertible into, exercisable for
or exchangeable for our equity securities), except for this
offering and the issuance of equity securities pursuant to our
Amended and Restated 1999 Stock Option Plan or our 2005
Long-Term Incentive Plan, during the lock-up period without the
consent of CIBC World Markets Corp. In the event that during the
lock-up period, (A) any shares are issued pursuant to our
Amended and Restated 1999 Stock Option Plan or our 2005 Long
Term Incentive Plan that are exercisable during the lock-up
period or (B) any registration is effected pursuant to a
registration statement on Form S-8 relating to shares that
are exercisable during the lock-up period, we have agreed to
obtain the written agreement of such grantee or purchaser or
holder of such registered securities that, during the lock-up
period, such person will not, without the prior written consent
of CIBC World Markets Corp., offer for sale, sell, distribute,
grant any option for the sale of, or otherwise dispose of,
directly or indirectly, or exercise any registration rights with
respect to, any shares of our common stock (or any securities
convertible into, exercisable for, or exchangeable for any
shares of our common stock) owned by such person.
The representatives have informed us that it does not expect
discretionary sales by the underwriters to exceed
five percent of the shares offered by this prospectus.
There is no established trading market for the shares. The
offering price for the shares has been determined by us, the
selling stockholders and the representative, based on the
following factors:
•
the history and prospects for the industry in which we compete;
•
our past and present operations;
•
our historical results of operations;
•
our prospects for future business and earning potential;
•
our management;
•
the general condition of the securities markets at the time of
    this offering;
•
the recent market prices of securities of generally comparable
    companies; and
•
the market capitalization and stages of development of other
    companies which we and the representative believe to be
    comparable to us.
Rules of the Commission may limit the ability of the
underwriters to bid for or purchase shares before the
distribution of the shares is completed. However, the
underwriters may engage in the following activities in
accordance with the rules:
•
Stabilizing transactions—The representative may make bids
    or purchases for the purpose of pegging, fixing or maintaining
    the price of the shares, so long as stabilizing bids do not
    exceed a specified maximum.
•
Over-allotments and syndicate covering transactions—The
    underwriters may sell more shares of our common stock in
    connection with this offering than the number of shares than
    they have committed to purchase. This over-allotment creates a
    short position for the underwriters. This short sales position
    may involve either
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"covered" short sales or "naked" short
    sales. Covered short sales are short sales made in an amount not
    greater than the underwriters' over-allotment option to
    purchase additional shares in this offering described above. The
    underwriters may close out any covered short position either by
    exercising their over-allotment option or by purchasing shares
    in the open market. To determine how they will close the covered
    short position, the underwriters will consider, among other
    things, the price of shares available for purchase in the open
    market, as compared to the price at which they may purchase
    shares through the over-allotment option. Naked short sales are
    short sales in excess of the over-allotment option. The
    underwriters must close out any naked short position by
    purchasing shares in the open market. A naked short position is
    more likely to be created if the underwriters are concerned
    that, in the open market after pricing, there may be downward
    pressure on the price of the shares that could adversely affect
    investors who purchase shares in this offering.
•
Penalty bids—If the representative purchases shares in the
    open market in a stabilizing transaction or syndicate covering
    transaction, they may reclaim a selling concession from the
    underwriters and selling group members who sold those shares as
    part of this offering.
Similar to other purchase transactions, the underwriters'
purchases to cover the syndicate short sales or to stabilize the
market price of our common stock may have the effect of raising
or maintaining the market price of our common stock or
preventing or mitigating a decline in the market price of our
common stock. As a result, the price of the shares of our common
stock may be higher than the price that might otherwise exist in
the open market. The imposition of a penalty bid might also have
an effect on the price of the shares if it discourages resales
of the shares.
Neither we nor the underwriters makes any representation or
prediction as to the effect that the transactions described
above may have on the price of the shares. These transactions
may occur on the Nasdaq National Market or otherwise. If such
transactions are commenced, they may be discontinued without
notice at any time.
Congress Financial Corporation (Southwest), an affiliate of
Wachovia Capital Markets, LLC, is the lender under our credit
agreement and Wachovia Capital Markets, LLC is acting as an
underwriter in this offering. As such, Congress Financial
Corporation (Southwest) has received and will continue to
receive customary fees in connection with the credit agreement.
In addition, in the future, certain of the underwriters or their
affiliates, may provide us, from time to time, with other
financial advisory or commercial or investment banking services,
for which we expect they will receive customary fees and
commissions.
In addition, an affiliate of CIBC World Markets Corp. has an
indirect interest in our Series A Preferred Stock and our
common stock, through ownership of a limited partnership
interest in Hampshire Equity Partners II, L.P. This
affiliate may be deemed to have received a portion of the net
proceeds of this offering upon the redemption of our
Series A Preferred Stock held by Hampshire Equity
Partners II, L.P. with a portion of the net proceeds of
this offering and its sale of common stock in this offering and
receipt of the net proceeds therefrom. We do not expect these
proceeds to exceed
$          in
the aggregate.
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Legal Matters
The validity of the common stock offered hereby will be passed
upon for us by Paul, Hastings, Janofsky & Walker LLP,
New York, New York. DLA Piper Rudnick Gray Cary US LLP,
Baltimore, Maryland, has represented the underwriters in this
offering.
Experts
The financial statements of Citi Trends, Inc. as of
January 31, 2004 and February 1, 2003 and for the
years then ended have been included herein in reliance upon the
report of KPMG LLP, independent registered public accounting
firm, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing. The audit report
covering the January 31, 2004 financial statements refers
to the adoption of Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity."
Where You Can Find More Information
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act
of 1933, as amended, for the common stock offered in this
offering. In addition, upon completion of this offering, we will
be required to file annual, quarterly and current reports, proxy
statements and other information with the Securities and
Exchange Commission. You may read and copy our registration
statement and the attached exhibits and schedules without charge
at the public reference room maintained by the Securities and
Exchange Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Securities and
Exchange Commission at 1 (800) SEC-0330 for further
information on the public reference room. You may also inspect
reports, proxy and information statements and other information
that we file electronically with the Securities and Exchange
Commission without charge at its Internet site,
http://www.sec.gov.
This prospectus constitutes part of the registration and does
not contain all of the information set forth in the registration
statement. Whenever a reference is made in this prospectus to
any of our contracts or other documents, the reference may not
be complete and, for a copy of the contract or document, you
should refer to the exhibits that are part of the registration
statement.
After the offering, we intend to furnish our stockholders with
annual reports containing financial statements audited by our
independent registered public accountants.
67
Table of Contents
Citi Trends, Inc.
Index to Financial Statements
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
    JANUARY 31, 2004 AND
FEBRUARY 1, 2003
Report of Independent Registered Public
    Accounting Firm
F-2
Balance Sheets as of January 31, 2004
    and February 1, 2003
F-3
Statements of Income for the Years Ended
    January 31, 2004 and February 1, 2003
F-4
Statements of Cash Flows for the Years
    Ended January 31, 2004 and February 1, 2003
F-5
Statements of Stockholders' Equity for
    the Years Ended January 31, 2004 and February 1,
    2003
F-6
Notes to Financial Statements for the Years
    Ended January 31, 2004 and February 1, 2003
F-7
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
    FEBRUARY 2, 2002
Balance Sheet as of February 2,
    2002
F-17
Statement of Income for the Year Ended
    February 2, 2002
F-18
Statement of Cash Flows for the Year Ended
    February 2, 2002
F-19
Statement of Stockholders' Equity for
    the Year Ended February 2, 2002
F-20
Notes to Financial Statements for the Year
    Ended February 2, 2002
F-21
CONDENSED FINANCIAL STATEMENTS AS OF AND FOR THE 39 WEEKS ENDED
    OCTOBER 30, 2004 AND NOVEMBER 1, 2003
Condensed Balance Sheets as of
    October 30, 2004 and November 1, 2003
F-29
Condensed Statements of Income for 39 Weeks
    Ended October 30, 2004 and November 1, 2003
F-30
Condensed Statements of Cash Flows for the
    39 Weeks Ended October 30, 2004 and November 1,
    2003
F-31
Notes to Condensed Financial Statements for
    the 39 Weeks Ended October 30, 2004 and November 1,
    2003
F-32
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Citi Trends, Inc.:
We have audited the accompanying balance sheets of Citi Trends,
Inc. (the "Company") as of January 31, 2004 and
February 1, 2003, and the related statements of income,
stockholders' equity, and cash flows for the fiscal years
ended January 31, 2004 and February 1, 2003. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Citi Trends, Inc. as of January 31, 2004 and
February 1, 2003, and the results of its operations and its
cash flows for the fiscal years ended January 1, 2004 and
February 1, 2003 in conformity with U.S. generally accepted
accounting principles.
As discussed in Note 2 to the financial statements,
effective July 6, 2003 the Company adopted the provisions
of the Statement of Financial Accounting Standards No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity".
KPMG LLP
Jacksonville, Florida
April 15, 2004
F-2
Table of Contents
Citi Trends, Inc.
Balance Sheets
January 31, 2004 and February 1, 2003
January 31,
February 1,
2004
2003
Assets
Current assets:
Cash and cash equivalents
$
9,954,232
5,824,847
Inventory
22,712,369
17,042,512
Prepaid and other current assets
1,770,998
1,193,007
Income tax receivable
—
195,068
Deferred tax asset
530,604
374,604
Total current assets
34,968,203
24,630,038
Property and equipment, net
12,749,601
9,995,996
Goodwill
1,371,404
1,371,404
Other assets
123,992
129,118
Total assets
$
49,213,200
36,126,556
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under revolving lines of credit
$
—
—
Accounts payable
19,577,370
13,469,260
Accrued expenses
2,121,520
1,642,493
Accrued compensation
1,669,462
1,917,368
Current portion of long-term debt
74,762
71,440
Current portion of capital lease obligations
566,667
774,052
Income tax payable
331,342
—
Layaway deposits
133,028
161,789
Total current liabilities
24,474,151
18,036,402
Long-term debt , less current portion
1,494,302
1,566,129
Capital lease obligations, less current portion
494,547
490,208
Preferred shares subject to mandatory redemption
5,160,313
—
Deferred tax liability
333,445
15,562
Other long-term liabilities
752,574
584,556
Total liabilities
32,709,332
20,692,857
Series A preferred stock, $0.01 par value. Liquidation
    preference of $1,000 per share. Authorized
    5,000 shares; issued and outstanding 3,605 shares in
    2003 and 2002
—
4,835,863
Stockholders' equity:
Common stock, $0.01 par value. Authorized
    500,000 shares; 363,275 shares issued in 2004 and 2003
3,633
3,633
Paid-in-capital
4,011,601
3,888,328
Retained earnings
12,571,384
6,788,625
Treasury stock, at cost; 5,775 shares
(57,750
)
(57,750
)
Subscription receivable
(25,000
)
(25,000
)
Total stockholders' equity
16,503,868
10,597,836
Commitments and contingencies (note 9)
Total liabilities and stockholders' equity
$
49,213,200
36,126,556
See accompanying notes to financial statements.
F-3
Table of Contents
Citi Trends, Inc.
Statements of Income
Years Ended January 31, 2004 and February 1,
2003
Fiscal
Fiscal
2003
2002
Net sales
$
157,198,306
$
124,950,935
Cost of sales
98,145,216
77,806,541
Gross profit
59,053,090
47,144,394
Selling, general and administrative expenses
48,844,888
38,759,624
Income from operations
10,208,202
8,384,770
Interest expense, including redeemable preferred stock dividend
563,342
255,708
Income before provision for income taxes
9,644,860
8,129,062
Provision for income taxes
3,726,914
3,101,237
Net income
$
5,917,946
$
5,027,825
Basic income per common share
$
15.92
$
12.95
Diluted income per common share
$
13.77
$
11.21
Average number of shares outstanding
Basic
363,275
363,275
Diluted
420,060
419,510
See accompanying notes to financial statements.
F-4
Table of Contents
Citi Trends, Inc.
Statements of Cash Flows
Years Ended January 31, 2004 and February 1,
2003
Fiscal
Fiscal
2003
2002
Operating activities:
Net income
$
5,917,946
5,027,825
Adjustment to reconcile net income to net cash provided by
    operating activities:
Dividends on preferred shares subject to mandatory redemption
189,263
—
Depreciation and amortization
4,032,602
3,014,549
Deferred income taxes
161,883
541,742
Loss on disposal of fixed assets
23,396
93,189
Noncash compensation expense
123,273
161,882
Changes in assets and liabilities:
Inventory
(5,669,857
)
(2,110,472
)
Prepaid and other current assets
(577,991
)
374,919
Income tax receivable
195,068
60,795
Other assets
(16,020
)
(39,294
)
Accounts payable
6,108,110
1,956,945
Accrued expenses and other long-term liabilities
647,045
576,631
Accrued compensation
(247,906
)
880,225
Income tax payable
331,342
—
Layaway deposits
(28,761
)
(82,278
)
Net cash provided by operating activities
11,189,393
10,456,658
Investing activities:
Purchase of property and equipment
(6,117,954
)
(5,926,622
)
Financing activities:
Fee paid for continuance of revolving line of credit
—
(50,000
)
Net repayments under revolving line of credit
—
(3,689,938
)
Repayments on long-term debt and capital lease obligations
(942,054
)
(742,969
)
Proceeds from issuance of long-term debt
—
1,680,000
Purchase of treasury stock
—
—
Proceeds from sale of stock
—
—
Net cash used in financing activities
(942,054
)
(2,802,907
)
Net increase (decrease) in cash and cash equivalents
4,129,385
1,727,129
Cash and cash equivalents:
Beginning of period
5,824,847
4,097,718
End of period
$
9,954,232
5,824,847
Supplemental disclosures of cash flow information:
Cash paid for interest
$
352,933
255,708
Cash paid for income taxes
$
3,036,620
2,498,700
Supplemental disclosures of noncash activities:
Dividends accrued on redeemable preferred stock
$
135,187
327,713
Purchases of property and equipment financed by entering into
    capital leases
$
670,503
660,012
Insurance settlement not yet received related to loss of fixed
    assets and inventory related to store fire
$
192,384
—
See accompanying notes to financial statements.
F-5
Table of Contents
Citi Trends, Inc.
Statements of Stockholders' Equity
Years Ended January 31, 2004 and February 1,
2003
Common Stock
Treasury Stock
Paid-in
Retained
Subscription
Shares
Amount
Capital
Earnings
Shares
Amount
Receivable
Total
Balance— February 2, 2002
363,275
3,633
3,726,446
2,088,513
5,775
(57,750
)
(25,000
)
5,735,842
Expense recorded in connection with issuance of stock options
161,882
161,882
Accrued preferred stock dividends
(327,713
)
(327,713
)
Net income
5,027,825
5,027,825
Balance— February 1, 2003
363,275
3,633
3,888,328
6,788,625
5,775
(57,750
)
(25,000
)
10,597,836
Expense recorded in connection with issuance of stock options
123,273
123,273
Accrued preferred stock dividends
(135,187
)
(135,187
)
Net income
5,917,946
5,917,946
Balance— January 31, 2004
363,275
3,633
4,011,601
12,571,384
5,775
(57,750
)
(25,000
)
16,503,868
See accompanying notes to financial statements.
F-6
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements
January 31, 2004 and February 1, 2003
(1)
Organization and Business
Citi Trends, Inc. (the "Company") is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of January 31, 2004,
the Company operated 161 stores in Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee, Texas, and Virginia.
(2)
Summary of Significant Accounting Policies
(a)
Fiscal Year
The Company's fiscal year ends on the Saturday closest to
January 31 of each year. Fiscal years 2003 and 2002
comprise 52 weeks. The years ended January 31, 2004
and February 1, 2003 are referred to as fiscal 2003 and
2002, respectively, in the accompanying financial statements.
(b)
Cash and Cash Equivalents
For purposes of the balance sheets and statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
(c)
Inventory
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. The Company
believes the first-in first-out retail inventory method results
in an inventory valuation that is fairly stated.
(d)
Property and Equipment, net
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (principally three to five years for computer
equipment and furniture, fixtures and equipment, five years
for leasehold improvements, and 15 years for buildings) of
the related assets or the relevant lease term, whichever is
shorter.
(e)
Goodwill
Goodwill represents the excess of the purchase price over the
fair value of assets acquired. The Company adopted the
provisions of Statement of Financial Accounting Standards
("SFAS") No. 142,
Goodwill and Other
Intangible Assets
, as of February 3, 2002. Pursuant to
SFAS No. 142, goodwill acquired in a purchase business
combination and determined to have an indefinite useful life is
not amortized, but instead tested for impairment at least
annually. The Company performed this analysis at the end of
fiscal 2003 and no impairment was indicated.
(f)
Impairment of Long-Lived Assets
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value of long-lived assets is reviewed. If this review indicates
that the carrying value of the asset will not be recovered as
determined based on projected undiscounted cash flows related to
the asset over its remaining life, the carrying value of the
asset is reduced to its estimated fair value. Impairment losses
in the future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
the Company's estimates for net sales, gross profit and
store expenses are not realized, future assessments of
recoverability could result in impairment charges.
F-7
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
(g)
Stock-Based Compensation
The Company applies the intrinsic-value-based method of
accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25,
Accounting for
Stock Issued to Employees
, and related interpretations
including Financial Accounting Standards Board
("FASB") interpretation (FIN) No. 44,
Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25
,
to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if
the current fair value of the underlying stock exceeds the
exercise price. The Company recognizes the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS No. 123,
Accounting for
Stock-Based Compensation
, and SFAS No. 148,
Accounting for Stock-Based Compensation— Transition and
Disclosure, an amendment of FASB Statement No. 123
,
establishes accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS No. 123, as amended. The following table
illustrates the effect on net income for fiscal 2003 and 2002 if
the fair-value-based method had been applied to all outstanding
and unvested awards in the period. Pro forma information
regarding net income and net income per share is required in
order to show our net income as if we had accounted for employee
stock options under the fair value method of
SFAS No. 123,
Accounting for Stock-Based
Compensation
, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation— Transition
Disclosure
. The fair values of options and shares issued
pursuant to our option plan at each grant date were estimated
using the Black-Scholes option pricing model.
2003
2002
Net income, as reported
$
5,917,946
5,027,825
Add stock-based employee compensation expense included in
    reported net income, net of tax of $45,855 and $62,729,
    respectively
77,415
99,153
Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $68,120 and $47,157, respectively
(114,997
)
(74,538
)
Pro forma net income
$
5,880,364
5,052,440
Pro forma Basic Income per common share
15.81
13.01
Pro forma Diluted Income per common share
13.68
11.27
(h)
Revenue Recognition
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. Revenue from layaway
sales is recognized when the customer has paid for and received
the merchandise. If the merchandise is not fully paid for within
60 days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program service charges, which are
non-refundable, are recognized in revenue when collected. All
sales are from cash, check or major credit card company
transactions. The Company does not offer company-sponsored
customer credit accounts.
(i)
Certain Financial Instruments with Characteristics of
    Liabilities and Equity
The Company prospectively adopted SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
.
SFAS No. 150 establishes standards for the
classification and measurement of certain financial instruments
with characteristics of both liabilities and equity.
SFAS No. 150 also includes required disclosures for
financial instruments within its scope. For the Company,
SFAS No. 150 was
F-8
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
effective for instruments entered into or modified after
May 1, 2003 and otherwise effective as of February 1,
2004, except for mandatorily redeemable financial instruments.
As such, the Company adopted the provisions of
SFAS No. 150 for our Series A Preferred Stock on
July 6, 2003 which required the Company to classify the
Series A Preferred Stock as a liability on our balance
sheet. The effective date of SFAS No. 150 has been
deferred indefinitely for certain other types of mandatorily
redeemable financial instruments. To illustrate the effect of
SFAS No. 150 the following table shows net income if
SFAS No. 150 had not been adopted for fiscal 2003 and
2002.
2003
2002
Net income, as reported
$
5,917,946
5,027,825
Add dividends on preferred shares subject to mandatory redemption
189,263
—
Pro forma net income
$
6,107,209
5,027,825
(j)
Earnings per Share
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
The following table provides a reconciliation of the earnings
figures used to calculate earning per share and used in
calculating diluted earnings per share for fiscal 2003 and 2002:
2003
2002
Net income, as reported
$
5,917,946
5,027,825
Subtract dividends on preferred shares subject to mandatory
    redemption
135,188
324,450
Numerator for EPS Calculation
$
5,782,758
4,703,375
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earning per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for fiscal 2003 and 2002:
2003
2002
Average number of common shares outstanding
363,275
363,275
Incremental shares from assumed exercises of stock options
56,785
56,235
Average number of common shares and common stock equivalents
    outstanding
420,060
419,510
For fiscal 2003, there was an immaterial number of options
outstanding to purchase shares of common stock excluded from the
calculation of diluted earnings per share because of
antidilution. For fiscal 2002 there were no options outstanding
to purchase shares of common stock excluded from the calculation
of diluted earnings per share because of antidilution.
(k)
Advertising
The Company expenses all advertising expenditures as incurred.
Advertising expense for fiscal 2003 and 2002 was $905,872 and
$618,051, respectively.
F-9
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
(l)
Store Opening and Closing Costs
New and relocated store opening costs are charged directly to
expense when incurred. When the Company decides to close or
relocate a store, the Company records an expense for the present
value of expected future rent payments, net of sublease income,
in the period that a store closes or relocates.
(m)
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
(n)
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(o)
Business Reporting Segments
The Company is a rapidly growing, value-priced retailer of urban
fashion apparel and accessories for the entire family and has
determined that its operations are within one reportable
segment. Accordingly, financial information on industry segments
is omitted. All sales are to customers and assets are located
within the United States.
(p)
Other Comprehensive Income
The Company did not have any components of other comprehensive
income for fiscal 2003 and 2002.
(3)
Property and Equipment, Net
The components of property and equipment at January 31,
2004 and February 1, 2003 are as follows:
2004
2003
Land
$
810,000
810,000
Building
1,340,000
1,340,000
Leasehold improvements
8,885,163
6,134,865
Furniture, fixtures, and equipment
9,000,105
5,779,811
Computer equipment
4,823,922
4,126,003
24,859,190
18,190,679
Accumulated depreciation and amortization
12,109,589
8,194,683
$
12,749,601
9,995,996
Depreciation expense for fiscal 2003 and 2002 was $4,011,456 and
$2,999,666, respectively. Computer equipment held under capital
leases and related accumulated depreciation was $3,373,409 and
$2,448,245, respectively, at January 31, 2004, and
$2,780,098 and $1,681,477, respectively, at February 1,
2003.
F-10
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
(4)
Revolving Lines of Credit
The Company has a revolving line of credit secured by
substantially all of the Company's assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2005. At January 31, 2004, the line of
credit provided for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $20,000,000 or the
Company's borrowing base ($14,569,838 at January 31,
2004), as defined in the credit agreement. The maximum credit
available under the credit agreement increased to $25,000,000
effective April 13, 2004. Borrowings under this secured
line of credit bear interest at either the prime rate plus 0.25%
or the Eurodollar rate plus 2.75%, at the Company's
election, based on conditions in the credit agreement.
Additionally, there is a letter of credit fee of 1.25% per
annum on the outstanding balance of letters of credit. The
interest rate on borrowings at January 31, 2004 was 4.00%.
At January 31, 2004, there were no outstanding borrowings
on the revolving line of credit, nor were there any outstanding
letters of credit. Under the terms of the credit agreement, the
Company is required to maintain a minimum tangible net worth.
The Company was in compliance with this requirement at
January 31, 2004.
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that expires in
June 2005. At January 31, 2004, the line of credit provided
for aggregate cash borrowings up to $3,000,000. Borrowings under
the credit agreement bear interest at the London Interbank
Offered Rate ("LIBOR") plus 2.00%. The interest
rate on borrowings at January 31, 2004 was 3.10%. At
January 31, 2004, there were no outstanding borrowings on
the unsecured revolving line of credit.
The Company borrows funds under these revolving lines of credit
from time to time and subsequently repays such borrowings with
available cash generated from operations.
(5)
Long-term Debt and Capital Lease Obligations
Capital Leases.
The Company has capital lease obligations
that finance the purchase of its computer equipment. These
obligations have maturity dates ranging from May 2004 to October
2007. The interest rates on these obligations range from 0.6% to
11.5%. All of these obligations are secured by the computer
equipment.
As of January 31, 2004 and February 1, 2003, long-term
debt and capital lease obligations consist of the following:
2004
2003
Mortgage payable issued to finance purchase of land and
    building; payable in monthly installments of $14,913, including
    interest, through April 2007 with a balloon payment of
    $1,303,412 due May 2007; interest at a fixed rate of 6.80%;
    secured by land and building
$
1,569,064
1,637,569
Capital lease obligations issued to finance purchase of computer
    equipment; payable in monthly installments averaging
    approximately $53,123, $32,101 and $11,106 in 2004, 2005 and
    2006, with maturity dates ranging from August 2003 to October
    2006; interest at rates ranging from 0.6% to 11.5%; secured by
    computer equipment
1,061,214
1,264,260
2,630,278
2,901,829
Less current portion of long-term debt and capital lease
    obligations
641,429
845,492
$
1,988,849
2,056,337
F-11
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
As of January 31, 2004, annual long-term debt and capital
lease obligation maturities are as follows:
Long-term
Capital Lease
Fiscal Year
Debt
Obligations
2004
$
74,762
637,482
2005
80,007
385,217
2006
85,620
133,277
2007
1,328,675
—
1,569,064
1,155,976
Less portion attributable to future interest payments (at rates
    ranging from 0.6% to 11.5%)
—
94,762
$
1,569,064
1,061,214
(6)
Income Taxes
The provision for income taxes for fiscal 2003 and 2002 consists
of the following:
2003
2002
Current:
Federal
$
2,987,496
2,136,445
State
577,535
423,050
3,565,031
2,559,495
Deferred:
Federal
135,658
465,423
State
26,225
76,319
161,883
541,742
$
3,726,914
3,101,237
Income tax expense computed using the federal statutory rate is
reconciled to the reported income tax expense as follows for
fiscal 2003 and 2002:
2003
2002
Statutory rate applied to income before income taxes
$
3,279,252
2,763,881
State income taxes, net of federal benefit
385,794
329,584
General business credits
(161,023
)
(117,004
)
Dividends on preferred stock
66,240
—
Other
156,651
124,776
Provision for income taxes
$
3,726,914
3,101,237
F-12
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
The components of deferred tax assets and liabilities at
January 31, 2004 and February 1, 2003 are as follows:
2004
2003
Deferred tax assets:
Book and tax depreciation differences
$
—
73,522
Deferred rent amortization
189,682
151,456
Inventory capitalization
572,515
361,057
Vacation liability
61,750
47,500
Stock compensation
129,071
80,848
Other
16,000
100,884
969,018
815,267
Deferred tax liabilities:
Book and tax depreciation differences
(188,881
)
—
Prepaid expenses
(309,464
)
(286,292
)
Goodwill
(129,612
)
(88,572
)
Other
(143,902
)
(81,361
)
(771,859
)
(456,225
)
Net deferred tax asset
$
197,159
359,042
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon
the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these
deductible differences. As such, a valuation allowance for
deferred tax assets was not considered necessary at
January 31, 2004 and February 1, 2003.
(7)
Preferred Shares Subject to Mandatory Redemption
The Company's Series A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or the liquidation of the Company, at a price
of $1,000 per share, plus accrued dividends. Dividends on
Series A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors or a change in control or liquidation of the Company.
At January 31, 2004 and February 1, 2003 the Company
had accrued dividends payable of $1,555,313 and $1,230,863,
respectively. During fiscal 2003, the Company's board of
directors adopted a resolution whereby the Company intends to
begin repaying its Series A Preferred Stock and all
dividends accrued thereon at a rate of $500,000 per
quarter, beginning in the second quarter of fiscal 2004.
(8)
Stockholders' Equity
(a)
Stockholders Agreement
The Company is party to a Stockholders Agreement dated
April 13, 1999 (the "Stockholders Agreement")
with Hampshire Equity Partners II, L.P., George Bellino and
certain management stockholders. Pursuant to the stockholders
agreement, four members of the Company's board of directors
may be designated by the owners of the majority of the voting
stock beneficially owned by Hampshire Equity Partners and its
affiliates; the Company's
F-13
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
stockholders have agreed generally not to transfer their shares;
the Company's management stockholders have been granted
tag-along rights in the event of the sale of more than 50% of
our common stock; the Company's management stockholders
have agreed to cooperate in any sale of the company by Hampshire
Equity Partners and the Company has agreed to register shares of
the Company's common stock held by the stockholder parties
in the event that the Company registers additional shares of the
Company's common stock under the Securities Act, other than
on a registration statement on Form S-4 or S-8, or in
connection with an exchange offer, merger, acquisition, dividend
reinvestment plan, stock option or other employee benefit plan.
(b)
Equity Transactions with Officer
In December 2001, the Company issued options to an officer for
16,800 shares of common stock. Since the estimated fair
market value of the Company's common stock issued exceeded
the exercise price of these options on the date of grant, the
Company recognized charges to earnings during fiscal 2003 and
2002 of $84,441 and $161,882, respectively. The Company will
recognize additional charges related to these options of $44,627
and $17,721 in fiscal 2004 and 2005, respectively.
(c)
Equity Transactions with Majority Stockholder
In August 2003, the Company's board of directors adopted a
plan whereby stock options are to be issued to the
Company's majority stockholder, as well as certain defined
members of management, in amounts necessary to prevent the
dilution of their ownership percentage as a result of the
issuance of stock options to other employees of the Company.
Options granted under this anti-dilution plan are to be issued
at the estimated fair market value of the Company's common
stock on the date of grant and vest immediately. During fiscal
2003, the Company issued stock options for 1,503 shares of
common stock under this anti-dilution plan, 1,425 of which were
issued to its majority stockholder. Because the majority
stockholder does not qualify as an employee, FASB Interpretation
No. 44, "Accounting for Certain Transactions Involving
Stock Compensation," required the Company to recognize a
charge to earnings during the year ended January 31, 2004
of $38,832. The fair value of the vested options was determined
using the Black-Scholes option-pricing model.
(d)
Stock Options
In 1999, the Company established the 1999 Citi Trends, Inc.
Stock Option Plan (the "Plan"). The Plan provides for
the grant of incentive and nonqualified options to key employees
and directors. The board of directors determines the exercise
price of option grants. Option grants generally vest in equal
installments over four years from the date of grant and are
generally exercisable up to ten years from the date of
grant. The Company has authorized up to 75,000 shares of
common stock for issuance under the Plan.
A summary of option activity in the Plan for fiscal 2003 and
2002 is as follows:
2003
2002
Wtd Avg
Wtd Avg
Exercise
Exercise
Shares
Price
Shares
Price
Outstanding at beginning of period
66,496
11
66,096
$
10
Granted
7,403
99
1,800
54
Exercised
—
—
—
—
Forfeited
(5,000
)
18
(1,400
)
10
Outstanding end of period
68,899
20
66,496
11
Options exercisable end of period
53,196
11
37,035
$
10
F-14
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
At January 31, 2004 the range of exercise prices and
weighted-average remaining contractual life of outstanding
options was $10 to $116 and 7.7 years, respectively.
The following table summarizes the status of Company options
exercisable at January 31, 2004 by exercise price:
Weighted Average
Number
Remaining
Number
Exercise Price
Outstanding
Contractual Life
Exercisable
$ 10
60,496
6.0
52,696
$ 50
800
8.0
200
$ 70
400
8.5
100
$ 94
4,603
8.9
200
$ 99
1,400
9.6
—
$116
1,200
9.8
—
68,899
53,196
The fair value of options granted during the years ended
January 31, 2004 and February 1, 2003 was $34.18 and
$20.85, respectively, using the Black-Scholes option-pricing
model, with the following weighted average assumptions:
2004
2003
Dividend yield
0.00%
0.00%
Expected volatility
50.00%
50.00%
Risk-free interest rate
2.50%
3.60%
Expected life, in years
10  years
10  years
Forfeiture rate
10.00%
10.00%
(9)
Commitments and Contingencies
The Company leases its stores under operating leases, which
generally have an initial term of five years with a five-year
renewal option. Future minimum rental payments under operating
leases having noncancelable lease terms at January 31, 2004
are as follows:
Fiscal Year Ending:
2004
$
5,919,819
2005
4,903,143
2006
4,025,774
2007
3,073,088
2008
1,942,456
Thereafter
2,109,233
Total future minimum lease payments
$
21,973,513
Certain operating leases provide for fixed monthly rentals while
others provide for rentals computed as a percentage of net
sales. Certain operating leases provide for a combination of
both fixed monthly rental and rentals computed as a percentage
of net sales. Rental expense was $6,363,257 and $4,787,768 for
the fiscal 2003 and 2002 (including $794,444 and $539,090 of
percentage rent), respectively.
F-15
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 31, 2004 and February 1, 2003
The Company is involved in certain legal matters arising in the
normal course of business. In the opinion of management, the
outcome of these matters will not materially affect its
financial condition, results of operations, or liquidity.
(10)
Related Party Transactions
The Company is a party to a consulting agreement with an
affiliate of its majority stockholder for management consulting
services. Included in operating expenses are management fees of
$240,000 and $190,000 for fiscal 2003 and 2002, respectively.
The consulting agreement has a four year term and is subject to
automatic one year renewals each February 1, subject to
60 days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90 days prior notice in the event of
(a) a sale of all or substantially all of our common stock
or assets, (b) a merger or consolidation in which we are
the surviving corporation or (c) a registered public
offering of our common stock.
F-16
Table of Contents
Citi Trends, Inc.
Balance Sheet
February 2, 2002
Assets
Current assets:
Cash and cash equivalents
$
4,097,717
Inventory
14,932,040
Prepaid and other assets
1,525,868
Income tax receivable
255,863
Deferred tax asset
352,146
Total current assets
21,163,634
Property and equipment
6,544,275
Goodwill, net of accumulated amortization of $197,196
1,371,404
Deferred tax asset
548,638
Other assets
104,707
Total assets
$
29,732,658
Liabilities and Stockholders' Equity
Current liabilities:
Borrowing under revolving line of credit
$
3,689,938
Accounts payable
11,512,314
Accrued expenses
1,198,143
Accrued compensation
932,272
Current portion of capital lease obligation
814,053
Layaway deposits
244,067
Total current liabilities
18,390,787
Long-term capital lease obligation
490,733
Other long-term liabilities
607,146
Total liabilities
19,488,666
Series A preferred stock, $0.01 par value. Liquidation
    preference of $1,000 per share. Authorized
    5,000 shares; issued and outstanding 3,605 shares in
    2001
4,508,150
Stockholders' equity:
Common stock, $0.01 par value. Authorized
    500,000 shares; 363,275 shares issued in 2001
3,633
Paid-in-capital
3,726,446
Subscription receivable
(25,000
)
Retained earnings
2,088,513
Treasury stock, at cost; 5,775 shares
(57,750
)
Total stockholders' equity
5,735,842
Commitments and contingencies (note 8)
Total liabilities and stockholders' equity
$
29,732,658
See accompanying notes to financial statements.
F-17
Table of Contents
Citi Trends, Inc.
Statement of Income
Year Ended February 2, 2002
Net sales
$
97,933,306
Cost of sales
62,050,323
Gross profit
35,882,983
Selling, general and administrative expenses
31,405,480
Income from operations
4,477,503
Interest expense
454,597
Income before provision for income taxes
4,022,906
Provision for income taxes
1,565,566
Net income
$
2,457,340
Basic income per common share
$
5.93
Diluted income per common share
$
5.59
Average number of shares outstanding
Basic
360,158
Diluted
382,190
See accompanying notes to financial statements.
F-18
Table of Contents
Citi Trends, Inc.
Statement of Cash Flows
Year Ended February 2, 2002
Operating activities:
Net income
$
2,457,340
Adjustment to reconcile net income to net cash provided by
    operating activities:
Depreciation and amortization
2,737,797
Deferred tax asset
(442,228
)
Loss on disposal of fixed assets
96,430
Noncash compensation expense
97,329
Changes in assets and liabilities:
Inventory
(1,928,967
)
Prepaid and other assets
(633,385
)
Tax receivable
206,351
Accounts payable
86,450
Accrued expenses and other liabilities
157,048
Layaway deposits
49,000
Net cash provided by operating activities
2,883,165
Investing activities:
Purchase of property and equipment
(2,124,820
)
Financing activities:
Net repayment under revolving line of credit
(1,223,850
)
Repayments under capital lease
(769,163
)
Purchase of treasury stock
(12,000
)
Proceeds from sale of stock
82,000
Net cash used in financing activities
(1,923,013
)
Net decrease in cash
(1,164,668
)
Cash:
Beginning of period
5,262,386
End of period
$
4,097,718
Supplemental disclosures of cash flow information:
Cash paid for interest
$
454,597
Cash paid for income taxes
1,801,443
Supplemental disclosures of noncash activities:
Dividends accrued on redeemable preferred stock
$
324,450
Purchases of property and equipment financed by entering into
    capital leases
$
18,200
See accompanying notes to financial statements.
F-19
Table of Contents
Citi Trends, Inc.
Statements of Stockholders' Equity
Year ended February 2, 2002
Retained
Common Stock
earnings
Treasury Stock
Paid-in
Subscription
(accumulated
Shares
Amount
capital
receivable
deficit)
Shares
Amount
Total
Balance — February 3, 2001
358,575
$
3,586
3,582,164
(25,000
)
(44,377
)
4,575
$
(45,750
)
$
3,470,623
Exercise of stock options
1,200
12
11,988
12,000
Purchase of 1,200 shares of common stock for cash
1,200
(12,000
)
(12,000
)
Issuance of 3,500 and 35 shares of preferred and common
    stock, respectively, for cash
3,500
35
104,965
105,000
Expense recorded in connection with issuance of stock options
27,329
27,329
Accrued preferred stock dividends
(324,450
)
(324,450
)
Net income
2,457,340
2,457,340
Balance — February 2, 2002
363,275
3,633
3,726,446
(25,000
)
2,088,513
5,775
(57,750
)
5,735,842
See accompanying notes to financial statements.
F-20
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements
February 2, 2002
(1)
Organization and Business
Citi Trends, Inc. (the "Company") is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of February 2, 2002,
the Company operated 123 stores in Alabama, Florida,
Georgia, Louisiana, Mississippi, North Carolina, South Carolina,
and Tennessee.
(2)
Summary of Significant Accounting Policies
(a)
Fiscal Year
The Company's fiscal year ends on the Saturday closest to
January 31 of each year. Fiscal year 2001 comprises
52 weeks. The year ended February 2, 2002 is referred
to as fiscal 2001 in the accompanying financial statements.
(b)
Cash and Cash Equivalents
For purposes of the balance sheet and statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
(c)
Inventory
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retailer
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. The Company
believes the first-in first-out retail inventory method results
in an inventory valuation that is fairly stated.
(d)
Property and Equipment, net
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (principally three to five years for computer equipment
and furniture, fixtures and equipment, five years for leasehold
improvements and 15 years for buildings) of the related
assets or the relevant lease term, whichever is shorter.
(e)
Goodwill
Goodwill represents the excess of the purchase price over the
fair value of assets acquired and, until February 3, 2002,
was being amortized over a 20-year period. During the year ended
February 2, 2002 the Company recorded $76,950 for goodwill
amortization.
(f)
Impairment of Long-Lived Assets
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value of long-lived assets is reviewed. If this review indicates
that the carrying value of the asset will not be recovered as
determined based on projected undiscounted cash flows related to
the asset over its remaining life, the carrying value of the
asset is reduced to its estimated fair value. Impairment losses
in the future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
the Company's estimates for nets sales, gross profit and
store expenses are not realized, future assessments of
recoverability could result in impairment charges.
F-21
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
(g)
Stock-Based Compensation
The Company applies the intrinsic-value-based method of
accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25,
Accounting for Stock Issued
to Employees
, and related interpretations including
Financial Accounting Standards Board ("FASB")
interpretation (FIN) No. 44,
Accounting for Certain
Transactions involving Stock Compensation, an interpretation of
APB Opinion No. 25
, to account for its fixed-plan
stock options. Under this method, compensation expense is
recorded on the date of grant only if the current fair value of
the underlying stock exceeds the exercise price. The Company
recognizes the fair value of stock rights granted to
nonemployees in the accompanying financial statements.
SFAS No. 123,
Accounting for Stock-Based
Compensation
, and SFAS No. 148,
Accounting for
Stock-Based Compensation— Transition and Disclosure, an
amendment of FASB Statement No. 123
, establishes
accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation
plans. As permitted by existing accounting standards, the
Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS No. 123, as amended. The following table
illustrates the effect on net income if the fair-value-based
method had been applied to all outstanding and unvested awards
in the period. Pro forma information regarding net income and
net income per share is required in order to show our net income
as if we had accounted for employee stock options under the fair
value method of SFAS No. 123, as amended. The fair
values of options and shares issued pursuant to our option plan
at each grant date were estimated using the Black-Scholes option
pricing model.
Net income, as reported
$
2,457,340
Add stock-based employee compensation expense included in
    reported net income, net of tax of $37,877
59,452
Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $47,359
(74,336
)
Pro forma net income
$
2,442,456
Pro forma Basic Income per common share
5.89
Pro forma Diluted Income per common share
5.55
(h)
Revenue Recognition
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. Revenue from layaway
sales is recognized when the customer has paid for and received
the merchandise. If the merchandise is not fully paid for within
60 days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program services charges are recognized in
revenue when collected. All sales are from cash, check or major
credit card company transactions. The Company does not offer
company-sponsored customer credit accounts. Net sales also
include $726,823 of rental income from a leased department for
fiscal 2001.
(i)
Earnings Per Share
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
F-22
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
The following table provides a reconciliation of the earnings
figure used to calculate earnings per share and used in
calculating diluted earnings per share for fiscal 2001:
Net income, as reported
$
2,457,340
Subtract dividends on preferred shares subject to mandatory
    redemption
321,563
Numerator for EPS Calculation
$
2,135,777
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earning per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for fiscal 2001:
Average number of common shares outstanding
360,158
Incremental shares from assumed exercises of stock options
22,032
Average number of common shares and common stock equivalents
    outstanding
382,190
For the fiscal year ended 2001 there were no options outstanding
to purchase shares of common stock excluded from the calculation
of diluted earnings per share because of antidilution.
(j)
Advertising
The Company expenses all advertising expenditures as incurred.
Advertising expense for fiscal 2001 was $680,675.
(k)
Store Opening and Closing Costs
New and relocated store opening costs are charged directly to
expense when incurred. When the Company decides to close or
relocate a store, the Company records an expense for the present
value of expected future rent payments net of sublease income in
the period that a store closes or relocates.
(l)
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
(m)
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(n)
Business Reporting Segments
The Company is a rapidly growing, value-priced retailer of urban
fashion apparel and accessories for the entire family and has
determined that its operations are within one reportable
segment. Accordingly, financial information on industry segments
is omitted. All sales are to customers and assets are located
within the United States.
F-23
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
(o)
Derivative Financial Instruments and Hedging Activities
The FASB issued SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities.
This statement, as
amended, established accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activity. The
Company adopted SFAS No. 133, as amended, on
February 4, 2001. The adoption of SFAS No. 133
had no effect on the Company's financial statements as the
Company does not use derivatives.
(3)
Property and Equipment
The components of property and equipment at February 2,
2002 are as follows:
Land
$
Leasehold improvements
7,277,129
Furniture, fixtures, and equipment
1,421,121
Computer equipment
3,063,516
11,761,766
Accumulated depreciation
5,217,491
$
6,544,275
Property and equipment held under capital leases and related
accumulated depreciation is $2,109,576 and $850,019,
respectively, at February 2, 2002.
(4)
Revolving Line of Credit
The Company has a revolving line of credit secured by
substantially all of the Company's assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2003. At February 2, 2002, the line of
credit provides for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $15,000,000 or the
Company's borrowing base, as defined in the credit
agreement. Borrowings under this secured line of credit bear
interest at either the prime rate plus 0.25% or the Eurodollar
rate plus 2.75%, at the Company's election, based on
conditions in the credit agreement. Additionally, there is a
letter of credit fee of 1.25% per annum on the outstanding
balance of letters of credit. The interest rate on borrowings at
February 2, 2002 was 5.00%. There were no letters of credit
outstanding at February 2, 2002. Under the terms of the
credit agreement, the Company is required to maintain a minimum
tangible net worth. The Company was in compliance with this
requirement at February 2, 2002.
(5)
Long-term Debt and Capital Lease Obligations
As of February 2, 2002, long-term debt and capital lease
obligations consist of the following:
Capital lease obligations issued to finance purchase of computer
    equipment; payable in monthly installments averaging
    approximately $73,718, and $41,579 in 2002, and 2003, with
    maturity dates ranging from August 2003 to December 2003;
    interest at rates ranging from 2.5% to 13.1%; secured by
    computer equipment
1,304,786
1,304,786
Less current portion of long-term debt and capital lease
    obligations
(814,053
)
$
490,733
F-24
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
As of February 2, 2002, capital lease obligation maturities
are as follows:
Fiscal Year
2004
$
884,621
2005
498,953
2006
—
2007
—
2008
—
1,383,574
Less portion attributable to future interest payments (at rates
    ranging from 2.5% to 13.1%)
(78,788
)
$
1,304,786
During the year ended February 3, 2001, the Company entered
into a sale and leaseback agreement for certain store equipment.
The transaction resulted in a $163,236 gain on sale of the
assets which has been deferred and is being amortized over the
life of the lease (36 months).
(6)
Income Taxes
The provision for income taxes for fiscal 2001 consists of the
following:
Current:
Federal
$
1,694,322
State
313,472
2,007,794
Deferred:
Federal
(372,329
)
State
(69,899
)
(442,228
)
$
1,565,566
Income tax expense computed using the federal statutory rate is
reconciled to the reported income tax expense as follows for
fiscal 2001:
Statutory rate applied to income before income taxes
$
1,367,547
State income taxes, net of federal benefit
160,578
Other
37,441
Income tax expense
$
1,565,566
F-25
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
The components of deferred tax assets and liabilities at
February 2, 2002 are as follows:
Deferred tax assets:
Book and tax depreciation differences
$
621,354
Deferred rent amortization
136,234
Inventory capitalization
427,852
Vacation liability
33,600
Other
53,200
1,272,240
Deferred tax liabilities:
Prepaid expenses
(293,540
)
Other
(77,916
)
(371,456
)
Net deferred tax asset
$
900,784
As of February 2, 2002, a valuation allowance for deferred
tax assets is not considered necessary because it is more likely
than not the deferred tax asset will be fully realized.
(7)
Stockholders' Equity
(a)
Preferred Shares Subject to Mandatory Redemption
The Company's Series A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or liquidation of the Company, at a price of
$1,000 per share, plus accrued dividends. Dividends on
Series A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors, a change in control or liquidation of the Company. At
February 2, 2002 the Company had accrued dividends payable
of $903,150.
(b)
Stockholders Agreement
The Company is party to a Stockholders Agreement dated
April 13, 1999 (the "Stockholders Agreement")
with Hampshire Equity Partners II, L.P., George Bellino and
certain management stockholders. Pursuant to the stockholders
agreement, four members of the Company's board of directors
may be designated by the owners of the majority of the voting
stock beneficially owned by Hampshire Equity Partners and its
affiliates; the Company's stockholders have agreed
generally not to transfer their shares; the Company's
management stockholders have been granted tag-along rights in
the event of the sale of more than 50% of the Company's
common stock; the Company's management stockholders have
agreed to cooperate in any sale of the Company by Hampshire
Equity Partners and the Company has agreed to register shares of
the Company's common stock held by the stockholder parties
in the event that the Company registers additional shares of the
Company's common stock under the Securities Act, other than
on a registration statement on Form S-4 or S-8, or in
connection with an exchange offer, merger, acquisition, dividend
reinvestment plan, stock option or other employee benefit plan.
(c)
Equity Transactions with New Officer
In December 2001, the Company issued options to an officer for
16,800 shares of common stock. Since the estimated fair
market value of the Company's common stock issued exceeded
the exercise price of these options on the date of grant, the
Company recognized a charge to earnings during fiscal 2001 of
$27,329. The Company will recognize additional charges related
to these options totaling $308,671 through December 2005.
F-26
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
(d)
Stock Options
In 1999, the Company established the 1999 Citi Trends, Inc.
Stock Option Plan (the "Plan"). The Plan provides for
the grant of incentive and nonqualified options to key employees
and directors. The board of directors determines the exercise
price of option grants. Options grants generally vest in equal
installments over four years from the date of grant and are
generally exercisable up to 10 years from the date of
grant. The Company has authorized up to 75,000 shares of
common stock for issuance under the Plan. During the year ended
February 2, 2002, the Company granted options to employees
and outside directors to acquire shares of its common stock at
an exercise price of $10 per share. Since the estimated
fair market value of the Company's common stock issued
exceeded the exercise price of certain of these options on the
date of grant, the Company recognized a charge to earnings
during the year ended February 2, 2002 of $27,329. The
Company will recognize additional charges to earnings totaling
$308,671 through December 2005 relating to these options.
A summary of option activity in the Plan for fiscal 2001 is as
follows (all options outstanding have an exercise price of
$10 per share):
Outstanding at beginning of period
46,646
Granted
23,850
Exercised
(1,200
)
Forfeited
(3,200
)
Outstanding at end of period
66,096
Options exercisable at end of period
22,023
The fair value of options granted during fiscal 2001 was $24.18,
using the Black-Scholes option-pricing model, with the following
weighted average assumptions.
Dividend yield
0.00
%
Expected volatility
0.00
%
Risk-free interest rate
5.35
%
Expected life, in years
10 years
(8)
Commitments
The Company leases its stores under operating leases, the
majority of which expire at various times during the next five
years. Future minimum rental payments under capital and
operating leases having noncancelable lease terms at
February 2, 2002 as follows:
Fiscal year ending:
2002
$
3,756,180
2003
3,524,248
2004
2,710,859
2005
1,428,603
2006
654,805
Thereafter
1,465,129
Total future minimum lease payments
13,539,824
Certain leases contain renewal options. Certain leases provide
for fixed monthly rentals and others provide that rent is
computed as a percentage of net sales in addition to fixed
rentals. Rental expense was $4,065,638 for fiscal 2001
(including $273,727 of percentage rent).
F-27
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements— (Continued)
February 2, 2002
The Company is involved in certain legal matters arising in the
normal course of business. In the opinion of management, the
outcome of these matters will not materially affect its
financial condition, results of operations, or liquidity.
(9)
Related Party Transactions
The Company is a party to a consulting agreement with an
affiliate of its majority stockholder for management consulting
services. Included in operating expenses are management fees of
$120,000 for fiscal 2001.
The consulting agreement has a four year term and is subject to
automatic one year renewals each February 1, subject to
60 days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90 days prior notice in the event of
(a) a sale of all or substantially all of our common stock
or assets, (b) a merger or consolidation in which we are
the surviving corporation or (c) a registered public
offering of our common stock.
F-28
Table of Contents
Citi Trends, Inc.
Condensed Balance Sheets
October 30, 2004 and January 31, 2004
(Unaudited)
10/30/04
1/31/04
Assets
Current assets:
Cash and cash equivalents
$
2,156,019
9,954,232
Inventory
37,439,758
22,712,369
Prepaid and other current assets
2,494,550
1,770,998
Income tax receivable
579,386
—
Deferred tax asset
668,604
530,604
Total current assets
43,338,317
34,968,203
Property and equipment, net
16,078,755
12,749,601
Goodwill
1,371,404
1,371,404
Other assets
119,704
123,992
Total assets
$
60,908,180
49,213,200
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under revolving lines of credit
$
5,388,067
—
Accounts payable
20,615,716
19,577,370
Accrued expenses
2,923,041
2,121,520
Accrued compensation
2,655,387
1,669,462
Current portion of long-term debt
77,949
74,762
Current portion of capital lease obligations
614,373
566,667
Income tax payable
—
331,342
Layaway deposits
1,141,656
133,028
Total current liabilities
33,416,189
24,474,151
Long-term debt, less current portion
1,442,757
1,494,302
Capital lease obligations, less current portion
646,425
494,547
Preferred shares subject to mandatory redemption
4,403,651
5,160,313
Deferred tax liability
471,445
333,445
Other long-term liabilities
1,406,482
752,574
Total liabilities
41,786,949
32,709,332
Stockholders' equity:
Common stock, $0.01 par value. Authorized
    500,000 shares; 363,875 and 363,275 shares issued in
    2004 and 2003
3,639
3,633
Paid-in-capital
4,109,737
4,011,601
Retained earnings
15,196,868
12,571,384
Treasury stock, at cost; 6,375 and 5,775 shares in 2004 and
    2003
(164,550
)
(57,750
)
Subscription receivable
(24,463
)
(25,000
)
Total stockholders' equity
19,121,231
16,503,868
Commitments and contingencies (note 10)
Total liabilities and stockholders' equity
$
60,908,180
49,213,200
See accompanying notes to financial statements.
F-29
Table of Contents
Citi Trends, Inc.
Condensed Statements of Income
39 Weeks Ended October 30, 2004 and November 1,
2003
(Unaudited)
2004
2003
Net sales
$
137,128,892
$
107,952,093
Cost of sales
86,288,239
67,466,353
Gross profit
50,840,653
40,485,740
Selling, general and administrative expenses
46,013,981
35,931,919
Income from operations
4,826,672
4,553,821
Interest expense, including redeemable preferred stock dividend
557,590
315,048
Income before provision for income taxes
4,269,082
4,238,773
Provision for income taxes
1,643,596
1,637,924
Net income
$
2,625,486
$
2,600,849
Basic income per common share
$
7.22
$
6.79
Diluted income per common share
$
6.20
$
5.89
Average number of shares outstanding
Basic
363,808
363,275
Diluted
423,701
418,532
See accompanying notes to financial statements.
F-30
Table of Contents
Citi Trends, Inc.
Condensed Statements of Cash Flows
39 Weeks Ended October 30, 2004 and November 1,
2003
(Unaudited)
2004
2003
Operating activities:
Net income
$
2,625,486
2,600,849
Adjustment to reconcile net income to net cash provided by
    operating activities:
Dividends on preferred shares subject to mandatory redemption
243,338
108,150
Depreciation and amortization
3,569,848
3,004,906
Noncash compensation expense
92,142
102,163
Changes in assets and liabilities:
Inventory
(14,727,389
)
(10,835,495
)
Prepaid and other current assets
(723,552
)
(65,577
)
Income tax receivable
(910,729
)
(27,780
)
Other assets
4,288
5,555
Accounts payable
1,038,347
3,939,674
Accrued expenses and other long-term liabilities
1,455,430
215,119
Accrued compensation
985,925
(70,322
)
Layaway deposits
1,008,627
938,281
Net cash used in operating activities
(5,338,239
)
(84,477
)
Investing activities:
Purchase of property and equipment
(6,230,583
)
(5,094,521
)
Financing activities:
Net Borrowing (repayments) under revolving line of credit
5,388,067
3,043,894
Repayments on long-term debt and capital lease obligations
(623,458
)
(780,013
)
Payment of dividends on preferred shares subject to mandatory
    redemption
(1,000,000
)
—
Proceeds from issuance of Capital Stock
6,000
—
Net cash provided by financing activities
3,770,609
2,263,881
Net decrease in cash and cash equivalents
(7,798,213
)
(2,915,117
)
Cash and cash equivalents:
Beginning of period
9,954,232
5,824,847
End of period
$
2,156,019
2,909,730
Supplemental disclosures of cash flow information:
Cash paid for interest
$
296,900
189,546
Cash paid for income taxes
$
2,559,729
1,663,704
Supplemental disclosures of noncash activities:
Dividends accrued on redeemable preferred stock
$
243,338
243,338
Purchases of property and equipment financed by entering into
    capital leases
$
670,503
660,012
See accompanying notes to financial statements.
F-31
Table of Contents
Citi Trends, Inc.
Notes to Condensed Financial Statements
39 Weeks Ended October 30, 2004 and November 1,
2003
(1)
Basis of Presentation
The consolidated financial statements included herein have been
prepared by management without audit and should be read in
conjunction with the consolidated financial statements and notes
thereto for fiscal 2003 included in this document. Due to the
seasonality of the Company's business, the results for the
interim periods are not necessarily indicative of the results
for the year. Certain information and note disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted,
although management believes that the disclosures are adequate
to fairly present the information. The accompanying consolidated
financial statements reflect, in the opinion of management, all
such adjustments necessary for a fair presentation of the
interim financial statements. In the opinion of management, all
such adjustments are of a normal recurring nature, except for
the adjustments resulting from the adoption of
FAS No. 150. See Note (7).
(2)
Organization and Business
Citi Trends, Inc. (the "Company") is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of October 30, 2004,
the Company operated 195 stores in Alabama, Arkansas, Florida,
Georgia, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, and Virginia.
(3)
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(4)
Recently Adopted Accounting Standards
In December 2003, the FASB issued FIN 46R,
Consolidation
of Variable Interest Entities
, which is an interpretation of
Accounting Research Bulletin No. 51,
Consolidated
Financial Statements
. FIN 46R requires that if an
entity has a controlling interest in a variable interest entity,
the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated
financial statements of the entity. FIN 46R is effective
immediately for all new variable interest entities created or
acquired after December 31, 2003. The adoption of
FIN 46R did not have an impact on the Company's
consolidated financial position or results of operations.
(5)
Revolving Lines of Credit
The Company has a revolving line of credit secured by
substantially all of the Company's assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2007. At October 30, 2004, the line of
credit provides for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $25,000,000 or the
Company's borrowing base, as defined in the credit
agreement. Borrowings under this secured line of credit bear
interest at either the prime rate plus 0.25% or the Eurodollar
rate plus 2.75%, at the Company's election, based on
conditions in the credit agreement. Additionally, there is a
letter of credit fee of 1.25% per annum on the outstanding
balance of letters of credit. The interest rate on borrowings at
October 30, 2004 was 4.75%. At October 30, 2004, there
was $4.0 million in outstanding borrowings on the revolving
line of credit, there were no outstanding letters of credit.
Under the terms of the
F-32
Table of Contents
Citi Trends, Inc.
Condensed Notes to Financial Statements—(Continued)
39 Weeks Ended October 30, 2004 and November 1,
2003
credit agreement the Company is required to maintain a minimum
tangible net worth of $3.9 million. The Company was in
compliance with this requirement at October 30, 2004.
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that was renewed
in June 2004. The line of credit provides for aggregate cash
borrowings up to $3,000,000 to be used for general operating
purposes. Borrowings under the credit agreement bear interest at
LIBOR plus 2.00% and the interest rate was 3.96% as of
October 30, 2004. At October 30, 2004, there was
$1.4 million in outstanding borrowings on the unsecured
revolving line of credit.
(6)
Preferred Shares Subject to Mandatory Redemption
The Company's Series A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or the liquidation of the Company, at a price
of $1,000 per share, plus accrued dividends. Dividends on
Series A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors or a change in control or liquidation of the Company.
At October 30, 2004 and November 1, 2003 the Company
had accrued dividends payable of $798,651 and $1,474,201,
respectively. During fiscal 2003, the Company's board of
directors adopted a resolution whereby the Company has begun
repaying its Series A Preferred Stock and all dividends
accrued thereon at a rate of $500,000 per quarter beginning
in the second quarter of fiscal 2004.
(7)
Certain Financial Instruments with Characteristics of
    Liabilities and Equity
The Company prospectively adopted SFAS No. 150, which
establishes standards for the classification and measurement of
certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 also includes
required disclosures for financial instruments within its scope.
For the Company, SFAS No. 150 was effective for
instruments entered into or modified after May 1, 2003 and
otherwise effective as of February 1, 2004, except for
mandatorily redeemable financial instruments. As such, the
Company adopted the provisions of SFAS No. 150 for our
Series A Preferred Stock on July 6, 2003 which
required the Company to classify the Series A Preferred
Stock as a liability on our balance sheet. The effective date of
SFAS No. 150 has been deferred indefinitely for
certain other types of mandatorily redeemable financial
instruments. To illustrate the effect of SFAS 150 the
following table shows net income if SFAS No. 150 had
not been adopted in the two 39-week periods ending
October 30, 2004 and November 1, 2003.
2004
2003
Net income, as reported
$
2,625,486
2,600,848
Add dividends on preferred shares subject to mandatory redemption
243,338
108,150
Pro forma net income
$
2,868,824
2,708,998
(8)
Stock-Based Compensation
The Company applies the intrinsic-value-based method of
accounting prescribed by APB Opinion No. 25,
Accounting
for Stock Issued to Employees,
and related interpretations
including FASB interpretation (FIN) No. 44,
Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25
,
to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if
the current fair value of the underlying stock exceeds the
exercise price. The Company recognizes the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS No. 123,
Accounting for
Stock-Based Compensation,
and SFAS No. 148,
F-33
Table of Contents
Citi Trends, Inc.
Condensed Notes to Financial Statements—(Continued)
39 Weeks Ended October 30, 2004 and November 1,
2003
Accounting for Stock-Based Compensation— Transition and
Disclosure, an amendment of FASB Statement No. 123
,
establishes accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS No. 123, as amended. The following table
illustrates the effect on net income if the fair-value-based
method had been applied to all outstanding and unvested awards
in the period. Pro forma information regarding net income and
net income per share is required in order to show our net income
as if we had accounted for employee stock options under the fair
value method of SFAS No. 123,
Accounting for
Stock-Based Compensation
, as amended by
SFAS No. 148,
Accounting for Stock-Based
Compensation— Transition Disclosure
. The fair values of
options and shares issued pursuant to our option plan at each
grant date were estimated using the Black-Scholes option pricing
model.
2004
2003
Net income, as reported
$
2,625,486
2,600,849
Add stock-based employee compensation expense included in
    reported net income, net of tax of $48,224 and $60,220,
    respectively
75,049
101,662
Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of 73,626 and $50,492, respectively
(114,580
)
(85,239
)
Pro forma net income
$
2,585,955
2,617,272
Pro forma Basic Income per common share
7.11
6.83
Pro forma Diluted Income per common share
6.10
5.93
(9)
Related Party Transactions
The Company is a party to a consulting agreement with an
affiliate of its majority stockholder for management consulting
services. Included in operating expenses are management fees of
$180,000 and $180,000 for the 39 weeks ended
October 30, 2004 and November 1, 2003, respectively.
The consulting agreement has a four year term and is subject to
automatic one year renewals each February 1, subject to
60 days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90 days prior notice in the event of
(a) a sale of all or substantially all of our common stock
or assets, (b) a merger or consolidation in which we are
not the surviving corporation or (c) a registered public
offering of our common stock, which includes this offering. It
is expected that both parties to the consulting agreement will
waive any notice requirement for termination upon consummation
of this offering.
(10)
Contingencies
The Company is from time to time involved in various legal
proceedings incidental to the conduct of its business, including
claims by its customers, employees or former employees. The
Company is currently the defendant in two putative collective
action lawsuits commenced after August, 2004 by former employees
under the Fair Labor Standards Act. The plaintiff in each of the
lawsuits is represented by the same law firm, and both suits are
pending in District Court of the United States for the Middle
District of Alabama, Northern Division. Each of the cases is in
its early stages, and the Company is in the process of
evaluating the claims made. While its review of the allegations
is preliminary, the Company believes that its business practices
are, and were during the relevant periods, in compliance with
the law. While the Company is unable to predict the outcome of
these matters, it plans to defend these suits vigorously.
F-34
Table of Contents
Citi Trends, Inc.
Condensed Notes to Financial Statements—(Continued)
39 Weeks Ended October 30, 2004 and November 1,
2003
(11)
Recently Issued Accounting Standards Not Currently
    Effective
In December 2004, the FASB issued SFAS No. 123 (revised
2004),
Share-Based Payment
. SFAS No. 123R
establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods and
services. SFAS No. 123R focuses primarily on
accounting for transactions in which an entity obtains employee
services in share-based payment transactions. Under
SFAS No. 123R, the Company, beginning in the third
quarter of 2005, will be required to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant date fair value of the award
(with limited exceptions). The cost will be recognized over the
period during which an employee is required to provide services
in exchange for the award.
Currently, the Company discloses the estimated effect on net
income of these share-based payments in the footnotes to the
financial statements. The estimated fair value (cost) of the
share-based payments has historically been determined using the
Black-Scholes pricing model. As of the date of this report, the
Company had not calculated the cost of share-based payments
using the various other methods allowed by
SFAS No. 123R and has not yet decided on the method to
be used upon implementation of this standard. The actual
compensation cost resulting from share-based payments to be
included in the Company's future results of operations may
vary significantly from the amounts currently disclosed in the
footnotes to the financial statements.
F-35
Table of Contents
[Pictures of the outside and inside of various stores]
Table of Contents
Shares
Common Stock
PROSPECTUS
,
2005
CIBC World Markets
Piper Jaffray
SG Cowen & Co.
Wachovia Securities
You should rely only on information contained in this
prospectus. No dealer, salesperson or other person is authorized
to give information that is not contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in
this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.
Until                     ,
2005 (25 days after the commencement of the offering), all
dealers that buy, sell or trade the common stock may be required
to deliver a prospectus, regardless of whether they are
participating in the offering. This is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Table of Contents
Part II
Information Not Required in Prospectus
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by the
registrant in connection with the sale of the securities being
registered. All amounts are estimates except the SEC
registration fee, the NASD fee and the Nasdaq National Market
listing fee.
SEC Registration fee
$
6,767.75
NASD filing fee
6,250.00
Nasdaq national market listing fee
5,000.00
Printing
*
Legal fees and expenses
*
Accounting fees and expenses
*
Transfer agent and registrar fees
*
Miscellaneous
*
Total
$
*
*
To be provided by amendment
Item 14.
Indemnification of Directors and Officers.
As permitted by Section 102(b)(7) of the Delaware General
Corporation Law, we have adopted provisions in our second
amended and restated certificate of incorporation and amended
and restated by-laws that limit or eliminate the personal
liability of our directors for a breach of their fiduciary duty
of care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information
reasonable available to them. Consequently, a director will not
be personally liable to us or our stockholders for monetary
damages or breach of fiduciary duty as a director except for:
•
any breach of the director's duty of loyalty to us or our
    stockholders;
•
any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends; or
•
any transaction from which the director derived an improper
    personal benefit.
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the fullest extent permitted under Delaware law.
As permitted by Section 145 of the Delaware General
Corporation Law, our amended and restated by-laws provide that:
•
we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;
•
we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions; and
•
the rights provided in our amended and restated by-laws are not
    exclusive.
Our second amended and restated certificate of incorporation,
attached as Exhibit 3.1 hereto, and our amended and
restated by-laws, attached as Exhibit 3.2 hereto, provide
for the indemnification provisions described above and elsewhere
herein. In addition, we have purchased a policy of
directors' and officers'
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liability insurance that insures our directors and officers
against the cost of defense, settlement or payment of a judgment
in some circumstances. These indemnification provisions may be
sufficiently broad to permit indemnification of our officers and
directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act of 1933, as amended.
The form of Underwriting Agreement, attached as Exhibit 1.1
hereto, provides for indemnification by the underwriters of us
and our officers and directors for specified liabilities,
including matters arising under the Securities Act of 1933, as
amended.
Item 15.
Recent Sales of Unregistered Securities.
Set forth below in reverse chronological order is information
regarding the number of shares of capital stock and options
issued by us
since                     ,
2002. Also included is the consideration if any received by us
for the securities.
There was no public offering in any such transaction and we
believe that each transaction was exempt from the registration
requirements of the Securities Act of 1933, as amended, by
reason of Regulation D and Section 4(2) of the
1933 Act, based on the private nature of the transactions
and the financial sophistication of the purchasers, all of whom
had access to complete information concerning us and acquired
the securities for investment and not with a view to the
distribution thereof. In addition, we believe that the
transactions described below with respect to the issuance of
option grants and warrants to our employees and directors were
exempt from registration requirements of the 1933 Act by
reason of Rule 701 promulgated thereunder.
Common Stock
In January 2004, a former employee of ours, resigned with
600 shares of vested stock options. The employee exercised
his options in March 2004 pursuant to the provisions of our
Amended and Restated 1999 Stock Option Plan and we issued to him
shares of our common stock. In September 2004, pursuant to the
terms and conditions of our Amended and Restated 1999 Stock
Option Plan, we repurchased the 600 shares of common stock
from him for the then fair market value of the common stock. As
consideration we issued him a non-negotiable three year junior
subordinated note in the amount of $106,800. The common shares
we repurchased are currently held by us in treasury stock.
Options
In August 2003, our board of directors adopted a plan whereby
stock options are to be issued to Hampshire Equity Partners, as
well as other common stockholders, in amounts necessary to
prevent the dilution of their ownership percentage as a result
of the issuance of stock options to our other employees. Options
granted under this anti-dilution plan are to be issued at the
estimated fair market value of our common stock on the date of
grant and vest immediately. During fiscal 2003, we issued stock
options for 1,503 shares of common stock under this
anti-dilution plan, 1,425 of which were issued to Hampshire
Equity Partners. Because Hampshire Equity Partners does not
qualify as an employee, FIN No. 44 required us to
recognize a charge to earnings during fiscal 2004 of $38,832.
The fair value of the vested options was determined using the
Black-Scholes option-pricing model.
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Table of Contents
Item 16.
Exhibits and Financial Statement Schedules
(a)
Exhibits.
The
following exhibits are filed as part of this registration
statement:
Exhibit No.
Description
1.1
Form of Underwriting Agreement
3.1
Form of Second Amended and Restated Certificate of Incorporation
3.2
Form of Amended and Restated By-laws
4.1
Specimen certificate for shares of common stock, $.01 par
    value*
5.1
Opinion of Paul, Hastings, Janofsky & Walker LLP*
10.1
Letter Agreement by and between R. Edward Anderson and Citi
    Trends, Inc., dated November 16, 2001
10.2
Employment and Non-Interference Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of April 13, 1999
10.3
Amendment No. 1 to the Employment and Non-Interference
    Agreement by and between George Bellino and Citi Trends, Inc.,
    dated as of December 2001
10.4
The Loan and Security Agreement, dated as of April 2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.
10.5
First Amendment to Loan and Security Agreement, dated as of
    June 28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.
10.6
Second Amendment to Loan and Security Agreement, dated as of
    November 30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.
10.7
Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.
10.8
Fourth Amendment to Loan and Security Agreement, dated as of
    February 9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.
10.9
Lease Agreement, dated as of September 30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant
10.1
0
$3.0 Million Promissory Note of Citi Trends, Inc. payable
    to Bank of America issued on June 21, 2004
10.1
1
Form of 2005 Long Term Incentive Plan
10.1
2
Nominating Agreement, dated as
    of           ,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners II, L.P.*
10.1
3
Registration Rights Agreement, dated as
    of           ,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners II, L.P.*
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Table of Contents
Exhibit No.
Description
10.1
4
Termination Agreement, dated as
    of           ,
    2005, by and between Citi Trends, Inc. and Hampshire Management
    Company LLC*
14.1
Citi Trends, Inc. Code of Business Conduct and Ethics*
23.1
Consent of KPMG LLP
23.2
Consent of Paul Hastings, Janofsky & Walker LLP
    (included in Exhibit 5.1)*
24.1
Power of Attorney (included on the signature page hereto)
* To be filed by amendment.
Item 17.
Undertakings.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)     For purposes of determining any
    liability under the Securities Act of 1933, as amended, the
    information omitted from the form of prospectus filed as part of
    this registration statement in reliance upon Rule 430A and
    contained in a form of prospectus filed by the registrant
    pursuant to Rule 424(b)(1) or (4) or 497(h) under the
    Securities Act of 1933, as amended, shall be deemed to be part
    of this registration statement as of the time it was declared
    effective.
(2)     For the purpose of determining
    any liability under the Securities Act of 1933, as amended, each
    post-effective amendment that contains a form of prospectus
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.
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Table of Contents
Signatures
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New
York, on the 28th of February, 2005.
CITI TRENDS, INC.
By:
/s/
R. Edward Anderson
R. Edward Anderson
Chief Executive
    Officer
Power of Attorney
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Each person whose signature appears below in so signing also
makes, constitutes and appoints R. Edward Anderson and
Thomas W. Stoltz, and each of them, his or her true and lawful
attorney-in-fact, with full power of substitution, for him or
her in any and all capacities, to execute and cause to be filed
with the Securities and Exchange Commission any and all
amendments and post-effective amendments to this Registration
Statement, with exhibits thereto and other documents in
connection therewith, and ratifies and confirms all that said
attorney-in-fact or his substitute or substitutes may do or
cause to be done.
Signature
Title
Date
/s/
R. Edward Anderson
R.
    Edward Anderson
Chief Executive Officer (Principal Executive Officer)
February 28, 2005
/s/
Thomas W. Stoltz
Thomas
    W. Stoltz
Chief Financial Officer (Principal Financial Officer)
February 28, 2005
/s/
George A. Bellino
George
    A. Bellino
Director
February 28, 2005
/s/
Gregory P. Flynn
Gregory
    P. Flynn
Director
February 28, 2005
/s/
Laurens M. Goff
Laurens
    M. Goff
Director
February 28, 2005
/s/
John S. Lupo
John
    S. Lupo
Director
February 28, 2005
/s/
Tracy L. Noll
Tracy
    L. Noll
Director
February 28, 2005
II-5
Table of Contents
Exhibit Index
Exhibit No.
Description
1.1
Form of Underwriting Agreement
3.1
Form of Second Amended and Restated Certificate of Incorporation
3.2
Form of Amended and Restated By-laws
4.1
Specimen certificate for shares of common stock, $.01 par
    value*
5.1
Opinion of Paul, Hastings, Janofsky & Walker LLP*
10.1
Letter Agreement by and between R. Edward Anderson and Citi
    Trends, Inc., dated November 16, 2001
10.2
Employment and Non-Interference Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of April 13, 1999
10.3
Amendment No. 1 to the Employment and Non-Interference
    Agreement by and between George Bellino and Citi Trends, Inc.,
    dated as of December 2001
10.4
The Loan and Security Agreement, dated as of April 2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.
10.5
First Amendment to Loan and Security Agreement, dated as of
    June 28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.
10.6
Second Amendment to Loan and Security Agreement, dated as of
    November 30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.
10.7
Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.
10.8
Fourth Amendment to Loan and Security Agreement, dated as of
    February 9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.
10.9
Lease Agreement, dated as of September 30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant
10.1
0
$3.0 Million Promissory Note of Citi Trends, Inc. payable
    to Bank of America issued on June 21, 2004
10.1
1
Form of 2005 Long Term Incentive Plan
10.1
2
Nominating Agreement, dated as
    of           ,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners II, L.P.*
10.1
3
Registration Rights Agreement, dated as
    of           ,
    2005, by and between Citi Trends, Inc. and Hampshire Equity
    Partners II, L.P.*
10.1
4
Termination Agreement, dated as
    of           ,
    2005, by and between Citi Trends, Inc. and Hampshire Management
    Company LLC*
Table of Contents
Exhibit No.
Description
14.1
Citi Trends, Inc. Code of Business Conduct and Ethics*
23.1
Consent of KPMG LLP
23.2
Consent of Paul Hastings, Janofsky & Walker LLP
    (included in Exhibit 5.1)*
24.1
Power of Attorney (included on the signature page hereto)
* To be filed by amendment.