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Use these links to rapidly review the document<BR>
<A HREF="#bg1694_table_of_contents">  Table of Contents</A> <BR>
<A HREF="#fa1694_index_to_consolidated_financial_statements">  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</A><BR></font>
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<P ALIGN="CENTER"><FONT SIZE=1><B>As filed with the Securities and Exchange Commission on July&nbsp;17, 2003  </B></FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=1><B> Registration No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=4><B>SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=1><B>Washington, DC 20549  </B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=4><B>FORM S-1<BR>  </B></FONT><FONT SIZE=1><B>Registration Statement<BR>
Under the<BR>
Securities Act of 1933  </B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=4><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1>(Exact Name of Registrant as Specified in Its Charter) </FONT></P>

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<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>Minnesota</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>5941</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>41-1870348</B></FONT></TD>
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<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1>(State or Other Jurisdiction of Incorporation or Organization)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1>(Primary Standard Industrial Classification Code Number)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1>(IRS Employer<BR>
Identification No.)</FONT></TD>
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<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>5810 Baker Road<BR>
Minnetonka, MN 55345<BR>
Telephone: (952)&nbsp;345-3700</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=1>&nbsp;</FONT></TD>
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<TD COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1>(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)</FONT></TD>
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<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><BR><FONT SIZE=1><B>Stanley A. Bodine<BR>
Chief Executive Officer<BR>
2nd Swing,&nbsp;Inc.<BR>
5810 Baker Road<BR>
Minnetonka, MN 55345<BR>
Telephone: (952)&nbsp;345-3700</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="32%"><FONT SIZE=1><B><BR>
&nbsp;</B></FONT></TD>
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<TD COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1>(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)</FONT></TD>
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<TD COLSPAN=3 ALIGN="CENTER"><BR><FONT SIZE=1><I>Copies to:</I></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Deanne M. Greco, Esq.</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Larry A. Barden, Esq.</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Moss &amp; Barnett</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Sidley Austin Brown &amp; Wood LLP</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>A Professional Association</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Bank One Plaza</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>4800 Wells Fargo Center</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>10 South Dearborn</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>90 South 7<SUP>th</SUP> Street</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Chicago, IL 60603</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Minneapolis, MN 55402</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Telephone: (312) 853-7785</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Telephone: (612) 347-0287</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Telefax: (312) 853-7036</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Telefax: (612) 339-6686</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=1>&nbsp;</FONT></TD>
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<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1><B>Approximate Date of Proposed Sale to the Public: </B></FONT><FONT SIZE=1>As soon as practicable after the effective date of this Registration
Statement. </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the
following box.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>


<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434, please check the following box.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=1><B>CALCULATION OF REGISTRATION FEE  </B></FONT></P>

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<TH WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>Title of Each Class of Securities to be<BR>
Registered</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Amount to be<BR>
Registered</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1><B>Proposed Maximum<BR>
Offering Price<BR>
Per Share</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1><B>Proposed Maximum<BR>
Aggregate Offering<BR>
Price(1)(2)</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Amount of<BR>
Registration Fee</B></FONT><BR></TH>
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<TD WIDTH="32%"><FONT SIZE=1>Common Stock, par value $.01 per share</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1>2,300,000 shares</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1>$10.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1>$23,000,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1>$1,861</FONT></TD>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>This
amount represents the proposed aggregate offering price of the securities registered hereunder to be sold by the registrant. These figures are estimated solely for purposes of
calculating the registration fee pursuant to Rule&nbsp;457 under the Securities Act of 1933, as amended.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Includes
shares of common stock that the placement agent has an option to place solely to cover overallotments, if any. </FONT></DD></DL>
<BR>
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<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=1><B>The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file&nbsp;a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933, or
until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine.  </B></FONT></P>

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<P ALIGN="CENTER"><FONT COLOR="#FF4040" SIZE=2><B>SUBJECT TO COMPLETION, DATED JULY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003</B></FONT></P>

<P><FONT COLOR="#FF4040" SIZE=2><B>The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.</B></FONT></P>

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 <IMG SRC="g398369.jpg" ALT="2ND SWING LOGO" WIDTH="313" HEIGHT="159">
</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="29%" VALIGN="CENTER"><BR><FONT SIZE=5><B>2nd Swing, Inc.<BR> </B></FONT><FONT SIZE=5>2,000,000&nbsp;Shares<BR>
of Common Stock<BR></FONT>
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This is our initial public offering and no public market currently exists for our shares. We expect that the initial public offering price will be between $8.00 and $10.00 per share. This price may not reflect the market price of our shares after our
offering.<BR></FONT>
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<TD WIDTH="57%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="17%" ALIGN="CENTER"><FONT SIZE=2><B><BR>
PER&nbsp;SHARE</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="11%" ALIGN="CENTER"><FONT SIZE=2><B><BR>
TOTAL</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
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<TR VALIGN="BOTTOM">
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<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="2%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
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<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>Public Offering Price</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>Placement Agent's Fee</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD WIDTH="57%" VALIGN="TOP"><FONT SIZE=2>Proceeds, before expenses, to 2nd Swing, Inc.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>WR
Hambrecht+Co, which is acting as placement agent for this offering, may also place up to an additional 300,000 shares at the public offering price within 30&nbsp;days of the date of this
prospectus to cover overallotments. We will pay the placement agent's fee with respect to any shares placed pursuant to this overallotment option. The placement agent expects to deliver shares of
common stock to purchasers on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003. </FONT></P>

<P><FONT SIZE=2>Proposed
American Stock Exchange Symbol: SSG </FONT></P>

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<UL>
<UL>
<P ALIGN="CENTER"><FONT SIZE=2><B>This offering involves a high degree of risk. You should purchase shares only if you can afford a complete loss of your
investment.<BR>
See "Risk Factors" beginning on page&nbsp;6.</B></FONT></P>

</UL>
</UL>
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<P><FONT SIZE=1><B> Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B>
<IMG SRC="g449348.jpg" ALT="WR HAMBRECHT + CO LOGO" WIDTH="235" HEIGHT="25">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>The date of this prospectus is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003 </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g398369.jpg" ALT="2ND SWING LOGO" WIDTH="313" HEIGHT="159">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g1028972.jpg" ALT="GRAPHIC" WIDTH="609" HEIGHT="412">
  </B></FONT></P>

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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g1037372.jpg" ALT="GRAPHIC" WIDTH="324" HEIGHT="216">
 </B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_bg1694_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="bg1694_table_of_contents"> </A>
<BR></FONT><FONT SIZE=2><B>Table of Contents    <BR>    </B></FONT></P>

<P><FONT SIZE=2>
<A NAME="BG1694_TOC"></A> </FONT></P>

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<TD WIDTH="100%"><A HREF="#ca1694_prospectus_summary"><FONT SIZE=2>Prospectus Summary</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#de1694_risk_factors"><FONT SIZE=2><BR>
Risk Factors</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dg1694_forward-looking_statements"><FONT SIZE=2><BR>
Forward-Looking Statements</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dg1694_use_of_proceeds"><FONT SIZE=2><BR>
Use of Proceeds</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dg1694_capitalization"><FONT SIZE=2><BR>
Capitalization</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dg1694_dividend_policy"><FONT SIZE=2><BR>
Dividend Policy</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dg1694_dilution"><FONT SIZE=2><BR>
Dilution</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dg1694_selected_financial_and_other_operating_data"><FONT SIZE=2><BR>
Selected Financial and Other Operating Data</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#di1694_management_s_discussion_and_an__man03466"><FONT SIZE=2><BR>
Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#di1694_our_business"><FONT SIZE=2><BR>
Our Business</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dk1694_management"><FONT SIZE=2><BR>
Management</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dm1694_certain_relationships_and_related_transactions"><FONT SIZE=2><BR>
Certain Relationships and Related Transactions</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dm1694_principal_shareholders"><FONT SIZE=2><BR>
Principal Shareholders</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dm1694_description_of_capital_stock"><FONT SIZE=2><BR>
Description of Capital Stock</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#dm1694_shares_eligible_for_future_sale"><FONT SIZE=2><BR>
Shares Eligible for Future Sale</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#do1694_plan_of_distribution"><FONT SIZE=2><BR>
Plan of Distribution</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#do1694_legal_matters"><FONT SIZE=2><BR>
Legal Matters</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#do1694_experts"><FONT SIZE=2><BR>
Experts</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#do1694_independent_auditors"><FONT SIZE=2><BR>
Independent Auditors</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#do1694_where_you_can_find_more_information"><FONT SIZE=2><BR>
Where You Can Find More Information</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><A HREF="#fa1694_index_to_consolidated_financial_statements"><FONT SIZE=2><BR>
Index to Financial Statements</FONT></A></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2ND
SWING&reg; and "IT'S NOT YOU, IT'S YOUR CLUBS!&reg;" are our registered trademarks and service marks. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
use market and industry data throughout this prospectus, which we have obtained from market research, publicly available information, and industry publications. These sources
generally state that the information that they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information are not guaranteed. The market
and industry data are often based on industry surveys and the preparers' experience in the industry. Although we believe that the surveys and market research that others have performed are reliable,
we have not independently verified this information. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ca1694_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1694_prospectus_summary"> </A>
<A NAME="toc_ca1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROSPECTUS SUMMARY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere
in this prospectus, including the section titled "Risk Factors" beginning on page 6 and the financial statements beginning on page F-1. Our fiscal year ends on the Sunday closest to
December&nbsp;31, resulting in years of either 52 or 53 weeks.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1694_2nd_swing,_inc."> </A>
<A NAME="toc_ca1694_2"> </A>
<BR></FONT><FONT SIZE=2><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a specialty retailer in the business of buying, selling, and trading pre-owned and new golf clubs and related equipment. Our 2<SUP>nd</SUP>
Swing stores provide golfers a convenient place to trade in or sell their existing golf clubs for store credit or cash and apply the value received towards the purchase of new or pre-owned
equipment. This enables golfers to acquire new technology or upgrade to more advanced equipment on a cost-effective basis. With 35 stores currently, we believe we are the largest store-based retailer
of pre-owned golf equipment and the only one with the objective of developing a national chain of stores focused primarily on buying, selling, and trading pre-owned golf
equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
stores are economically sized at approximately 3,500 square feet and are conveniently located in retail strip centers. Each 2<SUP>nd</SUP> Swing store carries a broad assortment
of new and pre-owned clubs from leading manufacturers as well as a selection of golf bags, gloves, balls, and other equipment. We believe our efficient store size, focus on higher margin
pre-owned equipment, and emphasis on hard goods merchandise, which we believe produces higher sales per square foot than apparel and shoes, have enabled us to achieve a store-level average
return on invested capital in excess of 50% in stores open for four years or longer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
opened our first store in 1997 and now operate 35 stores in fourteen states. Sales for the 12&nbsp;months ended June&nbsp;29, 2003 were $32.0&nbsp;million, of which 64% was
derived from the sale of pre-owned golf equipment. Same store sales increases were 20% in fiscal year 2001, 7% in fiscal year 2002, and 15% for the six months ended June&nbsp;29, 2003. </FONT></P>

<P><FONT SIZE=2><B>Business Strategy and Competitive Differentiation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the following key elements of our business strategy provide us with significant competitive advantages: </FONT></P>

<P><FONT SIZE=2><I> Differentiated Merchandise Strategy.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our merchandise mix consists exclusively of hard goods equipment, such as clubs, balls, bags, and accessories. While we offer
a broad selection of both new and pre-owned equipment, we focus on the sale of pre-owned clubs. We generally realize higher gross margins on sales of pre-owned
clubs than on sales of new equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Buying,
selling, and trading pre-owned equipment differentiates us from traditional golf retailers and creates a unique customer value by enhancing the golfer's purchasing
power for equipment (whether previously owned or new) with the trade-in value of the golfer's current equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the new equipment category, we offer major brands of golf equipment, including Callaway&reg;, Cleveland&reg;, Cobra&reg;, Nike&reg;, Ping&reg;,
TaylorMade&reg;, and Titleist&reg;. We believe that our ability to take trade-ins of pre-owned clubs significantly enhances our ability to sell new equipment. </FONT></P>

<P><FONT SIZE=2><I> Superior In-store Service and Product Expertise.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We emphasize a superior level of in-store service by staffing our stores with
well-trained, knowledgeable golfers, many of whom are PGA&reg; professionals. All stores feature an indoor driving net and putting green to test clubs and we offer customers a
3-day demo period for both new and pre-owned clubs. </FONT></P>

<P><FONT SIZE=2><I> Proprietary Pricing Model.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have developed a proprietary bid/ask pricing model that utilizes, among other factors, historic product sales data to enable us to
manage both cost and availability of our pre-owned inventory. Pricing information is developed at the corporate level based on supply, demand, and other variables and is adjusted
periodically to maximize sales, gross margin, and return on </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<A NAME="page_ca1694_1_2"> </A>

<P><FONT SIZE=2>inventory
investment. We believe this pricing model provides us with a key competitive advantage and also represents a significant barrier to entry. </FONT></P>

<P><FONT SIZE=2><I> Experienced Management Team.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have assembled a management team with significant golf expertise and with extensive experience in retailing, particularly the sale
of pre-owned merchandise. Five members of our management team, including our Chairman, Chief Executive Officer, and Chief Financial Officer, were involved in the founding and/or
development of FuncoLand&reg;, which, prior to its sale to Barnes&nbsp;&amp; Noble,&nbsp;Inc. in 2000, was the largest chain of retail stores selling previously played video game software and
hardware. </FONT></P>

<P><FONT SIZE=2><B>Growth and Expansion Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With a proven store model, an experienced management team, and scaleable infrastructure now in place, we plan to accelerate our rate of expansion and pursue our
goal of becoming the nation's leading retailer of pre-owned and new golf equipment. Key elements of our growth and expansion strategy include the following: </FONT></P>


<P><FONT SIZE=2><I> Accelerated Store Growth.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Over the past few years, we have demonstrated our ability to open new stores and to successfully enter new markets in new geographic
territories. We now operate 35 stores, having opened five new stores in 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
plan to open five additional stores in 2003, 20 stores in 2004, and 30 to 40 stores per year over the following three years. We believe there is the potential for at least 200
2<SUP>nd</SUP> Swing stores nationwide. </FONT></P>


<P><FONT SIZE=2><I> Increased Store Sales Productivity.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe we can increase sales in our existing stores by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Capitalizing
on favorable industry dynamics;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Further
developing the market for pre-owned golf equipment by increasing </FONT><FONT SIZE=2><I>2<SUP>nd</SUP> Swing</I></FONT><FONT SIZE=2> brand awareness;
and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Increasing
new equipment sales by adding new brand and equipment offerings. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><I> Enhanced Profitability at Store and Corporate Levels.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe opportunities exist to enhance store and corporate level profitability by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Leveraging
store-level operating costs and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Expanding
corporate operating margins and improving return on capital through continued leveraging of existing infrastructure costs and enhanced purchasing power. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
were incorporated on March&nbsp;10, 1997 under the laws of the State of Minnesota. Our corporate offices are located at 5810 Baker Road, Minnetonka, MN 55345, and our telephone
number is (952)&nbsp;345-3700. We also have a website, </FONT><FONT SIZE=2><I>www.2ndswing.com</I></FONT><FONT SIZE=2>, which provides general company information, a listing of our
store locations, and selected new product information. Information on our website should not be construed to be part of this prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
this prospectus, we use the terms "2<SUP>nd</SUP> Swing," "we," "us," and "our" to refer to 2<SUP>nd</SUP> Swing,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from the information contained in this
prospectus. We are
offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date
of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<A NAME="page_ca1694_1_3"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1694_the_offering"> </A>
<A NAME="toc_ca1694_3"> </A>
<BR></FONT><FONT SIZE=2><B>THE OFFERING    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2>Common stock offered by us</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>2,000,000 shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2><BR>
Common stock to be outstanding after offering</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
5,440,672 shares</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Use of proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
We will receive approximately $16.2&nbsp;million in net proceeds from this offering. We intend to use the proceeds:</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&#149;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="60%"><FONT SIZE=2>to open new retail stores and</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&#149;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="60%"><FONT SIZE=2>to fund working capital and for other general corporate purposes.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Pending application of the proceeds to these uses, we plan to repay indebtedness under our revolving credit facilities.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
See "Use of Proceeds."</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2><BR>
Proposed American Stock Exchange symbol</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
SSG</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
otherwise indicated, all information in this prospectus assumes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>WR&nbsp;Hambrecht+Co
does not exercise its overallotment option to place additional shares of our common stock,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
public offering price of $9.00 per share (mid-point of the pricing range set forth on the cover of this prospectus), and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
0.3-for-1 split of our common stock which we effected on September&nbsp;30, 2002. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
common stock to be outstanding after this offering excludes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>900,000
shares of common stock reserved for issuance upon the exercise of awards that may be granted under our stock compensation plan, under which options to purchase
399,750&nbsp;shares of common stock were outstanding as of June&nbsp;29, 2003, at a weighted average exercise price of $6.04 per share, and options to purchase 225,000 shares of common stock will
be granted upon the effectiveness of this offering with an exercise price equal to the public offering price;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>up
to 10,000 shares of common stock to be distributed to our nonofficer employees on the effectiveness of this offering (See "Management&#151;Employee Stock Awards");
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>150,000
shares of common stock reserved for issuance upon exercise of options that may be granted under our stock option plan for nonemployee directors, under which options
to purchase 12,500 shares at an exercise price equal to the public offering price were outstanding as of June&nbsp;29, 2003; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>120,867
shares of common stock reserved for issuance upon the exercise of outstanding warrants with a weighted average exercise price of $9.00 per share. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<A NAME="page_ca1694_1_4"> </A>
<UL>
<UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1694_summary_financial_and_operating_data"> </A>
<A NAME="toc_ca1694_4"> </A>
<BR></FONT><FONT SIZE=2><B>SUMMARY FINANCIAL AND OPERATING DATA    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the table below, we provide you with our summary historical financial data. We have prepared this information using our financial statements for each of the
five years in the period ended December&nbsp;29, 2002, and for the six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003. The financial statements for the years ended January&nbsp;2, 2000
and December&nbsp;31, 2000 have been audited by Silverman Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD, independent auditors. The financial statements for the years ended December&nbsp;30, 2001
and December&nbsp;29, 2002 have been audited by Ernst&nbsp;&amp; Young LLP, independent auditors. The financial statements for the year ended December&nbsp;27, 1998 and for the six months ended
June&nbsp;30, 2002 and June&nbsp;29, 2003 have not been audited. Operating results for the six months ended June&nbsp;29, 2003 are not necessarily indicative of the results that may be expected
for the year ending December&nbsp;28, 2003. The information presented below under the caption "Store Operating Data" is unaudited. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is important that you read this summary historical financial data in conjunction with our historical financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. </FONT></P>

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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;27,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;2,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(dollars in thousands, except per share amounts)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1><B>Statement of Operations Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Net sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>1,352</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,359</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>7,609</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>16,332</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>26,407</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>13,032</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>18,616</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Cost of sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>809</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,097</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>4,684</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>10,284</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>16,805</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>8,220</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>11,975</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>543</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,262</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>2,925</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>6,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>9,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4,812</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>6,641</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Selling, general, and administrative expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>755</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,511</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>4,677</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>8,315</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>11,606</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,811</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,485</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Operating loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(212</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,249</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,752</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,267</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,004</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(999</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(844</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Interest expense, net(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(183</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(228</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(336</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(537</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(269</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(436</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Net loss(3)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(395</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,265</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,980</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,603</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,541</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,268</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,280</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1><BR>
Net loss per share&#151;basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.49</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.63</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.79</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.87</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.75</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.38</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(0.37</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1><BR>
Weighted average shares outstanding</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
811,819</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
2,022,641</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
2,502,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
2,975,019</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,375,087</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,309,502</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,440,672</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><BR><FONT SIZE=1><B>Store Operating Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Stores open at the end of period</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>30</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>29</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>35</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1><BR>
Comparable store sales increase(4)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
n/a</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
15</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1><BR>
Approximate square feet of selling space at the end of period</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
8,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
12,600</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
33,300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
68,900</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
103,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
99,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
120,900</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
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<A NAME="page_ca1694_1_5"> </A>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><BR>
&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B><BR>
<BR>
As of June&nbsp;29, 2003<BR> </B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted(5)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1><B>Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=1>Net working capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>17,950</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=1><BR>
Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
11,642</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
21,468</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=1><BR>
Total debt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
6,375</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
31</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=1><BR>
Total liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
12,340</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
5,996</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=1><BR>
Shareholders' equity (deficit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(698</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1><BR>
15,472</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Our
fiscal year ends on a Sunday on or near December&nbsp;31 and consists of either 52 or 53 weeks. Fiscal year 1999 consisted of 53 weeks. All other years consisted of 52 weeks.
The six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003 each consisted of 26 weeks.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Our
1998 interest expense, net includes $170,000 of expense as the result of a beneficial conversion feature related to certain notes payable, which were convertible into our common
stock at $0.47 per share, which was at a discount to the then fair value of the common stock.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>We
converted from a Subchapter S corporation income tax filer to a C corporation on December&nbsp;10, 2000. In a Subchapter S corporation, the shareholders include the applicable
corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we established a valuation allowance for all net deferred tax benefits as the realization of these
assets is uncertain. Therefore, no income tax expense or benefit is recognized for any periods presented.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>Stores
are included in our comparable store sales base on the 365<SUP>th</SUP> day of operation. Comparable store sales for the fiscal year ended January&nbsp;2, 2000 were
computed using a comparable 52-week period.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(5)</FONT></DT><DD><FONT SIZE=1>The
balance sheet data as adjusted are presented as if the application of the estimated net proceeds of $16.2 million occurred at June&nbsp;29, 2003. Pending use of the proceeds for
new store openings, working capital, and other general corporate purposes, we plan to repay the outstanding indebtedness under our revolving credit facilities. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_de1694_1_6"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1694_risk_factors"> </A>
<A NAME="toc_de1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>You should carefully consider the risk factors set forth below and all other information contained in this prospectus before making an
investment decision regarding our common stock. The risks described below are not the only risks we face. Additional risks and uncertainties that we have not yet identified or that we currently
consider to be immaterial may also materially and adversely affect our business, financial condition, results of operations, and the value of our common stock. You could lose part or all of your
investment.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1694_risks_related_to_our_business"> </A>
<A NAME="toc_de1694_2"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Related to Our Business    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>We have a limited operating history and are subject to all the risks of new businesses.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been in operation for six years and are in an emerging growth stage. In addition, our concept of buying, selling, and trading pre-owned golf
equipment is relatively new. As of the date of this prospectus, 16 of our 35 stores have been open for less than two years and five of our stores have been open for less than one year. Our operating
history may not be indicative of future results. In addition, the likelihood of our future success must be evaluated in light of the difficulties and risks encountered by all new businesses and
especially of new entrants into the retail industry, which is characterized by a large number of participants, intense competition, and a high failure rate. </FONT></P>

<P><FONT SIZE=2><B>To date, we have incurred operating losses.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have incurred operating losses since our inception, and there can be no assurance that we will achieve profitability in the future. Our business plans and
strategies assume continued growth in the golf industry and the demand for pre-owned golf equipment. Future operating results will depend upon a number of factors, including our ability to
execute our expansion strategy, the state
of the golf industry, the development of key vendor relations, and competition in the golf retail industry. </FONT></P>

<P><FONT SIZE=2><B>Our expansion plan is dependent on a number of factors that could delay or prevent the successful opening of new stores and subsequent penetration into new markets.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will be unable to open and operate new stores successfully and our growth will be limited unless we can: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>identify
suitable markets and sites for store locations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>negotiate
acceptable lease terms;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>obtain
all necessary licenses and permits required to operate our business;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>hire,
train, and retain competent store management and personnel;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>maintain
a proportion of new stores to mature stores that does not harm existing sales;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>foster
current relationships and develop new relationships with vendors that are capable of supplying a greater volume of merchandise;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>manage
inventory effectively to meet the needs of new and existing stores on a timely basis;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>maintain
adequate inventories of pre-owned golf equipment in each of our stores; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>expand
our infrastructure to accommodate growth. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we will open new stores in regions of the United States in which we currently have few or no stores. Our experience in these markets is limited, and we cannot assure you
that we will be able to develop our brand in these markets or adapt to competitive, merchandising, and distribution </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>challenges
that may be different from those in our existing markets. Our inability to open new stores successfully and/or penetrate new markets would likely reduce our revenue and earnings growth. </FONT></P>

<P><FONT SIZE=2><B>Our success depends upon the golf industry maintaining growth and popularity.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business plans and strategies are based on certain assumptions regarding the golf industry, including continued demand for pre-owned golf equipment. Although
we believe that consumer interest in golf has generally grown over the past 20&nbsp;years, there can be no assurance that the popularity of golf will continue to grow or be sustained. Golf Datatech
reported the number of rounds played during 2002 decreased 2.9% compared to 2001. In addition, the cost of playing golf has increased in recent years. If the popularity of golf declines, the demand
for products sold in our stores could also decline. </FONT></P>

<P><FONT SIZE=2><B>Our success depends upon continued technological innovation in the golf industry.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demand for golf equipment has typically been driven by introduction of innovative products coupled with substantial industry advertising and promotion of these
products. Our business success depends on golf manufacturers' development, marketing, and distribution of new models of golf equipment to the retail sector. If golf manufacturers develop fewer new
models of golf equipment, reduce their promotion of golf equipment, or if there are fewer technological innovations in the production of new golf equipment, consumers may be less inclined to sell or
trade in existing equipment or may sell their pre-owned equipment less frequently. Conversely, if manufacturers develop new, technologically superior golf equipment or reduce the cost of
new equipment, consumers may opt to purchase new rather than pre-owned golf equipment. Any of these trends may impair the growth of the pre-owned golf equipment market, thus reducing our
ability to obtain pre-owned inventory and causing our sales to decline. </FONT></P>

<P><FONT SIZE=2><B>We may not be able to achieve comparable store sales gains in the future.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that we will continue to achieve comparable store sales gains. Our comparable store sales results could cause the price of our common
stock to fluctuate substantially. A variety of factors may affect our comparable store sales results, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>downward
trend in general economic conditions, which could affect consumer spending, especially on discretionary purchases;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
retail sales environment, such as changes in demand for the products we offer in our stores;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
availability and cost of credit from vendors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
results of our merchandising strategies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
success of our marketing and promotional programs;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>actions
of competitors, such as entry into the pre-owned equipment market;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to maintain the appropriate level of inventory; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to otherwise execute our business strategy. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
factors could result in decreased consumer spending, increased competition, our inability to obtain sufficient inventory at acceptable cost, and our inability to attract and retain
customers. </FONT></P>

<P><FONT SIZE=2><B>We rely on certain key vendors for new product, and loss of these relationships could harm our business.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are dependent to a significant degree upon our ability to purchase merchandise at competitive prices. We generally purchase new merchandise pursuant to
purchase orders, and we do not currently </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>have
long-term merchandise supply contracts with any key vendors. A vendor, therefore, could discontinue selling products to us at any time for reasons that may or may not be in our
control. In fiscal 2002, one vendor accounted for approximately 39% of our new product purchases. The loss of our relationship with this or any other significant vendor of a name brand product could
harm our business, financial condition, and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
regard to pre-owned golf equipment, which in 2002 accounted for approximately 65% of our total inventory purchases, we are dependent upon the availability of such
equipment and the desire of the owners to sell or trade it to our stores rather than to other purveyors of pre-owned merchandise. If we are unable to obtain adequate supplies of pre-owned
equipment at reasonable prices, our ability to generate sales and our results of operations could be impaired. </FONT></P>

<P><FONT SIZE=2><B>Our business is dependent on effective inventory management and valuation of new and pre-owned equipment.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Misjudgments by management regarding the popularity or value of certain golf equipment could create overstocked or understocked inventories, resulting in
decreased margins or dissatisfied customers, either of which could harm our financial and operating results. </FONT></P>

<P><FONT SIZE=2><B>We rely on a single distribution center and if there is a natural disaster or other serious disruption at that facility, we could lose merchandise and be unable to effectively
deliver it to our stores.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on a single distribution center in Minnetonka, Minnesota. Any natural disaster or other serious disruption to this facility due to fire, tornado, or any
other cause would damage a significant portion of
our inventory and could impair both our ability to adequately stock our stores and our sales and profitability. </FONT></P>

<P><FONT SIZE=2><B>Our business is subject to the seasonality common to most retailers in the golf industry. In addition, our operating results may otherwise fluctuate substantially, which could
cause the market price of our common stock to decline, particularly if our quarterly results are lower than the expectations of securities analysts.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2002, approximately 75% of our annual sales occurred during the second and third quarters. Because of this seasonal nature, our business is affected
by seasonal trends or unusual or severe weather conditions. Unfavorable weather conditions generally result in fewer golf rounds played, which typically results in lower demand for golf equipment.
Consequently, sustained adverse weather conditions, especially during the second and third quarters, could weaken our sales. Building inventory in advance for the second and third quarters could also
harm our financial results if anticipated sales are not realized. See "Management's Discussion and Analysis of Financial Condition and Results of Operations&#151;Seasonality and Quarterly
Results." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the timing of our new store openings, as well as the timing of new product introductions by our vendors, could result in unanticipated fluctuations in our quarterly results. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fluctuations
in our quarterly operating results may reduce the market price of our common stock, particularly if our quarterly results fall below the expectations of securities analysts. </FONT></P>

<P><FONT SIZE=2><B>The retail golf market is highly competitive, and we face competition from specialty golf retailers, golf pro shops, catalog and internet merchants, full-line sporting goods
stores, and mass merchants.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The retail industry, including the market for golf merchandise, is highly competitive, with few barriers to entry. We compete with both national and regional
retailers that sell new golf equipment and have marketing, sales, financial, and other resources far greater than ours. In addition, many of our competitors for sales of new merchandise may be able to
take advantage of trade and quantity </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>discounts
with respect to goods they obtain. Pre-owned golf equipment is sold primarily through regional and local retailers and several smaller companies that buy and sell
pre-owned golf equipment by mail. Internet brokers, resale, thrift, and consignment shops, pawn shops, auctions, want ads, and garage sales also compete for the sale of
pre-owned merchandise. If competitive pressures were to increase, we could be forced to reduce prices on equipment sold or pay higher prices to purchase pre-owned equipment. We
cannot assure you that we will be able to compete successfully against current and future competitors or that the competitive pressures we face will not weaken our business, operating results, and
financial condition. See "Our Business&#151;Competition." </FONT></P>

<P><FONT SIZE=2><B>Our success is dependent upon retaining and attracting skilled management.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends upon our ability to attract and retain high caliber top management personnel. P. Simon Kallal, our President and founder, has provided, since
our inception, valuable insight, direction, and contribution in the areas of industry knowledge, marketing, employee recruitment, and vendor relations. Our Chairman of the Board, David R. Pomije, has
provided important advice to our management and has been instrumental in obtaining financing as well as providing capital through his personal investment in us. See "Certain Relationships and Related
Transactions." Stanley A. Bodine joined us in 2000 as our Chief Executive Officer. Mr.&nbsp;Bodine has an extensive background in consumer products and proven expertise in the rollout and management
of successful specialty retail businesses. We have key-man insurance coverage for Stanley A. Bodine and P. Simon Kallal; however, we do not have employment agreements with any of our key
personnel and believe that the loss of the services of any of these individuals could impair our development and growth. </FONT></P>

<P><FONT SIZE=2><B>Our success is dependent upon retaining and attracting skilled employees.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to retaining top management personnel, we will need other key management and store personnel to successfully operate and expand our business. We
believe that attracting individuals with substantial golf experience is important to our continued growth and success. Factors such as salary, benefits, and the desire to work in the retail sector may
affect our ability to hire and retain such skilled individuals. We can give no assurance that we will be able to hire and retain the personnel required for our future growth. </FONT></P>

<P><FONT SIZE=2><B>Adverse global political and economic conditions may harm our business.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are recreational in nature and are, therefore, discretionary purchases for consumers. Consumers are generally more willing to make discretionary
purchases of golf and other leisure products during favorable economic conditions and when they are feeling confident and prosperous. Adverse economic conditions in the United States, a decrease in
prosperity among consumers, or even a decrease in consumer confidence as a result of anticipated adverse economic conditions could cause consumers to forgo or to postpone purchasing new or
pre-owned golf products. Terrorist activities and actual or threatened armed conflict have had, and could continue to have, a significant impact upon certain segments of the United States
economy and could reduce the level of demand for our products as consumers' attention and interest are diverted from golf and become focused on economic, political, and public safety issues. If such
events were to cause a significant disruption in domestic or international air, ground, or sea shipments, our ability to obtain inventory of new product also could be impaired. </FONT></P>

<P><FONT SIZE=2><B>Our ability to attract customers to our stores depends heavily on the success of the retail strip centers in which we are located.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to generate customer traffic, we must locate our stores in prominent locations within successful retail strip centers. We cannot control the development
of new strip centers, the availability or cost of appropriate locations within existing or new strip centers, or the success of individual strip </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>centers.
A significant decrease in traffic at the strip centers in which our stores are located could harm our results of operations. </FONT></P>


<P><FONT SIZE=2><B>Although the proceeds from this offering will be sufficient to fund our operations for at least twelve months, we may need to raise additional capital, and we can give no
assurance that such capital will be available.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the proceeds from this offering, together with funds available under existing financing arrangements and cash provided by operations, will be
sufficient for our planned growth and operations for at least the next twelve months. If the expenses of expansion exceed current estimates or if our stores do not perform at anticipated levels, we
may need additional capital to fund our continued growth. Such additional financing may be sought from a number of sources, including possible further offers or sales of equity securities or loans
from banks or other financial institutions. We may not be able to obtain additional financing from any source or on terms favorable or acceptable to us. If we are required to sell additional
securities, we may be required to do so at a price that is less than the price of the common stock offered by this prospectus. Further sales of equity securities could therefore result
in substantial dilution to investors purchasing the common stock in this offering. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of
Operations&#151;Liquidity and Capital Resources." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1694_risk_factors_with_regard_to_the_offering_1"> </A>
<A NAME="toc_de1694_3"> </A>
<BR></FONT><FONT SIZE=2><B>Risk Factors with Regard to the Offering    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Shares eligible for sale in the near future may cause the market price for our common stock to decline.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, may
depress the market price for our common stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering we will have outstanding 5,440,672 shares of common stock. Of these shares, 2,212,706 shares, including the 2,000,000 shares sold in this offering, will
be freely tradeable. The remaining shares of common stock will be available for sale in the public market subject to restrictions under federal securities law. Our officers, directors, and certain
shareholders holding an aggregate of approximately 3,014,503 shares have entered into agreements with the placement agent of this offering restricting these persons from selling, pledging, or
otherwise disposing of their shares for a period of 180&nbsp;days after the date of this prospectus without the prior written consent of WR&nbsp;Hambrecht+Co. However, WR&nbsp;Hambrecht+Co may,
in its sole discretion, release all or any portion of the common stock from the restrictions of the lockup agreements. The remaining 213,463 shares will be eligible for sale in the public market
beginning 90&nbsp;days after the offering. </FONT></P>

<P><FONT SIZE=2><B>You will immediately experience and may in the future experience dilution in the book value of your shares of our common stock.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investors purchasing common stock in this offering will experience an immediate substantial dilution of their investment in our common stock. The net tangible
book value per share after this offering of $2.84 will be substantially less than the assumed per share offering price of $9.00 due to the fact that the offering price exceeds the current net book
value per share. The investors in this offering will own approximately 36.8% of the shares outstanding after this offering, and their total cash investment will be approximately 66.1% of the total
investment in us to date. We have outstanding options and warrants to purchase an aggregate of 533,117&nbsp;shares of common stock at a weighted average exercise price of $6.78 per share. In
addition, options to purchase 225,000 shares of our common stock will be granted upon the effectiveness of this offering, each at an exercise price equal to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2>the
public offering price. You may realize further dilution as the result of exercise of these options and warrants. In the event that we issue additional common stock in the future, including shares
that may be issued in connection with the exercise of stock options and warrants, you may experience further dilution in the net book value per share of the common stock you have purchased. Decreases
in the book value of our common stock may reduce the price at which you may resell shares of our common stock. </FONT></P>

<P><FONT SIZE=2><B>There is no public market for our shares, and we cannot assure you that a market will develop after this offering.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we have applied to have our common stock approved for listing on the American Stock Exchange, there is currently no market for our common stock, and there
can be no assurance that a market for our common stock will ever develop. The purchase price of the common stock offered by this prospectus has been determined by negotiations between us and
WR&nbsp;Hambrecht+Co and may not be indicative of the price at which our common stock will trade after the offering. If a trading market fails to develop, you may be unable to resell shares of our
common stock. </FONT></P>

<P><FONT SIZE=2><B>Our management will have broad discretion regarding the use of proceeds from this offering.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that we will receive net proceeds from this offering of about $16.2&nbsp;million. We intend to use the net proceeds for new store openings and
general corporate purposes, including working capital. We also intend to repay our outstanding indebtedness under our revolving credit facilities pending use of the net proceeds for these purposes.
Our management will have broad discretion regarding how we use the remaining net proceeds of this offering, and you may disagree with the way these funds are utilized. </FONT></P>

<P><FONT SIZE=2><B>One of our principal shareholders will be able to exert substantial influence.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;David R. Pomije, our Chairman, will own approximately 33% of the outstanding common stock following the offering, including warrants to purchase common stock, and
may have effective control over the election of our board of directors and the direction of our affairs. His interests may be different from the interests of other shareholders. See "Principal
Shareholders." </FONT></P>

<P><FONT SIZE=2><B>We are offering the common stock on a best-efforts basis, and we cannot be certain that we will raise the full amount contemplated in this offering.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have retained WR&nbsp;Hambrecht+Co under a placement agency agreement to act as our exclusive placement agent in connection with this offering. The placement
agent is not obligated and does not intend to purchase any of the common stock offered hereby. The closing of this offering is not conditional on the sale of all of the shares offered hereby, and we
may sell all or any portion of such shares. Accordingly, we cannot be certain of the number of shares that will be purchased by investors. We currently anticipate that the closing will take place on
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003, but we cannot be certain that this will be the case. </FONT></P>

<P><FONT SIZE=2><B>We may incur increased costs as a result of recently enacted and proposed changes in laws and regulations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules
proposed by the SEC, could result in increased costs to us as we evaluate the implications of any new rules and respond to their requirements. The new rules could make it more difficult for us to
obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. The impact of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>these
events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, or as executive officers. We are currently
evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs. </FONT></P>

<P><FONT SIZE=2><B>Our directors have only limited liability for actions they may take on behalf of the shareholders.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Amended and Restated Articles of Incorporation provide, as permitted by Minnesota law, that our directors will not be personally liable to us or our
shareholders for monetary damages for breach of their fiduciary duty of care as directors, with certain exceptions. This provision could make it difficult for a shareholder to obtain monetary damages
in the event any director has been found to have breached his or her fiduciary duties, although nonmonetary remedies, such as injunctions, would be available in appropriate circumstances. In addition,
our Amended and Restated Bylaws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Minnesota law. In the event we are required to indemnify any of our
officers or directors, our officer and director liability insurance may not adequately protect us against any losses that may occur. See "Description of Capital Stock&#151;Limitation of
Liability and Indemnification." </FONT></P>

<P><FONT SIZE=2><B>Antitakeover provisions could adversely affect the price of our common stock.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the provisions of our Amended and Restated Articles of Incorporation, Amended and Restated Bylaws, and Minnesota law could delay or prevent a change of
control or a change in management that holders of common stock may consider beneficial, including the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
ability of our board of directors to issue shares of preferred stock and to establish the terms of the preferred stock, including voting rights;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provisions
for a classified board of directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provisions
for advance notice for director nominations and shareholder proposals;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provisions
for supermajority votes to remove directors, approve mergers, or amend specified provisions of our Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>statutory
limitations regarding share acquisitions and business combinations. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>These
provisions also could reduce the price of our common stock or prevent holders from receiving a premium for their shares by discouraging attempted takeovers. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1694_forward-looking_statements"> </A>
<A NAME="toc_dg1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Our
Business," and elsewhere in this prospectus constitute forward-looking statements. These statements involve risks, uncertainties, and other factors that may cause our or our industry's actual results,
levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," or the negative of these terms or other comparable terminology. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking
statements are estimates and projections reflecting our judgment and involve a number of risks and uncertainties that could cause actual results to differ materially from
those suggested by the forward-looking statements. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be
incorrect. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in the amount and degree of promotional intensity exerted by current competitors and potential new competition from both retail stores and alternative methods or
channels of distribution such as online services and mail order;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in national or regional United States economic conditions including, but not limited to, consumer credit availability, consumer credit delinquency and default rates,
interest rates, inflation, personal discretionary spending levels, and consumer sentiment about the economy in general;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes,
or perceived changes, in the rate of technological advancements in the design and manufacture of golf clubs;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
presence or absence of, or consumer acceptance of, new products or product features in the merchandise categories we sell and changes in our actual merchandise sales
mix;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>significant
changes in retail prices for products sold by our business or in the cost of playing golf;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in consumer interest in golf or adverse weather conditions restricting consumers' ability to play golf;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>lack
of availability or access to sources of inventory;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>inability
on the part of our business to liquidate excess inventory should excess inventory develop;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
ability to attract and retain an effective management team in a dynamic environment or changes in the cost or availability of a suitable work force to manage and support
our service-driven operating strategies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in availability or cost of working capital financing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in production or distribution costs or cost of materials for our advertising;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>availability
of appropriate real estate locations for expansion; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>those
other factors referenced in this prospectus under the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Our Business." </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe these forward-looking statements, which we have based on our current expectations, are reasonable; however, undue reliance should not be placed on any forward-looking
statements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<A NAME="toc_dg1694_2"> </A>
<BR></FONT><FONT SIZE=2><B>USE OF PROCEEDS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to receive approximately $16,200,000 in net proceeds from the sale of shares of our common stock in this offering, based on the sale of 2,000,000 shares
at an assumed initial public offering price of $9.00 per share, after deducting the placement agent's fee and our estimated offering expenses. If WR&nbsp;Hambrecht+Co exercises its overallotment
option in full, we expect our net proceeds to be approximately $18,700,000. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One
of the principal objectives of this offering is to raise funds to support our expansion plans. Our principal capital requirements are for inventory and property and equipment to open
new stores and enhance our existing product offering. Our initial investment per store is approximately $160,000 for inventory and approximately $105,000 for property and equipment. To date, our
principal sources of liquidity have been the issuance of common stock, borrowings from David R. Pomije, our Chairman of the Board and majority shareholder, and borrowings under our credit facility
with a commercial lending institution. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
plan to use approximately $6,600,000 of the net proceeds from this offering to open 25 new retail stores through the end of 2004. The balance of the net proceeds (approximately
$9,600,000), as well as any proceeds from the exercise of the placement agent's overallotment option, will be available for additional store openings, working capital, and other general corporate
purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pending
the application of the net proceeds to these purposes, we intend to repay outstanding indebtedness under our revolving credit facilities in order to reduce our interest expense
and improve our borrowing flexibility. Amounts repaid under these facilities will be available in the future should the need arise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revolving credit facilities include two revolving notes payable to David R. Pomije, our Chairman of the Board and majority shareholder. Both of these notes expire on March&nbsp;31,
2006. The interest rate on both notes is 12% per annum, payable monthly. We currently have drawn a total of $5,000,000 on these notes. We will have a total of $8,000,000 of availability under these
notes through June&nbsp;30, 2004, after which date we will have $5,000,000 of availability. See "Certain Relationships and Related Transactions." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also have a revolving credit facility with a commercial lending institution, which allows us to borrow up to $2,500,000, subject to borrowing base limitations. Borrowings under this
facility bear interest at 3.75% above the prime rate (8.00% at June&nbsp;29, 2003), payable monthly, and are secured by our inventory. This facility expires on March&nbsp;31, 2004. At
June&nbsp;29, 2003, our outstanding balance on this facility was $1,300,000, and our available borrowing capacity was approximately $740,000. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
enhance our financial flexibility and ensure access to additional capital to support our expansion program, we intend, following completion of this offering, to replace our current
credit facilities with a longer term facility from one or more commercial lending institutions providing greater borrowing capacity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount and timing of our expenditures, repayment of outstanding indebtedness, and future borrowings under our credit facilities may vary depending upon a number of factors, including
but not limited to the amount of cash we use in or generate from our operations, changes in our expansion strategy, and the availability of favorable financing. In the event that any of these factors
occurs, we may find it necessary or advisable to use portions of the net proceeds for other purposes, and we will have broad discretion in making such determination. For example, if we were to decide,
due to changes in the market for golf equipment, that further expansion was not in our best interest, we might devote any proceeds that would have been used for store openings for general corporate
purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pending
application of the proceeds not being utilized to repay outstanding indebtedness, we intend to invest the net proceeds in short-term investment grade or money market securities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<BR></FONT><FONT SIZE=2><B>CAPITALIZATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our capitalization as of June&nbsp;29, 2003: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>on
an actual basis; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>on
an as adjusted basis to give effect to the sale of 2,000,000 shares of our common stock in this offering at an assumed initial public offering price of $9.00 per share
(after deducting the placement agent's fee and our estimated offering expenses) and application of the net proceeds from the sale. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is important that you read this capitalization information in conjunction with our historical financial statements and related notes, "Use of Proceeds," "Selected Financial and Other
Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and other financial information appearing elsewhere in this prospectus. </FONT></P>

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<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of June&nbsp;29, 2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR>
(dollars in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,901</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Total debt</FONT><FONT SIZE=1>(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,375</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Shareholders' equity:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Common stock, par value $0.01 per share, 50,000,000&nbsp;shares authorized, 3,440,672&nbsp;shares issued and outstanding, actual; 5,440,672&nbsp;shares issued and outstanding, as adjusted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Additional paid-in-capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,968</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>22,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Deferred stock compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(24</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(24</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(6,676</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(6,676</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Total shareholders' equity (deficit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(698</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>15,472</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Total capitalization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>15,503</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Pending
use of the proceeds for new store openings, working capital, and other general corporate purposes, we plan to repay the outstanding indebtedness under our revolving credit
facilities. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=1><A
NAME="dg1694_dividend_policy"> </A>
<A NAME="toc_dg1694_4"> </A>
<BR></FONT><FONT SIZE=2><B>DIVIDEND POLICY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that we will retain all of our earnings in the foreseeable future to finance the expansion of our business and, therefore, we do not anticipate
paying any cash dividends on shares of our common stock in the foreseeable future. Our future dividend policy will also depend on the requirements of any financing agreements to which we may be a
party and other factors considered relevant by our board of directors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=3,SEQ=19,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=1036203,FOLIO='15',FILE='DISK015:[03STP4.03STP1694]DG1694A.;17',USER='CPULLIA',CD='17-JUL-2003;11:59' -->
<A NAME="page_dg1694_1_16"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1694_dilution"> </A>
<A NAME="toc_dg1694_5"> </A>
<BR></FONT><FONT SIZE=2><B>DILUTION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net tangible book value of our common stock on June&nbsp;29, 2003 was $(697,869), or approximately $(0.20) per share. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our common stock in this offering and the net tangible book value per share of our common stock immediately afterwards. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
giving effect to the sale of shares at an assumed initial public offering price of $9.00 per share, and after deducting the placement agent's fee and estimated offering expenses
payable by us, our net tangible book value at June&nbsp;29, 2003 would have been approximately $15.5&nbsp;million, or $2.84 per share. This represents an immediate increase in net tangible book
value of $3.04 per share to current shareholders and immediate dilution of $6.16 per share to new investors. The following table illustrates this dilution on a per share basis: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Assumed initial public offering price per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
Net tangible book value per share at June&nbsp;29, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(0.20</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="71%"><FONT SIZE=2>Increase per share attributable to this offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3.04</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>As adjusted net tangible book value per share after this offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.84</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Dilution per share to new investors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6.16</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes, on an as adjusted basis, as of June&nbsp;29, 2003, the total number of shares of our common stock, the total consideration paid, and the average price
per share paid by existing shareholders and by the investors in this offering, calculated before deducting the placement agent's fee and estimated offering expenses: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares Purchased</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total Consideration</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Existing shareholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,440,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>63.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,220,795</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>33.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.68</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>New investors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>36.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>66.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="31%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,440,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>27,220,795</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing discussion and tables assume WR&nbsp;Hambrecht+Co does not exercise its overallotment option. If the overallotment option is exercised in full, sales in this offering
will reduce the number of shares of common stock held by the existing shareholders to approximately 60% of the total shares of common stock outstanding after the offering and will increase the number
of shares held by new investors to 2,300,000, or approximately 40% of the total shares of common stock outstanding after the offering. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=4,SEQ=20,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=403373,FOLIO='16',FILE='DISK015:[03STP4.03STP1694]DG1694B.;13',USER='CPULLIA',CD='17-JUL-2003;11:59' -->
<A NAME="page_dg1694_1_17"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1694_selected_financial_and_other_operating_data"> </A>
<A NAME="toc_dg1694_6"> </A>
<BR></FONT><FONT SIZE=2><B>SELECTED FINANCIAL AND OTHER OPERATING DATA    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the table below, we provide you with our selected financial data. We have prepared this information using our financial statements for each of the five years
in the period ended December&nbsp;29, 2002, and for the six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003. The financial statements for the years ended January&nbsp;2, 2000 and
December&nbsp;31, 2000 have been audited by Silverman Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD, independent auditors. The financial statements for the years ended December&nbsp;30, 2001 and
December&nbsp;29, 2002 have been audited by Ernst&nbsp;&amp; Young LLP, independent auditors. The financial statements for the year ended December&nbsp;27, 1998 and for the six months ended
June&nbsp;30, 2002 and June&nbsp;29, 2003 have not been audited. Operating results for the six months ended June&nbsp;29, 2003 are not necessarily indicative of the results that may be expected
for the year ending December&nbsp;28, 2003. The information presented below under the caption "Store Operating Data" is unaudited. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial statements for the year ended December&nbsp;27, 1998 and for the six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003 have been derived from our unaudited
financial statements, which have been prepared on the same basis as our audited financial statements and in our opinion contain all adjustments consisting of any normal recurring adjustments necessary
for a fair presentation of the results of operations for such periods. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is important that you read this selected financial data in conjunction with our historical financial statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this prospectus. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;27,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;2,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(dollars in thousands, except per share amounts)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1><B>Statement of Operations Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Net sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>1,352</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,359</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>7,609</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>16,332</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>26,407</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>13,032</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>18,616</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>543</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,262</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>2,925</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>6,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>9,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4,812</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>6,641</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Selling, general, and administrative expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>755</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,511</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>4,677</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>8,315</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>11,606</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,811</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,485</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Operating loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(212</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,249</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,752</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,267</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,004</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(999</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(844</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Interest expense, net(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(183</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(228</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(336</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(537</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(269</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(436</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Net loss(3)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(395</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,265</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,980</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,603</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,541</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,268</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,280</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Net loss per share&#151;basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(0.49</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(0.63</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(0.79</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(0.87</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(0.75</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(0.38</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(0.37</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Weighted average shares outstanding</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>811,819</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,022,641</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>2,502,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>2,975,019</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>3,375,087</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,309,502</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,440,672</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><BR><FONT SIZE=1><B>Store Operating Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Stores open at the end of period</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>30</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>29</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>35</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Comparable store sales increase(4)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>n/a</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>15</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="15%"><FONT SIZE=1>Approximate square feet of selling space at the end of period</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>8,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>12,600</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>33,300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>68,900</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>103,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>99,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>120,900</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

<HR NOSHADE>
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<A NAME="page_dg1694_1_18"> </A>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;27,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;2,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1><B>Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="16%"><FONT SIZE=1><BR>
Net working capital (deficit)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
147</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
434</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
871</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(2,270</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4,559</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(717</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,780</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="16%"><FONT SIZE=1><BR>
Total assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
915</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,453</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4,584</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
6,476</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
9,797</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
9,109</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
11,642</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="16%"><FONT SIZE=1><BR>
Total debt</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
220</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
50</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,343</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4,808</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
6,410</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3,297</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
6,375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="16%"><FONT SIZE=1><BR>
Total liabilities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
492</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
405</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
2,301</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
6,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
9,226</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
7,364</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
12,340</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="16%"><FONT SIZE=1><BR>
Shareholders' equity (deficit)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
423</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
2,283</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(274</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
571</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,745</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(698</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Our
fiscal year ends on a Sunday on or near December&nbsp;31 and consists of either 52 or 53 weeks. Fiscal year 1999 consisted of 53 weeks. All other years consisted of 52 weeks.
The six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003 each consisted of 26 weeks.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Our
1998 interest expense, net includes $170,000 of expense as the result of a beneficial conversion feature related to certain notes payable, which were convertible into our common
stock at $0.47 per share, which was at a discount to the then fair value of the common stock.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>We
converted from a Subchapter S corporation income tax filer to a C corporation on December&nbsp;10, 2000. In a Subchapter S corporation, the shareholders include the applicable
corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we established a valuation allowance for all net deferred tax benefits as the realization of these
assets is uncertain. Therefore, no income tax expense or benefit is recognized for any periods presented.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>Stores
are included in our comparable store sales base on the 365<SUP>th</SUP> day of operation. Comparable store sales for the fiscal year ended January&nbsp;2, 2000 were
computed using a comparable 52-week period. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_di1694_1_19"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1694_management_s_discussion_and_an__man03466"> </A>
<A NAME="toc_di1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>  AND RESULTS OF OPERATIONS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion and analysis should be read in conjunction with "Selected Financial and Other Operating Data" and our financial
statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. The actual
results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those set forth under "Risk Factors" in this
prospectus.</I></FONT></P>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a specialty retailer in the business of buying, selling, and trading pre-owned and new golf clubs and related equipment. Our 2<SUP>nd</SUP>
Swing stores provide golfers a convenient place to trade in or sell their existing golf clubs for store credit or cash and apply the value received towards the purchase of new or pre-owned
equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
opened our first store in 1997, which was subsequently relocated in 1998, and now operate 35&nbsp;stores in fourteen states. We opened one additional store in 1998, two in 1999, six
in 2000, ten in&nbsp;2001, ten in 2002, and five in 2003. We plan to open five additional stores in 2003 and approximately 20&nbsp;stores in 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the store level, our results of operations are significantly impacted by the maturity of our stores. We believe that our stores generally do not achieve maturity until the fourth year
of operation. While our newer stores typically experience lower sales levels than more mature stores, store operating costs, which primarily consist of rent, payroll, and advertising expenses, are
relatively constant regardless of the age of the store. Therefore, stores generally incur losses in their initial months of operation because sales levels have not increased to a level sufficient to
support operating costs. Sales, which we believe increase as customer awareness of a new store grows, should be sufficient to cover costs or generate a slight store-level operating profit by the end
of the store's first twelve months of operations. A new store is typically expected to generate comparable store sales increases in the low double digits in the second and third years of operations
and low single digits by the time the store reaches maturity in its fourth year. In the fifth year and beyond, comparable store sales increases are expected to be nominal. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we achieved operating profitability at the store level in 2002, we are currently generating operating losses on a company-wide basis. This trend is due to the young
age of our store base and the significant investments we have made in building our corporate infrastructure, specifically information systems and management, to support a national base of retail
stores. While we currently anticipate that we will continue to incur operating losses on a company-wide basis over the next few years, we expect that such operating losses will decrease
through controlled expansion of our store base as a greater percentage of our stores will be mature and our newer stores help spread fixed corporate infrastructure costs over a larger store base. In
addition, as we open new stores in existing markets and expand into new markets in close proximity to existing markets, we expect to further leverage our brand recognition and existing advertising,
management, and distribution costs to enhance our operating results. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of our recent formation, brief operating history, and significant growth in the number of stores, operating results may not be comparable from period to period and may not be
indicative of our future performance. In addition, a disproportionate amount of our sales and profits are generated during the second and third quarters, reflecting the seasonality of the golf season
in the states in which we operate. </FONT></P>


<P><FONT SIZE=2><B>Critical Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prepare our financial statements in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain
estimates, judgments, and assumptions that </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

<HR NOSHADE>
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<A NAME="page_di1694_1_20"> </A>
<BR>

<P><FONT SIZE=2>we
believe are reasonable based upon the information available to us. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the periods presented. The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following: </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory Valuation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We review our inventory balances to determine if inventories can be sold at amounts equal to or greater
than their carrying value. The review includes identification of slow-moving inventories, obsolete inventories, and discontinued products or lines of products. The identification process
includes analysis of historical performance of the inventory and current operational plans for the inventory as well as industry and customer-specific trends. If we are unable to sell our inventories
at amounts equal to or greater than our carrying amounts, we would be required to adjust our inventory values accordingly. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In determining the carrying value of our net deferred tax assets, we must assess the likelihood that we will
generate sufficient future taxable income to realize the benefits of those assets.
If our estimates and related assumptions regarding future performance change in the future, we may be required to adjust the amount of the valuation allowance against our deferred tax assets. At
December&nbsp;29, 2002 and December&nbsp;30, 2001, we determined that we could not conclude that it was more likely than not that our net deferred tax assets would be realized and recorded
valuation allowances of approximately $2,091,775 and $896,422, respectively. We evaluate the realizability of the deferred tax assets quarterly and assess the need for adjustments to the valuation
allowance accordingly. </FONT></P>

<P><FONT SIZE=2><B>Results of Operations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our fiscal year ends on the Sunday closest to December&nbsp;31 and consists of either 52 or 53 weeks. Fiscal year 1999 consisted of 53 weeks. All other years
consisted of 52 weeks. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
quarters end on the Sunday closest to March&nbsp;31, June&nbsp;30, September&nbsp;30, and December&nbsp;31, with each quarter consisting of 13 weeks in a 52-week
year. In fiscal years consisting of 53 weeks, the quarter ending closest to December&nbsp;31 will consist of 14 weeks. The six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003 each
consisted of 26 weeks. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stores
are included in our comparable store sales base on the 365<SUP>th</SUP> day of operation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales are recognized at the time of the sale of our merchandise to our customers. Our merchandise inventories are carried at the lower of cost or market using the
first-in, first-out method. Pre-owned equipment traded in by customers is recorded as inventory at the amount of the store credit or cash payment given to the
customer. The subsequent sales of pre-owned merchandise are recorded at the retail price charged to that customer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost
of goods sold includes the cost of merchandise, inventory shrinkage, freight, and distribution. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling,
general, and administrative expenses include payroll, advertising, occupancy, and all expenses associated with our corporate headquarters. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=24,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=17554,FOLIO='20',FILE='DISK015:[03STP4.03STP1694]DI1694A.;17',USER='CHANSON',CD='17-JUL-2003;16:02' -->
<A NAME="page_di1694_1_21"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain financial data regarding our operations for the periods indicated: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Years ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 27,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 2,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1>Net sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>1,352</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,359</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>7,609</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>16,332</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>26,407</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>13,032</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>18,616</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>543</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,262</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>2,925</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>6,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>9,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>4,812</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>6,641</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1>Selling, general, and administrative expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>755</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,511</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>4,677</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>8,315</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>11,606</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,811</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,485</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1>Operating loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(212</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,249</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,752</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,267</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,004</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(999</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(844</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1>Interest expense, net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(183</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(228</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(336</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(537</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(269</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(436</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1>Net loss</FONT><FONT SIZE=1>(1)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(395</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,265</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,980</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,603</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(2,541</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,268</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,280</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="18%"><FONT SIZE=1><BR>
Store operating income (loss)</FONT><FONT SIZE=1>(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
73</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(58</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
181</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
589</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
519</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,097</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain financial data regarding our operations expressed as percentages of net sales for the periods indicated: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Years ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>December 27,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>January 2,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>December 30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>December 29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Net sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>100.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>40.1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>37.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>38.5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>37.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>36.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>36.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>35.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Selling, general, and administrative expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>55.8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>74.8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>61.5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>50.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>44.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>44.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>40.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Operating loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(15.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(37.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(23.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(13.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(7.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(7.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(4.5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Interest expense, net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(13.5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(3.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(2.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(2.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(2.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(2.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Net loss</FONT><FONT SIZE=1>(1)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(29.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(37.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(26.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(15.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(9.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(9.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(6.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><BR>
Store operating income (loss)</FONT><FONT SIZE=1>(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
5.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(1.7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
2.4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3.6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1><BR>
3.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1><BR>
4.0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1><BR>
5.9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>We converted from a Subchapter S corporation income tax filer to a C corporation on December&nbsp;10, 2000. In a Subchapter S corporation, the
shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we established a valuation allowance for all net deferred tax
benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is recognized for any periods presented.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Store operating income (loss) is calculated by subtracting selling expenses from gross profit. Selling expenses include payroll, advertising, occupancy,
and other direct expenses relating to our retail stores. Other direct expenses include, for example, depreciation, credit card fees, supplies, loss prevention, and telephone expense. Selling expenses
for the periods covered by the table above were: $470,366 for the year ended December&nbsp;27, 1998; $1,320,382 for the year ended January&nbsp;2, 2000; $2,744,483 for the year ended
December&nbsp;31, 2000; $5,458,767 for the year ended December&nbsp;30, 2001; $8,575,995 for the year ended December&nbsp;29, 2002; $4,292,585 for the six months ended June&nbsp;30, 2002, and
$5,544,275 for the six months ended June&nbsp;29, 2003. Operating loss can be derived from store operating income (loss) by subtracting general and administrative expenses (the difference between
selling, general, and administrative expenses and selling expenses). Management believes that store operating income (loss) is an important measure as it allows an assessment of operating performance
at the retail store level before taking into account the fixed corporate overhead. This measure should not be viewed as a more meaningful measure of our operating performance than other financial
data, such as operating loss. Other specialty retailers may not use store operating income (loss) to measure operating performance. </FONT></DD></DL>

<P><FONT SIZE=2><B>Comparison of Six Months Ended June&nbsp;29, 2003 and June&nbsp;30, 2002  </B></FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Sales.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net sales increased by $5,583,559, or 42.8%, to $18,615,598 in the six months ended June&nbsp;29, 2003 from
$13,032,039 in the six months ended June&nbsp;30, 2002. The increase is primarily due to the increased number of stores operated during the period. We operated 35&nbsp;stores as of June&nbsp;29,
2003 compared to 29&nbsp;stores as of June&nbsp;30, 2002. Sales from new stores represent $3,651,475 of the net sales increase. Comparable store sales for the six months ended June&nbsp;29, 2003
were 15%, primarily due to our maturing store base. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross profit, which is net sales less cost of sales, increased by $1,828,598, or 38.0%, to $6,640,623 in the
six months ended June&nbsp;29, 2003 from $4,812,025 in the six months ended June&nbsp;30, 2002. Gross profit was 35.7% of net sales in the six months ended June&nbsp;29, 2003 compared to 36.9%
in the six months ended June&nbsp;30, 2002. The decrease in gross profit as a percentage of sales was due to a shift in product mix from the higher margin pre-owned equipment to new equipment. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, General, and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses increased by $1,673,684, or
28.8%, to $7,484,861 in the six months ended June&nbsp;29, 2003 from $5,811,177 in the six months ended June&nbsp;30, 2002. The dollar increase in selling, general, and administrative expenses was
primarily due to the costs associated with operating a greater number of stores. Selling, general, and administrative expenses were 40.2% of net sales in the six months ended June&nbsp;29, 2003
compared to 44.6% in the six months ended June&nbsp;30, 2002. Included in selling, general, and administrative expenses are selling expenses of $5,544,275 and $4,292,585 for the six months ended
June&nbsp;29, 2003 and June&nbsp;30, 2002, respectively. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating Loss.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Operating loss decreased by $154,914, or 15.5%, to $844,238 in the six months ended June&nbsp;29, 2003 from
$999,152 in the six months ended June&nbsp;30, 2002. Operating loss was 4.5% of net sales in the six months ended June&nbsp;29, 2003 compared to 7.7% in the six months ended June&nbsp;30, 2002. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense, net of interest income, was $435,269 in the six months ended June&nbsp;29, 2003
compared to $268,534 in the six months ended June&nbsp;30, 2002. The increase is primarily due to increased borrowing to fund the opening of new stores and working capital needs. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Tax.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We converted from a Subchapter&nbsp;S corporation income tax filer to a C&nbsp;corporation on
December&nbsp;10, 2000. In a Subchapter S corporation, the shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a
C&nbsp;corporation, we have established a valuation allowance for all net deferred tax benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is
recognized for either six month period. </FONT></P>

<P><FONT SIZE=2><B>Comparison of Fiscal 2002 (52 weeks) to Fiscal 2001 (52 weeks)  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Sales.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net sales increased by $10,075,368, or 61.7%, to $26,407,335 in fiscal 2002 from $16,331,967 in fiscal 2001. The
increase is primarily due to the increased number of stores operated during the period. We operated 30 stores as of December&nbsp;29, 2002 compared to 20 stores as of December&nbsp;30, 2001. Sales
from new stores represent $8,949,302 of the net sales increase. Comparable store sales for fiscal 2002 were 7%, primarily due to our maturing store base. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross profit, which is net sales less cost of sales, increased by $3,553,784, or 58.8%, to $9,601,798 in fiscal
2002 from $6,048,014 in fiscal 2001. Gross profit was 36.4% of net sales in fiscal 2002 compared to 37.0% in fiscal 2001. The decrease in gross profit as a percentage of sales was due to a minor shift
in product mix from the higher margin pre-owned equipment to new equipment. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, General, and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses increased by $3,290,488, or
39.6%, to $11,605,491 in fiscal 2002 from $8,315,003 in fiscal 2001. The dollar increase in selling, general, and administrative expenses was primarily due to the costs associated with operating a
greater number of stores. Selling, general, and administrative expenses were 44.0% of net sales in fiscal 2002 compared to 50.9% in fiscal 2001. Included in selling, general, and administrative
expenses are selling expenses of $8,575,995 and $5,458,767 for fiscal 2002 and fiscal 2001, respectively. The decrease as a percentage of net sales was primarily due to leveraging expenses over a
larger store base. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating Loss.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Operating loss decreased by $263,296, or 11.6%, to $2,003,693 in fiscal 2002 from $2,266,989 in fiscal 2001.
Operating loss was 7.6% of net sales in fiscal 2002 compared to 13.9% in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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<P><FONT SIZE=2>fiscal
2001. The decrease as a percentage of net sales was primarily due to leveraging expenses over a larger store base. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense, net of interest income, was $537,258 in fiscal 2002 compared to $335,828 in fiscal 2001.
The increase is primarily due to increased borrowing to fund the opening of new stores. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Tax.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We converted from a Subchapter S&nbsp;corporation income tax filer to a C&nbsp;corporation on
December&nbsp;10, 2000. In a Subchapter S&nbsp;corporation, the shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a
C&nbsp;corporation, we have
established a valuation allowance for all net deferred tax benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is recognized for either year. </FONT></P>


<P><FONT SIZE=2><B>Comparison of Fiscal 2001 (52 weeks) to Fiscal 2000 (52 weeks)  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Sales.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net sales increased by $8,723,094, or 114.6%, to $16,331,967 in fiscal 2001 from $7,608,873 in fiscal 2000. The
increase is primarily due to the increased number of stores operating during the period. We operated 20 stores as of the end of fiscal 2001 compared to 10 stores at the end of fiscal 2000. Sales from
new stores represent $7,184,165 of the net sales increase. Comparable store sales increases for fiscal 2001 were 20%, due to the early stage of maturity of the stores in our comparable store base. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross profit, which is net sales less cost of sales, increased by $3,123,279, or 106.8%, to $6,048,014 in
fiscal 2001 from $2,924,735 in fiscal 2000. Gross profit was 37.0% of net sales in fiscal 2001 compared to 38.5% in fiscal 2000. The decrease in gross profit as a percentage of sales was due to a
minor shift in product mix from the higher margin pre-owned equipment to new equipment and an increase in distribution center expenses. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, General, and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses increased by $3,638,309, or
77.8%, to $8,315,003 in fiscal 2001 from $4,676,694 in fiscal 2000. The dollar increase was primarily due to adding management and administrative staff and systems development to support our growth.
Selling, general, and administrative expenses were 50.9% of net sales in fiscal 2001 compared to 61.5% in fiscal 2000. The decrease as a percentage of net sales was primarily due to leveraging
expenses over a larger store base. Included in selling, general, and administrative expenses are selling expenses of $5,458,767 and $2,744,483 for fiscal 2001 and fiscal 2000, respectively. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating Loss.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Operating loss increased by $515,030, or 29.4%, to $2,266,989 in fiscal 2001 from $1,751,959 in fiscal 2000.
The increase was primarily the result of an increase in management and administrative personnel and systems development to support our growth. Operating loss was 13.9% of net sales in fiscal 2001
compared to 23.0% in fiscal 2000. The decrease as a percentage of net sales was primarily due to leveraging expenses over a larger store base. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense, net of interest income, was $335,828 in fiscal 2001 compared to $227,899 in fiscal 2000.
The increase is primarily due to increased borrowing to fund the opening of new stores. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Tax.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We converted from a Subchapter S corporation income tax filer to a C corporation on December&nbsp;10, 2000. In
a Subchapter S corporation, the shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we have established a valuation
allowance for all net deferred tax benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is recognized for either year. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

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<P><FONT SIZE=2><B>Liquidity and Capital Resources  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary capital requirements are for inventory and property and equipment to support our expansion plans. Our initial investment per store is approximately
$160,000 for inventory and approximately $105,000 for property and equipment. Our main sources of liquidity have been the issuance of common stock, borrowings from David R. Pomije, our Chairman of the
Board and majority shareholder, and borrowings under our credit facility with a commercial lending institution. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
and cash equivalents at December&nbsp;30, 2001, December&nbsp;29, 2002, and June&nbsp;29, 2003 were $0, $1,055,859, and $75,193, respectively. Working capital (deficit) at
December&nbsp;30, 2001, December 29, 2002, and June&nbsp;29, 2003 was $(2,270,053), $4,558,817, and $1,779,786, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2000, 2001, and 2002, net cash used in operating activities was $2,664,234, $3,081,801, and $2,380,565, respectively. During the six months ended June&nbsp;30, 2002 and
June&nbsp;29, 2003, net cash of $670,263 and $264,252, respectively, was used in operating activities. Funds used in operating activities are impacted primarily by our net losses and investments in
working capital, primarily inventory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2000, 2001, and 2002, net cash used in investing activities was $1,244,332, $1,295,102, and $1,120,848, respectively. During the six months ended June&nbsp;30, 2002, net cash of
$848,067 was used in investing activities, primarily to open nine new stores. During the six months ended June&nbsp;29, 2003, net cash of $643,016 was used in investing activities, primarily for
property and equipment to open five new stores and for a new point-of-sale system. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
operations and investing activities have been supported to date by cash flow from financing activities. From inception, we have raised capital through the sale of shares of common
stock and loans from David R. Pomije. In four separate common stock issuances between December&nbsp;29, 1998 and March&nbsp;28, 2002, we raised net proceeds of $6,913,473 through the issuance of
1,159,594 common shares. Between December&nbsp;29, 1998 and January&nbsp;25, 1999, we sold 86,066 common shares at $2.85 per share for net proceeds of $245,000. On October&nbsp;22, 1999 we sold
300,000 shares of common stock at $5.00 per share for net proceeds of $1,475,000. On August&nbsp;8, 2000 we sold 48,000 shares of common stock at $5.00 per share for net proceeds of $240,000.
Between December&nbsp;11, 2000 and December&nbsp;29, 2000, we
sold 259,875 shares of common stock at $6.67 share for net proceeds of $1,707,490. Between January&nbsp;7, 2002 and March&nbsp;28, 2002, we sold 465,653 shares of common stock at $7.33 per share
for $3,245,983 in net proceeds. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
balance of our spending has been supported by loans from Mr.&nbsp;Pomije. Between January&nbsp;1998 and December&nbsp;1999, Mr.&nbsp;Pomije advanced us an aggregate of
$1,025,000, of which $570,000 was converted to shares of common stock and $455,000 was repaid in October&nbsp;1999. Between January&nbsp;2000 and March&nbsp;2002, Mr.&nbsp;Pomije advanced us
an aggregate of $7,867,500, of which $1,267,500 of the outstanding balance was converted to common stock and $3,100,000 was repaid. The remaining outstanding balance of $3,500,000 was structured into
a mezzanine note. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently have in place two notes from Mr.&nbsp;Pomije providing us with up to $8,000,000 in borrowing capacity to be used for store expansion. The first is a mezzanine revolving
promissory note, referred to above, under which we may borrow up to $3,500,000 with interest payable monthly at an annual rate of 12%. We have granted Mr.&nbsp;Pomije a security interest in our
inventory, accounts receivable, and certain other assets in connection with this note. The principal balance under the note, together with accrued interest thereon, is due and payable on
March&nbsp;31, 2006. As of June&nbsp;29, 2003, $3,500,000 was outstanding under the mezzanine revolving promissory note. We also have in place a working capital revolving promissory note from
Mr.&nbsp;Pomije under which we may borrow up to $4,500,000 with interest payable at an annual rate of 12%. We have agreed to grant Mr.&nbsp;Pomije a security interest in our inventory upon his
request in connection with this note. The principal balance under this note, together with accrued interest thereon, is due and payable on March&nbsp;31, 2006. As of June&nbsp;29, 2003, $1,500,000
was outstanding under the working capital revolving promissory note. After June&nbsp;30, 2004, the amount that we may borrow under the working capital revolving promissory note </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

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<P><FONT SIZE=2>will
be reduced from $4,500,000 to $1,500,000. The principal balance on the notes can be paid down and re-advanced at any time. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently have a $2,500,000 credit facility (subject to borrowing base limitations) with a commercial lending institution. The interest rate on this credit facility is 3.75% above
prime rate (8.0% at June&nbsp;29, 2003), and payment is secured by our inventory. As of June&nbsp;29, 2003, $1,343,650 was outstanding under this credit facility and we had approximately $734,000
of additional borrowing capacity. This credit facility expires March&nbsp;31, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
anticipate that the net proceeds of this offering will be approximately $16,200,000, of which we plan to use approximately $6,600,000 to open 25 new stores through the end of 2004.
The balance of the proceeds will be available for additional store openings, working capital, and other general corporate purposes. Pending the use of such proceeds for these purposes, we intend to
repay outstanding borrowings under our revolving credit facilities in order to reduce our interest expense. Amounts repaid under these facilities will be available for reborrowing during the term of
the facilities. If we repay all outstanding balances in full with proceeds from this offering, we will have the capacity to borrow up to $8,000,000 ($5,000,000 after June&nbsp;30, 2004) under the
revolving credit facilities with David&nbsp;R. Pomije that
expire on March&nbsp;31, 2006 and up to $2,500,000 under our existing revolving credit facility with a commercial lending institution that expires on March&nbsp;31, 2004. We currently expect that
cash available from this offering, after repayment of existing borrowings under the credit facilities, will enable us to open the 25 new stores we plan to open through the end of 2004. Based on
current expectations, however, it is likely that we will need to borrow additional funds to finance our expansion program in 2005 and 2006. To enhance our financial flexibility and ensure access to
additional capital to support our expansion program, we intend, following completion of this offering, to replace our current credit facilities with a longer term facility from one or more commercial
lending institutions providing greater borrowing capacity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not anticipate that cash flow from operations will be available to support our expansion plans until at least 2006, depending upon the performance of our stores and the
implementation of our expansion plans. If sufficient capital is not available from the offering, our existing or future credit facilities, or operations, we believe we could reduce our expansion plans
and continue to operate our then existing stores. </FONT></P>

<P><FONT SIZE=2><B>Contractual Obligations and Commercial Commitments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes our material contractual obligations, including both on-and-off balance sheet arrangements in effect at
June&nbsp;29, 2003, and adjusted to give effect to the sale by us of 2,000,000 shares of common stock in this offering at an assumed initial public offering price of $9.00 per share and the
application of the net proceeds of the sale (after deducting the placement agent's fee and estimated offering expenses): </FONT></P>

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<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=1><B>Contractual Obligations<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Thereafter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted(1)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Notes payable, shareholder(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Notes payable, bank(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1,344</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1,344</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>21</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>31</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Operating lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1,386</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2,671</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2,419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1,812</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>942</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>9,230</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>9,230</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=1>Total obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1,394</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>4,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>6,812</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>942</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>15,605</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>9,261</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Pending
use of proceeds for new store openings, working capital, and other general corporate purposes, we plan to repay the outstanding indebtedness under our revolving credit
facilities.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>This
balance relates to a revolving credit facility which can be repaid at any time. For purposes of this prospectus, we have shown the current principal balance being paid on the due
date of March&nbsp;31, 2006.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>This
balance relates to a revolving credit facility which can be repaid at any time. For purposes of this prospectus, we have shown the current principal balance being paid on the due
date of March&nbsp;31, 2004. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=7,SEQ=29,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=928043,FOLIO='25',FILE='DISK015:[03STP4.03STP1694]DI1694B.;13',USER='CHANSON',CD='17-JUL-2003;16:02' -->
<A NAME="page_di1694_1_26"> </A>

<P><FONT SIZE=2><B>Seasonality and Quarterly Results  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is affected by the pattern of seasonality common to most retail businesses in the golf industry. Our sales will, therefore, tend to be greater in the
second and third quarters of the year, which are the principal months for playing golf in most of the country. We do, however, anticipate some increase in sales during the holiday season. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
sales, gross profit, operating income (loss), and net income (loss) for the past ten quarters, together with the number of stores open at the end of each quarter, are presented in
the following table: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal 2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1<SUP>st</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2<SUP>nd</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>3<SUP>rd</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>4<SUP>th</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1<SUP>st</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2<SUP>nd</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>3<SUP>rd</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>4<SUP>th</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1<SUP>st</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2<SUP>nd</SUP><BR>
Quarter</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=29 ALIGN="CENTER"><FONT SIZE=1><B>(dollars in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="14%"><FONT SIZE=1>Net sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,644</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>6,160</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>6,112</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,416</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,125</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>9,907</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>9,850</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,525</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>4,403</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>14,213</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="14%"><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>613</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,340</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,260</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>835</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,090</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,722</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,614</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,176</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>5,145</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="14%"><FONT SIZE=1>Operating income (loss)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(906</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(285</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,018</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>469</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,473</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,570</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>726</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="14%"><FONT SIZE=1>Net income (loss)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(964</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(373</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(81</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,185</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,156</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(112</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>347</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,620</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,795</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>515</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="14%"><FONT SIZE=1>Stores open at quarter end</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>15</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>23</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>29</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>30</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>30</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>33</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>35</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the results presented above may not be indicative of future trends or performance, we anticipate that quarterly net sales and operating
results will continue to be significantly impacted by seasonality patterns. </FONT></P>

<P><FONT SIZE=2><B>Quantitative and Qualitative Disclosure about Market Risk  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are not currently subject to market risks for interest rates, foreign currency exchange rates, commodity prices, or other market price risks of a
material nature. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1694_our_business"> </A>
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<BR></FONT><FONT SIZE=2><B>OUR BUSINESS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a specialty retailer in the business of buying, selling, and trading pre-owned and new golf clubs and related equipment. Our 2<SUP>nd</SUP>
Swing stores provide golfers a convenient place to trade in or sell their existing golf clubs for store credit or cash and apply the value received towards the purchase of new or pre-owned
equipment. This enables golfers to acquire new technology or upgrade to more advanced equipment on a cost-effective basis. With 35 stores currently, we believe we are the largest
store-based retailer of pre-owned golf equipment and the only one with the objective of developing a national chain of stores focused primarily on buying, selling, and trading
pre-owned golf equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
stores are economically sized at approximately 3,500 square feet and are conveniently located in retail strip centers. Each 2<SUP>nd</SUP> Swing store carries a broad assortment
of new and pre-owned clubs from leading manufacturers, typically consisting of approximately 1,500 woods, 350 sets of irons, 500 putters, and 500&nbsp;sand wedges. In addition to golf
clubs, we also carry a selection of golf bags, gloves, balls, and other equipment. We believe our efficient store size, focus on higher margin pre-owned equipment, and emphasis on hard
goods merchandise, which we believe produces higher sales per square foot than apparel and shoes, have enabled us to achieve a store-level average return on invested capital in excess of 50% in stores
open for four years or longer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
opened our first store in 1997 and now operate 35 stores in fourteen states. Sales for the 12&nbsp;months ended June&nbsp;29, 2003 were $32.0 million, of which 64% was derived
from the sale of pre-owned golf equipment. Same store sales increases were 20% in fiscal 2001, 7% in fiscal 2002, and 15%&nbsp;for the six months ended June&nbsp;29, 2003. </FONT></P>

<P><FONT SIZE=2><B>Golf Industry Overview  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market Size and Growth Characteristics.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Based on a study by the National Sporting Goods Association&reg;, or NSGA,
retail sales of the types of new golf equipment and accessories sold in our stores were approximately $3.9&nbsp;billion in 2001. Golf clubs accounted for $2.5&nbsp;billion, with the balance
represented by balls, bags, gloves, and other golf accessories. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
NSGA estimates that retail sales of new golf equipment have grown from $2.5&nbsp;billion to $3.9&nbsp;billion, or at a compound annual rate of 4.6%, over the past
10&nbsp;years. However, sales of new golf equipment as well as the number of golf rounds played in 2002 declined due primarily to weaker overall trends in consumer spending and unfavorable weather
conditions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
popularity of golf, as well as golf equipment sales, has been, and is expected to be, influenced by the following factors: </FONT></P>

<UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Favorable demographic trends.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The aging of the huge baby boomer population segment will continue to have a positive impact on golf
equipment
spending. Research by the National Golf Foundation&reg;, or NGF&reg;, shows that golfers 45 and older represent 39% of the golfer population yet account for 47% of golf-related
spending. </FONT></P>

<P><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Growth in golf course facilities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Whereas there was significant growth in the early 1990s in new course development, new courses are
opening at a
decreasing rate as the market adjusts to participation levels. According to the Golf <SUP>20</SUP>/<SMALL>20</SMALL> Industry Report, the rate of new course openings in the past three years has gone from 3.2% to
2.3% to 1.5% in 2002, resulting in a total of approximately 15,800 regulation golf courses (at least nine regulation holes) in the United States at the end of 2002. Most of this growth has been
attributable to new public or daily fee courses, which now represent over 70% of all golf course facilities, significantly improving access to the game. The growth of alternative facilities including
driving ranges, par 3 courses, and other golf learning centers has also improved access to the game. </FONT></P>

<P><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industry initiatives.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Over the past few years, there have been numerous initiatives supported by the PGA of America, LPGA, USGA&reg;,
World
Golf Foundation, and others to increase golf </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

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<BR>

<P><FONT SIZE=2>participation.
These include programs such as "The First Tee," designed to introduce golf to juniors, "First Lesson Free," offering discounted or free introductory lessons to beginning golfers, "Link
Up 2 Golf," and over 70 "Nike Golf Learning Centers," designed to attract, develop, and retain golfers. </FONT></P>

<P><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increased visibility.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Visibility of golf and golf equipment has been enhanced by increased media coverage of PGA events, greater
exposure on
television, including The Golf Channel&reg;, an increased number of tour and special events and outings, and the emergence of superstars such as Tiger Woods and Annika Sorenstam. In addition,
advertising and promotions by equipment manufacturers have increased, and high-profile, sporting-goods manufacturers, such as Nike, have entered the golf equipment market. </FONT></P>

<P><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant technological advances in golf equipment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Over the past ten years, there have been significant technological advances in
club head and
shaft construction, design, and materials. The continuous
introduction of this improved technology, together with advertising and promotions by equipment manufacturers emphasizing the importance of equipment to one's game, has encouraged golfers to change
equipment frequently. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically,
no organized retail store marketplace has existed for pre-owned golf equipment, as sales of such equipment have largely occurred through second-hand
stores, garage sales, classified advertising sales, internet sites, and golfer-to-golfer transactions. Accordingly, no reliable data are currently available on the historic
size or growth rate of the pre-owned golf equipment market. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe several factors have driven general demand for pre-owned golf equipment in recent years. In particular, the continuous introduction of new, technologically
advanced equipment at higher prices has contributed to the need for an organized store-based market where golfers can buy, sell, trade, and test pre-owned golf equipment. This is similar
to the emergence of such other successful retail store concepts as Gamestop&reg; (pre-owned video games) and Carmax&reg; (pre-owned automobiles). </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail Channels of Distribution.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The retail channel for new golf clubs is highly competitive and fragmented. According to the
NGF, the primary channel is the specialty golf store, accounting for 44% of the retail market, followed by golf course pro-shops (28%), full-line sporting goods stores (11%),
mass merchants (7%), catalogs (5%), the internet (4%), and other (1%). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
specialty golf retailers have by far the largest market share, this channel is highly fragmented, with the top ten golf retail chains accounting for an estimated 25% of the total
number of retail outlets in the U.S. Most of these chains are regional, many are franchised, and all are privately held. </FONT></P>

<P><FONT SIZE=2><B>Business Strategy and Competitive Differentiation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the following key elements of our business strategy provide us with significant competitive advantages: </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Differentiated Merchandise Strategy.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our merchandise mix consists exclusively of hard goods equipment, such as clubs, balls,
bags, and accessories, which we believe generate higher sales per square foot than golf apparel and shoes. While we offer a broad selection of both new and pre-owned equipment, we focus on
the sale of pre-owned clubs, which accounted for 70% of our sales in 2002. We generally realize higher gross margins on sales of pre-owned clubs than on sales of new equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
pre-owned club strategy is the key differentiator from traditional golf retailers. We believe our ability to offer a broad assortment of both new and
pre-owned equipment from leading manufacturers appeals strongly to the avid golfer, our core customer. Buying, selling, and trading pre-owned equipment creates a unique
customer value by enhancing the golfer's purchasing power for equipment (whether previously owned or new) with the trade-in value of the golfer's current equipment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the new equipment category, we offer major brands of golf equipment, including Callaway, Cleveland, Cobra, Nike, Ping, TaylorMade, and Titleist. All products are purchased directly
from the manufacturer and priced competitively in comparison to other golf retailers. We believe that our ability to take trade-ins of pre-owned clubs significantly enhances
our ability to sell new equipment. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Superior In-store Service and Product Expertise.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We emphasize a superior level of in-store service by
staffing our stores with well-trained, knowledgeable golfers, many of whom are PGA professionals. These professionals provide our customers with extensive product knowledge, which we
believe enables us to build a reputation as a trusted source of information on golf equipment. All stores feature an indoor driving net and putting green to test clubs and we offer customers a
3-day demo period for both new and pre-owned clubs. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proprietary Pricing Model.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have developed a proprietary bid/ask pricing model that utilizes, among other factors, historic
product sales data, to enable us to manage both cost and availability of our pre-owned inventory. Pricing information is developed at the corporate level based on supply, demand, and other
variables and is adjusted periodically to maximize sales, gross margin, and return on inventory investment. We believe this pricing model provides us with a key competitive advantage and also
represents a significant barrier to entry. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Experienced Management Team.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have assembled a management team with significant golf expertise and with extensive
experience in retailing, particularly the sale of pre-owned merchandise. Five members of our management team, including our Chairman, Chief Executive Officer, and Chief Financial Officer,
were involved in the founding and/or development of FuncoLand&reg;, which, prior to its sale to Barnes&nbsp;&amp; Noble,&nbsp;Inc. in 2000, was the largest chain of retail stores selling
previously played video game software and hardware, with over 400 stores and annual revenues exceeding $250&nbsp;million for the fiscal year ended April&nbsp;2, 2000. </FONT></P>

<P><FONT SIZE=2><B>Growth and Expansion Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With a proven store model, an experienced management team, and scaleable infrastructure now in place, we plan to accelerate our rate of expansion and pursue our
goal of becoming the nation's leading retailer of pre-owned and new golf equipment. Key elements of our growth and expansion strategy include the following: </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated Store Growth.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Over the past few years, we have demonstrated our ability to open new stores and to successfully
enter new markets in new geographic territories. We now operate 35 stores, having opened five new stores in 2003. Of these five stores, four were opened in the new markets of Denver, Washington DC,
and St. Louis, and one was opened in an existing market. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
plan to open five additional stores in 2003 and 20 stores in 2004 in both new and existing markets. Beyond 2004, we plan to open 30 to 40 stores per year over the next three years,
and we believe there is the potential for at least 200 2<SUP>nd</SUP> Swing stores nationwide. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increased Store Sales Productivity.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe we can increase sales in our existing stores by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Capitalizing
on favorable industry dynamics, including positive golfer demographics and further advances in golf equipment technology;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Further
developing the market for pre-owned golf equipment by increasing </FONT><FONT SIZE=2><I>2<SUP>nd</SUP> Swing</I></FONT><FONT SIZE=2> brand awareness
through growing market penetration and enhanced advertising and marketing programs; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Increasing
new equipment sales by adding new brand and equipment offerings. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

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<UL>
</UL>
</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enhanced Profitability at Store and Corporate Levels.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe opportunities exist to enhance store and corporate level
profitability by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Leveraging
store-level operating costs, such as occupancy, advertising, and payroll, with improved sales in existing stores and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Expanding
corporate operating margins and improving return on capital through continued leveraging of existing infrastructure costs, such as systems, distribution, and
management, over a larger sales base and through enhanced purchasing power. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Merchandising and Product Sourcing  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our merchandise offerings include pre-owned and new golf clubs, as well as new golf balls, bags, gloves, and accessories. Our stores do not currently
carry golf apparel or shoes. Merchandise sales by major category for 2002 are shown below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Percentage of Net Sales</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Pre-Owned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>New</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Woods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Iron sets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Putters, wedges, and other clubs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Balls, bags, and gloves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>70</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-Owned Equipment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe we offer the largest retail selection of pre-owned clubs in the
marketplace. Our typical store carries approximately 3,000 SKUs of pre-owned clubs, with approximately 7,000 additional SKUs available to our customers through our inter-store club
transfer program, which allows each store to determine whether a club is available at another store and arrange for delivery to the store where the customer has requested the club. We offer all major
brands and models of clubs, including those no longer available in other golf stores or golf pro shops. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
obtain over 80% of our pre-owned inventory from trade-ins or purchases from our customers. In addition, we purchase demo and close-out equipment
directly from certain manufacturers and from golf pro shops through our country club program. Under this program, a dedicated PGA professional is responsible for establishing and maintaining contacts
with pro shops, through which we purchase rental sets, excess inventory, and member trade-ins. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Equipment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;New equipment, representing approximately 30% of our net sales in 2002, consists primarily of clubs, balls,
bags, and gloves. We carry major brands such as Callaway, Cleveland, Cobra, Nike, Ping, TaylorMade, and Titleist. We believe the recent addition of the Titleist and Ping product lines significantly
strengthens our brand line-up. Private-label clubs are currently not part of our merchandising strategy. We offer our customers both special orders and custom fitting on any new clubs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
new product is purchased directly from manufacturers by our central buying group and most is shipped directly to our stores. We purchase new equipment from approximately 20 vendors,
of which one vendor accounted for approximately 39% and our five next largest vendors accounted for approximately 43% of our total new product purchases in 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

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<P><FONT SIZE=2><B>Retail Stores  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Store Operations, Customer Service, and Training.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;One of our key competitive strengths is our ability to provide superior
levels of service to our customers. Our stores offer customers an opportunity to interact with knowledgeable sales associates, many of whom are PGA professionals, who can help the customer test and
select equipment that best matches the customer's playing abilities and product and price preferences. This enables our customers to make an informed and economical purchasing decision from products
that are available in numerous brands, models, and price ranges. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
stores are staffed with one store manager and two full-time sales managers. Currently, in multiple store regions, selected store managers also serve as an area manager,
overseeing stores in that region. The area managers, and store managers in single-store markets, report to our Vice Presidents of Operations and Sales. Most of our store managers have a college
degree, have previously served as sales managers for us, and all have completed our extensive management training program. We prefer to fill the three key store management positions with either PGA
professionals or golfers with competitive experience at the collegiate level. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have developed an extensive training program for all of our store-level employees. The program consists of a series of tests, as well as ongoing training from our support office sales
training staff, covering product knowledge, selling skills, and operating procedures. In addition, our vendors offer in-store training as new products are introduced. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
compensation programs are designed to provide all store-level employees with competitive compensation. In addition to a base salary, we have an incentive compensation plan for store
and sales managers based on meeting certain sales and operational goals at their stores. Store and area managers are also eligible to participate in our stock compensation plan. Our competitive
compensation program, together with the opportunity for year-round employment in the golf industry, has been an important factor in our ability to attract and retain PGA professionals and
other golf experts. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Store Layout and Design.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our retail stores average 3,500 square feet, of which approximately 90% is dedicated to selling
space and the remainder to merchandise storage and receiving. The store layout is standardized, and new and pre-owned golf equipment are displayed separately. Iron sets
are displayed on wall fixtures and woods, irons, putters, and wedges in customized display bins generally organized by brand. Typically, two-thirds of our store space is dedicated to
pre-owned clubs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have designed our stores to be interactive and to appeal to our avid golf customer. All stores are equipped with a driving net and putting green area, which give our customers the
opportunity to test equipment before purchase. Our knowledgeable sales staff and store design, enhanced by television monitors tuned to The Golf Channel or playing new equipment information videos,
create a golfer-friendly, pro shop-like atmosphere that encourages our customers to spend more time in the store. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Store Location and Site Selection.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our stores are located in metropolitan markets, primarily in strip centers near regional
malls with high visibility and easy access from major roadways. Key factors in selecting new markets include demographic and lifestyle characteristics, such as income, age, and golf participation
rates, as well as the concentration of golf courses. Our staff consists of real estate professionals experienced in national store roll-outs, including selecting retail store locations,
negotiating leases, overseeing store buildout, and managing multiple store development. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>31</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently operate the following 35 stores: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="55%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="25%" ALIGN="CENTER"><FONT SIZE=1><B>Metropolitan<BR>
Market</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="29%" ALIGN="CENTER"><FONT SIZE=1><B>Location</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" ALIGN="CENTER"><FONT SIZE=1><B>Opening Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Square<BR>
Footage</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Washington, DC</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Fairfax, VA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>May 2003</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,440</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>St. Louis, MO</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>St. Louis, MO</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2003</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,500</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Denver, CO</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Littleton, CO</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2003</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,481</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Denver, CO</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Lakewood, CO</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2003</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,175</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Philadelphia, PA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Wilmington, DE</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2003</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,600</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Cleveland, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Akron, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>July 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,960</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Lincoln Park, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>June 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>2,795</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Pittsburgh, PA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Ross Township, PA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>May 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,960</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Downers Grove, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,585</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Philadelphia, PA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Moorestown, NJ</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,816</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Grand Rapids, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Kentwood, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Omaha, NE</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Omaha, NE</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,520</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Pittsburgh, PA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>North Fayette, PA</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,800</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Louisville, KY</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Louisville, KY</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>February 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,252</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Columbus, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Columbus, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>February 2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,121</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Dayton, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Dayton, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>September 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,200</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Minneapolis, MN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Bloomington, MN(1)</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>September 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,200</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Vernon Hills, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>June 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>2,995</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Cleveland, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Mentor, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>May 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,574</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Schaumburg, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>4,452</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Orland Park, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,904</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Indianapolis, IN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Indianapolis, IN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,552</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Aurora, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,827</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Chicago, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Skokie, IL</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,845</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Cincinnati, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Florence, KY</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2001</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,450</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Cleveland, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>North Olmsted, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,498</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Detroit, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Westland, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 2000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,300</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Cincinnati, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Springdale, OH</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>4,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Detroit, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Novi, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>2,664</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Milwaukee, WI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Brookfield, WI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,225</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Detroit, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Orion, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>March 2000</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,683</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Minneapolis, MN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Roseville, MN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>November 1999</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>2,955</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Detroit, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Madison Heights, MI</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 1999</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>2,820</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Minneapolis, MN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Burnsville, MN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>August 1998</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,200</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=1>Minneapolis, MN</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=1>Minnetonka, MN(2)</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>April 1998</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1>3,600</FONT></TD>
</TR>
</TABLE></DIV>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Originally
opened in Edina, Minnesota in February&nbsp;2000 and relocated to Bloomington, Minnesota.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Originally
opened in Minneapolis, Minnesota in September&nbsp;1997 and relocated to Minnetonka, Minnesota. </FONT></DD></DL>

<P><FONT SIZE=2><B>Proprietary Pricing Model  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed a proprietary bid/ask pricing model, which enables us to manage store-level purchase and sale pricing decisions for pre-owned clubs
at the corporate level, thus eliminating the need for store managers to make such decisions independently. This model utilizes quantitative factors, such as historic sales, pricing, gross margin, and
inventory performance data. In addition, management analyzes such qualitative factors as product life cycle, seasonality, and future product introductions. We believe this centralization of our
pricing decisions enables us to determine the appropriate bid or ask price for all of our 50,000 SKUs and balance supply with consumer demand, thus contributing to our ability to optimize sales, gross
margins, and return on inventory investment. </FONT></P>


<P><FONT SIZE=2><B>Distribution and Replenishment  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate a centralized distribution center of approximately 5,000 square feet at our corporate headquarters in Minnetonka, Minnesota, that services all of our
stores. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately
50% of new equipment inventory received by our stores is shipped from our distribution center, with the remainder (primarily balls, bags, gloves, and other accessories)
shipped direct to our stores from our vendors. The majority of our merchandise is shipped from the distribution center via United Parcel Service&reg;. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
product inventory is generally replenished, depending upon the category, using a reorder point/reorder quantity system. This system is based on sales forecasts, inventory levels, and
economic order quantities. Iron sets, woods, wedges, and putters are replenished through our central distribution
center on a biweekly basis. Consumable items, such as balls and gloves, are replenished in bimonthly shipments directly from the manufacturers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately
80% of our pre-owned inventory is purchased directly from our customers. The balance, which comes from our country club program, vendor demo and refurbished
product purchases, and the Callaway certified pre-owned program, is shipped from our central distribution center. Pre-owned inventory for new stores is pulled back from our
existing stores and shipped from our distribution center prior to a new store opening. We believe our distribution center, along with our option to lease additional adjacent space, has the capacity to
serve at least 100 stores. </FONT></P>

<P><FONT SIZE=2><B>Management Information System  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current MIS capabilities include an integrated corporate software product provided by Lawson Software as our computing platform of the future. This software,
running in conjunction with an Oracle&reg; database, provides corporate level functionality in the areas of procurement, inventory control, and financial systems and reporting. It further
establishes the foundation for future WEB enabled communications and collaborative processing with our stores, vendors, and other business partners. Through these systems, reports are generated on
daily and historic operations performance, labor, inventory levels, and required generally accepted accounting principles financial data. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recently implemented a new point-of-sale (POS) system at our retail locations. The new POS functionality includes: credit/check authorization, inventory and price lookup, sales entry
and reporting, along with inventory receipt and transfer processing. Retail stores are polled nightly, with all sales and inventory transactions posted to the central corporate systems. </FONT></P>

<P><FONT SIZE=2><B>Marketing and Advertising  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our marketing program is designed to create consumer awareness of our unique retail concept of buying, selling, and trading pre-owned and new golf
equipment. Our marketing is based primarily on print advertising, which typically consists of ads in local newspapers as well as golf magazines with national circulation. We supplement our print
advertising program with radio advertising in select markets, participation in trade shows, and sponsoring local and regional charity golf events. Our strategy of clustering stores in metropolitan
markets enables us to utilize newspaper and radio advertising on a cost-effective basis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given
the seasonal nature of the golf equipment business, we spend approximately 95% of our advertising budget during the period from March through August and during the holiday season.
We
use an outside advertising agency to generate our advertisements, including layout, production, and media management. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have a website, </FONT><FONT SIZE=2><I>www.2ndswing.com</I></FONT><FONT SIZE=2>, which provides general company information, a listing of our store locations, and select new product
information. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>33</FONT></P>

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<P><FONT SIZE=2><B>Competition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The new golf equipment market is highly competitive and fragmented. The principal channels of distribution include national and regional specialty golf retail
chains, golf pro shops, catalog and internet merchants, full-line sporting goods stores, and mass merchants. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
primary competitors for new equipment are specialty golf retail chains such as Edwin Watts Golf&reg;, Golf Galaxy&reg;, Golf USA&reg;, Golfsmith&reg;,
Nevada Bob's&reg;, Pro Golf Discount&reg;, and World Wide Golf&reg;. Specialty golf stores typically operate larger stores than we do, carry a broader assortment of
merchandise, including golf shoes and apparel, have access to the premium national brands, and provide in-store services and product knowledge. These chains are generally regional, many
are franchised, and all are privately held. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Golf
pro shops are primarily located at golf course facilities. Most have access to the premium brands of equipment but carry a much more limited assortment due to space constraints. The
pro shops offer a high degree of product knowledge and service, including custom fitting and special ordering. The pro shops typically do not take trade-ins of pre-owned clubs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Catalog
and internet merchants such as Edwin Watts Golf, Golfsmith, and The Golf Warehouse&reg; offer an extensive assortment of premium branded product, but are limited in their
ability to offer in-store services, demo programs, and an opportunity for the customer to inspect and test the products prior to purchase. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Full-line
sporting goods stores include such companies as Dick's Sporting Goods&reg;, Gart Sports&reg;, and The Sports Authority&reg;. While
assortments vary from chain to chain, these stores typically carry golf apparel and shoes, but offer a more limited selection of clubs and have access to fewer premium brands on a direct basis. In
addition,
full-line sporting goods stores are typically more limited in their service offerings and generally have fewer golf experts on staff dedicated to this category. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mass
merchants include discount stores such as Wal-Mart&reg; and Target&reg; and warehouse clubs such as Costco&reg; and Sam's Club&reg;.
These stores offer a more limited assortment of equipment, have little or no access to premium brands, are focused on the lower-end of the mass market, and are basically
self-serve operators. They are, however, very competitive in the pricing of golf consumables such as balls and gloves. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
many of our chain store competitors (specialty golf stores, full-line sporting goods stores, and mass merchants) have substantially greater financial and marketing
resources than we do, we are currently, based on industry data and our survey of our competitors' business operations, the only chain focused primarily on the buying, selling, and trading of
pre-owned golf equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-owned
golf equipment is sold through a wide variety of channels including local and regional retailers dealing in second-hand goods, auctions,
consumer-to-consumer through classified ads or internet sites, garage sales, and consignment and pawn shops. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that the internet has become a more important channel over the past several years for the purchase and sale of pre-owned clubs. These sites either provide a means
for consumers to sell directly to other consumers (such as eBay&reg;) or resell equipment purchased from consumers. We believe our store-based strategy has inherent advantages over
internet-based operators. Our convenient store locations allow our customers to examine product quality, compare prices, and test the products either in-store or through our demo program
prior to purchase. Our customers can utilize the expertise of our store associates and benefit from the immediate availability of our broad selection of pre-owned equipment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>34</FONT></P>

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<P><FONT SIZE=2><B>Trademarks and Service Marks  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have registered 2ND SWING&reg;, "IT'S NOT YOU, IT'S YOUR CLUBS!&reg;", and 2ND SWING GOLF&reg; as trademarks and service marks with the
United States Patent and Trademark Office. We believe that these marks are of considerable
value to our business and important to our marketing efforts. In addition, we have registered our web address, </FONT> <FONT SIZE=2><I>www</I></FONT><FONT SIZE=2>.</FONT><FONT SIZE=2><I>2ndswing.com.</I></FONT></P>


<P><FONT SIZE=2><B>Properties  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our retail stores are leased. Leases typically provide for an initial three-year or five-year term, with varying options for
renewal. Our retail store leases for stores open as of June&nbsp;29, 2003 expire as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="54%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=1><B>During Year<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="26%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Expiring Leases</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>2007 or later</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that the termination of any particular lease would not have a material adverse effect on our business and that similar locations on comparable terms would be available within
the same or a contiguous market area. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to our retail outlets, we lease a 12,791 square foot office and distribution facility in Minnetonka, Minnesota, where our corporate headquarters are also located. This lease
expires June&nbsp;30, 2006. We have a five-year renewal option. </FONT></P>

<P><FONT SIZE=2><B>Employees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;11, 2003, we had 146 full-time employees, including 33 corporate and administrative personnel and 113 store personnel, and 139
part-time employees. During seasonal peak periods, we add temporary part-time employees. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success depends upon our ability to attract and retain qualified personnel. Although we have been successful in attracting qualified employees, there can be no assurance that we will
not experience difficulties in attracting and retaining qualified personnel as our store expansion program continues. We believe that our relations with our employees are good. None of our employees
is covered by a collective bargaining agreement. </FONT></P>

<P><FONT SIZE=2><B>Legal Proceedings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not currently a party to any material legal proceeding, and, to the best of our knowledge, none is threatened. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>35</FONT></P>

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<BR></FONT><FONT SIZE=2><B>MANAGEMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information about our current directors, executive officers, and certain key employees. Two additional directors, each of
whom will be independent under current and proposed SEC and American Stock Exchange rules, will be elected to our board of directors shortly after the closing of this offering. </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="29%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="59%" ALIGN="CENTER"><FONT SIZE=1><B>Position</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Stanley A. Bodine</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Chief Executive Officer and Class III Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>P. Simon Kallal</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>President and Class I Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Robert M. Hiben</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Chief Financial Officer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Mary C. Sim</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Controller</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>David R. Pomije</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Chairman of the Board and Class III Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>George E. Mileusnic</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Class II Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Mario A. Catalino</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>56</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Chief Information Officer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Joseph R. Brinkman</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Vice President of Merchandising</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Robert B. Jordan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Vice President of Sales</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>William A. Kranz</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Vice President of Construction</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Larry&nbsp;A. Kurzeka</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Vice President of Operations</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>Directors and Executive Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Stanley A. Bodine</I></B></FONT><FONT SIZE=2> was appointed Chief Executive Officer and a Director in 2000 and served as Chief Financial
Officer from 2001 until May 2003. Mr.&nbsp;Bodine had served as president and chief operating officer of Funco,&nbsp;Inc. from 1995 until 2000, and as an officer and a director of that company
from 1992 until 2000. Mr.&nbsp;Bodine held various management positions with The Pillsbury Company from 1978 to 1991, most recently as senior vice president of The
H&auml;agen-Dazs Company, with responsibility for business development in the United States, Europe, and the Pacific Rim. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>P. Simon Kallal</I></B></FONT><FONT SIZE=2> is our founder and has been President and a Director since our inception in 1997. He was a member of the University of
Minnesota golf team and graduated in 1998 with a bachelor of science degree in accounting from the University of Minnesota Carlson School of Management. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Robert M. Hiben</I></B></FONT><FONT SIZE=2> was appointed our Chief Financial Officer in May&nbsp;2003. Mr.&nbsp;Hiben had served as president of CFO Decisions,
Inc., a provider of financial consulting services to the retail industry since 2003. From 2001 to 2003, Mr.&nbsp;Hiben served as chief financial officer for HighJump Software, Inc., a developer of
supply chain software and warehouse management systems. Mr.&nbsp;Hiben served as chief financial officer for Funco, Inc. from 1995 to 2000 and as its controller from 1992 to 1995. From 1990 to 1992,
Mr.&nbsp;Hiben served as chief financial officer for Bretts Department Stores Company and in various financial capacities for Wilsons the Leather Experts Inc. from 1982 to 1990. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Mary C. Sim</I></B></FONT><FONT SIZE=2> has been our Controller since 2000. From 1995 to 2000, Ms.&nbsp;Sim served as director of accounting for Funco,&nbsp;Inc.
From 1992 to 1995, Ms.&nbsp;Sim was the accounting manager of Funco,&nbsp;Inc. and prior to that was a financial analyst at Holiday Companies,&nbsp;Inc. from 1990 to 1992. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>David R. Pomije</I></B></FONT><FONT SIZE=2> has been Chairman of the Board since 1997. From 1995 to 2000, Mr.&nbsp;Pomije was majority shareholder and chief
executive officer of Funco,&nbsp;Inc., a specialty retailer of new and previously played interactive entertainment products, which he founded in 1988. Funco,&nbsp;Inc. was acquired by
Barnes&nbsp;&amp; Noble,&nbsp;Inc. in June&nbsp;2000. Since 2000, Mr.&nbsp;Pomije has been a private investor and consultant to various private companies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>George E. Mileusnic</I></B></FONT><FONT SIZE=2> was elected as a Director in 2002. Mr.&nbsp;Mileusnic has been the Chief Financial Officer of Caribou Coffee Company
since 2001. Prior to that, he had been executive vice president and chief financial officer of Dean&nbsp;&amp; DeLuca,&nbsp;Inc. from 2000 to 2001. From 1998 to 2000, Mr.&nbsp;Mileusnic was an
independent consultant providing financial and management consulting and services to a variety </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>36</FONT></P>

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<P><FONT SIZE=2>of
business entities. Mr.&nbsp;Mileusnic served as a director for Funco,&nbsp;Inc. from 1993 to 2000 and was executive vice president of administration for a division of the Coleman
Company,&nbsp;Inc., from 1996 to 1998 and chief financial officer of the Coleman Company,&nbsp;Inc. from 1989 to 1996. Mr.&nbsp;Mileusnic currently serves on the board of trustees of the
American Independence Funds. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors is divided into three classes of directors serving staggered three-year terms. The terms of our directors expire as follows: Class&nbsp;I at our
annual meeting to be held in 2006; Class&nbsp;II at our annual meeting to be held in 2004; and Class&nbsp;III at our annual meeting to be held in 2005. Our officers are appointed by the board of
directors and serve until their successors are elected, subject to earlier resignation or removal by the board. </FONT></P>

<P><FONT SIZE=2><B>Other Key Employees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Mario A. Catalino</I></B></FONT><FONT SIZE=2> has been our Chief Information Officer since 2000. From 1998 to 2000, Mr.&nbsp;Catalino was
the director of application development for Best Buy Corp. Prior to joining Best Buy, Mr.&nbsp;Catalino served as vice president of information systems for NordicTrack from 1992 to 1998. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Joseph R. Brinkman</I></B></FONT><FONT SIZE=2> has been our Vice President of Merchandising since 2002, having served as our director of merchandising since 2001.
From 1993 to 2000, Mr.&nbsp;Brinkman served as an engineer, sourcing manager, and materials manager for Chart Industries. He has both a B.S. in Mechanical Engineering from the University of
Minnesota's Institute of Technology and an M.B.A. in Finance from the Carlson School of Management at the University of Minnesota. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Robert B. Jordan</I></B></FONT><FONT SIZE=2> has been our Vice President of Sales since 2002, having served as our director of sales since 2000. From 1999 until
joining us, Mr.&nbsp;Jordan was store manager for Austad's Golf stores. Prior to that, Mr.&nbsp;Jordan served as vice president of sales, marketing, and customer service for IC System from 1991 to
1998. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>William A. Kranz</I></B></FONT><FONT SIZE=2> has been our Vice President of Construction since 2000. From 1991 to 2000, Mr.&nbsp;Kranz served as vice president of
construction for Funco,&nbsp;Inc. Previously, Mr.&nbsp;Kranz was commercial construction manager for William A. Kranz Construction and supervised the build out of various retail and restaurant
properties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Larry A. Kurzeka</I></B></FONT><FONT SIZE=2> has been our Vice President of Operations since 2002. From 1997 to 2002, Mr.&nbsp;Kurzeka was vice president of the
Suncoast Division of The Musicland Group, a Best Buy company. From 1983 to 1997, he held a variety of positions at The Musicland Group, including vice president of the On Cue Division, director of
merchandise, financial planning manager, and product buyer. </FONT></P>

<P><FONT SIZE=2><B>Director Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nonemployee members of our board of directors will receive compensation for their service on the board of directors. Directors who are employees will not
receive any compensation for services performed in their capacity as directors. We will reimburse each director for reasonable out-of-pocket expenses incurred in attending
meetings of the board of directors and any of its committees. In addition, directors who are not employees will be eligible to receive options under our stock option plan for nonemployee directors.
Under this plan, eligible directors may receive an option to purchase 7,500 shares of our common stock upon becoming a director and grants to purchase 5,000 shares on the day following each annual
meeting, if serving on that date. During 2002, we paid $1,250 in director compensation and issued an option to purchase 7,500 shares at an exercise price equal to the public offering price. Through
June&nbsp;29, 2003, we paid $2,500 in director compensation and issued an option to purchase 5,000 shares at an exercise price equal to the public offering price. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>37</FONT></P>

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<P><FONT SIZE=2><B>Committees of the Board  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately after this offering, our board of directors will maintain an audit committee and a compensation committee. George E. Mileusnic, as well as two
additional independent directors, will serve on both of these committees. The audit committee will be responsible for recommending to the full board of directors the appointment of our independent
accountants and reviewing with those accountants the scope of their audit and their report. The audit committee will also review and evaluate our accounting principles and system of internal
accounting controls. The compensation committee will be responsible for acting on matters relating to the compensation of directors, senior management, and key employees, including the granting of
stock options. </FONT></P>

<P><FONT SIZE=2><B>Executive Compensation  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summary Compensation Table.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with regard to compensation paid to our Chief
Executive Officer, the only executive officer whose total annual salary and bonus for fiscal 2002 exceeded $100,000. </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Principal Position<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Annual Compensation<BR>
Salary</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Stanley A. Bodine<BR>
Chief Executive Officer and Chief Financial Officer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2002<BR>
2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>150,000<BR>
150,000</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Bodine
and P.&nbsp;Simon Kallal, our President, currently receive annual salaries of $150,000 and $120,000, respectively. Robert&nbsp;M. Hiben was
appointed as our Chief Financial Officer in May 2003 at an annual salary of $100,000. In connection with his appointment, we agreed to grant Mr.&nbsp;Hiben upon the effectiveness of this offering an
option to purchase 25,000&nbsp;shares of our common stock at an exercise price equal to the public offering price. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Option Grants in Fiscal Year 2002.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No options were granted to Mr.&nbsp;Bodine during the 2002 fiscal year. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aggregated Option Exercises in Last Fiscal year and Fiscal Year-End Option Values.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table provides
information relating to option exercises during fiscal 2002 and the number and value of shares of common stock subject to options held by Mr.&nbsp;Bodine as of December&nbsp;29, 2002. </FONT></P>

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<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired on<BR>
Exercise</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Value Realized</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Underlying Unexercised<BR>
Options at Fiscal Year-End<BR>
Exercisable/Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Value of Unexercised<BR>
In-the-Money Options<BR>
at Fiscal Year-End(1)<BR>
Exercisable/Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Stanley A. Bodine</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER"><FONT SIZE=2>60,000/90,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER"><FONT SIZE=2>$240,000/$360,000</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Value is calculated as the difference between the proposed public offering price ($9.00) and the option exercise price ($5.00) multiplied by the
number of shares underlying the option.</FONT></DD></DL>

<P><FONT SIZE=2><B>2000 Stock Compensation Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2000 Stock Compensation Plan (the "Plan") provides for grants of both incentive stock options, intended to qualify as such under Section&nbsp;422 of the
Internal Revenue Code of 1986 (the "Code"), and nonqualified stock options, stock appreciation rights, and other stock-based awards. Except for the authority to grant incentive stock options, which
expires in 2010, the Plan has no expiration date but may be terminated by the Board of Directors at any time, subject to the rights of the holders of options or other awards previously granted under
this Plan. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares Subject to the Plan.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have reserved 900,000 shares of common stock for issuance under the Plan. These shares may be
unissued shares or shares repurchased by us. The Plan provides for appropriate adjustment in the number of shares subject to the Plan and to the grants previously made </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>38</FONT></P>

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<P><FONT SIZE=2>if
there is a stock split, stock dividend, reorganization, or other relevant change affecting our corporate structure or equity securities. If shares under a grant are not issued or transferred to the
extent permitted prior to the expiration of the grant or an award is otherwise forfeited, the shares will become available for inclusion in future grants. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administration.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Plan is administered by the Board or a committee composed of "non-employee" directors (as
defined in Rule&nbsp;16b-3 under the Exchange Act). The Board or committee determines the participants, grants stock options, with or without stock appreciation rights, and other awards,
establishes rules and regulations for the operation of the Plan, and determines the price, term, vesting schedule, number of shares, and other terms of options and
other awards. The Board or committee may delegate its powers and duties to members of our administration with respect to participants who are not subject to Section&nbsp;16 of the Exchange Act. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eligible Participants.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employees eligible to receive grants under the Plan are the officers and certain other key employees
of the Company. As of July&nbsp;11, 2003, the number of employees potentially eligible for grants was approximately 100. The number of grantees could vary from year to year. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Options.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Options granted under the Plan may be in the form of either options that qualify as "incentive stock options"
under Section&nbsp;422 of the Code ("ISOs") or those that do not qualify as such ("NQSOs"). The term of an option will be fixed by the Board or committee, but no option may have a term of more than
ten years from the date of grant. Options will be exercisable at such times as determined by the Board or committee. The option exercise price will be determined by the Board or committee at the time
of grant but will not be less than 85% of the fair market value of our common stock on the date of grant (100% of the fair market value for ISOs). The grantee may pay the option price in cash or, if
permitted by the Board or committee, by delivering to us shares of common stock already owned by the grantee that have a fair market value equal to the option exercise price. The Code also places the
following additional restrictions on the award of ISOs. If an ISO is granted to a participant who owns, at the date of grant, in excess of 10% of our outstanding common stock, the exercise price must
be at least 110% of the fair market value on the date of grant and the term of the ISO may be no more than five years from the date of grant. The total fair market value of shares subject to ISOs that
are exercisable for the first time by any participant in any given calendar year cannot exceed $100,000 (valued as of the date of grant). </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Appreciation Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board or committee may grant stock appreciation rights ("SARs") in connection with a stock
option granted under the Plan. If a grantee exercises a SAR, the grantee will receive an amount equal to the excess of the fair market value of the shares with respect to which the SAR is being
exercised over the option exercise price of the shares. If a SAR is exercised in whole or in part, the right under the related option to purchase shares with respect to which the SAR has been
exercised will terminate to the same extent. If a stock option is exercised, any SAR related to the shares purchased will terminate. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Stock-Based Awards.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board or committee, in its discretion, may grant other awards that are valued in whole or in
part by reference to, or otherwise based on, the common stock, including, without limitation, performance shares, convertible preferred stock, convertible debentures, or exchangeable securities. Such
awards may be granted in addition to or in tandem with stock options or stock appreciation rights granted under the Plan. The Board or committee may set such terms with regard to the vesting of such
awards as it deems reasonable. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Termination of Employment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise provided in the related award agreement, awards granted under the Plan are
generally not transferable other than by the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules and regulations thereunder. Following the death of an optionee, any option held may be exercised, to the extent such option was exercisable at </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>39</FONT></P>

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<P><FONT SIZE=2>the
time of death or on such accelerated basis as the Board or committee may determine at or after grant, by the legal representative of the optionee's estate or by any person who acquired the option
by will or the laws of descent and distribution for a period of one year (or such other period as the Board or committee may specify at grant) from the date of death or until the expiration of the
stated term of the option, whichever period is shorter. If a participant's employment is terminated by reason of disability, any option held by such participant may thereafter be exercised, to the
extent it was exercisable at the time of termination or on such accelerated basis as the Board or committee may determine at or after grant, until the expiration of the stated term of such option
(unless otherwise specified by the Board or committee at the time of grant). If the optionee dies prior to the expiration of any unexercised option, the option may thereafter be exercised to the
extent it was exercisable at the time of death for a period of one year from the date of death or until the expiration of the stated term of the option, whichever period is shorter. If any optionee's
employment is terminated for any other reason, the option may be exercised, to the extent otherwise then exercisable, for the lesser of three months from the date of termination of employment or the
balance of the term of the option. Terms for awards other than stock options and stock appreciation rights may be set by the Board or committee at the time of the granting of the award. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change of Control.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event of a "Change in Control" (as defined in the Plan) any award granted under the Plan will
become fully exercisable and vested. For purposes of the Plan, a "Change in Control" occurs when (i)&nbsp;the majority of our directors are persons other than persons whose election has been
solicited by the Board of Directors or have been appointed by the Board to fill vacancies created by death, resignation, or a new position, (ii)&nbsp;any person or group of persons (as defined in
Section&nbsp;13(d) of the Exchange Act and the rules thereunder) acquires 20% or more of our outstanding voting stock, or (iii)&nbsp;the shareholders approve an acquisition of us by an entity
(other than a subsidiary or parent) through the purchase of our assets, or by merger, or otherwise. </FONT></P>

<P><FONT SIZE=2><B>Stock Option Plan for Nonemployee Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our Stock Option Plan for Nonemployee Directors (the "Directors Plan"), options to purchase up to an aggregate of 150,000 shares of common stock may be
granted to our directors who are not employees of us or any subsidiary (each an "Eligible Director"). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Directors Plan provides that each nonemployee director will be granted an option to purchase 7,500 shares on the date he or she is first elected or appointed. Thereafter, each
director serving as of the day following an annual meeting will be granted an option to purchase 5,000 shares of common stock on that date. Each option becomes exercisable on the earlier of the first
anniversary date of the
date of grant or the date of the next following annual meeting. The options generally expire seven years after the date of grant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exercise price of options granted under the Directors Plan is to be equal to the fair market value of a share of common stock on the date of grant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shares of common stock that may be issued to grantees under the Directors Plan may be unissued shares or shares repurchased by us. The Directors Plan provides for appropriate
adjustment in the number of shares subject to the Directors Plan and to the grants previously made if there is a stock split, stock dividend, reorganization, or other relevant change affecting our
corporate structure or equity securities. If any shares subject to an option are not issued because the option is not exercised, such shares will be available for future grants. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Directors Plan is administered by a committee appointed by the Board or, if no committee is appointed, by the Board. Other than the terms of the grants, the committee has full
authority to interpret the Directors Plan as it deems desirable and to make all other determinations necessary or appropriate for the administration of the Directors Plan. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>40</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
an Eligible Director's service as a director terminates because of death or disability, any option held by such Eligible Director that has not yet become exercisable will become
immediately exercisable. Such options will be exercisable, in the event of termination because of death, for one year following the date of death or until the expiration of the term of the option,
whichever is shorter, or if because of disability, until the expiration of the stated term of the option. If a director whose service has been terminated because of disability dies prior to the
expiration of the option, the option will thereafter be exercisable for one year from the date of death or until expiration of the term of the option, whichever is shorter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a "Change in Control" as defined in the Directors' Plan, all options granted shall become fully exercisable and vested. For purposes of the Directors Plan, a "Change in
Control" occurs when (i)&nbsp;the majority of our directors are persons other than persons whose election has been solicited by the Board of Directors or have been appointed by the Board to fill
vacancies created by death, resignation, or a new position, (ii)&nbsp;any person or group of persons (as defined in Section&nbsp;13(d) of the Exchange Act and the rules thereunder) acquires 20% or
more of our outstanding voting stock, or (iii)&nbsp;our shareholders approve an acquisition of us by an entity (other than a subsidiary or parent) through the purchase of our assets, or by merger,
or otherwise. </FONT></P>

<P><FONT SIZE=2><B>Employee Stock Awards  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrently with the effectiveness of the offering, we will issue, as stock awards, approximately 10,000 shares of our common stock to our nonofficer employees.
We plan to issue 50 shares of our common stock to each of our full-time employees and 25 shares of our common stock to each of our part-time employees. These shares will be issued without
consideration and will be freely tradeable upon issuance. We will recognize the fair value of the shares as compensation expense in the period in which they are issued. The issuance of these shares
will have no material impact on the book value per share of the shares outstanding following the offering. </FONT></P>

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<BR></FONT><FONT SIZE=2><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Purchases of Common Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August 2000, Stanley&nbsp;A. Bodine, our Chief Executive Officer, purchased 48,000 shares of common stock from us at $5.00 per share. Under the terms of the
purchase agreement for these shares, in the event that we issue shares to a third party at a price less than $5.00 per share either in connection with a merger or similar transaction or sale, Mr.
Bodine is entitled to receive additional shares for no additional consideration such that Mr.&nbsp;Bodine's holdings will have a total value of $240,000, assuming that his shares are valued at the
price at which the new shares were issued. Mr.&nbsp;Bodine has agreed to waive this provision upon completion of this offering. Mr.&nbsp;Bodine also has the right to include these shares in any
registration statement we file for sales of our common stock by other shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, Mr.&nbsp;Bodine and members of his immediate family purchased 72,000 shares of common stock from David&nbsp;R. Pomije at $5.00 per share. The purchase price was paid
with promissory notes payable to Mr.&nbsp;Pomije, which were secured by the purchased shares. The notes are payable in six annual installments, beginning in August 2001, and bear interest at an
annual rate of 6.33%. As of the date of this prospectus, $63,287 of the principal remains outstanding under the notes, and $32,647 in interest has been paid. </FONT></P>

<P><FONT SIZE=2><B>Loans from David R. Pomije  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between January&nbsp;2000 and March&nbsp;2002, Mr.&nbsp;Pomije, our Chairman of the Board and majority shareholder, advanced to us an aggregate of
$7,867,500. The annual interest rate on these loans was between 12.0% and 13.5% per annum. In December&nbsp;2000, $1,267,500 principal of the debt was converted to 190,125 shares of common stock. We
repaid $3,100,000 and as of March&nbsp;31, 2002, the outstanding balance was $3,500,000. Interest on these loans totaled $230,260 in fiscal 2000 and $339,750 in fiscal 2001. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
March&nbsp;31, 2002, Mr.&nbsp;Pomije agreed to convert the then $3,500,000 balance due into a mezzanine revolving promissory note, authorizing indebtedness not to exceed
$3,500,000. This note is due March&nbsp;31, 2006. We have granted Mr.&nbsp;Pomije a security interest in our inventory, accounts receivable, and certain other assets in connection with this note.
In addition, we have a $4,500,000 working capital revolving promissory note which is due March&nbsp;31, 2006. The borrowing availability under this note will decrease to $1,500,000 on
June&nbsp;30, 2004. We have agreed to grant Mr.&nbsp;Pomije a security interest in our inventory upon his request in connection with this note. Both notes bear interest at 12% per annum. As of
June&nbsp;29, 2003, the outstanding balance on the mezzanine revolving promissory note is $3,500,000, and $1,500,000 is outstanding on the working capital revolving promissory note. Interest on
loans from Mr.&nbsp;Pomije for fiscal 2002 was $456,961 and for the six months ended June&nbsp;29, 2003, was $333,573. Pending use of the proceeds of this offering for new store openings, working
capital, and other general corporate purposes, we plan to repay all amounts outstanding on these notes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
additional consideration for the mezzanine revolving promissory note, Mr.&nbsp;Pomije received a warrant to purchase 105,000 shares of our common stock at $9.17 per share. The
warrant is exercisable until March&nbsp;31, 2012. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>42</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm1694_principal_shareholders"> </A>
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<BR></FONT><FONT SIZE=2><B>PRINCIPAL SHAREHOLDERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information regarding the beneficial ownership of our common stock as of July&nbsp;11, 2003 and as adjusted for the sale
of shares of common stock in the offering: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
person known by us to beneficially own more than 5% of the outstanding shares of common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
of our directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
of our named executive officers; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>all
of our directors and executive officers as a group. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial
ownership is determined in accordance with the rules of the SEC and includes shares that may be acquired within sixty days of the date of this prospectus. To our knowledge,
all persons named in the table have sole voting and investment power with respect to all shares of common stock owned, unless otherwise noted. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Beneficial Ownership<BR>
of Common Stock<BR>
Before Offering</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Beneficial Ownership<BR>
of Common Stock<BR>
After Offering</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name(1)<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>David R. Pomije</FONT><FONT SIZE=1>(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,843,542</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>52.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,843,542</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>33.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>P. Simon Kallal</FONT><FONT SIZE=1>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>317,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>317,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Stanley A. Bodine</FONT><FONT SIZE=1>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>240,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>240,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Daniel J. Frederick</FONT><FONT SIZE=1>(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>231,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>231,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>George E. Mileusnic</FONT><FONT SIZE=1>(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Robert M. Hiben</FONT><FONT SIZE=1>(7)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>All directors and executive officers as a group (6&nbsp;persons)</FONT><FONT SIZE=1>(2)(3)(4)(6)(7)(8)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,427,018</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>66.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,427,018</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>42.8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>*</FONT></DT><DD><FONT SIZE=1>Less
than 1%
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>The
address for each shareholder is 5810 Baker Road, Minnetonka, Minnesota 55345, except Mr.&nbsp;Frederick for whom the address is 2520 Cedar Ridge Road, Woodland, Minnesota 55391.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Includes
6,000 shares held on behalf of Mr.&nbsp;Pomije's minor children and 105,000 shares issuable upon exercise of currently exercisable warrants.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>Includes
30,000 shares pledged to Mr. Pomije as security for a promissory note payable to Mr.&nbsp;Pomije by Mr. Kallal and 24,000 shares issuable upon exercise of a currently
exercisable option.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>Includes
shares held by Mr.&nbsp;Bodine and his wife, 36,000 shares held on behalf of their minor children, and 90,000 shares issuable upon exercise of currently exercisable
options.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(5)</FONT></DT><DD><FONT SIZE=1>Includes
shares held by Mr.&nbsp;Frederick and his wife.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(6)</FONT></DT><DD><FONT SIZE=1>Includes
7,500 shares issuable upon exercise of a currently exercisable option.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(7)</FONT></DT><DD><FONT SIZE=1>Includes
shares held by Mr. Hiben and his wife.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(8)</FONT></DT><DD><FONT SIZE=1>Includes
4,200 shares issuable upon exercise of a currently exercisable option.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>43</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm1694_description_of_capital_stock"> </A>
<A NAME="toc_dm1694_3"> </A>
<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF CAPITAL STOCK    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The description of our securities contained herein is qualified in its entirety by reference to our Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws and the Minnesota Business Corporation Act. </FONT></P>

<P><FONT SIZE=2><B>Capital Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Amended and Restated Articles of Incorporation authorize the issuance of 50,000,000 shares of capital stock, par value $0.01 per share. The board of directors
is authorized to establish different classes or series of shares and to fix the rights and preferences of any class or series so established. If not otherwise designated, our shares of capital stock
are common stock. As of the date of this prospectus, 3,440,672 shares of our common stock are issued and outstanding, and we have approximately 120 shareholders. All currently outstanding shares of
common stock are, and the common stock offered hereby will be, upon payment therefor, fully paid and nonassessable. Currently, we have no issued and outstanding preferred stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
holders of common stock are entitled to one vote for each share held of record on all matters voted upon by shareholders and may not cumulate votes for the election of directors.
Accordingly, the holders of a majority of the shares of common stock outstanding will be able to elect all of the directors. The holders of common stock are entitled to such dividends as may be
declared by the board of directors. Subject to the preferential rights, if any, of any class or series of preferred stock that may be authorized and issued by the board of directors, each share of
outstanding common stock is entitled to participate equally in any distribution of net assets made to our shareholders upon our liquidation. There are no redemption, sinking fund, conversion, or
preemptive rights with respect to the shares of common stock. All shares of common stock have equal rights and preferences. </FONT></P>

<P><FONT SIZE=2><B>Limitation of Liability and Indemnification  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by the Minnesota Business Corporation Act, our Amended and Restated Articles of Incorporation provide that none of our directors will be liable to us
or to our shareholders for monetary damages for breach of a fiduciary duty as a director other than for: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
breach of the director's duty of loyalty to us or to our shareholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>acts
or omissions not in good faith or involving intentional misconduct or a knowing violation of law;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>approval
of specified unlawful dividends or stock repurchases or redemptions; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
transaction from which the director derived an improper personal benefit. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Minnesota law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;302.A.521
of the Minnesota Business Corporation Act and our Amended and Restated Bylaws provide that we must indemnify any director, officer, employee, or agent made or
threatened to be made a party to a proceeding, by reason of the former or present official capacity of the person, against judgments, penalties, fines, settlements, and reasonable expenses incurred by
the person in connection with the proceeding if specified statutory standards are met. "Proceeding" means a threatened, pending, or completed civil, criminal, administrative, arbitration, or
investigative proceeding, including one by us or in our behalf. For a complete statement of these indemnification rights, please see Section&nbsp;302A.521 of the Minnesota Business Corporation Act
and our Amended and Restated Bylaws. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>44</FONT></P>

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<P><FONT SIZE=2><B>Antitakeover Provisions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specific provisions of the Minnesota Business Corporation Act, our Amended and Restated Articles of Incorporation, and our Amended and Restated Bylaws could have
the effect of discouraging attempts to acquire us, including by a hostile takeover, or to remove incumbent management even if some or a majority of our shareholders were to deem the attempt to be in
their best interest, including an attempt that might result in the payment of a premium over the market price for the shares of common stock held by our shareholders. </FONT></P>

<P><FONT SIZE=2><B>Issuance of Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Amended and Restated Articles of Incorporation provide that our board of directors is authorized, subject to certain limitations prescribed by law, without
further shareholder approval, to issue from time to time from the authorized capital stock shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights,
and any qualifications, limitations, or restrictions of the shares of each series of preferred stock. The board may, among other things, determine with respect to each series of preferred stock
specific voting rights, designations, dividend rights (and whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption price or prices,
conversion rights, and liquidation preferences. Because the board of directors will have the power to establish the preferences and the rights of the shares of any series of preferred stock without
any further action or vote by the shareholders, the board may grant the holders of any series of preferred stock preferences, powers, and rights, including voting rights, senior to the rights of the
holders of common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One
of the potential effects of issuing preferred stock may be to enable the board of directors to render more difficult, discourage, or prevent an attempt to obtain control of us by
means of a tender offer, proxy contest, merger, or otherwise and thereby protect the continuity of our current management. The issuance of shares of preferred stock pursuant to the board of directors'
authority may adversely affect the rights of holders of common stock. </FONT></P>

<P><FONT SIZE=2><B>Classified Board of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that the board of directors is divided into three classes of
directors serving staggered three-year terms. The classification of directors has the effect of making it more difficult for shareholders to change the composition of the board of
directors in a relatively short period of time. Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws also provide that directors may be removed only by the
affirmative vote of the holders of at least two-thirds of the voting power of all of the outstanding shares of common stock entitled to vote for the election of directors. In addition,
vacancies, whether created by resignation, death, removal, or an increase in the number of directors, may be filled by a vote of a majority of directors
then in office, even though less than a quorum. The foregoing provisions could prevent shareholders from removing incumbent directors and filling the resulting vacancies with their own nominees. </FONT></P>

<P><FONT SIZE=2><B>Supermajority Vote  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Amended and Restated Articles of Incorporation require the affirmative vote of at least two-thirds of the voting power of all outstanding shares
entitled to vote to authorize any merger, consolidation, exchange, sale, or other disposition of all or substantially all of our assets or our voluntary dissolution. These actions require only
majority shareholder approval if the proposed action has been approved by the affirmative vote of two-thirds of the directors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>45</FONT></P>

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<P><FONT SIZE=2><B>Amendments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The approval of the holders of at least two-thirds of the voting power of all outstanding shares of common stock entitled to vote for the election of
directors is required to amend specified provisions of our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws, including those described above. </FONT></P>

<P><FONT SIZE=2><B>Statutory Provisions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;302A.671 of the Minnesota Business Corporation Act applies, with specified exceptions, to any acquisition of our voting stock resulting in the
acquisition of beneficial ownership of 20% or more of the voting stock then outstanding. Section&nbsp;302A.671 requires approval of any acquisition by a majority of our shareholders prior to its
consummation. In general, shares acquired in the absence of approval are denied voting rights and are redeemable by us at their then fair market value within 30&nbsp;days after the acquiring person
has failed to provide us with a timely information statement or the date the shareholders have voted not to grant voting rights to the acquiring person's shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;302A.673
of the Minnesota Business Corporation Act generally prohibits any shareholder who or which owns 10% or more of our voting shares to enter into a business
combination with us, or with any of our subsidiaries, for four years following the shareholder's share acquisition date, unless the business combination is approved by a committee of all of the
disinterested members of the board of directors before the interested shareholder's share acquisition. </FONT></P>


<P><FONT SIZE=2><B>Warrants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2000, we issued warrants to purchase 2,400 shares of our common stock at $5.00 per share. These warrants are exercisable for a period of six years
commencing on April&nbsp;26, 2000 and were issued as partial consideration for marketing and advertising services. In March&nbsp;2002, we issued a warrant to purchase 105,000 shares of our common
stock at $9.17 per share. This warrant is exercisable for a period of ten years commencing on March&nbsp;31, 2002. In addition, in March&nbsp;2002, we issued a warrant to purchase 13,467 shares of
our common stock at $8.43 per share. This warrant is exercisable for a period of five years commencing on March&nbsp;28, 2002. </FONT></P>


<P><FONT SIZE=2><B>Transfer Agent and Registrar  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock is Wells Fargo Shareowner Services. </FONT></P>

<P><FONT SIZE=2><B>Listing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied to have our shares of common stock approved for listing on the American Stock Exchange under the symbol "SSG." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>46</FONT></P>

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<BR></FONT><FONT SIZE=2><B>SHARES ELIGIBLE FOR FUTURE SALE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no market for our common stock. We cannot predict the effect, if any, that market sales of shares of our common stock or
the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock
in the public market could adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity securities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering, we will have 5,440,672 shares of common stock outstanding, assuming WR&nbsp;Hambrecht+Co does not exercise its overallotment option, and 5,740,672
shares of common stock
outstanding if WR&nbsp;Hambrecht+Co exercises its overallotment option. We have reserved 1,050,000 shares of common stock for issuance upon exercise of options granted or to be granted under our
stock option plans, of which options to purchase 412,250 shares are currently outstanding. We also have reserved 120,867 shares of common stock for issuance upon the exercise of outstanding warrants. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of the 2,000,000 shares sold in this offering will be freely tradeable without restriction or further registration under the Securities Act, unless the shares are purchased by
"affiliates" of 2<SUP>nd</SUP>&nbsp;Swing as that term is defined in Rule&nbsp;144 under the Securities Act. The remaining 3,440,672 shares of common stock outstanding are "restricted
securities" under the Securities Act. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule&nbsp;144 or
Rule&nbsp;701 under the Securities Act. </FONT></P>

<P><FONT SIZE=2><B>Rule&nbsp;144  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;144, beginning
on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003, a person who has owned shares of our common stock for at least one year would be entitled
to sell within any three-month period a number of shares that does not exceed the greater of: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>1%
of the number of shares of common stock then outstanding, which will equal approximately 54,406 shares immediately after this offering; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
average weekly trading volume of the common stock on the American Stock Exchange during the four calendar weeks preceding the filing of a notice on Form&nbsp;144 with
respect to that sale. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
under Rule&nbsp;144 are also governed by manner of sale provisions and notice requirements and current public information about us must be available. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, a person who is deemed not to have been our affiliate at any time during the three months preceding a sale by him or her and who has beneficially owned his or her shares for
at least two years, may sell the shares in the public market under Rule&nbsp;144(k) without regard to the volume limitations, manner of sale provisions, notice requirements, or the availability of
current information we refer to above. Approximately 212,706 outstanding shares will qualify for this exemption immediately after the offering. </FONT></P>

<P><FONT SIZE=2><B>Rule&nbsp;701  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;11, 2003, approximately 108,510&nbsp;shares of common stock are issuable under currently exercisable options, which were issued in reliance on
Rule&nbsp;701. All of these shares may be eligible for sale in reliance on Rule&nbsp;701 beginning on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003. Sales of these shares of common stock will be limited under
lock-up agreements with WR&nbsp;Hambrecht+Co. In general, under Rule&nbsp;701 as currently in effect, our employees who have purchased shares from us in connection with a compensatory
plan or other agreement are eligible to resell those shares on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003, in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>47</FONT></P>

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<A NAME="page_dm1694_1_48"> </A>
<BR>

<P><FONT SIZE=2>reliance
on Rule&nbsp;144, but without compliance with restrictions, including the holding period, contained in Rule&nbsp;144. </FONT></P>

<P><FONT SIZE=2><B>Employee Stock Awards  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrently with the effectiveness of the offering, we will issue, as stock awards, approximately 10,000 shares of our common stock to our nonofficer employees.
We plan to issue 50 shares of our common stock to each of our full-time employees and 25 shares of our common stock to each of our part-time employees. These shares will be issued without
consideration and will be freely tradeable upon issuance. </FONT></P>

<P><FONT SIZE=2><B>Lock-Up Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this prospectus, all of our officers and directors, as well as certain shareholders, holding an aggregate of approximately 3,014,503 shares, or
88% of our currently outstanding common stock, have entered into, or will enter into prior to the offering, lock-up agreements in connection with this offering. These lock-up
agreements provide that these persons will not offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of our common stock or any securities exercisable for or convertible
into our common stock owned by them for a period of 180&nbsp;days after the date of this prospectus without the prior written consent of WR&nbsp;Hambrecht+Co, which has advised us that it has no
present intention to release any of the shares subject to the lock-up agreements prior to the expiration of the lock-up period. </FONT></P>

<P><FONT SIZE=2><B>Registration of Shares under Stock Option Plans  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to file a registration statement on Form&nbsp;S-8 covering all of the shares of common stock issuable or reserved for issuance under our
stock option plans as soon as practicable
following the date of this prospectus. When issued, these shares will be freely tradeable in the public market, subject to Rule&nbsp;144 volume limitations applicable to affiliates and the
lock-up agreements described above. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>48</FONT></P>

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NAME="page_do1694_1_49"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1694_plan_of_distribution"> </A>
<A NAME="toc_do1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>PLAN OF DISTRIBUTION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are offering the common stock on a best-efforts basis principally to selected institutional investors. WR Hambrecht+Co, LLC has agreed, subject to the terms
and conditions set forth in the placement agency agreement between us and them, to act as our exclusive placement agent in connection with this offering. The placement agent is not obligated and does
not intend to purchase any of the common stock offered hereby. We have agreed to pay the placement agent a fee equal to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of this offering as a placement agent's fee. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have granted the placement agent an option, exercisable within 30&nbsp;days after the date of this prospectus, to place up to an aggregate of 300,000 additional shares of common
stock at the same price per share to be paid for the other shares offered hereby solely for the purpose of covering overallotments. The placement agent may exercise the option only for the purpose of
covering excess placements, if any, made in connection with the distribution of the shares of common stock offered hereby. The placement agent will place any additional shares on the terms described
in the preceding paragraph and will receive the same placement agent's fee. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes the compensation to be paid by us to WR Hambrecht+Co. This information assumes either no exercise or full exercise by WR Hambrecht+Co of its overallotment
option: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Without<BR>
Overallotment</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>With<BR>
Overallotment</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Public offering price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Placement agent fee paid by us</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Proceeds, before expenses, to us</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
estimate that our total expenses for this offering, excluding the placement agent fee, will be approximately $750,000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
and each of our directors and executive officers and certain other shareholders, who in the aggregate have the right to sell or otherwise transfer approximately 3,014,503 shares of
common stock, have agreed, subject to limited exceptions, not to sell, offer, contract to sell, transfer the economic risk of ownership in, make any short sale, pledge, or otherwise dispose of any
shares of our common stock or securities convertible into our common stock, directly or indirectly, for a period of 180&nbsp;days after the date of this prospectus without the prior written consent
of WR Hambrecht+Co. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
agreement does not extend to bona fide gifts to immediate family members of such persons who agree to be bound by such restrictions or to limited partners or shareholders of such
holders who agree to be bound by such restrictions. In determining whether to consent to a transaction prohibited by these restrictions, WR Hambrecht+Co will take into account various factors,
including the number of shares requested to be sold, the anticipated manner and timing of sale, the potential impact of the sale on the market for the common stock, and market conditions generally. We
may grant options and issue common stock under existing stock option plans and issue unregistered shares in connection with any outstanding convertible securities or options during the
lock-up period. For more information, see "Shares Eligible for Future Sale." </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have agreed to indemnify WR Hambrecht+Co and its controlling persons against certain&nbsp;liabilities, including liabilities under the Securities Act, or to contribute to payments
WR&nbsp;Hambrecht+Co may be required to make in respect thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WR
Hambrecht+Co has informed us that it will not confirm, without client authorization, sales to its client accounts as to which it has discretionary authority. WR Hambrecht+Co has also
informed us that it intends to deliver all copies of this prospectus via hand delivery or through mail or courier services and only printed forms of the prospectus are intended to be used. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>49</FONT></P>

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<A NAME="page_do1694_1_50"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this offering, WR Hambrecht+Co and other persons participating in this offering may engage in transactions which affect the market price of the common stock. These may
include stabilizing and overallotment transactions and purchases to cover short positions. Stabilizing transactions consist of bids or purchases for the purpose of pegging, fixing, or maintaining the
price of the common stock. An overallotment involves placing more shares of common stock in this offering than are specified on the cover page of this prospectus, which results in a short position.
The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares overalloted by the placement agent is not greater than the number
of shares that
it may place in the overallotment option. In a naked short position, the number of shares overalloted is greater than the number of shares in the overallotment option. WR Hambrecht+Co may cover this
short position by purchasing common stock in the open market and/or by exercising all or part of its overallotment option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
determining the source of shares to close out the short position, WR&nbsp;Hambrecht+Co will consider, among other things, the price of shares available for purchase in the open
market as compared to the price at which it may place shares through the overallotment option. If WR&nbsp;Hambrecht+Co places more shares than could be covered by the overallotment option, a naked
short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if WR&nbsp;Hambrecht+Co is concerned that there could be
downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, WR Hambrecht+Co may impose a penalty bid. This allows WR Hambrecht+Co to reclaim the selling concession allowed to it if common stock sold in this offering is repurchased by
it in stabilizing or short covering transactions. These transactions, which may be effected on the American Stock Exchange or otherwise, may stabilize, maintain, or otherwise affect the market price
of the common stock and could cause the price to be higher than it would be without these transactions. WR&nbsp;Hambrecht+Co and other participants in this offering are not required to engage in any
of these activities and may discontinue any of these activities at any time without notice. We and WR&nbsp;Hambrecht+Co make no representation or prediction as to whether WR&nbsp;Hambrecht+Co will
engage in such transactions or choose to discontinue any transactions engaged in or as to the direction or magnitude of any effect that these transactions may have on the price of the common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have applied to list our common stock on the American Stock Exchange under the symbol "SSG." Prior to this offering, there has been no public market for our common stock.
Consequently, we, WR Hambrecht+Co, and the investors will negotiate to determine the initial public offering price. We will consider current market conditions, our operating results in recent periods,
the market capitalization of other companies in our industry, and estimates of our potential. The estimated price range specified on the cover page of this prospectus may change because of market
conditions and other factors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1694_legal_matters"> </A>
<A NAME="toc_do1694_2"> </A>
<BR></FONT><FONT SIZE=2><B>LEGAL MATTERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock offered hereby will be passed upon for us by Moss&nbsp;&amp; Barnett, A Professional Association, Minneapolis, Minnesota.
Certain legal matters in connection with this offering will be passed upon for the placement agent by Sidley Austin Brown&nbsp;&amp; Wood LLP, Chicago, Illinois. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1694_experts"> </A>
<A NAME="toc_do1694_3"> </A>
<BR></FONT><FONT SIZE=2><B>EXPERTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernst&nbsp;&amp; Young&nbsp;LLP, independent auditors, have audited our financial statements at December&nbsp;29, 2002 and for each of the two years then ended
as set forth in their report. Silverman Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD, independent auditors, have audited our financial statements for the year ended December&nbsp;31, 2000, as set
forth in their report. We have included our financial statements in the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>50</FONT></P>

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<A NAME="page_do1694_1_51"> </A>
<BR>

<P><FONT SIZE=2>prospectus
and elsewhere in the registration statement in reliance on the reports of Ernst&nbsp;&amp; Young&nbsp;LLP and Silverman Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD, given on their
authority as experts in accounting and auditing. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1694_independent_auditors"> </A>
<A NAME="toc_do1694_4"> </A>
<BR></FONT><FONT SIZE=2><B>INDEPENDENT AUDITORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;4, 2002, in anticipation of this offering, our board of directors engaged Ernst&nbsp;&amp; Young&nbsp;LLP as our independent auditors to
reaudit our December&nbsp;30, 2001 financial statements and dismissed Silverman Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD, our former auditors. During the fiscal years ended December&nbsp;31,
2000 and December&nbsp;30, 2001, and through September&nbsp;4, 2002, there were no disagreements with Silverman Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure or with respect to our financial statements which, if not resolved to the satisfaction of Silverman Olson
Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD, would have caused it to make reference to the subject matter of the disagreement in connection with its report. The report of Silverman Olson
Thorvilson&nbsp;&amp; Kaufmann LTD for the fiscal years ended December&nbsp;31, 2000 and December&nbsp;30, 2001 did not contain an adverse opinion or a disclaimer of opinion nor was the report
qualified or modified as to uncertainty, audit scope, or accounting principles. Prior to the board's decision to engage Ernst&nbsp;&amp; Young&nbsp;LLP, we did not consult Ernst&nbsp;&amp; Young LLP
with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or
any other matters or reportable events as set forth in Items&nbsp;304(a)(2)(i) and (ii) of Regulation&nbsp;S-K. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1694_where_you_can_find_more_information"> </A>
<A NAME="toc_do1694_5"> </A>
<BR></FONT><FONT SIZE=2><B>WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form&nbsp;S-1 under the Securities Act with respect to our common stock. This prospectus does
not contain all of the information set forth in the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits
and schedules filed as a part of the registration
statement. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. You may read and copy any document we file at the
SEC's public reference room in Washington, DC. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains a
website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at </FONT> <FONT SIZE=2><I>http://www.sec.gov.</I></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and will file periodic reports and other information,
including proxy statements, with the SEC. These periodic reports and other information will be available for inspection and copying at the SEC's public reference room and the website of the SEC
referred to above. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>51</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fa1694_index_to_consolidated_financial_statements"> </A>
<BR></FONT><FONT SIZE=2><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>
<A NAME="FA1694_TOC"></A> </FONT></P>

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<TD WIDTH="100%"><FONT SIZE=2><BR>
<A HREF="#fc2331_Report_of_Independent_Auditors_1">Report of Independent Auditors</A></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="100%"><FONT SIZE=2><BR>
<A HREF="#fe2331_Report_of_Independent_Auditors_2">Report of Independent Auditors</A></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="100%"><A HREF="#fg1694_2nd_swing,_inc._balance_sheets"><FONT SIZE=2><BR>
Balance Sheets</FONT></A></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="100%"><A HREF="#fg1694_2nd_swing,_inc._statements_of_operations"><FONT SIZE=2><BR>
Statements of Operations</FONT></A></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="100%"><A HREF="#fi1694_2nd_swing,_inc._stateme__fi102160"><FONT SIZE=2><BR>
Statement of Shareholders' Equity (Deficit)</FONT></A></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="100%"><A HREF="#fi1694_2nd_swing,_inc._statements_of_cash_flows"><FONT SIZE=2><BR>
Statements of Cash Flows</FONT></A></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="100%"><A HREF="#fk1694_2nd_swing,_inc._notes_to_finan__2nd05364"><FONT SIZE=2><BR>
Notes to Financial Statements</FONT></A></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>F-1</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fc1694_1_2"> </A> </FONT> <FONT SIZE=2><B><A NAME="fc2331_Report_of_Independent_Auditors_1">Report of Independent Auditors</A>  </B></FONT></P>

<P><FONT SIZE=2>The
Board of Directors<BR>
2<SUP>nd</SUP> Swing,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheets of 2<SUP>nd</SUP> Swing,&nbsp;Inc. as of December&nbsp;30, 2001 and December&nbsp;29, 2002, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 2<SUP>nd</SUP> Swing,&nbsp;Inc. as of
December&nbsp;30, 2001 and December&nbsp;29, 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the
United States. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>Ernst&nbsp;&amp;
Young LLP </FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>Minneapolis,
Minnesota<BR>
February&nbsp;21, 2003 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-2</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fe1694_1_3"> </A> </FONT> <FONT SIZE=2><B><A NAME="fe2331_Report_of_Independent_Auditors_2">Report of Independent Auditors</A>  </B></FONT></P>

<P><FONT SIZE=2>The
Board of Directors<BR>
2<SUP>nd</SUP> Swing,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying statements of operations, shareholders' equity (deficit), and cash flows of 2<SUP>nd</SUP> Swing, Inc. for the year ended December&nbsp;31, 2000.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, 2<SUP>nd</SUP> Swing,&nbsp;Inc.'s results of operations and its cash flows for
the year ended December&nbsp;31, 2000 in conformity with accounting principles generally accepted in the United States of America. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>Silverman
Olson Thorvilson&nbsp;&amp; Kaufmann&nbsp;LTD<BR>
Certified Public Accountants </FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>Minneapolis,
Minnesota<BR>
January&nbsp;29, 2001 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-3</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=58,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=891821,FOLIO='F-3',FILE='DISK015:[03STP4.03STP1694]FE1694A.;5',USER='NYANG',CD='17-JUL-2003;11:42' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fg1694_1_4"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg1694_2nd_swing,_inc._balance_sheets"> </A>
<A NAME="toc_fg1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.    <BR>    <BR>    Balance Sheets    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(Unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Current assets:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,055,859</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>75,193</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Other receivables</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>44,509</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>107,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>248,853</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>227,966</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>398,787</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>719,239</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,005,174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,609,242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,837,520</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,277,649</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,171,871</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,880,805</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Property and equipment, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,192,908</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,610,926</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,740,617</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,699</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14,343</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>20,566</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,476,256</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,797,140</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11,641,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Liabilities and shareholders' equity (deficit)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Current liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Notes payable to shareholder</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,800,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Note payable, bank</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,343,650</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>768,484</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,708,816</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,979,685</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Checks drawn in excess of available funds</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>279,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued payroll and benefits</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>151,710</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>205,070</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>365,466</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Purchase credit memos payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>276,269</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>347,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>417,980</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Other accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>216,888</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>254,013</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>893,766</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>51,655</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>77,505</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>80,550</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Current portion of capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,578</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>20,144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>19,922</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,547,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,613,054</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,101,019</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Notes payable to shareholder</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,962,180</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5,000,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Note payable, bank</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,406,434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Deferred rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
197,834</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
223,603</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
227,972</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Capital lease obligations, less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,644</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>21,258</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,866</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Shareholders' equity (deficit):</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Common stock, $.01 par value:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="45%"><FONT SIZE=2>Authorized shares&#151;50,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="45%"><FONT SIZE=2>Issued and outstanding shares&#151;2,975,019 at December&nbsp;30, 2001; 3,440,672 at December&nbsp;29, 2002 and June&nbsp;29, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>29,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,407</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,620,894</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,968,116</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,968,116</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred stock compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(69,226</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(35,619</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(24,592</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(2,855,342</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(5,396,293</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(6,675,800</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total shareholders' equity (deficit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(273,924</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>570,611</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(697,869</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total liabilities and shareholders' equity (deficit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,476,256</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,797,140</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11,641,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-4</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=59,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=605540,FOLIO='F-4',FILE='DISK015:[03STP4.03STP1694]FG1694A.;10',USER='GPEARMO',CD='16-JUL-2003;00:15' -->
<A NAME="page_fg1694_1_5"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg1694_2nd_swing,_inc._statements_of_operations"> </A>
<A NAME="toc_fg1694_2"> </A>
<BR></FONT><FONT SIZE=2><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.    <BR>    <BR>    Statements of Operations    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(Unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,608,873</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,331,967</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>26,407,335</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,032,039</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,615,598</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Cost of sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,684,138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,283,953</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,805,537</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,220,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,974,975</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,924,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,048,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,601,798</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,812,025</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,640,623</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2><BR>
Selling, general, and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,676,694</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8,315,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,605,491</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5,811,177</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
7,484,861</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Operating loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,751,959</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,266,989</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,003,693</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(999,152</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(844,238</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2><BR>
Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(234,471</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(340,611</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(541,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(268,534</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(435,269</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,572</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,783</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,414</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,979,858</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,602,817</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,540,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,267,686</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,279,507</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Basic and dilutive net loss per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.79</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.87</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.37</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Weighted average number of shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,502,026</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,975,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,375,087</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,309,502</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,440,672</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-5</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=60,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=642054,FOLIO='F-5',FILE='DISK015:[03STP4.03STP1694]FG1694B.;6',USER='GPEARMO',CD='16-JUL-2003;00:15' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fi1694_1_6"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fi1694_2nd_swing,_inc._stateme__fi102160"> </A>
<A NAME="toc_fi1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.    <BR>    <BR>    Statement of Shareholders' Equity (Deficit)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Total<BR>
Shareholders'<BR>
Equity<BR>
(Deficit)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Additional<BR>
Paid-In<BR>
Capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Deferred Stock<BR>
Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
Deficit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Balance at January&nbsp;2, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,477,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>24,770</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,686,230</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,663,073</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,047,927</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Common stock issued in private placement</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>307,875</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,079</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,944,411</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,947,490</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Common stock issued in conversion of note payable to shareholder</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>190,125</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,901</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,265,599</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,267,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Recapitalization resulting from election of C&nbsp;corporation status</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,390,406</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,390,406</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,979,858</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,979,858</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Balance at December&nbsp;31, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,975,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>29,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,505,834</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(252,525</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,283,059</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Stock option compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>115,060</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(115,060</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Amortization of stock option compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>45,834</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>45,834</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,602,817</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,602,817</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Balance at December&nbsp;30, 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,975,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>29,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,620,894</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(69,226</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,855,342</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(273,924</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Common stock issued in private placement</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>465,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,657</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,241,326</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,245,983</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Amortization of stock option compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>33,607</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>33,607</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Warrant value</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>105,896</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>105,896</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,540,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,540,951</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Balance at December&nbsp;29, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,440,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>34,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,968,116</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(35,619</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(5,396,293</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>570,611</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Amortization of stock option compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11,027</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,027</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Net loss (unaudited)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,279,507</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,279,507</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="19%"><FONT SIZE=2>Balance at June&nbsp;29, 2003 (unaudited)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,440,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>34,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,968,116</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(24,592</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(6,675,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(697,869</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-6</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=61,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=255253,FOLIO='F-6',FILE='DISK015:[03STP4.03STP1694]FI1694A.;5',USER='NYANG',CD='17-JUL-2003;11:43' -->
<A NAME="page_fi1694_1_7"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fi1694_2nd_swing,_inc._statements_of_cash_flows"> </A>
<A NAME="toc_fi1694_2"> </A>
<BR></FONT><FONT SIZE=2><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.    <BR>    <BR>    Statements of Cash Flows    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(Unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Operating activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,979,858</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,602,817</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,540,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,267,686</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,279,507</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Adjustments to reconcile net loss to net cash used in operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>318,535</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>536,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>752,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>341,183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>426,454</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Loss on disposal of fixed assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>91,331</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,607</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>86,871</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Warrant and stock option related expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>45,834</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>101,683</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>40,968</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>48,847</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,592,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,641,545</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,604,068</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,849,910</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,228,278</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(89,638</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(116,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(170,821</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(143,957</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(320,452</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Other receivables</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(29,038</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(13,922</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(63,474</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(77,732</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(140,870</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,101</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(8,644</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(7,900</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(6,223</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>298,898</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>289,423</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>940,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,073,157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,270,869</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Accrued payroll and benefits</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>62,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>43,020</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>53,360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(149,207</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>160,396</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Purchase credit memos payable and accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>231,301</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>169,657</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>108,362</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>302,126</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>710,227</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="23%"><FONT SIZE=2>Deferred rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,961</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>201,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>51,619</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>68,695</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,414</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash used in operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,664,234</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,081,801</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,380,565</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(670,263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(264,252</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Investing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Purchases of property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,244,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,306,352</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,121,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(848,067</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(643,016</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from sale of fixed assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>552</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,244,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,295,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,120,848</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(848,067</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(643,016</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Increase (decrease) in cash drawn in excess of available funds</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>279,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(279,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(169,839</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from borrowings on note payable to shareholder</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,260,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,757,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,865,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>800,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Payments of note payable to shareholder</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(650,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,665,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,550,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(800,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net increase (decrease) in note payable to bank</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(50,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,406,434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(62,784</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Payments on capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(16,027</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(7,814</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(10,614</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from issuance of common stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,442,490</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>505,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,245,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,245,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,002,490</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,238,871</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,557,272</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,518,330</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(73,398</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Increase (decrease) in cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>93,924</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(138,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,055,859</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(980,666</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents, beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>44,108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>138,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,055,859</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents, end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>138,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,055,859</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>75,193</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Supplemental disclosures of cash flow information</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash paid for interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>198,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>330,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>466,536</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>307,773</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>377,507</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-7</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=62,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=811175,FOLIO='F-7',FILE='DISK015:[03STP4.03STP1694]FI1694B.;9',USER='NYANG',CD='17-JUL-2003;11:43' -->
<A NAME="page_fi1694_1_8"> </A>

<P><FONT SIZE=2><B>Supplemental disclosures of noncash transactions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December&nbsp;31, 2000, the Company converted $1,267,500 of notes payable to the majority shareholder to 190,125 shares of common stock. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2000, the Company issued 75,765 shares of common stock in exchange for subscriptions receivable aggregating $505,000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the years ended December&nbsp;30, 2001 and December&nbsp;29, 2002, the Company acquired $10,969 and $49,207, respectively, of assets through capital lease obligations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the six months ended June&nbsp;30, 2002, the Company acquired $46,296 of assets through capital lease obligations. The Company did not acquire assets through capital lease
obligations during the six months ended June&nbsp;29, 2003. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-8</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=3,SEQ=63,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=811799,FOLIO='F-8',FILE='DISK015:[03STP4.03STP1694]FI1694B.;9',USER='NYANG',CD='17-JUL-2003;11:43' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fk1694_1_9"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fk1694_2nd_swing,_inc._notes_to_finan__2nd05364"> </A>
<A NAME="toc_fk1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>2<SUP>nd</SUP> Swing,&nbsp;Inc.    <BR>    <BR>    Notes to Financial Statements    <BR>    <BR>    Years Ended December&nbsp;31, 2000, December&nbsp;30, 2001, and December&nbsp;29, 2002<BR>  and six month periods ended
June&nbsp;30, 2002 (unaudited) and June&nbsp;29, 2003 (unaudited)    <BR>
</B></FONT></P>

<P><FONT SIZE=2><B>1. Nature of Operations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2<SUP>nd</SUP> Swing,&nbsp;Inc. (the Company or 2<SUP>nd</SUP> Swing) was incorporated in March&nbsp;1997. The Company is in the business of buying and
selling both new and pre-owned golf clubs and related golf equipment primarily through its 2<SUP>nd</SUP> Swing retail stores. As of December&nbsp;29, 2002, the Company owned and
operated a total of 30 stores: four in Minnesota, five in Michigan, six in Ohio, seven in Illinois, one in Indiana, one in Wisconsin, two in Pennsylvania, two in Kentucky, one in Nebraska, and one in
New Jersey. As of December&nbsp;30, 2001, the Company owned and operated a total of 20 stores: four in Minnesota, four in Michigan, five in Ohio, five in Illinois, one in Indiana and one in
Wisconsin. As of December&nbsp;31, 2000, the Company owned and operated a total of 10 stores: four in Minnesota, four in Michigan, and two in Ohio. The Company currently operates in a single
business segment and thus additional disclosures under Statement of Financial Accounting Standards (SFAS) No.&nbsp;131, </FONT><FONT SIZE=2><I>Disclosures About Segments of an Enterprise and
Related Information</I></FONT><FONT SIZE=2>, are not required. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's fiscal year ends on a Sunday on or near December&nbsp;31 consisting of either a 52- or 53-week year. Fiscal year 2002 ended on December&nbsp;29,
2002, fiscal year 2001 ended on December&nbsp;30, 2001, and fiscal year 2000 ended on December&nbsp;31, 2000. Each of these fiscal years consisted of 52&nbsp;weeks. Unless otherwise stated,
references to years in this report relate to the fiscal year rather than the calendar year. </FONT></P>

<P><FONT SIZE=2><B>2. Summary of Significant Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2><B>Cash Equivalents  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash equivalents represent investments with a maturity of three months or less at the time of purchase. Cash equivalents are recorded at cost, which approximates
market. </FONT></P>

<P><FONT SIZE=2><B>Concentrations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash. The Company maintains cash in bank deposit
accounts, which, at times, may exceed federally insured limits. The Company believes it has its cash deposits at high quality financial institutions. The Company believes no significant credit risk
exists with respect to these deposits. </FONT></P>

<P><FONT SIZE=2><B>Inventories  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consist of new and pre-owned golf clubs and related golf equipment and are recorded at the lower of cost (determined on a
first-in, first-out basis) or market. </FONT></P>

<P><FONT SIZE=2><B>Property and Equipment  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or,
in the case of leasehold improvements, over the shorter of the estimated useful lives or lease terms. Estimated useful lives for furniture and equipment and leasehold improvements are five years. When
indicators of impairment exist, long-lived assets are evaluated for impairment using an undiscounted cash flow analysis. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-9</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August&nbsp;2001, the Financial Accounting Standards Board issued SFAS No.&nbsp;144, </FONT><FONT SIZE=2><I>Accounting for the Impairment or Disposal of Long-Lived
Assets</I></FONT><FONT SIZE=2>, effective for fiscal years beginning after December&nbsp;15,&nbsp;2001. This statement develops one accounting model (based on the model in SFAS No.&nbsp;121) for
long-lived assets to be disposed of, expands the scope of discontinued operations, and modifies the accounting for discontinued operations. The adoption of this new statement did not have
a material impact on the Company's net earnings or financial position. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenditures
for additions and improvements are capitalized, while repairs and maintenance are expensed as incurred. </FONT></P>

<P><FONT SIZE=2><B>Revenue Recognition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from retail sales is recognized at the point of sale. The Company does not provide a reserve for sales returns because the amount is insignificant. </FONT></P>


<P><FONT SIZE=2><B>Vendor Allowances  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vendor allowances such as volume rebates and other purchase discounts are reflected as a reduction to cost of sales as the related inventory is sold. Vendor
advertising allowances are reflected as a reduction to advertising expense in selling, general, and administrative expenses after the advertising event has occurred. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2002, the Emerging Issues Task Force reached a consensus on Issue No.&nbsp;02-16, </FONT><FONT SIZE=2><I>Accounting by a Customer (Including a Reseller) for Certain
Consideration Received From a Vendor</I></FONT><FONT SIZE=2>. Under the new guidance, cash consideration received from a vendor should be classified as a reduction of cost of sales. If the
consideration received represents a payment for assets delivered to the vendor, it should be classified as revenue. If the consideration is a reimbursement of a specific, incremental, identifiable
cost incurred in selling the vendor's product, the cost should be characterized as a reduction of that cost incurred. The guidance is effective for fiscal periods beginning after December&nbsp;15,
2002. The adoption of this consensus did not have a material impact on net earnings, cash flows, or financial position. </FONT></P>

<P><FONT SIZE=2><B>Pre-Opening Costs  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-opening costs of new stores are expensed as incurred and are included in selling, general, and administrative expense. </FONT></P>


<P><FONT SIZE=2><B>Shipping and Handling Costs  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts billed to customers for shipping and handling are included in net sales. The related costs are included in cost of sales. </FONT></P>

<P><FONT SIZE=2><B>Cost of Goods Sold and Operating Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of goods sold includes the cost of merchandise, inventory shrinkage, freight, and distribution related expenses. Selling, general, and administrative
expenses include payroll, advertising, occupancy, and all expenses associated with the Company's corporate headquarters. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-10</FONT></P>

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<P><FONT SIZE=2><B>Advertising Costs  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising costs, included in selling, general, and administrative expenses in the accompanying statements of operations are expensed as incurred and aggregated
$407,801, $830,456, and $1,228,002, respectively, for 2000, 2001, and 2002 and $874,191 (unaudited) and $896,262 (unaudited), respectively, for the six months ended June&nbsp;30, 2002 and
June&nbsp;29, 2003. </FONT></P>

<P><FONT SIZE=2><B>Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to December&nbsp;10, 2000, the Company had elected, by the consent of the shareholders, to be taxed under the provisions of Subchapter S of the Internal
Revenue Code (the Code). Under the provisions of the Code, the shareholders included the applicable corporate income or loss in their personal income tax returns. On December&nbsp;10, 2000, the
Company's S corporation status terminated as a result of the completion of a private placement of its common stock that caused the number of shareholders to exceed the number allowed to retain S
corporation status. Accordingly, the Company has been and will be taxed as a C corporation in periods thereafter. As of December&nbsp;10, 2000, the accumulated deficit was reclassified to additional
paid-in capital. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent
to December&nbsp;10, 2000, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes represent the net tax effect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. The effect of changes in tax
rates is recognized in the period in which the rate change occurs. </FONT></P>


<P><FONT SIZE=2><B>Stock-Based Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2002, the Financial Accounting Standards Board (FASB) issued SFAS No.&nbsp;148, </FONT><FONT SIZE=2><I>Accounting for Stock-Based
Compensation&#151;Transition and Disclosure.</I></FONT><FONT SIZE=2> SFAS No.&nbsp;148 amends SFAS No.&nbsp;123, </FONT><FONT SIZE=2><I>Accounting for Stock-Based
Compensation,</I></FONT><FONT SIZE=2> to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In
addition, SFAS No.&nbsp;148 requires expanded and more prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and
the effect of the method on reported results. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has stock-based employee compensation plans comprised primarily of fixed stock options. However, it has not adopted a method under SFAS No.&nbsp;148 to expense stock
options and continues to apply Accounting Principles Board (APB) Opinion No.&nbsp;25, </FONT><FONT SIZE=2><I>Accounting for Stock Issued to Employees,</I></FONT><FONT SIZE=2> and related
interpretations in accounting for these plans. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair market price of the Company's stock at the measurement
date over the employee's option exercise price. Any resulting compensation expense is amortized ratably over the related vesting period. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-11</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below illustrates the effect on the Company's net loss and net loss per share as if it had applied the fair value recognition provisions of SFAS No.&nbsp;123 to stock-based
employee compensation for each of the last three fiscal years and the six&nbsp;months ended June&nbsp;29, 2003. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Six Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss, as reported</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,979,858</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,602,817</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,540,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,279,507</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Add stock-based employee compensation expense included in reported net earnings</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>45,834</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>33,607</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>11,027</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Deduct total stock-based compensation expense determined under fair value method for all awards</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(3,602</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(190,339</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(139,663</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(50,742</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Pro forma net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,983,460</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,747,322</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,647,007</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,319,222</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss per share:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="28%"><FONT SIZE=2>Basic and diluted&#151;as reported</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.79</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.87</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.37</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="28%"><FONT SIZE=2>Basic and diluted&#151;pro forma</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.79</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.92</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.78</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(.38</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of each stock option was estimated on the date of the grant using the Black-Scholes option-pricing model with the following
assumptions. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>6.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>6.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>4.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>4.0%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Expected dividend yield</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Expected stock price volatility</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>0.0%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Expected life of stock options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>5.0 years</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>8.0 years</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>8.0 years</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>8.0 years</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted average fair value of options granted during fiscal 2001 used in computing pro forma compensation expense was $2.54. </FONT></P>

<P><FONT SIZE=2><B>Net Income (Loss) Per Share  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS No.&nbsp;128, </FONT><FONT SIZE=2><I>Earnings Per Share</I></FONT><FONT SIZE=2> (EPS), requires dual presentation of basic EPS and diluted EPS on the face
of all income statements. Basic EPS is computed as net income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable through stock options and warrants. Outstanding options and warrants to purchase shares of the Company's common stock were
not included in the diluted EPS calculation for all periods presented in the financial statements as they were antidilutive. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-12</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=4,SEQ=67,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=505394,FOLIO='F-12',FILE='DISK015:[03STP4.03STP1694]FK1694A.;9',USER='RFARRIN',CD='16-JUL-2003;20:43' -->
<A NAME="page_fk1694_1_13"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
September&nbsp;30, 2002, the Company effected a .3-for-1 stock split, which resulted in the automatic conversion of one share of issued and
outstanding common stock into three-tenths of a share of common stock. For options and warrants outstanding, the number of shares of common stock that may be purchased upon the exercise of such
options and warrants and the per share exercise prices thereof have been adjusted appropriately to give effect to the stock split. The stock split did not affect the par value of the common stock and
had no impact on total shareholders' equity (deficit). All share and per share information has been retroactively adjusted to reflect the effect of the reverse stock split. </FONT></P>

<P><FONT SIZE=2><B>Use of Estimates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. </FONT></P>

<P><FONT SIZE=2><B>Reclassification  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain previous period amounts have been reclassified to conform with the current period presentation. These reclassifications have no effect on the net loss or
financial position. </FONT></P>

<P><FONT SIZE=2><B>Interim Financial Data  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim
financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for
the six months ended June&nbsp;29, 2003 are not necessarily indicative of the results that may be expected for the year ending December&nbsp;28, 2003. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-13</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=5,SEQ=68,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=860950,FOLIO='F-13',FILE='DISK015:[03STP4.03STP1694]FK1694A.;9',USER='RFARRIN',CD='16-JUL-2003;20:43' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_fm1694_1_14"> </A> </FONT></P>

<P><FONT SIZE=2><B>3. Property and Equipment, Net  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property
and equipment consisted of the following at: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="43%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="43%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(Unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>Furniture and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,764,937</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,483,343</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,963,080</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>855,927</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,114,280</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,105,917</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>Computer software</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>494,859</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>688,100</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>711,896</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,115,723</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4,285,723</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4,780,893</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>Less accumulated depreciation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(922,815</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,674,797</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(2,040,276</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>Property and equipment, net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,192,908</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,610,926</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,740,617</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in furniture and equipment are the following capital lease amounts: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29, 2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(Unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Furniture and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,968</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>60,175</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>60,175</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Less accumulated amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,095</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(18,710</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(28,085</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,873</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41,465</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>32,090</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
expense was $3,095 and $15,615, respectively, for the years ended December&nbsp;30, 2001 and December&nbsp;29, 2002 and $4,978 (unaudited) and $9,375 (unaudited) for the
six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003, respectively, and is included in depreciation expense. </FONT></P>

<P><FONT SIZE=2><B>4. Notes Payable to Shareholder and Bank  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;30, 2001, the Company had a $5,000,000 line of credit with its majority shareholder. Interest was payable monthly at a rate of 12% per
annum. The line expired March&nbsp;31, 2002. The line of credit was secured by substantially all corporate assets. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the years ended December&nbsp;31, 2000 and December&nbsp;30, 2001, the Company incurred interest aggregating $230,260 and $339,750, respectively, to its shareholder, of which
$45,591 remained unpaid at December&nbsp;30, 2001 and is included in other accrued expenses in the accompanying balance sheet. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March&nbsp;31, 2002, the Company obtained a Mezzanine Revolving Promissory Note (MRPN) from its majority shareholder under which the Company may borrow up to $3,500,000 with
interest payable monthly at a rate of 12% per annum. The principal balance under the MRPN, together with accrued interest thereon, is due and payable on March&nbsp;31, 2006 and is secured by
substantially all corporate assets. In consideration for the MRPN, the Company granted to its majority shareholder a warrant to purchase 105,000 shares of common stock at a price of $9.17 per share.
The warrant expires in March&nbsp;2012. The Company allocated $105,896 of the MRPN amount to the warrant based on the relative fair values of the MRPN and the warrant. The value allocated to the
warrant will be </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-14</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=69,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=149915,FOLIO='F-14',FILE='DISK015:[03STP4.03STP1694]FM1694A.;11',USER='CHANSON',CD='17-JUL-2003;16:21' -->
<A NAME="page_fm1694_1_15"> </A>
<BR>

<P><FONT SIZE=2>recognized
as additional interest expense over the term of the note. The warrant's fair value was determined using the Black-Scholes pricing model. For the year ended December&nbsp;29, 2002 and the
six months ended June&nbsp;29, 2003, interest expense of $68,076 and $37,820 (unaudited), respectively, was recognized related to such allocation. As of December&nbsp;29, 2002 and June&nbsp;29,
2003, the principal balance outstanding under the MRPN is $3,500,000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
as of March&nbsp;31, 2002, the Company obtained a Working Capital Revolving Promissory Note (WCRPN) from its majority shareholder under which the Company may borrow up to
$1,500,000 with interest payable monthly at a rate of 12% per annum. As of January&nbsp;8, 2003, the WCRPN availability has been increased from $1,500,000 to $4,500,000. The borrowing availability
under the WCRPN will decrease to $1,500,000 on June&nbsp;30, 2004. The principal balance under the WCRPN, together with accrued interest thereon, is due and payable on March&nbsp;31, 2006. As of
December&nbsp;29, 2002 and June&nbsp;29, 2003, the principal balance outstanding under the WCRPN is $1,500,000 and $1,500,000 (unaudited), respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;29, 2002 and the six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003, the Company incurred interest aggregating $456,961, $244,461
(unaudited), and $333,573 (unaudited), respectively, to its majority shareholder, of which $36,245 and $62,630 (unaudited) remained unpaid at December&nbsp;29, 2002 and June&nbsp;29, 2003,
respectively, and is included in other accrued expenses in the accompanying balance sheets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of November 2002, the Company has a $2,500,000 credit facility with a commercial lender that expires March&nbsp;31, 2004. Interest under the credit facility is at a variable rate of
3.75% above prime rate, and the credit facility is secured by the Company's inventories. At December&nbsp;29, 2002 and June&nbsp;29, 2003, the credit facility principal balance outstanding is
$1,406,434 and $1,343,650 (unaudited), respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
noted above, the notes payable to shareholder become due on March&nbsp;31, 2006 and the credit facility with the commercial lender becomes due on March&nbsp;31, 2004. The Company
intends to address its long-term financial requirements and to support expansion plans through various efforts, including the sale of equity securities and replacement of the current credit facilities
with longer term facilities providing greater borrowing capacity; however, there can be no assurance that such sources will be available. </FONT></P>

<P><FONT SIZE=2><B>5. Contingencies and Commitments  </B></FONT></P>

<P><FONT SIZE=2><B>Significant Vendor  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the years ended December&nbsp;30, 2001 and December&nbsp;29, 2002, purchases from one vendor represented approximately 15% and 11%, respectively, of
the Company's total inventories purchased. </FONT></P>

<P><FONT SIZE=2><B>Leases  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company leases its corporate and retail facilities as well as certain operating equipment under noncancelable operating leases. Most of the facilities' leases
contain renewal options and require the Company to pay other lease-related costs. Rent expense totaled $508,279, $1,208,632, and $2,025,220, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-15</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=70,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=589105,FOLIO='F-15',FILE='DISK015:[03STP4.03STP1694]FM1694A.;11',USER='CHANSON',CD='17-JUL-2003;16:21' -->
<A NAME="page_fm1694_1_16"> </A>
<BR>

<P><FONT SIZE=2>respectively,
during fiscal years 2000, 2001, and 2002, and $919,669 (unaudited) and $1,225,661 (unaudited), respectively, for the six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003, and
is included in selling, general, and administrative expenses in the accompanying statements of operations. The Company recognizes rent expense on a straight-line basis over the term of the
lease and recognizes the excess of such expense over the cash payments as deferred rent in the accompanying balance sheets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company also leases various equipment under capital leases. Amortization expense on assets under capital leases is included with depreciation expense. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;29, 2002, future minimum lease payments under noncancelable operating leases and capital leases are as follows for the years ending: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Operating<BR>
Leases</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital<BR>
Leases</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,348,980</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,058</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,237,311</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21,450</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,988,754</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,822</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,383,295</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>323,860</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Total minimum lease payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8,282,200</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>48,330</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Imputed interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(6,928</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Present value of net minimum lease payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41,402</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Less current portion</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(20,144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21,258</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>6. Private Placement of Common Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2001, the Company offered up to 818,182 shares of its common stock at $7.33 per share. From January&nbsp;1, 2002 through March&nbsp;31,
2002, the Company issued 465,653 shares of its common stock for proceeds, net of offering costs (aggregating $167,253), of $3,245,983. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the Company's private placement offering, the Company issued to the placement agent a five-year warrant to purchase 13,467 shares of the Company's common
stock at a price of $8.43 per share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December&nbsp;2000, the Company offered up to 450,000 shares of its common stock at $6.67 per share. Pursuant to the offering, the Company issued and entered into subscription
agreements to issue 450,000 shares of its common stock for proceeds, net of direct expenses (aggregating $25,010), of $2,974,990. The aggregate proceeds include $1,267,500 principal of notes payable
to the majority shareholder that were converted to 190,125 shares of common stock and $505,000 of subscriptions receivable. The subscribed amounts were received in January&nbsp;2001. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August&nbsp;2000, the Company sold to an officer/shareholder 48,000 shares of its common stock at $5.00 per share, for aggregate proceeds of $240,000. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-16</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=3,SEQ=71,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=371768,FOLIO='F-16',FILE='DISK015:[03STP4.03STP1694]FM1694A.;11',USER='CHANSON',CD='17-JUL-2003;16:21' -->
<A NAME="page_fm1694_1_17"> </A>
<BR>

<P><FONT SIZE=2><B>7. Employee Stock Compensation Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2000, the Company adopted a stock compensation plan. Pursuant to the plan, a committee appointed by the Board of Directors may grant options to key
individuals at its discretion. Option prices under the plan may not be less than 85% of the fair market value of the common stock at the date the option is granted. The Company accounts for this plan
under the recognition and measurement principles of Accounting Principles Board Opinion No.&nbsp;25, </FONT><FONT SIZE=2><I>Accounting for Stock Issued to Employees</I></FONT><FONT SIZE=2>, and
related interpretations. Generally, no stock compensation cost is reflected in net loss, as options granted under this plan had an exercise price equal to the market value of the underlying common
stock on the date of grant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;29, 2002, the Company has reserved 900,000 shares of common stock for issuance under the plan and 495,450 remain available for grant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has reserved 150,000 shares of common stock for issuance under a plan for nonemployee directors. The total shares remaining available for grant to nonemployee directors at
December&nbsp;29, 2002 are 142,500. The Company has granted options to purchase 12,500 shares of common stock at an exercise price equal to the public offering price to a nonemployee director. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
summary of the activity of the Company's stock compensation plan is presented below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Incentive<BR>
Stock<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Qualified<BR>
Stock<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise<BR>
Prices</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Granted in 2000 and outstanding at end of 2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>99,999</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>50,001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Granted in 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>288,750</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Cancelled in 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(27,900</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Outstanding at end of 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>99,999</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>310,851</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.06</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Cancelled in 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(6,300</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Outstanding at end of 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>99,999</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>304,551</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.05</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Cancelled during six months ended June&nbsp;29, 2003 (unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(4,800</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=2>Outstanding at June&nbsp;29, 2003 (unaudited)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>99,999</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>299,751</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.04</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Of
the non-qualified stock options granted in fiscal 2001, 45,300 of the stock options were granted in consideration for certain employees entering into
non-compete agreements. The fair value of these stock options amounting to $115,060 will be recognized as an expense in the statement of operations over the five-year vesting
period. Expense recognized in fiscal 2001 and 2002 related to these stock options was $45,834 and $33,607, respectively. Expense recognized in the six months ended June&nbsp;30, 2002 and
June&nbsp;29, 2003 related to these stock options was $18,227 (unaudited) and $11,027 (unaudited), respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-17</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=4,SEQ=72,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=84189,FOLIO='F-17',FILE='DISK015:[03STP4.03STP1694]FM1694A.;11',USER='CHANSON',CD='17-JUL-2003;16:21' -->
<A NAME="page_fm1694_1_18"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information about stock options outstanding, including those issued to officers/shareholders of the Company, at December&nbsp;29, 2002. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise<BR>
Prices</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding at<BR>
December 29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding at<BR>
December 29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>254,550</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>50,910</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>150,000</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7.6</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>60,000</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>404,550</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>110,910</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>8. Stock Warrants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;29, 2002, the Company had warrants outstanding to purchase 2,400 common shares of the Company at an exercise price of $5.00 with a
April&nbsp;2004 expiration date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March&nbsp;2002, the Company issued to the placement agent of a private offering a five-year warrant to purchase 13,467 shares of the Company's common stock at a price
of $8.43 per share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
in consideration for the MRPN entered into as of March&nbsp;31, 2002, the majority shareholder has a ten-year warrant to purchase 105,000 shares of the
Company's common stock at a price of $9.17 per share. The warrant's fair value was estimated using the Black-Scholes pricing model with the following assumptions: risk-free interest
rate&#151;4.65%; expected dividend yield&#151;0%; expected stock price volatility&#151;20%; expected life of warrant&#151;4 years. </FONT></P>

<P><FONT SIZE=2><B>9. Related-Party Transactions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;29, 2002, the Company had outstanding the following incentive and nonqualified stock options granted to shareholders: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="61%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Common Shares<BR>
Under Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" ALIGN="CENTER"><FONT SIZE=1><B>Expiration Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>150,000</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" ALIGN="CENTER"><FONT SIZE=2>August 2010</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>158,250</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>6.67</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" ALIGN="CENTER"><FONT SIZE=2>February 2011</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;29, 2002, 60,000 and 31,650 of the outstanding options granted are exercisable at $5.00 and $6.67 per share, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company incurred fees for financial and system consulting services from an entity owned by a 2<SUP>nd</SUP> Swing shareholder. Total fees incurred aggregated $94,385, $538, and
$16,172, respectively, for fiscal 2000, 2001, and 2002, and $9,890 (unaudited) and $4,438 (unaudited), respectively, for the six months ended June&nbsp;30, 2002 and June&nbsp;29, 2003. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-18</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=5,SEQ=73,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=572763,FOLIO='F-18',FILE='DISK015:[03STP4.03STP1694]FM1694A.;11',USER='CHANSON',CD='17-JUL-2003;16:21' -->
<A NAME="page_fm1694_1_19"> </A>
<BR>

<P><FONT SIZE=2><B>10. Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;10, 2000, the Company's S corporation status terminated as a result of the completion of a private placement of its common stock. Accordingly,
the Company has been and will be taxed as a C corporation subsequent to that date. During 2000, 2001, and 2002, the Company had net losses; therefore, no provision for income taxes is presented in the
accompanying statements of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
components of the Company's deferred income tax assets and liabilities are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;29,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June&nbsp;29,<BR>
2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred income tax assets:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Net operating loss carryforward</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>849,047</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,105,434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,619,621</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Accrued rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>84,047</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>120,443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>123,409</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Basis difference of fixed assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,819</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>7,072</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>32,633</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>58,415</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>942,985</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,258,510</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,801,445</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred income tax liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(46,563</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(166,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(205,518</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net deferred income tax assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>896,422</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,091,775</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,595,927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(896,422</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(2,091,775</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,595,927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has experienced operating losses since inception and has determined that realization of the tax benefit related to the net deferred tax asset is uncertain. Accordingly, a
valuation allowance has been recorded for the entire balance of the net deferred tax asset. At December&nbsp;29, 2002, the Company had a net operating loss carryforward of approximately $5,300,000
expiring at various dates through 2022. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-19</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=6,SEQ=74,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=226396,FOLIO='F-19',FILE='DISK015:[03STP4.03STP1694]FM1694A.;11',USER='CHANSON',CD='17-JUL-2003;16:21' -->
<BR>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g398369.jpg" ALT="2ND SWING LOGO" WIDTH="355" HEIGHT="180">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g1003108.jpg" ALT="GRAPHIC" WIDTH="664" HEIGHT="298">
  </B></FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Location</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Opening Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="13%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Location</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Opening Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Fairfax, VA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>May 2003</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Mentor, OH</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>May 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>St. Louis, MO</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>April 2003</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Schaumburg, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>April 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Littleton, CO</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>March 2003</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Orland Park, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>April 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Lakewood, CO</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>March 2003</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Indianapolis, IN</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Wilmington, DE</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>March 2003</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Aurora, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Akron, OH</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>July 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Skokie, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Lincoln Park, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>June 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Florence, KY</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Ross Township, PA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>May 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>North Olmsted, OH</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>April 2000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Downers Grove, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>April 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Westland, MI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>April 2000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Moorestown, NJ</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>April 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Springdale, OH</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Kentwood, MI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>April 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Novi, MI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Omaha, NE</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>April 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Brookfield, WI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>North Fayette, PA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>March 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Orion, MI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>March 2000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Louisville, KY</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>February 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Roseville, MN</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>November 1999</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Columbus, OH</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>February 2002</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Madison Heights, MI</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>April 1999</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Dayton, OH</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>September 2001</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Burnsville, MN</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>August 1998</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Bloomington, MN</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>September 2001</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>Minnetonka, MN</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>April 1998</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Vernon Hills, IL</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>June 2001</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<HR NOSHADE>
<!-- ZEQ.=1,SEQ=75,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=392531,FOLIO='blank',FILE='DISK015:[03STP4.03STP1694]HM1694A.;3',USER='MWORTHY',CD='11-JUL-2003;00:43' -->
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<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g398369.jpg" ALT="2ND SWING LOGO" WIDTH="313" HEIGHT="159">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>2,000,000 Shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>2nd Swing, Inc.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Stock  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B> <A NAME="ho1694_dealer_prospectus_delivery_obligation"> </A>
<A NAME="toc_ho1694_1"> </A>
<BR>    </B></FONT><FONT SIZE=2><B>Dealer Prospectus Delivery Obligation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(25 days after the date of this offering), all dealers
that effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions.  </B></FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=76,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=357388,FOLIO='blank',FILE='DISK015:[03STP4.03STP1694]HO1694A.;8',USER='RFARRIN',CD='16-JUL-2003;20:44' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ja1694_1_1"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ja1694_part_ii._information_not_required_in_prospectus"> </A>
<A NAME="toc_ja1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART II.    <BR>    <BR>    INFORMATION NOT REQUIRED IN PROSPECTUS    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Item 13. Other Expenses of Issuance and Distribution  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated expenses in connection with the issuance and distribution of the common stock registered hereby, other than placement agent's fee and fees, are set
forth in the following table: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>SEC registration fee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,861</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>NASD filing fee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,800</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>American Stock Exchange listing fee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>45,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Legal fees and expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>230,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Accounting fees and expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>320,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Blue Sky fees and expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Printing expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>90,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Transfer agent and registrar fees and expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Miscellaneous</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>42,339</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="76%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>750,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>2<SUP>nd</SUP>
Swing will bear all expenses. </FONT></P>

<P><FONT SIZE=2><B>Item 14. Indemnification of Directors and Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless prohibited in a corporation's articles or bylaws, Minnesota Statutes &sect;&nbsp;302A.521 requires indemnification of officers, directors,
employees, and agents, under certain circumstances, against judgments, penalties, fines, settlements, and reasonable expenses (including attorney's fees and disbursements) incurred by such person in
connection with a threatened or pending proceeding with respect to the acts or omissions of such person in his official capacity. The general effect of Minnesota Statutes &sect;&nbsp;302A.521
is to require the Registrant to reimburse (or pay on behalf of) directors and officers of the Registrant any personal liability that may be imposed for certain acts performed in their capacity as
directors and officers of the Registrant, except where such persons have not acted in good faith. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Amended and Restated Bylaws of the Registrant provide for such indemnification to the maximum extent permitted by Minnesota Statutes. The Registrant has purchased insurance covering
the liability of its directors and officers. </FONT></P>

<P><FONT SIZE=2><B>Item 15. Recent Sales of Unregistered Securities  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Effective
August&nbsp;8, 2000, the Company granted to Stanley A. Bodine options to purchase 150,000 shares of common stock at $5.00 per share under the Company's 2000
Stock Compensation Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;On
August&nbsp;8, 2000, the Company sold 48,000 shares of common stock to Stanley A. Bodine for $5.00 per share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;Between
December&nbsp;6, 2000 and January&nbsp;11, 2001, the Company sold 259,875 shares of common stock to 19 investors at $6.67 per share in a private placement. In
addition, $1,267,500 of debt owed to David R. Pomije was converted to 190,125 shares of common stock at approximately $6.67 per share. No commissions were paid in connection with the sale of the
foregoing securities as sales were made through the officers of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;Between
January&nbsp;7, 2002 and March&nbsp;28, 2002, the Company sold 465,653 shares of common stock to 28 investors at $7.33 per share in a private placement.
ThinkEquity Partners received a </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-1</FONT></P>

<HR NOSHADE>

<!-- ZEQ.=1,SEQ=77,EFW="2114620",CP="2ND SWING, INC.",DN="1",CHK=427839,FOLIO='II-1',FILE='DISK015:[03STP4.03STP1694]JA1694A.;7',USER='MVANGB',CD='17-JUL-2003;14:23' -->
<A NAME="page_ja1694_1_2"> </A>
<BR>

<P><FONT SIZE=2>commission
of $98,760 in connection with the sale of the foregoing securities and a warrant to purchase 13,467 shares of common stock at $8.43 per share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;&nbsp;&nbsp;&nbsp;On
March&nbsp;31, 2002, the Company granted to David R. Pomije a warrant to purchase 105,000 shares of common stock at $9.17 per share as additional consideration for a
loan to the Company. The value of the consideration was $105,896. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the options described in (A), above, as of the date of this Registration Statement, the Company has granted to its employees options to purchase 254,550
shares of common stock at $6.67 per share and to a nonemployee director options to purchase 12,500 shares at the initial public offering price. The Company relied on Rule 701 under the Securities Act
in making these grants. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.&nbsp;&nbsp;&nbsp;&nbsp;The
Company plans to issue approximately 10,000 shares to its nonofficer employees (approximately 275 individuals) upon effectiveness of the offering. These shares will
be issued for no consideration. The Company is relying on no-action positions taken by the staff that these grants are not "sales" and are not subject to the registration requirements of the
Securities Act. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
underwriters were used in connection with the foregoing transactions. The Company relied on the exemption provided by Section&nbsp;4(2) of the Securities Act of 1933 in making the
sales outlined in (B) and (E),&nbsp;above, in that the transactions, both individually and in the aggregate, did not involve a public offering. The registrant relied on the exemptions provided by
Regulation D in connection with the transactions described in (C) and (D)&nbsp;above, and filed a report on Form D for each. </FONT></P>

<P><FONT SIZE=2><B>Item 16. Exhibits and Financial Statement Schedules.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>A.&nbsp;&nbsp;&nbsp;&nbsp;Exhibits  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit No.</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="87%" ALIGN="LEFT"><FONT SIZE=1><B>Description of Exhibit<BR> </B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>Form of Placement Agency Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*3.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Amended and Restated Articles of Incorporation of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*3.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Amended and Restated Bylaws of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Form of Stock Certificate evidencing common stock</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(a)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Letter Agreement dated March 31, 2002 with David R. Pomije regarding Mezzanine financing</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(b)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
$1,500,000 Working Capital Revolving Promissory Note to David R. Pomije dated March&nbsp;31, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(c)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
$3,500,000 Mezzanine Revolving Promissory Note to David R. Pomije dated March&nbsp;31, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(d)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Agreement to extend promissory notes dated September&nbsp;27, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(e)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Security Agreement dated April&nbsp;2, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(f)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Warrant to David R. Pomije dated March&nbsp;31, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(g)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Agreement to Amend Working Capital Revolving Promissory Note and Mezzanine Revolving Promissory Note dated January&nbsp;8, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(h)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Amended and Restated Subordination Agreement dated January&nbsp;27, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(i)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Agreement to Extend Mezzanine Revolving Promissory Note and Working Capital Promissory Note dated July&nbsp;15, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.3</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Subscription Agreement and Letter of Investment Intent between the Company and Stanley&nbsp;A. Bodine.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>II-2</FONT></P>

<HR NOSHADE>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.4</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(a)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Credit and Security Agreement by and between 2<SUP>nd</SUP> Swing, Inc. and Wells Fargo Business Credit, Inc. dated November&nbsp;21, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*4.4</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(b)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
First Amendment to Credit and Security Agreement and Waiver of Default dated February&nbsp;28, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
**5.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Opinion of Moss &amp; Barnett, A Professional Association, Counsel to the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*10.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(a)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Lease dated June 22, 2001 for principal executive office</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*10.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(b)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Amendment No. 1 to principal executive office lease</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*10.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>(c)</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Amendment No. 2 to principal executive office lease</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*10.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
2000 Stock Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*10.3</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Stock Option Plan for Nonemployee Directors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
*16</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Letter from Silverman Olson Thorvilson &amp; Kaufmann LTD regarding change in accountants</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.1</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Consent of Ernst &amp; Young LLP, independent auditors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Consent of Silverman Olson Thorvilson &amp; Kaufmann LTD, independent auditors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
**23.3</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Consent of Counsel to the Company (filed as part of Exhibit 5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2><BR>
Power of Attorney (included on signature page)</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to same-numbered exhibit filed with Registration Statement on Form&nbsp;S-1, File No.&nbsp;333-100438</FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>**</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>B.&nbsp;&nbsp;&nbsp;&nbsp;Financial Statement Schedules  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial statement schedules are omitted because they are not applicable, not required, or the information is included in the financial statements or related
notes. </FONT></P>

<P><FONT SIZE=2><B>Item 17. Undertakings.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each purchaser. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-3</FONT></P>

<HR NOSHADE>
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<A NAME="page_ja1694_1_4"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned registrant hereby undertakes that: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purpose of determining any liability under the Securities Act of 1933, each posteffective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>II-4</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_jc1694_1_5"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc1694_signatures_and_power_of_attorney"> </A>
<A NAME="toc_jc1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES AND POWER OF ATTORNEY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement on Form&nbsp;S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized in the City of Minneapolis, State of Minnesota, on July&nbsp;17, 2003. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><FONT SIZE=2><B>2<SUP>nd</SUP> SWING,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STANLEY A. BODINE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2>Stanley A. Bodine,<BR></FONT> <FONT SIZE=2><I>Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW
ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Stanley A. Bodine, Robert&nbsp;M. Hiben, and Mary C. Sim, and each of them,
his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this Registration Statement on Form&nbsp;S-1, including any amendment increasing or decreasing the amount of securities for which
registration is being sought or any registration for the same offering filed in accordance with Rule&nbsp;462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed below on the 17th day of July,&nbsp;2003, by the following persons in the
capacities indicated: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="CENTER"><FONT SIZE=1><B>Name</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="50%" ALIGN="CENTER"><FONT SIZE=1><B>Title</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STANLEY A. BODINE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Stanley A. Bodine</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2><BR>
Chief Executive Officer (principal executive officer) and Director</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ROBERT M. HIBEN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Robert M. Hiben</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2><BR>
Chief Financial Officer (principal financial officer)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="47%" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>P. SIMON KALLAL</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> P. Simon Kallal</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="47%" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID R. POMIJE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> David R. Pomije</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="47%" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>MARY C. SIM</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Mary C. Sim</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2><BR>
Controller (principal accounting officer)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="47%" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>GEORGE E. MILEUSNIC</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> George E. Mileusnic</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>II-5</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ka1694_exhibit_index"> </A>
<A NAME="toc_ka1694_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT INDEX    <BR>    </B></FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit No.</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="86%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Exhibit</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2><BR>
Form of Placement Agency Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*3.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amended and Restated Articles of Incorporation of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*3.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amended and Restated Bylaws of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Form of Stock Certificate evidencing common stock</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(a)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Letter Agreement dated March 31, 2002 with David R. Pomije regarding Mezzanine financing</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(b)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>$1,500,000 Working Capital Revolving Promissory Note to David R. Pomije dated March 31, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(c)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>$3,500,000 Mezzanine Revolving Promissory Note to David R. Pomije dated March 31, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(d)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Agreement to extend promissory notes dated September&nbsp;27, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(e)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Security Agreement dated April&nbsp;2, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(f)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Warrant to David R. Pomije dated March&nbsp;31, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(g)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Agreement to Amend Working Capital Revolving Promissory Note and Mezzanine Revolving Promissory Note dated January&nbsp;8, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(h)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amended and Restated Subordination Agreement dated January&nbsp;27, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(i)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Agreement to Extend Mezzanine Revolving Promissory Note and Working Capital Promissory Note Dated July&nbsp;15, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Subscription Agreement and Letter of Investment Intent between the Company and Stanley&nbsp;A. Bodine.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.4</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(a)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Credit and Security Agreement by and between 2<SUP>nd</SUP> Swing, Inc. and Wells Fargo Business Credit, Inc. dated November&nbsp;21, 2002</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*4.4</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(b)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>First Amendment to Credit and Security Agreement and Waiver of Default dated February&nbsp;28, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>**5.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Opinion of Moss &amp; Barnett, A Professional Association, Counsel to the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*10.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(a)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Lease dated June 22, 2001 for principal executive office</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*10.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(b)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amendment No. 1 to principal executive office lease</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*10.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(c)</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amendment No. 2 to principal executive office lease</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*10.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>2000 Stock Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*10.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Stock Option Plan for Nonemployee Directors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*16</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Letter from Silverman Olson Thorvilson &amp; Kaufmann LTD regarding change in accountants</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Consent of Ernst &amp; Young LLP, independent auditors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Consent of Silverman Olson Thorvilson &amp; Kaufmann LTD, independent auditors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>**23.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Consent of Counsel to the Company (filed as part of Exhibit 5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Power of Attorney (included on signature page)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to same-numbered exhibit filed with Registration Statement on Form&nbsp;S-1, File No.&nbsp;333-100438
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>**</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment </FONT></DD></DL>
<HR NOSHADE>
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Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
As filed with the Securities and Exchange Commission on July 17, 2003
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
Registration Statement
Under the
Securities Act of 1933
2
nd
Swing, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
5941
41-1870348
(State or Other Jurisdiction of Incorporation or Organization)
(Primary Standard Industrial Classification Code Number)
(IRS Employer
Identification No.)
5810 Baker Road
Minnetonka, MN 55345
Telephone: (952) 345-3700
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
Stanley A. Bodine
Chief Executive Officer
2nd Swing, Inc.
5810 Baker Road
Minnetonka, MN 55345
Telephone: (952) 345-3700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Deanne M. Greco, Esq.
Larry A. Barden, Esq.
Moss & Barnett
Sidley Austin Brown & Wood LLP
A Professional Association
Bank One Plaza
4800 Wells Fargo Center
10 South Dearborn
90 South 7
th
Street
Chicago, IL 60603
Minneapolis, MN 55402
Telephone: (312) 853-7785
Telephone: (612) 347-0287
Telefax: (312) 853-7036
Telefax: (612) 339-6686
Approximate Date of Proposed Sale to the Public:
As soon as practicable after the effective date of this Registration
Statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box.
o
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of earlier effective registration statement for the same offering.
o
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
o
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be
Registered
Amount to be
Registered
Proposed Maximum
Offering Price
Per Share
Proposed Maximum
Aggregate Offering
Price(1)(2)
Amount of
Registration Fee
Common Stock, par value $.01 per share
2,300,000 shares
$10.00
$23,000,000
$1,861
(1)
This
amount represents the proposed aggregate offering price of the securities registered hereunder to be sold by the registrant. These figures are estimated solely for purposes of
calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2)
Includes
shares of common stock that the placement agent has an option to place solely to cover overallotments, if any.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or
until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED JULY      , 2003
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.
2nd Swing, Inc.
2,000,000 Shares
of Common Stock
This is our initial public offering and no public market currently exists for our shares. We expect that the initial public offering price will be between $8.00 and $10.00 per share. This price may not reflect the market price of our shares after our
offering.
PER SHARE
TOTAL
Public Offering Price
$
$
Placement Agent's Fee
$
$
Proceeds, before expenses, to 2nd Swing, Inc.
$
$
WR
Hambrecht+Co, which is acting as placement agent for this offering, may also place up to an additional 300,000 shares at the public offering price within 30 days of the date of this
prospectus to cover overallotments. We will pay the placement agent's fee with respect to any shares placed pursuant to this overallotment option. The placement agent expects to deliver shares of
common stock to purchasers on                          , 2003.
Proposed
American Stock Exchange Symbol: SSG
This offering involves a high degree of risk. You should purchase shares only if you can afford a complete loss of your
investment.
See "Risk Factors" beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is                          , 2003
Table of Contents
Prospectus Summary
Risk Factors
Forward-Looking Statements
Use of Proceeds
Capitalization
Dividend Policy
Dilution
Selected Financial and Other Operating Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Our Business
Management
Certain Relationships and Related Transactions
Principal Shareholders
Description of Capital Stock
Shares Eligible for Future Sale
Plan of Distribution
Legal Matters
Experts
Independent Auditors
Where You Can Find More Information
Index to Financial Statements
2ND
SWING® and "IT'S NOT YOU, IT'S YOUR CLUBS!®" are our registered trademarks and service marks.
We
use market and industry data throughout this prospectus, which we have obtained from market research, publicly available information, and industry publications. These sources
generally state that the information that they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information are not guaranteed. The market
and industry data are often based on industry surveys and the preparers' experience in the industry. Although we believe that the surveys and market research that others have performed are reliable,
we have not independently verified this information.
i
PROSPECTUS SUMMARY
The following is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere
in this prospectus, including the section titled "Risk Factors" beginning on page 6 and the financial statements beginning on page F-1. Our fiscal year ends on the Sunday closest to
December 31, resulting in years of either 52 or 53 weeks.
2
nd
Swing, Inc.
We are a specialty retailer in the business of buying, selling, and trading pre-owned and new golf clubs and related equipment. Our 2
nd
Swing stores provide golfers a convenient place to trade in or sell their existing golf clubs for store credit or cash and apply the value received towards the purchase of new or pre-owned
equipment. This enables golfers to acquire new technology or upgrade to more advanced equipment on a cost-effective basis. With 35 stores currently, we believe we are the largest store-based retailer
of pre-owned golf equipment and the only one with the objective of developing a national chain of stores focused primarily on buying, selling, and trading pre-owned golf
equipment.
Our
stores are economically sized at approximately 3,500 square feet and are conveniently located in retail strip centers. Each 2
nd
Swing store carries a broad assortment
of new and pre-owned clubs from leading manufacturers as well as a selection of golf bags, gloves, balls, and other equipment. We believe our efficient store size, focus on higher margin
pre-owned equipment, and emphasis on hard goods merchandise, which we believe produces higher sales per square foot than apparel and shoes, have enabled us to achieve a store-level average
return on invested capital in excess of 50% in stores open for four years or longer.
We
opened our first store in 1997 and now operate 35 stores in fourteen states. Sales for the 12 months ended June 29, 2003 were $32.0 million, of which 64% was
derived from the sale of pre-owned golf equipment. Same store sales increases were 20% in fiscal year 2001, 7% in fiscal year 2002, and 15% for the six months ended June 29, 2003.
Business Strategy and Competitive Differentiation
We believe the following key elements of our business strategy provide us with significant competitive advantages:
Differentiated Merchandise Strategy.
Our merchandise mix consists exclusively of hard goods equipment, such as clubs, balls, bags, and accessories. While we offer
a broad selection of both new and pre-owned equipment, we focus on the sale of pre-owned clubs. We generally realize higher gross margins on sales of pre-owned
clubs than on sales of new equipment.
Buying,
selling, and trading pre-owned equipment differentiates us from traditional golf retailers and creates a unique customer value by enhancing the golfer's purchasing
power for equipment (whether previously owned or new) with the trade-in value of the golfer's current equipment.
In
the new equipment category, we offer major brands of golf equipment, including Callaway®, Cleveland®, Cobra®, Nike®, Ping®,
TaylorMade®, and Titleist®. We believe that our ability to take trade-ins of pre-owned clubs significantly enhances our ability to sell new equipment.
Superior In-store Service and Product Expertise.
We emphasize a superior level of in-store service by staffing our stores with
well-trained, knowledgeable golfers, many of whom are PGA® professionals. All stores feature an indoor driving net and putting green to test clubs and we offer customers a
3-day demo period for both new and pre-owned clubs.
Proprietary Pricing Model.
We have developed a proprietary bid/ask pricing model that utilizes, among other factors, historic product sales data to enable us to
manage both cost and availability of our pre-owned inventory. Pricing information is developed at the corporate level based on supply, demand, and other variables and is adjusted
periodically to maximize sales, gross margin, and return on
1
inventory
investment. We believe this pricing model provides us with a key competitive advantage and also represents a significant barrier to entry.
Experienced Management Team.
We have assembled a management team with significant golf expertise and with extensive experience in retailing, particularly the sale
of pre-owned merchandise. Five members of our management team, including our Chairman, Chief Executive Officer, and Chief Financial Officer, were involved in the founding and/or
development of FuncoLand®, which, prior to its sale to Barnes & Noble, Inc. in 2000, was the largest chain of retail stores selling previously played video game software and
hardware.
Growth and Expansion Strategy
With a proven store model, an experienced management team, and scaleable infrastructure now in place, we plan to accelerate our rate of expansion and pursue our
goal of becoming the nation's leading retailer of pre-owned and new golf equipment. Key elements of our growth and expansion strategy include the following:
Accelerated Store Growth.
Over the past few years, we have demonstrated our ability to open new stores and to successfully enter new markets in new geographic
territories. We now operate 35 stores, having opened five new stores in 2003.
We
plan to open five additional stores in 2003, 20 stores in 2004, and 30 to 40 stores per year over the following three years. We believe there is the potential for at least 200
2
nd
Swing stores nationwide.
Increased Store Sales Productivity.
We believe we can increase sales in our existing stores by:
•
Capitalizing
on favorable industry dynamics;
•
Further
developing the market for pre-owned golf equipment by increasing
2
nd
Swing
brand awareness;
and
•
Increasing
new equipment sales by adding new brand and equipment offerings.
Enhanced Profitability at Store and Corporate Levels.
We believe opportunities exist to enhance store and corporate level profitability by:
•
Leveraging
store-level operating costs and
•
Expanding
corporate operating margins and improving return on capital through continued leveraging of existing infrastructure costs and enhanced purchasing power.
We
were incorporated on March 10, 1997 under the laws of the State of Minnesota. Our corporate offices are located at 5810 Baker Road, Minnetonka, MN 55345, and our telephone
number is (952) 345-3700. We also have a website,
www.2ndswing.com
, which provides general company information, a listing of our
store locations, and selected new product information. Information on our website should not be construed to be part of this prospectus.
In
this prospectus, we use the terms "2
nd
Swing," "we," "us," and "our" to refer to 2
nd
Swing, Inc.
You
should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from the information contained in this
prospectus. We are
offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date
of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs.
2
THE OFFERING
Common stock offered by us
2,000,000 shares
Common stock to be outstanding after offering
5,440,672 shares
Use of proceeds
We will receive approximately $16.2 million in net proceeds from this offering. We intend to use the proceeds:
•
to open new retail stores and
•
to fund working capital and for other general corporate purposes.
Pending application of the proceeds to these uses, we plan to repay indebtedness under our revolving credit facilities.
See "Use of Proceeds."
Proposed American Stock Exchange symbol
SSG
Unless
otherwise indicated, all information in this prospectus assumes:
•
WR Hambrecht+Co
does not exercise its overallotment option to place additional shares of our common stock,
•
a
public offering price of $9.00 per share (mid-point of the pricing range set forth on the cover of this prospectus), and
•
a
0.3-for-1 split of our common stock which we effected on September 30, 2002.
The
common stock to be outstanding after this offering excludes:
•
900,000
shares of common stock reserved for issuance upon the exercise of awards that may be granted under our stock compensation plan, under which options to purchase
399,750 shares of common stock were outstanding as of June 29, 2003, at a weighted average exercise price of $6.04 per share, and options to purchase 225,000 shares of common stock will
be granted upon the effectiveness of this offering with an exercise price equal to the public offering price;
•
up
to 10,000 shares of common stock to be distributed to our nonofficer employees on the effectiveness of this offering (See "Management—Employee Stock Awards");
•
150,000
shares of common stock reserved for issuance upon exercise of options that may be granted under our stock option plan for nonemployee directors, under which options
to purchase 12,500 shares at an exercise price equal to the public offering price were outstanding as of June 29, 2003; and
•
120,867
shares of common stock reserved for issuance upon the exercise of outstanding warrants with a weighted average exercise price of $9.00 per share.
3
SUMMARY FINANCIAL AND OPERATING DATA
In the table below, we provide you with our summary historical financial data. We have prepared this information using our financial statements for each of the
five years in the period ended December 29, 2002, and for the six months ended June 30, 2002 and June 29, 2003. The financial statements for the years ended January 2, 2000
and December 31, 2000 have been audited by Silverman Olson Thorvilson & Kaufmann LTD, independent auditors. The financial statements for the years ended December 30, 2001
and December 29, 2002 have been audited by Ernst & Young LLP, independent auditors. The financial statements for the year ended December 27, 1998 and for the six months ended
June 30, 2002 and June 29, 2003 have not been audited. Operating results for the six months ended June 29, 2003 are not necessarily indicative of the results that may be expected
for the year ending December 28, 2003. The information presented below under the caption "Store Operating Data" is unaudited.
It
is important that you read this summary historical financial data in conjunction with our historical financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing elsewhere in this prospectus.
Year Ended(1)
Six Months Ended
December 27,
1998
January 2,
2000
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(unaudited)
(unaudited)
(unaudited)
(dollars in thousands, except per share amounts)
Statement of Operations Data:
Net sales
$
1,352
$
3,359
$
7,609
$
16,332
$
26,407
$
13,032
$
18,616
Cost of sales
809
2,097
4,684
10,284
16,805
8,220
11,975
Gross profit
543
1,262
2,925
6,048
9,602
4,812
6,641
Selling, general, and administrative expenses
755
2,511
4,677
8,315
11,606
5,811
7,485
Operating loss
(212
)
(1,249
)
(1,752
)
(2,267
)
(2,004
)
(999
)
(844
)
Interest expense, net(2)
(183
)
(16
)
(228
)
(336
)
(537
)
(269
)
(436
)
Net loss(3)
$
(395
)
$
(1,265
)
$
(1,980
)
$
(2,603
)
$
(2,541
)
$
(1,268
)
$
(1,280
)
Net loss per share—basic and diluted
$
(0.49
)
$
(0.63
)
$
(0.79
)
$
(0.87
)
$
(0.75
)
$
(0.38
)
$
(0.37
)
Weighted average shares outstanding
811,819
2,022,641
2,502,026
2,975,019
3,375,087
3,309,502
3,440,672
Store Operating Data:
Stores open at the end of period
3
4
10
20
30
29
35
Comparable store sales increase(4)
n/a
20
%
19
%
20
%
7
%
9
%
15
%
Approximate square feet of selling space at the end of period
8,800
12,600
33,300
68,900
103,800
99,800
120,900
4
As of June 29, 2003
Actual
As Adjusted(5)
(in thousands)
Balance Sheet Data:
Net working capital
$
1,780
$
17,950
Total assets
11,642
21,468
Total debt
6,375
31
Total liabilities
12,340
5,996
Shareholders' equity (deficit)
(698
)
15,472
(1)
Our
fiscal year ends on a Sunday on or near December 31 and consists of either 52 or 53 weeks. Fiscal year 1999 consisted of 53 weeks. All other years consisted of 52 weeks.
The six months ended June 30, 2002 and June 29, 2003 each consisted of 26 weeks.
(2)
Our
1998 interest expense, net includes $170,000 of expense as the result of a beneficial conversion feature related to certain notes payable, which were convertible into our common
stock at $0.47 per share, which was at a discount to the then fair value of the common stock.
(3)
We
converted from a Subchapter S corporation income tax filer to a C corporation on December 10, 2000. In a Subchapter S corporation, the shareholders include the applicable
corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we established a valuation allowance for all net deferred tax benefits as the realization of these
assets is uncertain. Therefore, no income tax expense or benefit is recognized for any periods presented.
(4)
Stores
are included in our comparable store sales base on the 365
th
day of operation. Comparable store sales for the fiscal year ended January 2, 2000 were
computed using a comparable 52-week period.
(5)
The
balance sheet data as adjusted are presented as if the application of the estimated net proceeds of $16.2 million occurred at June 29, 2003. Pending use of the proceeds for
new store openings, working capital, and other general corporate purposes, we plan to repay the outstanding indebtedness under our revolving credit facilities.
5
RISK FACTORS
You should carefully consider the risk factors set forth below and all other information contained in this prospectus before making an
investment decision regarding our common stock. The risks described below are not the only risks we face. Additional risks and uncertainties that we have not yet identified or that we currently
consider to be immaterial may also materially and adversely affect our business, financial condition, results of operations, and the value of our common stock. You could lose part or all of your
investment.
Risks Related to Our Business
We have a limited operating history and are subject to all the risks of new businesses.
We have been in operation for six years and are in an emerging growth stage. In addition, our concept of buying, selling, and trading pre-owned golf
equipment is relatively new. As of the date of this prospectus, 16 of our 35 stores have been open for less than two years and five of our stores have been open for less than one year. Our operating
history may not be indicative of future results. In addition, the likelihood of our future success must be evaluated in light of the difficulties and risks encountered by all new businesses and
especially of new entrants into the retail industry, which is characterized by a large number of participants, intense competition, and a high failure rate.
To date, we have incurred operating losses.
We have incurred operating losses since our inception, and there can be no assurance that we will achieve profitability in the future. Our business plans and
strategies assume continued growth in the golf industry and the demand for pre-owned golf equipment. Future operating results will depend upon a number of factors, including our ability to
execute our expansion strategy, the state
of the golf industry, the development of key vendor relations, and competition in the golf retail industry.
Our expansion plan is dependent on a number of factors that could delay or prevent the successful opening of new stores and subsequent penetration into new markets.
We will be unable to open and operate new stores successfully and our growth will be limited unless we can:
•
identify
suitable markets and sites for store locations;
•
negotiate
acceptable lease terms;
•
obtain
all necessary licenses and permits required to operate our business;
•
hire,
train, and retain competent store management and personnel;
•
maintain
a proportion of new stores to mature stores that does not harm existing sales;
•
foster
current relationships and develop new relationships with vendors that are capable of supplying a greater volume of merchandise;
•
manage
inventory effectively to meet the needs of new and existing stores on a timely basis;
•
maintain
adequate inventories of pre-owned golf equipment in each of our stores; and
•
expand
our infrastructure to accommodate growth.
In
addition, we will open new stores in regions of the United States in which we currently have few or no stores. Our experience in these markets is limited, and we cannot assure you
that we will be able to develop our brand in these markets or adapt to competitive, merchandising, and distribution
6
challenges
that may be different from those in our existing markets. Our inability to open new stores successfully and/or penetrate new markets would likely reduce our revenue and earnings growth.
Our success depends upon the golf industry maintaining growth and popularity.
Our business plans and strategies are based on certain assumptions regarding the golf industry, including continued demand for pre-owned golf equipment. Although
we believe that consumer interest in golf has generally grown over the past 20 years, there can be no assurance that the popularity of golf will continue to grow or be sustained. Golf Datatech
reported the number of rounds played during 2002 decreased 2.9% compared to 2001. In addition, the cost of playing golf has increased in recent years. If the popularity of golf declines, the demand
for products sold in our stores could also decline.
Our success depends upon continued technological innovation in the golf industry.
Demand for golf equipment has typically been driven by introduction of innovative products coupled with substantial industry advertising and promotion of these
products. Our business success depends on golf manufacturers' development, marketing, and distribution of new models of golf equipment to the retail sector. If golf manufacturers develop fewer new
models of golf equipment, reduce their promotion of golf equipment, or if there are fewer technological innovations in the production of new golf equipment, consumers may be less inclined to sell or
trade in existing equipment or may sell their pre-owned equipment less frequently. Conversely, if manufacturers develop new, technologically superior golf equipment or reduce the cost of
new equipment, consumers may opt to purchase new rather than pre-owned golf equipment. Any of these trends may impair the growth of the pre-owned golf equipment market, thus reducing our
ability to obtain pre-owned inventory and causing our sales to decline.
We may not be able to achieve comparable store sales gains in the future.
There can be no assurance that we will continue to achieve comparable store sales gains. Our comparable store sales results could cause the price of our common
stock to fluctuate substantially. A variety of factors may affect our comparable store sales results, including:
•
downward
trend in general economic conditions, which could affect consumer spending, especially on discretionary purchases;
•
the
retail sales environment, such as changes in demand for the products we offer in our stores;
•
the
availability and cost of credit from vendors;
•
the
results of our merchandising strategies;
•
the
success of our marketing and promotional programs;
•
actions
of competitors, such as entry into the pre-owned equipment market;
•
our
ability to maintain the appropriate level of inventory; and
•
our
ability to otherwise execute our business strategy.
These
factors could result in decreased consumer spending, increased competition, our inability to obtain sufficient inventory at acceptable cost, and our inability to attract and retain
customers.
We rely on certain key vendors for new product, and loss of these relationships could harm our business.
We are dependent to a significant degree upon our ability to purchase merchandise at competitive prices. We generally purchase new merchandise pursuant to
purchase orders, and we do not currently
7
have
long-term merchandise supply contracts with any key vendors. A vendor, therefore, could discontinue selling products to us at any time for reasons that may or may not be in our
control. In fiscal 2002, one vendor accounted for approximately 39% of our new product purchases. The loss of our relationship with this or any other significant vendor of a name brand product could
harm our business, financial condition, and results of operations.
With
regard to pre-owned golf equipment, which in 2002 accounted for approximately 65% of our total inventory purchases, we are dependent upon the availability of such
equipment and the desire of the owners to sell or trade it to our stores rather than to other purveyors of pre-owned merchandise. If we are unable to obtain adequate supplies of pre-owned
equipment at reasonable prices, our ability to generate sales and our results of operations could be impaired.
Our business is dependent on effective inventory management and valuation of new and pre-owned equipment.
Misjudgments by management regarding the popularity or value of certain golf equipment could create overstocked or understocked inventories, resulting in
decreased margins or dissatisfied customers, either of which could harm our financial and operating results.
We rely on a single distribution center and if there is a natural disaster or other serious disruption at that facility, we could lose merchandise and be unable to effectively
deliver it to our stores.
We rely on a single distribution center in Minnetonka, Minnesota. Any natural disaster or other serious disruption to this facility due to fire, tornado, or any
other cause would damage a significant portion of
our inventory and could impair both our ability to adequately stock our stores and our sales and profitability.
Our business is subject to the seasonality common to most retailers in the golf industry. In addition, our operating results may otherwise fluctuate substantially, which could
cause the market price of our common stock to decline, particularly if our quarterly results are lower than the expectations of securities analysts.
During fiscal 2002, approximately 75% of our annual sales occurred during the second and third quarters. Because of this seasonal nature, our business is affected
by seasonal trends or unusual or severe weather conditions. Unfavorable weather conditions generally result in fewer golf rounds played, which typically results in lower demand for golf equipment.
Consequently, sustained adverse weather conditions, especially during the second and third quarters, could weaken our sales. Building inventory in advance for the second and third quarters could also
harm our financial results if anticipated sales are not realized. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Seasonality and Quarterly
Results."
In
addition, the timing of our new store openings, as well as the timing of new product introductions by our vendors, could result in unanticipated fluctuations in our quarterly results.
Fluctuations
in our quarterly operating results may reduce the market price of our common stock, particularly if our quarterly results fall below the expectations of securities analysts.
The retail golf market is highly competitive, and we face competition from specialty golf retailers, golf pro shops, catalog and internet merchants, full-line sporting goods
stores, and mass merchants.
The retail industry, including the market for golf merchandise, is highly competitive, with few barriers to entry. We compete with both national and regional
retailers that sell new golf equipment and have marketing, sales, financial, and other resources far greater than ours. In addition, many of our competitors for sales of new merchandise may be able to
take advantage of trade and quantity
8
discounts
with respect to goods they obtain. Pre-owned golf equipment is sold primarily through regional and local retailers and several smaller companies that buy and sell
pre-owned golf equipment by mail. Internet brokers, resale, thrift, and consignment shops, pawn shops, auctions, want ads, and garage sales also compete for the sale of
pre-owned merchandise. If competitive pressures were to increase, we could be forced to reduce prices on equipment sold or pay higher prices to purchase pre-owned equipment. We
cannot assure you that we will be able to compete successfully against current and future competitors or that the competitive pressures we face will not weaken our business, operating results, and
financial condition. See "Our Business—Competition."
Our success is dependent upon retaining and attracting skilled management.
Our success depends upon our ability to attract and retain high caliber top management personnel. P. Simon Kallal, our President and founder, has provided, since
our inception, valuable insight, direction, and contribution in the areas of industry knowledge, marketing, employee recruitment, and vendor relations. Our Chairman of the Board, David R. Pomije, has
provided important advice to our management and has been instrumental in obtaining financing as well as providing capital through his personal investment in us. See "Certain Relationships and Related
Transactions." Stanley A. Bodine joined us in 2000 as our Chief Executive Officer. Mr. Bodine has an extensive background in consumer products and proven expertise in the rollout and management
of successful specialty retail businesses. We have key-man insurance coverage for Stanley A. Bodine and P. Simon Kallal; however, we do not have employment agreements with any of our key
personnel and believe that the loss of the services of any of these individuals could impair our development and growth.
Our success is dependent upon retaining and attracting skilled employees.
In addition to retaining top management personnel, we will need other key management and store personnel to successfully operate and expand our business. We
believe that attracting individuals with substantial golf experience is important to our continued growth and success. Factors such as salary, benefits, and the desire to work in the retail sector may
affect our ability to hire and retain such skilled individuals. We can give no assurance that we will be able to hire and retain the personnel required for our future growth.
Adverse global political and economic conditions may harm our business.
Our products are recreational in nature and are, therefore, discretionary purchases for consumers. Consumers are generally more willing to make discretionary
purchases of golf and other leisure products during favorable economic conditions and when they are feeling confident and prosperous. Adverse economic conditions in the United States, a decrease in
prosperity among consumers, or even a decrease in consumer confidence as a result of anticipated adverse economic conditions could cause consumers to forgo or to postpone purchasing new or
pre-owned golf products. Terrorist activities and actual or threatened armed conflict have had, and could continue to have, a significant impact upon certain segments of the United States
economy and could reduce the level of demand for our products as consumers' attention and interest are diverted from golf and become focused on economic, political, and public safety issues. If such
events were to cause a significant disruption in domestic or international air, ground, or sea shipments, our ability to obtain inventory of new product also could be impaired.
Our ability to attract customers to our stores depends heavily on the success of the retail strip centers in which we are located.
In order to generate customer traffic, we must locate our stores in prominent locations within successful retail strip centers. We cannot control the development
of new strip centers, the availability or cost of appropriate locations within existing or new strip centers, or the success of individual strip
9
centers.
A significant decrease in traffic at the strip centers in which our stores are located could harm our results of operations.
Although the proceeds from this offering will be sufficient to fund our operations for at least twelve months, we may need to raise additional capital, and we can give no
assurance that such capital will be available.
We believe that the proceeds from this offering, together with funds available under existing financing arrangements and cash provided by operations, will be
sufficient for our planned growth and operations for at least the next twelve months. If the expenses of expansion exceed current estimates or if our stores do not perform at anticipated levels, we
may need additional capital to fund our continued growth. Such additional financing may be sought from a number of sources, including possible further offers or sales of equity securities or loans
from banks or other financial institutions. We may not be able to obtain additional financing from any source or on terms favorable or acceptable to us. If we are required to sell additional
securities, we may be required to do so at a price that is less than the price of the common stock offered by this prospectus. Further sales of equity securities could therefore result
in substantial dilution to investors purchasing the common stock in this offering. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources."
Risk Factors with Regard to the Offering
Shares eligible for sale in the near future may cause the market price for our common stock to decline.
Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, may
depress the market price for our common stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.
Upon
completion of this offering we will have outstanding 5,440,672 shares of common stock. Of these shares, 2,212,706 shares, including the 2,000,000 shares sold in this offering, will
be freely tradeable. The remaining shares of common stock will be available for sale in the public market subject to restrictions under federal securities law. Our officers, directors, and certain
shareholders holding an aggregate of approximately 3,014,503 shares have entered into agreements with the placement agent of this offering restricting these persons from selling, pledging, or
otherwise disposing of their shares for a period of 180 days after the date of this prospectus without the prior written consent of WR Hambrecht+Co. However, WR Hambrecht+Co may,
in its sole discretion, release all or any portion of the common stock from the restrictions of the lockup agreements. The remaining 213,463 shares will be eligible for sale in the public market
beginning 90 days after the offering.
You will immediately experience and may in the future experience dilution in the book value of your shares of our common stock.
Investors purchasing common stock in this offering will experience an immediate substantial dilution of their investment in our common stock. The net tangible
book value per share after this offering of $2.84 will be substantially less than the assumed per share offering price of $9.00 due to the fact that the offering price exceeds the current net book
value per share. The investors in this offering will own approximately 36.8% of the shares outstanding after this offering, and their total cash investment will be approximately 66.1% of the total
investment in us to date. We have outstanding options and warrants to purchase an aggregate of 533,117 shares of common stock at a weighted average exercise price of $6.78 per share. In
addition, options to purchase 225,000 shares of our common stock will be granted upon the effectiveness of this offering, each at an exercise price equal to
10
the
public offering price. You may realize further dilution as the result of exercise of these options and warrants. In the event that we issue additional common stock in the future, including shares
that may be issued in connection with the exercise of stock options and warrants, you may experience further dilution in the net book value per share of the common stock you have purchased. Decreases
in the book value of our common stock may reduce the price at which you may resell shares of our common stock.
There is no public market for our shares, and we cannot assure you that a market will develop after this offering.
While we have applied to have our common stock approved for listing on the American Stock Exchange, there is currently no market for our common stock, and there
can be no assurance that a market for our common stock will ever develop. The purchase price of the common stock offered by this prospectus has been determined by negotiations between us and
WR Hambrecht+Co and may not be indicative of the price at which our common stock will trade after the offering. If a trading market fails to develop, you may be unable to resell shares of our
common stock.
Our management will have broad discretion regarding the use of proceeds from this offering.
We estimate that we will receive net proceeds from this offering of about $16.2 million. We intend to use the net proceeds for new store openings and
general corporate purposes, including working capital. We also intend to repay our outstanding indebtedness under our revolving credit facilities pending use of the net proceeds for these purposes.
Our management will have broad discretion regarding how we use the remaining net proceeds of this offering, and you may disagree with the way these funds are utilized.
One of our principal shareholders will be able to exert substantial influence.
David R. Pomije, our Chairman, will own approximately 33% of the outstanding common stock following the offering, including warrants to purchase common stock, and
may have effective control over the election of our board of directors and the direction of our affairs. His interests may be different from the interests of other shareholders. See "Principal
Shareholders."
We are offering the common stock on a best-efforts basis, and we cannot be certain that we will raise the full amount contemplated in this offering.
We have retained WR Hambrecht+Co under a placement agency agreement to act as our exclusive placement agent in connection with this offering. The placement
agent is not obligated and does not intend to purchase any of the common stock offered hereby. The closing of this offering is not conditional on the sale of all of the shares offered hereby, and we
may sell all or any portion of such shares. Accordingly, we cannot be certain of the number of shares that will be purchased by investors. We currently anticipate that the closing will take place on
                       , 2003, but we cannot be certain that this will be the case.
We may incur increased costs as a result of recently enacted and proposed changes in laws and regulations.
Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules
proposed by the SEC, could result in increased costs to us as we evaluate the implications of any new rules and respond to their requirements. The new rules could make it more difficult for us to
obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. The impact of
11
these
events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, or as executive officers. We are currently
evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs.
Our directors have only limited liability for actions they may take on behalf of the shareholders.
Our Amended and Restated Articles of Incorporation provide, as permitted by Minnesota law, that our directors will not be personally liable to us or our
shareholders for monetary damages for breach of their fiduciary duty of care as directors, with certain exceptions. This provision could make it difficult for a shareholder to obtain monetary damages
in the event any director has been found to have breached his or her fiduciary duties, although nonmonetary remedies, such as injunctions, would be available in appropriate circumstances. In addition,
our Amended and Restated Bylaws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Minnesota law. In the event we are required to indemnify any of our
officers or directors, our officer and director liability insurance may not adequately protect us against any losses that may occur. See "Description of Capital Stock—Limitation of
Liability and Indemnification."
Antitakeover provisions could adversely affect the price of our common stock.
Some of the provisions of our Amended and Restated Articles of Incorporation, Amended and Restated Bylaws, and Minnesota law could delay or prevent a change of
control or a change in management that holders of common stock may consider beneficial, including the following:
•
the
ability of our board of directors to issue shares of preferred stock and to establish the terms of the preferred stock, including voting rights;
•
provisions
for a classified board of directors;
•
provisions
for advance notice for director nominations and shareholder proposals;
•
provisions
for supermajority votes to remove directors, approve mergers, or amend specified provisions of our Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws; and
•
statutory
limitations regarding share acquisitions and business combinations.
These
provisions also could reduce the price of our common stock or prevent holders from receiving a premium for their shares by discouraging attempted takeovers.
12
FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Our
Business," and elsewhere in this prospectus constitute forward-looking statements. These statements involve risks, uncertainties, and other factors that may cause our or our industry's actual results,
levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," or the negative of these terms or other comparable terminology.
Forward-looking
statements are estimates and projections reflecting our judgment and involve a number of risks and uncertainties that could cause actual results to differ materially from
those suggested by the forward-looking statements. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be
incorrect. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include:
•
changes
in the amount and degree of promotional intensity exerted by current competitors and potential new competition from both retail stores and alternative methods or
channels of distribution such as online services and mail order;
•
changes
in national or regional United States economic conditions including, but not limited to, consumer credit availability, consumer credit delinquency and default rates,
interest rates, inflation, personal discretionary spending levels, and consumer sentiment about the economy in general;
•
changes,
or perceived changes, in the rate of technological advancements in the design and manufacture of golf clubs;
•
the
presence or absence of, or consumer acceptance of, new products or product features in the merchandise categories we sell and changes in our actual merchandise sales
mix;
•
significant
changes in retail prices for products sold by our business or in the cost of playing golf;
•
changes
in consumer interest in golf or adverse weather conditions restricting consumers' ability to play golf;
•
lack
of availability or access to sources of inventory;
•
inability
on the part of our business to liquidate excess inventory should excess inventory develop;
•
the
ability to attract and retain an effective management team in a dynamic environment or changes in the cost or availability of a suitable work force to manage and support
our service-driven operating strategies;
•
changes
in availability or cost of working capital financing;
•
changes
in production or distribution costs or cost of materials for our advertising;
•
availability
of appropriate real estate locations for expansion; and
•
those
other factors referenced in this prospectus under the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Our Business."
We
believe these forward-looking statements, which we have based on our current expectations, are reasonable; however, undue reliance should not be placed on any forward-looking
statements.
13
USE OF PROCEEDS
We expect to receive approximately $16,200,000 in net proceeds from the sale of shares of our common stock in this offering, based on the sale of 2,000,000 shares
at an assumed initial public offering price of $9.00 per share, after deducting the placement agent's fee and our estimated offering expenses. If WR Hambrecht+Co exercises its overallotment
option in full, we expect our net proceeds to be approximately $18,700,000.
One
of the principal objectives of this offering is to raise funds to support our expansion plans. Our principal capital requirements are for inventory and property and equipment to open
new stores and enhance our existing product offering. Our initial investment per store is approximately $160,000 for inventory and approximately $105,000 for property and equipment. To date, our
principal sources of liquidity have been the issuance of common stock, borrowings from David R. Pomije, our Chairman of the Board and majority shareholder, and borrowings under our credit facility
with a commercial lending institution.
We
plan to use approximately $6,600,000 of the net proceeds from this offering to open 25 new retail stores through the end of 2004. The balance of the net proceeds (approximately
$9,600,000), as well as any proceeds from the exercise of the placement agent's overallotment option, will be available for additional store openings, working capital, and other general corporate
purposes.
Pending
the application of the net proceeds to these purposes, we intend to repay outstanding indebtedness under our revolving credit facilities in order to reduce our interest expense
and improve our borrowing flexibility. Amounts repaid under these facilities will be available in the future should the need arise.
Our
revolving credit facilities include two revolving notes payable to David R. Pomije, our Chairman of the Board and majority shareholder. Both of these notes expire on March 31,
2006. The interest rate on both notes is 12% per annum, payable monthly. We currently have drawn a total of $5,000,000 on these notes. We will have a total of $8,000,000 of availability under these
notes through June 30, 2004, after which date we will have $5,000,000 of availability. See "Certain Relationships and Related Transactions."
We
also have a revolving credit facility with a commercial lending institution, which allows us to borrow up to $2,500,000, subject to borrowing base limitations. Borrowings under this
facility bear interest at 3.75% above the prime rate (8.00% at June 29, 2003), payable monthly, and are secured by our inventory. This facility expires on March 31, 2004. At
June 29, 2003, our outstanding balance on this facility was $1,300,000, and our available borrowing capacity was approximately $740,000.
To
enhance our financial flexibility and ensure access to additional capital to support our expansion program, we intend, following completion of this offering, to replace our current
credit facilities with a longer term facility from one or more commercial lending institutions providing greater borrowing capacity.
The
amount and timing of our expenditures, repayment of outstanding indebtedness, and future borrowings under our credit facilities may vary depending upon a number of factors, including
but not limited to the amount of cash we use in or generate from our operations, changes in our expansion strategy, and the availability of favorable financing. In the event that any of these factors
occurs, we may find it necessary or advisable to use portions of the net proceeds for other purposes, and we will have broad discretion in making such determination. For example, if we were to decide,
due to changes in the market for golf equipment, that further expansion was not in our best interest, we might devote any proceeds that would have been used for store openings for general corporate
purposes.
Pending
application of the proceeds not being utilized to repay outstanding indebtedness, we intend to invest the net proceeds in short-term investment grade or money market securities.
14
CAPITALIZATION
The following table sets forth our capitalization as of June 29, 2003:
•
on
an actual basis; and
•
on
an as adjusted basis to give effect to the sale of 2,000,000 shares of our common stock in this offering at an assumed initial public offering price of $9.00 per share
(after deducting the placement agent's fee and our estimated offering expenses) and application of the net proceeds from the sale.
It
is important that you read this capitalization information in conjunction with our historical financial statements and related notes, "Use of Proceeds," "Selected Financial and Other
Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and other financial information appearing elsewhere in this prospectus.
As of June 29, 2003
Actual
As Adjusted
(unaudited)
(dollars in thousands)
Cash and cash equivalents
$
75
$
9,901
Total debt
(1)
$
6,375
$
31
Shareholders' equity:
Common stock, par value $0.01 per share, 50,000,000 shares authorized, 3,440,672 shares issued and outstanding, actual; 5,440,672 shares issued and outstanding, as adjusted
34
54
Additional paid-in-capital
5,968
22,118
Deferred stock compensation
(24
)
(24
)
Accumulated deficit
(6,676
)
(6,676
)
Total shareholders' equity (deficit)
(698
)
15,472
Total capitalization
$
5,677
$
15,503
(1)
Pending
use of the proceeds for new store openings, working capital, and other general corporate purposes, we plan to repay the outstanding indebtedness under our revolving credit
facilities.
DIVIDEND POLICY
We anticipate that we will retain all of our earnings in the foreseeable future to finance the expansion of our business and, therefore, we do not anticipate
paying any cash dividends on shares of our common stock in the foreseeable future. Our future dividend policy will also depend on the requirements of any financing agreements to which we may be a
party and other factors considered relevant by our board of directors.
15
DILUTION
The net tangible book value of our common stock on June 29, 2003 was $(697,869), or approximately $(0.20) per share. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our common stock in this offering and the net tangible book value per share of our common stock immediately afterwards.
After
giving effect to the sale of shares at an assumed initial public offering price of $9.00 per share, and after deducting the placement agent's fee and estimated offering expenses
payable by us, our net tangible book value at June 29, 2003 would have been approximately $15.5 million, or $2.84 per share. This represents an immediate increase in net tangible book
value of $3.04 per share to current shareholders and immediate dilution of $6.16 per share to new investors. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share
$
9.00
Net tangible book value per share at June 29, 2003
$
(0.20
)
Increase per share attributable to this offering
3.04
As adjusted net tangible book value per share after this offering
2.84
Dilution per share to new investors
$
6.16
The
following table summarizes, on an as adjusted basis, as of June 29, 2003, the total number of shares of our common stock, the total consideration paid, and the average price
per share paid by existing shareholders and by the investors in this offering, calculated before deducting the placement agent's fee and estimated offering expenses:
Shares Purchased
Total Consideration
Average Price
Per Share
Number
Percentage
Amount
Percentage
Existing shareholders
3,440,672
63.2
%
$
9,220,795
33.9
%
$
2.68
New investors
2,000,000
36.8
18,000,000
66.1
9.00
Total
5,440,672
100.0
%
$
27,220,795
100.0
%
The
foregoing discussion and tables assume WR Hambrecht+Co does not exercise its overallotment option. If the overallotment option is exercised in full, sales in this offering
will reduce the number of shares of common stock held by the existing shareholders to approximately 60% of the total shares of common stock outstanding after the offering and will increase the number
of shares held by new investors to 2,300,000, or approximately 40% of the total shares of common stock outstanding after the offering.
16
SELECTED FINANCIAL AND OTHER OPERATING DATA
In the table below, we provide you with our selected financial data. We have prepared this information using our financial statements for each of the five years
in the period ended December 29, 2002, and for the six months ended June 30, 2002 and June 29, 2003. The financial statements for the years ended January 2, 2000 and
December 31, 2000 have been audited by Silverman Olson Thorvilson & Kaufmann LTD, independent auditors. The financial statements for the years ended December 30, 2001 and
December 29, 2002 have been audited by Ernst & Young LLP, independent auditors. The financial statements for the year ended December 27, 1998 and for the six months ended
June 30, 2002 and June 29, 2003 have not been audited. Operating results for the six months ended June 29, 2003 are not necessarily indicative of the results that may be expected
for the year ending December 28, 2003. The information presented below under the caption "Store Operating Data" is unaudited.
The
financial statements for the year ended December 27, 1998 and for the six months ended June 30, 2002 and June 29, 2003 have been derived from our unaudited
financial statements, which have been prepared on the same basis as our audited financial statements and in our opinion contain all adjustments consisting of any normal recurring adjustments necessary
for a fair presentation of the results of operations for such periods.
It
is important that you read this selected financial data in conjunction with our historical financial statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this prospectus.
Year Ended(1)
Six Months Ended
December 27,
1998
January 2,
2000
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(unaudited)
(unaudited)
(unaudited)
(dollars in thousands, except per share amounts)
Statement of Operations Data:
Net sales
$
1,352
$
3,359
$
7,609
$
16,332
$
26,407
$
13,032
$
18,616
Gross profit
543
1,262
2,925
6,048
9,602
4,812
6,641
Selling, general, and administrative expenses
755
2,511
4,677
8,315
11,606
5,811
7,485
Operating loss
(212
)
(1,249
)
(1,752
)
(2,267
)
(2,004
)
(999
)
(844
)
Interest expense, net(2)
(183
)
(16
)
(228
)
(336
)
(537
)
(269
)
(436
)
Net loss(3)
$
(395
)
$
(1,265
)
$
(1,980
)
$
(2,603
)
$
(2,541
)
$
(1,268
)
$
(1,280
)
Net loss per share—basic and diluted
$
(0.49
)
$
(0.63
)
$
(0.79
)
$
(0.87
)
$
(0.75
)
$
(0.38
)
$
(0.37
)
Weighted average shares outstanding
811,819
2,022,641
2,502,026
2,975,019
3,375,087
3,309,502
3,440,672
Store Operating Data:
Stores open at the end of period
3
4
10
20
30
29
35
Comparable store sales increase(4)
n/a
20
%
19
%
20
%
7
%
9
%
15
%
Approximate square feet of selling space at the end of period
8,800
12,600
33,300
68,900
103,800
99,800
120,900
17
Year Ended(1)
Six Months Ended
December 27,
1998
January 2,
2000
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(unaudited)
(unaudited)
(unaudited)
(in thousands)
Balance Sheet Data:
Net working capital (deficit)
$
147
$
434
$
871
$
(2,270
)
$
4,559
$
(717
)
$
1,780
Total assets
915
1,453
4,584
6,476
9,797
9,109
11,642
Total debt
220
50
1,343
4,808
6,410
3,297
6,375
Total liabilities
492
405
2,301
6,750
9,226
7,364
12,340
Shareholders' equity (deficit)
423
1,048
2,283
(274
)
571
1,745
(698
)
(1)
Our
fiscal year ends on a Sunday on or near December 31 and consists of either 52 or 53 weeks. Fiscal year 1999 consisted of 53 weeks. All other years consisted of 52 weeks.
The six months ended June 30, 2002 and June 29, 2003 each consisted of 26 weeks.
(2)
Our
1998 interest expense, net includes $170,000 of expense as the result of a beneficial conversion feature related to certain notes payable, which were convertible into our common
stock at $0.47 per share, which was at a discount to the then fair value of the common stock.
(3)
We
converted from a Subchapter S corporation income tax filer to a C corporation on December 10, 2000. In a Subchapter S corporation, the shareholders include the applicable
corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we established a valuation allowance for all net deferred tax benefits as the realization of these
assets is uncertain. Therefore, no income tax expense or benefit is recognized for any periods presented.
(4)
Stores
are included in our comparable store sales base on the 365
th
day of operation. Comparable store sales for the fiscal year ended January 2, 2000 were
computed using a comparable 52-week period.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with "Selected Financial and Other Operating Data" and our financial
statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. The actual
results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those set forth under "Risk Factors" in this
prospectus.
Overview
We are a specialty retailer in the business of buying, selling, and trading pre-owned and new golf clubs and related equipment. Our 2
nd
Swing stores provide golfers a convenient place to trade in or sell their existing golf clubs for store credit or cash and apply the value received towards the purchase of new or pre-owned
equipment.
We
opened our first store in 1997, which was subsequently relocated in 1998, and now operate 35 stores in fourteen states. We opened one additional store in 1998, two in 1999, six
in 2000, ten in 2001, ten in 2002, and five in 2003. We plan to open five additional stores in 2003 and approximately 20 stores in 2004.
At
the store level, our results of operations are significantly impacted by the maturity of our stores. We believe that our stores generally do not achieve maturity until the fourth year
of operation. While our newer stores typically experience lower sales levels than more mature stores, store operating costs, which primarily consist of rent, payroll, and advertising expenses, are
relatively constant regardless of the age of the store. Therefore, stores generally incur losses in their initial months of operation because sales levels have not increased to a level sufficient to
support operating costs. Sales, which we believe increase as customer awareness of a new store grows, should be sufficient to cover costs or generate a slight store-level operating profit by the end
of the store's first twelve months of operations. A new store is typically expected to generate comparable store sales increases in the low double digits in the second and third years of operations
and low single digits by the time the store reaches maturity in its fourth year. In the fifth year and beyond, comparable store sales increases are expected to be nominal.
Although
we achieved operating profitability at the store level in 2002, we are currently generating operating losses on a company-wide basis. This trend is due to the young
age of our store base and the significant investments we have made in building our corporate infrastructure, specifically information systems and management, to support a national base of retail
stores. While we currently anticipate that we will continue to incur operating losses on a company-wide basis over the next few years, we expect that such operating losses will decrease
through controlled expansion of our store base as a greater percentage of our stores will be mature and our newer stores help spread fixed corporate infrastructure costs over a larger store base. In
addition, as we open new stores in existing markets and expand into new markets in close proximity to existing markets, we expect to further leverage our brand recognition and existing advertising,
management, and distribution costs to enhance our operating results.
Because
of our recent formation, brief operating history, and significant growth in the number of stores, operating results may not be comparable from period to period and may not be
indicative of our future performance. In addition, a disproportionate amount of our sales and profits are generated during the second and third quarters, reflecting the seasonality of the golf season
in the states in which we operate.
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain
estimates, judgments, and assumptions that
19
we
believe are reasonable based upon the information available to us. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the periods presented. The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following:
Inventory Valuation.
We review our inventory balances to determine if inventories can be sold at amounts equal to or greater
than their carrying value. The review includes identification of slow-moving inventories, obsolete inventories, and discontinued products or lines of products. The identification process
includes analysis of historical performance of the inventory and current operational plans for the inventory as well as industry and customer-specific trends. If we are unable to sell our inventories
at amounts equal to or greater than our carrying amounts, we would be required to adjust our inventory values accordingly.
Income Taxes.
In determining the carrying value of our net deferred tax assets, we must assess the likelihood that we will
generate sufficient future taxable income to realize the benefits of those assets.
If our estimates and related assumptions regarding future performance change in the future, we may be required to adjust the amount of the valuation allowance against our deferred tax assets. At
December 29, 2002 and December 30, 2001, we determined that we could not conclude that it was more likely than not that our net deferred tax assets would be realized and recorded
valuation allowances of approximately $2,091,775 and $896,422, respectively. We evaluate the realizability of the deferred tax assets quarterly and assess the need for adjustments to the valuation
allowance accordingly.
Results of Operations
Our fiscal year ends on the Sunday closest to December 31 and consists of either 52 or 53 weeks. Fiscal year 1999 consisted of 53 weeks. All other years
consisted of 52 weeks.
Our
quarters end on the Sunday closest to March 31, June 30, September 30, and December 31, with each quarter consisting of 13 weeks in a 52-week
year. In fiscal years consisting of 53 weeks, the quarter ending closest to December 31 will consist of 14 weeks. The six months ended June 30, 2002 and June 29, 2003 each
consisted of 26 weeks.
Stores
are included in our comparable store sales base on the 365
th
day of operation.
Our
sales are recognized at the time of the sale of our merchandise to our customers. Our merchandise inventories are carried at the lower of cost or market using the
first-in, first-out method. Pre-owned equipment traded in by customers is recorded as inventory at the amount of the store credit or cash payment given to the
customer. The subsequent sales of pre-owned merchandise are recorded at the retail price charged to that customer.
Cost
of goods sold includes the cost of merchandise, inventory shrinkage, freight, and distribution.
Selling,
general, and administrative expenses include payroll, advertising, occupancy, and all expenses associated with our corporate headquarters.
20
The
following table sets forth certain financial data regarding our operations for the periods indicated:
Years ended
Six Months Ended
December 27,
1998
January 2,
2000
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(unaudited)
(unaudited)
(unaudited)
(in thousands)
Net sales
$
1,352
$
3,359
$
7,609
$
16,332
$
26,407
$
13,032
$
18,616
Gross profit
543
1,262
2,925
6,048
9,602
4,812
6,641
Selling, general, and administrative expenses
755
2,511
4,677
8,315
11,606
5,811
7,485
Operating loss
(212
)
(1,249
)
(1,752
)
(2,267
)
(2,004
)
(999
)
(844
)
Interest expense, net
(183
)
(16
)
(228
)
(336
)
(537
)
(269
)
(436
)
Net loss
(1)
(395
)
(1,265
)
(1,980
)
(2,603
)
(2,541
)
(1,268
)
(1,280
)
Store operating income (loss)
(2)
$
73
$
(58
)
$
181
$
589
$
1,026
$
519
$
1,097
The following table sets forth certain financial data regarding our operations expressed as percentages of net sales for the periods indicated:
Years ended
Six Months Ended
December 27,
1998
January 2,
2000
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(unaudited)
(unaudited)
(unaudited)
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Gross profit
40.1
37.6
38.5
37.0
36.4
36.9
35.7
Selling, general, and administrative expenses
55.8
74.8
61.5
50.9
44.0
44.6
40.2
Operating loss
(15.7
)
(37.2
)
(23.0
)
(13.9
)
(7.6
)
(7.7
)
(4.5
)
Interest expense, net
(13.5
)
(0.5
)
(3.0
)
(2.0
)
(2.0
)
(2.0
)
(2.4
)
Net loss
(1)
(29.2
)
(37.7
)
(26.0
)
(15.9
)
(9.6
)
(9.7
)
(6.9
)
Store operating income (loss)
(2)
5.4
(1.7
)
2.4
3.6
3.9
4.0
5.9
(1)
We converted from a Subchapter S corporation income tax filer to a C corporation on December 10, 2000. In a Subchapter S corporation, the
shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we established a valuation allowance for all net deferred tax
benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is recognized for any periods presented.
(2)
Store operating income (loss) is calculated by subtracting selling expenses from gross profit. Selling expenses include payroll, advertising, occupancy,
and other direct expenses relating to our retail stores. Other direct expenses include, for example, depreciation, credit card fees, supplies, loss prevention, and telephone expense. Selling expenses
for the periods covered by the table above were: $470,366 for the year ended December 27, 1998; $1,320,382 for the year ended January 2, 2000; $2,744,483 for the year ended
December 31, 2000; $5,458,767 for the year ended December 30, 2001; $8,575,995 for the year ended December 29, 2002; $4,292,585 for the six months ended June 30, 2002, and
$5,544,275 for the six months ended June 29, 2003. Operating loss can be derived from store operating income (loss) by subtracting general and administrative expenses (the difference between
selling, general, and administrative expenses and selling expenses). Management believes that store operating income (loss) is an important measure as it allows an assessment of operating performance
at the retail store level before taking into account the fixed corporate overhead. This measure should not be viewed as a more meaningful measure of our operating performance than other financial
data, such as operating loss. Other specialty retailers may not use store operating income (loss) to measure operating performance.
Comparison of Six Months Ended June 29, 2003 and June 30, 2002
Net Sales.
Net sales increased by $5,583,559, or 42.8%, to $18,615,598 in the six months ended June 29, 2003 from
$13,032,039 in the six months ended June 30, 2002. The increase is primarily due to the increased number of stores operated during the period. We operated 35 stores as of June 29,
2003 compared to 29 stores as of June 30, 2002. Sales from new stores represent $3,651,475 of the net sales increase. Comparable store sales for the six months ended June 29, 2003
were 15%, primarily due to our maturing store base.
21
Gross Profit.
Gross profit, which is net sales less cost of sales, increased by $1,828,598, or 38.0%, to $6,640,623 in the
six months ended June 29, 2003 from $4,812,025 in the six months ended June 30, 2002. Gross profit was 35.7% of net sales in the six months ended June 29, 2003 compared to 36.9%
in the six months ended June 30, 2002. The decrease in gross profit as a percentage of sales was due to a shift in product mix from the higher margin pre-owned equipment to new equipment.
Selling, General, and Administrative Expenses.
Selling, general, and administrative expenses increased by $1,673,684, or
28.8%, to $7,484,861 in the six months ended June 29, 2003 from $5,811,177 in the six months ended June 30, 2002. The dollar increase in selling, general, and administrative expenses was
primarily due to the costs associated with operating a greater number of stores. Selling, general, and administrative expenses were 40.2% of net sales in the six months ended June 29, 2003
compared to 44.6% in the six months ended June 30, 2002. Included in selling, general, and administrative expenses are selling expenses of $5,544,275 and $4,292,585 for the six months ended
June 29, 2003 and June 30, 2002, respectively.
Operating Loss.
Operating loss decreased by $154,914, or 15.5%, to $844,238 in the six months ended June 29, 2003 from
$999,152 in the six months ended June 30, 2002. Operating loss was 4.5% of net sales in the six months ended June 29, 2003 compared to 7.7% in the six months ended June 30, 2002.
Interest Expense.
Interest expense, net of interest income, was $435,269 in the six months ended June 29, 2003
compared to $268,534 in the six months ended June 30, 2002. The increase is primarily due to increased borrowing to fund the opening of new stores and working capital needs.
Income Tax.
We converted from a Subchapter S corporation income tax filer to a C corporation on
December 10, 2000. In a Subchapter S corporation, the shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a
C corporation, we have established a valuation allowance for all net deferred tax benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is
recognized for either six month period.
Comparison of Fiscal 2002 (52 weeks) to Fiscal 2001 (52 weeks)
Net Sales.
Net sales increased by $10,075,368, or 61.7%, to $26,407,335 in fiscal 2002 from $16,331,967 in fiscal 2001. The
increase is primarily due to the increased number of stores operated during the period. We operated 30 stores as of December 29, 2002 compared to 20 stores as of December 30, 2001. Sales
from new stores represent $8,949,302 of the net sales increase. Comparable store sales for fiscal 2002 were 7%, primarily due to our maturing store base.
Gross Profit.
Gross profit, which is net sales less cost of sales, increased by $3,553,784, or 58.8%, to $9,601,798 in fiscal
2002 from $6,048,014 in fiscal 2001. Gross profit was 36.4% of net sales in fiscal 2002 compared to 37.0% in fiscal 2001. The decrease in gross profit as a percentage of sales was due to a minor shift
in product mix from the higher margin pre-owned equipment to new equipment.
Selling, General, and Administrative Expenses.
Selling, general, and administrative expenses increased by $3,290,488, or
39.6%, to $11,605,491 in fiscal 2002 from $8,315,003 in fiscal 2001. The dollar increase in selling, general, and administrative expenses was primarily due to the costs associated with operating a
greater number of stores. Selling, general, and administrative expenses were 44.0% of net sales in fiscal 2002 compared to 50.9% in fiscal 2001. Included in selling, general, and administrative
expenses are selling expenses of $8,575,995 and $5,458,767 for fiscal 2002 and fiscal 2001, respectively. The decrease as a percentage of net sales was primarily due to leveraging expenses over a
larger store base.
Operating Loss.
Operating loss decreased by $263,296, or 11.6%, to $2,003,693 in fiscal 2002 from $2,266,989 in fiscal 2001.
Operating loss was 7.6% of net sales in fiscal 2002 compared to 13.9% in
22
fiscal
2001. The decrease as a percentage of net sales was primarily due to leveraging expenses over a larger store base.
Interest Expense.
Interest expense, net of interest income, was $537,258 in fiscal 2002 compared to $335,828 in fiscal 2001.
The increase is primarily due to increased borrowing to fund the opening of new stores.
Income Tax.
We converted from a Subchapter S corporation income tax filer to a C corporation on
December 10, 2000. In a Subchapter S corporation, the shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a
C corporation, we have
established a valuation allowance for all net deferred tax benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is recognized for either year.
Comparison of Fiscal 2001 (52 weeks) to Fiscal 2000 (52 weeks)
Net Sales.
Net sales increased by $8,723,094, or 114.6%, to $16,331,967 in fiscal 2001 from $7,608,873 in fiscal 2000. The
increase is primarily due to the increased number of stores operating during the period. We operated 20 stores as of the end of fiscal 2001 compared to 10 stores at the end of fiscal 2000. Sales from
new stores represent $7,184,165 of the net sales increase. Comparable store sales increases for fiscal 2001 were 20%, due to the early stage of maturity of the stores in our comparable store base.
Gross Profit.
Gross profit, which is net sales less cost of sales, increased by $3,123,279, or 106.8%, to $6,048,014 in
fiscal 2001 from $2,924,735 in fiscal 2000. Gross profit was 37.0% of net sales in fiscal 2001 compared to 38.5% in fiscal 2000. The decrease in gross profit as a percentage of sales was due to a
minor shift in product mix from the higher margin pre-owned equipment to new equipment and an increase in distribution center expenses.
Selling, General, and Administrative Expenses.
Selling, general, and administrative expenses increased by $3,638,309, or
77.8%, to $8,315,003 in fiscal 2001 from $4,676,694 in fiscal 2000. The dollar increase was primarily due to adding management and administrative staff and systems development to support our growth.
Selling, general, and administrative expenses were 50.9% of net sales in fiscal 2001 compared to 61.5% in fiscal 2000. The decrease as a percentage of net sales was primarily due to leveraging
expenses over a larger store base. Included in selling, general, and administrative expenses are selling expenses of $5,458,767 and $2,744,483 for fiscal 2001 and fiscal 2000, respectively.
Operating Loss.
Operating loss increased by $515,030, or 29.4%, to $2,266,989 in fiscal 2001 from $1,751,959 in fiscal 2000.
The increase was primarily the result of an increase in management and administrative personnel and systems development to support our growth. Operating loss was 13.9% of net sales in fiscal 2001
compared to 23.0% in fiscal 2000. The decrease as a percentage of net sales was primarily due to leveraging expenses over a larger store base.
Interest Expense.
Interest expense, net of interest income, was $335,828 in fiscal 2001 compared to $227,899 in fiscal 2000.
The increase is primarily due to increased borrowing to fund the opening of new stores.
Income Tax.
We converted from a Subchapter S corporation income tax filer to a C corporation on December 10, 2000. In
a Subchapter S corporation, the shareholders include the applicable corporate loss in their personal income tax returns. Commencing with our change to a C corporation, we have established a valuation
allowance for all net deferred tax benefits as the realization of these assets is uncertain. Therefore, no income tax expense or benefit is recognized for either year.
23
Liquidity and Capital Resources
Our primary capital requirements are for inventory and property and equipment to support our expansion plans. Our initial investment per store is approximately
$160,000 for inventory and approximately $105,000 for property and equipment. Our main sources of liquidity have been the issuance of common stock, borrowings from David R. Pomije, our Chairman of the
Board and majority shareholder, and borrowings under our credit facility with a commercial lending institution.
Cash
and cash equivalents at December 30, 2001, December 29, 2002, and June 29, 2003 were $0, $1,055,859, and $75,193, respectively. Working capital (deficit) at
December 30, 2001, December 29, 2002, and June 29, 2003 was $(2,270,053), $4,558,817, and $1,779,786, respectively.
During
2000, 2001, and 2002, net cash used in operating activities was $2,664,234, $3,081,801, and $2,380,565, respectively. During the six months ended June 30, 2002 and
June 29, 2003, net cash of $670,263 and $264,252, respectively, was used in operating activities. Funds used in operating activities are impacted primarily by our net losses and investments in
working capital, primarily inventory.
During
2000, 2001, and 2002, net cash used in investing activities was $1,244,332, $1,295,102, and $1,120,848, respectively. During the six months ended June 30, 2002, net cash of
$848,067 was used in investing activities, primarily to open nine new stores. During the six months ended June 29, 2003, net cash of $643,016 was used in investing activities, primarily for
property and equipment to open five new stores and for a new point-of-sale system.
Our
operations and investing activities have been supported to date by cash flow from financing activities. From inception, we have raised capital through the sale of shares of common
stock and loans from David R. Pomije. In four separate common stock issuances between December 29, 1998 and March 28, 2002, we raised net proceeds of $6,913,473 through the issuance of
1,159,594 common shares. Between December 29, 1998 and January 25, 1999, we sold 86,066 common shares at $2.85 per share for net proceeds of $245,000. On October 22, 1999 we sold
300,000 shares of common stock at $5.00 per share for net proceeds of $1,475,000. On August 8, 2000 we sold 48,000 shares of common stock at $5.00 per share for net proceeds of $240,000.
Between December 11, 2000 and December 29, 2000, we
sold 259,875 shares of common stock at $6.67 share for net proceeds of $1,707,490. Between January 7, 2002 and March 28, 2002, we sold 465,653 shares of common stock at $7.33 per share
for $3,245,983 in net proceeds.
The
balance of our spending has been supported by loans from Mr. Pomije. Between January 1998 and December 1999, Mr. Pomije advanced us an aggregate of
$1,025,000, of which $570,000 was converted to shares of common stock and $455,000 was repaid in October 1999. Between January 2000 and March 2002, Mr. Pomije advanced us
an aggregate of $7,867,500, of which $1,267,500 of the outstanding balance was converted to common stock and $3,100,000 was repaid. The remaining outstanding balance of $3,500,000 was structured into
a mezzanine note.
We
currently have in place two notes from Mr. Pomije providing us with up to $8,000,000 in borrowing capacity to be used for store expansion. The first is a mezzanine revolving
promissory note, referred to above, under which we may borrow up to $3,500,000 with interest payable monthly at an annual rate of 12%. We have granted Mr. Pomije a security interest in our
inventory, accounts receivable, and certain other assets in connection with this note. The principal balance under the note, together with accrued interest thereon, is due and payable on
March 31, 2006. As of June 29, 2003, $3,500,000 was outstanding under the mezzanine revolving promissory note. We also have in place a working capital revolving promissory note from
Mr. Pomije under which we may borrow up to $4,500,000 with interest payable at an annual rate of 12%. We have agreed to grant Mr. Pomije a security interest in our inventory upon his
request in connection with this note. The principal balance under this note, together with accrued interest thereon, is due and payable on March 31, 2006. As of June 29, 2003, $1,500,000
was outstanding under the working capital revolving promissory note. After June 30, 2004, the amount that we may borrow under the working capital revolving promissory note
24
will
be reduced from $4,500,000 to $1,500,000. The principal balance on the notes can be paid down and re-advanced at any time.
We
currently have a $2,500,000 credit facility (subject to borrowing base limitations) with a commercial lending institution. The interest rate on this credit facility is 3.75% above
prime rate (8.0% at June 29, 2003), and payment is secured by our inventory. As of June 29, 2003, $1,343,650 was outstanding under this credit facility and we had approximately $734,000
of additional borrowing capacity. This credit facility expires March 31, 2004.
We
anticipate that the net proceeds of this offering will be approximately $16,200,000, of which we plan to use approximately $6,600,000 to open 25 new stores through the end of 2004.
The balance of the proceeds will be available for additional store openings, working capital, and other general corporate purposes. Pending the use of such proceeds for these purposes, we intend to
repay outstanding borrowings under our revolving credit facilities in order to reduce our interest expense. Amounts repaid under these facilities will be available for reborrowing during the term of
the facilities. If we repay all outstanding balances in full with proceeds from this offering, we will have the capacity to borrow up to $8,000,000 ($5,000,000 after June 30, 2004) under the
revolving credit facilities with David R. Pomije that
expire on March 31, 2006 and up to $2,500,000 under our existing revolving credit facility with a commercial lending institution that expires on March 31, 2004. We currently expect that
cash available from this offering, after repayment of existing borrowings under the credit facilities, will enable us to open the 25 new stores we plan to open through the end of 2004. Based on
current expectations, however, it is likely that we will need to borrow additional funds to finance our expansion program in 2005 and 2006. To enhance our financial flexibility and ensure access to
additional capital to support our expansion program, we intend, following completion of this offering, to replace our current credit facilities with a longer term facility from one or more commercial
lending institutions providing greater borrowing capacity.
We
do not anticipate that cash flow from operations will be available to support our expansion plans until at least 2006, depending upon the performance of our stores and the
implementation of our expansion plans. If sufficient capital is not available from the offering, our existing or future credit facilities, or operations, we believe we could reduce our expansion plans
and continue to operate our then existing stores.
Contractual Obligations and Commercial Commitments
The following table summarizes our material contractual obligations, including both on-and-off balance sheet arrangements in effect at
June 29, 2003, and adjusted to give effect to the sale by us of 2,000,000 shares of common stock in this offering at an assumed initial public offering price of $9.00 per share and the
application of the net proceeds of the sale (after deducting the placement agent's fee and estimated offering expenses):
Contractual Obligations
Fiscal 2003
Fiscal 2004
Fiscal 2005
Fiscal 2006
Thereafter
Total
As Adjusted(1)
(in thousands)
Notes payable, shareholder(2)
$
—
$
—
$
—
$
5,000
$
—
$
5,000
$
—
Notes payable, bank(3)
—
1,344
—
—
—
1,344
—
Capital lease obligations
8
21
2
—
—
31
31
Operating lease obligations
1,386
2,671
2,419
1,812
942
9,230
9,230
Total obligations
$
1,394
$
4,036
$
2,421
$
6,812
$
942
$
15,605
$
9,261
(1)
Pending
use of proceeds for new store openings, working capital, and other general corporate purposes, we plan to repay the outstanding indebtedness under our revolving credit
facilities.
(2)
This
balance relates to a revolving credit facility which can be repaid at any time. For purposes of this prospectus, we have shown the current principal balance being paid on the due
date of March 31, 2006.
(3)
This
balance relates to a revolving credit facility which can be repaid at any time. For purposes of this prospectus, we have shown the current principal balance being paid on the due
date of March 31, 2004.
25
Seasonality and Quarterly Results
Our business is affected by the pattern of seasonality common to most retail businesses in the golf industry. Our sales will, therefore, tend to be greater in the
second and third quarters of the year, which are the principal months for playing golf in most of the country. We do, however, anticipate some increase in sales during the holiday season.
Net
sales, gross profit, operating income (loss), and net income (loss) for the past ten quarters, together with the number of stores open at the end of each quarter, are presented in
the following table:
Fiscal 2001
Fiscal 2002
Fiscal 2003
1
st
Quarter
2
nd
Quarter
3
rd
Quarter
4
th
Quarter
1
st
Quarter
2
nd
Quarter
3
rd
Quarter
4
th
Quarter
1
st
Quarter
2
nd
Quarter
(dollars in thousands)
Net sales
$
1,644
$
6,160
$
6,112
$
2,416
$
3,125
$
9,907
$
9,850
$
3,525
$
4,403
$
14,213
Gross profit
613
2,340
2,260
835
1,090
3,722
3,614
1,176
1,496
5,145
Operating income (loss)
(906
)
(285
)
(2
)
(1,074
)
(1,018
)
19
469
(1,473
)
(1,570
)
726
Net income (loss)
(964
)
(373
)
(81
)
(1,185
)
(1,156
)
(112
)
347
(1,620
)
(1,795
)
515
Stores open at quarter end
15
19
20
20
23
29
30
30
33
35
Although the results presented above may not be indicative of future trends or performance, we anticipate that quarterly net sales and operating
results will continue to be significantly impacted by seasonality patterns.
Quantitative and Qualitative Disclosure about Market Risk
Our operations are not currently subject to market risks for interest rates, foreign currency exchange rates, commodity prices, or other market price risks of a
material nature.
26
OUR BUSINESS
We are a specialty retailer in the business of buying, selling, and trading pre-owned and new golf clubs and related equipment. Our 2
nd
Swing stores provide golfers a convenient place to trade in or sell their existing golf clubs for store credit or cash and apply the value received towards the purchase of new or pre-owned
equipment. This enables golfers to acquire new technology or upgrade to more advanced equipment on a cost-effective basis. With 35 stores currently, we believe we are the largest
store-based retailer of pre-owned golf equipment and the only one with the objective of developing a national chain of stores focused primarily on buying, selling, and trading
pre-owned golf equipment.
Our
stores are economically sized at approximately 3,500 square feet and are conveniently located in retail strip centers. Each 2
nd
Swing store carries a broad assortment
of new and pre-owned clubs from leading manufacturers, typically consisting of approximately 1,500 woods, 350 sets of irons, 500 putters, and 500 sand wedges. In addition to golf
clubs, we also carry a selection of golf bags, gloves, balls, and other equipment. We believe our efficient store size, focus on higher margin pre-owned equipment, and emphasis on hard
goods merchandise, which we believe produces higher sales per square foot than apparel and shoes, have enabled us to achieve a store-level average return on invested capital in excess of 50% in stores
open for four years or longer.
We
opened our first store in 1997 and now operate 35 stores in fourteen states. Sales for the 12 months ended June 29, 2003 were $32.0 million, of which 64% was derived
from the sale of pre-owned golf equipment. Same store sales increases were 20% in fiscal 2001, 7% in fiscal 2002, and 15% for the six months ended June 29, 2003.
Golf Industry Overview
Market Size and Growth Characteristics.
Based on a study by the National Sporting Goods Association®, or NSGA,
retail sales of the types of new golf equipment and accessories sold in our stores were approximately $3.9 billion in 2001. Golf clubs accounted for $2.5 billion, with the balance
represented by balls, bags, gloves, and other golf accessories.
The
NSGA estimates that retail sales of new golf equipment have grown from $2.5 billion to $3.9 billion, or at a compound annual rate of 4.6%, over the past
10 years. However, sales of new golf equipment as well as the number of golf rounds played in 2002 declined due primarily to weaker overall trends in consumer spending and unfavorable weather
conditions.
The
popularity of golf, as well as golf equipment sales, has been, and is expected to be, influenced by the following factors:
Favorable demographic trends.
The aging of the huge baby boomer population segment will continue to have a positive impact on golf
equipment
spending. Research by the National Golf Foundation®, or NGF®, shows that golfers 45 and older represent 39% of the golfer population yet account for 47% of golf-related
spending.
Growth in golf course facilities.
Whereas there was significant growth in the early 1990s in new course development, new courses are
opening at a
decreasing rate as the market adjusts to participation levels. According to the Golf
20
/
20
Industry Report, the rate of new course openings in the past three years has gone from 3.2% to
2.3% to 1.5% in 2002, resulting in a total of approximately 15,800 regulation golf courses (at least nine regulation holes) in the United States at the end of 2002. Most of this growth has been
attributable to new public or daily fee courses, which now represent over 70% of all golf course facilities, significantly improving access to the game. The growth of alternative facilities including
driving ranges, par 3 courses, and other golf learning centers has also improved access to the game.
Industry initiatives.
Over the past few years, there have been numerous initiatives supported by the PGA of America, LPGA, USGA®,
World
Golf Foundation, and others to increase golf
27
participation.
These include programs such as "The First Tee," designed to introduce golf to juniors, "First Lesson Free," offering discounted or free introductory lessons to beginning golfers, "Link
Up 2 Golf," and over 70 "Nike Golf Learning Centers," designed to attract, develop, and retain golfers.
Increased visibility.
Visibility of golf and golf equipment has been enhanced by increased media coverage of PGA events, greater
exposure on
television, including The Golf Channel®, an increased number of tour and special events and outings, and the emergence of superstars such as Tiger Woods and Annika Sorenstam. In addition,
advertising and promotions by equipment manufacturers have increased, and high-profile, sporting-goods manufacturers, such as Nike, have entered the golf equipment market.
Significant technological advances in golf equipment.
Over the past ten years, there have been significant technological advances in
club head and
shaft construction, design, and materials. The continuous
introduction of this improved technology, together with advertising and promotions by equipment manufacturers emphasizing the importance of equipment to one's game, has encouraged golfers to change
equipment frequently.
Historically,
no organized retail store marketplace has existed for pre-owned golf equipment, as sales of such equipment have largely occurred through second-hand
stores, garage sales, classified advertising sales, internet sites, and golfer-to-golfer transactions. Accordingly, no reliable data are currently available on the historic
size or growth rate of the pre-owned golf equipment market.
We
believe several factors have driven general demand for pre-owned golf equipment in recent years. In particular, the continuous introduction of new, technologically
advanced equipment at higher prices has contributed to the need for an organized store-based market where golfers can buy, sell, trade, and test pre-owned golf equipment. This is similar
to the emergence of such other successful retail store concepts as Gamestop® (pre-owned video games) and Carmax® (pre-owned automobiles).
Retail Channels of Distribution.
The retail channel for new golf clubs is highly competitive and fragmented. According to the
NGF, the primary channel is the specialty golf store, accounting for 44% of the retail market, followed by golf course pro-shops (28%), full-line sporting goods stores (11%),
mass merchants (7%), catalogs (5%), the internet (4%), and other (1%).
While
specialty golf retailers have by far the largest market share, this channel is highly fragmented, with the top ten golf retail chains accounting for an estimated 25% of the total
number of retail outlets in the U.S. Most of these chains are regional, many are franchised, and all are privately held.
Business Strategy and Competitive Differentiation
We believe the following key elements of our business strategy provide us with significant competitive advantages:
Differentiated Merchandise Strategy.
Our merchandise mix consists exclusively of hard goods equipment, such as clubs, balls,
bags, and accessories, which we believe generate higher sales per square foot than golf apparel and shoes. While we offer a broad selection of both new and pre-owned equipment, we focus on
the sale of pre-owned clubs, which accounted for 70% of our sales in 2002. We generally realize higher gross margins on sales of pre-owned clubs than on sales of new equipment.
Our
pre-owned club strategy is the key differentiator from traditional golf retailers. We believe our ability to offer a broad assortment of both new and
pre-owned equipment from leading manufacturers appeals strongly to the avid golfer, our core customer. Buying, selling, and trading pre-owned equipment creates a unique
customer value by enhancing the golfer's purchasing power for equipment (whether previously owned or new) with the trade-in value of the golfer's current equipment.
28
In
the new equipment category, we offer major brands of golf equipment, including Callaway, Cleveland, Cobra, Nike, Ping, TaylorMade, and Titleist. All products are purchased directly
from the manufacturer and priced competitively in comparison to other golf retailers. We believe that our ability to take trade-ins of pre-owned clubs significantly enhances
our ability to sell new equipment.
Superior In-store Service and Product Expertise.
We emphasize a superior level of in-store service by
staffing our stores with well-trained, knowledgeable golfers, many of whom are PGA professionals. These professionals provide our customers with extensive product knowledge, which we
believe enables us to build a reputation as a trusted source of information on golf equipment. All stores feature an indoor driving net and putting green to test clubs and we offer customers a
3-day demo period for both new and pre-owned clubs.
Proprietary Pricing Model.
We have developed a proprietary bid/ask pricing model that utilizes, among other factors, historic
product sales data, to enable us to manage both cost and availability of our pre-owned inventory. Pricing information is developed at the corporate level based on supply, demand, and other
variables and is adjusted periodically to maximize sales, gross margin, and return on inventory investment. We believe this pricing model provides us with a key competitive advantage and also
represents a significant barrier to entry.
Experienced Management Team.
We have assembled a management team with significant golf expertise and with extensive
experience in retailing, particularly the sale of pre-owned merchandise. Five members of our management team, including our Chairman, Chief Executive Officer, and Chief Financial Officer,
were involved in the founding and/or development of FuncoLand®, which, prior to its sale to Barnes & Noble, Inc. in 2000, was the largest chain of retail stores selling
previously played video game software and hardware, with over 400 stores and annual revenues exceeding $250 million for the fiscal year ended April 2, 2000.
Growth and Expansion Strategy
With a proven store model, an experienced management team, and scaleable infrastructure now in place, we plan to accelerate our rate of expansion and pursue our
goal of becoming the nation's leading retailer of pre-owned and new golf equipment. Key elements of our growth and expansion strategy include the following:
Accelerated Store Growth.
Over the past few years, we have demonstrated our ability to open new stores and to successfully
enter new markets in new geographic territories. We now operate 35 stores, having opened five new stores in 2003. Of these five stores, four were opened in the new markets of Denver, Washington DC,
and St. Louis, and one was opened in an existing market.
We
plan to open five additional stores in 2003 and 20 stores in 2004 in both new and existing markets. Beyond 2004, we plan to open 30 to 40 stores per year over the next three years,
and we believe there is the potential for at least 200 2
nd
Swing stores nationwide.
Increased Store Sales Productivity.
We believe we can increase sales in our existing stores by:
•
Capitalizing
on favorable industry dynamics, including positive golfer demographics and further advances in golf equipment technology;
•
Further
developing the market for pre-owned golf equipment by increasing
2
nd
Swing
brand awareness
through growing market penetration and enhanced advertising and marketing programs; and
•
Increasing
new equipment sales by adding new brand and equipment offerings.
29
Enhanced Profitability at Store and Corporate Levels.
We believe opportunities exist to enhance store and corporate level
profitability by:
•
Leveraging
store-level operating costs, such as occupancy, advertising, and payroll, with improved sales in existing stores and
•
Expanding
corporate operating margins and improving return on capital through continued leveraging of existing infrastructure costs, such as systems, distribution, and
management, over a larger sales base and through enhanced purchasing power.
Merchandising and Product Sourcing
Our merchandise offerings include pre-owned and new golf clubs, as well as new golf balls, bags, gloves, and accessories. Our stores do not currently
carry golf apparel or shoes. Merchandise sales by major category for 2002 are shown below:
Percentage of Net Sales
Pre-Owned
New
Total
Woods
35
%
9
%
44
%
Iron sets
23
8
31
Putters, wedges, and other clubs
11
5
16
Balls, bags, and gloves
1
8
9
Total
70
%
30
%
100
%
Pre-Owned Equipment.
We believe we offer the largest retail selection of pre-owned clubs in the
marketplace. Our typical store carries approximately 3,000 SKUs of pre-owned clubs, with approximately 7,000 additional SKUs available to our customers through our inter-store club
transfer program, which allows each store to determine whether a club is available at another store and arrange for delivery to the store where the customer has requested the club. We offer all major
brands and models of clubs, including those no longer available in other golf stores or golf pro shops.
We
obtain over 80% of our pre-owned inventory from trade-ins or purchases from our customers. In addition, we purchase demo and close-out equipment
directly from certain manufacturers and from golf pro shops through our country club program. Under this program, a dedicated PGA professional is responsible for establishing and maintaining contacts
with pro shops, through which we purchase rental sets, excess inventory, and member trade-ins.
New Equipment.
New equipment, representing approximately 30% of our net sales in 2002, consists primarily of clubs, balls,
bags, and gloves. We carry major brands such as Callaway, Cleveland, Cobra, Nike, Ping, TaylorMade, and Titleist. We believe the recent addition of the Titleist and Ping product lines significantly
strengthens our brand line-up. Private-label clubs are currently not part of our merchandising strategy. We offer our customers both special orders and custom fitting on any new clubs.
All
new product is purchased directly from manufacturers by our central buying group and most is shipped directly to our stores. We purchase new equipment from approximately 20 vendors,
of which one vendor accounted for approximately 39% and our five next largest vendors accounted for approximately 43% of our total new product purchases in 2002.
30
Retail Stores
Store Operations, Customer Service, and Training.
One of our key competitive strengths is our ability to provide superior
levels of service to our customers. Our stores offer customers an opportunity to interact with knowledgeable sales associates, many of whom are PGA professionals, who can help the customer test and
select equipment that best matches the customer's playing abilities and product and price preferences. This enables our customers to make an informed and economical purchasing decision from products
that are available in numerous brands, models, and price ranges.
Our
stores are staffed with one store manager and two full-time sales managers. Currently, in multiple store regions, selected store managers also serve as an area manager,
overseeing stores in that region. The area managers, and store managers in single-store markets, report to our Vice Presidents of Operations and Sales. Most of our store managers have a college
degree, have previously served as sales managers for us, and all have completed our extensive management training program. We prefer to fill the three key store management positions with either PGA
professionals or golfers with competitive experience at the collegiate level.
We
have developed an extensive training program for all of our store-level employees. The program consists of a series of tests, as well as ongoing training from our support office sales
training staff, covering product knowledge, selling skills, and operating procedures. In addition, our vendors offer in-store training as new products are introduced.
Our
compensation programs are designed to provide all store-level employees with competitive compensation. In addition to a base salary, we have an incentive compensation plan for store
and sales managers based on meeting certain sales and operational goals at their stores. Store and area managers are also eligible to participate in our stock compensation plan. Our competitive
compensation program, together with the opportunity for year-round employment in the golf industry, has been an important factor in our ability to attract and retain PGA professionals and
other golf experts.
Store Layout and Design.
Our retail stores average 3,500 square feet, of which approximately 90% is dedicated to selling
space and the remainder to merchandise storage and receiving. The store layout is standardized, and new and pre-owned golf equipment are displayed separately. Iron sets
are displayed on wall fixtures and woods, irons, putters, and wedges in customized display bins generally organized by brand. Typically, two-thirds of our store space is dedicated to
pre-owned clubs.
We
have designed our stores to be interactive and to appeal to our avid golf customer. All stores are equipped with a driving net and putting green area, which give our customers the
opportunity to test equipment before purchase. Our knowledgeable sales staff and store design, enhanced by television monitors tuned to The Golf Channel or playing new equipment information videos,
create a golfer-friendly, pro shop-like atmosphere that encourages our customers to spend more time in the store.
Store Location and Site Selection.
Our stores are located in metropolitan markets, primarily in strip centers near regional
malls with high visibility and easy access from major roadways. Key factors in selecting new markets include demographic and lifestyle characteristics, such as income, age, and golf participation
rates, as well as the concentration of golf courses. Our staff consists of real estate professionals experienced in national store roll-outs, including selecting retail store locations,
negotiating leases, overseeing store buildout, and managing multiple store development.
31
We
currently operate the following 35 stores:
Metropolitan
Market
Location
Opening Date
Square
Footage
Washington, DC
Fairfax, VA
May 2003
3,440
St. Louis, MO
St. Louis, MO
April 2003
3,500
Denver, CO
Littleton, CO
March 2003
3,481
Denver, CO
Lakewood, CO
March 2003
3,175
Philadelphia, PA
Wilmington, DE
March 2003
3,600
Cleveland, OH
Akron, OH
July 2002
3,960
Chicago, IL
Lincoln Park, IL
June 2002
2,795
Pittsburgh, PA
Ross Township, PA
May 2002
3,960
Chicago, IL
Downers Grove, IL
April 2002
3,585
Philadelphia, PA
Moorestown, NJ
April 2002
3,816
Grand Rapids, MI
Kentwood, MI
April 2002
3,000
Omaha, NE
Omaha, NE
April 2002
3,520
Pittsburgh, PA
North Fayette, PA
March 2002
3,800
Louisville, KY
Louisville, KY
February 2002
3,252
Columbus, OH
Columbus, OH
February 2002
3,121
Dayton, OH
Dayton, OH
September 2001
3,200
Minneapolis, MN
Bloomington, MN(1)
September 2001
3,200
Chicago, IL
Vernon Hills, IL
June 2001
2,995
Cleveland, OH
Mentor, OH
May 2001
3,574
Chicago, IL
Schaumburg, IL
April 2001
4,452
Chicago, IL
Orland Park, IL
April 2001
3,904
Indianapolis, IN
Indianapolis, IN
March 2001
3,552
Chicago, IL
Aurora, IL
March 2001
3,827
Chicago, IL
Skokie, IL
March 2001
3,845
Cincinnati, OH
Florence, KY
March 2001
3,450
Cleveland, OH
North Olmsted, OH
April 2000
3,498
Detroit, MI
Westland, MI
April 2000
3,300
Cincinnati, OH
Springdale, OH
March 2000
4,000
Detroit, MI
Novi, MI
March 2000
2,664
Milwaukee, WI
Brookfield, WI
March 2000
3,225
Detroit, MI
Orion, MI
March 2000
3,683
Minneapolis, MN
Roseville, MN
November 1999
2,955
Detroit, MI
Madison Heights, MI
April 1999
2,820
Minneapolis, MN
Burnsville, MN
August 1998
3,200
Minneapolis, MN
Minnetonka, MN(2)
April 1998
3,600
(1)
Originally
opened in Edina, Minnesota in February 2000 and relocated to Bloomington, Minnesota.
(2)
Originally
opened in Minneapolis, Minnesota in September 1997 and relocated to Minnetonka, Minnesota.
Proprietary Pricing Model
We have developed a proprietary bid/ask pricing model, which enables us to manage store-level purchase and sale pricing decisions for pre-owned clubs
at the corporate level, thus eliminating the need for store managers to make such decisions independently. This model utilizes quantitative factors, such as historic sales, pricing, gross margin, and
inventory performance data. In addition, management analyzes such qualitative factors as product life cycle, seasonality, and future product introductions. We believe this centralization of our
pricing decisions enables us to determine the appropriate bid or ask price for all of our 50,000 SKUs and balance supply with consumer demand, thus contributing to our ability to optimize sales, gross
margins, and return on inventory investment.
Distribution and Replenishment
We operate a centralized distribution center of approximately 5,000 square feet at our corporate headquarters in Minnetonka, Minnesota, that services all of our
stores.
32
Approximately
50% of new equipment inventory received by our stores is shipped from our distribution center, with the remainder (primarily balls, bags, gloves, and other accessories)
shipped direct to our stores from our vendors. The majority of our merchandise is shipped from the distribution center via United Parcel Service®.
New
product inventory is generally replenished, depending upon the category, using a reorder point/reorder quantity system. This system is based on sales forecasts, inventory levels, and
economic order quantities. Iron sets, woods, wedges, and putters are replenished through our central distribution
center on a biweekly basis. Consumable items, such as balls and gloves, are replenished in bimonthly shipments directly from the manufacturers.
Approximately
80% of our pre-owned inventory is purchased directly from our customers. The balance, which comes from our country club program, vendor demo and refurbished
product purchases, and the Callaway certified pre-owned program, is shipped from our central distribution center. Pre-owned inventory for new stores is pulled back from our
existing stores and shipped from our distribution center prior to a new store opening. We believe our distribution center, along with our option to lease additional adjacent space, has the capacity to
serve at least 100 stores.
Management Information System
Our current MIS capabilities include an integrated corporate software product provided by Lawson Software as our computing platform of the future. This software,
running in conjunction with an Oracle® database, provides corporate level functionality in the areas of procurement, inventory control, and financial systems and reporting. It further
establishes the foundation for future WEB enabled communications and collaborative processing with our stores, vendors, and other business partners. Through these systems, reports are generated on
daily and historic operations performance, labor, inventory levels, and required generally accepted accounting principles financial data.
We
recently implemented a new point-of-sale (POS) system at our retail locations. The new POS functionality includes: credit/check authorization, inventory and price lookup, sales entry
and reporting, along with inventory receipt and transfer processing. Retail stores are polled nightly, with all sales and inventory transactions posted to the central corporate systems.
Marketing and Advertising
Our marketing program is designed to create consumer awareness of our unique retail concept of buying, selling, and trading pre-owned and new golf
equipment. Our marketing is based primarily on print advertising, which typically consists of ads in local newspapers as well as golf magazines with national circulation. We supplement our print
advertising program with radio advertising in select markets, participation in trade shows, and sponsoring local and regional charity golf events. Our strategy of clustering stores in metropolitan
markets enables us to utilize newspaper and radio advertising on a cost-effective basis.
Given
the seasonal nature of the golf equipment business, we spend approximately 95% of our advertising budget during the period from March through August and during the holiday season.
We
use an outside advertising agency to generate our advertisements, including layout, production, and media management.
We
have a website,
www.2ndswing.com
, which provides general company information, a listing of our store locations, and select new product
information.
33
Competition
The new golf equipment market is highly competitive and fragmented. The principal channels of distribution include national and regional specialty golf retail
chains, golf pro shops, catalog and internet merchants, full-line sporting goods stores, and mass merchants.
Our
primary competitors for new equipment are specialty golf retail chains such as Edwin Watts Golf®, Golf Galaxy®, Golf USA®, Golfsmith®,
Nevada Bob's®, Pro Golf Discount®, and World Wide Golf®. Specialty golf stores typically operate larger stores than we do, carry a broader assortment of
merchandise, including golf shoes and apparel, have access to the premium national brands, and provide in-store services and product knowledge. These chains are generally regional, many
are franchised, and all are privately held.
Golf
pro shops are primarily located at golf course facilities. Most have access to the premium brands of equipment but carry a much more limited assortment due to space constraints. The
pro shops offer a high degree of product knowledge and service, including custom fitting and special ordering. The pro shops typically do not take trade-ins of pre-owned clubs.
Catalog
and internet merchants such as Edwin Watts Golf, Golfsmith, and The Golf Warehouse® offer an extensive assortment of premium branded product, but are limited in their
ability to offer in-store services, demo programs, and an opportunity for the customer to inspect and test the products prior to purchase.
Full-line
sporting goods stores include such companies as Dick's Sporting Goods®, Gart Sports®, and The Sports Authority®. While
assortments vary from chain to chain, these stores typically carry golf apparel and shoes, but offer a more limited selection of clubs and have access to fewer premium brands on a direct basis. In
addition,
full-line sporting goods stores are typically more limited in their service offerings and generally have fewer golf experts on staff dedicated to this category.
Mass
merchants include discount stores such as Wal-Mart® and Target® and warehouse clubs such as Costco® and Sam's Club®.
These stores offer a more limited assortment of equipment, have little or no access to premium brands, are focused on the lower-end of the mass market, and are basically
self-serve operators. They are, however, very competitive in the pricing of golf consumables such as balls and gloves.
While
many of our chain store competitors (specialty golf stores, full-line sporting goods stores, and mass merchants) have substantially greater financial and marketing
resources than we do, we are currently, based on industry data and our survey of our competitors' business operations, the only chain focused primarily on the buying, selling, and trading of
pre-owned golf equipment.
Pre-owned
golf equipment is sold through a wide variety of channels including local and regional retailers dealing in second-hand goods, auctions,
consumer-to-consumer through classified ads or internet sites, garage sales, and consignment and pawn shops.
We
believe that the internet has become a more important channel over the past several years for the purchase and sale of pre-owned clubs. These sites either provide a means
for consumers to sell directly to other consumers (such as eBay®) or resell equipment purchased from consumers. We believe our store-based strategy has inherent advantages over
internet-based operators. Our convenient store locations allow our customers to examine product quality, compare prices, and test the products either in-store or through our demo program
prior to purchase. Our customers can utilize the expertise of our store associates and benefit from the immediate availability of our broad selection of pre-owned equipment.
34
Trademarks and Service Marks
We have registered 2ND SWING®, "IT'S NOT YOU, IT'S YOUR CLUBS!®", and 2ND SWING GOLF® as trademarks and service marks with the
United States Patent and Trademark Office. We believe that these marks are of considerable
value to our business and important to our marketing efforts. In addition, we have registered our web address,
www
.
2ndswing.com.
Properties
All of our retail stores are leased. Leases typically provide for an initial three-year or five-year term, with varying options for
renewal. Our retail store leases for stores open as of June 29, 2003 expire as follows:
During Year
Number of
Expiring Leases
2004
1
2005
7
2006
12
2007 or later
15
We
believe that the termination of any particular lease would not have a material adverse effect on our business and that similar locations on comparable terms would be available within
the same or a contiguous market area.
In
addition to our retail outlets, we lease a 12,791 square foot office and distribution facility in Minnetonka, Minnesota, where our corporate headquarters are also located. This lease
expires June 30, 2006. We have a five-year renewal option.
Employees
As of July 11, 2003, we had 146 full-time employees, including 33 corporate and administrative personnel and 113 store personnel, and 139
part-time employees. During seasonal peak periods, we add temporary part-time employees.
Our
success depends upon our ability to attract and retain qualified personnel. Although we have been successful in attracting qualified employees, there can be no assurance that we will
not experience difficulties in attracting and retaining qualified personnel as our store expansion program continues. We believe that our relations with our employees are good. None of our employees
is covered by a collective bargaining agreement.
Legal Proceedings
We are not currently a party to any material legal proceeding, and, to the best of our knowledge, none is threatened.
35
MANAGEMENT
The following table sets forth certain information about our current directors, executive officers, and certain key employees. Two additional directors, each of
whom will be independent under current and proposed SEC and American Stock Exchange rules, will be elected to our board of directors shortly after the closing of this offering.
Name
Age
Position
Stanley A. Bodine
53
Chief Executive Officer and Class III Director
P. Simon Kallal
29
President and Class I Director
Robert M. Hiben
46
Chief Financial Officer
Mary C. Sim
37
Controller
David R. Pomije
47
Chairman of the Board and Class III Director
George E. Mileusnic
49
Class II Director
Mario A. Catalino
56
Chief Information Officer
Joseph R. Brinkman
33
Vice President of Merchandising
Robert B. Jordan
55
Vice President of Sales
William A. Kranz
48
Vice President of Construction
Larry A. Kurzeka
49
Vice President of Operations
Directors and Executive Officers
Stanley A. Bodine
was appointed Chief Executive Officer and a Director in 2000 and served as Chief Financial
Officer from 2001 until May 2003. Mr. Bodine had served as president and chief operating officer of Funco, Inc. from 1995 until 2000, and as an officer and a director of that company
from 1992 until 2000. Mr. Bodine held various management positions with The Pillsbury Company from 1978 to 1991, most recently as senior vice president of The
Häagen-Dazs Company, with responsibility for business development in the United States, Europe, and the Pacific Rim.
P. Simon Kallal
is our founder and has been President and a Director since our inception in 1997. He was a member of the University of
Minnesota golf team and graduated in 1998 with a bachelor of science degree in accounting from the University of Minnesota Carlson School of Management.
Robert M. Hiben
was appointed our Chief Financial Officer in May 2003. Mr. Hiben had served as president of CFO Decisions,
Inc., a provider of financial consulting services to the retail industry since 2003. From 2001 to 2003, Mr. Hiben served as chief financial officer for HighJump Software, Inc., a developer of
supply chain software and warehouse management systems. Mr. Hiben served as chief financial officer for Funco, Inc. from 1995 to 2000 and as its controller from 1992 to 1995. From 1990 to 1992,
Mr. Hiben served as chief financial officer for Bretts Department Stores Company and in various financial capacities for Wilsons the Leather Experts Inc. from 1982 to 1990.
Mary C. Sim
has been our Controller since 2000. From 1995 to 2000, Ms. Sim served as director of accounting for Funco, Inc.
From 1992 to 1995, Ms. Sim was the accounting manager of Funco, Inc. and prior to that was a financial analyst at Holiday Companies, Inc. from 1990 to 1992.
David R. Pomije
has been Chairman of the Board since 1997. From 1995 to 2000, Mr. Pomije was majority shareholder and chief
executive officer of Funco, Inc., a specialty retailer of new and previously played interactive entertainment products, which he founded in 1988. Funco, Inc. was acquired by
Barnes & Noble, Inc. in June 2000. Since 2000, Mr. Pomije has been a private investor and consultant to various private companies.
George E. Mileusnic
was elected as a Director in 2002. Mr. Mileusnic has been the Chief Financial Officer of Caribou Coffee Company
since 2001. Prior to that, he had been executive vice president and chief financial officer of Dean & DeLuca, Inc. from 2000 to 2001. From 1998 to 2000, Mr. Mileusnic was an
independent consultant providing financial and management consulting and services to a variety
36
of
business entities. Mr. Mileusnic served as a director for Funco, Inc. from 1993 to 2000 and was executive vice president of administration for a division of the Coleman
Company, Inc., from 1996 to 1998 and chief financial officer of the Coleman Company, Inc. from 1989 to 1996. Mr. Mileusnic currently serves on the board of trustees of the
American Independence Funds.
Our
board of directors is divided into three classes of directors serving staggered three-year terms. The terms of our directors expire as follows: Class I at our
annual meeting to be held in 2006; Class II at our annual meeting to be held in 2004; and Class III at our annual meeting to be held in 2005. Our officers are appointed by the board of
directors and serve until their successors are elected, subject to earlier resignation or removal by the board.
Other Key Employees
Mario A. Catalino
has been our Chief Information Officer since 2000. From 1998 to 2000, Mr. Catalino was
the director of application development for Best Buy Corp. Prior to joining Best Buy, Mr. Catalino served as vice president of information systems for NordicTrack from 1992 to 1998.
Joseph R. Brinkman
has been our Vice President of Merchandising since 2002, having served as our director of merchandising since 2001.
From 1993 to 2000, Mr. Brinkman served as an engineer, sourcing manager, and materials manager for Chart Industries. He has both a B.S. in Mechanical Engineering from the University of
Minnesota's Institute of Technology and an M.B.A. in Finance from the Carlson School of Management at the University of Minnesota.
Robert B. Jordan
has been our Vice President of Sales since 2002, having served as our director of sales since 2000. From 1999 until
joining us, Mr. Jordan was store manager for Austad's Golf stores. Prior to that, Mr. Jordan served as vice president of sales, marketing, and customer service for IC System from 1991 to
1998.
William A. Kranz
has been our Vice President of Construction since 2000. From 1991 to 2000, Mr. Kranz served as vice president of
construction for Funco, Inc. Previously, Mr. Kranz was commercial construction manager for William A. Kranz Construction and supervised the build out of various retail and restaurant
properties.
Larry A. Kurzeka
has been our Vice President of Operations since 2002. From 1997 to 2002, Mr. Kurzeka was vice president of the
Suncoast Division of The Musicland Group, a Best Buy company. From 1983 to 1997, he held a variety of positions at The Musicland Group, including vice president of the On Cue Division, director of
merchandise, financial planning manager, and product buyer.
Director Compensation
The nonemployee members of our board of directors will receive compensation for their service on the board of directors. Directors who are employees will not
receive any compensation for services performed in their capacity as directors. We will reimburse each director for reasonable out-of-pocket expenses incurred in attending
meetings of the board of directors and any of its committees. In addition, directors who are not employees will be eligible to receive options under our stock option plan for nonemployee directors.
Under this plan, eligible directors may receive an option to purchase 7,500 shares of our common stock upon becoming a director and grants to purchase 5,000 shares on the day following each annual
meeting, if serving on that date. During 2002, we paid $1,250 in director compensation and issued an option to purchase 7,500 shares at an exercise price equal to the public offering price. Through
June 29, 2003, we paid $2,500 in director compensation and issued an option to purchase 5,000 shares at an exercise price equal to the public offering price.
37
Committees of the Board
Immediately after this offering, our board of directors will maintain an audit committee and a compensation committee. George E. Mileusnic, as well as two
additional independent directors, will serve on both of these committees. The audit committee will be responsible for recommending to the full board of directors the appointment of our independent
accountants and reviewing with those accountants the scope of their audit and their report. The audit committee will also review and evaluate our accounting principles and system of internal
accounting controls. The compensation committee will be responsible for acting on matters relating to the compensation of directors, senior management, and key employees, including the granting of
stock options.
Executive Compensation
Summary Compensation Table.
The following table sets forth information with regard to compensation paid to our Chief
Executive Officer, the only executive officer whose total annual salary and bonus for fiscal 2002 exceeded $100,000.
Name and Principal Position
Fiscal Year
Annual Compensation
Salary
Stanley A. Bodine
Chief Executive Officer and Chief Financial Officer
2002
2001
$
$
150,000
150,000
Mr. Bodine
and P. Simon Kallal, our President, currently receive annual salaries of $150,000 and $120,000, respectively. Robert M. Hiben was
appointed as our Chief Financial Officer in May 2003 at an annual salary of $100,000. In connection with his appointment, we agreed to grant Mr. Hiben upon the effectiveness of this offering an
option to purchase 25,000 shares of our common stock at an exercise price equal to the public offering price.
Option Grants in Fiscal Year 2002.
No options were granted to Mr. Bodine during the 2002 fiscal year.
Aggregated Option Exercises in Last Fiscal year and Fiscal Year-End Option Values.
The following table provides
information relating to option exercises during fiscal 2002 and the number and value of shares of common stock subject to options held by Mr. Bodine as of December 29, 2002.
Name
Shares
Acquired on
Exercise
Value Realized
Number of Shares
Underlying Unexercised
Options at Fiscal Year-End
Exercisable/Unexercisable
Value of Unexercised
In-the-Money Options
at Fiscal Year-End(1)
Exercisable/Unexercisable
Stanley A. Bodine
—
—
60,000/90,000
$240,000/$360,000
(1)
Value is calculated as the difference between the proposed public offering price ($9.00) and the option exercise price ($5.00) multiplied by the
number of shares underlying the option.
2000 Stock Compensation Plan
Our 2000 Stock Compensation Plan (the "Plan") provides for grants of both incentive stock options, intended to qualify as such under Section 422 of the
Internal Revenue Code of 1986 (the "Code"), and nonqualified stock options, stock appreciation rights, and other stock-based awards. Except for the authority to grant incentive stock options, which
expires in 2010, the Plan has no expiration date but may be terminated by the Board of Directors at any time, subject to the rights of the holders of options or other awards previously granted under
this Plan.
Shares Subject to the Plan.
We have reserved 900,000 shares of common stock for issuance under the Plan. These shares may be
unissued shares or shares repurchased by us. The Plan provides for appropriate adjustment in the number of shares subject to the Plan and to the grants previously made
38
if
there is a stock split, stock dividend, reorganization, or other relevant change affecting our corporate structure or equity securities. If shares under a grant are not issued or transferred to the
extent permitted prior to the expiration of the grant or an award is otherwise forfeited, the shares will become available for inclusion in future grants.
Administration.
The Plan is administered by the Board or a committee composed of "non-employee" directors (as
defined in Rule 16b-3 under the Exchange Act). The Board or committee determines the participants, grants stock options, with or without stock appreciation rights, and other awards,
establishes rules and regulations for the operation of the Plan, and determines the price, term, vesting schedule, number of shares, and other terms of options and
other awards. The Board or committee may delegate its powers and duties to members of our administration with respect to participants who are not subject to Section 16 of the Exchange Act.
Eligible Participants.
Employees eligible to receive grants under the Plan are the officers and certain other key employees
of the Company. As of July 11, 2003, the number of employees potentially eligible for grants was approximately 100. The number of grantees could vary from year to year.
Stock Options.
Options granted under the Plan may be in the form of either options that qualify as "incentive stock options"
under Section 422 of the Code ("ISOs") or those that do not qualify as such ("NQSOs"). The term of an option will be fixed by the Board or committee, but no option may have a term of more than
ten years from the date of grant. Options will be exercisable at such times as determined by the Board or committee. The option exercise price will be determined by the Board or committee at the time
of grant but will not be less than 85% of the fair market value of our common stock on the date of grant (100% of the fair market value for ISOs). The grantee may pay the option price in cash or, if
permitted by the Board or committee, by delivering to us shares of common stock already owned by the grantee that have a fair market value equal to the option exercise price. The Code also places the
following additional restrictions on the award of ISOs. If an ISO is granted to a participant who owns, at the date of grant, in excess of 10% of our outstanding common stock, the exercise price must
be at least 110% of the fair market value on the date of grant and the term of the ISO may be no more than five years from the date of grant. The total fair market value of shares subject to ISOs that
are exercisable for the first time by any participant in any given calendar year cannot exceed $100,000 (valued as of the date of grant).
Stock Appreciation Rights.
The Board or committee may grant stock appreciation rights ("SARs") in connection with a stock
option granted under the Plan. If a grantee exercises a SAR, the grantee will receive an amount equal to the excess of the fair market value of the shares with respect to which the SAR is being
exercised over the option exercise price of the shares. If a SAR is exercised in whole or in part, the right under the related option to purchase shares with respect to which the SAR has been
exercised will terminate to the same extent. If a stock option is exercised, any SAR related to the shares purchased will terminate.
Other Stock-Based Awards.
The Board or committee, in its discretion, may grant other awards that are valued in whole or in
part by reference to, or otherwise based on, the common stock, including, without limitation, performance shares, convertible preferred stock, convertible debentures, or exchangeable securities. Such
awards may be granted in addition to or in tandem with stock options or stock appreciation rights granted under the Plan. The Board or committee may set such terms with regard to the vesting of such
awards as it deems reasonable.
Termination of Employment.
Unless otherwise provided in the related award agreement, awards granted under the Plan are
generally not transferable other than by the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules and regulations thereunder. Following the death of an optionee, any option held may be exercised, to the extent such option was exercisable at
39
the
time of death or on such accelerated basis as the Board or committee may determine at or after grant, by the legal representative of the optionee's estate or by any person who acquired the option
by will or the laws of descent and distribution for a period of one year (or such other period as the Board or committee may specify at grant) from the date of death or until the expiration of the
stated term of the option, whichever period is shorter. If a participant's employment is terminated by reason of disability, any option held by such participant may thereafter be exercised, to the
extent it was exercisable at the time of termination or on such accelerated basis as the Board or committee may determine at or after grant, until the expiration of the stated term of such option
(unless otherwise specified by the Board or committee at the time of grant). If the optionee dies prior to the expiration of any unexercised option, the option may thereafter be exercised to the
extent it was exercisable at the time of death for a period of one year from the date of death or until the expiration of the stated term of the option, whichever period is shorter. If any optionee's
employment is terminated for any other reason, the option may be exercised, to the extent otherwise then exercisable, for the lesser of three months from the date of termination of employment or the
balance of the term of the option. Terms for awards other than stock options and stock appreciation rights may be set by the Board or committee at the time of the granting of the award.
Change of Control.
In the event of a "Change in Control" (as defined in the Plan) any award granted under the Plan will
become fully exercisable and vested. For purposes of the Plan, a "Change in Control" occurs when (i) the majority of our directors are persons other than persons whose election has been
solicited by the Board of Directors or have been appointed by the Board to fill vacancies created by death, resignation, or a new position, (ii) any person or group of persons (as defined in
Section 13(d) of the Exchange Act and the rules thereunder) acquires 20% or more of our outstanding voting stock, or (iii) the shareholders approve an acquisition of us by an entity
(other than a subsidiary or parent) through the purchase of our assets, or by merger, or otherwise.
Stock Option Plan for Nonemployee Directors
Under our Stock Option Plan for Nonemployee Directors (the "Directors Plan"), options to purchase up to an aggregate of 150,000 shares of common stock may be
granted to our directors who are not employees of us or any subsidiary (each an "Eligible Director").
The
Directors Plan provides that each nonemployee director will be granted an option to purchase 7,500 shares on the date he or she is first elected or appointed. Thereafter, each
director serving as of the day following an annual meeting will be granted an option to purchase 5,000 shares of common stock on that date. Each option becomes exercisable on the earlier of the first
anniversary date of the
date of grant or the date of the next following annual meeting. The options generally expire seven years after the date of grant.
The
exercise price of options granted under the Directors Plan is to be equal to the fair market value of a share of common stock on the date of grant.
The
shares of common stock that may be issued to grantees under the Directors Plan may be unissued shares or shares repurchased by us. The Directors Plan provides for appropriate
adjustment in the number of shares subject to the Directors Plan and to the grants previously made if there is a stock split, stock dividend, reorganization, or other relevant change affecting our
corporate structure or equity securities. If any shares subject to an option are not issued because the option is not exercised, such shares will be available for future grants.
The
Directors Plan is administered by a committee appointed by the Board or, if no committee is appointed, by the Board. Other than the terms of the grants, the committee has full
authority to interpret the Directors Plan as it deems desirable and to make all other determinations necessary or appropriate for the administration of the Directors Plan.
40
If
an Eligible Director's service as a director terminates because of death or disability, any option held by such Eligible Director that has not yet become exercisable will become
immediately exercisable. Such options will be exercisable, in the event of termination because of death, for one year following the date of death or until the expiration of the term of the option,
whichever is shorter, or if because of disability, until the expiration of the stated term of the option. If a director whose service has been terminated because of disability dies prior to the
expiration of the option, the option will thereafter be exercisable for one year from the date of death or until expiration of the term of the option, whichever is shorter.
In
the event of a "Change in Control" as defined in the Directors' Plan, all options granted shall become fully exercisable and vested. For purposes of the Directors Plan, a "Change in
Control" occurs when (i) the majority of our directors are persons other than persons whose election has been solicited by the Board of Directors or have been appointed by the Board to fill
vacancies created by death, resignation, or a new position, (ii) any person or group of persons (as defined in Section 13(d) of the Exchange Act and the rules thereunder) acquires 20% or
more of our outstanding voting stock, or (iii) our shareholders approve an acquisition of us by an entity (other than a subsidiary or parent) through the purchase of our assets, or by merger,
or otherwise.
Employee Stock Awards
Concurrently with the effectiveness of the offering, we will issue, as stock awards, approximately 10,000 shares of our common stock to our nonofficer employees.
We plan to issue 50 shares of our common stock to each of our full-time employees and 25 shares of our common stock to each of our part-time employees. These shares will be issued without
consideration and will be freely tradeable upon issuance. We will recognize the fair value of the shares as compensation expense in the period in which they are issued. The issuance of these shares
will have no material impact on the book value per share of the shares outstanding following the offering.
41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Purchases of Common Stock
In August 2000, Stanley A. Bodine, our Chief Executive Officer, purchased 48,000 shares of common stock from us at $5.00 per share. Under the terms of the
purchase agreement for these shares, in the event that we issue shares to a third party at a price less than $5.00 per share either in connection with a merger or similar transaction or sale, Mr.
Bodine is entitled to receive additional shares for no additional consideration such that Mr. Bodine's holdings will have a total value of $240,000, assuming that his shares are valued at the
price at which the new shares were issued. Mr. Bodine has agreed to waive this provision upon completion of this offering. Mr. Bodine also has the right to include these shares in any
registration statement we file for sales of our common stock by other shareholders.
In
addition, Mr. Bodine and members of his immediate family purchased 72,000 shares of common stock from David R. Pomije at $5.00 per share. The purchase price was paid
with promissory notes payable to Mr. Pomije, which were secured by the purchased shares. The notes are payable in six annual installments, beginning in August 2001, and bear interest at an
annual rate of 6.33%. As of the date of this prospectus, $63,287 of the principal remains outstanding under the notes, and $32,647 in interest has been paid.
Loans from David R. Pomije
Between January 2000 and March 2002, Mr. Pomije, our Chairman of the Board and majority shareholder, advanced to us an aggregate of
$7,867,500. The annual interest rate on these loans was between 12.0% and 13.5% per annum. In December 2000, $1,267,500 principal of the debt was converted to 190,125 shares of common stock. We
repaid $3,100,000 and as of March 31, 2002, the outstanding balance was $3,500,000. Interest on these loans totaled $230,260 in fiscal 2000 and $339,750 in fiscal 2001.
Effective
March 31, 2002, Mr. Pomije agreed to convert the then $3,500,000 balance due into a mezzanine revolving promissory note, authorizing indebtedness not to exceed
$3,500,000. This note is due March 31, 2006. We have granted Mr. Pomije a security interest in our inventory, accounts receivable, and certain other assets in connection with this note.
In addition, we have a $4,500,000 working capital revolving promissory note which is due March 31, 2006. The borrowing availability under this note will decrease to $1,500,000 on
June 30, 2004. We have agreed to grant Mr. Pomije a security interest in our inventory upon his request in connection with this note. Both notes bear interest at 12% per annum. As of
June 29, 2003, the outstanding balance on the mezzanine revolving promissory note is $3,500,000, and $1,500,000 is outstanding on the working capital revolving promissory note. Interest on
loans from Mr. Pomije for fiscal 2002 was $456,961 and for the six months ended June 29, 2003, was $333,573. Pending use of the proceeds of this offering for new store openings, working
capital, and other general corporate purposes, we plan to repay all amounts outstanding on these notes.
As
additional consideration for the mezzanine revolving promissory note, Mr. Pomije received a warrant to purchase 105,000 shares of our common stock at $9.17 per share. The
warrant is exercisable until March 31, 2012.
42
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of July 11, 2003 and as adjusted for the sale
of shares of common stock in the offering:
•
each
person known by us to beneficially own more than 5% of the outstanding shares of common stock;
•
each
of our directors;
•
each
of our named executive officers; and
•
all
of our directors and executive officers as a group.
Beneficial
ownership is determined in accordance with the rules of the SEC and includes shares that may be acquired within sixty days of the date of this prospectus. To our knowledge,
all persons named in the table have sole voting and investment power with respect to all shares of common stock owned, unless otherwise noted.
Beneficial Ownership
of Common Stock
Before Offering
Beneficial Ownership
of Common Stock
After Offering
Name(1)
Shares
Percent
Shares
Percent
David R. Pomije
(2)
1,843,542
52.0
%
1,843,542
33.2
%
P. Simon Kallal
(3)
317,526
9.2
317,526
5.8
Stanley A. Bodine
(4)
240,000
6.8
240,000
4.3
Daniel J. Frederick
(5)
231,000
6.7
231,000
4.2
George E. Mileusnic
(6)
14,250
*
14,250
*
Robert M. Hiben
(7)
6,000
*
6,000
*
All directors and executive officers as a group (6 persons)
(2)(3)(4)(6)(7)(8)
2,427,018
66.1
2,427,018
42.8
*
Less
than 1%
(1)
The
address for each shareholder is 5810 Baker Road, Minnetonka, Minnesota 55345, except Mr. Frederick for whom the address is 2520 Cedar Ridge Road, Woodland, Minnesota 55391.
(2)
Includes
6,000 shares held on behalf of Mr. Pomije's minor children and 105,000 shares issuable upon exercise of currently exercisable warrants.
(3)
Includes
30,000 shares pledged to Mr. Pomije as security for a promissory note payable to Mr. Pomije by Mr. Kallal and 24,000 shares issuable upon exercise of a currently
exercisable option.
(4)
Includes
shares held by Mr. Bodine and his wife, 36,000 shares held on behalf of their minor children, and 90,000 shares issuable upon exercise of currently exercisable
options.
(5)
Includes
shares held by Mr. Frederick and his wife.
(6)
Includes
7,500 shares issuable upon exercise of a currently exercisable option.
(7)
Includes
shares held by Mr. Hiben and his wife.
(8)
Includes
4,200 shares issuable upon exercise of a currently exercisable option.
43
DESCRIPTION OF CAPITAL STOCK
The description of our securities contained herein is qualified in its entirety by reference to our Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws and the Minnesota Business Corporation Act.
Capital Stock
Our Amended and Restated Articles of Incorporation authorize the issuance of 50,000,000 shares of capital stock, par value $0.01 per share. The board of directors
is authorized to establish different classes or series of shares and to fix the rights and preferences of any class or series so established. If not otherwise designated, our shares of capital stock
are common stock. As of the date of this prospectus, 3,440,672 shares of our common stock are issued and outstanding, and we have approximately 120 shareholders. All currently outstanding shares of
common stock are, and the common stock offered hereby will be, upon payment therefor, fully paid and nonassessable. Currently, we have no issued and outstanding preferred stock.
The
holders of common stock are entitled to one vote for each share held of record on all matters voted upon by shareholders and may not cumulate votes for the election of directors.
Accordingly, the holders of a majority of the shares of common stock outstanding will be able to elect all of the directors. The holders of common stock are entitled to such dividends as may be
declared by the board of directors. Subject to the preferential rights, if any, of any class or series of preferred stock that may be authorized and issued by the board of directors, each share of
outstanding common stock is entitled to participate equally in any distribution of net assets made to our shareholders upon our liquidation. There are no redemption, sinking fund, conversion, or
preemptive rights with respect to the shares of common stock. All shares of common stock have equal rights and preferences.
Limitation of Liability and Indemnification
As permitted by the Minnesota Business Corporation Act, our Amended and Restated Articles of Incorporation provide that none of our directors will be liable to us
or to our shareholders for monetary damages for breach of a fiduciary duty as a director other than for:
•
any
breach of the director's duty of loyalty to us or to our shareholders;
•
acts
or omissions not in good faith or involving intentional misconduct or a knowing violation of law;
•
approval
of specified unlawful dividends or stock repurchases or redemptions; and
•
any
transaction from which the director derived an improper personal benefit.
In
appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Minnesota law.
Section 302.A.521
of the Minnesota Business Corporation Act and our Amended and Restated Bylaws provide that we must indemnify any director, officer, employee, or agent made or
threatened to be made a party to a proceeding, by reason of the former or present official capacity of the person, against judgments, penalties, fines, settlements, and reasonable expenses incurred by
the person in connection with the proceeding if specified statutory standards are met. "Proceeding" means a threatened, pending, or completed civil, criminal, administrative, arbitration, or
investigative proceeding, including one by us or in our behalf. For a complete statement of these indemnification rights, please see Section 302A.521 of the Minnesota Business Corporation Act
and our Amended and Restated Bylaws.
44
Antitakeover Provisions
Specific provisions of the Minnesota Business Corporation Act, our Amended and Restated Articles of Incorporation, and our Amended and Restated Bylaws could have
the effect of discouraging attempts to acquire us, including by a hostile takeover, or to remove incumbent management even if some or a majority of our shareholders were to deem the attempt to be in
their best interest, including an attempt that might result in the payment of a premium over the market price for the shares of common stock held by our shareholders.
Issuance of Preferred Stock
Our Amended and Restated Articles of Incorporation provide that our board of directors is authorized, subject to certain limitations prescribed by law, without
further shareholder approval, to issue from time to time from the authorized capital stock shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights,
and any qualifications, limitations, or restrictions of the shares of each series of preferred stock. The board may, among other things, determine with respect to each series of preferred stock
specific voting rights, designations, dividend rights (and whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption price or prices,
conversion rights, and liquidation preferences. Because the board of directors will have the power to establish the preferences and the rights of the shares of any series of preferred stock without
any further action or vote by the shareholders, the board may grant the holders of any series of preferred stock preferences, powers, and rights, including voting rights, senior to the rights of the
holders of common stock.
One
of the potential effects of issuing preferred stock may be to enable the board of directors to render more difficult, discourage, or prevent an attempt to obtain control of us by
means of a tender offer, proxy contest, merger, or otherwise and thereby protect the continuity of our current management. The issuance of shares of preferred stock pursuant to the board of directors'
authority may adversely affect the rights of holders of common stock.
Classified Board of Directors
Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that the board of directors is divided into three classes of
directors serving staggered three-year terms. The classification of directors has the effect of making it more difficult for shareholders to change the composition of the board of
directors in a relatively short period of time. Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws also provide that directors may be removed only by the
affirmative vote of the holders of at least two-thirds of the voting power of all of the outstanding shares of common stock entitled to vote for the election of directors. In addition,
vacancies, whether created by resignation, death, removal, or an increase in the number of directors, may be filled by a vote of a majority of directors
then in office, even though less than a quorum. The foregoing provisions could prevent shareholders from removing incumbent directors and filling the resulting vacancies with their own nominees.
Supermajority Vote
Our Amended and Restated Articles of Incorporation require the affirmative vote of at least two-thirds of the voting power of all outstanding shares
entitled to vote to authorize any merger, consolidation, exchange, sale, or other disposition of all or substantially all of our assets or our voluntary dissolution. These actions require only
majority shareholder approval if the proposed action has been approved by the affirmative vote of two-thirds of the directors.
45
Amendments
The approval of the holders of at least two-thirds of the voting power of all outstanding shares of common stock entitled to vote for the election of
directors is required to amend specified provisions of our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws, including those described above.
Statutory Provisions
Section 302A.671 of the Minnesota Business Corporation Act applies, with specified exceptions, to any acquisition of our voting stock resulting in the
acquisition of beneficial ownership of 20% or more of the voting stock then outstanding. Section 302A.671 requires approval of any acquisition by a majority of our shareholders prior to its
consummation. In general, shares acquired in the absence of approval are denied voting rights and are redeemable by us at their then fair market value within 30 days after the acquiring person
has failed to provide us with a timely information statement or the date the shareholders have voted not to grant voting rights to the acquiring person's shares.
Section 302A.673
of the Minnesota Business Corporation Act generally prohibits any shareholder who or which owns 10% or more of our voting shares to enter into a business
combination with us, or with any of our subsidiaries, for four years following the shareholder's share acquisition date, unless the business combination is approved by a committee of all of the
disinterested members of the board of directors before the interested shareholder's share acquisition.
Warrants
In April 2000, we issued warrants to purchase 2,400 shares of our common stock at $5.00 per share. These warrants are exercisable for a period of six years
commencing on April 26, 2000 and were issued as partial consideration for marketing and advertising services. In March 2002, we issued a warrant to purchase 105,000 shares of our common
stock at $9.17 per share. This warrant is exercisable for a period of ten years commencing on March 31, 2002. In addition, in March 2002, we issued a warrant to purchase 13,467 shares of
our common stock at $8.43 per share. This warrant is exercisable for a period of five years commencing on March 28, 2002.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Wells Fargo Shareowner Services.
Listing
We have applied to have our shares of common stock approved for listing on the American Stock Exchange under the symbol "SSG."
46
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. We cannot predict the effect, if any, that market sales of shares of our common stock or
the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock
in the public market could adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity securities.
Upon
completion of this offering, we will have 5,440,672 shares of common stock outstanding, assuming WR Hambrecht+Co does not exercise its overallotment option, and 5,740,672
shares of common stock
outstanding if WR Hambrecht+Co exercises its overallotment option. We have reserved 1,050,000 shares of common stock for issuance upon exercise of options granted or to be granted under our
stock option plans, of which options to purchase 412,250 shares are currently outstanding. We also have reserved 120,867 shares of common stock for issuance upon the exercise of outstanding warrants.
All
of the 2,000,000 shares sold in this offering will be freely tradeable without restriction or further registration under the Securities Act, unless the shares are purchased by
"affiliates" of 2
nd
Swing as that term is defined in Rule 144 under the Securities Act. The remaining 3,440,672 shares of common stock outstanding are "restricted
securities" under the Securities Act. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or
Rule 701 under the Securities Act.
Rule 144
In general, under Rule 144, beginning
on                        , 2003, a person who has owned shares of our common stock for at least one year would be entitled
to sell within any three-month period a number of shares that does not exceed the greater of:
•
1%
of the number of shares of common stock then outstanding, which will equal approximately 54,406 shares immediately after this offering; or
•
the
average weekly trading volume of the common stock on the American Stock Exchange during the four calendar weeks preceding the filing of a notice on Form 144 with
respect to that sale.
Sales
under Rule 144 are also governed by manner of sale provisions and notice requirements and current public information about us must be available.
In
addition, a person who is deemed not to have been our affiliate at any time during the three months preceding a sale by him or her and who has beneficially owned his or her shares for
at least two years, may sell the shares in the public market under Rule 144(k) without regard to the volume limitations, manner of sale provisions, notice requirements, or the availability of
current information we refer to above. Approximately 212,706 outstanding shares will qualify for this exemption immediately after the offering.
Rule 701
As of July 11, 2003, approximately 108,510 shares of common stock are issuable under currently exercisable options, which were issued in reliance on
Rule 701. All of these shares may be eligible for sale in reliance on Rule 701 beginning on                        ,
2003. Sales of these shares of common stock will be limited under
lock-up agreements with WR Hambrecht+Co. In general, under Rule 701 as currently in effect, our employees who have purchased shares from us in connection with a compensatory
plan or other agreement are eligible to resell those shares on                        , 2003, in
47
reliance
on Rule 144, but without compliance with restrictions, including the holding period, contained in Rule 144.
Employee Stock Awards
Concurrently with the effectiveness of the offering, we will issue, as stock awards, approximately 10,000 shares of our common stock to our nonofficer employees.
We plan to issue 50 shares of our common stock to each of our full-time employees and 25 shares of our common stock to each of our part-time employees. These shares will be issued without
consideration and will be freely tradeable upon issuance.
Lock-Up Agreements
As of the date of this prospectus, all of our officers and directors, as well as certain shareholders, holding an aggregate of approximately 3,014,503 shares, or
88% of our currently outstanding common stock, have entered into, or will enter into prior to the offering, lock-up agreements in connection with this offering. These lock-up
agreements provide that these persons will not offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of our common stock or any securities exercisable for or convertible
into our common stock owned by them for a period of 180 days after the date of this prospectus without the prior written consent of WR Hambrecht+Co, which has advised us that it has no
present intention to release any of the shares subject to the lock-up agreements prior to the expiration of the lock-up period.
Registration of Shares under Stock Option Plans
We intend to file a registration statement on Form S-8 covering all of the shares of common stock issuable or reserved for issuance under our
stock option plans as soon as practicable
following the date of this prospectus. When issued, these shares will be freely tradeable in the public market, subject to Rule 144 volume limitations applicable to affiliates and the
lock-up agreements described above.
48
PLAN OF DISTRIBUTION
We are offering the common stock on a best-efforts basis principally to selected institutional investors. WR Hambrecht+Co, LLC has agreed, subject to the terms
and conditions set forth in the placement agency agreement between us and them, to act as our exclusive placement agent in connection with this offering. The placement agent is not obligated and does
not intend to purchase any of the common stock offered hereby. We have agreed to pay the placement agent a fee equal to $        per share of this offering as a placement agent's fee.
We
have granted the placement agent an option, exercisable within 30 days after the date of this prospectus, to place up to an aggregate of 300,000 additional shares of common
stock at the same price per share to be paid for the other shares offered hereby solely for the purpose of covering overallotments. The placement agent may exercise the option only for the purpose of
covering excess placements, if any, made in connection with the distribution of the shares of common stock offered hereby. The placement agent will place any additional shares on the terms described
in the preceding paragraph and will receive the same placement agent's fee.
The
following table summarizes the compensation to be paid by us to WR Hambrecht+Co. This information assumes either no exercise or full exercise by WR Hambrecht+Co of its overallotment
option:
Per Share
Without
Overallotment
With
Overallotment
Public offering price
Placement agent fee paid by us
Proceeds, before expenses, to us
We
estimate that our total expenses for this offering, excluding the placement agent fee, will be approximately $750,000.
We
and each of our directors and executive officers and certain other shareholders, who in the aggregate have the right to sell or otherwise transfer approximately 3,014,503 shares of
common stock, have agreed, subject to limited exceptions, not to sell, offer, contract to sell, transfer the economic risk of ownership in, make any short sale, pledge, or otherwise dispose of any
shares of our common stock or securities convertible into our common stock, directly or indirectly, for a period of 180 days after the date of this prospectus without the prior written consent
of WR Hambrecht+Co.
This
agreement does not extend to bona fide gifts to immediate family members of such persons who agree to be bound by such restrictions or to limited partners or shareholders of such
holders who agree to be bound by such restrictions. In determining whether to consent to a transaction prohibited by these restrictions, WR Hambrecht+Co will take into account various factors,
including the number of shares requested to be sold, the anticipated manner and timing of sale, the potential impact of the sale on the market for the common stock, and market conditions generally. We
may grant options and issue common stock under existing stock option plans and issue unregistered shares in connection with any outstanding convertible securities or options during the
lock-up period. For more information, see "Shares Eligible for Future Sale."
We
have agreed to indemnify WR Hambrecht+Co and its controlling persons against certain liabilities, including liabilities under the Securities Act, or to contribute to payments
WR Hambrecht+Co may be required to make in respect thereof.
WR
Hambrecht+Co has informed us that it will not confirm, without client authorization, sales to its client accounts as to which it has discretionary authority. WR Hambrecht+Co has also
informed us that it intends to deliver all copies of this prospectus via hand delivery or through mail or courier services and only printed forms of the prospectus are intended to be used.
49
In
connection with this offering, WR Hambrecht+Co and other persons participating in this offering may engage in transactions which affect the market price of the common stock. These may
include stabilizing and overallotment transactions and purchases to cover short positions. Stabilizing transactions consist of bids or purchases for the purpose of pegging, fixing, or maintaining the
price of the common stock. An overallotment involves placing more shares of common stock in this offering than are specified on the cover page of this prospectus, which results in a short position.
The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares overalloted by the placement agent is not greater than the number
of shares that
it may place in the overallotment option. In a naked short position, the number of shares overalloted is greater than the number of shares in the overallotment option. WR Hambrecht+Co may cover this
short position by purchasing common stock in the open market and/or by exercising all or part of its overallotment option.
In
determining the source of shares to close out the short position, WR Hambrecht+Co will consider, among other things, the price of shares available for purchase in the open
market as compared to the price at which it may place shares through the overallotment option. If WR Hambrecht+Co places more shares than could be covered by the overallotment option, a naked
short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if WR Hambrecht+Co is concerned that there could be
downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
In
addition, WR Hambrecht+Co may impose a penalty bid. This allows WR Hambrecht+Co to reclaim the selling concession allowed to it if common stock sold in this offering is repurchased by
it in stabilizing or short covering transactions. These transactions, which may be effected on the American Stock Exchange or otherwise, may stabilize, maintain, or otherwise affect the market price
of the common stock and could cause the price to be higher than it would be without these transactions. WR Hambrecht+Co and other participants in this offering are not required to engage in any
of these activities and may discontinue any of these activities at any time without notice. We and WR Hambrecht+Co make no representation or prediction as to whether WR Hambrecht+Co will
engage in such transactions or choose to discontinue any transactions engaged in or as to the direction or magnitude of any effect that these transactions may have on the price of the common stock.
We
have applied to list our common stock on the American Stock Exchange under the symbol "SSG." Prior to this offering, there has been no public market for our common stock.
Consequently, we, WR Hambrecht+Co, and the investors will negotiate to determine the initial public offering price. We will consider current market conditions, our operating results in recent periods,
the market capitalization of other companies in our industry, and estimates of our potential. The estimated price range specified on the cover page of this prospectus may change because of market
conditions and other factors.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon for us by Moss & Barnett, A Professional Association, Minneapolis, Minnesota.
Certain legal matters in connection with this offering will be passed upon for the placement agent by Sidley Austin Brown & Wood LLP, Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial statements at December 29, 2002 and for each of the two years then ended
as set forth in their report. Silverman Olson Thorvilson & Kaufmann LTD, independent auditors, have audited our financial statements for the year ended December 31, 2000, as set
forth in their report. We have included our financial statements in the
50
prospectus
and elsewhere in the registration statement in reliance on the reports of Ernst & Young LLP and Silverman Olson Thorvilson & Kaufmann LTD, given on their
authority as experts in accounting and auditing.
INDEPENDENT AUDITORS
On September 4, 2002, in anticipation of this offering, our board of directors engaged Ernst & Young LLP as our independent auditors to
reaudit our December 30, 2001 financial statements and dismissed Silverman Olson Thorvilson & Kaufmann LTD, our former auditors. During the fiscal years ended December 31,
2000 and December 30, 2001, and through September 4, 2002, there were no disagreements with Silverman Olson Thorvilson & Kaufmann LTD on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure or with respect to our financial statements which, if not resolved to the satisfaction of Silverman Olson
Thorvilson & Kaufmann LTD, would have caused it to make reference to the subject matter of the disagreement in connection with its report. The report of Silverman Olson
Thorvilson & Kaufmann LTD for the fiscal years ended December 31, 2000 and December 30, 2001 did not contain an adverse opinion or a disclaimer of opinion nor was the report
qualified or modified as to uncertainty, audit scope, or accounting principles. Prior to the board's decision to engage Ernst & Young LLP, we did not consult Ernst & Young LLP
with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or
any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to our common stock. This prospectus does
not contain all of the information set forth in the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits
and schedules filed as a part of the registration
statement. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. You may read and copy any document we file at the
SEC's public reference room in Washington, DC. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains a
website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at
http://www.sec.gov.
Upon
completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and will file periodic reports and other information,
including proxy statements, with the SEC. These periodic reports and other information will be available for inspection and copying at the SEC's public reference room and the website of the SEC
referred to above.
51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
Report of Independent Auditors
Balance Sheets
Statements of Operations
Statement of Shareholders' Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
F-1
Report of Independent Auditors
The
Board of Directors
2
nd
Swing, Inc.
We
have audited the accompanying balance sheets of 2
nd
Swing, Inc. as of December 30, 2001 and December 29, 2002, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 2
nd
Swing, Inc. as of
December 30, 2001 and December 29, 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the
United States.
Ernst &
Young LLP
Minneapolis,
Minnesota
February 21, 2003
F-2
Report of Independent Auditors
The
Board of Directors
2
nd
Swing, Inc.
We
have audited the accompanying statements of operations, shareholders' equity (deficit), and cash flows of 2
nd
Swing, Inc. for the year ended December 31, 2000.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, 2
nd
Swing, Inc.'s results of operations and its cash flows for
the year ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
Silverman
Olson Thorvilson & Kaufmann LTD
Certified Public Accountants
Minneapolis,
Minnesota
January 29, 2001
F-3
2
nd
Swing, Inc.
Balance Sheets
December 30,
2001
December 29,
2002
June 29,
2003
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
—
$
1,055,859
$
75,193
Other receivables
44,509
107,983
248,853
Prepaid expenses
227,966
398,787
719,239
Inventories
4,005,174
5,609,242
7,837,520
Total current assets
4,277,649
7,171,871
8,880,805
Property and equipment, net
2,192,908
2,610,926
2,740,617
Other assets
5,699
14,343
20,566
Total assets
$
6,476,256
$
9,797,140
$
11,641,988
Liabilities and shareholders' equity (deficit)
Current liabilities:
Notes payable to shareholder
$
4,800,000
$
—
$
—
Note payable, bank
—
—
1,343,650
Accounts payable
768,484
1,708,816
3,979,685
Checks drawn in excess of available funds
279,118
—
—
Accrued payroll and benefits
151,710
205,070
365,466
Purchase credit memos payable
276,269
347,506
417,980
Other accrued expenses
216,888
254,013
893,766
Deferred rent
51,655
77,505
80,550
Current portion of capital lease obligations
3,578
20,144
19,922
Total current liabilities
6,547,702
2,613,054
7,101,019
Notes payable to shareholder
—
4,962,180
5,000,000
Note payable, bank
—
1,406,434
—
Deferred rent
197,834
223,603
227,972
Capital lease obligations, less current portion
4,644
21,258
10,866
Shareholders' equity (deficit):
Common stock, $.01 par value:
Authorized shares—50,000,000
Issued and outstanding shares—2,975,019 at December 30, 2001; 3,440,672 at December 29, 2002 and June 29, 2003
29,750
34,407
34,407
Additional paid-in capital
2,620,894
5,968,116
5,968,116
Deferred stock compensation
(69,226
)
(35,619
)
(24,592
)
Accumulated deficit
(2,855,342
)
(5,396,293
)
(6,675,800
)
Total shareholders' equity (deficit)
(273,924
)
570,611
(697,869
)
Total liabilities and shareholders' equity (deficit)
$
6,476,256
$
9,797,140
$
11,641,988
See
accompanying notes.
F-4
2
nd
Swing, Inc.
Statements of Operations
Year Ended
Six Months Ended
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(Unaudited)
Net sales
$
7,608,873
$
16,331,967
$
26,407,335
$
13,032,039
$
18,615,598
Cost of sales
4,684,138
10,283,953
16,805,537
8,220,014
11,974,975
Gross profit
2,924,735
6,048,014
9,601,798
4,812,025
6,640,623
Selling, general, and administrative expenses
4,676,694
8,315,003
11,605,491
5,811,177
7,484,861
Operating loss
(1,751,959
)
(2,266,989
)
(2,003,693
)
(999,152
)
(844,238
)
Interest expense
(234,471
)
(340,611
)
(541,672
)
(268,534
)
(435,269
)
Interest income
6,572
4,783
4,414
—
—
Net loss
$
(1,979,858
)
$
(2,602,817
)
$
(2,540,951
)
$
(1,267,686
)
$
(1,279,507
)
Basic and dilutive net loss per share
$
(0.79
)
$
(0.87
)
$
(0.75
)
$
(0.38
)
$
(0.37
)
Weighted average number of shares outstanding
2,502,026
2,975,019
3,375,087
3,309,502
3,440,672
See
accompanying notes.
F-5
2
nd
Swing, Inc.
Statement of Shareholders' Equity (Deficit)
Common Stock
Total
Shareholders'
Equity
(Deficit)
Additional
Paid-In
Capital
Deferred Stock
Compensation
Accumulated
Deficit
Shares
Amount
Balance at January 2, 2000
2,477,019
$
24,770
$
2,686,230
$
—
$
(1,663,073
)
$
1,047,927
Common stock issued in private placement
307,875
3,079
1,944,411
—
—
1,947,490
Common stock issued in conversion of note payable to shareholder
190,125
1,901
1,265,599
—
—
1,267,500
Recapitalization resulting from election of C corporation status
—
—
(3,390,406
)
—
3,390,406
—
Net loss
—
—
—
—
(1,979,858
)
(1,979,858
)
Balance at December 31, 2000
2,975,019
29,750
2,505,834
—
(252,525
)
2,283,059
Stock option compensation
—
—
115,060
(115,060
)
—
—
Amortization of stock option compensation
—
—
—
45,834
—
45,834
Net loss
—
—
—
—
(2,602,817
)
(2,602,817
)
Balance at December 30, 2001
2,975,019
29,750
2,620,894
(69,226
)
(2,855,342
)
(273,924
)
Common stock issued in private placement
465,653
4,657
3,241,326
—
—
3,245,983
Amortization of stock option compensation
—
—
—
33,607
—
33,607
Warrant value
—
—
105,896
—
—
105,896
Net loss
—
—
—
—
(2,540,951
)
(2,540,951
)
Balance at December 29, 2002
3,440,672
34,407
5,968,116
(35,619
)
(5,396,293
)
570,611
Amortization of stock option compensation
—
—
—
11,027
—
11,027
Net loss (unaudited)
—
—
—
—
(1,279,507
)
(1,279,507
)
Balance at June 29, 2003 (unaudited)
3,440,672
$
34,407
$
5,968,116
$
(24,592
)
$
(6,675,800
)
$
(697,869
)
See accompanying notes.
F-6
2
nd
Swing, Inc.
Statements of Cash Flows
Year Ended
Six Months Ended
December 31,
2000
December 30,
2001
December 29,
2002
June 30,
2002
June 29,
2003
(Unaudited)
Operating activities
Net loss
$
(1,979,858
)
$
(2,602,817
)
$
(2,540,951
)
$
(1,267,686
)
$
(1,279,507
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
318,535
536,320
752,019
341,183
426,454
Loss on disposal of fixed assets
91,331
9,607
18
—
86,871
Warrant and stock option related expenses
—
45,834
101,683
40,968
48,847
Changes in operating assets and liabilities:
Inventories
(1,592,024
)
(1,641,545
)
(1,604,068
)
(1,849,910
)
(2,228,278
)
Prepaid expenses
(89,638
)
(116,260
)
(170,821
)
(143,957
)
(320,452
)
Other receivables
(29,038
)
(13,922
)
(63,474
)
(77,732
)
(140,870
)
Other assets
13,033
(3,101
)
(8,644
)
(7,900
)
(6,223
)
Accounts payable
298,898
289,423
940,332
2,073,157
2,270,869
Accrued payroll and benefits
62,265
43,020
53,360
(149,207
)
160,396
Purchase credit memos payable and accrued expenses
231,301
169,657
108,362
302,126
710,227
Deferred rent
10,961
201,983
51,619
68,695
7,414
Net cash used in operating activities
(2,664,234
)
(3,081,801
)
(2,380,565
)
(670,263
)
(264,252
)
Investing activities
Purchases of property and equipment
(1,244,332
)
(1,306,352
)
(1,121,400
)
(848,067
)
(643,016
)
Proceeds from sale of fixed assets
—
11,250
552
—
—
Net cash used in investing activities
(1,244,332
)
(1,295,102
)
(1,120,848
)
(848,067
)
(643,016
)
Financing activities
Increase (decrease) in cash drawn in excess of available funds
—
279,118
(279,118
)
(169,839
)
—
Proceeds from borrowings on note payable to shareholder
3,260,000
3,757,500
3,865,000
1,000,000
800,000
Payments of note payable to shareholder
(650,000
)
(300,000
)
(3,665,000
)
(2,550,000
)
(800,000
)
Net increase (decrease) in note payable to bank
(50,000
)
—
1,406,434
—
(62,784
)
Payments on capital lease obligations
—
(2,747
)
(16,027
)
(7,814
)
(10,614
)
Proceeds from issuance of common stock
1,442,490
505,000
3,245,983
3,245,983
—
Net cash provided by financing activities
4,002,490
4,238,871
4,557,272
1,518,330
(73,398
)
Increase (decrease) in cash and cash equivalents
93,924
(138,032
)
1,055,859
—
(980,666
)
Cash and cash equivalents, beginning of period
44,108
138,032
—
—
1,055,859
Cash and cash equivalents, end of period
$
138,032
$
—
$
1,055,859
$
—
$
75,193
Supplemental disclosures of cash flow information
Cash paid for interest
$
198,332
$
330,298
$
466,536
$
307,773
$
377,507
F-7
Supplemental disclosures of noncash transactions
During the year ended December 31, 2000, the Company converted $1,267,500 of notes payable to the majority shareholder to 190,125 shares of common stock.
During
the year ended December 31, 2000, the Company issued 75,765 shares of common stock in exchange for subscriptions receivable aggregating $505,000.
During
the years ended December 30, 2001 and December 29, 2002, the Company acquired $10,969 and $49,207, respectively, of assets through capital lease obligations.
During
the six months ended June 30, 2002, the Company acquired $46,296 of assets through capital lease obligations. The Company did not acquire assets through capital lease
obligations during the six months ended June 29, 2003.
See
accompanying notes.
F-8
2
nd
Swing, Inc.
Notes to Financial Statements
Years Ended December 31, 2000, December 30, 2001, and December 29, 2002
and six month periods ended
June 30, 2002 (unaudited) and June 29, 2003 (unaudited)
1. Nature of Operations
2
nd
Swing, Inc. (the Company or 2
nd
Swing) was incorporated in March 1997. The Company is in the business of buying and
selling both new and pre-owned golf clubs and related golf equipment primarily through its 2
nd
Swing retail stores. As of December 29, 2002, the Company owned and
operated a total of 30 stores: four in Minnesota, five in Michigan, six in Ohio, seven in Illinois, one in Indiana, one in Wisconsin, two in Pennsylvania, two in Kentucky, one in Nebraska, and one in
New Jersey. As of December 30, 2001, the Company owned and operated a total of 20 stores: four in Minnesota, four in Michigan, five in Ohio, five in Illinois, one in Indiana and one in
Wisconsin. As of December 31, 2000, the Company owned and operated a total of 10 stores: four in Minnesota, four in Michigan, and two in Ohio. The Company currently operates in a single
business segment and thus additional disclosures under Statement of Financial Accounting Standards (SFAS) No. 131,
Disclosures About Segments of an Enterprise and
Related Information
, are not required.
The
Company's fiscal year ends on a Sunday on or near December 31 consisting of either a 52- or 53-week year. Fiscal year 2002 ended on December 29,
2002, fiscal year 2001 ended on December 30, 2001, and fiscal year 2000 ended on December 31, 2000. Each of these fiscal years consisted of 52 weeks. Unless otherwise stated,
references to years in this report relate to the fiscal year rather than the calendar year.
2. Summary of Significant Accounting Policies
Cash Equivalents
Cash equivalents represent investments with a maturity of three months or less at the time of purchase. Cash equivalents are recorded at cost, which approximates
market.
Concentrations
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash. The Company maintains cash in bank deposit
accounts, which, at times, may exceed federally insured limits. The Company believes it has its cash deposits at high quality financial institutions. The Company believes no significant credit risk
exists with respect to these deposits.
Inventories
Inventories consist of new and pre-owned golf clubs and related golf equipment and are recorded at the lower of cost (determined on a
first-in, first-out basis) or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or,
in the case of leasehold improvements, over the shorter of the estimated useful lives or lease terms. Estimated useful lives for furniture and equipment and leasehold improvements are five years. When
indicators of impairment exist, long-lived assets are evaluated for impairment using an undiscounted cash flow analysis.
F-9
In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets
, effective for fiscal years beginning after December 15, 2001. This statement develops one accounting model (based on the model in SFAS No. 121) for
long-lived assets to be disposed of, expands the scope of discontinued operations, and modifies the accounting for discontinued operations. The adoption of this new statement did not have
a material impact on the Company's net earnings or financial position.
Expenditures
for additions and improvements are capitalized, while repairs and maintenance are expensed as incurred.
Revenue Recognition
Revenue from retail sales is recognized at the point of sale. The Company does not provide a reserve for sales returns because the amount is insignificant.
Vendor Allowances
Vendor allowances such as volume rebates and other purchase discounts are reflected as a reduction to cost of sales as the related inventory is sold. Vendor
advertising allowances are reflected as a reduction to advertising expense in selling, general, and administrative expenses after the advertising event has occurred.
During
2002, the Emerging Issues Task Force reached a consensus on Issue No. 02-16,
Accounting by a Customer (Including a Reseller) for Certain
Consideration Received From a Vendor
. Under the new guidance, cash consideration received from a vendor should be classified as a reduction of cost of sales. If the
consideration received represents a payment for assets delivered to the vendor, it should be classified as revenue. If the consideration is a reimbursement of a specific, incremental, identifiable
cost incurred in selling the vendor's product, the cost should be characterized as a reduction of that cost incurred. The guidance is effective for fiscal periods beginning after December 15,
2002. The adoption of this consensus did not have a material impact on net earnings, cash flows, or financial position.
Pre-Opening Costs
Pre-opening costs of new stores are expensed as incurred and are included in selling, general, and administrative expense.
Shipping and Handling Costs
Amounts billed to customers for shipping and handling are included in net sales. The related costs are included in cost of sales.
Cost of Goods Sold and Operating Expenses
Cost of goods sold includes the cost of merchandise, inventory shrinkage, freight, and distribution related expenses. Selling, general, and administrative
expenses include payroll, advertising, occupancy, and all expenses associated with the Company's corporate headquarters.
F-10
Advertising Costs
Advertising costs, included in selling, general, and administrative expenses in the accompanying statements of operations are expensed as incurred and aggregated
$407,801, $830,456, and $1,228,002, respectively, for 2000, 2001, and 2002 and $874,191 (unaudited) and $896,262 (unaudited), respectively, for the six months ended June 30, 2002 and
June 29, 2003.
Income Taxes
Prior to December 10, 2000, the Company had elected, by the consent of the shareholders, to be taxed under the provisions of Subchapter S of the Internal
Revenue Code (the Code). Under the provisions of the Code, the shareholders included the applicable corporate income or loss in their personal income tax returns. On December 10, 2000, the
Company's S corporation status terminated as a result of the completion of a private placement of its common stock that caused the number of shareholders to exceed the number allowed to retain S
corporation status. Accordingly, the Company has been and will be taxed as a C corporation in periods thereafter. As of December 10, 2000, the accumulated deficit was reclassified to additional
paid-in capital.
Subsequent
to December 10, 2000, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes represent the net tax effect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. The effect of changes in tax
rates is recognized in the period in which the rate change occurs.
Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148,
Accounting for Stock-Based
Compensation—Transition and Disclosure.
SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based
Compensation,
to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 requires expanded and more prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and
the effect of the method on reported results.
The
Company has stock-based employee compensation plans comprised primarily of fixed stock options. However, it has not adopted a method under SFAS No. 148 to expense stock
options and continues to apply Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,
and related
interpretations in accounting for these plans. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair market price of the Company's stock at the measurement
date over the employee's option exercise price. Any resulting compensation expense is amortized ratably over the related vesting period.
F-11
The
table below illustrates the effect on the Company's net loss and net loss per share as if it had applied the fair value recognition provisions of SFAS No. 123 to stock-based
employee compensation for each of the last three fiscal years and the six months ended June 29, 2003.
Year Ended
Six Months Ended
December 31, 2000
December 30, 2001
December 29, 2002
June 29,
2003
(unaudited)
Net loss, as reported
$
(1,979,858
)
$
(2,602,817
)
$
(2,540,951
)
$
(1,279,507
)
Add stock-based employee compensation expense included in reported net earnings
—
45,834
33,607
11,027
Deduct total stock-based compensation expense determined under fair value method for all awards
(3,602
)
(190,339
)
(139,663
)
(50,742
)
Pro forma net loss
$
(1,983,460
)
$
(2,747,322
)
$
(2,647,007
)
$
(1,319,222
)
Net loss per share:
Basic and diluted—as reported
$
(.79
)
$
(.87
)
$
(.75
)
$
(.37
)
Basic and diluted—pro forma
$
(.79
)
$
(.92
)
$
(.78
)
$
(.38
)
The fair value of each stock option was estimated on the date of the grant using the Black-Scholes option-pricing model with the following
assumptions.
2000
2001
2002
2003
Risk-free interest rate
6.0%
6.0%
4.0%
4.0%
Expected dividend yield
0.0%
0.0%
0.0%
0.0%
Expected stock price volatility
0.0%
0.0%
0.0%
0.0%
Expected life of stock options
5.0 years
8.0 years
8.0 years
8.0 years
The
weighted average fair value of options granted during fiscal 2001 used in computing pro forma compensation expense was $2.54.
Net Income (Loss) Per Share
SFAS No. 128,
Earnings Per Share
(EPS), requires dual presentation of basic EPS and diluted EPS on the face
of all income statements. Basic EPS is computed as net income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable through stock options and warrants. Outstanding options and warrants to purchase shares of the Company's common stock were
not included in the diluted EPS calculation for all periods presented in the financial statements as they were antidilutive.
F-12
Effective
September 30, 2002, the Company effected a .3-for-1 stock split, which resulted in the automatic conversion of one share of issued and
outstanding common stock into three-tenths of a share of common stock. For options and warrants outstanding, the number of shares of common stock that may be purchased upon the exercise of such
options and warrants and the per share exercise prices thereof have been adjusted appropriately to give effect to the stock split. The stock split did not affect the par value of the common stock and
had no impact on total shareholders' equity (deficit). All share and per share information has been retroactively adjusted to reflect the effect of the reverse stock split.
Use of Estimates
The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassification
Certain previous period amounts have been reclassified to conform with the current period presentation. These reclassifications have no effect on the net loss or
financial position.
Interim Financial Data
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim
financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for
the six months ended June 29, 2003 are not necessarily indicative of the results that may be expected for the year ending December 28, 2003.
F-13
3. Property and Equipment, Net
Property
and equipment consisted of the following at:
December 30, 2001
December 29, 2002
June 29,
2003
(Unaudited)
Furniture and equipment
$
1,764,937
$
2,483,343
$
2,963,080
Leasehold improvements
855,927
1,114,280
1,105,917
Computer software
494,859
688,100
711,896
3,115,723
4,285,723
4,780,893
Less accumulated depreciation
(922,815
)
(1,674,797
)
(2,040,276
)
Property and equipment, net
$
2,192,908
$
2,610,926
$
2,740,617
Included
in furniture and equipment are the following capital lease amounts:
December 30, 2001
December 29, 2002
June 29, 2003
(Unaudited)
Furniture and equipment
$
10,968
$
60,175
$
60,175
Less accumulated amortization
(3,095
)
(18,710
)
(28,085
)
$
7,873
$
41,465
$
32,090
Amortization
expense was $3,095 and $15,615, respectively, for the years ended December 30, 2001 and December 29, 2002 and $4,978 (unaudited) and $9,375 (unaudited) for the
six months ended June 30, 2002 and June 29, 2003, respectively, and is included in depreciation expense.
4. Notes Payable to Shareholder and Bank
As of December 30, 2001, the Company had a $5,000,000 line of credit with its majority shareholder. Interest was payable monthly at a rate of 12% per
annum. The line expired March 31, 2002. The line of credit was secured by substantially all corporate assets.
During
the years ended December 31, 2000 and December 30, 2001, the Company incurred interest aggregating $230,260 and $339,750, respectively, to its shareholder, of which
$45,591 remained unpaid at December 30, 2001 and is included in other accrued expenses in the accompanying balance sheet.
As
of March 31, 2002, the Company obtained a Mezzanine Revolving Promissory Note (MRPN) from its majority shareholder under which the Company may borrow up to $3,500,000 with
interest payable monthly at a rate of 12% per annum. The principal balance under the MRPN, together with accrued interest thereon, is due and payable on March 31, 2006 and is secured by
substantially all corporate assets. In consideration for the MRPN, the Company granted to its majority shareholder a warrant to purchase 105,000 shares of common stock at a price of $9.17 per share.
The warrant expires in March 2012. The Company allocated $105,896 of the MRPN amount to the warrant based on the relative fair values of the MRPN and the warrant. The value allocated to the
warrant will be
F-14
recognized
as additional interest expense over the term of the note. The warrant's fair value was determined using the Black-Scholes pricing model. For the year ended December 29, 2002 and the
six months ended June 29, 2003, interest expense of $68,076 and $37,820 (unaudited), respectively, was recognized related to such allocation. As of December 29, 2002 and June 29,
2003, the principal balance outstanding under the MRPN is $3,500,000.
Additionally,
as of March 31, 2002, the Company obtained a Working Capital Revolving Promissory Note (WCRPN) from its majority shareholder under which the Company may borrow up to
$1,500,000 with interest payable monthly at a rate of 12% per annum. As of January 8, 2003, the WCRPN availability has been increased from $1,500,000 to $4,500,000. The borrowing availability
under the WCRPN will decrease to $1,500,000 on June 30, 2004. The principal balance under the WCRPN, together with accrued interest thereon, is due and payable on March 31, 2006. As of
December 29, 2002 and June 29, 2003, the principal balance outstanding under the WCRPN is $1,500,000 and $1,500,000 (unaudited), respectively.
During
the year ended December 29, 2002 and the six months ended June 30, 2002 and June 29, 2003, the Company incurred interest aggregating $456,961, $244,461
(unaudited), and $333,573 (unaudited), respectively, to its majority shareholder, of which $36,245 and $62,630 (unaudited) remained unpaid at December 29, 2002 and June 29, 2003,
respectively, and is included in other accrued expenses in the accompanying balance sheets.
As
of November 2002, the Company has a $2,500,000 credit facility with a commercial lender that expires March 31, 2004. Interest under the credit facility is at a variable rate of
3.75% above prime rate, and the credit facility is secured by the Company's inventories. At December 29, 2002 and June 29, 2003, the credit facility principal balance outstanding is
$1,406,434 and $1,343,650 (unaudited), respectively.
As
noted above, the notes payable to shareholder become due on March 31, 2006 and the credit facility with the commercial lender becomes due on March 31, 2004. The Company
intends to address its long-term financial requirements and to support expansion plans through various efforts, including the sale of equity securities and replacement of the current credit facilities
with longer term facilities providing greater borrowing capacity; however, there can be no assurance that such sources will be available.
5. Contingencies and Commitments
Significant Vendor
During the years ended December 30, 2001 and December 29, 2002, purchases from one vendor represented approximately 15% and 11%, respectively, of
the Company's total inventories purchased.
Leases
The Company leases its corporate and retail facilities as well as certain operating equipment under noncancelable operating leases. Most of the facilities' leases
contain renewal options and require the Company to pay other lease-related costs. Rent expense totaled $508,279, $1,208,632, and $2,025,220,
F-15
respectively,
during fiscal years 2000, 2001, and 2002, and $919,669 (unaudited) and $1,225,661 (unaudited), respectively, for the six months ended June 30, 2002 and June 29, 2003, and
is included in selling, general, and administrative expenses in the accompanying statements of operations. The Company recognizes rent expense on a straight-line basis over the term of the
lease and recognizes the excess of such expense over the cash payments as deferred rent in the accompanying balance sheets.
The
Company also leases various equipment under capital leases. Amortization expense on assets under capital leases is included with depreciation expense.
As
of December 29, 2002, future minimum lease payments under noncancelable operating leases and capital leases are as follows for the years ending:
Operating
Leases
Capital
Leases
2003
$
2,348,980
$
25,058
2004
2,237,311
21,450
2005
1,988,754
1,822
2006
1,383,295
—
2007
323,860
—
Total minimum lease payments
$
8,282,200
48,330
Imputed interest
(6,928
)
Present value of net minimum lease payments
41,402
Less current portion
(20,144
)
$
21,258
6. Private Placement of Common Stock
In September 2001, the Company offered up to 818,182 shares of its common stock at $7.33 per share. From January 1, 2002 through March 31,
2002, the Company issued 465,653 shares of its common stock for proceeds, net of offering costs (aggregating $167,253), of $3,245,983.
In
connection with the Company's private placement offering, the Company issued to the placement agent a five-year warrant to purchase 13,467 shares of the Company's common
stock at a price of $8.43 per share.
In
December 2000, the Company offered up to 450,000 shares of its common stock at $6.67 per share. Pursuant to the offering, the Company issued and entered into subscription
agreements to issue 450,000 shares of its common stock for proceeds, net of direct expenses (aggregating $25,010), of $2,974,990. The aggregate proceeds include $1,267,500 principal of notes payable
to the majority shareholder that were converted to 190,125 shares of common stock and $505,000 of subscriptions receivable. The subscribed amounts were received in January 2001.
In
August 2000, the Company sold to an officer/shareholder 48,000 shares of its common stock at $5.00 per share, for aggregate proceeds of $240,000.
F-16
7. Employee Stock Compensation Plan
In fiscal 2000, the Company adopted a stock compensation plan. Pursuant to the plan, a committee appointed by the Board of Directors may grant options to key
individuals at its discretion. Option prices under the plan may not be less than 85% of the fair market value of the common stock at the date the option is granted. The Company accounts for this plan
under the recognition and measurement principles of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees
, and
related interpretations. Generally, no stock compensation cost is reflected in net loss, as options granted under this plan had an exercise price equal to the market value of the underlying common
stock on the date of grant.
As
of December 29, 2002, the Company has reserved 900,000 shares of common stock for issuance under the plan and 495,450 remain available for grant.
The
Company has reserved 150,000 shares of common stock for issuance under a plan for nonemployee directors. The total shares remaining available for grant to nonemployee directors at
December 29, 2002 are 142,500. The Company has granted options to purchase 12,500 shares of common stock at an exercise price equal to the public offering price to a nonemployee director.
A
summary of the activity of the Company's stock compensation plan is presented below:
Incentive
Stock
Options
Non-
Qualified
Stock
Options
Weighted
Average
Exercise
Prices
Granted in 2000 and outstanding at end of 2000
99,999
50,001
$
5.00
Granted in 2001
—
288,750
6.67
Cancelled in 2001
—
(27,900
)
6.67
Outstanding at end of 2001
99,999
310,851
6.06
Cancelled in 2002
—
(6,300
)
6.67
Outstanding at end of 2002
99,999
304,551
6.05
Cancelled during six months ended June 29, 2003 (unaudited)
—
(4,800
)
6.67
Outstanding at June 29, 2003 (unaudited)
99,999
299,751
6.04
Of
the non-qualified stock options granted in fiscal 2001, 45,300 of the stock options were granted in consideration for certain employees entering into
non-compete agreements. The fair value of these stock options amounting to $115,060 will be recognized as an expense in the statement of operations over the five-year vesting
period. Expense recognized in fiscal 2001 and 2002 related to these stock options was $45,834 and $33,607, respectively. Expense recognized in the six months ended June 30, 2002 and
June 29, 2003 related to these stock options was $18,227 (unaudited) and $11,027 (unaudited), respectively.
F-17
The
following table summarizes information about stock options outstanding, including those issued to officers/shareholders of the Company, at December 29, 2002.
Options Outstanding
Options Exercisable
Weighted-
Average
Remaining
Contractual
Life
Exercise
Prices
Number
Outstanding at
December 29,
2002
Weighted-
Average
Exercise
Price
Number
Outstanding at
December 29,
2002
Weighted-
Average
Exercise
Price
$
6.67
254,550
8.1
$
6.67
50,910
$
6.67
5.00
150,000
7.6
5.00
60,000
5.00
404,550
110,910
8. Stock Warrants
As of December 29, 2002, the Company had warrants outstanding to purchase 2,400 common shares of the Company at an exercise price of $5.00 with a
April 2004 expiration date.
In
March 2002, the Company issued to the placement agent of a private offering a five-year warrant to purchase 13,467 shares of the Company's common stock at a price
of $8.43 per share.
Additionally,
in consideration for the MRPN entered into as of March 31, 2002, the majority shareholder has a ten-year warrant to purchase 105,000 shares of the
Company's common stock at a price of $9.17 per share. The warrant's fair value was estimated using the Black-Scholes pricing model with the following assumptions: risk-free interest
rate—4.65%; expected dividend yield—0%; expected stock price volatility—20%; expected life of warrant—4 years.
9. Related-Party Transactions
At December 29, 2002, the Company had outstanding the following incentive and nonqualified stock options granted to shareholders:
Common Shares
Under Options
Exercise Price
Per Share
Expiration Date
150,000
$
5.00
August 2010
158,250
$
6.67
February 2011
At
December 29, 2002, 60,000 and 31,650 of the outstanding options granted are exercisable at $5.00 and $6.67 per share, respectively.
The
Company incurred fees for financial and system consulting services from an entity owned by a 2
nd
Swing shareholder. Total fees incurred aggregated $94,385, $538, and
$16,172, respectively, for fiscal 2000, 2001, and 2002, and $9,890 (unaudited) and $4,438 (unaudited), respectively, for the six months ended June 30, 2002 and June 29, 2003.
F-18
10. Income Taxes
On December 10, 2000, the Company's S corporation status terminated as a result of the completion of a private placement of its common stock. Accordingly,
the Company has been and will be taxed as a C corporation subsequent to that date. During 2000, 2001, and 2002, the Company had net losses; therefore, no provision for income taxes is presented in the
accompanying statements of operations.
Significant
components of the Company's deferred income tax assets and liabilities are as follows:
December 30,
2001
December 29,
2002
June 29,
2003
(unaudited)
Deferred income tax assets:
Net operating loss carryforward
$
849,047
$
2,105,434
$
2,619,621
Accrued rent
84,047
120,443
123,409
Basis difference of fixed assets
2,819
—
—
Other
7,072
32,633
58,415
942,985
2,258,510
2,801,445
Deferred income tax liabilities:
Depreciation
(46,563
)
(166,735
)
(205,518
)
Net deferred income tax assets
896,422
2,091,775
2,595,927
Valuation allowance
(896,422
)
(2,091,775
)
(2,595,927
)
$
—
$
—
$
—
The
Company has experienced operating losses since inception and has determined that realization of the tax benefit related to the net deferred tax asset is uncertain. Accordingly, a
valuation allowance has been recorded for the entire balance of the net deferred tax asset. At December 29, 2002, the Company had a net operating loss carryforward of approximately $5,300,000
expiring at various dates through 2022.
F-19
Location
Opening Date
Location
Opening Date
Fairfax, VA
May 2003
Mentor, OH
May 2001
St. Louis, MO
April 2003
Schaumburg, IL
April 2001
Littleton, CO
March 2003
Orland Park, IL
April 2001
Lakewood, CO
March 2003
Indianapolis, IN
March 2001
Wilmington, DE
March 2003
Aurora, IL
March 2001
Akron, OH
July 2002
Skokie, IL
March 2001
Lincoln Park, IL
June 2002
Florence, KY
March 2001
Ross Township, PA
May 2002
North Olmsted, OH
April 2000
Downers Grove, IL
April 2002
Westland, MI
April 2000
Moorestown, NJ
April 2002
Springdale, OH
March 2000
Kentwood, MI
April 2002
Novi, MI
March 2000
Omaha, NE
April 2002
Brookfield, WI
March 2000
North Fayette, PA
March 2002
Orion, MI
March 2000
Louisville, KY
February 2002
Roseville, MN
November 1999
Columbus, OH
February 2002
Madison Heights, MI
April 1999
Dayton, OH
September 2001
Burnsville, MN
August 1998
Bloomington, MN
September 2001
Minnetonka, MN
April 1998
Vernon Hills, IL
June 2001
2,000,000 Shares
2nd Swing, Inc.
Common Stock
Dealer Prospectus Delivery Obligation
Until                              (25 days after the date of this offering), all dealers
that effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the issuance and distribution of the common stock registered hereby, other than placement agent's fee and fees, are set
forth in the following table:
SEC registration fee
$
1,861
NASD filing fee
2,800
American Stock Exchange listing fee
45,000
Legal fees and expenses
230,000
Accounting fees and expenses
320,000
Blue Sky fees and expenses
10,000
Printing expenses
90,000
Transfer agent and registrar fees and expenses
8,000
Miscellaneous
42,339
Total
$
750,000
2
nd
Swing will bear all expenses.
Item 14. Indemnification of Directors and Officers
Unless prohibited in a corporation's articles or bylaws, Minnesota Statutes § 302A.521 requires indemnification of officers, directors,
employees, and agents, under certain circumstances, against judgments, penalties, fines, settlements, and reasonable expenses (including attorney's fees and disbursements) incurred by such person in
connection with a threatened or pending proceeding with respect to the acts or omissions of such person in his official capacity. The general effect of Minnesota Statutes § 302A.521
is to require the Registrant to reimburse (or pay on behalf of) directors and officers of the Registrant any personal liability that may be imposed for certain acts performed in their capacity as
directors and officers of the Registrant, except where such persons have not acted in good faith.
The
Amended and Restated Bylaws of the Registrant provide for such indemnification to the maximum extent permitted by Minnesota Statutes. The Registrant has purchased insurance covering
the liability of its directors and officers.
Item 15. Recent Sales of Unregistered Securities
A.    Effective
August 8, 2000, the Company granted to Stanley A. Bodine options to purchase 150,000 shares of common stock at $5.00 per share under the Company's 2000
Stock Compensation Plan.
B.    On
August 8, 2000, the Company sold 48,000 shares of common stock to Stanley A. Bodine for $5.00 per share.
C.    Between
December 6, 2000 and January 11, 2001, the Company sold 259,875 shares of common stock to 19 investors at $6.67 per share in a private placement. In
addition, $1,267,500 of debt owed to David R. Pomije was converted to 190,125 shares of common stock at approximately $6.67 per share. No commissions were paid in connection with the sale of the
foregoing securities as sales were made through the officers of the Company.
D.    Between
January 7, 2002 and March 28, 2002, the Company sold 465,653 shares of common stock to 28 investors at $7.33 per share in a private placement.
ThinkEquity Partners received a
II-1
commission
of $98,760 in connection with the sale of the foregoing securities and a warrant to purchase 13,467 shares of common stock at $8.43 per share.
E.    On
March 31, 2002, the Company granted to David R. Pomije a warrant to purchase 105,000 shares of common stock at $9.17 per share as additional consideration for a
loan to the Company. The value of the consideration was $105,896.
F.     In
addition to the options described in (A), above, as of the date of this Registration Statement, the Company has granted to its employees options to purchase 254,550
shares of common stock at $6.67 per share and to a nonemployee director options to purchase 12,500 shares at the initial public offering price. The Company relied on Rule 701 under the Securities Act
in making these grants.
G.    The
Company plans to issue approximately 10,000 shares to its nonofficer employees (approximately 275 individuals) upon effectiveness of the offering. These shares will
be issued for no consideration. The Company is relying on no-action positions taken by the staff that these grants are not "sales" and are not subject to the registration requirements of the
Securities Act.
No
underwriters were used in connection with the foregoing transactions. The Company relied on the exemption provided by Section 4(2) of the Securities Act of 1933 in making the
sales outlined in (B) and (E), above, in that the transactions, both individually and in the aggregate, did not involve a public offering. The registrant relied on the exemptions provided by
Regulation D in connection with the transactions described in (C) and (D) above, and filed a report on Form D for each.
Item 16. Exhibits and Financial Statement Schedules.
A.    Exhibits
Exhibit No.
Description of Exhibit
1
Form of Placement Agency Agreement
*3.1
Amended and Restated Articles of Incorporation of the Company
*3.2
Amended and Restated Bylaws of the Company
*4.1
Form of Stock Certificate evidencing common stock
*4.2
(a)
Letter Agreement dated March 31, 2002 with David R. Pomije regarding Mezzanine financing
*4.2
(b)
$1,500,000 Working Capital Revolving Promissory Note to David R. Pomije dated March 31, 2002
*4.2
(c)
$3,500,000 Mezzanine Revolving Promissory Note to David R. Pomije dated March 31, 2002
*4.2
(d)
Agreement to extend promissory notes dated September 27, 2002
*4.2
(e)
Security Agreement dated April 2, 2002
*4.2
(f)
Warrant to David R. Pomije dated March 31, 2002
*4.2
(g)
Agreement to Amend Working Capital Revolving Promissory Note and Mezzanine Revolving Promissory Note dated January 8, 2003
*4.2
(h)
Amended and Restated Subordination Agreement dated January 27, 2003
4.2
(i)
Agreement to Extend Mezzanine Revolving Promissory Note and Working Capital Promissory Note dated July 15, 2003
*4.3
Subscription Agreement and Letter of Investment Intent between the Company and Stanley A. Bodine.
II-2
*4.4
(a)
Credit and Security Agreement by and between 2
nd
Swing, Inc. and Wells Fargo Business Credit, Inc. dated November 21, 2002
*4.4
(b)
First Amendment to Credit and Security Agreement and Waiver of Default dated February 28, 2003
**5.1
Opinion of Moss & Barnett, A Professional Association, Counsel to the Company
*10.1
(a)
Lease dated June 22, 2001 for principal executive office
*10.1
(b)
Amendment No. 1 to principal executive office lease
*10.1
(c)
Amendment No. 2 to principal executive office lease
*10.2
2000 Stock Compensation Plan
*10.3
Stock Option Plan for Nonemployee Directors
*16
Letter from Silverman Olson Thorvilson & Kaufmann LTD regarding change in accountants
23.1
Consent of Ernst & Young LLP, independent auditors
23.2
Consent of Silverman Olson Thorvilson & Kaufmann LTD, independent auditors
**23.3
Consent of Counsel to the Company (filed as part of Exhibit 5.1)
24
Power of Attorney (included on signature page)
*
Incorporated
by reference to same-numbered exhibit filed with Registration Statement on Form S-1, File No. 333-100438
**
To
be filed by amendment
B.    Financial Statement Schedules
Financial statement schedules are omitted because they are not applicable, not required, or the information is included in the financial statements or related
notes.
Item 17. Undertakings.
A.    Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
B.    The
undersigned hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each purchaser.
II-3
C.    The
undersigned registrant hereby undertakes that:
1.     For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective.
2.     For
the purpose of determining any liability under the Securities Act of 1933, each posteffective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES AND POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized in the City of Minneapolis, State of Minnesota, on July 17, 2003.
2
nd
SWING, INC.
By:
/s/
STANLEY A. BODINE
Stanley A. Bodine,
Chief Executive Officer
KNOW
ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Stanley A. Bodine, Robert M. Hiben, and Mary C. Sim, and each of them,
his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this Registration Statement on Form S-1, including any amendment increasing or decreasing the amount of securities for which
registration is being sought or any registration for the same offering filed in accordance with Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed below on the 17th day of July, 2003, by the following persons in the
capacities indicated:
Name
Title
/s/
STANLEY A. BODINE
Stanley A. Bodine
Chief Executive Officer (principal executive officer) and Director
/s/
ROBERT M. HIBEN
Robert M. Hiben
Chief Financial Officer (principal financial officer)
/s/
P. SIMON KALLAL
P. Simon Kallal
Director
/s/
DAVID R. POMIJE
David R. Pomije
Director
/s/
MARY C. SIM
Mary C. Sim
Controller (principal accounting officer)
/s/
GEORGE E. MILEUSNIC
George E. Mileusnic
Director
II-5
EXHIBIT INDEX
Exhibit No.
Description of Exhibit
1
Form of Placement Agency Agreement
*3.1
Amended and Restated Articles of Incorporation of the Company
*3.2
Amended and Restated Bylaws of the Company
*4.1
Form of Stock Certificate evidencing common stock
*4.2
(a)
Letter Agreement dated March 31, 2002 with David R. Pomije regarding Mezzanine financing
*4.2
(b)
$1,500,000 Working Capital Revolving Promissory Note to David R. Pomije dated March 31, 2002
*4.2
(c)
$3,500,000 Mezzanine Revolving Promissory Note to David R. Pomije dated March 31, 2002
*4.2
(d)
Agreement to extend promissory notes dated September 27, 2002
*4.2
(e)
Security Agreement dated April 2, 2002
*4.2
(f)
Warrant to David R. Pomije dated March 31, 2002
*4.2
(g)
Agreement to Amend Working Capital Revolving Promissory Note and Mezzanine Revolving Promissory Note dated January 8, 2003
*4.2
(h)
Amended and Restated Subordination Agreement dated January 27, 2003
4.2
(i)
Agreement to Extend Mezzanine Revolving Promissory Note and Working Capital Promissory Note Dated July 15, 2003
*4.3
Subscription Agreement and Letter of Investment Intent between the Company and Stanley A. Bodine.
*4.4
(a)
Credit and Security Agreement by and between 2
nd
Swing, Inc. and Wells Fargo Business Credit, Inc. dated November 21, 2002
*4.4
(b)
First Amendment to Credit and Security Agreement and Waiver of Default dated February 28, 2003
**5.1
Opinion of Moss & Barnett, A Professional Association, Counsel to the Company
*10.1
(a)
Lease dated June 22, 2001 for principal executive office
*10.1
(b)
Amendment No. 1 to principal executive office lease
*10.1
(c)
Amendment No. 2 to principal executive office lease
*10.2
2000 Stock Compensation Plan
*10.3
Stock Option Plan for Nonemployee Directors
*16
Letter from Silverman Olson Thorvilson & Kaufmann LTD regarding change in accountants
23.1
Consent of Ernst & Young LLP, independent auditors
23.2
Consent of Silverman Olson Thorvilson & Kaufmann LTD, independent auditors
**23.3
Consent of Counsel to the Company (filed as part of Exhibit 5.1)
24
Power of Attorney (included on signature page)
*
Incorporated
by reference to same-numbered exhibit filed with Registration Statement on Form S-1, File No. 333-100438
**
To
be filed by amendment