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<TITLE>UNITED STATES </TITLE>
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<P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D. C. 20549<BR>
<BR>
<B>FORM 10-Q<BR>
<BR>
</B>/X/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.<BR>
<BR>
For the quarterly period ended September 30, 2001.<BR>
<BR>
<B>OR<BR>
<BR>
</B>/&nbsp;&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.<BR>
<BR>
For The Transition Period From ____ To<BR>
<BR>
<B>Commission File Number 0-23385<BR>
<BR>
BRASS EAGLE INC.<BR>
</B>(Exact name of registrant as specified in its charter)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=608>
<TR><TD WIDTH="53%" VALIGN="TOP">
<P ALIGN="CENTER">Delaware</TD>
<TD WIDTH="47%" VALIGN="TOP">
<P ALIGN="CENTER">71-0578572</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<P ALIGN="CENTER">(State or other jurisdiction</TD>
<TD WIDTH="47%" VALIGN="TOP">
<P ALIGN="CENTER">( I.R.S. Employer</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<P ALIGN="CENTER">of incorporation or organization)</TD>
<TD WIDTH="47%" VALIGN="TOP">
<P ALIGN="CENTER">Identification Number)</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER"><BR>
<B>1201 S. E. 30<SUP>th</SUP> St., Bentonville, Arkansas 72712<BR>
</B>(Address of principal executive offices) (zip code)<BR>
<BR>
<B>501-464-8700<BR>
</B>(Registrant's telephone number, including area code)</P>
<P>Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.&nbsp;&nbsp;Yes<U> X </U>No___<BR>
<BR>
The number of shares of the Registrant's Common Stock, $0.01 par value, outstanding as of November 6, 2001 was 7,146,918.</P>
<B><P ALIGN="CENTER">BRASS EAGLE INC.<BR>
<BR>
</B>FORM 10-Q<BR>
<BR>
QUARTER ENDED SEPTEMBER 30, 2001<BR>
<BR>
<U>INDEX</P></U>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=631>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>Part I:</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Financial Information</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">Item1.</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Condensed Consolidated Financial Statements</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Independent Accountants' Report</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Condensed Consolidated Balance Sheets as of September 30, 2001 </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;(unaudited) and December 31, 2000</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Condensed Consolidated Statements of Operations for the Three and</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;Nine Months ended September 30, 2001 (unaudited) and September 30, &nbsp;&nbsp;&nbsp;2000 (unaudited)</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Condensed Consolidated Statements of Comprehensive Income for the</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;Three and Nine Months Ended September 30, 2001 (unaudited) and &nbsp;&nbsp;&nbsp;September 30, 2000 (unaudited)</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Condensed Consolidated Statements of Cash Flows for the Nine </TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;Months ended September 30, 2001 (unaudited) and September 30,2000 &nbsp;&nbsp;&nbsp;(unaudited)</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Notes to Condensed Consolidated Financial Statements</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">Item 2.</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Management's Discussion and Analysis of Financial Condition and</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Results of Operations</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">Item 3.</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Quantitative and Qualitative Disclosures About Market Risk</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>Part II:</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Other Information</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">Item 6.</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>Exhibits and Reports on Form 8-K</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>Signatures</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="76%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">BRASS EAGLE INC.</P>
<P>PART I:&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL INFORMATION<BR>
Item 1.&#9; - Financial Statements</P>
</B><P ALIGN="CENTER"><BR>
INDEPENDENT ACCOUNTANTS' REPORT</P>
<P><BR>
<BR>
Board of Directors and Shareholders<BR>
Brass Eagle Inc.<BR>
Bentonville, Arkansas <BR>
<BR>
<BR>
We have reviewed the condensed consolidated balance sheet of Brass Eagle Inc. as of September 30, 2001 and the related condensed consolidated statements of operations and comprehensive income for the three month and nine month periods ended September 30, 2001 and 2000, and the condensed consolidated statements of cash flows for the nine month periods ended September 30, 2001 and 2000. These financial statements are the responsibility of the Company's management.<BR>
<BR>
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.<BR>
<BR>
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. </P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>Crowe, Chizek and Company LLP</TD>
</TR>
</TABLE>

<P><BR>
Oak Brook, Illinois<BR>
October 23, 2001</P>
<B><P ALIGN="CENTER">BRASS EAGLE INC.<BR>
CONDENSED CONSOLIDATED BALANCE SHEETS<BR>
(In thousands except share data)</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=637>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="CENTER">SEPTEMBER 30,</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="CENTER">DECEMBER 31,</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2001&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="CENTER">(unaudited)</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>Assets</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>Current assets</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Cash and cash equivalents</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;431&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,457</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Accounts receivable - less allowance </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;&nbsp;for doubtful accounts of $457 in 2001 &nbsp;&nbsp;and $393 in 2000</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
16,970</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
25,881</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Due from affiliate</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">326</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Inventories</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">20,497</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">14,003</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Prepaid expenses and other current &nbsp;&nbsp;assets</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
827</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
790</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Deferred income taxes</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,886</U></TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,780</U></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">40,611</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">46,237</TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP" COLSPAN=3>
<P>Property, plant and equipment, net</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">16,609</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">14,911</TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=4>
<P>Other assets:</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=4>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">288</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">325</TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=4>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets, net</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,809</U></TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34,343</U></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;90,317</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95,816</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">============</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">===========</TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=4>
<P>Liabilities and stockholders' equity</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>Current liabilities</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Revolving credit facility</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,520</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,860</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Accounts payable </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">5,648</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">7,340</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Accrued expenses</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">4,351</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,853</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Current maturities of long-term debt</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,407</U></TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,607</U></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">19,926</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">24,660</TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=4>
<P>Long-term debt, less current maturities</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">17,190</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">19,615</TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" COLSPAN=4>
<P>Deferred income taxes</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">964</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">821</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>Stockholders' equity</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Common stock, $.01 par value, &nbsp;&nbsp;10,000,000 shares authorized, </TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;&nbsp;7,264,823 issued and 7,145,123</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;&nbsp;outstanding at September 30, 2001; &nbsp;&nbsp;7,258,290 issued &nbsp;&nbsp;and 7,138,590 &nbsp;&nbsp;outstanding at December 31, 2000</TD>
<TD WIDTH="23%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">73</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
<BR>
73</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Additional paid-in capital</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">25,841</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">25,802</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Accumulated other comprehensive &nbsp;&nbsp;income</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
(589)</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT"><BR>
0</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Retained earnings</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">27,455</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,388</TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>Treasury stock 119,700 shares at cost</TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(543)</U></TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(543)</U></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;52,237</U></TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50,720</U></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;90,317</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95,816</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P ALIGN="RIGHT">===========</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="RIGHT">==========</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=6>
<P>See accompanying notes to condensed consolidated financial statements. </TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=6>
<P>&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER"><BR>
<BR>
BRASS EAGLE INC.<BR>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
</B>(In thousands except share and per share data)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=637>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">THREE MONTHS ENDED</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">NINE MONTHS ENDED</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="CENTER">2001</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="CENTER">2000</U></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="CENTER">2001</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="CENTER">2000</U></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(unaudited)</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="30%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(unaudited)</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Net sales</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15,570</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23,125</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;57,673</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;54,917</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Cost of sales</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,322</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,550</U></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35,920</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34,526</U></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Gross profit</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">5,248</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">9,575</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">21,753</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">20,391</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Strategic initiative expense</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">651</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">651</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Operating expenses</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,519</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,129</U></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,989</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,478</U></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Operating income (loss)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(271)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">3,795</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">4,764</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">7,262</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Minority interest</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">51</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">29</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">153</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">50</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Interest income (expense)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(461)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(598)</U></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,458)</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(326)</U></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Income (loss) before income taxes</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(681)</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">3,226</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">3,459</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">6,986</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Provision (benefit) for income taxes</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(263)</U></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,209</U></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,392</U></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,615</U></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Net income (loss)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(418)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,017</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,067</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,371</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">=======</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>Net income (loss) per share:</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.06)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.28</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.29</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.61</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.06)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">0.27</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">0.27</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">0.58</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=6>
<P>Weighted average shares outstanding:</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,145,123</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,137,304</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">7,144,014</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">7,136,173</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,145,123</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,517,947</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">7,561,261</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">7,523,373</TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=6>
<P>See accompanying notes to condensed consolidated financial statements.</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER"><BR>
BRASS EAGLE INC.<BR>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME<BR>
</B>(In thousands)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=637>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=3>
<B><P ALIGN="CENTER">THREE MONTHS <BR>
ENDED</B></TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=3>
<B><P ALIGN="CENTER">NINE MONTHS <BR>
ENDED</B></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=3>
<B><U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=3>
<B><U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<B><U><P ALIGN="CENTER">2001</B></U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">2000</B></U></TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<B><U><P ALIGN="CENTER">2001</B></U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">2000</B></U></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="CENTER">(unaudited)</TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=3>
<P ALIGN="CENTER">(unaudited)</TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>Net income (loss)</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(418)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,017</TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,067</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;4,371</TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>Other comprehensive income (loss):</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;Loss on derivative, net of tax</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(207)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</U></TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(589)</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</U></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>Comprehensive income (loss)</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(625)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,017</TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;1,478</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;4,371</TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=======</TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">=======</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">======</TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=7>
<P>See accompanying notes to condensed consolidated financial statements.</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER"><BR>
BRASS EAGLE INC.<BR>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
</B>(In thousands)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="66%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="CENTER">NINE MONTHS ENDED</B></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=2>
<B><U><FONT SIZE=2><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">2001</B></U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">2000</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">(Unaudited)</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P>Cash flows from operating activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Net income</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,067</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,371</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Adjustments to reconcile net income to net cash from operating activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">429</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(442)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,333</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,890</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Provision for doubtful accounts</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">106</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(13)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Minority interest</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(152)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(50)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Stock compensation expense</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">23</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">20</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposition of equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">81</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">67</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Changes in assets and liabilities </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,780</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,863)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(6,494)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(4,155)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">274</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,087</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,042)</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,249</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Net cash from operating activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,405</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,161</U></FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P>Cash flows from investing activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Purchases of property and equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,213)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(3,397)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Acquisition of Nittan assets</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,322)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Acquisition of assets of JT USA, L. P.</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(32,374)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Proceeds on sales of equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Net cash from investing activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,501)</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(35,771)</U></FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P>Cash flows from financing activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Bank loan fees</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(350)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Payments on long-term debt</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(4,606)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,402)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Proceeds from long-term debt</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">28,000</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Net (payments) proceeds from line of credit</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(340)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,280</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Issuance of stock</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Net cash from financing activities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,930)</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27,547</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Net change in cash</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,026)</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,063)</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Cash at beginning of period</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,457</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,185</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Cash at end of period</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;431&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;122</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">==========</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">==========</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>Supplemental disclosures of cash flow information</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Cash paid during the period:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,189</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,175</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,575</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">634</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P>Supplemental schedules of non-cash investing and financing activities:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;In conjunction with the acquisition of assets of JT USA, LP</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liabilities were assumed as follows:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of assets acquired</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34,177</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">32,374</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liabilities assumed</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,803</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P>See accompanying notes to condensed consolidated financial statements. </FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER"><BR>
BRASS EAGLE INC.<BR>
<BR>
</B>Notes to Condensed Consolidated Financial Statements<BR>
(All information for the three and nine month periods ended September 30, 2001 and 2000 is unaudited)</P>
<B><P>NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<BR>
<BR>
</B>The significant accounting policies and practices followed by Brass Eagle are as follows:</P>
<U><P>Description of Business</U>:&nbsp;&nbsp;Brass Eagle is a leading manufacturer of paintball markers and other paintball products. Brass Eagle sells its products through major domestic and international retailers and paintball specialty stores. The financial statements include the accounts of Brass Eagle and its subsidiaries.<BR>
<BR>
<U>Interim Results</U>:&nbsp;&nbsp;The accompanying condensed consolidated balance sheet at September 30, 2001 and the condensed consolidated statements of operations, comprehensive income and cash flows for the three and nine month periods ended September 30, 2001 and 2000 are unaudited. In the opinion of management, these statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the results of the interim periods. The results of operations for the three month and nine month periods ended September 30, 2001 are not necessarily indicative of the results expected for the full calendar year. Because all of the disclosures required by generally accepted accounting principles are not included, these interim statements should be read in conjunction with the financial statements and notes thereto contained in Brass Eagle's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.<BR>
<BR>
<B>NOTE 2 - INVENTORIES<BR>
<BR>
</B>Inventories consist of the following components (in thousands):</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=643>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<B><P ALIGN="CENTER">September 30,</B></TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><P ALIGN="CENTER">December 31,</B></TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;2001&nbsp;&nbsp;&nbsp;&nbsp;</B></U></TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;2000&nbsp;&nbsp;&nbsp;&nbsp;</B></U></TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>Finished goods</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,912</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,697</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>Raw materials</TD>
<TD WIDTH="18%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,585</U></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,306</U></TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,497</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,003</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
</TABLE>

<B><P><BR>
NOTE 3 - FINANCIAL INSTRUMENTS<BR>
<BR>
</B>Brass Eagle adopted FASB SFAS No. 133, "Accounting for Derivative Investments and Hedging Activities", on January 1, 2001. This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.<BR>
<BR>
During fiscal 2000, Brass Eagle entered into an interest rate swap arrangement, which is a derivative financial instrument with a bank. The purpose of the interest rate swap arrangement is to reduce exposure to interest rate fluctuations by effectively fixing the interest rate on part of the borrowings under Brass Eagle's term debt. The term of the hedge is through August 29, 2003. As a result of its adoption of SFAS No. 133, Brass Eagle recorded a loss to Comprehensive Income of $589,000, net of income taxes of $392,000, during the nine months ended September 30, 2001.<BR>
<BR>
<B>NOTE 4 - NEW ACCOUNTING PRONOUNCEMENT<BR>
<BR>
</B>On June 29, 2001, the FASB approved its proposed SFAS No. 141, ("FAS 141") "Business Combinations," and SFAS No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets"<BR>
<BR>
Under FAS 141, all business combinations should be accounted for using the purchase method of accounting; use of the pooling-of-interests method is prohibited. The provisions of the statement will apply to all business combinations initiated after June 30, 2001.<BR>
<BR>
FAS 142 will apply to all acquired intangible assets whether acquired singly, as part of a group, or in a business combination. The statement will supersede Accounting Principles Board, ("APB"), Opinion No. 17, "Intangible Assets," and will carry forward provisions in APB Opinion No. 17 related to internally developed intangible assets. Adoption of FAS 142 will result in the cessation of goodwill amortization. All of the provisions of the statement will be applied in future fiscal years, commencing January, 2002, to all goodwill and other intangible assets recognized in Brass Eagle's statement of financial position, regardless of when those assets were initially recognized.<BR>
<BR>
As of September 30, 2001, Brass Eagle has goodwill and other intangible assets (net of amortization) of $32.8 million. Brass Eagle's amortization expense for the nine month period ended September 30, 2001 was $1.5 million. Brass Eagle is currently evaluating the effects of these new pronouncements.<BR>
<BR>
FAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets" establishes a single accounting model, based on the framework established in FAS No. 121 and APB Opinion No. 30, for long-lived assets to be disposed of by sale. It eliminates the practice of valuing discontinued operations at net realizable value, and does not allow recognition of future operating losses before they occur. The basic presentation of discontinued operations in the income statement under APB 30 is retained, but expanded to include presentation of a <I>component of an entity </I>(which describes operations and cash flows that can clearly be distinguished, both operationally and for financial reporting purposes, from the rest of the entity) rather than a <I>segment of a business.<BR>
<BR>
</I>Under this pronouncement, long-lived assets that are to be disposed of other than by sale (abandonment, exchange, distribution in spinoff, etc.) should have their depreciable lives revised in accordance with APB Opinion No 20, "Accounting Changes". An impairment loss should be recognized at the date a long-lived asset is exchanged for a similar productive asset or if the carrying amount of the asset exceeds its fair value. The provisions of this statement is effective for financial statements issued for fiscal years beginning after December 15, 2001.<BR>
<BR>
Management does not believe the adoption of this pronouncement will have a material effect on Brass Eagle's financial statements.<BR>
<BR>
<B>NOTE 5 - ACQUISITION<BR>
<BR>
</B>On March 5, 2001, Brass Eagle acquired selected machinery and equipment from Nittan USA, Inc., a manufacturer of CO2 jets, for $2.3 million in cash. Brass Eagle has agreed to lease facilities in Batesville, Mississippi to house the equipment and produce CO2 jets, which are sold to Brass Eagle customers.<BR>
<BR>
<B>NOTE 6- CREDIT FACILITY &amp; LONG-TERM DEBT BORROWINGS<BR>
<BR>
</B>The original Senior Credit Facility, dated June 30, 2000 and modified on February 1, 2001, is comprised of a $5.5 million revolving credit facility, a $2.0 million term loan and a $25.2 million term loan used for the acquisition of substantially all the assets of JT USA, L.P. The funds available under the revolving credit facility are limited to eligible accounts receivable and inventory, as defined, up to a maximum of $5.5 million. The credit facility is secured by all tangible and intangible assets of Brass Eagle, exclusive of its investment in Challenge Park LLC.<BR>
<BR>
The $2.0 million loan requires quarterly principal payments of $0.2 million and matures in September 2003. The $25.2 million term loan requires quarterly principal payments of $1.4 million and matures in June 2005. Borrowings bear interest, as designated by Brass Eagle, at either the bank's prime rate (adjusted up to prime plus 1.50% depending on Brass Eagle's leverage ratio) or LIBOR (plus 1.25% to 2.50% depending on Brass Eagle's leverage ratio).<BR>
<BR>
The agreement includes certain restrictive covenants including maintaining a minimum net worth of $40.0 million plus 75% of cumulative net income from the time of borrowing, a leverage ratio of 2.00, a fixed charge coverage ratio of 2.25 from June 30, 2001 to September 30, 2001 and 2.50 at December 31, 2001 and beyond. The agreement also limits capital expenditures to $4.5 million in 2001, excluding the purchase of the Nittan assets. Brass Eagle was in compliance with these covenants at September 30, 2001. In addition, the agreement provides for an excess cash flow recapture requirement for the first two years of the agreement equal to 50% of the excess cash flow over fixed charges, not to exceed $750,000.<BR>
<BR>
<B>ITEM 2. -&nbsp;&nbsp;MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS<BR>
<BR>
</B>The following discussion should be read in conjunction with the accompanying condensed consolidated financial statements for the three months and nine months ended September 30, 2001 and the 2000 10-K.<BR>
<BR>
<U>Special Note Regarding Forward-Looking Statements<BR>
<BR>
</U>Certain statements in this filing and in other filings by Brass Eagle with the Securities and Exchange Commission and in press releases, presentations by Brass Eagle or its management and oral statements may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include statements regarding Brass Eagle's financial position, results of operations, market position, product development, regulatory matters, growth opportunities and growth rates, acquisition and divestiture opportunities, and other similar forecasts and statements of expectation. Words such as expects, anticipates, intends, plans, projects, believes, seeks, estimates, should, may, would, will and variations of these words and similar expressions are intended to identify these forward-looking statements. The statements are not statements of historical fact. Rather, they are based on Brass Eagle's estimates, assumptions, projections and current expectations, and are not guarantees of future performance. Brass Eagle disclaims any obligation to update or revise any forward-looking statement based upon the occurrence of future events, the receipt of new information, or otherwise. The forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of Brass Eagle to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause Brass Eagle's actual results to differ materially from the results, projections and expectations expressed in the forward-looking statements include, but are not limited to, the following possibilities: <BR>
<BR>
(1)&nbsp;&nbsp;Intensifying competition, including specifically the intensification of price competition, the entry of new competitors and the introduction of new products by new and existing competitors;<BR>
(2)&nbsp;&nbsp;Failure to obtain new customers or retain existing customers or maintain relationships with mass merchandisers;<BR>
(3)&nbsp;&nbsp;Inability to carry out marketing and sales plans or to integrate acquired businesses;<BR>
(4)&nbsp;&nbsp;Loss of key executives;<BR>
(5)&nbsp;&nbsp;General economic and business conditions which are less favorable than expected;<BR>
(6)&nbsp;&nbsp;Failure to maintain credit facilities on satisfactory terms;<BR>
(7)&nbsp;&nbsp;Unanticipated changes in industry trends;<BR>
(8)&nbsp;&nbsp;Changes in general economic conditions that might impact the demand for Brass Eagle's products; and<BR>
(9)&nbsp;&nbsp;Decreases in customer spending levels due to general economic conditions or other factors affecting their volume of business.<BR>
<BR>
<B>RESULTS OF OPERATIONS <BR>
<BR>
</B>The following table sets forth operations data as a percentage of net sales for the periods indicated:</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">Three Months Ended </B></TD>
<TD WIDTH="27%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">Nine Months Ended</B></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP" COLSPAN=2>
<B><U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></TD>
<TD WIDTH="27%" VALIGN="TOP" COLSPAN=2>
<B><U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><P ALIGN="RIGHT">&nbsp;&nbsp;2001&nbsp;&nbsp;</B></U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><P ALIGN="RIGHT">&nbsp;&nbsp;2000&nbsp;&nbsp;</B></U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><P ALIGN="RIGHT">&nbsp;&nbsp;2001&nbsp;&nbsp;</B></U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;2000&nbsp;&nbsp;&nbsp;</B></U></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Net sales</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">100.0%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">100.0%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">100.0%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">100.0%</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Cost of sales</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">66.3%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">58.6%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">62.3%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">62.9%</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Gross profit</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">33.7%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">41.4%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">37.7%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">37.1%</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Strategic initiative expenses</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">2.8%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">1.2%</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Operating expenses</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">35.4%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">22.2%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">29.5%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">22.7%</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Operating income (loss)</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">(1.7%)</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">16.4%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">8.3%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">13.2%</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Net income (loss)</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">(2.7%)</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">8.7%</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">3.6%</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="RIGHT">8.0%</TD>
</TR>
</TABLE>

<B><P><BR>
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000<BR>
<BR>
</B><I>Net Sales.&nbsp;&nbsp;</I>Net<I> </I>sales decreased by 32.5% to $15.6 million for the three months ended September 30, 2001, compared to $23.1 million for the three months ended September 30, 2000. The decrease in net sales was primarily due to decline in the retail market. The overall slow down in consumer purchases has resulted in retailers more tightly controlling inventories going into the holiday season and this trend was exacerbated by the events of September 11th.<BR>
<BR>
Domestic sales of Brass Eagle products decreased by 34.9% to $14.2 million (or 91.0% of sales) for the three months ended September 30, 2001 from $21.8 million (or 94.4% of sales) for the three months ended September 30, 2000. International sales increased by 7.7% to $1.4 million (9.0% of sales) for the three months ended September 30, 2001 from $1.3 million (or 5.6% of sales) for the three months ended September 30, 2000. The increase in international sales was primarily due to continued growth in our foreign customer base.<BR>
<BR>
<I>Gross Profit.&nbsp;&nbsp;</I>Gross profit as a percentage of net sales decreased to 33.7% for the three months ended September 30, 2001, compared to 41.4% for the three months ended September 30, 2000. The decrease was due primarily to reduced manufacturing efficiencies.<BR>
<BR>
<I>Strategic Initiative Expenses.&nbsp;&nbsp;</I>During the third quarter of 2000, Brass Eagle terminated discussions with a prospective buyer regarding the potential acquisition of Brass Eagle. Brass Eagle incurred one-time, strategic initiative expenses of $651,000, or $0.05 per share in connection with the proposed transaction, a portion of which represents expenses of the prospective buyer reimbursed by Brass Eagle, as previously agreed.<BR>
<BR>
<I>Operating Expenses.&nbsp;&nbsp;</I>Operating expenses increased 7.8% to $5.5 million in the three months ended September 30, 2001, compared to $5.1 million in the three months ended September 30, 2000, primarily due to increased selling expenses. The increase in selling expenses was due to increased labor and related costs associated with new growth.<BR>
<BR>
<I>Operating Income.&nbsp;&nbsp;</I>Operating income decreased by 107.1% to a $271,000 loss in the three months ended September 30, 2001, compared to $3.8 million income in the three months ended September 30, 2000. This decrease was due to decreased unit sales and lower gross profit margins associated with the economic slowdown, as well as increased operating expenses.<BR>
<BR>
<I>Interest.&nbsp;&nbsp;</I>Brass Eagle recorded net interest expense of $461,000 for the three months ended September 30, 2001, compared to $598,000 for the three months ended September 30, 2000. The decrease in net interest expense was due to the reduction of the term loans from Bank of America and a lower interest rate in three months ended September 30, 2001 compared to three months ended September 30, 2000.<BR>
<I><BR>
Income Tax Rate.&nbsp;&nbsp;</I>Brass Eagle's<I> </I>effective federal and state income tax rate was 38.6% for the three months ended September 30, 2001 and 37.5% for the three months ended September 30, 2000. The increase in the income tax rate is due to higher effective state taxes due primarily to a reduction in tax credits for the State of Missouri and a higher effective tax rate from the JT operations located in California.<BR>
<B><BR>
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000<BR>
<BR>
</B><I>Net Sales. </I>Net<I> </I>sales increased by 5.1% to $57.7 million for the first nine months of 2001 compared to $54.9 million the first nine months of 2000. The increase in net sales was primarily due to increased sales of masks and sales of new product lines.<BR>
<BR>
Domestic sales increased by 3.5% to $53.2 million (or 92.2% of sales) for the nine months ended September 30, 2001 from $51.4 million (or 93.6% of sales) for the nine months ended September 30, 2000. International sales increased by 28.6% to $4.5 million (or 7.8% of sales) for the nine months ended September 30, 2001 from $3.5 million (or 6.4% of sales) for the nine months ended September 30, 2000. The increase in international sales was primarily due to continued growth of the foreign customer base.<BR>
<BR>
<I>Gross Profit. </I>Gross profit as a percentage of net sales increased to 37.7% for the first nine months of 2001 compared to 37.1% for the first nine months of 2000. The increase was due primarily to cost savings resulting from Brass Eagle sourcing masks and some other products outside the United States.<BR>
<BR>
<I>Strategic Initiative Expenses. </I>During the third quarter of 2000, Brass Eagle terminated discussions with a prospective buyer regarding the potential acquisition of Brass Eagle. Brass Eagle incurred one-time, strategic initiative expenses of $651,000, or $0.05 per share in connection with the proposed transaction, a portion of which represents expenses of the prospective buyer reimbursed by Brass Eagle, as previously agreed.<BR>
<BR>
<I>Operating Expenses. </I>Operating expenses increased by 36.0% to $17.0 million the first nine months of 2001 compared to $12.5 million in the first nine months of 2000, primarily due to increased selling expenses. The increase in selling expenses was due to increased salaries and related costs associated with new growth, and an increase of freight due to increased sales. Administrative cost also increased due to additional staff as a result of new growth. Amortization expenses increased due to the JT USA acquisition.<BR>
<BR>
<I>Operating Income. </I>Operating income decreased by 34.2% to $4.8 million in the first nine months of 2001 compared to $7.3 million in the first nine months of 2000. The decrease was primarily due to increased operating expenses offset by increased unit sales volume and improved gross profit margins.<BR>
<BR>
<I>Interest. </I>Brass Eagle recorded net interest expense of $1.5 million in the first nine months of 2001 compared to $326,000 in the first nine months of 2000. The increase in net interest expense was due to the acquisition of the assets of JT USA on June 30, 2000 and the purchase of selected Nittan assets on March 5, 2001.<BR>
<I><BR>
Income Tax Rate. </I>Brass Eagle's effective federal and state income tax rate was 40.2% in the first nine months ended September 30, 2001 and 37.4% for the first nine months ended September 30, 2000. The increase in the income tax rate is due to higher effective state taxes primarily due to a reduction in credits from the Sate of Missouri, and a higher effective tax rate from the JT operations located in California.<BR>
<BR>
<B>Liquidity and Capital Resources<BR>
<BR>
</B>As of September 30, 2001, Brass Eagle had working capital of $20.7 million. Brass Eagle is planning capital expenditures of approximately $0.8 million for the remainder of 2001 for the expansion and improvement of manufacturing capacity. The investments will be funded from available cash and borrowings from the credit facility.<BR>
<BR>
Brass Eagle believes that funds generated from operations, together with borrowings under the credit facility, will be adequate to meet its anticipated cash requirements for at least the next 18 months. Brass Eagle may, when and if the opportunity arises, acquire or participate in other businesses or ventures involved in activities or having product lines that are compatible with those of Brass Eagle or pursue the vertical integration of production capabilities for one or more of Brass Eagle's products which are currently purchased from third parties. The capital expenditures that would be associated with any such activities that may occur in the future would be funded with available cash and cash equivalents, borrowings from the credit facility, working capital, or a combination of such sources.<BR>
<BR>
Net cash provided by operating activities for the nine months ended September 30, 2001 was $3.4 million, consisting primarily of net income of $2.1 million, depreciation and amortization expense of $3.3 million, plus a net decrease in accounts receivable of $8.8 million, a decrease in accounts payable and accrued expenses of $5.0 million, a decrease in deferred taxes of $429,000, an increase in prepaid expenses of $274,000 and an increase in inventory of $6.5 million. <BR>
<BR>
Net cash used in investing activities was $3.5 million for the nine months ended September 30, 2001. This was due primarily to the acquisition of selected assets of Nittan USA, Inc. for $2.3 million and purchases of property and equipment of $1.2 million.<BR>
<BR>
Net cash used in financing activities was $2.9 million in the nine months ended September 30, 2001, due to the reduction of long-term debt of $4.6 million and net payments on the line of credit of $340,000, offset by borrowings of $2.0 million and the issuance of common stock of $16,000.<BR>
<B><BR>
ITEM 3:&nbsp;&nbsp;QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B><BR>
<BR>
Brass Eagle is exposed to market risk from changes in interest rates. Brass Eagle holds a derivative instrument in the form of an interest rate swap, which is viewed as a risk management tool and is not used for trading or speculative purposes. The intent of the interest rate swap is to effectively fix the interest rate on part of the borrowings under Brass Eagle's term debt. Quantitative disclosures relating to financial instruments and debt are included in the tables below.<BR>
<BR>
The following table provides information on Brass Eagle's fixed maturity investments as of September 30, 2001 that are sensitive to changes in interest rates. The table also presents the debt upon which an interest rate swap agreement was entered. Since the interest rate swap effectively fixes the interest rate on the notional amount of debt, changes in interest rates have no current effect on the interest expense recorded by Brass Eagle on the portion of the debt covered by the interest rate swap.</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="44%" VALIGN="TOP">
<P><B><U>Liability</B></U></TD>
<TD WIDTH="30%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">Amount</B></U></TD>
<TD WIDTH="26%" VALIGN="TOP">
<B><U><P>Maturity Date</B></U></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP">
<P>Variable rate debt</TD>
<TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="CENTER">$22.6 million</TD>
<TD WIDTH="26%" VALIGN="TOP">
<P>June 30, 2005</TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP">
<P>Interest rate swap notional amount<BR>
</TD>
<TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="CENTER">$14.0 million</TD>
<TD WIDTH="26%" VALIGN="TOP">
<P>August 29, 2003</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P>&nbsp;</P>
<P>PART II: OTHER INFORMATION<BR>
<BR>
Item 6.&nbsp;&nbsp;Exhibits and Reports on Form 8-K<BR>
<BR>
</B>(a)&nbsp;&nbsp;Exhibits<BR>
<BR>
The following exhibits are filed with this Report:</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER"><B>Exhibit</B></TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<B><U><P ALIGN="CENTER">Number</B></U></TD>
<TD WIDTH="86%" VALIGN="TOP">
<B><U><P>Description of Document</B></U></TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>11</TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>Statement of Computation of Earnings Per Share</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<P><BR>
______________________________________________________________________________<BR>
<BR>
<BR>
(b)&nbsp;&nbsp;Reports on Form 8-K:<BR>
<BR>
Brass Eagle filed no Current Reports on Form 8-K during the 3rd quarter of 2001.<BR>
<BR>
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>Brass Eagle Inc.</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>Date:&nbsp;&nbsp;November 14, 2001</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>By:&nbsp;&nbsp;/s/&nbsp;&nbsp;J. R. Brian Hanna</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>J. R. Brian Hanna</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>Vice President-Finance and Chief Financial Officer and Treasurer</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>(On behalf of the Registrant and as the Registrant's principal Financial and Accounting Officer)</TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER"><BR>
BRASS EAGLE INC.</P>
</B><U><P ALIGN="CENTER">EXHIBIT INDEX</P>
</U><P>&nbsp;&nbsp;&nbsp;&nbsp;The following exhibits are filed with this Report:</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER"><B><U>NUMBER</B></U></TD>
<TD WIDTH="86%" VALIGN="TOP">
<B><U><P>DESCRIPTION OF DOCUMENT</B></U></TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>11</TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>Statement of Computation of Earnings Per Share</TD>
</TR>
<TR><TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="86%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<P>&nbsp;</P>
<B><P ALIGN="CENTER">BRASS EAGLE INC.</P>
</B><P ALIGN="RIGHT">Exhibit 11</P>
<B><P ALIGN="CENTER">STATEMENT OF COMPUTATION OF EARNINGS PER SHARE<BR>
</B>(In thousands except share and per share data)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=638>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">THREE MONTHS ENDED</TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">NINE MONTHS ENDED</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
<TD WIDTH="29%" VALIGN="TOP" COLSPAN=2>
<U><P ALIGN="CENTER">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEPTEMBER 30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="CENTER">2001</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="CENTER">2000</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="CENTER">2001</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="CENTER">2000</U></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>Basic Net Income Per Share</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;Net income (loss) available to &nbsp;&nbsp;&nbsp;common stockholders.</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(418)</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">2,017</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,067</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">4,371</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>Weighted average common shares</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outstanding</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,145,123</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,137,304</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,144,014</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">7,136,173</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;Basic net income (loss) per share</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.06)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.28</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.29</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.61</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>Diluted Net Income Per Share</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) available to </TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common stockholders</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(418)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,017</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,067</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,371</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;Pro forma basic weighted average</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares outstanding</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,145,123</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,137,304</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,144,014</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">7,136,173</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;Add dilutive effect of stock</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;380,643</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;417,247</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;387,200</U></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;Weighted average dilutive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common&nbsp;shares outstanding</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">7,145,123</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,517,947</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,561,261</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">7,523,373</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted net income (loss) per share</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.06)</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.27</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.27</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.58</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">=========</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">========</TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

</BODY>
</HTML>
[{"type": "10-Q", "sequence": "1", "filename": "q30110q.htm", "description": "3RD QTR. 10-Q, 2001", "secsgml_size_bytes": 91120}]
{"company-data": {"conformed-name": "BRASS EAGLE INC", "cik": "0001046112", "assigned-sic": "5990", "irs-number": "710578572", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-23385", "film-number": "1786127"}, "business-address": {"street1": "1201 SE 30TH ST.", "city": "BENTONVILLE", "state": "AR", "zip": "72712", "phone": "501-464-8700"}}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2001.
OR
/  /           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For The Transition Period From ____ To
Commission File Number 0-23385
BRASS EAGLE INC.
(Exact name of registrant as specified in its charter)
Delaware
71-0578572
(State or other jurisdiction
( I.R.S. Employer
of incorporation or organization)
Identification Number)
1201 S. E. 30
th
St., Bentonville, Arkansas 72712
(Address of principal executive offices) (zip code)
501-464-8700
(Registrant's telephone number, including area code)
Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes
X
No___
The number of shares of the Registrant's Common Stock, $0.01 par value, outstanding as of November 6, 2001 was 7,146,918.
BRASS EAGLE INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
INDEX
Part I:
Financial Information
Item1.
Condensed Consolidated Financial Statements
Independent Accountants' Report
Condensed Consolidated Balance Sheets as of September 30, 2001
(unaudited) and December 31, 2000
Condensed Consolidated Statements of Operations for the Three and
Nine Months ended September 30, 2001 (unaudited) and September 30,    2000 (unaudited)
Condensed Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 2001 (unaudited) and    September 30, 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 2001 (unaudited) and September 30,2000    (unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Part II:
Other Information
Item 6.
Exhibits and Reports on Form 8-K
Signatures
BRASS EAGLE INC.
PART I:    FINANCIAL INFORMATION
Item 1.	 - Financial Statements
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Shareholders
Brass Eagle Inc.
Bentonville, Arkansas
We have reviewed the condensed consolidated balance sheet of Brass Eagle Inc. as of September 30, 2001 and the related condensed consolidated statements of operations and comprehensive income for the three month and nine month periods ended September 30, 2001 and 2000, and the condensed consolidated statements of cash flows for the nine month periods ended September 30, 2001 and 2000. These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
October 23, 2001
BRASS EAGLE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
SEPTEMBER 30,
DECEMBER 31,
2001
2000
(unaudited)
Assets
Current assets
Cash and cash equivalents
$                 431
$           3,457
Accounts receivable - less allowance
for doubtful accounts of $457 in 2001   and $393 in 2000
16,970
25,881
Due from affiliate
0
326
Inventories
20,497
14,003
Prepaid expenses and other current   assets
827
790
Deferred income taxes
1,886
1,780
Total current assets
40,611
46,237
Property, plant and equipment, net
16,609
14,911
Other assets:
Other assets
288
325
Intangible assets, net
32,809
34,343
$              90,317
$          95,816
============
===========
Liabilities and stockholders' equity
Current liabilities
Revolving credit facility
$               3,520
$            3,860
Accounts payable
5,648
7,340
Accrued expenses
4,351
7,853
Current maturities of long-term debt
6,407
5,607
Total current liabilities
19,926
24,660
Long-term debt, less current maturities
17,190
19,615
Deferred income taxes
964
821
Stockholders' equity
Common stock, $.01 par value,   10,000,000 shares authorized,
7,264,823 issued and 7,145,123
outstanding at September 30, 2001;   7,258,290 issued   and 7,138,590   outstanding at December 31, 2000
73
73
Additional paid-in capital
25,841
25,802
Accumulated other comprehensive   income
(589)
0
Retained earnings
27,455
25,388
Treasury stock 119,700 shares at cost
(543)
(543)
52,237
50,720
$            90,317
$          95,816
===========
==========
See accompanying notes to condensed consolidated financial statements.
BRASS EAGLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share and per share data)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2001
2000
2001
2000
(unaudited)
(unaudited)
Net sales
$        15,570
$       23,125
$       57,673
$    54,917
Cost of sales
10,322
13,550
35,920
34,526
Gross profit
5,248
9,575
21,753
20,391
Strategic initiative expense
651
651
Operating expenses
5,519
5,129
16,989
12,478
Operating income (loss)
(271)
3,795
4,764
7,262
Minority interest
51
29
153
50
Interest income (expense)
(461)
(598)
(1,458)
(326)
Income (loss) before income taxes
(681)
3,226
3,459
6,986
Provision (benefit) for income taxes
(263)
1,209
1,392
2,615
Net income (loss)
$        (418)
$        2,017
$       2,067
$     4,371
========
========
========
=======
Net income (loss) per share:
Basic
$      (0.06)
$          0.28
$         0.29
$      0.61
Diluted
$      (0.06)
0.27
0.27
0.58
Weighted average shares outstanding:
Basic
7,145,123
7,137,304
7,144,014
7,136,173
Diluted
7,145,123
7,517,947
7,561,261
7,523,373
See accompanying notes to condensed consolidated financial statements.
BRASS EAGLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
THREE MONTHS
ENDED
NINE MONTHS
ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2001
2000
2001
2000
(unaudited)
(unaudited)
Net income (loss)
$       (418)
$      2,017
$     2,067
$    4,371
Other comprehensive income (loss):
Loss on derivative, net of tax
(207)
0
(589)
0
Comprehensive income (loss)
$       (625)
$      2,017
$    1,478
$    4,371
========
=======
=======
======
See accompanying notes to condensed consolidated financial statements.
BRASS EAGLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
2001
2000
(Unaudited)
Cash flows from operating activities
Net income
$            2,067
$          4,371
Adjustments to reconcile net income to net cash from operating activities
Deferred income taxes
429
(442)
Depreciation and amortization
3,333
1,890
Provision for doubtful accounts
106
(13)
Minority interest
(152)
(50)
Stock compensation expense
23
20
Loss on disposition of equipment
81
67
Changes in assets and liabilities
Accounts receivable
8,780
(2,863)
Inventories
(6,494)
(4,155)
Prepaid expenses and other assets
274
1,087
Accounts payable and accrued expenses
(5,042)
5,249
Net cash from operating activities
3,405
5,161
Cash flows from investing activities
Purchases of property and equipment
(1,213)
(3,397)
Acquisition of Nittan assets
(2,322)
0
Acquisition of assets of JT USA, L. P.
0
(32,374)
Proceeds on sales of equipment
34
0
Net cash from investing activities
(3,501)
(35,771)
Cash flows from financing activities
Bank loan fees
0
(350)
Payments on long-term debt
(4,606)
(1,402)
Proceeds from long-term debt
2,000
28,000
Net (payments) proceeds from line of credit
(340)
1,280
Issuance of stock
16
19
Net cash from financing activities
(2,930)
27,547
Net change in cash
(3,026)
(3,063)
Cash at beginning of period
3,457
3,185
Cash at end of period
$              431
$                 122
==========
==========
Supplemental disclosures of cash flow information
Cash paid during the period:
Taxes
$           3,189
$              1,175
Interest
1,575
634
Supplemental schedules of non-cash investing and financing activities:
In conjunction with the acquisition of assets of JT USA, LP
Liabilities were assumed as follows:
Fair value of assets acquired
$                  0
$            34,177
Cash paid
0
32,374
Liabilities assumed
0
1,803
See accompanying notes to condensed consolidated financial statements.
BRASS EAGLE INC.
Notes to Condensed Consolidated Financial Statements
(All information for the three and nine month periods ended September 30, 2001 and 2000 is unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by Brass Eagle are as follows:
Description of Business
:  Brass Eagle is a leading manufacturer of paintball markers and other paintball products. Brass Eagle sells its products through major domestic and international retailers and paintball specialty stores. The financial statements include the accounts of Brass Eagle and its subsidiaries.
Interim Results
:  The accompanying condensed consolidated balance sheet at September 30, 2001 and the condensed consolidated statements of operations, comprehensive income and cash flows for the three and nine month periods ended September 30, 2001 and 2000 are unaudited. In the opinion of management, these statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the results of the interim periods. The results of operations for the three month and nine month periods ended September 30, 2001 are not necessarily indicative of the results expected for the full calendar year. Because all of the disclosures required by generally accepted accounting principles are not included, these interim statements should be read in conjunction with the financial statements and notes thereto contained in Brass Eagle's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
NOTE 2 - INVENTORIES
Inventories consist of the following components (in thousands):
September 30,
December 31,
2001
2000
Finished goods
$      16,912
$        8,697
Raw materials
3,585
5,306
$      20,497
$       14,003
========
========
NOTE 3 - FINANCIAL INSTRUMENTS
Brass Eagle adopted FASB SFAS No. 133, "Accounting for Derivative Investments and Hedging Activities", on January 1, 2001. This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.
During fiscal 2000, Brass Eagle entered into an interest rate swap arrangement, which is a derivative financial instrument with a bank. The purpose of the interest rate swap arrangement is to reduce exposure to interest rate fluctuations by effectively fixing the interest rate on part of the borrowings under Brass Eagle's term debt. The term of the hedge is through August 29, 2003. As a result of its adoption of SFAS No. 133, Brass Eagle recorded a loss to Comprehensive Income of $589,000, net of income taxes of $392,000, during the nine months ended September 30, 2001.
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENT
On June 29, 2001, the FASB approved its proposed SFAS No. 141, ("FAS 141") "Business Combinations," and SFAS No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets"
Under FAS 141, all business combinations should be accounted for using the purchase method of accounting; use of the pooling-of-interests method is prohibited. The provisions of the statement will apply to all business combinations initiated after June 30, 2001.
FAS 142 will apply to all acquired intangible assets whether acquired singly, as part of a group, or in a business combination. The statement will supersede Accounting Principles Board, ("APB"), Opinion No. 17, "Intangible Assets," and will carry forward provisions in APB Opinion No. 17 related to internally developed intangible assets. Adoption of FAS 142 will result in the cessation of goodwill amortization. All of the provisions of the statement will be applied in future fiscal years, commencing January, 2002, to all goodwill and other intangible assets recognized in Brass Eagle's statement of financial position, regardless of when those assets were initially recognized.
As of September 30, 2001, Brass Eagle has goodwill and other intangible assets (net of amortization) of $32.8 million. Brass Eagle's amortization expense for the nine month period ended September 30, 2001 was $1.5 million. Brass Eagle is currently evaluating the effects of these new pronouncements.
FAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets" establishes a single accounting model, based on the framework established in FAS No. 121 and APB Opinion No. 30, for long-lived assets to be disposed of by sale. It eliminates the practice of valuing discontinued operations at net realizable value, and does not allow recognition of future operating losses before they occur. The basic presentation of discontinued operations in the income statement under APB 30 is retained, but expanded to include presentation of a
component of an entity
(which describes operations and cash flows that can clearly be distinguished, both operationally and for financial reporting purposes, from the rest of the entity) rather than a
segment of a business.
Under this pronouncement, long-lived assets that are to be disposed of other than by sale (abandonment, exchange, distribution in spinoff, etc.) should have their depreciable lives revised in accordance with APB Opinion No 20, "Accounting Changes". An impairment loss should be recognized at the date a long-lived asset is exchanged for a similar productive asset or if the carrying amount of the asset exceeds its fair value. The provisions of this statement is effective for financial statements issued for fiscal years beginning after December 15, 2001.
Management does not believe the adoption of this pronouncement will have a material effect on Brass Eagle's financial statements.
NOTE 5 - ACQUISITION
On March 5, 2001, Brass Eagle acquired selected machinery and equipment from Nittan USA, Inc., a manufacturer of CO2 jets, for $2.3 million in cash. Brass Eagle has agreed to lease facilities in Batesville, Mississippi to house the equipment and produce CO2 jets, which are sold to Brass Eagle customers.
NOTE 6- CREDIT FACILITY & LONG-TERM DEBT BORROWINGS
The original Senior Credit Facility, dated June 30, 2000 and modified on February 1, 2001, is comprised of a $5.5 million revolving credit facility, a $2.0 million term loan and a $25.2 million term loan used for the acquisition of substantially all the assets of JT USA, L.P. The funds available under the revolving credit facility are limited to eligible accounts receivable and inventory, as defined, up to a maximum of $5.5 million. The credit facility is secured by all tangible and intangible assets of Brass Eagle, exclusive of its investment in Challenge Park LLC.
The $2.0 million loan requires quarterly principal payments of $0.2 million and matures in September 2003. The $25.2 million term loan requires quarterly principal payments of $1.4 million and matures in June 2005. Borrowings bear interest, as designated by Brass Eagle, at either the bank's prime rate (adjusted up to prime plus 1.50% depending on Brass Eagle's leverage ratio) or LIBOR (plus 1.25% to 2.50% depending on Brass Eagle's leverage ratio).
The agreement includes certain restrictive covenants including maintaining a minimum net worth of $40.0 million plus 75% of cumulative net income from the time of borrowing, a leverage ratio of 2.00, a fixed charge coverage ratio of 2.25 from June 30, 2001 to September 30, 2001 and 2.50 at December 31, 2001 and beyond. The agreement also limits capital expenditures to $4.5 million in 2001, excluding the purchase of the Nittan assets. Brass Eagle was in compliance with these covenants at September 30, 2001. In addition, the agreement provides for an excess cash flow recapture requirement for the first two years of the agreement equal to 50% of the excess cash flow over fixed charges, not to exceed $750,000.
ITEM 2. -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying condensed consolidated financial statements for the three months and nine months ended September 30, 2001 and the 2000 10-K.
Special Note Regarding Forward-Looking Statements
Certain statements in this filing and in other filings by Brass Eagle with the Securities and Exchange Commission and in press releases, presentations by Brass Eagle or its management and oral statements may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include statements regarding Brass Eagle's financial position, results of operations, market position, product development, regulatory matters, growth opportunities and growth rates, acquisition and divestiture opportunities, and other similar forecasts and statements of expectation. Words such as expects, anticipates, intends, plans, projects, believes, seeks, estimates, should, may, would, will and variations of these words and similar expressions are intended to identify these forward-looking statements. The statements are not statements of historical fact. Rather, they are based on Brass Eagle's estimates, assumptions, projections and current expectations, and are not guarantees of future performance. Brass Eagle disclaims any obligation to update or revise any forward-looking statement based upon the occurrence of future events, the receipt of new information, or otherwise. The forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of Brass Eagle to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause Brass Eagle's actual results to differ materially from the results, projections and expectations expressed in the forward-looking statements include, but are not limited to, the following possibilities:
(1)  Intensifying competition, including specifically the intensification of price competition, the entry of new competitors and the introduction of new products by new and existing competitors;
(2)  Failure to obtain new customers or retain existing customers or maintain relationships with mass merchandisers;
(3)  Inability to carry out marketing and sales plans or to integrate acquired businesses;
(4)  Loss of key executives;
(5)  General economic and business conditions which are less favorable than expected;
(6)  Failure to maintain credit facilities on satisfactory terms;
(7)  Unanticipated changes in industry trends;
(8)  Changes in general economic conditions that might impact the demand for Brass Eagle's products; and
(9)  Decreases in customer spending levels due to general economic conditions or other factors affecting their volume of business.
RESULTS OF OPERATIONS
The following table sets forth operations data as a percentage of net sales for the periods indicated:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2001
2000
2001
2000
Net sales
100.0%
100.0%
100.0%
100.0%
Cost of sales
66.3%
58.6%
62.3%
62.9%
Gross profit
33.7%
41.4%
37.7%
37.1%
Strategic initiative expenses
0
2.8%
0
1.2%
Operating expenses
35.4%
22.2%
29.5%
22.7%
Operating income (loss)
(1.7%)
16.4%
8.3%
13.2%
Net income (loss)
(2.7%)
8.7%
3.6%
8.0%
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000
Net Sales.
Net
sales decreased by 32.5% to $15.6 million for the three months ended September 30, 2001, compared to $23.1 million for the three months ended September 30, 2000. The decrease in net sales was primarily due to decline in the retail market. The overall slow down in consumer purchases has resulted in retailers more tightly controlling inventories going into the holiday season and this trend was exacerbated by the events of September 11th.
Domestic sales of Brass Eagle products decreased by 34.9% to $14.2 million (or 91.0% of sales) for the three months ended September 30, 2001 from $21.8 million (or 94.4% of sales) for the three months ended September 30, 2000. International sales increased by 7.7% to $1.4 million (9.0% of sales) for the three months ended September 30, 2001 from $1.3 million (or 5.6% of sales) for the three months ended September 30, 2000. The increase in international sales was primarily due to continued growth in our foreign customer base.
Gross Profit.
Gross profit as a percentage of net sales decreased to 33.7% for the three months ended September 30, 2001, compared to 41.4% for the three months ended September 30, 2000. The decrease was due primarily to reduced manufacturing efficiencies.
Strategic Initiative Expenses.
During the third quarter of 2000, Brass Eagle terminated discussions with a prospective buyer regarding the potential acquisition of Brass Eagle. Brass Eagle incurred one-time, strategic initiative expenses of $651,000, or $0.05 per share in connection with the proposed transaction, a portion of which represents expenses of the prospective buyer reimbursed by Brass Eagle, as previously agreed.
Operating Expenses.
Operating expenses increased 7.8% to $5.5 million in the three months ended September 30, 2001, compared to $5.1 million in the three months ended September 30, 2000, primarily due to increased selling expenses. The increase in selling expenses was due to increased labor and related costs associated with new growth.
Operating Income.
Operating income decreased by 107.1% to a $271,000 loss in the three months ended September 30, 2001, compared to $3.8 million income in the three months ended September 30, 2000. This decrease was due to decreased unit sales and lower gross profit margins associated with the economic slowdown, as well as increased operating expenses.
Interest.
Brass Eagle recorded net interest expense of $461,000 for the three months ended September 30, 2001, compared to $598,000 for the three months ended September 30, 2000. The decrease in net interest expense was due to the reduction of the term loans from Bank of America and a lower interest rate in three months ended September 30, 2001 compared to three months ended September 30, 2000.
Income Tax Rate.
Brass Eagle's
effective federal and state income tax rate was 38.6% for the three months ended September 30, 2001 and 37.5% for the three months ended September 30, 2000. The increase in the income tax rate is due to higher effective state taxes due primarily to a reduction in tax credits for the State of Missouri and a higher effective tax rate from the JT operations located in California.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000
Net Sales.
Net
sales increased by 5.1% to $57.7 million for the first nine months of 2001 compared to $54.9 million the first nine months of 2000. The increase in net sales was primarily due to increased sales of masks and sales of new product lines.
Domestic sales increased by 3.5% to $53.2 million (or 92.2% of sales) for the nine months ended September 30, 2001 from $51.4 million (or 93.6% of sales) for the nine months ended September 30, 2000. International sales increased by 28.6% to $4.5 million (or 7.8% of sales) for the nine months ended September 30, 2001 from $3.5 million (or 6.4% of sales) for the nine months ended September 30, 2000. The increase in international sales was primarily due to continued growth of the foreign customer base.
Gross Profit.
Gross profit as a percentage of net sales increased to 37.7% for the first nine months of 2001 compared to 37.1% for the first nine months of 2000. The increase was due primarily to cost savings resulting from Brass Eagle sourcing masks and some other products outside the United States.
Strategic Initiative Expenses.
During the third quarter of 2000, Brass Eagle terminated discussions with a prospective buyer regarding the potential acquisition of Brass Eagle. Brass Eagle incurred one-time, strategic initiative expenses of $651,000, or $0.05 per share in connection with the proposed transaction, a portion of which represents expenses of the prospective buyer reimbursed by Brass Eagle, as previously agreed.
Operating Expenses.
Operating expenses increased by 36.0% to $17.0 million the first nine months of 2001 compared to $12.5 million in the first nine months of 2000, primarily due to increased selling expenses. The increase in selling expenses was due to increased salaries and related costs associated with new growth, and an increase of freight due to increased sales. Administrative cost also increased due to additional staff as a result of new growth. Amortization expenses increased due to the JT USA acquisition.
Operating Income.
Operating income decreased by 34.2% to $4.8 million in the first nine months of 2001 compared to $7.3 million in the first nine months of 2000. The decrease was primarily due to increased operating expenses offset by increased unit sales volume and improved gross profit margins.
Interest.
Brass Eagle recorded net interest expense of $1.5 million in the first nine months of 2001 compared to $326,000 in the first nine months of 2000. The increase in net interest expense was due to the acquisition of the assets of JT USA on June 30, 2000 and the purchase of selected Nittan assets on March 5, 2001.
Income Tax Rate.
Brass Eagle's effective federal and state income tax rate was 40.2% in the first nine months ended September 30, 2001 and 37.4% for the first nine months ended September 30, 2000. The increase in the income tax rate is due to higher effective state taxes primarily due to a reduction in credits from the Sate of Missouri, and a higher effective tax rate from the JT operations located in California.
Liquidity and Capital Resources
As of September 30, 2001, Brass Eagle had working capital of $20.7 million. Brass Eagle is planning capital expenditures of approximately $0.8 million for the remainder of 2001 for the expansion and improvement of manufacturing capacity. The investments will be funded from available cash and borrowings from the credit facility.
Brass Eagle believes that funds generated from operations, together with borrowings under the credit facility, will be adequate to meet its anticipated cash requirements for at least the next 18 months. Brass Eagle may, when and if the opportunity arises, acquire or participate in other businesses or ventures involved in activities or having product lines that are compatible with those of Brass Eagle or pursue the vertical integration of production capabilities for one or more of Brass Eagle's products which are currently purchased from third parties. The capital expenditures that would be associated with any such activities that may occur in the future would be funded with available cash and cash equivalents, borrowings from the credit facility, working capital, or a combination of such sources.
Net cash provided by operating activities for the nine months ended September 30, 2001 was $3.4 million, consisting primarily of net income of $2.1 million, depreciation and amortization expense of $3.3 million, plus a net decrease in accounts receivable of $8.8 million, a decrease in accounts payable and accrued expenses of $5.0 million, a decrease in deferred taxes of $429,000, an increase in prepaid expenses of $274,000 and an increase in inventory of $6.5 million.
Net cash used in investing activities was $3.5 million for the nine months ended September 30, 2001. This was due primarily to the acquisition of selected assets of Nittan USA, Inc. for $2.3 million and purchases of property and equipment of $1.2 million.
Net cash used in financing activities was $2.9 million in the nine months ended September 30, 2001, due to the reduction of long-term debt of $4.6 million and net payments on the line of credit of $340,000, offset by borrowings of $2.0 million and the issuance of common stock of $16,000.
ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Brass Eagle is exposed to market risk from changes in interest rates. Brass Eagle holds a derivative instrument in the form of an interest rate swap, which is viewed as a risk management tool and is not used for trading or speculative purposes. The intent of the interest rate swap is to effectively fix the interest rate on part of the borrowings under Brass Eagle's term debt. Quantitative disclosures relating to financial instruments and debt are included in the tables below.
The following table provides information on Brass Eagle's fixed maturity investments as of September 30, 2001 that are sensitive to changes in interest rates. The table also presents the debt upon which an interest rate swap agreement was entered. Since the interest rate swap effectively fixes the interest rate on the notional amount of debt, changes in interest rates have no current effect on the interest expense recorded by Brass Eagle on the portion of the debt covered by the interest rate swap.
Liability
Amount
Maturity Date
Variable rate debt
$22.6 million
June 30, 2005
Interest rate swap notional amount
$14.0 million
August 29, 2003
PART II: OTHER INFORMATION
Item 6.  Exhibits and Reports on Form 8-K
(a)  Exhibits
The following exhibits are filed with this Report:
Exhibit
Number
Description of Document
11
Statement of Computation of Earnings Per Share
______________________________________________________________________________
(b)  Reports on Form 8-K:
Brass Eagle filed no Current Reports on Form 8-K during the 3rd quarter of 2001.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Brass Eagle Inc.
Date:  November 14, 2001
By:  /s/  J. R. Brian Hanna
J. R. Brian Hanna
Vice President-Finance and Chief Financial Officer and Treasurer
(On behalf of the Registrant and as the Registrant's principal Financial and Accounting Officer)
BRASS EAGLE INC.
EXHIBIT INDEX
The following exhibits are filed with this Report:
NUMBER
DESCRIPTION OF DOCUMENT
11
Statement of Computation of Earnings Per Share
BRASS EAGLE INC.
Exhibit 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(In thousands except share and per share data)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2001
2000
2001
2000
Basic Net Income Per Share
Net income (loss) available to    common stockholders.
$          (418)
2,017
$        2,067
4,371
=========
=========
========
========
Weighted average common shares
Outstanding
7,145,123
7,137,304
7,144,014
7,136,173
=========
=========
========
========
Basic net income (loss) per share
$         (0.06)
$          0.28
$          0.29
$        0.61
=========
=========
========
========
Diluted Net Income Per Share
Net income (loss) available to
common stockholders
$          (418)
$         2,017
$        2,067
$       4,371
=========
=========
========
========
Pro forma basic weighted average
common shares outstanding
7,145,123
7,137,304
7,144,014
7,136,173
Add dilutive effect of stock
Options
0
380,643
417,247
387,200
Weighted average dilutive
common shares outstanding
7,145,123
7,517,947
7,561,261
7,523,373
=========
=========
=========
========
Diluted net income (loss) per share
$         (0.06)
$          0.27
$          0.27
$        0.58
=========
=========
=========
========