<HTML>
<HEAD>
<TITLE>FORM S-1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>As filed with the Securities and Exchange Commission on
January&nbsp;5, 2006</B>
</DIV>

<DIV align="right" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Registration
<FONT style="white-space: nowrap">No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

<DIV align="center" style="font-size: 6pt;color: #000000; background: #ffffff; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 2.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

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

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>REGISTRATION STATEMENT UNDER</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

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

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

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
(Exact name of Registrant as specified in its charter)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
</TR>

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

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

</TABLE>
</CENTER>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>102 Fahm Street</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Savannah, Georgia 31401</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(912) 236-1561</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
(Address, including zip code, and telephone number, including
area code, of
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
registrant&#146;s principal executive offices)
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>R. Edward Anderson</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Chief Executive Officer</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>102 Fahm Street</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Savannah, Georgia 31401</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(912)&nbsp;236-1561</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Copies to:
</DIV>

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

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

<TR>
    <TD align="center" valign="top">
    <B>William F. Schwitter,&nbsp;Esq.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Wm. David Chalk,&nbsp;Esq.</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>DLA Piper Rudnick Gray Cary US LLP</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>75 East 55th&nbsp;Street</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>6225 Smith Avenue</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>New York, New York 10022</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Baltimore, Maryland 21209</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>(212)&nbsp;318-6000</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>(410)&nbsp;580-3000</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>(212)&nbsp;319-4090 (fax)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>(410)&nbsp;580-3001 (fax)</B></TD>
</TR>

</TABLE>
</CENTER>

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

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

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

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

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

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

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

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

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

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>


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

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

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

<TR>
    <TD align="center" nowrap>Securities to be Registered</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Registered</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Aggregate Offering Price<SUP style="font-size: 85%; vertical-align: text-top">(1)(2)</SUP></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap>Registration Fee</TD>
</TR>


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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, par value $.01&nbsp;per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    1,725,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $69,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $7,383.00</TD>
</TR>

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

</TR>

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

</TR>

</TABLE>
</CENTER>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule&nbsp;457(c) under the Securities Act of
    1933, as amended, based on the average of the high and low
    prices of the common stock as reported by the Nasdaq National
    Market on December&nbsp;28, 2005.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    Includes shares of common stock subject to the
    underwriters&#146; over-allotment option.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT style="font-size: 8pt" color="#E8112D">The information in
this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and we
are not soliciting offers to buy these securities in any state
where the offer or sale is not
permitted.</FONT><FONT style="font-size: 8pt"> <BR>


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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">

</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B><FONT color="#E8112D">Subject to Completion, Dated
January&nbsp;5, 2006</FONT></B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>1,500,000 Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y09649y0964900.gif" alt="(CITITRENDS LOGO)">
</DIV>

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The selling stockholders of Citi Trends, Inc. identified in this
prospectus are offering 1,500,000&nbsp;shares of our common
stock. We will not receive any of the proceeds from the sale of
shares of common stock by the selling stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our shares of common stock are listed for trading on the Nasdaq
National Market under the symbol &#147;CTRN.&#148; On
January&nbsp;4, 2006, the last reported sale price of our common
stock on the Nasdaq National Market was $41.85 per share.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Investing in the common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;7.</B>
</DIV>

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

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

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

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

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

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

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

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The selling stockholders have granted an option to the
underwriters to purchase up to a maximum of 225,000 additional
shares of our common stock from the selling stockholders within
30&nbsp;days following the date of this prospectus to cover
over-allotments, if any.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The underwriters expect to deliver the shares in New York, New
York on or about January&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006
</DIV>

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

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

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CIBC World Markets</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;color: #000000; background: #ffffff;">

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

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

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The date of this prospectus is
January &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 21pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>LOGO</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>MAP OF STORE LOCATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>PICTURE OF FRONT OF STORE</B>
</DIV>

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

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Table of Contents</B>
</DIV>

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

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

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

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

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Special Note&nbsp;Regarding Forward-Looking
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Price Range of Our Common Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

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

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Related Party Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Principal and Selling Stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Description of Capital Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09649exv5w1.htm">EX-5.1: OPINION OF PAUL, HASTINGS, JANOFSKY & WALKER LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y09649exv23w1.htm">EX-23.1: CONSENT OF KPMG LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">-i-

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='101'></A>
</DIV>

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

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

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

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    <TD width="2%"></TD>
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<TR valign="top">
    <TD align="left">
    <I>This summary highlights information contained in other parts
    of this prospectus, and because it is only a summary, it does
    not contain all of the information that you should consider
    before buying shares. You should read the entire prospectus
    carefully, including the risk factors and financial statements.
    All share numbers in this prospectus reflect a 26-for-one stock
    split of our common stock, which was effected on May&nbsp;11,
    2005. Our fiscal year ends on the Saturday closest to
    January&nbsp;31, and, except as otherwise provided, references
    in this prospectus to a fiscal year mean the 52- or
    <FONT style="white-space: nowrap">53-week</FONT> period ended on
    the Saturday closest to January 31 of the succeeding year.
    Fiscal 2004, for example, refers to the fiscal year ended
    January&nbsp;29, 2005.</I></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left">
    We are a rapidly growing, value-priced retailer of urban fashion
    apparel and accessories for the entire family. We offer quality,
    branded merchandise for men, women and children, including
    products from nationally recognized brands, as well as private
    label products and a limited assortment of home d&#233;cor
    items. Our merchandise offerings are designed to appeal to the
    preferences of fashion conscious consumers, particularly
    African-Americans. Through strong relationships with our
    suppliers, we believe that we are able to offer our products at
    compelling values. We seek to provide nationally recognized
    branded merchandise at 20% to 60% discounts to department and
    specialty stores&#146; regular prices.</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD align="left">
    We operate 236 stores (including two stores currently closed due
    to hurricane damage) in both urban and rural markets in fourteen
    states. Originally, our stores were located in the Southeast,
    and during late fiscal 2004 and fiscal 2005 we expanded into the
    Mid-Atlantic region, the Midwest and Texas. Our stores average
    approximately 9,000 square feet of selling space, and our stores
    opened since the beginning of fiscal 2003 average approximately
    10,500 square feet of selling space. Our stores are generally
    located in neighborhood strip shopping centers that are
    convenient to low and moderate income consumers. These locations
    allow us to serve our customers at rents that we believe are
    attractive, and combined with our differentiated merchandise
    assortment, compelling value proposition and efficient operating
    model, enable us to generate strong returns on store
    investments. Our new stores typically return our initial unit
    investment within 12 to 14&nbsp;months.</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD align="left">
    Our predecessor was founded in 1946 and grew to become a chain
    of family apparel stores operating in the Southeast under the
    Allied Department Stores name. In 1999, our chain of stores,
    then consisting of 85 stores throughout the Southeast, was
    acquired by Hampshire Equity Partners II, L.P., a private equity
    firm. Our management team implemented several strategies that
    have driven our success including refining our merchandise
    offerings with a focus on urban fashions for the entire family,
    accelerating and completing the remodeling of virtually all of
    the 85 acquired stores, and executing an aggressive new store
    growth plan. We</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

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    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
    <TD width="2%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    grew our store base from 85 stores at the time of the
    acquisition to 236 stores as of January&nbsp;4, 2006;</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    increased average sales per store from $0.8&nbsp;million in
    fiscal 2000 to $1.1&nbsp;million in fiscal 2004;</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    generated comparable store sales increases in each of the past
    five fiscal years;</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    increased net sales from $80.9&nbsp;million in fiscal 2000 to
    $203.4&nbsp;million in fiscal 2004, representing a compound
    annual growth rate of 25.9%; and</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    increased net income from $1.2&nbsp;million in fiscal 2000 to
    $7.3&nbsp;million in fiscal 2004.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

<TR valign="top">
    <TD align="left">
    We have continued our rapid growth in fiscal 2005 with net sales
    increasing 40.7% to $193.0&nbsp;million in the first nine months
    of fiscal 2005 from $137.1&nbsp;million in the first nine months
    of fiscal 2004. Net income grew 165.6% to $6.3&nbsp;million in
    the first nine months of fiscal 2005 versus $2.4&nbsp;million in
    the first nine months of fiscal 2004. Our comparable store sales
    increased 6.9%, 11.5% and 25.0%, respectively, in each of the
    first three quarters of fiscal 2005 compared to 3.5%, 0.3% and
    3.0%, respectively, in each of the first three quarters of
    fiscal 2004. As discussed more fully below in &#147;&#151;Recent
    Developments&#148; and in &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations&#151;
    Overview,&#148; following Hurricanes</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">1

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

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

<TR valign="top">
    <TD align="left">
    Katrina, Rita and Wilma, we experienced a significant increase
    in sales since September of fiscal 2005 in our store locations
    in the markets directly affected by the hurricanes and in
    contiguous markets. This increase more than offset the sales
    lost on the days certain of our stores were closed due to the
    hurricanes. This positive post-hurricane impact has begun to
    dissipate, and we anticipate that the magnitude of this trend
    will continue to diminish over time.</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD align="left">
    Our goal is to be the leading value-priced retailer of urban
    fashion apparel and accessories. We believe the following
    business strengths differentiate us from our competitors and are
    important to our success.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

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    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
    <TD width="2%"></TD>
</TR>

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left">
    Our growth strategy is to open stores in new and existing
    markets, as well as to increase sales in existing stores. Adding
    stores in the markets we currently serve enables us to benefit
    from enhanced name recognition and achieve advertising and
    operating synergies, and entering new markets opens additional
    growth opportunities. For fiscal 2005, we have opened 36 new
    stores thus far and have no additional openings planned. We
    expect to open 42 to 45 new stores in fiscal 2006. Approximately
    90% of the new stores we intend to open in fiscal 2006 will be
    located in states we currently serve. We intend to increase
    comparable store sales primarily through merchandising
    enhancements and the expansion of product categories such as
    home d&#233;cor and intimate apparel.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left">
    Our strong operating and financial momentum continued in the
    first two months of the fourth quarter of fiscal 2005. As
    discussed in this section and in &#147;Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations&#151;Overview&#148;, following Hurricanes Katrina,
    Rita and Wilma we experienced a significant increase in sales in
    our store locations in the markets directly affected by the
    hurricanes and in contiguous markets. This increase more than
    offset the sales lost on the days certain of our stores were
    closed for one or more days due to the hurricanes.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
    <TD width="2%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    We expect that net sales for the four-week period ended
    November&nbsp;26, 2005 increased 43.5% to $24.7&nbsp;million
    compared with $17.2&nbsp;million for the four-week period ended
    November&nbsp;27, 2004. We expect that comparable store sales
    increased 26.0% for the four-week period ended November&nbsp;26,
    2005 compared with a 0.9% increase in the prior-year period. We
    expect further that comparable store sales in the non-affected
    markets increased approximately 18.1% for the four-week period
    ended November&nbsp;26, 2005 compared to the prior year period.</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Likewise, we expect that our net sales for the five-week period
    ended December&nbsp;31, 2005 increased 46.4% to
    $51.3&nbsp;million compared with $35.0&nbsp;million for the
    five-week period ended January&nbsp;1, 2005. We expect that
    comparable store sales increased 21.4% for the five-week period
    ended December&nbsp;31, 2005 compared with a 4.3% increase in
    the prior-year period. We expect further that comparable store
    sales in the non-affected markets increased approximately 15.3%
    for the five-week period ended December&nbsp;31, 2005 compared
    to the prior year period.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">2

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left">
    The preceding financial information contains our expectations
    relating to our results of operations for two of the months of
    the fourth quarter of fiscal 2005. Our actual results could
    differ from these expectations. Factors that could cause our
    actual results to differ from these expectations include
    possible accounting adjustments resulting from our quarter-end
    accounting and review procedures and other factors, including
    those described under &#147;Special Note&nbsp;Regarding
    Forward-Looking Statements.&#148;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left">
    We are incorporated in Delaware, and our principal executive
    offices are located at 102 Fahm Street, Savannah, Georgia 31401.
    Our telephone number is (912)&nbsp;236-1561 and website address
    is www.cititrends.com. Information contained in, or accessible
    through, our website does not constitute part of this prospectus.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">3

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

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

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

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR>
    <TD valign="top">
    Common stock offered by the selling stockholders</TD>
    <TD></TD>
    <TD valign="top">
    1,500,000 shares</TD>
</TR>

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

<TR>
    <TD valign="top">
    Common stock to be outstanding after the offering</TD>
    <TD></TD>
    <TD valign="top">
     <BR>
     13,012,715 shares</TD>
</TR>

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

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    The selling stockholders will receive all of the net proceeds
    from the sale of shares of our common stock offered by this
    prospectus. We will not receive any of the proceeds from the
    sale of shares of common stock offered by this prospectus.</TD>
</TR>

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

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

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left">
    Unless otherwise stated, information in this prospectus assumes:</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
    <TD width="2%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    a 26-for-one stock split of our common stock, which was effected
    on May&nbsp;11, 2005;</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    no exercise of outstanding options to purchase
    1,574,133&nbsp;shares of common stock outstanding as of
    January&nbsp;4, 2006, at a weighted average exercise price of
    $2.60 per share, other than the 376,612 options to be exercised
    by certain selling stockholders in connection with this
    offering;&nbsp;and</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">4
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides summary financial and operating
data for each of the fiscal years in the five-year period ended
January&nbsp;29, 2005 and for the nine months ended
October&nbsp;29, 2005 and October&nbsp;30, 2004, including:
(a)&nbsp;our statement of income data for each such period,
(b)&nbsp;additional operating data for each such period and
(c)&nbsp;our balance sheet data as of October&nbsp;29, 2005. The
statement of income data for fiscal 2002, fiscal 2003 and fiscal
2004 are derived from our audited financial statements included
elsewhere in this prospectus that have been audited by KPMG LLP,
an independent registered public accounting firm. The statement
of income data for fiscal 2000 and fiscal 2001 are derived from
our audited financial statements that are not included in this
prospectus. The statement of income data for the nine months
ended October&nbsp;29, 2005 and October&nbsp;30, 2004 are
derived from our unaudited condensed interim financial
statements included elsewhere in this prospectus. The unaudited
condensed financial statements for the nine months ended
October&nbsp;29, 2005 and October&nbsp;30, 2004 have been
prepared on the same basis as our audited financial statements
and include, in the opinion of management, all adjustments,
consisting of normal recurring accruals that management
considers necessary for a fair presentation of the financial
information set forth in those statements. Results of operations
for the interim periods are not necessarily indicative of the
results that might be expected for any other interim period or
for an entire period. The summary financial and operating data
set forth below should be read in conjunction with, and are
qualified in their entirety by reference to, the sections of
this prospectus entitled &#147;Selected Financial and Operating
Data&#148; and &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and our
financial statements and related notes included elsewhere in
this prospectus. Historical results are not necessarily
indicative of results to be expected for any future period.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


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

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

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

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

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


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap>(dollars in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap>(unaudited)</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>192,961</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,039</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,922</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,281</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,641</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense (income),
    net<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(197</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,560</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,278</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.49</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,219,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,302,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,305,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,348,502</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,791,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,757,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,771,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,879,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,945,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,847,419</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Opened during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling square footage at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>786,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>891,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,043,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,290,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,715,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,663,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,017,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales
    increase<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.1%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average sales per
    store<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>906</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 29,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>(in thousands)</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,371</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,793</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Our fiscal year ends on the Saturday closest to January 31 of
    each year. Fiscal years 2001, 2002, 2003 and 2004 comprise
    52&nbsp;weeks. Fiscal year 2000 comprises 53&nbsp;weeks.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    Our Series&nbsp;A Preferred Stock, which was redeemed using a
    portion of the net proceeds from our initial public offering,
    was reclassified as debt as of the second quarter of fiscal
    2003, in accordance with the Financial Accounting Standards
    Board&#146;s (&#147;FASB&#148;) Statement of Financial
    Accounting Standards (&#147;SFAS&#148;) No.&nbsp;150, Accounting
    for Certain Financial Instruments with Characteristics of both
    Liabilities and Equity. The amount of dividends treated as
    interest expense was $100,000 for the nine months ended
    October&nbsp;29, 2005, $324,450 in fiscal 2004, $189,000 in
    fiscal 2003 and none in fiscal 2002.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD align="left">
    The number of stores open at the end of the period includes four
    stores closed as of October&nbsp;29, 2005, as a result of
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP>&nbsp;</TD>
    <TD align="left">
    This data includes the positive impact of sales as a result of
    Hurricanes Katrina, Rita and Wilma during the months of
    September and October.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP>&nbsp;</TD>
    <TD align="left">
    Average sales per store is defined as net sales divided by the
    average of stores open at the end of the prior period and stores
    open at the end of the current period.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">6

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='102'></A>
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Relating to Citi Trends, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our success depends on our ability to anticipate, identify
and respond rapidly to changes in consumers&#146; fashion
tastes, and our failure to evaluate adequately fashion trends
could have a material adverse effect on our business, financial
condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The apparel industry in general and our core customer market in
particular are subject to rapidly evolving fashion trends and
shifting consumer demands. Accordingly, our success is heavily
dependent on our ability to anticipate, identify and capitalize
on emerging fashion trends, including products, styles and
materials that will appeal to our target consumers. Our failure
to anticipate, identify or react appropriately to changes in
styles, trends, brand preferences or desired image preferences
is likely to lead to lower demand for our merchandise, which
could cause, among other things, sales declines, excess
inventories and higher markdowns. The inaccuracy of our
forecasts regarding fashion trends could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>If we are unsuccessful in competing with our retail apparel
competitors, our market share could decline or our growth could
be impaired and, as a result, our financial results could
suffer.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The retail apparel market is highly competitive, with few
barriers to entry. We compete against a diverse group of
retailers, including national off-price apparel chains such as
The TJX Companies, Inc., or TJX Companies, Burlington Coat
Factory Warehouse Corp., or Burlington Coat Factory, and Ross
Stores, Inc., or Ross Stores; mass merchants such as Wal-Mart
and Kmart; smaller discount retail chains that only sell
women&#146;s products, such as Rainbow, Dots, Fashion Cents,
It&#146;s Fashions (a subsidiary of The Cato Corporation) and
Simply Fashions; and general merchandise discount stores and
dollar stores, which offer a variety of products, including
apparel, for the value-conscious consumer. We also compete
against local off-price and specialty retail stores, regional
retail chains, traditional department stores, and Internet and
other direct retailers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The level of competition we face from these retailers varies
depending on the product segment, as many of our competitors do
not offer apparel for the entire family. Our greatest
competition is generally in women&#146;s apparel. Many of our
competitors are larger than we are and have substantially
greater resources than we do and, as a result, may be able to
adapt better to changing market conditions, exploit new
opportunities, exert greater pricing pressures on suppliers and
open new stores more quickly and effectively than we can. Many
of these retailers have better name recognition among consumers
than we have and purchase significantly more merchandise from
vendors. These retailers may be able to purchase branded
merchandise that we cannot purchase because of their name
recognition and relationships with suppliers, or they may be
able to purchase branded merchandise with better pricing
concessions than we receive. Our local and regional competitors
have extensive knowledge of the consumer base and may be able to
garner more loyalty from customers than we can. In addition, our
online competitors enjoy a retailing advantage over us as we
have only recently completed the upgrade of our website to
enable Internet sales of selected urban branded apparel provided
by third parties. If the consumer base we serve is satisfied
with the selection, quality and price of our competitors&#146;
products, consumers may decide not to shop in our stores.
Additionally, if our existing competitors or other retailers
decide to focus more on our core customers, particularly
African-Americans consumers, we may have greater difficulty in
competing effectively, our business and results of operations
could be adversely affected, and the market price of our common
stock could suffer.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>We could experience a reduction in sales and revenues or
reduced cash flows if we are unable to fulfill our current and
future merchandising needs.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We depend on our suppliers for the continued availability and
satisfactory quality of our merchandise. Most of our suppliers
could discontinue selling to us at any time. Additionally, if
the manufacturers or other owners of brands or trademarks
terminate the license agreements under which some of our
suppliers sell us products, we may be unable to obtain
replacement merchandise of comparable fashion appeal or quality,
in the same quantities or at the same prices. If we lose the
services of one or more of our significant suppliers or one or
more of them fail to meet our merchandising needs, we may be
unable to obtain replacement merchandise in a timely manner. If
our existing suppliers cannot meet our increased needs and we
cannot locate alternative supply sources, we may be unable to
obtain sufficient quantities of the most popular items of the
nationally recognized brands at attractive prices, which could
negatively impact our sales, revenues and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>As an apparel retailer, we rely on numerous third parties in
the supply chain to produce and deliver the products that we
sell, and our business may be negatively impacted by their
failure to comply with applicable law.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As an importer and retailer of goods, we rely on numerous third
parties to supply the products that we sell. Violations of law
by our importers, buying agents, manufacturers or distributors
could result in delays in shipments and receipt of goods and
could subject us to fines or other penalties, any of which could
restrict our business activities, increase our operating
expenses or cause our revenues to decline. Further, we are
susceptible to the receipt of counterfeit brands or unlicensed
goods. We could incur liability with manufacturers or other
owners of the brands or trademarked products if we inadvertently
receive and sell counterfeit brands or unlicensed goods and,
therefore, is important that we establish relationships with
reputable vendors to prevent the possibility that we
inadvertently receive counterfeit brands or unlicensed goods.
Although we have a quality assurance team to check merchandise
in an effort to assure that we purchase only authentic brands
and licensed goods and are careful in selecting our vendors, we
may receive products that we are prohibited from selling or
incur liability for selling counterfeit brands or unlicensed
goods, which could increase our operating expenses and cause our
net income to decline.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>If our growth strategy is unsuccessful, our financial
condition and results of operation could suffer and the market
price of our common stock could decline.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our ability to continue to increase our net sales and earnings
depends, in large part, on opening new stores and operating our
new and existing stores profitably. We opened 40 new stores in
fiscal 2004. For fiscal 2005, we have opened 36 new stores thus
far and have no additional openings planned. We expect to open
42 to 45 new stores in fiscal 2006. If we are unable to open all
of these stores or operate them profitability, we may not
achieve our forecasted sales and earnings growth targets.
Additionally, growth of our store base will place increased
demands on our operating, managerial and administrative
resources and may lead to management and operating
inefficiencies, including merchandising, personnel, distribution
and integration problems. These demands and inefficiencies may
cause deterioration in the financial performance of our
individual stores and, therefore, our entire business.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>We would experience increased operating costs and limited
amounts of growth if we are unable to obtain reasonably priced
financing.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We may need to raise additional debt or equity capital in the
future to open new stores, to respond to competitive pressures
or to respond to unforeseen financial requirements. We may not
be able to obtain additional capital on commercially reasonable
terms or at all. Our inability to obtain reasonably priced
financing could create increased operating costs and diminished
levels of growth, as we could be forced to incur indebtedness
with above-market interest rates or with substantial restrictive
covenants, issue equity securities that dilute the ownership
interests of existing stockholders or scale back our operations
and/or store growth strategy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>A significant disruption to our distribution process or
southeastern retail locations could have a material adverse
effect on our business, financial condition and results of
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our ability to distribute merchandise to our store locations in
a timely manner is essential to the efficient and profitable
operation of our business. We have two distribution centers
located in Savannah, Georgia, one of which also serves as our
corporate headquarters, and our recently acquired distribution
center in Darlington, South Carolina. Together, these facilities
provide distribution capacity to support twice our current sales
volume. Any natural disaster or other disruption to the
operation of any of these facilities due to fire, hurricane,
other natural disaster or any other cause or our inability to
continue the timely and efficient build out of our Darlington,
South Carolina distribution center could damage a significant
portion of our inventory or impair our ability to stock our
stores and process product returns to suppliers adequately.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In addition, the southeastern United States, where our three
distribution centers are located, is vulnerable to significant
damage or destruction from hurricanes and tropical storms.
Although we maintain insurance on our stores and other
facilities, the economic effects of a natural disaster that
affects our distribution centers and/or a significant number of
our stores could increase our operating expenses, impair our
cash flows and reduce our revenues, which could negatively
impact the market price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Hurricanes Katrina, Rita and Wilma have temporarily increased
our sales in our store locations in the affected markets and
contiguous markets.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Hurricanes Katrina, Rita and Wilma, which caused damage to areas
of the Gulf Coast region of the United States during the period
of August 2005 to October 2005, impacted our stores in Alabama,
Florida, Mississippi, Louisiana and Texas. Thirty-eight of our
stores were closed for one or more days due to the hurricanes.
Two existing stores have not reopened as of January&nbsp;4,
2006. In addition, one store scheduled to open in September 2005
was heavily damaged by Hurricane Katrina and remains unopened.
Following Hurricanes Katrina, Rita and Wilma, we experienced an
increase in sales in our store locations in the markets directly
affected by Hurricanes Katrina, Rita and Wilma and in contiguous
markets. We believe that these sales increases resulted directly
from aid distributed to our customers and the need for our
customers to replace lost or damaged clothing and other items.
These sales increases have begun to dissipate, and we anticipate
that the magnitude of these increases will continue to diminish
over time and that we will not continue to increase or maintain
our sales at the levels achieved in the months of September,
October, November and December in fiscal 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The future contribution of stores affected by the hurricanes to
our results of operations will depend on the recovery of the
local economy in general in the hurricane impacted areas of the
Gulf Coast region. A natural disaster producing the devastation
of Hurricane Katrina is unprecedented in recent U.S. history,
and the recovery of the local economies and impacted industries
in the affected regions will to a certain extent depend on the
leadership and actions of federal, state and local governments,
which are beyond our control. We can provide no assurance as to
the timing and ultimate success of recovery efforts led by
federal, state and local governments. In addition, the long-term
impact of the hurricanes, such as lack of housing, unemployment
or increases in gasoline prices, may disproportionately affect
many of our customers in the Gulf Coast region.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our net sales, inventory levels and earnings fluctuate on a
seasonal basis, which makes our business more susceptible to
adverse events that occur during those seasons.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our net sales and earnings are disproportionately higher during
the first and fourth quarters each year due to the importance of
the spring selling season, which includes Easter, and the fall
selling season, which includes Christmas. Factors negatively
affecting us during the first and fourth quarters, including
adverse weather and unfavorable economic conditions, will have a
greater adverse effect on our financial condition than if our
business were less seasonal.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>We experience fluctuations and variability in our comparable
store sales and quarterly results of operations and, as a
result, the market price of our common stock may fluctuate or
decline substantially.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our comparable store sales and quarterly results have fluctuated
significantly in the past based on a number of economic,
seasonal and competitive factors, and we expect them to continue
to fluctuate in the future. Since the beginning of fiscal 2003,
our quarter-to-quarter comparable store sales have ranged from
an increase of 0.3% to an increase of 25.0%. The largest of
these increases was due to the unusually high customer traffic
following Hurricanes Katrina, Rita and Wilma. In addition, we
may be unable to maintain historical levels of comparable store
sales as we execute our growth strategy and expand our business.
This variability could cause our comparable store sales and
quarterly results to fall below the expectations of securities
analysts or investors, which could result in volatility of the
market price of our common stock. If our comparable store sales
and quarterly results fail to meet the expectations of the
market generally, the market price of our common stock could
decline substantially.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our sales and revenues could decline as a result of general
economic and other factors outside of our control, such as
changes in consumer spending patterns and declines in employment
levels.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Downturns, or the expectation of a downturn, in general economic
conditions could adversely affect consumer spending patterns,
our sales and our results of operations. Because apparel
generally is a discretionary purchase, declines in consumer
spending patterns may have a more negative effect on apparel
retailers than some other retailers. Therefore, we may not be
able to maintain our historical rate of growth in revenues and
earnings, or remain as profitable, if there is a decline in
consumer spending patterns. In addition, since the majority of
our stores are located in the southeastern United States, our
operations are more susceptible to regional factors than the
operations of our more geographically diversified competitors.
Therefore, any adverse economic conditions that have a
disproportionate effect on the southeastern United States could
have a greater negative effect on our sales, revenues and
results of operations than on retailers with a more
geographically diversified store base.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We believe that our &#147;Citi Trends&#148; trademark is
integral to our store design and our success in building
consumer loyalty to our brand. We have registered this trademark
with the U.S. Patent and Trademark Office. We have also
registered, or applied for registration of, additional
trademarks with the U.S. Patent and Trademark Office that we
believe are important to our business. We cannot assure you that
these registrations will prevent imitation of our name,
merchandising concept, store design or private label merchandise
or the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
infringement of our other intellectual property rights by
others. Imitation of our name, concept, store design or
merchandise in a manner that projects lesser quality or carries
a negative connotation of our brand image could have a material
adverse effect on our business, financial condition and results
of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In addition, we cannot assure you that others will not try to
block the manufacture or sale of our private label merchandise
by claiming that our merchandise violates their trademarks or
other proprietary rights since other entities may have rights to
trademarks that contain the word &#147;Citi&#148; or may have
rights in similar or competing marks for apparel and/or
accessories. Although we cannot currently estimate the
likelihood of success of any such lawsuit or ultimate resolution
of such a conflict, such a controversy could have a material
adverse effect on our business, financial condition and results
of operations.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are in the process of documenting and testing our internal
control procedures in order to satisfy the requirements of
Section&nbsp;404 of the Sarbanes-Oxley Act of 2002.
Section&nbsp;404 requires annual management assessments of the
effectiveness of our internal controls over financial reporting
and a report by our independent auditors addressing these
assessments. We may be required to be in compliance with
Section&nbsp;404 as early as the time we file our annual report
for fiscal 2006 with the Securities and Exchange Commission, or
the Commission. During the course of our testing, we may
identify deficiencies in our internal controls, which we may be
unable to correct in time to meet the deadline imposed by the
Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain
the adequacy of our internal controls, we may be unable to
conclude on an ongoing basis that we have effective internal
controls over financial reporting. Moreover, effective internal
controls, particularly those related to revenue recognition, are
necessary for us to produce reliable financial reports and are
important in our effort to prevent financial fraud. If we cannot
produce reliable financial reports or prevent fraud, our
business, financial condition and results of operations could be
harmed, investors could lose confidence in our reported
financial information, the market price of our stock could
decline significantly and we may be unable to obtain additional
financing to operate and expand our business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Several of our stores have been substantially damaged by
Hurricanes Katrina, Rita and Wilma. There can be no assurance
that our losses from the hurricanes will be completely covered
by our insurance.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We estimate that Hurricanes Katrina, Rita and Wilma caused total
damages of approximately $1.2&nbsp;million in our stores located
in five of the fourteen states in which we currently operate
stores. In addition, thirty-eight of our stores were closed for
one or more days due to the hurricanes, of which two existing
stores have not reopened as of January&nbsp;4, 2006. We are
seeking to recover most of our damages attributable to the
hurricanes from insurance under the insurance policies that we
maintain. There can be no assurance that our losses from
property damage will be offset by the proceeds of insurance
obtained under our insurance policies.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We purchase the products we sell directly from over 1,000
vendors, and a substantial portion of this merchandise is
manufactured outside of the United States and imported by our
vendors from countries such as China and other areas of the Far
East, including Taiwan and the Philippines. The countries in
which our merchandise currently is manufactured or may be
manufactured in the future could become subject to new trade
restrictions imposed by the United States or other foreign
governments. Trade restrictions, including increased tariffs or
quotas, embargoes, and customs restrictions, against apparel
items, as well as United States or foreign labor strikes, work
stoppages or boycotts, could increase the cost or reduce the
supply of apparel available to us and have a material adverse
effect on our business, financial condition and results of
operations. In addition, our merchandise supply could be
impacted if our vendors&#146; imports become subject to existing
or future duties and quotas, or if our vendors face increased
competition from other companies for production facilities,
import quota capacity and shipping capacity.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We also face a variety of other risks generally associated with
relying on vendors that do business in foreign markets and
import merchandise from abroad, such as:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    political instability or the threat of terrorism, in particular
    in countries where our vendors source merchandise such as Taiwan
    and the Philippines;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    enhanced security measures at United States and foreign ports,
    which could delay delivery of imports;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    imposition of new or supplemental duties, taxes, and other
    charges on imports;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    delayed receipt or non-delivery of goods due to the failure of
    foreign-source suppliers to comply with applicable import
    regulations;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    delayed receipt or non-delivery of goods due to organized labor
    strikes or unexpected or significant port congestion at United
    States ports; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    local business practice and political issues, including issues
    relating to compliance with domestic or international labor
    standards, which may result in adverse publicity.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The United States may impose new initiatives that adversely
affect the trading status of countries where apparel is
manufactured. These initiatives may include retaliatory duties
or other trade sanctions that, if enacted, would increase the
cost of products imported from countries where our vendors
acquire merchandise. Any of these factors could have a material
adverse effect on our sales, revenues and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>The removal of import quotas on textiles and clothing in the
future may adversely affect our merchandise supply, impact our
sales and reduce our cash flows.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On January&nbsp;1, 2005, in accordance with the World Trade
Organization, or the WTO, Agreement on Textiles and Clothing,
the import quotas on textiles and clothing manufactured by
countries that are members of the WTO were eliminated.
Subsequently, the United States and Europe experienced a surge
of imported goods from China, a country that benefited from the
removal of the quotas. In response, the United States initially
implemented new quotas against various textile and apparel items
from China and ultimately negotiated an agreement with the
Chinese government. The agreement between the United States and
China went into effect in November 2005 and will continue in
effect through December&nbsp;31, 2008. During that time, China
has agreed to specified quota limits on most textile and apparel
products, and the United States has agreed to use restraint in
exercising its right to impose additional safeguards. Beginning
in January 2009, the U.S.-China agreement and the quotas against
Chinese apparel will expire. At that point, the United States
would still have the ability to impose safeguards under the WTO
Agreement on Textiles and Clothing although the requirements for
doing so will be more stringent. The situation in 2009
potentially could be similar to the experience in 2005, with
import surges and a cycle of safeguards and negotiations. This
could create logistical delays in our ability to maintain
required inventory levels and alter cost differentials between
vendors that source domestically and vendors that source more
extensively from overseas. We believe this could lower the cost
of apparel products and thereby reduce our average dollar amount
of sales per customer in our stores. Additionally, retaliatory
trade actions could cause a disruption of the supply chain of
products from foreign markets, difficulty in predicting
accurately the prices of merchandise to be imported from a
particular country and adverse effects on our merchandise
supply, sales and cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>We depend on the experience and expertise of our senior
management team and key employees, and the loss of the services
of R.&nbsp;Edward Anderson or George A.&nbsp;Bellino could have
a material adverse effect on our business strategy, operating
costs, financial condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The success of our business is dependent upon the close
supervision of all aspects of our business by our senior
management, particularly the operation of our stores, the
selection of our merchandise and the site selection for new
stores. In addition, we do not have a non-competition agreement
with R.&nbsp;Edward Anderson, our Chief Executive Officer, and
our non-competition agreement with George&nbsp;A.&nbsp;Bellino,
our President and Chief Merchandising Officer, will expire on
December&nbsp;31, 2006. Accordingly, they could leave us and
begin to work for one of our competitors, and, if we lose the
services of Mr.&nbsp;Anderson or Mr.&nbsp;Bellino, it could
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
have a material adverse effect on our business strategy,
operating costs, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Failure to attract, train, assimilate and retain skilled
personnel could have a material adverse effect on our growth
strategy and our financial condition.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Like most retailers, we experience significant employee turnover
rates, particularly among store sales associates and managers,
and our continued growth will require us to hire and train even
more new personnel. We therefore must continually attract, hire
and train new personnel to meet our staffing needs. We
constantly compete for qualified personnel with companies in our
industry and in other industries. A significant increase in the
turnover rate among our store sales associates and managers
would increase our recruiting and training costs and could
decrease our operating efficiency and productivity. If we are
unable to retain our employees or attract, train, assimilate or
retain other skilled personnel in the future, we may not be able
to service our customers as effectively, thus reducing our
ability to continue our growth and to operate our existing
stores as profitably as we have in the past.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
From time to time, legislative proposals are made to increase
the minimum wage in the United States, as well as certain
individual states. Wage rates for many of our employees are at
or slightly above the minimum wage. As federal and/or state
minimum wage rates increase, we may need to increase not only
the wage rates of our minimum wage employees but the wages paid
to our other hourly employees as well. Any increase in the cost
of our labor could have a material adverse effect on our
operating costs, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>If legal proceedings to which we are a party result in an
adverse judgment against us, it could have a material adverse
effect on our business, financial condition and results of
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are from time to time involved in various legal proceedings
incidental to the conduct of our business. Such claims may be
made by our customers, employees or former employees and could
have a material adverse effect on our business, financial
condition and results of operation. We are not currently aware
of any legal proceedings pending or threatened against us that
we expect to have a material adverse effect on our business,
financial condition and results of operations.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We depend on the accuracy, reliability and proper functioning of
our management information systems, including systems used to
track our sales and facilitate inventory management. We also
rely on our management information systems for merchandise
planning, replenishment and markdowns, and other key business
functions. These functions enhance our ability to optimize sales
while limiting markdowns and reducing inventory risk through
properly marking down slow-selling styles, reordering existing
styles and effectively distributing new inventory to our stores.
We do not currently have redundant systems for all functions
performed by our management information systems. Any
interruption in these systems could impair our ability to manage
our inventory effectively, which could have a material adverse
effect on our business, financial condition and results of
operations. To support our growth, we will need to expand our
management information systems, and our failure to link and
maintain these systems adequately could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We depend on third-party suppliers to maintain and periodically
upgrade our management information systems, including the
software programs supporting our inventory management functions.
This software is
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
licensed to us by third-party suppliers. If any of these
suppliers is unable to continue to maintain and upgrade these
software programs and if we are unable to convert to alternate
systems in an efficient and timely manner, it could result in a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We locate our stores in strip shopping centers, street front
locations and downtown business districts where we believe our
consumers and potential consumers shop. The success of an
individual store can depend on favorable placement within a
given strip shopping center or business district. We cannot
control the development of alternative shopping destinations
near our existing stores or the availability or cost of real
estate within existing or new shopping destinations. If our
store locations fail to attract sufficient consumer traffic or
we are unable to locate replacement locations on terms
acceptable to us, our business, results of operations, and
financial condition could suffer. If one or more of the anchor
tenants located in the strip shopping centers or business
districts where our stores are located close or leave, or if
there is significant deterioration of the surrounding areas in
which our stores are located, our business, results of
operations and financial condition may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Relating to this Offering of Common Stock</B>
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our stock price is volatile. From our initial public offering in
May 2005 through January&nbsp;4, 2006, the trading price of our
common stock has ranged from $14.00 to $43.66 per share. As a
result of this volatility, investors may not be able to sell
their common stock at or above their respective purchase prices.
The market price for our common stock may be influenced by many
factors, including:
</DIV>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our current stockholders hold a substantial number of shares
that they will be able to sell in the public market in the near
future. As of January&nbsp;4, 2006, 13,012,715 shares of our
common stock were outstanding. As of January&nbsp;4, 2006,
1,574,133&nbsp;additional shares of our common stock were
subject to outstanding stock options, of which 376,612 will be
exercised by certain selling stockholders in connection with
this offering. All of the shares sold in this offering and all
of the shares issued and sold in our initial public offering,
are freely tradeable, except for any shares acquired by holders
who are subject to market stand-off provisions or
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
lock-up agreements entered into in connection with this
offering, or by any of our &#147;affiliates,&#148; as that term
is defined in Rule&nbsp;144 promulgated under the Securities Act
of 1933, as amended, which generally includes officers,
directors and 10% or greater stockholders. The remaining
7,491,827 shares of our common stock held by existing
stockholders are restricted shares, which may be sold in the
public market only if they are registered or if they qualify for
an exemption from registration under Rules&nbsp;144 or 701
promulgated under the Securities Act of 1933, as amended. Sales
of a significant portion of the shares of our common stock
outstanding after this offering will continue to be restricted
as a result of securities laws or contractual arrangements,
including lock-up agreements entered into between our directors
and officers and the representatives of the underwriters in this
offering. These lock-up agreements restrict holders&#146;
ability to transfer their stock for 90&nbsp;days after the date
of this prospectus. These lock-up agreements cover 7,579,884
fully diluted shares of our common stock. The managing
underwriter may, however, waive the lock-up period at any time
for any stockholder who is party to a lock-up agreement. Sales
of a substantial number of shares of our common stock after this
offering, or after the expiration or waiver of applicable
lock-up periods, could cause our stock price to fall and/or
impair our ability to raise capital through the sale of
additional stock.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Upon the completion of our initial public offering, Hampshire
Equity Partners&nbsp;II, L.P. and certain of its affiliates,
together Hampshire Equity Partners, owned, on a fully diluted
basis, approximately 58% of our common stock and will own, on a
fully diluted basis, approximately 46.0% of our common stock
after this offering. As a result, Hampshire Equity Partners has
an ability to exercise control over matters requiring
stockholder approval. These matters include the election of
directors and the approval of significant corporate
transactions, including potential mergers, consolidations or
sales of all or substantially all of our assets. Hampshire
Equity Partners&nbsp;II, L.P. has one representative, our
current Chairman of the Board, on our five member board of
directors. In connection with our initial public offering, we
entered into a nominating agreement with Hampshire Equity
Partners&nbsp;II, L.P. pursuant to which we, acting through our
nominating and corporate governance committee, agreed, subject
to the requirements of our directors&#146; fiduciary duties,
that (i)&nbsp;Hampshire Equity Partners&nbsp;II, L.P. is
entitled to designate two directors to be nominated for election
to our board of directors as long as Hampshire Equity
Partners&nbsp;II, L.P. owns in the aggregate at least 40% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering or
(ii)&nbsp;Hampshire Equity Partners&nbsp;II, L.P. is entitled to
designate one director to be nominated for election to our board
of directors as long as Hampshire Equity Partners&nbsp;II, L.P.
owns in the aggregate less than 40% and at least 15% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering. If at any time
Hampshire Equity Partners&nbsp;II, L.P. owns less than 15% of
the shares of our common stock which it owned immediately prior
to the consummation of our initial public offering, it will not
have the right to nominate any directors for election to our
board of directors. Your interests as a holder of the common
stock may differ from the interests of Hampshire Equity Partners.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Securities analysts may not continue to cover our common
stock or they may issue negative reports, and this may have a
negative impact on the price of our common stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The trading market for our common stock relies, in part, on the
research and reports that industry or financial analysts publish
about our company or our industry. Public statements by these
securities analysts may affect our stock price. If any of the
analysts who cover us downgrades the rating of our common stock,
our common stock price would likely decline. If any of these
analysts ceases coverage of our common stock, we could lose
visibility in the market, which in turn could cause our common
stock price to decline. Further, if no analysts continue to
cover our common stock, the lack of research coverage may
depress the market price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In addition, recently-adopted rules mandated by the
Sarbanes-Oxley Act of 2002 and a global settlement with the
Commission have caused a number of fundamental changes in how
securities analysts are reviewed and compensated. In particular,
many investment banking firms are now required to contract with
independent
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
financial analysts for their stock research. In this
environment, it may be difficult for companies with smaller
market capitalizations, such as our company, to attract
independent financial analysts to cover them, which could have a
negative effect on the market price of our common stock.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have never declared or paid any cash dividends on our common
stock and do not currently intend to do so for the foreseeable
future. We currently intend to invest our future earnings, if
any, to fund our growth. Therefore, you are not likely to
receive any dividends on your common stock for the foreseeable
future.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our second amended and restated certificate of incorporation and
amended and restated by-laws contain several provisions that may
make it more difficult for a third party to acquire control of
us without the approval of our board of directors. These
provisions include, among other things, a classified board of
directors, advance notice for raising business or making
nominations at stockholder meetings and &#147;blank check&#148;
preferred stock. Blank check preferred stock enables our board
of directors, without stockholder approval, to designate and
issue additional series of preferred stock with such dividend,
liquidation, conversion, voting or other rights, including
convertible securities with no limitations on conversion, as our
board of directors may determine, including rights to dividends
and proceeds in a liquidation that are senior to the common
stock.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our costs have increased and may continue to increase as a
result of being a public company, and complying with regulations
applicable to public companies may adversely affect our
business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As a public company, we have incurred and will continue to incur
significant legal, accounting and other expenses that we did not
incur as a private company. In addition, the Sarbanes-Oxley Act
of 2002, as well as new rules subsequently implemented by the
SEC and the Nasdaq National Market, have required changes in the
corporate governance practices of public companies. We expect
these new rules and regulations to increase significantly our
legal and financial compliance costs and to make some activities
more time-consuming and costly. For example, in connection with
becoming a public company, we created additional board
committees and adopted policies regarding internal controls and
disclosure controls and procedures. In addition, we are in the
process of evaluating our internal control structure in relation
to Section&nbsp;404 of the Sarbanes-Oxley Act and, pursuant to
this section, we may be required to include management and
auditor reports on internal controls over financial reporting as
part of our annual report for the year ending fiscal 2006. We
will incur additional costs in, and dedicate significant
resources toward, complying with these requirements, which may
divert management&#146;s attention from, and which may in turn
adversely affect, our business. We also expect these new laws,
rules and regulations to make it more difficult and more
expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the
same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified persons to serve on our
board of directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these new
laws, rules and regulations, and we cannot predict or estimate
the amount of additional costs we may incur or the timing of
such costs. The costs of compliance or our failure to comply
with these laws, rules and regulations could adversely affect
our financial condition, results of operation and the price of
our common stock.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have made forward-looking statements in this prospectus,
including in the sections entitled &#147;Prospectus
Summary,&#148; &#147;Risk Factors,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operation&#148; and &#147;Business.&#148; All statements other
than historical facts contained in this prospectus, including
statements regarding our future financial position, business
policy and plans and objectives of management for future
operations, are forward-looking statements. The words
&#147;believe,&#148; &#147;may,&#148; &#147;could,&#148;
&#147;estimate,&#148; &#147;continue,&#148;
&#147;anticipate,&#148; &#147;intend,&#148; &#147;expect&#148;
and similar expressions, as they relate to us, are intended to
identify forward-looking statements. For example, our statements
to the effect that we intend to open a specified number of new
stores, our expectations regarding our net sales for the months
of November and December, our expectations of comparable store
sales increases for the four-week period ended November&nbsp;26,
2005 and the five-week period ended December&nbsp;31, 2005 and
our expectations of comparable store sales increases in markets
not affected by Hurricanes Katrina, Rita and Wilma for the same
periods, that we intend to increase comparable store sales and
our expectations as to the effects of our adoption of
SFAS&nbsp;123R on our compensation costs, constitute
forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections
about future events, including, among other things:
</DIV>

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    implementation of our growth strategy;</TD>
</TR>

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    <TD style="font-size: 3pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
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    our ability to anticipate and respond to fashion trends;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    competition in our markets;</TD>
</TR>

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

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

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

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    economic conditions in general, and the recovery of local
    economies in areas impacted by Hurricanes Katrina, Rita and
    Wilma.</TD>
</TR>

</TABLE>

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

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">17

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

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The selling stockholders will receive all of the net proceeds
from the sale of shares of our common stock offered by this
prospectus. We will not receive any of the proceeds from the
sale of shares of common stock offered by this prospectus.
</DIV>

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

<!-- link1 "Price Range of Our Common Stock" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our common stock has been quoted on the Nasdaq National Market
under the symbol &#147;CTRN&#148; since our initial public
offering on May&nbsp;17, 2005. The following table shows the
high and low per share prices or our common stock for the
periods indicated.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Fiscal 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Low</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter (beginning May&nbsp;17, 2005)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter (through January&nbsp;4, 2006)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.54</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On January&nbsp;4, 2006, the last reported sale price of our
common stock on the Nasdaq National Market was $41.85 per share.
On January&nbsp;4, 2006, there were six&nbsp;holders of record
of our common stock.
</DIV>

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

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

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

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">18

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
 <A name='107'></A>
</DIV>

<!-- link1 "Capitalization" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The table below sets forth our cash and cash equivalents and our
capitalization as of October&nbsp;29, 2005. You should read this
information together with the sections of this prospectus
entitled &#147;Selected Financial and Operating Data&#148; and
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the financial
statements and related notes appearing elsewhere in this
prospectus.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 29, 2005</B></TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>(unaudited)</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>(in thousands,</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>except share and</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>per share amounts)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,371</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations (including current portion)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,289</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $.01 par value per share, 20,000,000 shares
    authorized, 13,034,270 issued and 12,868,520 outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,720</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,107</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,793</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74,082</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">19
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='108'></A>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides selected financial and operating
data for each of the fiscal years in the five-year period ended
January&nbsp;29, 2005 and for the nine months ended
October&nbsp;29, 2005 and October&nbsp;30, 2004, including:
(a)&nbsp;our statement of income data for each such period,
(b)&nbsp;additional operating data for each such period and
(c)&nbsp;our balance sheet data as of the end of each such
period. The statement of income data for fiscal 2002, fiscal
2003 and fiscal 2004, and the balance sheet data as of
January&nbsp;31, 2004 and January&nbsp;29, 2005 are derived from
our audited financial statements included elsewhere in this
prospectus that have been audited by KPMG LLP, an independent
registered public accounting firm. The statement of income data
for fiscal 2000 and fiscal 2001 and the balance sheet data as of
January&nbsp;29, 2000, February&nbsp;3, 2001, February&nbsp;2,
2002 and February&nbsp;1, 2003 are derived from our audited
financial statements that are not included in this prospectus.
We have also included data for the nine months ended
October&nbsp;30, 2004 and October&nbsp;29, 2005 from our
unaudited condensed interim financial statements included
elsewhere in this prospectus. The unaudited condensed financial
statements for the nine months ended October&nbsp;29, 2005 and
October&nbsp;30, 2004 have been prepared on the same basis as
our audited financial statements and include, in the opinion of
management, all adjustments, consisting of normal recurring
accruals that management considers necessary for a fair
presentation of the financial information set forth in those
statements. Results of operations for the interim periods are
not necessarily indicative of the results that might be expected
for any other interim period or for an entire period. The
selected financial and operating data set forth below should be
read in conjunction with, and are qualified in their entirety by
reference to, the section of this prospectus entitled
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and our financial
statements and related notes included elsewhere in this
prospectus. Historical results are not necessarily indicative of
results to be expected for any future period.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


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

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

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

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

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


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="center" nowrap>(dollars in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap>(unaudited)</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>192,961</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,039</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,922</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,281</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,641</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense (income), net
    <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(197</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,560</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,278</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.49</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,219,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,302,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,305,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,348,502</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,791,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,757,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,771,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,879,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,945,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,847,419</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Opened during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed during period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling square footage at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>786,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>891,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,043,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,290,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,715,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,663,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,017,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales increase
    <SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.1%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average sales per
    store<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>906</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,371</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,793</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="right" style="font-size: 8pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>(footnotes on following page)</I>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">20
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<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 33%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Our fiscal year ends on the Saturday closest to January 31 of
    each year. Fiscal years 2001, 2002, 2003 and 2004 comprise
    52&nbsp;weeks. Fiscal year 2000 comprises 53&nbsp;weeks.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    Our Series&nbsp;A Preferred Stock, which was redeemed using a
    portion of the net proceeds from our initial public offering,
    was reclassified as debt as of the second quarter of fiscal
    2003, in accordance with the Financial Accounting Standards
    Board&#146;s (&#147;FASB&#148;) Statement of Financial
    Accounting Standards (&#147;SFAS&#148;) No.&nbsp;150, Accounting
    for Certain Financial Instruments with Characteristics of both
    Liabilities and Equity. The amount of dividends treated as
    interest expense was $100,000 for the nine months ended
    October&nbsp;29, 2005, $324,450 in fiscal 2004, $189,000 in
    fiscal 2003 and none in fiscal 2002.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD align="left">
    The number of stores open at the end of the period includes four
    stores closed as of October&nbsp;29, 2005, as a result of the
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP>&nbsp;</TD>
    <TD align="left">
    This data includes the positive impact of positive sales as a
    result of Hurricanes Katrina, Rita and Wilma during the months
    of September and October.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP>&nbsp;</TD>
    <TD align="left">
    Average sales per store is defined as net sales divided by the
    average of stores open at the end of the prior period and stores
    open at the end of the current period.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">21

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

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

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>and Results of Operations</B>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. Our merchandise
offerings are designed to appeal to the preferences of fashion
conscious consumers, particularly African-Americans. Originally
our stores were located in the Southeast, and during late fiscal
2004 and fiscal 2005 we expanded into the Mid-Atlantic region,
the Midwest and Texas. We operate 236 stores in both urban and
rural markets in fourteen states, with two stores still closed
due to Hurricanes Katrina, Rita and Wilma.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
During the third quarter of fiscal 2005, our comparable store
sales have benefited from additional customer purchases that we
believe are related to Hurricanes Katrina, Rita and Wilma. These
hurricanes caused extensive damage to areas of the Gulf Coast of
the United States and impacted some of our stores in Alabama,
Florida, Mississippi, Louisiana and Texas. Thirty-eight of our
stores were closed for one or more days due to the hurricanes.
Two existing stores have not reopened as of January&nbsp;4,
2006. In addition, one store scheduled to open in September 2005
was heavily damaged by Hurricane Katrina and remains unopened.
In regions impacted by the hurricanes, however, the subsequent
sales from the stores that we have reopened, as well as sales
from stores located nearby, have more than offset the sales lost
on the days the stores affected were closed, positively
impacting our comparable store sales. We believe, however, that
sales increases in our stores located in markets directly
affected by the hurricanes and in contiguous markets resulted
directly from aid distributed to our customers and the need for
our customers to replace lost or damaged clothing and other
items. These sales increases have begun to dissipate. We
anticipate that the magnitude of these increases will continue
to diminish over time and that we will not continue to increase
or maintain our sales or comparable store sales at the levels
achieved in the months of September, October, November and
December in fiscal 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On May&nbsp;18, 2005, we completed our initial public offering,
in which we issued and sold 2,700,000 shares of our common stock
and certain selling stockholders sold 1,150,000 shares of our
common stock, at $14.00 per share. In addition, we received
notice on May&nbsp;27, 2005, that the underwriters had exercised
the over-allotment option granted in connection with our initial
public offering, pursuant to which we issued and sold an
additional 577,500 shares on June&nbsp;1, 2005. We received
gross proceeds of approximately $45.9&nbsp;million and
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">22

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
incurred approximately $4.8&nbsp;million in expenses in
connection with the initial public offering and over-allotment
option, for net proceeds of approximately $41.1&nbsp;million. We
did not receive any proceeds from the sale of the shares by the
selling stockholders in the initial public offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are continuing to pursue an aggressive store growth strategy
and believe that the addition of new stores will be the primary
source of future growth. In fiscal 2003 and fiscal 2004, we
opened 25 and 40 stores, respectively. During this period, we
entered the Baltimore, Houston, Norfolk and Washington, D.C.
markets, where we opened a total of 15 new stores. We have
continued to expand in fiscal 2005, opening 36 new stores thus
far with no additional openings planned and entering the
Cincinnati, Dallas, Louisville and Miami markets. We expect to
open 42 to 45 new stores in fiscal 2006. Approximately 90% of
the new stores we intend to open in fiscal 2006 will be located
in states that we currently serve.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our new store expansion is fueled by store economics that we
believe to be very attractive. From an investment perspective,
we seek to design stores that are inviting and easy to shop,
while limiting start up and fixturing costs. We also have
relatively low store operating costs. Our real estate approach
is focused on strip shopping center sites within low to moderate
income neighborhoods, and we generally utilize previously
occupied store sites rather than newly constructed sites. As a
result, we are usually able to secure sites with substantial
customer traffic at attractive lease terms. Our ongoing
advertising expenses are also low, with a significant amount of
advertising focused on new store openings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our stores generate rapid payback of investment. The average
investment for the 65 stores opened in fiscal 2003 and fiscal
2004, including leasehold improvements, equipment, fixturing,
cost of inventory to stock the store (net of accounts payables),
and pre-opening store expenses, was approximately $280,000.
These 65 stores generated average sales of $1.4&nbsp;million and
average store operating profit (defined as store operating
revenues less cost of sales and store operating expenses which
is comprised of payroll, occupancy, advertising and other
operating costs) of approximately $230,000 during their first
12&nbsp;months of operation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We measure our performance using key operating statistics. One
of our main performance measures is comparable store sales
growth. We define a comparable store as a store that has been
open for an entire fiscal year. Therefore, a store will not be
considered a comparable store until its
13<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
month of operation at the earliest or its
24<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
month at the latest. As an example, all stores opened in fiscal
2003 and fiscal 2004 were not considered comparable stores in
fiscal 2004. Relocated and expanded stores are included in the
comparable store sales results. We also use other operating
statistics, most notably average sales per store. As we
typically occupy existing space in established shopping centers
rather than sites built specifically for our stores, our store
square footage (and therefore sales per square foot) varies by
store. We focus on the overall store sales volume as the
critical driver of profitability. Our average sales per store
has increased as we have driven comparable store sales and
opened new stores which are generally larger than our existing
stores. Our average sales per store have increased from
$0.8&nbsp;million in fiscal 2000 to $1.1&nbsp;million in fiscal
2004, and from $770,000 in the nine months ended
October&nbsp;30, 2004 to $906,000 in the nine months ended
October&nbsp;29, 2005. In addition to sales, we measure gross
margin percentage and store operating expenses, with a
particular focus on labor as a percentage of sales. These
results translate into store level contribution, which we use to
evaluate overall performance of each individual store. Finally,
we monitor corporate expenses against budgeted amounts.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In October 2005, we purchased an approximately 286,500 square
foot distribution center in Darlington, South Carolina that is
situated on 90 acres of land. To date we have paid approximately
$1.6&nbsp;million of the $3&nbsp;million to $4&nbsp;million in
total we expect to spend on acquisition costs and for capital
improvements necessary to prepare the location for full
operation. We began receiving and processing shipments from this
new distribution location in the fourth quarter of fiscal 2005.
We expect this facility, together with our two locations in
Savannah, to provide us the capacity to double our existing
sales volume.
</DIV>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">23

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In December 2004, the FASB issued a revision to
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation</I>. SFAS&nbsp;No.&nbsp;123R replaces
SFAS&nbsp;No.&nbsp;123 and supersedes APB Opinion No.&nbsp;25,
<I>Accounting for Stock Issued to Employees</I>, and establishes
standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. The
impact of adopting SFAS&nbsp;No.&nbsp;123R will be dependent on
numerous factors including, but not limited to, the valuation
model chosen by us to value stock-based awards, the assumed
award forfeiture rate, the accounting policies adopted
concerning the method of recognizing the fair value of awards
over the requisite service period and the transition method
chosen for adopting SFAS&nbsp;No.&nbsp;123R. We have
preliminarily estimated the effects of adoption of
SFAS&nbsp;No.&nbsp;123R will result in an additional
compensation expense of $1.0&nbsp;million to $1.5&nbsp;million
in fiscal 2006 and a yet to be determined additional
compensation expense in fiscal 2007.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are documenting and testing our internal control procedures
in order to comply with the requirements of Section&nbsp;404 of
the Sarbanes-Oxley Act of 2002. Section&nbsp;404 requires annual
management assessments of the effectiveness of our internal
controls over financial reporting and reports by our independent
auditors. We may be required to comply with Section&nbsp;404 as
early as the time we file our annual report for fiscal 2006 with
the Commission. During this time period specific internal
controls may be identified as being deficient. We plan to
remediate any identified deficiencies and comply with our
Section&nbsp;404 obligations before the deadline.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Net sales consist of store sales, net of returns by customers,
and layaway fees. Cost of sales consists of the cost of products
we sell and associated freight costs. Selling, general and
administrative expense is comprised of store costs, including
salaries and store occupancy costs, handling costs, corporate
and distribution center costs and advertising costs. We operate
on a 52- or 53-week fiscal year, which ends on the Saturday
closest to January 31. Each of our fiscal quarters consists of
four 13-week periods, with an extra week added on to the fourth
quarter every five to six years. Our last three fiscal years
ended on February&nbsp;1, 2003, January&nbsp;31, 2004 and
January&nbsp;29, 2005 and each included 52&nbsp;weeks.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following discussion of our financial performance is based
on the condensed financial statements set forth elsewhere in
this prospectus. The nature of our business is seasonal.
Historically, sales in the first and fourth quarters have been
higher than sales achieved in the second and third quarters of
the fiscal year. Expenses, and to a greater extent operating
income, vary by quarter. Results of a period shorter than a full
year may not be indicative of results expected for the entire
year. Furthermore, the seasonal nature of our business may
affect comparisons between periods.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">24

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


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

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


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>February 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>January 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>October 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>October 29,</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2005</B></TD>
</TR>

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



<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="center" nowrap>(dollars in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap>(unaudited)</TD>
</TR>

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>192,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.7</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.3</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense (income), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(197</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.3%</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

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

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

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Fiscal Year Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Thirty-Nine Weeks Ended</B></TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>February 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 29,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stores open, beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New stores</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed stores</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stores open, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales
    increase<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.1%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    The number of stores open at the end of the period includes four
    stores closed as of October&nbsp;29, 2005, as a result of
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.</TD>
</TR>

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Thirty-Nine Weeks Ended October&nbsp;29, 2005 Compared to
Thirty-Nine Weeks Ended October&nbsp;30, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Net Sales.</I> Net sales increased $55.8&nbsp;million, or
40.7%, to $193.0&nbsp;million for the thirty-nine weeks ended
October&nbsp;29, 2005 from $137.1&nbsp;million in the
thirty-nine weeks ended October&nbsp;30, 2004. The increase in
net sales was primarily due to 31 new store openings since
October&nbsp;30, 2004 and a comparable store sales increase of
14.1% for the thirty-nine weeks ended October&nbsp;29, 2005
compared to the thirty-nine weeks ended October&nbsp;30, 2004.
The 31&nbsp;stores opened since October&nbsp;30, 2004 accounted
for $21.6&nbsp;million of the total increase in sales, the 35
stores opened between February&nbsp;1, 2004 and October&nbsp;30,
2004 accounted for $17.3&nbsp;million and the 158 comparable
stores contributed $16.9&nbsp;million of the increase in sales.
Four stores were expanded and/or relocated since
October&nbsp;30, 2004, all of which, occurred in the thirty-nine
weeks ended October&nbsp;29, 2005. The increase in comparable
store sales was primarily from an increase in customer
transactions which was due in part to improved sales trends from
the increasing consumer preference for branded goods. Comparable
store sales for the thirty-nine weeks ended October&nbsp;29,
2005 also were positively impacted by post-hurricane sales in
September and October. Federal Emergency Management Act vouchers
and other one-time assistance enabled many of our customers to
purchase sizeable amounts of apparel and
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">25
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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
other items to replace what had been lost. While the hurricanes
have had a negative effect on us by causing 38 stores to be
closed for one day or more during the thirty-nine weeks ended
October&nbsp;29, 2005, the subsequent sales increases after the
stores have reopened has more than offset the sales missed on
those lost days. Stores located in areas contiguous to the
stores affected directly by the hurricanes have also shown a
dramatic increase in their sales for the thirty-nine weeks ended
October&nbsp;29, 2005. We believe that sales increases in our
stores located in markets directly affected by the hurricanes
and in contiguous markets resulted directly from aid distributed
to our customers and the need for our customers to replace lost
or damaged clothing and other items. These sales increases have
begun to dissipate. We anticipate that the magnitude of these
increases will continue to diminish in the thirteen weeks ended
January&nbsp;28, 2006, and that we will not continue to increase
or maintain our sales at the levels achieved in the months of
September, October, November and December in fiscal 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Gross Profit.</I> Gross profit increased $23.1&nbsp;million,
or 45.4%, to $73.9&nbsp;million in the thirty-nine weeks ended
October&nbsp;29, 2005 from $50.8&nbsp;million in the thirty-nine
weeks ended October&nbsp;30, 2004. The increase in gross profit
is primarily a result of the strong sales increases. As a
percentage of net sales, gross profit increased to 38.3% in the
thirty-nine weeks ended October&nbsp;29, 2005 from 37.1% in the
thirty-nine weeks ended October&nbsp;30, 2004. This increase, as
a percentage of net sales, was primarily due to reduced markdown
rates which was a result of well balanced inventories and strong
sales increases in the thirty-nine weeks ended October&nbsp;29,
2005 compared to the thirty-nine weeks ended October&nbsp;30,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Selling, General and Administrative Expense.</I> Selling,
general and administrative expenses increased
$17.8&nbsp;million, or 38.4%, to $64.3&nbsp;million in the
thirty-nine weeks ended October&nbsp;29, 2005 from
$46.4&nbsp;million in the thirty-nine weeks ended
October&nbsp;30, 2004. The increase in these expenses was due
primarily to additional store level, distribution and corporate
costs arising from the opening of 31 new stores since
October&nbsp;30, 2004, the payment of a $1.2&nbsp;million fee to
terminate the consulting agreement with Hampshire Equity
Partners&nbsp;II, L.P. and property losses from Hurricanes
Katrina, Rita and Wilma, which we anticipate will total
approximately $700,000 net of insurance recoveries in the
thirty-nine weeks ended October&nbsp;29, 2005. Selling, general
and administrative costs increased additionally due to costs
associated with being a public company of approximately
$700,000. Selling, general and administrative expense as a
percentage of net sales decreased to 33.3% in the thirty-nine
weeks ended October&nbsp;29, 2005 from 33.9% in the thirty-nine
weeks ended October&nbsp;30, 2004<B>. </B>The decrease as a
percentage of net sales was primarily due to our strong
comparable sales growth and the fixed nature of the selling,
general and administrative expenses. In addition, this decrease
is in part due to a prior year charge in the thirty-nine weeks
ended October&nbsp;30, 2004 of approximately $300,000 for
additional vacation pay accrual pursuant to a change in our
vacation policy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Interest Income.</I> Interest income increased to
approximately $499,000 in the thirty-nine weeks ended
October&nbsp;29, 2005 from approximately $16,700 in the
thirty-nine weeks ended October&nbsp;30, 2004. The increase in
interest income was due primarily to interest income earned on
proceeds from our initial public offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Interest Expense</I>. Interest expense decreased 47.4% to
approximately $302,000 in the thirty-nine weeks ended
October&nbsp;29, 2005 from approximately $574,000 in the
thirty-nine weeks ended October&nbsp;30, 2004. The decrease in
interest expense was due primarily to the redemption of our
preferred shares subject to mandatory redemption, the absence of
any borrowings under the line of credit and repaying in full our
mortgage on the Fahm Street headquarters and distribution center.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Provision for Income Taxes.</I> The provision for income
taxes increased to approximately $3.6&nbsp;million in the
thirty-nine weeks ended October&nbsp;29, 2005 from
$1.5&nbsp;million in the thirty-nine weeks ended
October&nbsp;30, 2004. The effective income tax rates for fiscal
2005 and fiscal 2004 were 36.2%, and 38.5%, respectively. The
tax rate decreased in fiscal 2005 as a result of tax exempt
investments, a qualification to utilize job tax credits and a
reduction in non-deductible preferred stock dividends.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Net Income. </I>Net income increased 165.6% to
$6.3&nbsp;million in the thirty-nine weeks ended
October&nbsp;29, 2005 from $2.4&nbsp;million in the thirty-nine
weeks ended October&nbsp;30, 2004. The increase in net income
was due to the factors discussed previously.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">26

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Fiscal 2004 Compared to Fiscal 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Net Sales.</I> Net sales increased $46.2&nbsp;million, or
29.4%, to $203.4&nbsp;million for fiscal 2004 from
$157.2&nbsp;million for fiscal 2003. The increase resulted
primarily from net sales of $63.2&nbsp;million in fiscal 2004
from stores opened during fiscal 2004 and fiscal 2003 as
compared to net sales of $20.9&nbsp;million in fiscal 2003 from
stores opened in fiscal 2003. In addition, the increase was due
to a comparable store sales increase of $4.0&nbsp;million, or
3.0%. The increase in comparable store sales resulted, in part,
from an increase in the number of customer transactions and
average items per sale, partially offset by a decrease in the
average price of an item sold. Remodeled and relocated stores
accounted for less of the growth of comparable store sales in
fiscal 2004 (only about 0.3% of the 3% growth) due to fewer
stores being relocated and remodeled during the year.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Gross Profit.</I> Gross profit increased $17.1&nbsp;million,
or 28.9%, to $76.1&nbsp;million for fiscal 2004 from
$59.1&nbsp;million for fiscal 2003. The increase resulted
primarily from the operation of new stores opened in fiscal 2004
and the full period impact of new stores opened during fiscal
2003, partially offset by a decrease in gross profit margin.
Gross profit as a percentage of sales was 37.4% for fiscal 2004
compared to 37.6% for fiscal 2003. Gross margins decreased as a
result of higher inbound and outbound freight costs primarily
due to fuel surcharges. Our gross margins may not be comparable
to other retailers as we include distribution center,
advertising and promotional costs in our selling, general and
administrative expenses, while certain other retailers deduct
these costs directly from their gross margin.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Selling, General and Administrative Expenses.</I> Selling,
general and administrative expenses increased
$14.7&nbsp;million, or 30.2%, to $63.6&nbsp;million for fiscal
2004 from $48.8&nbsp;million for fiscal 2003. This increase was
caused primarily by store level, distribution and corporate
costs associated with the growing store base and the full period
impact of new stores opened in fiscal 2003. As a percentage of
net sales, selling, general and administrative expenses
increased to 31.3% for fiscal 2004 from 31.1% for fiscal 2003.
The increase was partially driven by approximately $360,000 of
additional vacation pay accrual pursuant to a change in our
vacation policy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Interest Expense.</I> Interest expense increased
approximately $169,000 for fiscal 2004 to approximately $732,000
compared to approximately $563,000 for fiscal 2003. The increase
was primarily the result of the adoption of
SFAS&nbsp;No.&nbsp;150, which increased interest expense by the
inclusion of dividends on mandatory redeemable obligations that
were previously deducted from equity as dividends, and increased
borrowings related to the cost of new stores during the period,
inclusive of inventory. We adopted SFAS&nbsp;No.&nbsp;150 on
July&nbsp;6, 2003, and dividends treated as interest expense in
fiscal 2004 and fiscal 2003 were approximately $324,000 and
approximately $189,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Provision for Income Taxes.</I> The provision for income
taxes increased approximately $824,000 for fiscal 2004 to
$4.6&nbsp;million compared to $3.7&nbsp;million for fiscal 2003.
Our effective tax rate was 38.5% and 38.6% for fiscal 2004 and
fiscal 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Net Income.</I> Net income increased to $7.3&nbsp;million for
fiscal 2004 from $5.9&nbsp;million as a result of the factors
discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Fiscal 2003 Compared to Fiscal 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Net Sales.</I> Net sales increased $32.2&nbsp;million, or
25.8%, to $157.2&nbsp;million for fiscal 2003 from
$125.0&nbsp;million for fiscal 2002. The increase resulted
primarily from net sales of $38.6&nbsp;million in fiscal 2003
from stores opened during fiscal 2003 and fiscal 2002 as
compared to net sales of $10.8&nbsp;million in fiscal 2002 from
stores opened in fiscal 2002. In addition, the increase was due
to a comparable store sales increase of $6.1&nbsp;million, or
5.7%. The increase in comparable store sales resulted, in part,
from an increase in the number of customer transactions and
average items per sale, partially offset by a decrease in
average price of an item sold. In addition, in fiscal 2002, we
took over shoe operations in our stores from a third party
licensee that had previously managed the shoe merchandise and
paid us a commission on sales. As a result of this purchase, we
recognized shoe sales as part of net sales (amounting to
$3.8&nbsp;million in fiscal 2003) instead
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">27

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
of recognizing only the commissions as an increase to operating
income. The increase in comparable store sales in fiscal 2003
benefited from the full year impact of this change. The increase
was also caused by the impact of increased sales from stores
that were relocated and remodeled during the two-year period,
with such stores accounting for approximately one-third of the
5.7% comparable store sales increase.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Interest Expense.</I> Interest expense increased
approximately $308,000 for fiscal 2003 to approximately
$563,000, compared to approximately $256,000 for fiscal 2002.
The increase was primarily the result of our adoption of
SFAS&nbsp;No.&nbsp;150, which increased interest expense by the
inclusion of dividends on mandatory redeemable obligations that
were previously deducted from equity as dividends, increased
borrowings related to the costs of opening new stores during the
year, and the full year impact of the purchase of, and mortgage
on, the office and distribution facility in Savannah, Georgia.
The amount of dividends treated as interest expense in fiscal
2003 was approximately $189,000 and none in fiscal 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Provision for Income Taxes.</I> The provision for income
taxes increased approximately $626,000 for fiscal 2003 to
$3.7&nbsp;million, compared to $3.1&nbsp;million for fiscal
2002. Our effective tax rate was 38.6% and 38.1% for fiscal 2003
and fiscal 2002, respectively. The rate increased in fiscal 2003
due to reclassifying nondeductible preferred stock dividends as
interest expense with the adoption of SFAS&nbsp;No.&nbsp;150 in
July 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Net Income.</I> Net income increased to $5.9&nbsp;million for
fiscal 2003 from $5.0&nbsp;million in fiscal 2002 as a result of
the factors discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Quarterly Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table sets forth our unaudited quarterly results
of operations for fiscal 2003 and fiscal 2004 and the
thirty-nine weeks ended October&nbsp;29, 2005. Each quarterly
period presented below consists of 13&nbsp;weeks, and the
information includes our statement of income data for each such
period and additional operating data for each such period. In
the opinion of management, these unaudited interim financial
data have been prepared on the same basis as the audited
financial statements and reflect all adjustments (consisting
only of normal recurring adjustments) and fairly present the
financial information disclosed for these periods. The interim
financial data set forth below should be read in conjunction
with, and are qualified in their entirety by reference to, the
audited financial statements and related notes included
elsewhere in this prospectus. The results of operations for
historical periods are not necessarily indicative of results for
any future period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Due to the importance of the spring selling season, which
includes Easter, and the fall selling season, which includes
Christmas, the first and fourth fiscal quarters have
historically contributed, and we expect they will continue to
have a significant contribution to our profitability for our
entire fiscal year. As a result, any factors negatively
affecting us in any year during the first and fourth fiscal
quarters, including adverse weather and unfavorable economic
conditions, could have a material adverse effect on our
financial condition and results of operations for the entire
year.
</DIV>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">28

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
markdowns, store closings, remodels and relocations, competitive
factors, weather and general economic conditions.
</DIV>

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

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

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>May&nbsp;3,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Aug.&nbsp;2,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Nov.&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Jan.&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>May&nbsp;1,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>July&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Oct.&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Jan.&nbsp;29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Apr.&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>July&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Oct.&nbsp;29,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

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


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="43" align="center" nowrap>(dollars in thousands, except per share amounts; unaudited)</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>69,895</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,873</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,252</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense (income), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(252</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss)&nbsp;before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,390</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(41</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,632</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.01</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.00</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.00</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.00</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.18</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,305,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,310,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,300,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,925,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,825,199</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,814,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,794,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,810,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,834,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,867,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,875,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,864,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,902,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,986,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,587,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,379,974</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open, beginning of quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Opened during quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Closed during
    quarter<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total open at end of
    period<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comparable store sales
    Increase<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.0%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    The number of stores open at the end of the period includes four
    stores closed as of October&nbsp;29, 2005, as a result of
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD align="left">
    Comparable store sales in this period benefited from strong
    sales in hurricane affected areas. Comparable store sales in
    areas not affected by the hurricanes were approximately 18.1%
    for the period.</TD>
</TR>

</TABLE>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On May&nbsp;18, 2005, we completed our initial public offering
of our common stock, as a result of which we issued and sold
2,700,000 shares of common stock at $14.00 per share. In
addition, we received notice on May&nbsp;27, 2005, that the
underwriters had exercised the over-allotment option, pursuant
to which we issued and sold an additional 577,500 shares on
June&nbsp;1, 2005. Upon completing the offering and the
over-allotment option granted in connection with our initial
public offering, we received gross proceeds of approximately
$45.9&nbsp;million and incurred approximately $4.8&nbsp;million
in expenses in connection with our initial public offering, for
net proceeds of approximately $41.1&nbsp;million. In addition,
1,150,000 shares of common stock were sold in our initial public
offering by certain of our selling stockholders, for which we
received no proceeds. As a result, upon the closing of the
offering, there were 12,602,154 shares of common stock
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Following the closing of our initial public offering on
May&nbsp;23, 2005, each of our 3,605 shares of mandatory
redeemable preferred stock were redeemed and extinguished for
approximately $3.6&nbsp;million, and we repaid in full our
mortgage on the Fahm Street headquarters and distribution center
in the amount of approximately $1.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Using a portion of the proceeds from our initial public offering
and cash flow from operations, we purchased a distribution
center in Darlington, South Carolina in the thirteen weeks
ending October&nbsp;29, 2005.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">29

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Thirty-Nine Weeks Ended October&nbsp;29, 2005 and
October&nbsp;30, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
At October&nbsp;29, 2005, we had total cash, cash equivalents
and marketable securities of $42.0&nbsp;million compared with
total cash and cash equivalents of $11.8&nbsp;million at
January&nbsp;29, 2005. The most significant factors in the
change in our net liquidity position during the first
thirty-nine weeks of 2005 were the proceeds from our initial
public offering, positive net income from operations adjusted
for depreciation and other non-cash charges, offset by the
purchase of additional inventory and capital expenditures to
open new stores and purchase our distribution center in
Darlington, South Carolina.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Inventory represented approximately 43% of our total assets as
of October&nbsp;29, 2005. Management&#146;s ability to manage
our inventory can have a significant impact on our cash flows
from operations during a given interim period or fiscal year. In
addition, inventory purchases can be somewhat seasonal in
nature, such as the purchase of warm-weather or
Christmas-related merchandise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Cash Flows Provided by (Used in) Operating Activities</I>.
Net cash provided by (used in) operating activities was
$3.1&nbsp;million in the thirty-nine weeks ended
October&nbsp;29, 2005 compared to ($5.3) million in the
thirty-nine weeks ended October&nbsp;30, 2004. The main sources
of cash provided during the thirty-nine weeks ended
October&nbsp;29, 2005 was net income adjusted for depreciation
and other non-cash charges of $12.3&nbsp;million, increases in
accrued expenses of $2.6&nbsp;million, increases in accrued
compensation of $2.5&nbsp;million and deposits taken on layaway
transactions of $1.2&nbsp;million. Uses of cash consisted of the
net increase in net inventory of $11.1&nbsp;million, a
$3.7&nbsp;million change in the net income tax
receivable/payable, and an approximately $580,000 increase in
prepaid assets and other current assets related to insurance
receivables for property damages from Hurricanes Katrina, Rita
and Wilma.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Cash Flows Used in Investing Activities.</I> Cash used in
investing activities was $41.0&nbsp;million in the thirty-nine
weeks ended October&nbsp;29, 2005 compared to $6.2&nbsp;million
in the thirty-nine weeks ended October&nbsp;30, 2004. Net cash
used in investing activities increased during the thirty-nine
weeks ended October&nbsp;29, 2005 compared to the thirty-nine
weeks ended October&nbsp;30, 2004 primarily because of the
investment of $32.6&nbsp;million of cash proceeds from the IPO
in municipal auction rate securities. We also made capital
expenditures in the amount of $8.9&nbsp;million in the
thirty-nine weeks ended October&nbsp;29, 2005 for the purchase
of the distribution center in Darlington, South Carolina,
purchase of property and equipment for the build out of 26 new
stores, four relocations and remodels, and other general
corporate purposes compared to $6.9&nbsp;million in the
thirty-nine weeks ended October&nbsp;30, 2004 used for the
purchase of property and equipment for the build out of 35 new
stores, three relocations and remodels and other general
corporate purposes. Approximately $988,000 of our capital
expenditures on new stores in the thirty-nine weeks ended
October&nbsp;29, 2005 will be reimbursed to us by the landlords
of the leased properties. These tenant improvement dollars will
be amortized over the life of the individual store&#146;s lease
as a reduction to occupancy expense.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Cash Flows Provided by Financing Activities.</I> Cash
provided by financing activities was $35.5&nbsp;million in the
thirty-nine weeks ended October&nbsp;29, 2005 and
$3.8&nbsp;million in the thirty-nine weeks ended
October&nbsp;30, 2004. Financing activities in the thirty-nine
weeks ended October&nbsp;29, 2005 included the receipt of
$41.3&nbsp;million from the initial public offering and
subsequent option exercises by employees, payment of
$3.6&nbsp;million redeeming the preferred shares subject to
mandatory redemption, the $1.5&nbsp;million payoff of the
mortgage on the Fahm Street headquarters and distribution center
and scheduled repayments of approximately $758,000 on
outstanding capital leases.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Fiscal 2004 and Fiscal 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For fiscal 2004, cash and cash equivalents increased by
$1.8&nbsp;million to $11.8&nbsp;million from $10.0&nbsp;million
at the end of fiscal 2003. The primary contributor to the
increase in cash and cash equivalents was $12.7&nbsp;million
provided by operating activities, partially offset by
$8.6&nbsp;million used in investing activities, primarily to
open new stores, and $2.2&nbsp;million used in financing
activities, primarily to make dividend payments to holders of
mandatory redeemable stock and repayment on long-term debt and
capital lease obligations.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">30

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For fiscal 2003, cash and cash equivalents increased by
$4.2&nbsp;million to $10.0&nbsp;million from $5.8&nbsp;million
at the end of fiscal 2002. The primary contributor to the
increase in cash and cash equivalents was $11.2&nbsp;million of
cash provided by operations, partially offset by
$6.1&nbsp;million used in investing activities, primarily to
open new stores.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Net cash provided by operating activities was $12.7&nbsp;million
for fiscal 2004 and $11.2&nbsp;million for fiscal 2003. Net cash
provided by operating activities increased in fiscal 2004
attributable to net income of $7.3&nbsp;million, depreciation,
amortization and other non-cash charges of $5.2&nbsp;million and
approximately $155,000 provided by net operating assets and
liabilities. Cash flow from net operating assets and liabilities
in fiscal 2004 was largely attributable to the investment in
inventory, net of accounts payable, offset by the increase in
accrued expenses and income tax payable. In fiscal 2004 this
change in net inventory position (inventory less accounts
payable) resulted in a use of cash of $4.9&nbsp;million. The
change in net inventory position in fiscal 2004 reflects the
opening of 40 stores and an increase in inventory levels in
preparation for a mid-March Easter season in fiscal 2005.
Accrued expenses increased $2.8&nbsp;million due to additional
accruals for rent and landlord allowances, sales taxes, freight,
professional fees and other expenses. Income tax payable
increased $2.1&nbsp;million due to our change of method of
paying installments on income tax.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Net cash used in investing activities was $8.6&nbsp;million for
fiscal 2004, and $6.1&nbsp;million for fiscal 2003. Net cash
used in investing activities increased in fiscal 2004 compared
to fiscal 2003 because we purchased additional property and
equipment to open 40 new stores compared to 25 new stores in the
prior year. Net cash used in investing activities was
$6.1&nbsp;million for fiscal 2003, and $5.9&nbsp;million for
fiscal 2002. Net cash used in investing activities increased in
fiscal 2003 compared to fiscal 2002 because we purchased
additional property and equipment to open 25 new stores compared
to 16 new stores in the prior year.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Net cash used in financing activities was $2.2&nbsp;million for
fiscal 2004 and approximately $942,000 for fiscal 2003. Net cash
used in financing activities for fiscal 2004 was attributable to
$1.4&nbsp;million in payments on preferred stock dividends and
approximately $831,000 for payments on capital lease obligations
and mortgage payments on our Fahm Street facility. Net cash used
in financing activities was approximately $942,000 for fiscal
2003 and $2.8&nbsp;million for fiscal 2002. Net cash used in
financing activities for fiscal 2003 was attributable to
payments on capital lease obligations and mortgage payments on
our Fahm Street facility. Until required for other purposes, we
maintain our cash and cash equivalents in deposit accounts or
highly liquid investments with remaining maturities of
90&nbsp;days or less at the time of purchase.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Liquidity Sources, Requirements and Contractual Cash
Requirements and Commitments</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our principal sources of liquidity consist of: (i)&nbsp;cash,
cash equivalents and marketable securities (which equaled
$42.0&nbsp;million as of October&nbsp;29, 2005); (ii)&nbsp;a
secured line of credit with a maximum available borrowing of
$25.0&nbsp;million subject to our inventory levels (with
availability of $25&nbsp;million and none drawn down as of
October&nbsp;29, 2005); (iii)&nbsp;an unsecured line of credit
with a maximum available borrowing of $3.0&nbsp;million subject
to our inventory levels (with availability of $3.0&nbsp;million
and none drawn down as of October&nbsp;29, 2005); (iv)&nbsp;cash
generated from operations on an ongoing basis as we sell our
merchandise inventory; and (v)&nbsp;trade credit. Short-term
trade credit represents a significant source of financing for
our inventory purchases. Trade credit arises from customary
payment terms and trade practices with our vendors. Our
management regularly reviews the adequacy of credit available to
us from our vendors. Historically, our principal liquidity
requirements have been to meet our working capital and capital
expenditure needs.
</DIV>

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

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">31

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We anticipate that our capital expenditures for the fourth
quarter of fiscal 2005 will be approximately $2.6&nbsp;million.
We anticipate that our capital expenditures will be
approximately $13&nbsp;million to $15&nbsp;million for fiscal
2006. These expenditures will relate to the purchase of property
and equipment for the 42 to 45 stores we plan to open in fiscal
2006, the addition of more office space and the continued
buildout of our Darlington, South Carolina distribution center.
We plan to finance these capital expenditures with cash flow
from operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table discloses aggregate information about our
contractual obligations as of October&nbsp;29, 2005 and the
periods in which payments are due:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


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

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

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

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

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


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

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating
    leases<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>541</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total contractual cash obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>68,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>541</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Represents fixed minimum rentals in stores and does not include
    incremental rents which are computed as a percentage of net
    sales. For example, in fiscal 2004 incremental percentage rent
    was approximately $723,000, which represented 8.6% of total rent
    expense.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Indebtedness.</I> We have a revolving line of credit secured
by substantially all of our assets pursuant to which we pay
customary fees. This secured line of credit expires in April
2007. This secured line of credit provides for aggregate cash
borrowings and the issuance of letters of credit up to the
lesser of $25.0&nbsp;million or our borrowing base (which was
approximately $25&nbsp;million at October&nbsp;29, 2005), with a
letter of credit sub-limit of $2.0&nbsp;million. Borrowings
under this secured line of credit bear interest at the prime
rate plus a spread or LIBOR plus a spread, at our election,
based on conditions in the credit agreement. As of
October&nbsp;29, 2005, we had no outstanding borrowings on the
line of credit, and no outstanding letters of credit. Under the
terms of the credit agreement, we are required to maintain a
minimum tangible net worth.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In September 2003, we entered into an annual unsecured revolving
line of credit with Bank of America that was renewed in June
2004. The line of credit provides for aggregate cash borrowings
up to $3.0&nbsp;million to be used for general operating
purposes. Borrowings under the credit agreement bear interest at
LIBOR plus a spread. At October&nbsp;29, 2005, there was no
balance on this revolving line of credit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We borrow funds under these revolving lines of credit from time
to time and subsequently repay such borrowings with available
cash generated from operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Capital Leases.</I> We have capital lease obligations that
financed the purchase of our computer equipment. At
October&nbsp;29, 2005, our capital lease obligations were
$1.3&nbsp;million. These obligations have maturity dates ranging
from March 2005 to December 2007. The interest rates on these
obligations range from 7.2% to 13.0%. All of these obligations
are secured by the computer equipment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Operating Leases.</I> We lease our stores under operating
leases, which generally have an initial term of five years with
one five-year renewal option. The typical store lease requires a
combination of both fixed monthly rentals and rentals computed
as percentage of net sales after a certain sales threshold has
been met. For the thirty-nine weeks ended October&nbsp;29, 2005,
rental expense was $8.6&nbsp;million compared to
$6.4&nbsp;million for the thirty-nine weeks ended
October&nbsp;30, 2004 (including approximately $840,000 and
$540,000 of percentage rent, respectively).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Purchase Obligations.</I> As of October&nbsp;29, 2005, we had
purchase obligations of $57.0&nbsp;million, all of which were
for less than one year. These purchase obligations primarily
consist of outstanding merchandise orders.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">32

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Off-Balance Sheet Arrangements.</I> Other than the store
operating leases described above, we do not have any off-balance
sheet arrangements.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As of October&nbsp;29, 2005, we had outstanding vested options
to purchase approximately 1,430,228 shares of common stock, at a
weighted average exercise price of $0.78 per share, and
outstanding unvested options to purchase 286,900 shares of
common stock, at a weighted average price of $10.64 per share.
The per share value of each share of common stock underlying the
vested and unvested options, based on the difference between the
exercise price per option and the estimated fair market value of
the shares at the dates of the grant of the options (also
referred to as intrinsic value), ranges from $0 to $4.20 per
share.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For all stock option grants prior to fiscal 2005, the fair
market values of the shares at the dates of grant were
originally estimated by our board of directors, with input from
management. We did not obtain contemporaneous valuations by an
unrelated valuation specialist because we based our valuation on
comparable private company market multiple analyses. We used a
consistent formula based on our twelve-month rolling EBITDA,
defined as earnings before taxes, interest, depreciation and
amortization, multiplied by a private company multiple less
outstanding debt. We believe this formula removes uncertainties
associated with asset based valuation methodologies and
methodologies based on estimated future revenues and costs. For
grants in fiscal 2005, stock options were granted under this
plan at the market price on the grant date and generally vest
ratably over a four-year period. All stock options granted under
this plan have a ten-year life subject to earlier termination
upon death, disability or cessation of employment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Significant Factors Contributing to the Difference between
Fair Value as of the Date of Each Grant and the IPO Price</I>.
As disclosed more fully in Note&nbsp;8 to the Consolidated
Financial Statements, we granted stock options during fiscal
2004 with a fair value of $9.55 per share for the first quarter,
$10.25 per share for the second quarter and $11.05 per share for
the third quarter. Factors that contributed to the difference
between the fair value of those grants and our initial public
offering price are:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the increased private company valuation of the company that
    occurred subsequent to the date of the grants but previous to
    the initial public offering based on earnings and cash flows;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the span of time between grant dates and the time of the initial
    public offering;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the fact that private company valuations are normally based on
    historical performance while a public company&#146;s are based
    on future expected earnings;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the uncertainty of our future cash flow and earnings at the date
    of the grants;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our dependence on results in the fourth quarter of fiscal 2004,
    which had not been completed at the date of the grants and which
    accounted for approximately 67% of our net income for fiscal
    2004;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    increased same store sales when compared with the same periods
    from previous years; (the continued growth in our store base;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    increased average sales per store;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the continued growth in our store base;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our expanded geographic footprint; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    our determination in December 2004 to initiate the process of an
    initial public offering and begin drafting a registration
    statement.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The intrinsic value exceeded the exercise price established at
the date of each grant by the following amounts: $3.01 per share
for those options granted in the first quarter of fiscal 2004,
$3.44 per share for those options granted in the second quarter
of fiscal 2004 and $4.20 per share for those options granted in
the third quarter of fiscal 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Based on the closing price of $27.40 per share on
October&nbsp;29, 2005, the intrinsic value of the options
outstanding on October&nbsp;29, 2005 was $47.0&nbsp;million, of
which $39.1&nbsp;million related to vested options and
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">33

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
$7.9&nbsp;million related to unvested options. Although it is
reasonable to conclude that the completion of this offering will
add value to the shares because they will have increased
liquidity and marketability, the amount of additional value can
be measured with neither precision nor certainty.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our board of directors has authorized awards for our management
employees in the form of stock option grants. See
&#147;Management&#151;2005 Long Term Incentive Plan&#151;Initial
Grants.&#148;
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. We believe the following critical
accounting policies describe the more significant judgments and
estimates used in the preparation of our financial statements:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Revenue Recognition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
While our recognition of revenue is predominantly derived from
routine retail transactions and does not involve significant
judgment, revenue recognition represents an important accounting
policy of ours. We recognize retail sales at the time the
customer takes possession of the merchandise and purchases are
paid for less an allowance for returns. We allow for returns up
to 10&nbsp;days after the date of sales and the estimate for
returns is based on actual observed return activity 10&nbsp;days
after the period ends. Revenue from layaway sales is recognized
when the customer has paid for and received the merchandise.
However, revenue from the $2.00 service charge for participating
in the program and from the $5.00 re-stocking fee, if charged as
part of the layaway program, is recognized at the time of
payment. All sales are from cash, check or major credit card
company transactions.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Inventory</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. Inherent in the
retail inventory calculation are certain significant management
judgments and estimates including, among others, merchandise
markups, markdowns and shrinkage, which impact the ending
inventory valuation at cost as well as resulting gross margins.
We estimate a shrinkage reserve for the period between the last
physical count and the balance sheet date. The estimate for the
shrinkage reserve can be affected by changes in actual shrinkage
trends. We believe the first-in first-out retail inventory
method results in an inventory valuation that is fairly stated.
Many retailers have arrangements with vendors that provide for
rebates and allowances under certain conditions, which
ultimately affect the value of the inventory. We have not
entered into such arrangements with our vendors.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Property and Equipment, net</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have a significant investment in property and equipment.
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (primarily three to five years for computer equipment and
furniture, fixtures and equipment, five years for leasehold
improvements, and 15&nbsp;years for buildings) of the related
assets or the relevant lease term, whichever is shorter. Any
reduction in these estimated useful lives would result in a
higher annual depreciation expense for the related assets.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <I>Impairment of Long-Lived Assets</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We continually evaluate whether events and changes in
circumstances warrant revised estimates of the useful lives or
recognition of an impairment loss for intangible assets. Future
adverse changes in market and legal conditions, or poor
operating results of underlying assets could result in losses or
an inability to recover the carrying value of the intangible
asset, thereby possibly requiring an impairment charge in the
future. If facts and circumstances indicate that a long-lived
asset, including property and equipment, may be impaired, the
carrying value is reviewed. If this review indicates that the
carrying value of the asset will not be recovered as determined
based on projected undiscounted cash flows related to the asset
over its remaining life, the carrying value of the asset is
reduced to its estimated fair value. Impairment losses in the
future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
our estimates for net sales, gross profit and store expenses are
not realized, future assessments of recoverability could result
in impairment charges.
</DIV>

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

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    <I>Stock-Based Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We apply the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB)&nbsp;Opinion
No.&nbsp;25, <I>Accounting for Stock Issued to Employees,</I>
and related interpretations including FASB interpretation
(FIN)&nbsp;No.&nbsp;44, <I>Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion
No.&nbsp;25</I>, to account for our fixed-plan stock options.
Under this method, compensation expense is recorded on the date
of grant only if the current fair value of the underlying stock
exceeds the exercise price. We recognize the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS&nbsp;No.&nbsp;123, Accounting for Stock-Based
Compensation, and SFAS&nbsp;No.&nbsp;148, <I>Accounting for
Stock-Based Compensation&#151;Transition and Disclosure, an
amendment of FASB Statement No.&nbsp;123</I>, establishes
accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation
plans. As permitted by existing accounting standards, we have
elected to continue to apply the intrinsic-value-based method of
accounting described above, and have adopted only the disclosure
requirements of SFAS&nbsp;No.&nbsp;123, as amended. Pro forma
information regarding net income and net income per share is
required in order to show our net income as if we had accounted
for employee stock options under the fair value method of
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation,</I> as amended by SFAS&nbsp;No.&nbsp;148,
<I>Accounting for Stock-Based Compensation&#151;Transition
Disclosure</I>. This information is contained in Notes&nbsp;2
and 8 to our financial statements. The fair values of options
and shares issued pursuant to our option plan at each grant date
were estimated using the Black-Scholes option pricing model.
</DIV>

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    <I>Operating Leases</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We lease substantially all of our store properties and accounts
for the leases as operating leases in accordance with
SFAS&nbsp;No.&nbsp;13, <I>Accounting for Leases.</I> Many lease
agreements contain tenant improvement allowances, rent holidays,
rent escalation clauses and/or contingent rent provisions. For
purposes of recognizing incentives and minimum rental expenses
on a straight-line basis over the terms of the leases, we use
the date of initial possession to begin amortization, which is
generally when we enter the space and begin to make improvements
in preparation of intended use.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For scheduled rent escalation clauses during the lease terms or
for rental payments commencing &#147;rent holidays&#148; at a
date other than the date of initial occupancy, we record minimum
rental expenses on a straight-line basis over the terms of the
leases. For tenant improvement allowances we record a deferred
rent liability on the consolidated balance sheets and amortize
the deferred rent over the terms of the leases.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Certain leases provide for contingent rents that are not
measurable at inception. These contingent rents are primarily
based on a percentage of sales that are in excess of a
predetermined level. These amounts are excluded from minimum
rent and are included in the determination of total rent expense
when it is probable that the expense has been incurred and the
amount is reasonably estimable.
</DIV>

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    <I>Accounting for Income Taxes</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We account for income taxes in accordance with
SFAS&nbsp;No.&nbsp;109, <I>Accounting for Income Taxes</I>. The
computation of income taxes is subject to estimation due to the
judgment required and the uncertainty related to the
recoverability of deferred tax assets or the outcome of tax
audits. We adjust our income tax provision in the period it is
determined that actual results will differ from our estimates.
Tax law and rate changes are reflected in the income tax
provision in which such changes are enacted.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The above listing is not intended to be a comprehensive list of
all our accounting policies. In many cases the accounting
treatment of a particular transaction is specifically dictated
by generally accepted accounting principles, with no need for
management&#146;s judgment in their application. There are also
areas in which management&#146;s judgment in selecting any
available alternative would not produce a materially different
result.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Quantitative and Qualitative Disclosure about Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are exposed to financial market risks related to changes in
interest rates connected with our revolving lines of credit,
which bear interest at variable rates. We cannot predict market
fluctuations in interest rates. As a result, future results may
differ materially from estimated results due to adverse changes
in interest rates or debt availability. A hypothetical 100 basis
point increase in prevailing market interest rates would not
have materially impacted our financial position, results of
operations, cash flows for fiscal 2004. We do not engage in
financial transactions for trading or speculative purposes, and
we have not entered into any interest rate hedging contracts.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We source all of our product from apparel markets in the United
States and, therefore, are not subject to fluctuations in
foreign currency exchange rates. We have not entered into
forward contracts to hedge against fluctuations in foreign
currency prices.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
If we were to begin sourcing product directly from overseas, our
risk management policy would allow us to utilize foreign
currency forward and option contracts to manage currency
exposures. If we were to enter into hedging contracts, we
anticipate that the contracts would have maturities of less than
three months and would settle before the end of each quarterly
period. Additionally, we do not expect to enter into any hedging
contracts for trading or speculative purposes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In June 2005 we began investing excess cash in auction rate
securities. These securities are highly liquid, variable-rate
debt securities. While the underlying security has a long-term
nominal maturity, the interest rate is reset through dutch
auctions that are typically held every 35&nbsp;days, creating a
short-term instrument. Due to the short-term nature of these
investments, we believe that we do not have material exposure to
changes in the fair value of our investments as a result of
changes in interest rates. Declines in interest rates, however,
will reduce future investment income. We do not enter into
investments for trading or speculative purposes.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
<I>Exchanges of Nonmonetary Assets</I>. SFAS&nbsp;No.&nbsp;153
amends APB Opinion No.&nbsp;29, <I>Accounting for Nonmonetary
Transactions,</I> which requires that exchanges of nonmonetary
assets be measured based on the fair value of the assets
exchanged, but which includes certain exceptions to that
principle. SFAS&nbsp;No.&nbsp;153 eliminates the exception from
APB Opinion No.&nbsp;29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have a commercial
substance. SFAS&nbsp;No.&nbsp;153 is effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after
June&nbsp;15, 2005. The adoption of SFAS&nbsp;No.&nbsp;153 is
not expected to have a material impact on our consolidated
financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In December 2004, the FASB issued a revision to
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation</I>. SFAS&nbsp;No.&nbsp;123R replaces
SFAS&nbsp;No.&nbsp;123 and supersedes APB Opinion No.&nbsp;25,
<I>Accounting for Stock Issued to Employees,</I> and establishes
standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services.
SFAS&nbsp;No.&nbsp;123R focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions and is effective as of the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
beginning of the first annual period that begins after
June&nbsp;15, 2005 for public entities that do not file as small
business issuers. We have illustrated the effect on our earnings
as if we had adopted the fair value method of accounting for
stock-based compensation under SFAS&nbsp;No.&nbsp;123. This
information is contained in notes 2 and 8 to our financial
statements. The fair values of options and shares issued
pursuant to our option plan at each grant date were estimated
using the Black-Scholes option pricing model. The fair
value-based method of SFAS&nbsp;No.&nbsp;123 is similar in most
respects to the fair value-based method under
SFAS&nbsp;No.&nbsp;123R, although the election of certain
methods within the applicable transition rules of
SFAS&nbsp;No.&nbsp;123R may affect the impact on our
consolidated financial position or results of operations. The
impact of adopting SFAS&nbsp;No.&nbsp;123R will be dependent on
numerous factors including, but not limited to, the valuation
model chosen by us to value stock-based awards, the assumed
award forfeiture rate, the accounting policies adopted
concerning the method of recognizing the fair value of awards
over the requisite service period and the transition method
chosen for adopting SFAS&nbsp;No.&nbsp;123R. We have
preliminarily estimated the effects of adoption of
SFAS&nbsp;No.&nbsp;123R will result in an additional
compensation expense of $1.0&nbsp;million to $1.5&nbsp;million
in fiscal 2006 and a yet to be determined additional
compensation expense in fiscal 2007.
</DIV>

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<A name='110'></A>
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. We offer quality,
branded products from nationally recognized brands, as well as
private label products and a limited assortment of home
d&#233;cor items. Our merchandise offerings are designed to
appeal to the preferences of fashion conscious consumers,
particularly African-Americans. We believe that we provide our
merchandise at compelling values. We seek to provide nationally
recognized branded merchandise at 20% to 60% discounts to
department and specialty stores&#146; regular prices. Our stores
average approximately 9,000 square feet of selling space and are
typically located in neighborhood shopping centers that are
convenient to low to moderate income customers. Originally our
stores were located in the Southeast, and during late fiscal
2004 and fiscal 2005 we expanded into the Mid-Atlantic region,
the Midwest and Texas. We operate 236 stores (including two
stores currently closed due to the recent hurricanes) in both
urban and rural markets in fourteen states. For fiscal 2005, we
have opened 36 new stores and have no additional openings
planned. We expect to open 42 to 45 new stores in fiscal 2006.
Approximately 90% of the new stores we intend to open in fiscal
2006 will be located in states that we currently serve.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores,
then consisting of 85 stores throughout the Southeast, was
acquired by Hampshire Equity Partners II, L.P., a private equity
firm. Our management team has implemented several strategies
designed to differentiate our stores, improve our operating and
financial performance and position us for growth, including:
</DIV>

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

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

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

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

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    rebranding our stores and our company to Citi Trends in order to
    convey more effectively our positioning to consumers;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    investing in infrastructure to support growth, including opening
    an additional distribution center and installing new point of
    sale systems in all of our stores; and</TD>
</TR>

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

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

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
According to NPD Fashionworld, a division of the NPD Group, or
NPD, a nationally recognized firm that specializes in apparel
research, based on Consumer Panel Estimated Data, retail sales
of off-price apparel totaled $16.5&nbsp;billion in the U.S. in
2004, an increase of more than 15% from 2003. The popularity of
this segment continues to grow, with off-price retailers
accounting for 9.5% of overall retail apparel sales in the U.S.
in 2004, versus 8.6% in 2003 and 8.2% in 2002, according to NPD.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The off-price apparel market is dominated by large format,
national apparel companies, such as TJX Companies, Burlington
Coat Factory and Ross Stores. Our management believes that these
retailers generally target more affluent consumers and seek to
achieve high volumes by serving the fashion needs of a broad
segment of the population. Mass merchants and general
merchandise discount retailers, such as Wal-Mart and Kmart, also
offer apparel at reduced prices, but we believe that they
generally focus on basic apparel and are less fashion oriented.
As a result, we believe there is significant demand for a value
retailer that addresses the market of low to moderate income
consumers generally and, particularly, African-American and other
</DIV>

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minority consumers who seek value-priced, urban fashion apparel
and accessories. We believe this market benefits from several
favorable characteristics, including:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Growing Market with Favorable Demographics.</I> Based on U.S.
Census Bureau data, approximately 31% of the U.S. population was
non-white in 2000 versus approximately 20% in 1980. According to
U.S.&nbsp;Census Bureau data this percentage is estimated to
increase to approximately 35% by 2010. African-Americans
represented 12.7% of the population as of 2000, which is
expected to increase to 13.1% in 2010, based upon U.S. Census
Bureau data.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Significant Spending on Apparel.</I> According to the Selig
Center for Economic Growth at The University of Georgia the
combined U.S. buying power of non-whites grew from
$454.3&nbsp;billion in 1990 to approximately $956.4&nbsp;billion
in 2000. During that period, buying power for African-Americans
grew from $318.1&nbsp;billion to $590.2&nbsp;billion and is
estimated by the Selig Center to grow approximately 70% to
$1.0&nbsp;trillion in 2010.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We believe our core customers are more fashion oriented, which
results in a greater propensity to purchase apparel. According
to the U.S. Department of Labor, African-Americans spend 4.6% of
their annual income on apparel and related products and
services, compared to 3.2% for the U.S. population as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Expansion of Urban Apparel Brands.</I> In recent years, a
series of nationally recognized urban brands, often associated
with hip-hop and rap musicians, has emerged and gained
significant popularity. These brands offer distinctive, urban
apparel designed to appeal to African-American consumers, as
well as to the broader population. Sales from 13 national urban
apparel brands tracked by NPD totaled approximately
$1.9&nbsp;billion in 2004, an increase of approximately 46% from
2003.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Focus on Urban Fashion Mix.</I> We focus our merchandise on
urban fashions, which we believe appeals to our core customers.
We do not attempt to dictate trends, but rather devote
considerable effort to identifying emerging trends and ensuring
that our apparel assortment is considered timely and fashionable
in the urban market. Our merchandising staff tests new
merchandise before reordering and actively manages the mix of
brands and products in our stores to keep our offering fresh and
minimize markdowns.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Superior Value Proposition.</I> As a value-priced retailer,
we seek to offer first quality, fashionable merchandise at
compelling prices. We seek to provide nationally recognized
brands at 20% to 60% discounts to department and specialty
stores&#146; regular prices. We also offer products under our
proprietary brands such as Citi Steps, Diva Blue and Urban
Sophistication. These private labels enable us to expand product
selection, offer fashion merchandise at lower prices and enhance
our product offerings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Merchandise Mix that Appeals to the Entire Family.</I> We
merchandise our stores to create a destination environment
capable of meeting the fashion needs of the entire
value-conscious family. Each store offers a wide variety of
products for men and women, as well as infants, toddlers, boys
and girls. Our stores feature sportswear, dresses, plus-sized
apparel, outerwear, footwear and accessories, as well as a
limited assortment of home d&#233;cor items. We believe that the
breadth of our merchandise distinguishes our stores from many
competitors that offer urban apparel primarily for women, and
reduces our exposure to fashion trends and demand cycles in any
single category.
</DIV>

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<I>Strong and Flexible Sourcing Relationships.</I> We maintain
strong sourcing relationships with a large group of suppliers.
We have purchased merchandise from more than 1,000 vendors in
the past twelve months. Purchasing is controlled by our 20-plus
member buying team located at our Savannah, Georgia headquarters
and in New York, New York, and our buyers have an average of
more than 20&nbsp;years of retail experience. We purchase
merchandise through planned programs with vendors at reduced
prices and opportunistically through close-outs, with the
majority of our merchandise purchased for the current season and
a limited quantity held
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
for sale in future seasons. To foster our vendor relationships,
we pay vendors promptly and do not ask for typical retail
concessions such as promotional and markdown allowances or
delivery concessions such as drop shipments to stores.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Attractive Fashion Presentation and Store Environment.</I> We
seek to provide a fashion-focused shopping environment that is
similar to a specialty apparel retailer, rather than a typical
off-price store. Products from nationally recognized brands are
prominently displayed by brand, rather than by size, on
dedicated, four-way fixtures featuring multiple sizes and
styles. The remaining merchandise is arranged on hanging racks.
All stores are carpeted and well-lit, with most featuring a
sound system that plays urban adult and urban contemporary music
throughout the store. Nearly all of our stores have either been
opened or remodeled in the past six years.
</DIV>

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<I>Highly Profitable Store Model.</I> We operate a proven and
efficient store model that delivers strong cash flow and store
level return on investment. We locate stores in high traffic
strip shopping centers that are convenient to low and moderate
income neighborhoods. We generally utilize previously occupied
store sites. This approach enables us to generate substantial
traffic at attractive rents. Similarly, our advertising expenses
are low as we do not rely on promotion-driven sales but rather
seek to build our reputation for value through everyday low
prices. At the same time, from an investment perspective, we
seek to design stores that are inviting and easy to shop, while
limiting startup and fixturing costs. As a result, our stores
generate rapid payback of investments, typically within 12 to
14&nbsp;months.
</DIV>

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<B>Growth Strategy</B>
</DIV>

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Our growth strategy is to open stores in new and existing
markets, as well as to increase sales in existing stores. Adding
stores in the markets we currently serve often enables us to
benefit from enhanced name recognition and achieve advertising
and operating synergies. In fiscal 2003 and fiscal 2004, we
opened 25 and 40 stores, respectively, and entered the
Baltimore, Houston, Norfolk and Washington, D.C. markets.
</DIV>

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For fiscal 2005, we have opened 36 new stores thus far and have
no additional openings planned, and we entered the Cincinnati,
Dallas, Louisville and Miami markets. We expect to open 42 to 45
new stores in fiscal 2006. Approximately 90% of the new stores
we intend to open in fiscal 2006 will be located in states we
currently serve.
</DIV>

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We intend to increase comparable store sales by increasing the
assortment and amount of inventory in existing merchandise
categories for which recent sales and/or sales trends are
encouraging. We also intend to increase comparable store sales
through the expansion of adjacent product categories such as
home d&#233;cor and intimate apparel. In order to expand such
developing categories, we added a dedicated buyer in home
d&#233;cor in fiscal 2005 and upgraded our buying capabilities
and focus within the intimate apparel category.
</DIV>

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<B>Store Operations</B>
</DIV>

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<I>Store Format.</I> Our existing 236 stores&#146; average
selling space is approximately 9,000 square feet, which allows
us space and flexibility to departmentalize our stores and
provide directed traffic patterns. New stores opened since the
beginning of fiscal 2003 average approximately 10,500 square
feet of selling space, which is larger than our historical store
base. As a result of these new stores, as well as due to the
remodeling and expansion of existing stores, our average square
footage of selling space per store has increased from
approximately 7,600 at the end of fiscal 2002 to its current
level.
</DIV>

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We arrange our stores in a racetrack format with women&#146;s
sportswear, our most attractive and fashion current merchandise,
in the center of each store, and complementary categories
adjacent to those items. Men&#146;s and boy&#146;s apparel is
displayed on one side of the store while dresses, footwear and
accessories are displayed on the other side. Merchandise for
infants, toddlers and girls is displayed along the back of the
store. Impulse items, such as jewelry and sunglasses, are
featured near the checkout area. Products from nationally
recognized brands are prominently displayed on four way racks at
the front of each department. The
</DIV>

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remaining merchandise is displayed on hanging racks and
occasionally on table displays. Large hanging signs identify
each category location. The unobstructed floor plan allows the
customer to see virtually all of the different product areas
from the store entrance and provides us the flexibility easily
to expand and contract departments in response to consumer
demand, seasonality and merchandise availability. Virtually all
of our inventory is displayed on the selling floor. Our prices
are clearly marked and often have the comparative retail-selling
price noted on the price tag.
</DIV>

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<I>Store Management.</I> Store operations are managed by our
Vice President of Store Operations, three regional managers and
26 district managers, each of whom typically manages eight to
ten stores. Our typical store is staffed with a store manager,
two or three assistant managers and seven to eight part time
sales associates, all of whom rotate work days on a shift basis.
District managers and store managers participate in a bonus
program based on achieving predetermined levels of sales and
profits. The district managers also participate in bonus
programs based on achieving targeted payroll costs. Our regional
managers participate in a bonus program based on a rollup of the
district managers&#146; bonuses. The assistant managers and
sales associates are compensated on an hourly basis with
incentives. Moreover, we recognize individual performance
through internal promotions and provide extensive opportunities
for advancement, particularly given our rapid growth.
</DIV>

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We place significant emphasis on loss prevention in order to
control inventory shrinkage. Our initiatives include electronic
tags on all of our products, training and education of store
personnel on loss prevention issues, digital video camera
systems, alarm systems and motion detectors in the stores. We
also capture extensive point-of-sale data and maintain systems
that monitor returns, voids and employee sales, and produce
trend and exception reports to assist us in identifying
shrinkage issues. We have a centralized loss prevention team
that focuses exclusively on implementation of these initiatives
and specifically on stores that have experienced above average
levels of shrinkage.
</DIV>

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<I>Employee Training.</I> Our employees are critical to
achieving our goals, and we strive to hire employees with high
energy levels and motivation. We have well-established store
operating policies and procedures and an extensive 90-day
in-store training program for new store managers and assistant
managers. Our sales associates also participate in a 30-day
customer service and store procedures training program, which is
designed to enable them to assist customers in a friendly,
helpful manner.
</DIV>

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<I>Layaway Program.</I> We offer a layaway program that allows
customers to purchase merchandise by initially paying a 20%
deposit together with a $2.00 service charge. The customer then
makes additional payments every two weeks and has 60&nbsp;days
within which to complete the purchase. If the purchase is not
completed, the customer receives a merchandise credit for
amounts paid less a $5.00 re-stocking fee and the service
charge. Sales under our layaway program accounted for
approximately 13% of our total sales in fiscal 2004.
</DIV>

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<I>Store Economics.</I> We believe we benefit from attractive
store-level economics. The average investment for the 65 stores
we opened in fiscal 2003 and fiscal 2004, including leasehold
improvements, equipment, fixturing, cost of inventory to stock
the store (net of accounts payable) and pre-opening store
expenses, was approximately $280,000. These 65 stores generated
average sales of $1.4&nbsp;million and average store operating
profit (defined as store operating revenue less cost of sales
and store operating expenses which is comprised of payroll,
occupancy, advertising and other operating costs) of
approximately $230,000 during their first twelve months of
operation.
</DIV>

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<B>Store Locations</B>
</DIV>

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As of January&nbsp;4, 2006, we operated 236 stores (including
two stores, one in Belle Glade, Florida and one in New Orleans,
Louisiana, currently closed due to the recent hurricanes)
located in fourteen states. Our stores are primarily located in
strip shopping centers and downtown business districts. We have
no franchising relationships as all of our stores are
company-operated. The table below sets forth the number of
stores in each of these fourteen states and the specific markets
within each such state in which we operated at least two stores
as of January&nbsp;4, 2006:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Alabama&#151;19</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Birmingham&#151;4
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Montgomery&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mobile&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;11 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Arkansas&#151;5</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Little
Rock&#151;3 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;2 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Florida&#151;16</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jacksonville&#151;3
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Orlando&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tampa&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;9 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Georgia&#151;48</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Albany&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlanta&#151;9
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Augusta&#151;3
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Macon&#151;3
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Savannah&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;29 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kentucky&#151;1</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Louisiana&#151;22</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baton
Rouge&#151;2 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Monroe&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
Orleans&#151;2 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shreveport&#151;3
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;13 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Maryland&#151;3</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baltimore&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;1 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mississippi&#151;19</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jackson&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;17 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>North Carolina&#151;31</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charlotte&#151;3
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Durham&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fayetteville&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Greensboro&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Winston-Salem&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;20 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ohio&#151;1</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>South Carolina&#151;32</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charleston&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Columbia&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Orangeburg&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;26 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Tennessee&#151;10</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Memphis&#151;6
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nashville&#151;2
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;2 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Texas&#151;16</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dallas-Fort
Worth&#151;3 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Houston&#151;8
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;5 <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Virginia&#151;13</B> <BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Norfolk&#151;7
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richmond&#151;4
<BR>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Single
store locations&#151;2 <BR>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Site Selection.</I> Cost-effective store locations are an
important part of our profitability model. Accordingly, we look
for second and third use store locations that offer attractive
rents, but also meet our demographic and economic criteria.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In selecting a location, we target both urban and rural markets.
Demographic criteria used in site selection include
concentrations of our core consumers. In addition, we require
convenient site accessibility, as well as strong co-tenants,
such as food stores, dollar stores, rent-to-own stores and other
apparel stores. We prepare detailed demographic studies and pro
forma financial statements for each prospective store location.
Our economic criteria for a site include specific store-level
profitability and return on capital invested.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have a dedicated real estate management team responsible for
new store site selection. Our group has identified a significant
number of target sites in existing strip shopping centers and
off-mall locations with appropriate market characteristics in
both new and existing markets. We opened a total of 65 new
stores in fiscal 2003 and fiscal 2004. We have opened 36 new
stores in fiscal 2005 and expect to open 42 to 45 new stores in
fiscal 2006. We have funded our store openings with a portion of
the net proceeds from our initial public offering and cash flow
from operations.
</DIV>

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Shortly after we sign a new store lease, our store construction
department prepares the store by installing fixtures, signs,
dressing rooms, checkout counters, cash register systems and
other items. Once we take possession of a store site, we can
open the store within approximately three to four weeks.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Merchandising.</I> Our merchandising policy is to offer high
quality, branded products at attractive prices for the entire
value-conscious family. We seek to maintain a diverse assortment
of first quality, in-season
</DIV>

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merchandise that appeals to the distinctive tastes and
preferences of our core customers. Approximately 35% to 40% of
our sales are typically represented by nationally recognized
brands that we purchase from approximately 30 to 50 vendors. We
also offer a wide variety of products from less recognized
brands that represent approximately 60% of sales. The remaining
10% of sales represent private label products under our
proprietary brands such as Citi Steps, Diva Blue and Urban
Sophistication. Our private label products enable us to expand
product selection, offer merchandise at lower prices and enhance
our product offerings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our merchandise includes apparel, accessories and home
d&#233;cor. Within apparel, we offer men&#146;s, women&#146;s,
which includes dresses, sportswear and plus size offerings, and
children&#146;s, which includes offerings for infants, toddlers,
boys and girls. We also offer accessories, which includes
intimate apparel, handbags, hats, jewelry, footwear, toys, belts
and sleepwear, as well as a limited assortment of home
d&#233;cor, which includes giftware, lamps, pictures, mirrors
and figurines.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table sets forth our approximate merchandise
assortment by classification as a percentage of net sales for
the thirty-nine weeks ended October&nbsp;29, 2005. We have made
an estimate for layaways based on total layaway transactions
still outstanding as of October&nbsp;29, 2005.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

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

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Women&#146;s</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Children&#146;s</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Men&#146;s</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accessories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Home d&#233;cor</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Pricing.</I> We purchase our merchandise at low prices and
mark prices up less than department or specialty stores. We seek
to provide our nationally recognized brands at prices 20% to 60%
below regular retail prices available in department stores and
specialty stores, and that product offering validates both our
value and fashion positioning to our consumers. We also consider
the price-to-value relationships of our non-branded products to
be strong. Our basic pricing strategy is everyday low prices.
Our discount from the suggested retail price is usually
reflected on the price tag. We review each department in our
stores at least monthly for possible markdowns based on sales
rates and fashion seasons to promote faster turnover of
inventory and to accelerate the flow of current merchandise. Our
return policy permits any customer the right to return
merchandise within ten days of purchase and receive a cash
refund if they have a receipt, unless such item was purchased in
a closeout or discount in which case we will only permit a
merchandise exchange. We believe that our practice in this
regard is more restrictive when compared to other apparel
retailers.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our merchandising department oversees the sourcing and
allocation of merchandise to our stores, which allows us to
utilize volume purchase discounts and maintain control over our
inventory. We source our merchandise from over 1,000 vendors,
consisting of domestic manufacturers and importers. For the
thirty-nine weeks ended October&nbsp;29, 2005, no vendor
represented over 6% of our net sales. Our President and Chief
Merchandising Officer supervises our 18 member planning and
allocation team, as well as our buying team which is comprised
of four merchandise managers and 19 buyers. Consistent with our
plan to grow the intimate apparel and home d&#233;cor
categories, we added a dedicated buyer in home d&#233;cor in
fiscal 2005 and upgraded our buying capabilities and focus in
intimate apparel.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our buyers have an average of more than 20&nbsp;years of
experience in the retail business and have developed
long-standing relationships with many of our vendors, including
those controlling the distribution of branded apparel. These
buyers are responsible for maintaining vendor relationships,
securing high quality, fashionable merchandise that meets our
margin requirements and identifying and responding to emerging
fashion trends. Our buyers, who are based in Savannah and New
York, accomplish this by traveling to the major United States
apparel markets regularly, visiting our major manufacturers and
attending national and regional apparel
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
trade shows, including urban-focused trade shows. We also retain
the services of two independent fashion consulting firms,
Barbara Fields Buying and Henry Donegar Associates, that monitor
market trends.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our buyers purchase merchandise in styles, sizes and quantities
to meet inventory levels developed by our planning staff. We
work closely with our suppliers and are able to differentiate
ourselves by our willingness to purchase less than a full
assortment of styles, colors and sizes and by our policy of
paying promptly and not asking for typical retail concessions
such as promotional and markdown allowances. Our purchasing
department utilizes several buying techniques that enable us to
offer to consumers branded and other merchandise at everyday low
prices. The majority of the nationally recognized branded
products we sell are purchased in-season and represent our
vendors&#146; excess inventories resulting from production or
retailer order cancellations. We generally purchase later in the
merchandising buying cycle than department and specialty stores.
This allows us to take advantage of imbalances between
retailers&#146; demands for specific merchandise and
manufacturers&#146; supply of that merchandise. We also purchase
merchandise from some vendors in advance of the selling season
at reduced prices. Occasionally, we purchase merchandise on an
opportunistic basis, which we then &#147;pack and hold&#148; for
sale three to nine months later. Where possible, we seek to
purchase items based on style or color in limited quantities on
a test basis with the right to reorder as needed. Finally, we
purchase private label merchandise that we source to our
specifications.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As is customary in the industry, we do not enter into long-term
contracts with any of our suppliers. While we believe we may
encounter delays if we change suppliers, we believe alternate
sources of merchandise for all product categories are available
at comparable prices.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We allocate merchandise across our store base according to
store-level demand. Our merchandising staff utilizes a
centralized management system to monitor merchandise purchasing,
allocation and sales in order to maximize inventory turnover,
identify and respond to changing product demands and determine
the timing of mark-downs to our merchandise. Our buyers also
regularly review the age and condition of our merchandise and
manage both the reordering and clearance processes. In addition,
our merchandising team communicates with our regional, district
and store managers to ascertain regional and store-level
conditions and to better ensure that our product mix meets our
consumers&#146; demands in terms of quality, fashion, price and
availability.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our advertising goal is to build the &#147;Citi Trends&#148;
brand and promote consumers&#146; association of our brand with
value, quality, fashion and everyday low prices. We generally
focus our advertising efforts during the Easter, back-to-school
and Christmas seasons. This advertising consists of radio
commercials on local hip-hop radio stations that highlight our
brands, our value and our everyday low prices. We also do
in-store advertising that includes window signs designated for
special purposes, such as seasonal events and clearance periods,
and taped audio advertisements co-mingled with our in-store
music programs. Signs change in color, quantity and theme every
three to six weeks. For store grand openings, we typically seek
to create community awareness and consumer excitement through
radio advertising preceding and during the grand opening and by
creating an on-site event with local radio personalities
broadcasting from the new location. We also distribute
promotional items such as gift certificates and shopping sprees
in connection with our grand openings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our marketing efforts center on promoting our everyday low
prices and on demonstrating the strong price-to-value
relationship of our products to our consumers. We do not utilize
promotional advertising. Our merchandise is priced so that our
competition rarely has lower prices. In the limited situations
where our competition offers the same merchandise at a lower
price, we will match the price.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
All merchandise sold in our stores is shipped directly from our
distribution centers in Savannah, Georgia and our distribution
center in Darlington, South Carolina. In October 2005, we
purchased our Darlington facility which is situated on 90 acres
of land. To date we have paid approximately $1.6&nbsp;million of
the $3&nbsp;million to
</DIV>

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$4&nbsp;million in total we expect to spend on acquisition costs
and for capital improvements necessary to prepare the location
for full operation. We began receiving and processing shipments
from this new distribution location in the fourth quarter of
fiscal 2005. We will continue our physical renovation and
updating of the distribution center, which has the same
technology and information systems as our other distribution
centers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
All work necessary to prepare the merchandise to be sales-floor
ready is performed in our distribution centers. Some of our
merchandise comes from vendors pre-ticketed and pre-packed and
can be shipped directly from the distribution centers to our
stores without repacking. However, most merchandise has to be
price ticketed and repacked in store shipping units before being
shipped to the stores.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We generally ship merchandise from our distribution centers to
stores daily, but approximately 40 of our smaller volume stores
receive merchandise every other day. We use United Parcel
Service, Inc. and FedEx Corporation to ship merchandise to our
stores. Our two distribution centers in Savannah have a combined
approximately 240,000 square feet, including approximately
20,000&nbsp;square feet of office space. Our Darlington, South
Carolina facility has approximately 286,500&nbsp;square feet. We
expect these facilities to provide us the capacity to double our
existing sales volume.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Quality control reviews of every merchandise receipt are
performed by a dedicated team at our distribution centers. These
teams are responsible for working with our vendors and
manufacturers to ensure consistent and superior quality across
all merchandise categories. Nearly all of our merchandise is
purchased from recognized domestic manufacturers and importers,
which reduces our risk of inadvertently handling counterfeit
items.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have information systems in place to support each of our
business functions. We purchased our enterprise software from
Island Pacific, a primary software provider to the retail
industry. Our computer platform is an IBM AS400. The Island
Pacific software supports the following business functions:
purchasing, purchase order management, price and markdown
management, distribution, merchandise allocation, general
ledger, accounts payable and sales audit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Island Pacific merchandise system captures and reports sales
and inventory by item, by store and by day. This information
allows our merchandising team to evaluate merchandise
performance in considerable detail with high levels of
precision. Over the last four years we have enhanced the Island
Pacific software, particularly to enhance merchandise allocation
and distribution functions. In 2004, we purchased and installed
Buyers Toolbox software to aid our merchandise planning and
allocation functions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our stores use point-of-sale software from DataVantage, a
division of MICROS Systems, Inc., to run our store cash
registers. The system uses bar code scanners at checkout to
capture item sales. It also supports end-of-day processing and
automatically transmits sales and transaction data to Savannah
each night. Additionally, the software supports store time clock
and payroll functions. To facilitate marking down and
re-ticketing merchandise, employees in our stores use hand-held
scanners that read the correct item price and prepare new price
tickets for merchandise. Our DataVantage software also enables
us to sort and review transaction data and generate exception
and other database reporting to assist in loss prevention.
</DIV>

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We had planned to complete installation of the latest upgrade to
the DataVantage software. We, however, experienced delays
implementing the upgrade and now plan to complete installation
of the upgrade by the end of fiscal 2006. The new software will
enable improved and less costly telecommunications between our
stores and our corporate headquarters. The upgrade will also
provide improved credit and debit card processing, store e-mail
and more reliable data transmissions to our home office systems.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We believe that our information systems, with upgrades and
updates over time, are adequate to support our operations for
the foreseeable future.
</DIV>

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<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The markets we serve are highly competitive. The principal
methods of competition in our retail business are fashion,
assortment, pricing and presentation. We believe we have a
competitive advantage in our offering of fashionable brands at
everyday low prices. We compete against a diverse group of
retailers including national off-price retailers, mass
merchants, smaller specialty retailers and dollar stores. The
off-price retail companies with which we compete include TJX
Companies, Burlington Coat Factory and Ross Stores. In
particular, TJX Companies&#146; A.J. Wright stores target
moderate income consumers. Ross Stores has recently launched a
similar concept targeting lower income consumers, called
dd&#146;s DISCOUNTS. We believe our strategy of appealing to
African-American consumers and offering urban apparel products
allows us to compete successfully with these retailers. We also
believe we offer a more inviting store format than the off-price
retailers, including our use of carpeted floors and more
prominently displayed brands. We also compete with a group of
smaller specialty retailers that only sell women&#146;s
products, such as Rainbow, Dots, Fashion Cents, It&#146;s
Fashions and Simply Fashions. Our mass merchant competitors
include Wal-Mart and Kmart. These chains do not focus on fashion
apparel and, within their apparel offering, lack the urban focus
that we believe differentiates our offering and appeals to our
core customers. Similarly, while some of the dollar store chains
offer apparel, they typically offer a more limited selection
focused on basic apparel needs.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We regard our trademarks and service marks as having significant
value and as being important to our marketing efforts. We have
registered the &#147;Citi Trends&#148; trademark with the U.S.
Patent and Trademark Office on the Principal Register as both a
trademark for retail department store services and as a
trademark for clothing. We have also registered the following
trademarks with the U.S. Patent and Trademark Office on the
Principal Register: &#147;Citi Club,&#148; &#147;Citi
Express,&#148; &#147;Citi Knights,&#148; &#147;Citi Nite,&#148;
&#147;Citi Steps,&#148; &#147;Citi Trends Fashion for
Less,&#148; &#147;Citi Women,&#148; &#147;CT Sport,&#148;
&#147;Diva Blue,&#148; &#147;Lil Citi Man,&#148; &#147;Lil
Ms&nbsp;Hollywood,&#148; &#147;Univer Soul&#148;, &#147;Urban
Sophistication&#148; and &#147;Vintage Harlem.&#148; Our policy
is to pursue registration of our marks and to oppose vigorously
infringement of our marks.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
All our existing 236 stores, totaling approximately
2.6&nbsp;million gross square feet, are leased under operating
leases. Additionally, as of January&nbsp;4, 2006, we have signed
leases for 11 new stores to be opened during fiscal 2006
aggregating approximately 150,000 total gross square feet. Our
typical store lease is for five years with an option to extend
our lease term for an additional five-year period, and all but
one lease requires us to pay percentage rent and increases in
specified site-related charges. Nearly all of our store leases
provide us the right to cancel following an initial three-year
period in the event the store does not meet pre-determined sales
levels.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We own an approximately 170,000 square foot facility located on
Fahm Street in Savannah, Georgia, which serves as our
headquarters and one of our three distribution centers. This
facility is financed under a mortgage which was repaid with a
portion of the proceeds from our initial public offering. We
currently lease the land and building for our distribution
center located on Coleman Boulevard. The lease for this
distribution center expires in September 2006, with options to
renew for up to three more years. On October&nbsp;19, 2005, we
acquired an approximately 286,500 square foot distribution
center in Darlington, South Carolina. We began to receive
shipments into the new facility in December. In addition, we
currently lease 1,200 square feet in New York City, which is
used for buyer operations and meetings with vendors.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As of January&nbsp;4, 2006, we had approximately 1,120 full-time
and approximately 1,600 part-time employees. Of these employees,
approximately 2,295 are employed in our stores and the remainder
are employed in our
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
distribution centers and corporate offices. We are not a party
to any collective bargaining agreements, and none of our
employees is represented by a labor union.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are from time to time involved in various legal proceedings
incidental to the conduct of our business, including claims by
our customers, employees or former employees. Such claims could
have a material adverse effect on our business, financial
condition and results of operation. We, however, are not aware
of any legal proceedings pending or threatened against us that
we expected to have a material adverse effect on our business,
financial condition or results of operation.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='111'></A>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table sets forth information regarding our
executive officers and directors and their ages as of
January&nbsp;4, 2006:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Position</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief Merchandising Officer</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President of Store Operations</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gregory P. Flynn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board of Directors</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John S. Lupo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patricia M. Luzier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tracy L. Noll</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>R.&nbsp;Edward Anderson.</I> Mr.&nbsp;Anderson has served as
our Chief Executive Officer and as a director since December
2001. Prior to his current responsibilities, Mr.&nbsp;Anderson
served as Executive Vice President and Chief Financial Officer
of Variety Wholesalers, our previous owner, from December 1997
to December 2001. From 1978 to 1994, Mr.&nbsp;Anderson served as
Chief Financial Officer of Rose&#146;s Stores, Inc., a discount
retailer. In August 1994, Mr.&nbsp;Anderson was promoted to
Chief Executive Officer and served in this position until
December 1997. Mr.&nbsp;Anderson also served as the Chairman of
the Board of Directors of Rose&#146;s Stores, Inc. from August
1994 to December 1997.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>George A. Bellino. </I>Mr.&nbsp;Bellino has served as our
President and Chief Merchandising Officer since December 2001
and served as a director from April 1999 to May 2005.
Mr.&nbsp;Bellino served as our Chief Executive Officer and
President from April 1999 to December 2001. From January 1997 to
March 1999, Mr.&nbsp;Bellino served as President of our
predecessor company. From June 1992 to December 1996,
Mr.&nbsp;Bellino served as the Vice President of Merchandising
at Pennsylvania Fashions, a privately held off-price apparel
chain. From June 1990 to October 1991, Mr.&nbsp;Bellino served
as President of General Textiles / Family Bargain Center, a
retail apparel chain.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Thomas W. Stoltz. </I>Mr.&nbsp;Stoltz has served as our Chief
Financial Officer since September 2000. From January 1999 to
August 2000, Mr.&nbsp;Stoltz served as Chief Financial Officer
of Sharon Luggage and Gifts, a privately held retailer. From
August 1996 to December 1998, Mr.&nbsp;Stoltz served as the
Chief Financial Officer and Vice President of Finance of Factory
Card Outlet, a greeting card retailer. Mr.&nbsp;Stoltz is a
certified public accountant licensed in North Carolina and a
member of the American Institute of Certified Public Accountants.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>James A. Dunn. </I>Mr.&nbsp;Dunn has served as our Vice
President of Store Operations since April 2001. From January to
April 2001, Mr.&nbsp;Dunn was our Director of Training and
Development and from January 2000 to January 2001 was one of our
Regional Managers. Prior to joining us, Mr.&nbsp;Dunn was a
Store Manager at Staples from January 1999 to December 2000.
Prior to that Mr.&nbsp;Dunn was a Regional Manager at Dress
Barn, where he supervised 77 stores and 10 district sales
managers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Gregory P. Flynn. </I>Mr.&nbsp;Flynn has served as our
Chairman of the board of directors since 2001 and as a member of
the compensation committee since 2001. Mr.&nbsp;Flynn is also a
member of the nominating and corporate governance committee.
Mr.&nbsp;Flynn is currently a Managing Partner of Hampshire
Equity Partners II, L.P. and Hampshire Equity Partners III, L.P.
and has been associated with Hampshire since 1996. Hampshire
Equity Partners II, L.P. and certain of its affiliates are
selling stockholders in this offering. From 1994 to 1996,
Mr.&nbsp;Flynn served as a Managing Partner of ING Equity
Partners, L.P.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>John S. Lupo. </I>Mr.&nbsp;Lupo has served as a director
since May 2003, and is the Chairman of the compensation
committee, as well as a member of the audit committee and the
nominating and corporate governance committee.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Mr.&nbsp;Lupo is a principal in the consulting firm Renaissance
Partners, LLC, which he joined in February 2000. From November
1998 until December 1999, Mr.&nbsp;Lupo served as Executive Vice
President of Basset Furniture. From October 1996 until October
1998, Mr.&nbsp;Lupo served as the Chief Operating Officer of the
International Division of Wal-Mart Stores Inc., and from
September 1990 until September 1996, Mr.&nbsp;Lupo served as
Senior Vice President and General Merchandise Manager of
Wal-Mart Stores Inc. Mr.&nbsp;Lupo is a director for Spectrum
Brands (formerly known as Rayovac Corp.), a public reporting
company, and serves on their Compensation and Corporate
Governance and Nominating Committees.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Tracy L. Noll. </I>Mr.&nbsp;Noll has served as a director
since July 2000 and is the Chairman of the audit committee, as
well as a member of the compensation committee and the
nominating and corporate governance committee. Mr.&nbsp;Noll is
currently a private investor based in Dallas, Texas. He served
as President and Chief Operating Officer of National Dairy
Holdings, L.P. from April 2001 to September 2003. He served as
Executive Vice President of Suiza Foods Corporation, a public
reporting company, from September 1994 until March 2001,
including serving as Chief Financial Officer from September 1994
until July 1997. He served as Vice President and Chief Financial
Officer of Morningstar Foods Inc., a public reporting company,
from April 1988 until June 1994. Mr.&nbsp;Noll currently serves
as a Director and is Chairman of the Audit Committee of Reddy
Ice Group, Inc., a public reporting company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Patricia M. Luzier. </I>Ms.&nbsp;Luzier has served as a
director since November&nbsp;30, 2005 and is the Chairman of the
nominating and corporate governance committee, as well as a
member of the audit committee and the compensation committee.
Ms.&nbsp;Luzier was previously the Senior Vice President and
Chief Administrative Officer of Cole National Corporation, a
public reporting specialty retailer, from 1999 until October
2004. She served as Senior Vice President, Human Resources and
Administration for HomePlace Group, Inc. from 1998 until 1999.
She also served as Senior Vice President of Human Resources with
Vicorp Restaurants, Inc. from 1994 until 1998. Ms.&nbsp;Luzier
currently serves as a Director for Dale Carnegie and Associates
and serves on their Compensation Committee.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Each of our executive officers serves at the discretion of the
board of directors and holds office until his successor is
elected and qualified or until his earlier resignation or
removal. There are no family relationships among any of our
directors or executive officers.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our board of directors consists of five directors divided into
three classes, three of which are &#147;independent&#148; under
the rules of the Nasdaq National Market. Mr.&nbsp;Flynn is the
only Hampshire Equity Partners nominated director, and the three
independent directors are Messrs.&nbsp;Noll and Lupo and
Ms.&nbsp;Luzier.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our second amended and restated certificate of incorporation
divides our board into three classes having staggered terms,
with one of such classes being elected each year for a new
three-year term. Class&nbsp;I directors have an initial term
expiring in 2006, Class&nbsp;II directors have an initial term
expiring in 2007 and Class&nbsp;III directors have an initial
term expiring in 2008. Class&nbsp;I is comprised of
Ms.&nbsp;Luzier. Class&nbsp;II is comprised of Messrs.&nbsp;Noll
and Lupo. Class&nbsp;III is comprised of Messrs.&nbsp;Flynn and
Anderson.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In connection with our initial public offering, we entered into
a nominating agreement with Hampshire Equity Partners&nbsp;II,
L.P. pursuant to which we, acting through our nominating and
corporate governance committee, agreed, subject to the
requirements of our directors&#146; fiduciary duties, that
(i)&nbsp;Hampshire Equity Partners&nbsp;II, L.P. is entitled to
designate two directors to be nominated for election to our
board of directors as long as Hampshire Equity Partners&nbsp;II,
L.P. owns in the aggregate at least 40% of the shares of our
common stock which it owned immediately prior to the
consummation of our initial public offering or
(ii)&nbsp;Hampshire Equity Partners&nbsp;&nbsp;II, L.P. is
entitled to designate one director to be nominated for election
to our board of directors as long as Hampshire Equity
Partners&nbsp;&nbsp;II, L.P. owns in the aggregate less than 40%
and at least 15% of the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering. If at any time
Hampshire Equity Partners&nbsp;&nbsp;II, L.P. owns less than 15%
of the shares of our common stock which it owned immediately
prior to the consummation of our initial public offering, it
will not have the right to nominate any directors for election
to our board of directors. See &#147;Related Party
Transactions&#151;Nominating Agreement&#148;.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our board of directors has established an audit committee, a
compensation committee and a nominating and corporate governance
committee.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Audit Committee</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The audit committee, currently consisting of Messrs.&nbsp;Noll
and Lupo and Ms.&nbsp;Luzier, reviews our internal accounting
procedures and consults with and reviews the services provided
by our independent registered public accountants. Mr.&nbsp;Noll
is the Chairman of the audit committee and qualifies as an
&#147;audit committee financial expert&#148; for purposes of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act. The principal duties and responsibilities of our audit
committee are to:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    have direct responsibility for the selection, compensation,
    retention, replacement and oversight of the work of our
    independent auditors, including prescribing what services are
    allowable and approve in advance all services provided by the
    auditors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    set clear hiring policies for employees or former employees of
    the independent auditors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review all proposed company hires formerly employed by the
    independent auditors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    have direct responsibility for ensuring its receipt from the
    independent auditors at least annually of a formal written
    statement delineating all relationships between the auditor and
    us, consistent with Independence Standards Board Standard
    No.&nbsp;1;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    discuss with the independent directors any disclosed
    relationships or services that may impact the objectivity and
    independence of the auditor and for taking, or recommending that
    the full board of directors take, appropriate action to oversee
    the independence of the independent auditor;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    discuss with the internal auditors and the independent auditors
    the overall scope and plans for their respective audits,
    including the adequacy of staffing, compensation and resources;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review, at least annually, the results and scope of the audit
    and other services provided by our independent auditors and
    discuss any audit problems or difficulties and management&#146;s
    response;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review our annual audited financial statement and quarterly
    financial statements and discuss the statements with management
    and the independent auditors (including disclosures in our
    Exchange Act reports in response to Item&nbsp;303,
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148;, of
    Regulation&nbsp;S-K);</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss with management, the internal auditors and
    the independent auditors the adequacy and effectiveness of our
    internal controls, including our ability to monitor and manage
    business risk, legal and ethical compliance programs and
    financial reporting;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss separately with the internal auditors and the
    independent auditors, with and without management present, the
    results of their examinations;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review our compliance with legal and regulatory independence;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss our interim financial statements and the
    earnings press releases prior to the filing of our quarterly
    reports on Form&nbsp;10-Q, as well as financial information and
    earnings guidance provided to analysts and rating agencies;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and discuss our risk assessment and risk management
    policies;</TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    prepare an audit committee report required by the Commission to
    be included in our annual proxy statement;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    engage independent counsel and other advisors to assist the
    audit committee in carrying out its duties;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and approve all related party transactions consistent
    with the rules applied to companies listed on the Nasdaq
    National Market; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    establish procedures regarding complaints received by us or our
    employees regarding accounting, accounting controls or
    accounting matters.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The audit committee is required to report regularly to our board
of directors to discuss any issues that arise with respect to
the quality or integrity of our financial statements, our
compliance with legal or regulatory requirements, the
performance and independence of our independent auditors, or the
performance of the internal audit function.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation Committee</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The compensation committee, consisting of Messrs.&nbsp;Lupo,
Noll and Flynn and Ms.&nbsp;Luzier, reviews and determines the
compensation and benefits of all of our officers, establishes
and reviews general policies relating to the compensation and
benefits of all of our employees, and administers our long-term
incentive plan. Mr.&nbsp;Lupo is the Chairman of the
compensation committee. The principal duties and
responsibilities of our compensation committee are to:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    review and approve corporate goals and objectives relevant to
    our Chief Executive Officer&#146;s and other named executive
    officers&#146; compensation;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    evaluate the Chief Executive Officer&#146;s performance in light
    of these goals and objectives;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    either as a committee, or together with the other independent
    directors, determine and approve the Chief Executive
    Officer&#146;s compensation;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    make recommendations to our board of directors regarding the
    salaries, incentive compensation plans and equity-based plans
    for our employees; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    produce a compensation committee report on executive
    compensation as required by the Commission to be included in our
    annual proxy statements or annual reports on Form&nbsp;10-K
    filed with the Commission.</TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation Committee Interlocks and Insider
    Participation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Prior to establishing the compensation committee, the board of
directors as a whole performed the functions delegated to the
compensation committee. No member of our current compensation
committee serves or has ever served as one of our officers or
employees. None of our executive officers serves or has ever
served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers
serving on our board of directors or compensation committee.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Nominating and Corporate Governance Committee</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The nominating and corporate governance committee currently
consists of Messrs.&nbsp;Lupo, Noll and Flynn and
Ms.&nbsp;Luzier. Ms.&nbsp;Luzier is the Chair of the nominating
and corporate governance committee. The principal duties and
responsibilities of our nominating and corporate governance
committee are to:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    identify individuals qualified to become board members,
    consistent with criteria approved by the board of directors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    recommend the individuals identified be selected as nominees at
    annual meetings of our stockholders;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    develop and recommend to the board of directors a set of
    corporate governance principles applicable to us; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    oversee the evaluation of the board of directors and management.</TD>
</TR>

</TABLE>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Code of Business Conduct</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have adopted a written code of business conduct applicable to
our directors, officers and employees in accordance with the
rules of the Nasdaq National Market and the Commission. Our code
of business conduct is designed to deter wrongdoing and to
promote:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    honest and ethical conduct;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    full, fair, accurate, timely and understandable disclosure in
    reports and documents that we file with the Commission and in
    our other public communications;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    compliance with applicable laws, rules and regulations,
    including insider trading compliance; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    accountability for adherence to the code and prompt internal
    reporting of violations of the code, including illegal or
    unethical behavior regarding accounting or auditing practices.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our code is available on our website at www.cititrends.com.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our independent directors currently receive a $24,000 annual
retainer, $2,500 per meeting attended and an annual award of
2,500 options with an exercise price set to the fair market
value of our common stock on the date of grant as compensation
from us for their services as members of the board of directors.
A director who serves as the chairman of the audit committee
receives an $8,000 annual retainer and a director who serves as
chair of the compensation committee receives a $2,000 annual
retainer. All non-employee directors also receive $500 for
attendance at each committee meeting. We reimburse all of our
directors for out-of-pocket expenses in connection with
attendance at board of directors and committee meetings.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table sets forth a summary of the compensation
paid during fiscal 2004 to our Chief Executive Officer and our
four most highly compensated executive officers, together
referred to as our named executive officers:
</DIV>

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

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Long-Term</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Annual Compensation<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Securities</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Underlying Options</B></TD>
</TR>

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

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>327,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>144,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>619</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>248,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,342</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    President and Chief Merchandising Officer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>173,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>140,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vice President of Store Operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Excludes perquisites and other benefits, which for each named
    individual are less than 10% of the sum of such
    individual&#146;s annual salary and bonus.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">52

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table contains summary information regarding stock
option grants made during fiscal 2004 by us to the named
executive officers. We also granted stock options to purchase
shares of common stock to certain of our employees and to our
current stockholders, including Hampshire Equity
Partners&nbsp;II, L.P. All options were granted at fair market
value of our common stock, as determined by our board of
directors, on the grant date.
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Option Grants In Last Fiscal Year</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


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

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

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>% of Total</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Rates of Stock Price</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Appreciation for</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Granted to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Option Term<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Employees in</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Per</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Granted</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Share</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>5%</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>10%</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10/30/14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10/30/14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,917</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)&nbsp;</SUP></TD>
    <TD align="left">
    Potential realizable value is based upon the initial public
    offering price of our common stock of $14.00. Potential
    realizable values are net of exercise price, but before taxes
    associated with exercise. Amounts representing hypothetical
    gains are those that could be achieved if options are exercised
    at the end of the option term. The assumed 5% and 10% rates of
    stock price appreciation are provided in accordance with rules
    of the Commission, based on the initial public offering price of
    $14.00 per share and do not represent our estimate or projection
    of the future stock price.</TD>
</TR>

</TABLE>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides information about the number and
value of unexercised options to purchase common stock held on
January&nbsp;29, 2005 by the named executive officers. There was
no public market for our common stock on January&nbsp;29, 2005.
Accordingly, we have calculated the values of the unexercised
options on the basis of the initial public offering price of
$14.00 per share, less the applicable exercise price, multiplied
by the number of shares acquired upon exercise. None of the
named executive officers exercised any stock options in fiscal
2004.
</DIV>

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

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

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Number of Securities Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Value of Unsecured In-the-</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Unexercised Options at Fiscal Year End</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Money Options<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
</TR>

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

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>437,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>437,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,955,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,916,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,062,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>699,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185,913</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    The options were granted under our Amended and Restated 1999
    Stock Option Plan. These options generally vest in equal
    installments over four years from the date of grant and are
    generally exercisable up to ten years from the date of grant.
    The fair value of the options granted during the year ended
    January&nbsp;29, 2005 was $2.50 using the Black-Scholes
    option-pricing model, with weighted average assumptions: no
    dividend yield; 50% expected volatility; 2.50% risk-free
    interest rate; ten year expected life and a 10% forfeiture rate.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">53

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>2005 Long-Term Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our board of directors and stockholders adopted the 2005
Long-Term Incentive Plan to replace our Amended and Restated
1999 Stock Option Plan. The 2005 Long-Term Incentive Plan
enables our key employees and directors to acquire and maintain
stock ownership, thereby strengthening their commitment to our
success and their desire to remain with us, focusing their
attention on managing as an equity owner and aligning their
interests with those of our stockholders. In addition, the plan
is intended to attract and retain key employees, which, together
with the key directors, we refer to collectively as eligible
persons, and to provide incentives and rewards for superior
performance that will ultimately lead to our profitable growth.
The plan was approved by a majority of our stockholders on
April&nbsp;8, 2005. As of January&nbsp;4, 2006, options to
purchase up to 1,416,133 shares of our common stock remained
outstanding under the Amended and Restated 1999 Stock Option
Plan. Due to the adoption of the new plan, the Amended and
Restated 1999 Stock Option Plan was terminated and no additional
options was granted under that plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The principal features of our incentive plan are described in
summary form below.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Shares Subject to the Plan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The incentive plan provides that no more than 1,300,000 shares
of our common stock may be issued pursuant to awards under the
incentive plan; provided that, in the aggregate, no more than
50% of the total shares of our common stock can be made the
subject of an award other than as options under the incentive
plan. These shares of our common stock will be authorized but
unissued shares in such amounts as determined by the board of
directors. However, the amount of shares of our common stock
granted to an individual in any calendar year period can not
exceed 5% of the total number of reserved shares of common
stock. Also, in any calendar year period, the maximum dollar
amount of cash or the fair market value of common stock that any
individual can receive in connection with performance units can
not exceed $2.5&nbsp;million. The number of shares of our common
stock available for awards, as well as the terms of outstanding
awards, are subject to adjustment as provided in the incentive
plan for stock splits, stock dividends, recapitalizations,
mergers, consolidations, liquidations, changes in corporate
structure and other similar events. Awards that may be granted
under the incentive plan include stock options, stock
appreciation rights (SARs), restricted shares, performance
units, performance shares and director&#146;s shares. Upon the
granting of an award to an individual, the number of shares of
common stock available shall be reduced depending on the type of
award granted, as provided in the incentive plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The shares of our common stock subject to any award that
expires, terminates or is cancelled, is settled in cash, or is
forfeited or becomes unexercisable, will again be available for
subsequent awards, except as prohibited by law.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Administration</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our compensation committee administers the incentive plan. With
respect to decisions involving an award to a reporting person
within the meaning of Rule&nbsp;16a-2 under the Exchange Act,
the committee is to consist of two or more directors who are
disinterested within the meaning of Rule&nbsp;16b-3 under the
Exchange Act. With respect to decisions involving an award
intended to satisfy the requirements of section 162(m) of the
Internal Revenue Code, the committee is to consist solely of two
or more directors who are &#147;outside directors&#148; for
purposes of that code section. We satisfy these requirements as
our compensation committee is comprised of three independent
directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Subject to the terms of the incentive plan, the committee has
express authority to determine the eligible persons who will
receive awards, when such awards will be granted, the number of
shares of our common stock, units, or SARs to be covered by each
award, the relationship between awards and the terms and
conditions of awards. The committee has broad discretion to
prescribe, amend, and rescind rules relating to the incentive
plan and its administration, to interpret and construe the
incentive plan and the terms of all award agreements, and to
take all actions necessary or advisable to administer the
incentive plan. Within the
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">54

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
limits of the incentive plan, the committee may accelerate the
vesting of any awards, allow the exercise of unvested awards,
and may modify, replace, cancel, or renew them.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The incentive plan provides that the determination of the
committee on all matters relating to awards and the incentive
plan are final. The incentive plan also releases members of the
committee from liability for good faith actions associated with
the administration of the incentive plan.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Eligibility</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The committee may grant options that are intended to qualify as
incentive stock options, which we refer to as ISOs, only to
employees, and may grant all other awards to employees or any
nonemployee director. The incentive plan and the discussion
below use the term &#147;grantee&#148; to refer to an eligible
person who has received an award under the incentive plan.
Although the incentive plan provides the general provisions of
our available awards, upon the determination by the committee of
the type and amount of award to be granted to a grantee, the
eligible grantee will enter into an agreement with us specifying
the specific terms of the award to be granted. Each type of
award (i.e., stock option, restricted share, performance units
and performance shares) is governed by a separate agreement that
describes the respective terms governing such award, such as the
exercise date, term and expiration, restrictions, value, form
and timing of payment.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Stock Options</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Stock options granted under the incentive plan provide grantees
with the right to purchase shares of our common stock at a
predetermined exercise price. The committee may grant stock
options that are intended to qualify as ISOs, or stock options
that are not intended to so qualify, which we refer to as
non-ISOs. The incentive plan also provides that ISO treatment
may not be available for stock options that become first
exercisable in any calendar year to the extent the value of the
underlying shares that are the subject of the stock option
exceed $100,000, based upon the fair market value of the shares
of our common stock on the stock option grant date. Any ISO
shall be granted within ten years from the earlier of the date
the incentive plan is adopted by our board of directors or the
date the incentive plan is approved by our stockholders.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Stock Appreciation Rights (SARs)</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
A SAR generally permits a grantee to receive, upon exercise,
shares of our common stock equal in value to the excess of
(i)&nbsp;the fair market value, on the date of exercise, of the
shares of our common stock with respect to which the SAR is
being exercised, over (ii)&nbsp;the exercise price of the SAR
for such shares. The committee may grant SARs in tandem with
stock options, or independently of them. The committee has the
discretion to grant SARs to any eligible employee or nonemployee
director.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Exercise Price for Stock Options and SARs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The exercise price of non-ISOs and SARs may not be less than
100% of the fair market value of our common stock on the grant
date of the award. The exercise price of ISOs may not be less
than 110% of the fair market value of our common stock on the
grant date of the award for owners who own more than 10% of our
shares of common stock on the grant date. For ISOs granted to
other participants and for options intended to be exempt from
Internal Revenue Code Section&nbsp;162(m) limitations, the
exercise price may not be less than 100% of the fair market
value of our common stock on the grant date. With respect to
stock options and SARs, payment of the exercise price may be
made in any of the following forms, or combination of them:
shares of unrestricted stock held by the grantee for at least
six months (or a lesser period as determined by the committee)
prior to the exercise of the option or SAR, based upon its fair
market value on the day preceding the date of exercise, or
through simultaneous sale through a broker of unrestricted stock
acquired on exercise. The exercise price of any option and SAR
must be determined by the committee no later than the date of
grant of such option or SAR and the exercise price shall be paid
in full at the time of the exercise.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Exercise and Term of Options and SARs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The committee will determine the times, circumstances and
conditions under which a stock option or SAR may be exercisable.
Unless provided otherwise in the applicable award agreement,
each option or SAR shall be exercisable in one or more
installments commencing on or after the first anniversary of the
grant date; provided, however, that all options or SARs shall
become fully vested and exercisable upon a change of control, as
defined in the incentive plan. To the extent exercisable in
accordance with the agreement granting them, a stock option or
SAR may be exercised in whole or in part, and from time to time
during its term, subject to earlier termination relating to a
holder&#146;s termination of employment or service as may be
determined by the committee at the time of the grant. The term
during which grantees may exercise stock options and SARs may
not exceed ten years from the date of grant or five years in the
case of ISOs granted to employees who, at the time of grant, own
more than 10% of our outstanding shares of common stock;
provided that, an option (excluding ISOs) may, upon the death of
the holder of such option, be exercised for up to one year
following the date of the holder&#146;s death, even if the
period extends beyond the ten year limit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Options and SARs granted to nonemployee directors will be
exercisable with respect to one-third of the underlying shares
on each of the first, second and third anniversaries of the
grant date and will have a term of not more than ten years. If a
nonemployee director ceases to serve as a director, any option
or SAR granted to such director shall be exercisable during its
remaining term, to the extent that the option or SAR was
exercisable on the date the nonemployee director ceased to be a
director.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Restricted Shares</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Under the incentive plan, the committee may grant restricted
shares that are forfeitable until certain vesting requirements
are met. For restricted shares, the incentive plan provides the
committee with discretion to determine the per share purchase
price of such shares, which can not be less than the minimum
consideration (as defined in the incentive plan generally as the
par value of a share of common stock), and the terms and
conditions under which a grantee&#146;s interests in such awards
become vested. The incentive plan also provides the committee
with discretion to determine whether the payment of dividends
declared on the shares should be deferred and held by us until
restrictions on the shares lapse, whether dividends should be
reinvested in additional shares of restricted shares subject to
certain restrictions and terms, whether interest will be
credited to the account of such holder for dividends not
reinvested and whether dividends issued on the restricted shares
should be treated as additional restricted shares. Payment of
the purchase price for shares of restricted stock shall be made
in full by the grantee before the delivery of such shares and,
in any event, no later than ten days after the grant date for
such shares. This payment may be made in cash or, with prior
approval of the committee and subject to certain conditions,
shares of restricted or unrestricted stock owned by the grantee.
Under the incentive plan, the committee has discretion to
provide in the award agreement that all or any portion of a
grantee&#146;s award of restricted shares shall be forfeited
(a)&nbsp;upon the grantee&#146;s termination of employment
within a specified time period, (b)&nbsp;if specified
performance goals are not satisfied by us or the grantee within
a specified time period or (c)&nbsp;if any other listed
restriction in the governing award agreement is not satisfied.
If a share of restricted stock is forfeited, then the grantee
shall be deemed to have resold such share to us at a specified
price, we shall pay the grantee the amount due as soon as
possible, but no later than 90&nbsp;days after forfeiture, and
the share of restricted stock shall cease to be outstanding.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Performance Awards</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The incentive plan authorizes the committee to grant
performance-based awards in the form of performance units and
performance shares that are &#147;performance compensation
awards&#148; that are intended to be exempt from Internal
Revenue Code Section&nbsp;162(m) limitations unless otherwise
designated in the applicable award agreement. In either case,
unless otherwise specified in the award agreement, upon the
achievement, within the specified period of time, of the
performance objectives, a performance unit shall be deemed
exercised on the date on which it first becomes exercisable.
Performance units are payable in cash or restricted stock,
except that the committee may decide to pay benefits wholly or
partly in stock delivered to the grantee or
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
credited to a specified brokerage account. For performance
shares, unless otherwise specified in the award agreement or by
the committee, upon the achievement within the specified period
of time of the performance objectives, grantees shall be awarded
shares of restricted stock or common stock, unless the committee
decides to pay cash in lieu of stock, based upon the number of
percentage shares specified in the award agreement multiplied by
the performance percentage achieved. The committee decides the
length of performance periods, but the periods may not be less
than one year nor more than 5&nbsp;years. Any performance shares
with respect to which the performance goals have not been
achieved at the end of the performance period shall expire.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
With respect to performance compensation awards, the incentive
plan requires that the committee specify in writing the
performance period to which the award relates, and an objective
formula by which to measure whether and the extent to which the
award is earned on the basis of the level of performance
achieved with respect to one or more performance measures. Once
established for a performance period, the performance measures
and performance formula applicable to the award may not be
amended or modified in a manner that would cause the
compensation payable under the award to fail to constitute
performance-based compensation under Internal Revenue Code
Section&nbsp;162(m).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Under the incentive plan, the possible performance measures to
be used by the committee for performance compensation awards
include stock price, basic earnings per share, operating income,
return on equity or assets, cash flow, earnings before interest,
taxes, depreciation and amortization, revenues, overall revenues
or sales growth, expense reduction or management, market
position, total income, return on net assets, economic value
added, stockholder value added, cash flow return on investment,
net operating profit, net operating profit after tax, return on
capital and return on invested capital. Each measure will be, to
the extent applicable, determined in accordance with generally
accepted accounting principles as consistently applied by us, or
such other standard applied by the committee and, if so
determined by the committee, and in the case of a performance
compensation award, to the extent permitted under Internal
Revenue Code Section&nbsp;162(m), adjusted to reflect the impact
of specified corporate transactions, special charges, foreign
currency effects, accounting or tax law changes and other
extraordinary or nonrecurring events. Performance measures may
vary from performance period to performance period, and from
grantee to grantee, and may be established on a stand-alone
basis, in tandem or in the alternative.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Tandem Awards</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The committee may grant and identify any award with another
award granted under the incentive plan, on terms and conditions
set forth by the committee.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Initial Awards</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our board of directors authorized awards for our management
employees in the form of stock option grants. Our fiscal 2005
grants were as follows: options to purchase 168,000, 4,000 and
2,500 shares of common stock at the exercise price of $14.00,
$26.03 and $35.75 per share, respectively. These grants were
awarded as follows: options to purchase 28,000, 11,000, 6,000,
5,000 and 119,500 shares of common stock were awarded to
Messrs.&nbsp;Anderson, Bellino, Stoltz, Dunn and all management
employees as a group (approximately 60 employees), respectively.
Independent board members received options to purchase 5,000
shares of common stock for their services in fiscal 2005.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Income Tax Withholding</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As a condition for the issuance of shares of our common stock
pursuant to awards, the incentive plan requires satisfaction of
any applicable federal, state, local, or foreign withholding tax
obligations that may arise in connection with the award or the
issuance of shares of our common stock.
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Transferability</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Unless set forth in the agreement evidencing the award, awards
(other than an award of restricted stock) may not be assigned or
transferred except by will or the laws of descent and
distribution or, in the case of an option other than an ISO,
pursuant to a domestic relations order as defined under
Rule&nbsp;16a-12 under the Exchange Act. An option may be
exercised during the lifetime of the grantee only by that
grantee or his or her guardian, legal representatives or, except
as would cause an ISO to lose such status, by a bankruptcy
trustee. Notwithstanding the foregoing, the committee may set
forth in the agreement evidencing the award (other than an ISO)
that the award may be transferred to an immediate family member,
or related trust or related partnership. The terms of an award
shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the grantee.
Each share of restricted stock shall be nontransferable until
such share becomes non-forfeitable.
</DIV>

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

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Certain Corporate Transactions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
With respect to any award which relates to stock, in the event
of our liquidation or dissolution or merger or consolidation
with another entity, the incentive plan and awards issued
thereunder shall continue in effect in accordance with their
terms, except that following any of these events either
(a)&nbsp;each outstanding award shall be treated as provided for
in the agreement entered into in connection with the event or
(b)&nbsp;if not so provided in the agreement entered into in
connection with the event, a grantee shall be entitled to
receive with respect to each share of stock subject to the
outstanding award, upon the vesting, payment or exercise of the
award the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a share of
stock was entitled to receive in connection with that certain
event.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The applicable award agreement pertaining to each award shall
set forth the terms and conditions applicable to such award upon
a termination of employment of any grantee by us, which, except
for awards granted to nonemployee directors, shall be as the
committee may, in its discretion, determine at the time the
award is granted or thereafter.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Term of Plan; Amendments and Termination</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The term of the incentive plan is ten years from April&nbsp;8,
2005, the date it was approved by our board of directors and
stockholders, or at such earlier time as our board of directors
may determine. Our board of directors may from time to time,
amend or modify the incentive plan without the approval of our
stockholders, unless stockholder approval is required
(a)&nbsp;to retain ISO treatment under the Internal Revenue
Code, (b)&nbsp;to permit transactions in stock under the
incentive plan to be exempt from liability under
Section&nbsp;16(b) of the Exchange Act or (c)&nbsp;under the
listing requirements of any securities exchange on which any of
our equity securities are listed.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Governing Law</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Except where preempted by federal law, the law of the State of
Georgia shall be controlling in all matters relating to the
incentive plan, without giving effect to the conflicts of law
principles thereof.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Set forth below are summaries of all of our employment
agreements and arrangements with our named executive officers.
The following summaries do not contain all of the terms of the
agreements they summarize, and we refer you to the agreements,
which are incorporated by reference into this registration
statement of which this prospectus forms a part, for a complete
understanding of the terms thereof. See &#147;Where You Can Find
More Information.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Amended and Restated Employment Agreement with R. Edward
Anderson</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On December&nbsp;29, 2005, we entered into an amended and
restated employment agreement with Mr.&nbsp;Anderson, pursuant
to which Mr.&nbsp;Anderson continues as our Chief Executive
Officer on an at will basis and as a member of our board of
directors.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The agreement provides that Mr.&nbsp;Anderson will receive an
annual base salary of $340,000 (not including perquisites) and
will be eligible to earn a bonus at the sole discretion of our
board of directors.
</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Severance</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The agreement provides that in the event that Mr.&nbsp;Anderson
is terminated for any reason other than for &#147;cause,&#148;
he is entitled to severance pay of six months base salary to be
paid in equal amounts over a period of six months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&#147;Cause&#148; as defined in the agreement means
Mr.&nbsp;Anderson&#146;s:
</DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    commission of a willful act of fraud or dishonesty, the purpose
    or effect of which, in the board&#146;s sole determination,
    materially and adversely affects us;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    conviction of a felony or a crime involving embezzlement,
    conversion of property or moral turpitude (whether by plea of
    <I>nolo contendere </I>or otherwise);</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engaging in willful or reckless misconduct or gross negligence
    in connection with any property or activity of ours, the purpose
    or effect of which, in the board&#146;s sole determination,
    materially and adversely affects us;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    material breach of any of his obligations as a stockholder or
    otherwise under our organizational documents; provided that
    Mr.&nbsp;Anderson has been given written notice by the board of
    such breach and 30&nbsp;days from such notice fails to cure the
    breach;&nbsp;or</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure or refusal to perform any material duty or
    responsibility under his agreement or a board determination that
    Mr.&nbsp;Anderson has breached his fiduciary obligations to us;
    provided that Mr.&nbsp;Anderson has been given written notice by
    the board of such failure, refusal or breach and 30&nbsp;days
    from such notice fails to cure such failure, refusal or breach.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Amended and Restated Employment Agreement with George A.
Bellino</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On December&nbsp;29, 2005, we entered into an amended and
restated employment agreement with Mr.&nbsp;Bellino, pursuant to
which Mr.&nbsp;Bellino continues as our President and Chief
Merchandising Officer on an at will basis.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The agreement provides that Mr.&nbsp;Bellino will receive an
annual base salary of $245,000 (not including perquisites) and
will be eligible to earn a bonus at the sole discretion of our
board of directors.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Severance</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The agreement provides that in the event that Mr.&nbsp;Bellino
is terminated for any reason other than for &#147;cause,&#148;
he is entitled to severance pay of six months base salary to be
paid in equal amounts over a period of six months.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">59

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&#147;Cause&#148; as defined in the agreement means
Mr.&nbsp;Bellino&#146;s:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    commission of a willful act of fraud or dishonesty, the purpose
    or effect of which, in the board&#146;s sole determination,
    materially and adversely affects us;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    conviction of a felony or a crime involving embezzlement,
    conversion of property or moral turpitude (whether by plea of
    <I>nolo contendere </I>or otherwise);</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engaging in willful or reckless misconduct or gross negligence
    in connection with any property or activity of ours, the purpose
    or effect of which, in the board&#146;s sole determination,
    materially and adversely affects us;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    material breach of any of his obligations as a stockholder or
    otherwise under our organizational documents; provided that
    Mr.&nbsp;Bellino has been given written notice by the board of
    such breach and 30&nbsp;days from such notice fails to cure the
    breach;&nbsp;or</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure or refusal to perform any material duty or
    responsibility under his agreement or a board determination that
    Mr.&nbsp;Bellino has breached his fiduciary obligations to us;
    provided that Mr.&nbsp;Bellino has been given written notice by
    the board of such failure, refusal or breach and 30&nbsp;days
    from such notice fails to cure such failure, refusal or breach.</TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Non-Interference</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
From the date of his agreement until December&nbsp;31, 2006,
Mr.&nbsp;Bellino has agreed not to, without our consent, own,
manage, operate, control, invest or acquire an interest in, or
otherwise engage or participate in, whether as a proprietor,
partner, stockholder, lender, director, officer, employee, joint
venturer, investor, lessor, agent, representative or other
participant, any business which competes with us in any state
where we operate.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Limitation of Liability and Indemnification of Officers and
Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our second amended and restated
certificate of incorporation and our amended and restated
by-laws that limit or eliminate the personal liability of our
directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably
available to them. Consequently, a director will not be
personally liable to us or our stockholders for monetary damages
or breach of fiduciary duty as a director, except for liability
for:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    stockholders;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends; or</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the full extent permitted under Delaware law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As permitted by the Delaware General Corporation Law, our
amended and restated by-laws provide that:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">60

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the rights provided in our by-laws are not exclusive.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employees or agents in
which indemnification by us is sought, nor are we aware of any
threatened litigation or proceeding that may result in a claim
for indemnification.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">61

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='112'></A>
</DIV>

<!-- link1 "Related Party Transactions" -->

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We were a party to an Amended and Restated Management Consulting
Agreement, or the consulting agreement, effective as of
February&nbsp;1, 2004 with Hampshire Management Company LLC, or
the consultant, which is an affiliate of one of the selling
stockholders, pursuant to which it provided us with certain
consulting services related to, but not limited to, our
financial affairs, relationships with our lenders, stockholders
and other third-party associates or affiliates, and the
expansion of our business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In connection with our initial public offering, the parties
terminated the consulting agreement and we paid the consultant a
one time termination fee of $1.2&nbsp;million in the second
quarter of fiscal 2005.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Prior to our initial public offering, Hampshire Equity Partners
II, L.P., George Bellino and certain management stockholders
were party to a Stockholders Agreement, dated as of
April&nbsp;13, 1999, or the stockholders agreement. The
stockholders agreement provided, among other things, that four
members of our board of directors were designated by Hampshire
Equity Partners and its affiliates, the stockholders agreed
generally not to transfer their shares and the management
stockholders were granted tag-along rights in the event of a
sale of more than 50% of our stock. We agreed to register shares
of our common stock held by the stockholders under certain
circumstances and agreed that Hampshire Equity Partners would
include its shares of common stock in an initial public offering
of our common stock. In connection with our initial public
offering, we terminated the stockholders agreement in its
entirety.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In connection with our initial public offering, we entered into
a registration rights agreement with Hampshire Equity
Partners&nbsp;II, L.P., who will hold 5,744,282&nbsp;shares, or
approximately 39.4%, of our shares of common stock on a fully
diluted basis following the consummation of this offering.
Pursuant to the terms and provisions of the registration rights
agreement, Hampshire Equity Partners&nbsp;II, L.P. will have the
right from time to time, subject to certain restrictions, to
cause us to register its shares of common stock for sale under
the Securities Act of 1933, as amended, on Form&nbsp;S-1 or, if
available, on Form&nbsp;S-3 or any similar short-form
registration statement. In addition, if at any time we register
additional shares of common stock, Hampshire Equity
Partners&nbsp;II, L.P. will be entitled to include its shares of
common stock in the registration statement relating to that
offering. If our subsequent registration is made pursuant to an
underwritten offering, Hampshire Equity Partners&nbsp;II, L.P.
must sell its registrable securities to the underwriters
selected by us if they choose to participate in that
registration.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In connection with our initial public offering, we entered into
a nominating agreement with Hampshire Equity Partners&nbsp;II,
L.P. pursuant to which we, acting through our nominating and
corporate governance committee, agreed, subject to the
requirements of our directors&#146; fiduciary duties, that
(i)&nbsp;Hampshire Equity Partners&nbsp;II, L.P. is entitled to
designate up to two directors to be nominated for election to
our board of directors as long as Hampshire Equity
Partners&nbsp;II, L.P. owns in the aggregate at least 40% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering or
(ii)&nbsp;Hampshire Equity Partners&nbsp;II, L.P. is entitled to
designate one director to be nominated for election to our board
of directors as long as Hampshire Equity Partners&nbsp;II, L.P.
owns in the aggregate less than 40% and at least 15% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering. If at any time
Hampshire Equity Partners&nbsp;II, L.P. owns less than 15%, it
will not have the right to nominate any directors for election
to our board of directors.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">62

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='113'></A>
</DIV>

<!-- link1 "Principal and Selling Stockholders" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table sets forth information known to us with
respect to the beneficial ownership of our common stock as of
January&nbsp;4, 2006, and as adjusted to reflect the sale of
1,500,000 shares of common stock in this offering by selling
stockholders, for the following persons:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    each stockholder known by us to own beneficially more than 5% of
    our common stock;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    each of our directors and named executive officers;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    all directors and executive officers as a group; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    each of the selling stockholders.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
This table lists applicable percentage ownership based on
13,012,715&nbsp;shares of common stock outstanding as of
January&nbsp;4, 2006, and also lists applicable percentage
ownership based on shares of common stock outstanding after
completion of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have determined beneficial ownership in the table in
accordance with the rules of the Commission. In computing the
number of shares beneficially owned by a person and the
percentage ownership of that person, we have deemed shares of
common stock subject to options held by that person that are
currently exercisable or will become exercisable within
60&nbsp;days of January&nbsp;4, 2006 to be outstanding, but we
have not deemed these shares to be outstanding for computing the
percentage ownership of any other person. To our knowledge,
except as set forth in the footnotes below, each stockholder
identified in the table possesses sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by that stockholder. Unless otherwise
indicated, the address of all listed stockholders is
c/o&nbsp;Citi Trends, Inc., 102&nbsp;Fahm Street, Savannah,
Georgia 31401.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percentage of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Owned Prior</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares Being</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>After the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Before the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding After</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Name of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>to the Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offered</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>the Offering</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <B>Directors and Named Executive Officers:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R. Edward Anderson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chief Executive Officer and Director</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>466,665</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>341,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George A. Bellino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    President and Chief Merchandising Officer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>491,072</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>366,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas W. Stoltz</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chief Financial Officer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,917</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Dunn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vice President of Store Operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,431</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tracy L. Noll</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Director</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,064</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John S. Lupo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Director</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,200</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gregory P.
    Flynn<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Director</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,900,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,710,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patricia M. Luzier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Director</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Directors and executive officers as a group (eight persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,079,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,579,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>5% Stockholder:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hampshire Equity Partners (as
    defined)<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,900,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,710,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

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

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

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    Includes 29,163&nbsp;shares of common stock and
    437,502&nbsp;options to purchase shares of common stock that are
    currently exercisable or will become exercisable within
    60&nbsp;days of January&nbsp;4, 2006.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    Includes 129,568&nbsp;shares of common stock and 361,504 options
    to purchase shares of common stock that are currently
    exercisable or will become exercisable within 60&nbsp;days of
    January&nbsp;4, 2006.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    Consists of options to purchase shares of common stock that are
    currently exercisable or will become exercisable within
    60&nbsp;days of January&nbsp;4, 2006.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD align="left">
    Includes 45,500&nbsp;shares of common stock and
    44,564&nbsp;options to purchase shares of common stock that are
    currently exercisable or will become exercisable within
    60&nbsp;days of January&nbsp;4, 2006.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP>&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Flynn is the Vice President of Lexington Equity
    Partners II, Inc., the general partner of Hampshire Equity
    Partners II, L.P., and is deemed to beneficially own the shares
    of common stock held by Hampshire Equity Partners (as defined in
    footnote&nbsp;6 below). Mr.&nbsp;Flynn has disclaimed beneficial
    ownership of the shares of common stock held by Hampshire Equity
    Partners.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP>&nbsp;</TD>
    <TD align="left">
    Hampshire Equity Partners refers to Hampshire Equity Partners
    II, L.P., Hampshire Equity Partners Cayman D.B. II, LP and
    Hampshire Equity Partners Cayman II, LP. Hampshire Equity
    Partners II, L.P. currently owns 6,762,933&nbsp;shares of our
    common stock, which includes 66,612&nbsp;options to purchase
    shares of common stock that are currently exercisable or will
    become exercisable within 60&nbsp;days of January&nbsp;4, 2006,
    and is offering to sell 1,018,652&nbsp;shares in this offering.
    Hampshire Equity Partners Cayman D.B. II, L.P. currently owns
    1,115,296&nbsp;shares of our common stock and is offering to
    sell 167,989&nbsp;shares in this offering. Hampshire Equity
    Partners Cayman II, L.P. currently owns 22,306&nbsp;shares of
    our common stock and is offering to sell 3,359&nbsp;shares in
    this offering. Lexington Equity Partners II, L.P. is the general
    partner of Hampshire Equity Partners II, L.P. Lexington Equity
    Partners Cayman II, L.P. is the general partner of each of
    Hampshire Equity Partners Cayman D.B. II, LP and Hampshire
    Equity Partners Cayman II, LP. The general partner of each of
    Lexington Equity Partners II, L.P. and Lexington Equity Partners
    Cayman II, L.P. is Lexington Equity Partners II, Inc., which has
    ultimate voting and investment control over the shares of our
    common stock held by Hampshire Equity Partners. Tracey Rudd, an
    employee of an affiliate of Hampshire Equity Partners, is the
    President of Lexington Equity Partners II, Inc. and
    Mr.&nbsp;Flynn, one of our directors, is the Vice President of
    Lexington Equity Partners II, Inc. The address for each of
    Hampshire Equity Partners II, L.P., Hampshire Equity Partners
    Cayman D.B. II, LP and Hampshire Equity Partners Cayman II, LP
    is 520&nbsp;Madison Avenue, New York, New York 10022.</TD>
</TR>

</TABLE>

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

<TR valign="top">
    <TD>&nbsp;*</TD>
    <TD align="left">
    Less than 1%.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='114'></A>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are authorized to issue 20,000,000 shares of common stock,
$0.01 par value per share, and 5,000 shares of undesignated
preferred stock, $0.01 par value per share. The following
description of our capital stock does not purport to be complete
and is subject to, and qualified in its entirety by, our second
amended and restated certificate of incorporation and amended
and restated by-laws, which were previously filed as exhibits to
our registration statement filed in connection with our initial
public offering.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Dividend Rights.</I> Subject to preferences that may apply to
shares of preferred stock outstanding at the time, the holders
of outstanding shares of common stock are entitled to receive
dividends out of assets legally available at the time and in the
amounts as our board of directors may from time to time
determine.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Voting Rights.</I> Each common stockholder is entitled to one
vote for each share of common stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the
election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for
election.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>No Preemptive or Similar Rights.</I> No holder of our common
stock is entitled to preemptive rights to subscribe for any
shares of capital stock and our common stock is not subject to
conversion or redemption.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Right to Receive Liquidation Distributions.</I> Upon our
liquidation, dissolution or winding-up, the assets legally
available for distribution to our stockholders are distributable
ratably among the holders of our common stock and any
participating preferred stock outstanding at that time, after
payment of liquidation preferences, if any, on any outstanding
preferred stock and payment of other claims of creditors. Each
outstanding share of common stock is, and all shares of common
stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
No shares of, and no securities convertible into, our preferred
stock are outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Under our second amended and restated certificate of
incorporation our board of directors is authorized, subject to
the limits imposed by the Delaware General Corporation Law, but
without further action by our stockholders, to issue shares of
preferred stock in one or more series, to establish from time to
time the number of shares to be included in each series, to fix
the rights, preferences and privileges of the shares of each
wholly unissued series and any of its qualifications,
limitations and restrictions. Our board of directors can also
increase or decrease the number of any series, but not below the
number of shares of that series then outstanding, without any
further vote or action by our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our board of directors may authorize the issuance of preferred
stock with voting or conversion rights that adversely affect the
voting power or other rights of our common stockholders. The
issuance of preferred stock, while providing flexibility in
connection with possible acquisitions, financings and other
corporate purposes, could have the effect of delaying, deferring
or preventing our change in control and may cause the market
price of our common stock to decline or impair the voting and
other rights of the holders of our common stock. We have no
current plans to issue any shares of preferred stock.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Anti-Takeover Effects of Various Provisions of the Delaware
General Corporation Law and Our Second Amended and Restated
Certificate of Incorporation and Our Amended and Restated
By-laws</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Provisions of the Delaware General Corporation Law, our second
amended and restated certificate of incorporation and our
amended and restated by-laws contain provisions that may have
some anti-takeover effects and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that
might result in a premium over the market price for the shares
held by stockholders.
</DIV>

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

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    <TD></TD>
    <TD>
    <I>Delaware Anti-Takeover Statute</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We are subject to Section&nbsp;203 of the Delaware General
Corporation Law. Subject to specific exceptions,
Section&nbsp;203 prohibits a publicly held Delaware corporation
from engaging in a &#147;business combination&#148; with an
&#147;interested stockholder&#148; for a period of three years
after the time the person became an interested stockholder,
unless:
</DIV>

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    <TD width="2%"></TD>
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    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the business combination, or the transaction in which the
    stockholder became an interested stockholder, is approved by our
    board of directors prior to the time the interested stockholder
    attained that status;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    upon consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding those shares owned by persons who are directors and
    also officers and by employee stock plans in which employee
    participants do not have the right to determine confidentially
    whether shares held subject to the plan will be tendered in a
    tender or exchange offer; or</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    at or after the time a person became an interested stockholder,
    the business combination is approved by our board of directors
    and authorized at an annual or special meeting of stockholders
    by the affirmative vote of at least two-thirds of the
    outstanding voting stock that is not owned by the interested
    stockholder.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&#147;Business combinations&#148; include mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder. Subject to various exceptions, in
general an &#147;interested stockholder&#148; is a person who,
together with his or her affiliates and associates, owns, or
within three years did own, 15% or more of the shares of the
corporation&#146;s outstanding voting stock. These restrictions
could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In addition, provisions of our second amended and restated
certificate of incorporation and amended and restated by-laws,
which are summarized in the following paragraphs, may have an
anti-takeover effect.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Classified Board of Directors.</I> Our second amended and
restated certificate of incorporation divides our board into
three classes having staggered terms, with one of such classes
being elected each year for a new three-year term. Class&nbsp;I
directors have an initial term expiring in 2006, Class&nbsp;II
directors have an initial term expiring in 2007 and
Class&nbsp;III directors have an initial term expiring in 2008.
Class&nbsp;I is comprised of Ms.&nbsp;Luzier. Class&nbsp;II is
comprised of Messrs.&nbsp;Noll and Lupo. Class&nbsp;III is
comprised of Messrs.&nbsp;Flynn and Anderson.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Quorum Requirements; Removal of Directors.</I> Our second
amended and restated certificate of incorporation provides for a
minimum quorum of one-third in voting power of the outstanding
shares of our capital stock entitled to vote, except that a
minimum quorum of a majority in voting power of the outstanding
shares of our capital stock entitled to vote is necessary to
hold a vote for any director in a contested election, the
removal of a director or the filling of a vacancy on our board
of directors. Directors may be removed only for cause by the
affirmative vote of at least a majority in voting power of the
outstanding shares of our capital stock entitled to vote
generally in the election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>No Cumulative Voting.</I> The Delaware General Corporation
Law provides that stockholders are not entitled to cumulate
votes in the election of directors unless provided for otherwise
in a company&#146;s certificate of
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
incorporation. Our second amended and restated certificate of
incorporation does not grant our stockholders cumulative voting
rights.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>No Stockholder Action by Written Consent; Calling of Special
Meeting of Stockholders</I>. Our second amended and restated
certificate of incorporation generally prohibits stockholder
action by written consent. It and our amended and restated
by-laws also provide that special meetings of our stockholders
may be called only by (1)&nbsp;the chairman of our board of
directors or (2)&nbsp;our board of directors pursuant to a
resolution approved by our board of directors or (3)&nbsp;our
board of directors upon a request by holders of at least 50% in
voting power of all the outstanding shares entitled to vote at
that meeting.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Advance Notice Requirements for Stockholder Proposals and
Director Nominations. </I>Our amended and restated by-laws
provide that stockholders seeking to bring business before or to
nominate candidates for election as directors at an annual
meeting of stockholders must provide timely notice of their
proposal in writing to the corporate secretary. To be timely, a
stockholder&#146;s notice must be delivered or mailed and
received at our principal executive offices not less than 90 nor
more than 120&nbsp;days in advance of the anniversary date of
the immediately preceding annual meeting of stockholders. Our
amended and restated by-laws also specify requirements as to the
form and content of a stockholder&#146;s notice. These
provisions may impede stockholders&#146; ability to bring
matters before an annual meeting of stockholders or make
nominations for directors at an annual meeting of stockholders.
Stockholder nominations for the election of directors at a
special meeting must be received by our corporate secretary by
the later of ten days following the day on which notice of the
date of the special meeting was mailed or public disclosure of
the date of the special meeting was made or 90&nbsp;days prior
to the date that meeting is proposed to be held and not more
than 120&nbsp;days prior to such meeting.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Limitations on Liability and Indemnification of Officers and
Directors.</I> As discussed above under
&#147;Management-Limitation of Liability and Indemnification of
Officers and Directors,&#148; the Delaware General Corporation
Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders
for monetary damages for breaches of directors&#146; fiduciary
duties as directors. Our second amended and restated certificate
of incorporation includes a provision that eliminates the
personal liability of directors for monetary damages for actions
taken as a director, except for liability:
</DIV>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    for breach of duty of loyalty;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    under Section&nbsp;174 of the Delaware General Corporation Law
    (unlawful dividends or stock repurchases); or</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    for transactions from which the director derived improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our amended and restated by-laws provide that we must indemnify
and advance expenses to our directors and officers to the
fullest extent authorized by the Delaware General Corporation
Law. We are also expressly authorized to, and do, carry
directors&#146; and officers&#146; insurance for our directors,
officers and certain employees for some liabilities. We believe
that these indemnification provisions and insurance are useful
to attract and retain qualified directors and executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The limitation of liability and indemnification provisions in
our amended and restated by-laws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent that, in a class action or direct suit, we pay the costs
of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Authorized but Unissued Shares.</I> Our authorized but
unissued shares of common stock and preferred stock will be
available for future issuance without your approval. We may use
additional shares for a variety of
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
corporate purposes, including future public offerings to raise
additional capital, corporate acquisitions and employee benefit
plans. The existence of authorized but unissued shares of common
stock and preferred stock could render more difficult or
discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Supermajority Provisions.</I> The Delaware General
Corporation Law provides generally that the affirmative vote of
a majority in voting power of the outstanding shares entitled to
vote is required to amend a corporation&#146;s certificate of
incorporation, unless the certificate of incorporation requires
a greater percentage. Our second amended and restated
certificate of incorporation provides that the following
provisions in the second amended and restated certificate of
incorporation may be amended only by a vote of two-thirds or
more in voting power of all the outstanding shares of our
capital stock entitled to vote:
</DIV>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the prohibition on stockholder action by written consent;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the ability to call a special meeting of stockholders being
    vested solely in (1)&nbsp;the chairman of our board of
    directors, (2)&nbsp;our board of directors pursuant to a
    resolution adopted by our board of directors and (3)&nbsp;our
    board of directors upon a request by holders of at least 50% in
    voting power of all the outstanding shares entitled to vote at
    that meeting;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions relating to the classification of our board of
    directors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions relating to the size of our board of directors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions relating to the quorum requirements for
    stockholder action and the removal of directors;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the limitation on the liability of our directors to us and our
    stockholders;</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the provisions granting authority to our board of directors to
    amend or repeal our by-laws without a stockholder vote, as
    described in more detail in the next succeeding paragraph; and</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the supermajority voting requirements listed above.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our second amended and restated certificate of incorporation
grants our board of directors the authority to amend and repeal
our by-laws without a stockholder vote in any manner not
inconsistent with the laws of the State of Delaware or our
second amended and restated certificate of incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In addition, our second amended and restated certificate of
incorporation and our amended and restated by-laws provide that
the same provisions listed above and found in our amended and
restated by-laws may be amended by stockholders representing no
less than two-thirds of the voting power of all the outstanding
shares of our capital stock entitled to vote.
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The transfer agent and registrar for our stock is American Stock
Transfer and Trust&nbsp;Company. The transfer agent&#146;s
address is 59 Maiden Lane, New York, New York 10038.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">68

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='115'></A>
</DIV>

<!-- link1 "Shares Eligible for Future Sale" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Future sales of substantial amounts of our common stock in the
public market could adversely affect prevailing market prices.
Furthermore, since certain shares will not be available for sale
shortly after the offering because of contractual and legal
restrictions on resale described below, sales of substantial
amounts of common stock in the public market after the
restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Upon completion of this offering, 13,012,715 shares of common
stock will be outstanding, assuming no exercise of currently
outstanding and exercisable options. Of these shares, the shares
sold in this offering, plus any additional shares sold upon
exercise of the underwriters&#146; over-allotment option, and
all of the 4,427,500 shares issued and sold in our initial
public offering will be freely transferable without restriction
under the Securities Act of 1933, as amended, unless they are
held by our &#147;affiliates&#148; as that term is used under
the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. The remaining
7,491,827&nbsp;shares of common stock held by existing
stockholders are restricted shares. In addition, upon
consummation of this offering, a total of 1,574,133&nbsp;options
will be outstanding, of which 1,290,033 options will be fully
vested. Restricted shares may be sold in the public market only
if registered or if they qualify for an exemption from
registration under Rules&nbsp;144 or 701 promulgated under the
Securities Act of 1933, as amended, which rules are summarized
below.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In general, under Rule&nbsp;144 as in effect on the date of this
prospectus, beginning 90&nbsp;days after the effective date of
this offering, our affiliates, or a person (or persons whose
shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule&nbsp;144) for at least one year,
are entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the
then outstanding shares of common stock or the average weekly
trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Commission.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Sales under Rule&nbsp;144 are subject to requirements relating
to the manner of sale, notice and the availability of current
public information about us. A person (or persons whose shares
are aggregated) who was not our affiliate at any time during the
90&nbsp;days immediately preceding the sale and who has
beneficially owned restricted shares for at least two years is
entitled to sell such shares under Rule&nbsp;144(k) without
regard to the limitations described above.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our employees, officers, directors or consultants who purchased
or were awarded shares or options to purchase shares under a
written compensatory plan or contract are entitled to rely on
the resale provisions of Rule&nbsp;701 under the Securities Act
of 1933, as amended, which permits affiliates and non-affiliates
to sell their Rule&nbsp;701 shares without having to comply with
the Rule&nbsp;144 holding period restrictions, in each case
commencing 90&nbsp;days after the effective date of this
offering. In addition, non-affiliates may sell Rule&nbsp;701
shares without complying with the public information, volume and
notice provisions of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On June&nbsp;8, 2005, we filed a registration statement on
Form&nbsp;S-8 registering shares of common stock subject to
outstanding stock options or reserved for issuance under our
Amended and Restated 1999 Stock Option Plan and 2005 Long-Term
Incentive Plan. Shares issued pursuant to our Amended and
Restated 1999 Stock Option Plan and 2005 Long-Term Incentive
Plan and registered under that registration statement are,
subject to Rule&nbsp;144 volume limitations applicable to
affiliates, be available for sale in the open market, unless
such shares are subject to vesting restrictions with us or the
lock-up agreements described below.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Each of our executive officers and directors and certain other
stockholders, including Hampshire Equity Partners, have agreed
to a 90-day &#147;lock-up&#148; with respect to our shares of
common stock and other of our securities that they beneficially
own, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable
for shares of common stock. These lock-up agreements cover
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">69

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
fully diluted shares of our common stock. This means that, for a
period of 90&nbsp;days following the date of this prospectus,
the lock-up period, subject to specified exceptions, such
persons may not, directly or indirectly, offer, sell, pledge or
otherwise dispose of these securities without the prior written
consent of CIBC World Markets Corp. In addition, the lock-up
period may be extended in the event that (i)&nbsp;we release
earnings or announce certain material news during the last
17&nbsp;days of the lock-up period, or (ii)&nbsp;prior to the
expiration of the lock-up period, we announce that we will
release earnings during the
<FONT style="white-space: nowrap">16-day</FONT> period beginning
on the last day of the lock-up period. The restrictions in the
lock-up agreements will not prevent such persons from
transferring their shares or other securities as distributions
to such persons&#146; limited partners or as gifts, to members
of their immediate family or to a trust for the benefit of
themselves or member of their family or by will or intestacy,
provided, in each case, that the transferee of such shares of
other securities agrees to be locked-up to the same extent as
the person from whom they received the shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have been advised by CIBC World Markets Corp. that the
release of any lock-up agreement by it will be considered on a
<FONT style="white-space: nowrap">case-by</FONT>-case basis. The
factors considered by CIBC World Markets Corp. in any such
decision may include the length of time before the lock-up
agreement expires, the number of shares involved, the reason for
the requested release, market conditions, the trading price of
our common stock, and the identity of the person or entity
seeking the release (i.e., us or one of our affiliates,
stockholders, executive officers or directors). We have also
been advised by the underwriters that the underwriters have no
current intention of waiving the lock-ups.
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Pursuant to the registration rights agreement executed in
connection with our initial public offering, Hampshire Equity
Partners&nbsp;II, L.P. has the right to demand registration of
its shares and to include its shares in registration statements
that we file after the consummation of this offering, subject to
certain exceptions. See &#147;Related Party Transactions&#151;
Registration Rights Agreement.&#148;
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">70

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='116'></A>
</DIV>

<!-- link1 "Underwriting" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We and the selling stockholders will enter into an underwriting
agreement with the underwriters named below. CIBC World Markets
Corp., Piper Jaffray &#38; Co., SG Cowen &#38; Co., LLC and
Wachovia Capital Markets, LLC, are acting as the representatives
of the underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The underwriting agreement provides for the purchase of a
specific number of shares of common stock by each of the
underwriters. The underwriters&#146; obligations are several,
which means that each underwriter is required to purchase a
specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject
to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of
shares of common stock set forth opposite its name below:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of Shares</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CIBC World Markets Corp.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Piper Jaffray&nbsp;&#38; Co.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SG Cowen&nbsp;&#38; Co., LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wachovia Capital Markets, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,500,000</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The underwriters have agreed to purchase all of the shares
offered by this prospectus (other than those covered by the
over-allotment option described below) if any are purchased.
Under the underwriting agreement, if an underwriter defaults in
its commitment to purchase shares, the commitments of
non-defaulting underwriters may be increased or the underwriting
agreement may be terminated, depending on the circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The shares should be ready for delivery on or about
January &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006 against payment in
immediately available funds. The underwriters are offering the
shares subject to various conditions and may reject all or part
of any order. The representatives have advised us and the
selling stockholders that the underwriters propose to offer the
shares directly to the public at the public offering price that
appears on the cover page of this prospectus. In addition, the
representatives may offer some of the shares to other securities
dealers at such price less a concession of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The underwriters may also allow, and such dealers may
reallow, a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to other dealers. After the shares are released for sale
to the public, the representatives may change the offering price
and other selling terms at various times.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The selling stockholders have granted the underwriters an
over-allotment option. This option, which is exercisable for up
to 30&nbsp;days after the date of this prospectus, permits the
underwriters to purchase a maximum of 225,000 additional shares
to cover over-allotments. If the underwriters exercise all or
part of this option, they will purchase shares covered by the
option at the public offering price that appears on the cover
page of this prospectus, less the underwriting discount. If this
option is exercised in full, the total price to the public will
be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
the total proceeds to the selling stockholders will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The underwriters have severally agreed that, to the extent the
over-allotment option is exercised, they will each purchase a
number of additional shares proportionate to the
underwriter&#146;s initial amount reflected in the foregoing
table.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides information regarding the amount of
the discount to be paid to the underwriters by the selling
stockholders:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total Without</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total With Full</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise of Over-</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise of Over-</B></TD>
</TR>

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

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


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

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">71

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We estimate that the total expenses of this offering payable by
us, excluding the underwriting discount, will be approximately
$440,900. We have agreed to bear the expenses (other than
underwriting discounts and commissions) of the selling
stockholders in connection with this offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Each of our executive officers and directors and certain other
stockholders, including Hampshire Equity Partners have agreed to
a 90-day &#147;lock-up&#148; with respect to our shares of
common stock and other of our securities that they beneficially
own, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable
for shares of common stock. These lock-up agreements cover
7,579,884 fully diluted shares of our common stock. This means
that for a period of 90&nbsp;days following the date of this
prospectus, the lock-up period, subject to specified exceptions,
such persons may not, directly or indirectly, offer, sell,
pledge or otherwise dispose of these securities without the
prior written consent of CIBC World Markets Corp. In addition,
the lock-up period may be extended in the event that (i)&nbsp;we
release earnings or announce certain material news during the
last 17&nbsp;days of the lock-up period, or (ii)&nbsp;prior to
the expiration of the lock-up period, we announce that we will
release earnings during the 16-day period beginning on the last
day of the lock-up period. The restrictions in the lock-up
agreements will not prevent such persons from transferring their
shares or other securities as distributions to such
persons&#146; limited partners or as gifts, to members of their
immediate family or to a trust for the benefit of themselves of
member of their family or by will or intestacy, provided in each
case, that the transferee of such shares of other securities
agree to be locked-up to the same extent as the person from whom
they received the shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have agreed not to issue, sell or register (other than
pursuant to a registration statement on Form&nbsp;S-8), or
otherwise dispose of, directly or indirectly, any of our equity
securities (or any securities convertible into, exercisable for
or exchangeable for our equity securities), except for the
issuance of equity securities pursuant to our 2005 Long-Term
Incentive Plan, during the lock-up period without the consent of
CIBC World Markets Corp. In the event that during the lock-up
period, (A)&nbsp;any shares are issued pursuant to our 2005 Long
Term Incentive Plan that are exercisable during the lock-up
period (other than issuances, after the consummation of this
offering, upon conversion of options outstanding as of the date
of this prospectus), or (B)&nbsp;any registration is effected on
Form&nbsp;S-8 or on any successor form relating to shares that
are exercisable during the lock-up period (other than shares
issued or issuable upon conversion of options outstanding as of
the date of this prospectus), we have agreed to obtain the
written agreement of such grantee or holder of such registered
securities that, during the lock-up period, such person will
not, without the prior written consent of CIBC World Markets
Corp., offer for sale, sell, distribute, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, or
exercise any registration rights with respect to, such shares of
our common stock (or any securities convertible into,
exercisable for, or exchangeable for such shares of our common
stock) owned by such person.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The representatives have informed us that they do not expect
discretionary sales by the underwriters to exceed five percent
of the shares offered by this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our common stock is listed on the Nasdaq National Market under
the symbol &#147;CTRN.&#148; As of January&nbsp;4, 2006, the
last reported price of our common stock was $41.85&nbsp;per
share.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Rules of the Commission may limit the ability of the
underwriters to bid for or purchase shares before the
distribution of the shares is completed. However, the
underwriters may engage in the following activities in
accordance with the rules:
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Stabilizing transactions&#151;The representative may make bids
    or purchases for the purpose of pegging, fixing or maintaining
    the price of the shares, so long as stabilizing bids do not
    exceed a specified maximum.</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Over-allotments and syndicate covering transactions&#151;The
    underwriters may sell more shares of our common stock in
    connection with this offering than the number of shares than
    they have committed to purchase. This over-allotment creates a
    short position for the underwriters. This short sales position
    may</TD>
</TR>

</TABLE>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    involve either &#147;covered&#148; short sales or
    &#147;naked&#148; short sales. Covered short sales are short
    sales made in an amount not greater than the underwriters&#146;
    over-allotment option to purchase additional shares in this
    offering described above. The underwriters may close out any
    covered short position either by exercising their over-allotment
    option or by purchasing shares in the open market. To determine
    how they will close the covered short position, the underwriters
    will consider, among other things, the price of shares available
    for purchase in the open market, as compared to the price at
    which they may purchase shares through the over-allotment
    option. Naked short sales are short sales in excess of the
    over-allotment option. The underwriters must close out any naked
    short position by purchasing shares in the open market. A naked
    short position is more likely to be created if the underwriters
    are concerned that, in the open market after pricing, there may
    be downward pressure on the price of the shares that could
    adversely affect investors who purchase shares in this offering.</TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    Penalty bids&#151;If the representative purchases shares in the
    open market in a stabilizing transaction or syndicate covering
    transaction, they may reclaim a selling concession from the
    underwriters and selling group members who sold those shares as
    part of this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Similar to other purchase transactions, the underwriters&#146;
purchases to cover the syndicate short sales or to stabilize the
market price of our common stock may have the effect of raising
or maintaining the market price of our common stock or
preventing or mitigating a decline in the market price of our
common stock. As a result, the price of the shares of our common
stock may be higher than the price that might otherwise exist in
the open market. The imposition of a penalty bid might also have
an effect on the price of the shares if it discourages resales
of the shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Neither we nor the underwriters makes any representation or
prediction as to the effect that the transactions described
above may have on the price of the shares. These transactions
may occur on the Nasdaq National Market or otherwise. If such
transactions are commenced, they may be discontinued without
notice at any time.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Congress Financial Corporation (Southwest), an affiliate of
Wachovia Capital Markets, LLC, is the lender under our credit
agreement and Wachovia Capital Markets, LLC is acting as an
underwriter in this offering. As such, Congress Financial
Corporation (Southwest) has received and will continue to
receive customary fees in connection with the credit agreement.
In addition, in the future, certain of the underwriters or their
affiliates may provide us, from time to time, with other
financial advisory or commercial or investment banking services,
for which we expect they will receive customary fees and
commissions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Based on information provided to us by CIBC World Markets Corp.
and Hampshire Equity Partners, a managing director of CIBC World
Markets Corp. has an approximate 0.02% indirect interest in our
common stock, through ownership of limited partnership interests
in Hampshire Equity Partners&nbsp;II, L.P. We do not expect the
proceeds with respect to this indirect interest to exceed
$30,000 in the aggregate.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As of January&nbsp;4, 2006, Hampshire Equity Partners, on a
fully diluted basis, currently holds approximately 54.2% of our
common stock and after the offering will hold, on a fully
diluted basis, approximately 46.0% of our common stock. Based
upon this ownership interest, Hampshire Equity Partners is an
&#147;affiliate&#148; of the company (as such term is defined
under the Securities Act of 1933, as amended) and may be deemed
to be an &#147;underwriter&#148; under the Securities Act of
1933, as amended. Certain of our other &#147;affiliates&#148;
are also selling stockholders in this offering, including
Messrs.&nbsp;Anderson, Bellino, Stoltz, Noll and Dunn, who are
members of management and employees of ours, and may similarly
be deemed to be &#147;underwriters&#148; under the Securities
Act of 1933, as amended. See &#147;Principal and Selling
Stockholders.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "Legal Matters" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The validity of the common stock offered hereby will be passed
upon for us by Paul, Hastings, Janofsky &#38; Walker LLP, New
York, New York. DLA Piper Rudnick Gray Cary US LLP, Baltimore,
Maryland, has represented the underwriters in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='118'></A>
</DIV>

<!-- link1 "Experts" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The financial statements of Citi Trends, Inc. as of
January&nbsp;29, 2005 and January&nbsp;31, 2004 and for the
years ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003 have been included herein in reliance upon
the report of KPMG LLP, independent registered public accounting
firm, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing. The audit report
refers to the adoption of Statement of Financial Accounting
Standards No.&nbsp;150, &#147;Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity&#148; on July&nbsp;6, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='119'></A>
</DIV>

<!-- link1 "Where You Can Find More Information" -->

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have filed with the Commission a registration statement on
Form&nbsp;S-1 under the Securities Act of 1933, as amended, to
register the shares of common stock offered in this offering. We
are required to file annual, quarterly and current reports,
proxy statements and other information with the Commission. You
may read and copy our registration statement and the attached
exhibits and schedules without charge at the public reference
room maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at
<FONT style="white-space: nowrap">1&nbsp;(800)&nbsp;SEC-0330</FONT>
for further information on the public reference room. You may
also inspect reports, proxy and information statements and other
information that we file electronically with the Commission
without charge at its Internet site, http://www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
This prospectus constitutes part of the registration and does
not contain all of the information set forth in the registration
statement. Whenever a reference is made in this prospectus to
any of our contracts or other documents, the reference may not
be complete and, for a copy of the contract or document, you
should refer to the exhibits that are part of the registration
statement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We intend to furnish our stockholders with annual reports
containing financial statements audited by our independent
registered public accountants and to make available to our
stockholders quarterly reports for the first three quarters of
each fiscal year containing unaudited interim financial
statements.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
 <A name='120'></A>
</DIV>

<!-- link1 "Citi Trends, Inc. Index to Financial Statements" -->

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Index to Financial Statements</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="91%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JANUARY 29,
    2005, JANUARY 31, 2004 AND FEBRUARY 1, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#201'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#202'>Balance Sheets as of January&nbsp;29, 2005
    and January&nbsp;31, 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#203'>Statements of Income for the Years Ended
    January&nbsp;29, 2005, January&nbsp;31, 2004 and
    February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#204'>Statements of Cash Flows for the Years
    Ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
    February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#205'>Statements of Stockholders&#146; Equity for
    the Years Ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
    February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#206'>Notes to Financial Statements for the Years
    Ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
    February&nbsp;1, 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED
    OCTOBER 29, 2005 AND OCTOBER 30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#207'>Condensed Balance Sheets as of
    October&nbsp;29, 2005 and January&nbsp;29, 2005 (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#208'>Condensed Statements of Income for the
    Thirty-nine weeks ended October&nbsp;29, 2005 and
    October&nbsp;30, 2004 (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#209'>Condensed Statements of Cash Flows for the
    Thirty-nine weeks ended October&nbsp;29, 2005 an
    October&nbsp;30, 2004 (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#210'>Notes to the Condensed Financial Statements
    (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-24</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-1
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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='201'></A>
</DIV>

<!-- link1 "Report of Independent Registered Public Accounting Firm" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Citi Trends, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We have audited the accompanying balance sheets of Citi Trends,
Inc. (the &#147;Company&#148;) as of January&nbsp;29, 2005, and
January&nbsp;31, 2004, and the related statements of income,
stockholders&#146; equity, and cash flows for the fiscal years
ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Citi Trends, Inc. as of January&nbsp;29, 2005, and
January&nbsp;31, 2004, and the results of its operations and its
cash flows for the fiscal years ended January&nbsp;29, 2005,
January&nbsp;31, 2004 and February&nbsp;1, 2003 in conformity
with U.S. generally accepted accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As discussed in Note&nbsp;2 to the financial statements,
effective July&nbsp;6, 2003 the Company adopted the provisions
of the Statement of Financial Accounting Standards No.&nbsp;150,
&#147;Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
/s/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KPMG LLP
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Jacksonville, Florida
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
March&nbsp;30, 2005, except as to Note&nbsp;12(c) which is as of
April&nbsp;28, 2005 and Note&nbsp;12(d) which is as of
May&nbsp;11, 2005
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-2

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='202'></A>
</DIV>

<!-- link1 "Balance Sheets" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005 and January&nbsp;31, 2004</B>
</DIV>

<CENTER>
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<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 31,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,801,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,172,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,712,369</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,770,998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>530,604</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,714,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,968,203</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,573,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,749,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,992</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70,789,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,213,200</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="11" align="center" valign="top">
    <B>Liabilities and Stockholders&#146; Equity</B></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under revolving lines of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,132,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,577,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,199,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,121,520</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,537,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,669,462</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,762</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,455,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,342</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,028</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,375,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,474,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,526,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,494,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>688,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,984,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,160,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>818,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,632,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,574</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,024,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,709,332</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01 par value. Authorized 20,000,000 shares;
    9,460,750 and 9,445,150 shares issued in 2005 and 2004;
    9,295,000 shares outstanding in 2005 and 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in-capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,120,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,011,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,828,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,571,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock, at cost; 165,750 and 150,150 shares in 2005 and
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,764,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,503,868</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (notes 9 and 10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70,789,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,213,200</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-3

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='203'></A>
</DIV>

<!-- link1 "Statements of Income" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Years Ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>203,441,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157,198,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,950,935</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127,307,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,145,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,806,541</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,134,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,053,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,144,394</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,593,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,844,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,759,624</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,540,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,208,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,384,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, including redeemable preferred stock dividend</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>732,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,708</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,808,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,644,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,129,062</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,551,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,726,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,101,237</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.51</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.44</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,302,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,879,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,771,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,757,110</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to financial statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-4

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='204'></A>
</DIV>

<!-- link1 "Statements of Cash Flows" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Years Ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>324,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,871,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,032,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,014,549</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123,841</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>541,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,189</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest on Subscription Receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,882</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,460,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,669,857</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,110,472</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(845,787</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(577,991</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>374,919</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,795</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29,334</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,020</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,554,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,108,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,956,945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,823,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>647,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>576,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>868,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(247,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,123,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,761</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82,278</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,658,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,189,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,456,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,631,233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,117,954</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,926,622</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fee paid for continuance of revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,716,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,295,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,369,853</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,716,044</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,295,521</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137,059,791</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on long-term debt and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(831,456</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(942,054</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(742,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,680,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment of dividends on preferred shares subject to mandatory
    redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,366,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from payment of shareholder note receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,180,506</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(942,054</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,802,907</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,847,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,129,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,727,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,824,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,097,718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    End of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,801,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,824,847</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of cash flow information:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>518,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>352,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>255,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,550,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,036,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,498,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosures of noncash activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends accrued on redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>327,713</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment financed by entering into
    capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,106,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>660,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Insurance settlement not yet received related to loss of fixed
    assets and inventory related to store fire</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-5

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='205'></A>
</DIV>

<!-- link1 "Statements of Stockholders&#146; Equity" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Statements of Stockholders&#146; Equity</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Years Ended January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


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

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

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Receivable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Total</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; February&nbsp;2, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,445,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,726,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,088,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,735,842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense recorded in connection with issuance of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,882</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(327,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(327,713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; February&nbsp;1, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,445,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,888,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,788,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,597,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense recorded in connection with issuance of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued preferred stock dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135,187</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135,187</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; January&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,445,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,011,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,571,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,503,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense recorded in connection with issuance of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,299</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of 600 shares of common stock in exchange for a
    3&nbsp;year note</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(106,800</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(106,800</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest recorded on subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment received on subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&#151; January&nbsp;29, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,460,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,120,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,828,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,764,969</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-6

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='206'></A>
</DIV>

<!-- link1 "Notes to Financial Statements" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Notes to Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Organization and Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Citi Trends, Inc. (the &#147;Company&#148;) is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of January&nbsp;29, 2005,
the Company operated 200 stores in Alabama, Arkansas, Florida,
Georgia, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, and Virginia.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></TD>
    <TD>
    <I>Fiscal Year</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company&#146;s fiscal year ends on the Saturday closest to
January 31 of each year. The years ended January&nbsp;29, 2005,
January&nbsp;31, 2004 and February&nbsp;1, 2003 are referred to
as fiscal 2004, 2003 and 2002, respectively, in the accompanying
financial statements. Fiscal years 2004, 2003 and 2002 are each
comprised of 52&nbsp;weeks.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></TD>
    <TD>
    <I>Cash and Cash Equivalents</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For purposes of the balance sheets and statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></TD>
    <TD>
    <I>Inventory</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. The Company
believes the first-in first-out retail inventory method results
in an inventory valuation that is fairly stated.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></TD>
    <TD>
    <I>Property and Equipment, net</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (principally three to five years for computer equipment
and furniture, fixtures and equipment, five years for leasehold
improvements, and 15&nbsp;years for buildings) of the related
assets or the relevant lease term, whichever is shorter.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</I></TD>
    <TD>
    <I>Goodwill</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Goodwill represents the excess of the purchase price over the
fair value of assets acquired. The Company adopted the
provisions of Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;142, <I>Goodwill and Other
Intangible Assets,</I> as of February&nbsp;3, 2002. Pursuant to
SFAS&nbsp;No.&nbsp;142, goodwill acquired in a purchase business
combination and determined to have an indefinite useful life is
not amortized, but instead tested for impairment at least
annually. The Company performed this analysis at the end of
fiscal 2004 and no impairment was indicated.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-7

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</I></TD>
    <TD>
    <I>Impairment of Long-Lived Assets</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value of long-lived assets is reviewed. If this review indicates
that the carrying value of the asset will not be recovered as
determined based on projected undiscounted cash flows related to
the asset over its remaining life, the carrying value of the
asset is reduced to its estimated fair value. Impairment losses
in the future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
the Company&#146;s estimates for net sales, gross profit and
store expenses are not realized, future assessments of
recoverability could result in impairment charges.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</I></TD>
    <TD>
    <I>Stock-Based Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company applies the intrinsic-value-based method of
accounting prescribed by Accounting Principles Board
(&#147;APB&#148;) Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees,</I> and related interpretations including
Financial Accounting Standards Board (&#147;FASB&#148;)
interpretation (FIN)&nbsp;No.&nbsp;44, <I>Accounting for Certain
Transactions involving Stock Compensation, an interpretation of
APB Opinion No.&nbsp;25</I>, to account for its fixed-plan stock
options. Under this method, compensation expense is recorded on
the date of grant only if the current fair value of the
underlying stock exceeds the exercise price. The Company
recognizes the fair value of stock rights granted to
non-employees in the accompanying financial statements.
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation,</I> and SFAS&nbsp;No.&nbsp;148, <I>Accounting for
Stock-Based Compensation&#151;Transition and Disclosure, an
amendment of FASB Statement No.&nbsp;123</I>, establishes
accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation
plans. As permitted by existing accounting standards, the
Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, as amended. The following table
illustrates the effect on net income for fiscal 2004, 2003 and
2002 if the fair-value-based method had been applied to all
outstanding and unvested awards in the period. Pro forma
information regarding net income and net income per share is
required in order to show our net income as if we had accounted
for employee stock options under the fair value method of
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation,</I> as amended by SFAS&nbsp;No.&nbsp;148,
<I>Accounting for</I>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-8

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Stock-Based Compensation&#151;Transition Disclosure</I>. The
fair values of options and shares issued pursuant to our option
plan at each grant date were estimated using the Black-Scholes
option pricing model.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add stock-based employee compensation expense included in
    reported net income, net of tax of $39,791, $45,855 and $62,729,
    respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99,153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $86,829, $68,120 and $47,157, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(138,583</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,997</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,538</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,182,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,880,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,052,440</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.51</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.51</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.44</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.44</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</I></TD>
    <TD>
    <I>Revenue Recognition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. The Company allows
for returns up to 10&nbsp;days after the date of sales and the
estimate for returns is based on actual return activity
10&nbsp;days after the period ends. Revenue from layaway sales
is recognized when the customer has paid for and received the
merchandise. If the merchandise is not fully paid for within
60&nbsp;days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program service charges, which are
non-refundable, are recognized in revenue when collected. All
sales are from cash, check or major credit card company
transactions. The Company does not offer company-sponsored
customer credit accounts.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</I></TD>
    <TD>
    <I>Cost of Sales</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Cost of sales includes the cost of inventory sold during the
period, net of discounts and allowances; purchasing costs;
transportation costs including inbound freight and internal
transfer costs. Distribution center costs, advertising and
promotional expenses are not considered a portion of cost of
sales and are included as part of selling, general and
administrative expenses.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</I></TD>
    <TD>
    <I>Certain Financial Instruments with Characteristics of
    Liabilities and Equity</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company has prospectively adopted SFAS&nbsp;No.&nbsp;150,
<I>Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity</I>.
SFAS&nbsp;No.&nbsp;150 establishes standards for the
classification and measurement of certain financial instruments
with characteristics of both liabilities and equity.
SFAS&nbsp;No.&nbsp;150 also includes required disclosures for
financial instruments within its scope. For the Company,
SFAS&nbsp;No.&nbsp;150 was effective for instruments entered
into or modified after May&nbsp;1, 2003 and otherwise effective
as of February&nbsp;1, 2004, except for mandatorily redeemable
financial instruments. As such, the Company adopted
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-9

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
the provisions of SFAS&nbsp;No.&nbsp;150 for our Series&nbsp;A
Preferred Stock on July&nbsp;6, 2003 which required the Company
to classify the Series&nbsp;A Preferred Stock as a liability on
our balance sheet. The effective date of SFAS&nbsp;No.&nbsp;150
has been deferred indefinitely for certain other types of
mandatorily redeemable financial instruments. To illustrate the
effect of SFAS&nbsp;No.&nbsp;150 the following table shows net
income if SFAS&nbsp;No.&nbsp;150
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>324,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,581,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,107,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</I></TD>
    <TD>
    <I>Earnings per Share</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides a reconciliation of the earnings
figures used to calculate earning per share and used in
calculating diluted earnings per share for fiscal 2004, 2003 and
2002:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,917,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,027,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtract dividends on preferred shares subject to mandatory
    redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>324,450</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Numerator for EPS calculation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,257,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,782,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,703,375</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earning per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for fiscal 2004, 2003 and 2002:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,302,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,295,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incremental shares from assumed exercises of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,576,588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,476,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,462,110</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares and common stock equivalents
    outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,879,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,771,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,757,110</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For fiscal 2004 and 2002 there were no options outstanding to
purchase shares of common stock excluded from the calculation of
diluted earnings per share because of antidilution. For fiscal
2003, there was an immaterial number of options outstanding to
purchase shares of common stock excluded from the calculation of
diluted earnings per share because of antidilution.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-10

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</I></TD>
    <TD>
    <I>Advertising</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company expenses all advertising expenditures as incurred.
Advertising expense for fiscal 2004, 2003 and 2002 was
$1,164,701, $905,872 and $618,051, respectively.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</I></TD>
    <TD>
    <I>Operating Leases</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
We account for our store leases in accordance with
SFAS&nbsp;No.&nbsp;13, Accounting for Leases and other
authoritative guidance. Rent expense for operating leases, which
have escalating rentals over the term of the lease, is
recognized on a straight-line basis over the initial term.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Certain of our leases contain tenant improvement allowances,
rent holidays, rent escalation clauses and/or contingent rent
provisions. Incentives, rent holidays and minimum rental
expenses are recognized on a straight-line basis over the term
of the lease based on the date of initial possession, which is
generally the date the property is available to the Company to
make improvements in preparation of its intended use.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For tenant improvement allowances, we record a deferred rent
liability on the balance sheet and amortize the deferred rent
over the term of the lease as a reduction to rent expense.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</I></TD>
    <TD>
    <I>Store Opening and Closing Costs</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
New and relocated store opening costs are charged directly to
expense when incurred. When the Company decides to close or
relocate a store, the Company records an expense for the present
value of expected future rent payments, net of sublease income,
in the period that a store closes or relocates.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</I></TD>
    <TD>
    <I>Income Taxes</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)</I></TD>
    <TD>
    <I>Use of Estimates</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)</I></TD>
    <TD>
    <I>Business Reporting Segments</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company is a value-priced retailer of urban fashion apparel
and accessories for the entire family. The Company&#146;s chief
operating decision maker reviews performance and the allocation
of resources on a store by store basis. Because the Company
operates one business activity and the level of review by the
Company&#146;s chief operating decision maker is on a store by
store basis, the Company has determined that its operations
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-11

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
are within one reportable segment. Accordingly, financial
information on industry segments is omitted. All sales are to
customers and assets are located within the United States.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)</I></TD>
    <TD>
    <I>Other Comprehensive Income</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company did not have any components of other comprehensive
income for fiscal 2004, 2003 and 2002.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)</I></TD>
    <TD>
    <I>Recently Issued Accounting Standards Not Currently
    Effective</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123
(revised 2004), <I>Share-Based Payment</I>.
SFAS&nbsp;No.&nbsp;123R establishes standards for the accounting
for transactions in which an entity exchanges its equity
instruments for goods and services. SFAS&nbsp;No.&nbsp;123R
focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment
transactions. Under SFAS&nbsp;No.&nbsp;123R, the Company,
beginning in the third quarter of 2005, will be required to
measure the cost of employee services received in exchange for
an award of equity instruments based on the grant date fair
value of the award (with limited exceptions). The cost will be
recognized over the period during which an employee is required
to provide services in exchange for the award.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Currently, the Company discloses the estimated effect on net
income of these share-based payments in the notes to the
financial statements. The estimated fair value (cost)&nbsp;of
the share-based payments has historically been determined using
the Black-Scholes pricing model. As of the date of this report,
the Company had not calculated the cost of share-based payments
using the various other methods allowed by
SFAS&nbsp;No.&nbsp;123R and has not yet decided on the method to
be used upon implementation of this standard. The actual
compensation cost resulting from share-based payments to be
included in the Company&#146;s future results of operations may
vary significantly from the amounts currently disclosed in the
notes to the financial statements.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Property and Equipment, Net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The components of property and equipment at January&nbsp;29,
2005 and January&nbsp;31, 2004 are as follows:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 31,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>810,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>810,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Building</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,340,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,340,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,134,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,885,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture, fixtures, and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,660,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,000,105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,535,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,823,922</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,481,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,859,190</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,907,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,109,589</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,573,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,749,601</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Depreciation expense for fiscal 2004, 2003 and 2002 was
$4,848,537, $4,011,456 and $2,999,666, respectively. Computer
equipment held under capital leases and related accumulated
depreciation was $4,466,372 and $3,103,821, respectively, at
January&nbsp;29, 2005 and $3,373,409 and $2,448,245,
respectively, at January&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-12

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Revolving Lines of Credit</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company has a revolving line of credit secured by
substantially all of the Company&#146;s assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2007. At January&nbsp;29, 2005, the line of
credit provided for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $25,000,000 or the
Company&#146;s borrowing base (approximately $23,500,000 at
January&nbsp;29, 2005), as defined in the credit agreement.
Borrowings under this secured line of credit bear interest at
either the prime rate or the Eurodollar rate plus 2.25%, at the
Company&#146;s election, based on conditions in the credit
agreement. Additionally, there is a letter of credit fee of
1.25% per annum on the outstanding balance of letters of credit.
At January&nbsp;29, 2005, there were no outstanding borrowings
on the revolving line of credit, nor were there any outstanding
letters of credit. Under the terms of the credit agreement, the
Company is required to maintain a minimum tangible net worth.
The Company was in compliance with this requirement at
January&nbsp;29, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that expires in
June 2005. At January&nbsp;29, 2005, the line of credit provided
for aggregate cash borrowings up to $3,000,000. Borrowings under
the credit agreement bear interest at the London Interbank
Offered Rate (&#147;LIBOR&#148;) plus 2.00%. At January&nbsp;29,
2005, there were no outstanding borrowings on the unsecured
revolving line of credit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company borrows funds under these revolving lines of credit
from time to time and subsequently repays such borrowings with
available cash generated from operations.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Long-term Debt and Capital Lease Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Capital Leases.</I> The Company has capital lease obligations
that finance the purchase of its computer equipment. These
obligations have maturity dates ranging from March 2005 to
December 2007. The interest rates on these obligations range
from 7.2% to 11.5%. All of these obligations are secured by the
computer equipment.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-13

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As of January&nbsp;29, 2005 and January&nbsp;31, 2004, long-term
debt and capital lease obligations consist of the following:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 31,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage payable issued to finance purchase of land and
    building; payable in monthly installments of $14,913, including
    interest, through June 2007 with a balloon payment of $1,303,412
    due July 2007; interest at a fixed rate of 6.80%; secured by
    land and building</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,496,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,569,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-negotiable three year junior subordinated note payable on
    September&nbsp;30, 2007 issued in exchange for 600 shares of
    common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations issued to finance purchase of computer
    equipment; payable in monthly installments averaging
    approximately $68,092, $45,357 and $15,889 in 2005, 2006 and
    2007, with maturity dates ranging from March 2005 to December
    2007; interest at rates ranging from 7.2% to 11.5%; secured by
    computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,406,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,061,214</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,011,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,630,278</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion of long-term debt and capital lease
    obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>797,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>641,429</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,214,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,988,849</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As of January&nbsp;31, 2004, annual long-term debt and capital
lease obligation maturities are as follows:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Long-term</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Capital Lease</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Debt</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Obligations</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>801,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>544,278</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,440,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,639</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,605,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,528,029</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less portion attributable to future interest payments (at rates
    ranging from 7.2% to 11.5%)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(121,131</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,605,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,406,898</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The provision for income taxes for fiscal 2004, 2003 and 2002
consists of the following:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

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

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,910,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,987,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,136,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>577,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,050</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,674,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,565,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,559,495</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(104,170</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>465,423</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,671</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,319</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123,841</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>541,742</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,551,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,726,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,101,237</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-14

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Income tax expense computed using the federal statutory rate is
reconciled to the reported income tax expense as follows for
fiscal 2004, 2003 and 2002:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statutory rate applied to income before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,014,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,279,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,763,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income taxes, net of federal benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>491,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>329,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General business credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(161,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(117,004</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,776</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,551,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,726,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,101,237</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The components of deferred tax assets and liabilities at
January&nbsp;29, 2005 and January&nbsp;31, 2004 are as follows:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>518,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>189,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred rent amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>850,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>572,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vacation liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,071</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,000</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,773,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>969,018</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book and tax depreciation differences</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(681,945</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(188,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(462,832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(309,464</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(170,652</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(129,612</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137,068</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(143,902</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,452,497</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(771,859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>321,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>197,159</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon
the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these
deductible differences. As such, a valuation allowance for
deferred tax assets was not considered necessary at
January&nbsp;29, 2005 and January&nbsp;29, 2004.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Preferred Shares Subject to Mandatory Redemption</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company&#146;s Series&nbsp;A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series&nbsp;A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or the liquidation of the Company, at a price
of $1,000 per share, plus accrued dividends. Dividends on
Series&nbsp;A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors or a change in control or
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-15

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
liquidation of the Company. At January&nbsp;29, 2005 and
January&nbsp;31, 2004 the Company had accrued interest and
dividends payable of $379,763 and $1,555,313, respectively.
During fiscal 2003, the Company&#146;s board of directors
adopted a resolution whereby the Company intends to begin
repaying its Series&nbsp;A Preferred Stock and all dividends
accrued thereon at a rate of $500,000 per quarter, beginning in
the second quarter of fiscal 2004. In fiscal 2004 the Company
paid dividends and interest of $1.5&nbsp;million.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Stockholders&#146; Equity</B></TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></TD>
    <TD>
    <I>Stockholders Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company is party to a Stockholders Agreement dated
April&nbsp;13, 1999 (the &#147;Stockholders Agreement&#148;)
with Hampshire Equity Partners II, L.P., George Bellino and
certain management stockholders. Pursuant to the Stockholders
Agreement, four members of the Company&#146;s board of directors
may be designated by the owners of the majority of the voting
stock beneficially owned by Hampshire Equity Partners and its
affiliates; the Company&#146;s stockholders have agreed
generally not to transfer their shares; the Company&#146;s
management stockholders have been granted tag-along rights in
the event of the sale of more than 50% of our common stock; the
Company&#146;s management stockholders have agreed to cooperate
in any sale of the company by Hampshire Equity Partners and the
Company has agreed to register shares of the Company&#146;s
common stock held by the stockholder parties in the event that
the Company registers additional shares of the Company&#146;s
common stock under the Securities Act, other than on a
registration statement on Form&nbsp;S-4 or S-8, or in connection
with an exchange offer, merger, acquisition, dividend
reinvestment plan, stock option or other employee benefit plan.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></TD>
    <TD>
    <I>Equity Transactions with Officer</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In December 2001, the Company issued options to an officer for
436,800 shares of common stock. Since the estimated fair market
value of the Company&#146;s common stock issued exceeded the
exercise price of these options on the date of grant, the
Company recognized charges to earnings during fiscal 2004, 2003
and 2002 of $44,627, $84,441 and $161,882, respectively.
Additional charges related to these options of $17,721 will be
recognized in fiscal 2005.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></TD>
    <TD>
    <I>Equity Transactions with Majority Stockholder</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In August 2003, the Company&#146;s board of directors adopted a
plan (the &#147;Anti-Dilution Plan&#148;) whereby stock options
are to be issued to the Company&#146;s majority stockholder, as
well as certain defined members of management, in amounts
necessary to prevent the dilution of their ownership percentage
as a result of the issuance of stock options to other employees
of the Company. Options granted under this Anti-Dilution Plan
are to be issued at the estimated fair market value of the
Company&#146;s common stock on the date of grant and vest
immediately. This Anti-Dilution Plan was terminated. See
Note&nbsp;12. During fiscal 2004 and 2003, the Company issued
stock options for 31,174 and 39,078 shares of common stock,
respectively, under this Anti-Dilution Plan, 29,562 and 37,050,
respectively, of which were issued to its majority stockholder.
Because the majority stockholder does not qualify as an
employee, FASB Interpretation No.&nbsp;44, &#147;Accounting for
Certain Transactions Involving Stock Compensation,&#148;
required the Company to recognize a charge to earnings during
fiscal 2004 and 2003 of $58,672 and $38,832, respectively. The
fair value of the vested options was determined using the
Black-Scholes option-pricing model.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-16

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></TD>
    <TD>
    <I>Stock Options</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In 1999, the Company established the 1999 Citi Trends, Inc.
Stock Option Plan (the &#147;Plan&#148;). The Plan provides for
the grant of incentive and nonqualified options to key employees
and directors. The board of directors determines the exercise
price of option grants. Option grants generally vest in equal
installments over four years from the date of grant and are
generally exercisable up to ten years from the date of grant.
The Company has authorized up to 1,950,000 shares of common
stock for issuance under the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
A summary of option activity in the Plan for fiscal 2004, 2003
and 2002 is as follows:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2002</B></TD>
</TR>

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

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

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

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,791,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,728,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,718,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(130,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,400</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.38</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,861,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,791,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,728,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.40</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options exercisable end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,616,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,383,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>962,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.38</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
At January&nbsp;29, 2005 the range of exercise prices and
weighted-average remaining contractual life of outstanding
options was $0.38 to $6.85 and 6&nbsp;years, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table summarizes the status of Company options
exercisable at January&nbsp;29, 2005 by exercise price:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

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

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Exercise Price &#38;</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Value of Options</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Fair Value of Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>at Date of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>on Date of Grant</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Quarter of Grant</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Contractual Life</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Grant</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $0.38<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">4th Quarter 2001 and prior</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,552,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,498,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>336,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $1.92</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>1st Quarter 2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $2.69</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>2nd Quarter 2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $3.62</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>2nd Quarter 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>101,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>58,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $3.81</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>3rd Quarter 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>26,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $4.46</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>4th Quarter 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>26,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $6.54<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>1st Quarter 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>36,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>109,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $6.81<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>2nd Quarter 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>20,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>71,552</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $6.85<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>3rd Quarter 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>283,811</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,861,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,616,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>800,927</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-17

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 33%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD align="left">
    436,800 shares were granted during the 4th quarter 2001, the
    exercise price was $0.38 and the fair value of the options were
    $1.15.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>&nbsp;</TD>
    <TD align="left">
    36,400 shares were granted during the 1st quarter 2004, the
    exercise price was $6.54 and the fair value of the options were
    $9.55.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD align="left">
    20,800 shares were granted during the 2nd quarter 2004, the
    exercise price was $6.81 and the fair value of the options were
    $10.25.</TD>
</TR>

<TR valign="top">
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD align="left">
    67,574 shares were granted during the 3rd quarter 2004, the
    exercise price was $6.85 and the fair value of the options were
    $11.05.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Since the estimated fair market value of the Company&#146;s
common stock exceeded the exercise price of the options
referenced in footnotes (2), (3)&nbsp;and (4)&nbsp;above on the
dates of their respective grants, the Company expects to
recognize charges related to these options of approximately
$83,000, $83,000, $83,000 and $26,000 in fiscal 2005, fiscal
2006, fiscal 2007 and fiscal 2008, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The fair value of options granted during the years ended
January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003 was $2.50, $1.31 and $0.80, respectively,
using the Black-Scholes option-pricing model, with the following
weighted average assumptions:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.50%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.50%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.60%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected life, in years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10 years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeiture rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.00%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company leases its stores under operating leases, which
generally have an initial term of five years with a five-year
renewal option. Future minimum rental payments under operating
leases having noncancelable lease terms at January&nbsp;29, 2005
are as follows:
</DIV>

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

</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

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

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,223,506</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,318,638</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,032,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,706,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,365,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614,920</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total future minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,261,828</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Certain operating leases provide for fixed monthly rentals while
others provide for rentals computed as a percentage of net
sales. Certain operating leases provide for a combination of
both fixed monthly rental and rentals computed as a percentage
of net sales. Rental expense was $8,417,799, $6,363,257 and
$4,787,768 for the fiscal 2004, 2003 and 2002 (including
$723,471, $794,444 and $539,090 of percentage rent),
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company from time to time is involved in various legal
proceedings incidental to the conduct of its business, including
claims by customers, employees or former employees. The Company
is currently the defendant in a putative collective action
lawsuit commenced by a former employee under the Fair Labor
Standards Act. The suit is pending in District Court of the
United States for the Middle District of Alabama, Northern
Division. The plaintiff is seeking unpaid compensation and
benefits, liquidated damages, attorneys fees, costs and
injunctive relief. The case is in its early stages, and the
Company is in the process of
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-18

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
evaluating the claims made. While the Company&#146;s review of
the allegations is preliminary, it believes that its business
practices are, and were during the relevant periods, in
compliance with the law. While the Company is unable to predict
the outcome of this matter, it plans to defend this suit
vigorously.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(10)</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company is a party to an Amended and Restated Management
Consulting Agreement, or the consulting agreement, effective as
of February&nbsp;1, 2004 with Hampshire Management Company LLC,
or the consultant, which is an affiliate of the Company&#146;s
majority stockholder, pursuant to which it provides the Company
with certain consulting services related to, but not limited to,
financial affairs, relationships with lenders, stockholders and
other third-party associates or affiliates, and the expansion of
the Company&#146;s business.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Term and Termination</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The consulting agreement has a four year term and is subject to
automatic one year renewals each February&nbsp;1, subject to
60&nbsp;days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90&nbsp;days prior notice in the event of
(a)&nbsp;a sale of all or substantially all of our common stock
or assets, (b)&nbsp;a merger or consolidation in which we are
not the surviving corporation or (c)&nbsp;a registered public
offering of our common stock, which includes this offering. It
is expected that both parties to the consulting agreement will
waive any notice requirement for termination upon consummation
of the initial public offering.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Compensation</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Under the consulting agreement, the Company pays the consultant
an annual management fee of $240,000, payable in monthly
installments. The Company agreed to indemnify the consultant,
its affiliates and associates, and each of the respective
owners, partners, officers, directors, members, employees and
agents of each, from and against any loss, liability, damage,
claim or expenses (including the fees and expenses of counsel)
relating to their performance under the consulting agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Upon the consummation of the Company&#146;s IPO (see
Note&nbsp;12), the Company intends to negotiate a termination of
the consulting agreement and has tentatively agreed to pay the
consultant a termination fee of $1.2&nbsp;million before
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Included in operating expenses are management fees of $240,000,
$240,000 and $190,000 for fiscal 2004, 2003 and 2002,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-19

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Citi Trends, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Financial Statements&#151;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>January&nbsp;29, 2005, January&nbsp;31, 2004 and
February&nbsp;1, 2003</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(11)</B></TD>
    <TD>
    <B>Valuation and Qualifying Accounts</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table presents amounts that have been reserved on
the balance sheet.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

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

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

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

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at February&nbsp;2, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>806,367</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additions charged to costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,066,634</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deductions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,808,188</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at February&nbsp;1, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,064,813</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additions charged to costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,541,749</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deductions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,672,235</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>934,327</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additions charged to costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,917,053</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deductions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,629,883</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;29, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,221,497</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Additions charged to costs and expenses is the result of
anticipated inventory shrinkage. Deductions represent actual
inventory shrinkage incurred from physical inventories taken
during the fiscal year.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(12)</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></TD>
    <TD>
    <I>Initial Public Offering</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On February&nbsp;28, 2005, the Company filed a Registration
Statement on Form&nbsp;S-1 with the Securities and Exchange
Commission to register shares in an initial public offering
(&#147;IPO&#148;). The IPO is expected to be consummated during
the second quarter of 2005.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></TD>
    <TD>
    <I>Long-Term Incentive Plan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On March&nbsp;8, 2005 the Company adopted the 2005 Long-Term
Incentive Plan which will become effective upon the consummation
of the IPO. Under the Incentive Plan, the Company has reserved
910,000 shares of Common Stock for the grant of stock options
and other equity incentive awards.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></TD>
    <TD>
    <I>Termination of Anti-Dilution Plan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On April&nbsp;28, 2005, the Company terminated the Anti-Dilution
Plan discussed in Note&nbsp;8(c).
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></TD>
    <TD>
    <I>Stock Split</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In connection with the IPO, on May&nbsp;11, 2005, the Board of
Directors approved a 26-for-1 stock split of the Company&#146;s
common stock. All share and per share amounts related to common
stock and stock options included in the accompanying financial
statements and footnotes have been restated to reflect the stock
split.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-20

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='207'></A>
</DIV>

<!-- link1 "Condensed Balance Sheets" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Condensed Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>October&nbsp;29, 2005 and January&nbsp;29, 2005</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>January 29,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

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


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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,371,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,801,442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marketable securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,581,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,978,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,172,832</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,388,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,285,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,420,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139,000</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,024,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,714,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,796,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,573,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,371,404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>184,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,182</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>125,377,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70,789,560</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="11" align="center" valign="top">
    <B>Liabilities and Stockholders&#146; Equity</B></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under revolving lines of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,798,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,132,301</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,691,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,199,772</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,014,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,537,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>725,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,455,247</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,494,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,791</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,723,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,375,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,526,110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>688,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,984,763</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,075,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>818,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,221,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,632,114</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,584,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,024,592</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01 par value. Authorized 20,000,000; 13,034,270
    shares issued at October&nbsp;29, 2005 and 9,460,750 shares
    issued at January&nbsp;29, 2005; 12,868,520 shares outstanding
    at October&nbsp;29, 2005 and 9,295,000 outstanding at
    January&nbsp;29, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,608</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in-capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,720,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,029,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,106,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,828,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock, at cost; 165,750 shares as of October&nbsp;29,
    2005 and January&nbsp;29, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,550</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subscription receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,792,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,764,968</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (note&nbsp;7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>125,377,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70,789,560</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to the condensed financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-21

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='208'></A>
</DIV>

<!-- link1 "Condensed Statements of Income Thirty-Nine Weeks Ended October 29, 2005 and October 30, 2004" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Condensed Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Thirty-Nine Weeks Ended October&nbsp;29, 2005 and
October&nbsp;30, 2004</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 30,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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


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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>192,960,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>137,128,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,038,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,288,238</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,922,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,840,653</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,281,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,439,668</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,641,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,400,985</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>499,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,734</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, including redeemable preferred stock dividend</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(302,335</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(574,324</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,838,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,843,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,560,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,479,707</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,278,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,363,688</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,348,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,305,400</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,847,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,945,038</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to the condensed financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-22

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

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='209'></A>
</DIV>

<!-- link1 "Condensed Statements of Cash Flows" -->

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Condensed Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Thirty-nine Weeks Ended October&nbsp;29, 2005 and
October&nbsp;30, 2004</B>
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>October 30,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>(Unaudited)</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,278,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,363,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>243,338</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,369,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,587,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of property and equipment due to hurricane
    damage</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,412</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax benefit on stock option exercise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,316,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,805,643</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,618,342</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(576,850</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(723,555</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73,388</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,666,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,929,299</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and other long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,601,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,969,512</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,476,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>887,067</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax payable/receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,740,299</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,074,618</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Layaway deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,241,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,008,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,067,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,348,705</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in marketable securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32,581,066</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,431,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,228,499</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,012,918</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,228,499</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross borrowings under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,860,104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross repayments under revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,472,037</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments on long-term debt and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,237,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(626,077</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from payment of shareholder note receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of preferred shares subject to mandatory redemption</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,605,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,000,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,333,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,515,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,778,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net decrease in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,430,310</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,798,214</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,801,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,954,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    End of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,371,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,156,018</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosure of cash flow information:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>664,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>296,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,007,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,559,729</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment financed by entering into
    capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>514,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>670,503</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to the condensed financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-23

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='210'></A>
</DIV>

<!-- link1 "Citi Trends, Inc. Notes to the Condensed Financial Statements (unaudited) October 29, 2005" -->

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

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to the Condensed Financial Statements (unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>October&nbsp;29, 2005</B>
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The condensed balance sheet as of October&nbsp;29, 2005, the
condensed statements of operations for the thirty-nine-week
periods ended October&nbsp;29, 2005 and October&nbsp;30, 2004,
and the condensed statements of cash flows for the thirty-nine
week periods ended October&nbsp;29, 2005 and October&nbsp;30,
2004 have been prepared by Citi Trends, Inc. (the
&#147;Company&#148;), without audit. The condensed balance sheet
at January&nbsp;29, 2005 has been derived from the audited
financials statements at that date, but does not include all
required year end disclosures. In the opinion of management,
such statements include all adjustments considered necessary to
present fairly the Company&#146;s financial position as of
October&nbsp;29, 2005 and January&nbsp;29, 2005, and its results
of operations and cash flows at October&nbsp;29, 2005 and
October&nbsp;30, 2004 and for all periods presented.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Certain information and disclosures normally included in the
notes to the annual financial statements prepared in accordance
with U.S. generally accepted accounting principles have been
omitted from these condensed financial statements. The Company
suggests that you read its condensed financial statements in
conjunction with the financial statements and notes thereto
included in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The results of operations for the thirty-nine weeks ended
October&nbsp;29, 2005 are not necessarily indicative of the
operating results that may be expected for the year ending
January&nbsp;28, 2006.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Stock-Based Compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company applies the intrinsic-value-based method of
accounting prescribed by APB Opinion No.&nbsp;25, <I>Accounting
for Stock Issued to Employees,</I> and related interpretations
including FASB interpretation (FIN)&nbsp;No.&nbsp;44,
<I>Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No.&nbsp;25</I>,
to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if
the current fair value of the underlying stock exceeds the
exercise price. The Company recognizes the fair value of stock
rights granted to non-employees in the accompanying condensed
financial statements. SFAS&nbsp;No.&nbsp;123, <I>Accounting for
Stock-Based Compensation,</I> and SFAS&nbsp;No.&nbsp;148,
<I>Accounting for Stock-Based Compensation&#151;Transition and
Disclosure, an amendment of FASB Statement No.&nbsp;123</I>,
establishes accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, as amended. The following table
illustrates the effect on net income for the thirty-nine ended
October&nbsp;29, 2005 and October&nbsp;30, 2004 as if the
fair-value-based method had been applied to all outstanding and
unvested awards in the periods. Pro forma information regarding
net income and net income per share is required in order to
disclose the Company&#146;s net income as if it had accounted
for employee stock options under the fair value method of
SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock-Based
Compensation,</I> as amended by SFAS&nbsp;No.&nbsp;148,
<I>Accounting for</I>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-24

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<I>Stock-Based Compensation&#151;Transition Disclosure</I>. The
fair values of options and shares issued pursuant to its option
plan at each grant date were estimated using the Black-Scholes
option pricing model.
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


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

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

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,278,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,363,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add stock-based employee compensation expense included in
    reported net income, net of tax of $27,336 and $33,355,
    respectively, for the thirty-nine weeks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $98,350 and $101,582, respectively, for the thirty-nine
    weeks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(173,335</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(179,032</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,152,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,243,443</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.25</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma basic income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.24</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.22</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma diluted income per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.20</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Earnings per Share</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earnings per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for the thirty-nine weeks ended October&nbsp;29, 2005 and
October&nbsp;30, 2004:
</DIV>

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

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,348,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,305,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incremental shares from assumed exercises of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,498,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,639,638</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of common shares and common stock equivalents
    outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,847,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,945,038</TD>
    <TD>&nbsp;</TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
For the thirty-nine weeks ended October&nbsp;29, 2005 and
October&nbsp;30, 2004 there were 4,000 and 0 options,
respectively, outstanding to purchase shares of common stock
excluded from the calculation of diluted earnings per share
because of anti-dilution.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Marketable Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Marketable securities consist primarily of auction rate
municipal securities which are highly liquid, variable rate debt
securities. While the underlying security has a long-term
nominal maturity, the interest rate is periodically reset
through dutch auctions typically every thirty-five days. Since
these auction rate securities are priced and subsequently trade
at short-term intervals they are classified as current assets.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-25

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company classifies all investments as available-for-sale.
Available-for-sale securities are carried at estimated fair
value, based on available market information, with unrealized
gains and losses, if any, reported as a component of
stockholders&#146; equity. As a result of the resetting variable
rates, the carrying value of available-for-sale securities
approximates fair market value due to their short maturities.
For these reasons, the Company has no cumulative gross
unrealized or realized gains or losses from these investments.
All income generated from these investments was recorded as
interest income. The Company has no investments considered to be
trading securities.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Revolving Lines of Credit</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company has a revolving line of credit secured by
substantially all of the Company&#146;s assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2007. At October&nbsp;29, 2005, the line of
credit provided for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $25,000,000 or the
Company&#146;s borrowing base (approximately $25,000,000 at
October&nbsp;29, 2005), as defined in the credit agreement.
Borrowings under this secured line of credit bear interest at
either the prime rate or the Eurodollar rate plus 2.25%, at the
Company&#146;s election, based on conditions in the credit
agreement. Additionally, there is a letter of credit fee of
1.25% per annum on the outstanding balance of letters of credit.
At October&nbsp;29, 2005, there were no outstanding borrowings
on the revolving line of credit, nor were there any outstanding
letters of credit. Under the terms of the credit agreement, the
Company is required to maintain a minimum tangible net worth.
The Company was in compliance with this requirement at
October&nbsp;29, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that expires on
June&nbsp;30, 2006. At October&nbsp;29, 2005, the line of credit
provided for aggregate cash borrowings up to $3,000,000.
Borrowings under the credit agreement bear interest at LIBOR
plus 2.00%. At October&nbsp;29, 2005, there were no outstanding
borrowings on the unsecured revolving line of credit.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Equity Transactions with Majority Stockholder</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In August 2003, the Company&#146;s board of directors adopted
the Anti-Dilution Plan whereby stock options were to be issued
to the Company&#146;s majority stockholder, as well as certain
defined members of management, in amounts necessary to prevent
the dilution of their ownership percentage as a result of the
issuance of stock options to other employees of the Company.
Options granted under this Anti-Dilution Plan were to be issued
at the estimated fair market value of the Company&#146;s common
stock on the date of grant and vest immediately. On
April&nbsp;28, 2005 the Company terminated the Anti-Dilution
Plan. During the thirty-nine week periods ended October&nbsp;29,
2005 and October&nbsp;30, 2004, the Company issued 0 and 31,174
stock options, respectively, under this Anti-Dilution Plan.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company from time to time is involved in various legal
proceedings incidental to the conduct of its business, including
claims by customers, employees or former employees. While
litigation is subject to uncertainties and the outcome of any
litigated matter is not predictable, the Company is not aware of
any legal proceedings pending or threatened against it that it
expects to have a material adverse effect on its financial
condition or results of operations.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Related Party Transactions&#151;Management Consulting
    Agreement</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company was a party to an Amended and Restated Management
Consultant Agreement, or the Consulting Agreement, effective as
of February&nbsp;1, 2004 with Hampshire Management Company LLC,
or the Consultant, which is an affiliate of the Company&#146;s
majority stockholder, pursuant to which the Consultant provided
the Company with certain consulting services related to, but not
limited to, financial affairs, relationships with lenders,
stockholders and other third-party associates or affiliates, and
the expansion of the
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-26

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Company&#146;s business. In connection with the Company&#146;s
initial public offering (see note&nbsp;10), the parties
terminated the Consulting Agreement and the Company paid the
Consultant a one time termination fee of $1.2&nbsp;million in
the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Included in operating expenses were management fees of $72,857
and the termination fee of $1.2&nbsp;million for the thirty-nine
weeks ended October&nbsp;29, 2005 and management fees of
approximately $180,000 for the thirty-nine weeks ended
October&nbsp;30, 2004.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Long-Term Incentive Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On March&nbsp;8, 2005 the Company adopted the 2005 Long-Term
Incentive Plan which became effective upon the consummation of
the initial public offering. Under the Incentive Plan, the
Company may grant up to 1.3&nbsp;million shares of common stock
that may be issued for the grant of stock options and other
equity incentive awards. In the thirty-nine weeks ended
October&nbsp;29, 2005, the Company issued approximately 172,000
options under this plan.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(10)</B></TD>
    <TD>
    <B>Initial Public Offering</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On May&nbsp;18, 2005, the Company completed the initial public
offering, or IPO, of its common stock as a result of which the
Company issued and sold 2,700,000 shares of common stock at
$14.00 per share. In addition, the Company received notice on
May&nbsp;27, 2005, that the underwriters had exercised the
over-allotment option granted in connection with the IPO,
pursuant to which the Company issued and sold an additional
577,500 shares on June&nbsp;1, 2005. Upon completing the
offering and the over-allotment option, the Company received
gross proceeds of approximately $45.9&nbsp;million and incurred
approximately $4.8&nbsp;million in expenses in connection with
the IPO, for net proceeds of approximately $41.1&nbsp;million.
In addition, 1,150,000 shares of common stock were sold in the
IPO by certain selling stockholders of the Company, for which
the Company received no proceeds. As a result, upon the closing
of the offering, there were 12,602,154 shares of common stock
outstanding. The Company&#146;s common stock is listed on NASDAQ
under the symbol &#147;CTRN&#148;.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(11)</B></TD>
    <TD>
    <B>Stock Split</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In connection with the IPO, on May&nbsp;11, 2005, the Board of
Directors approved a 26-for-1 stock split of the Company&#146;s
common stock. All share and per share amounts related to common
stock and stock options included in the accompanying condensed
financial statements and notes have been restated to reflect the
stock split.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(12)</B></TD>
    <TD>
    <B>Use of IPO Proceeds</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The Company received net proceeds of approximately
$41.2&nbsp;million from the IPO. Following the closing of the
IPO, each of the Company&#146;s 3,605 shares of mandatory
redeemable preferred stock were redeemed and extinguished for
approximately $3.6&nbsp;million, and the Company repaid in full
the mortgage on its Fahm Street Headquarters and Distribution
Center in the amount of approximately $1.5&nbsp;million.
Subsequent to the IPO the Company has invested approximately
$30.2&nbsp;million of the proceeds in short term investments and
has spent approximately $4.3&nbsp;million on capital
expenditures for new stores and approximately $1.6&nbsp;million
to date for a distribution center in Darlington, South Carolina.
</DIV>

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(13)</B></TD>
    <TD>
    <B>Recent Accounting Pronouncements</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In December of 2004, the FASB issued SFAS&nbsp;No.&nbsp;123R,
&#147;Share-Based Payment,&#148; which replaces the requirements
under SFAS&nbsp;No.&nbsp;123 and APB No.&nbsp;25.
SFAS&nbsp;No.&nbsp;123R sets accounting requirements for
&#147;share-based&#148; compensation to employees, including
employee stock purchase plans, and requires all share-based
payments, including employee stock options, to be recognized in
the financial statements of the Company based on their fair
value. It carries forward prior guidance on accounting for
awards to non-
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-27

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
employees. The accounting for employee stock ownership plan
transactions will continue to be accounted for in accordance
with Statement of Position 93-6, while awards to most
non-employee directors will be accounted for as employee awards.
This Statement is effective for public companies that do not
file as small business issuers as of the beginning of their
first annual period beginning after June&nbsp;15, 2005 (the
Statement is effective January&nbsp;29, 2006 for the Company).
The impact of adopting SFAS&nbsp;No.&nbsp;123R will be dependent
on numerous factors including, but not limited to, the valuation
model chosen by the Company to value stock-based awards; the
assumed award forfeiture rate; the accounting policies adopted
concerning the method of recognizing the fair value of awards
over the requisite service period; and the transition method
chosen for adopting SFAS&nbsp;No.&nbsp;123R. The Company has
preliminarily estimated the effects of adoption of
SFAS&nbsp;No.&nbsp;123R will result in an additional
compensation expense of $1.0-1.5&nbsp;million in fiscal 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In May, 2005, the FASB issued SFAS&nbsp;No.&nbsp;154
&#147;Accounting Changes and Error Corrections: a replacement of
APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3.&#148;
Statement 154 requires retrospective application for voluntary
changes in accounting principle unless it is impracticable to do
so. The requirements are effective for accounting changes made
in fiscal years beginning after December&nbsp;12, 2005. The
Company has assessed the impact of Statement 154, and does not
expect it to have an impact on its financial position, results
of operations or cash flows.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-28

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<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 21pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PICTURES OF STORES</B>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>1,500,000 Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y09649y0964900.gif" alt="(CITITRENDS LOGO)">
</DIV>

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 0pt;color: #000000; background: #ffffff; margin-top: 60pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 56%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<DIV style="width: 56%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 56pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
January &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006
</DIV>

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff; margin-top: 56pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CIBC World Markets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 16pt; margin-top: 47pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B>Piper Jaffray</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>SG Cowen &#38; Co.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    <B>Wachovia Securities</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 18pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.5pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>You should rely only on information contained in this
prospectus. No dealer, salesperson or other person is authorized
to give information that is not contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in
this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Part&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Information Not Required in Prospectus</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by the
registrant in connection with the sale of the securities being
registered. All amounts are estimates.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SEC registration fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer agent and registrar fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>440,900</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As permitted by Section&nbsp;102(b)(7) of the Delaware General
Corporation Law, we have adopted provisions in our second
amended and restated certificate of incorporation and amended
and restated by-laws that limit or eliminate the personal
liability of our directors for a breach of their fiduciary duty
of care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information
reasonable available to them. Consequently, a director will not
be personally liable to us or our stockholders for monetary
damages or breach of fiduciary duty as a director except for:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends; or</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the fullest extent permitted under Delaware law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
As permitted by Section&nbsp;145 of the Delaware General
Corporation Law, our amended and restated by-laws provide that:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149; &nbsp;</TD>
    <TD align="left">
    the rights provided in our amended and restated by-laws are not
    exclusive.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Our second amended and restated certificate of incorporation,
attached as Exhibit&nbsp;3.1 to our Registration Statement on
Form&nbsp;S-1 filed with the SEC on February&nbsp;28, 2005, and
our amended and restated by-laws, attached as Exhibit&nbsp;3.2
to our Registration Statement on Form&nbsp;S-1 filed with the
SEC on February&nbsp;28, 2005, provide for the indemnification
provisions described above and elsewhere herein. In addition, we
have purchased a policy of directors&#146; and officers&#146;
liability insurance that insures our directors and officers
against the cost of defense, settlement or payment of a judgment
in some circumstances. These indemnification provisions may be
sufficiently broad to permit indemnification of our officers and
directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act of 1933, as amended
(the &#147;1933 Act&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The form of Underwriting Agreement, to be filed by amendment,
provides for indemnification by the underwriters of us and our
officers and directors for specified liabilities, including
matters arising under the 1933 Act.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Set forth below in reverse chronological order is information
regarding the number of shares of capital stock and options
issued by us since January 2003. Also included is the
consideration if any received by us for the securities.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
There was no public offering in any such transaction and we
believe that each transaction was exempt from the registration
requirements of the 1933 Act, by reason of Regulation&nbsp;D and
Section&nbsp;4(2) of the 1933 Act, based on the private nature
of the transactions and the financial sophistication of the
purchasers, all of whom had access to complete information
concerning us and acquired the securities for investment and not
with a view to the distribution thereof. In addition, we believe
that the transactions described below with respect to the
issuance of option grants and warrants to our employees and
directors were exempt from registration requirements of the 1933
Act by reason of Rule&nbsp;701 promulgated thereunder.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Common Stock</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In January 2004, a former employee of ours resigned with 15,600
shares of vested stock options. The employee exercised his
options in March 2004 pursuant to the provisions of our Amended
and Restated 1999 Stock Option Plan and we issued to him shares
of our common stock. In September 2004, pursuant to the terms
and conditions of our Amended and Restated 1999 Stock Option
Plan, we repurchased the 15,600 shares of common stock from him
for the then fair market value of the common stock. As
consideration we issued him a non-negotiable three year junior
subordinated note in the amount of $106,800. The common shares
we repurchased are currently held by us in treasury stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Options</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
On March&nbsp;10, 2004, Messrs.&nbsp;Lupo and Noll received
options to purchase 2,600 shares of our common stock at an
exercise price of $6.54 per share. Also in fiscal 2004, we
granted Messrs.&nbsp;Anderson, Bellino and Noll options to
purchase 312, 676 and 156 shares of our common stock,
respectively, at an exercise price of $6.85 per share.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Additionally, during fiscal 2004, certain employees, including
buyers and district managers, received options to purchase an
aggregate of 88,868 shares of our common stock pursuant to the
terms of our Amended and Restated 1999 Stock Option Plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
In August 2003, our board of directors adopted an Anti-Dilution
Plan whereby stock options are to be issued to Hampshire Equity
Partners&nbsp;II, L.P., as well as other common stockholders, in
amounts necessary to prevent the dilution of their ownership
percentage as a result of the issuance of stock options to our
other employees. Options granted under this Anti-Dilution Plan
are to be issued at the estimated fair market value of our
common stock on the date of grant and vest immediately. The
Anti-Dilution Plan was terminated effective on
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
April&nbsp;28, 2005. See Note&nbsp;12 to our consolidated
financial statements. During fiscal 2004 and fiscal 2003, we
issued stock options for 31,174 and 39,078 shares of common
stock, respectively, under this Anti-Dilution Plan, 37,050 of
which were issued to Hampshire Equity Partners&nbsp;II, L.P.
Because Hampshire Equity Partners&nbsp;II, L.P. does not qualify
as an employee, FIN&nbsp;No.&nbsp;44 required us to recognize a
charge to earnings during fiscal 2004 and fiscal 2003 of $58,672
and $38,832, respectively. The fair value of the vested options
was determined using the Black-Scholes option-pricing model.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
(a)&nbsp;<I>Exhibits</I>. The following exhibits are filed as
part of this registration statement:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement******</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Certificate of Incorporation*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated By-laws*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen certificate for shares of common stock, $.01 par
    value***</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP*****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement by and between R.
    Edward Anderson and Citi Trends, Inc., dated as of
    December&nbsp;30, 2005****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of December&nbsp;30,
    2005****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Loan and Security Agreement, dated as of April&nbsp;2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Loan and Security Agreement, dated as of
    June&nbsp;28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Loan and Security Agreement, dated as of
    November&nbsp;30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Loan and Security Agreement, dated as of
    February&nbsp;9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated as of September&nbsp;30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $3.0 Million Promissory Note of Citi Trends, Inc. payable to
    Bank of America issued on June&nbsp;21, 2004*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of 2005 Long Term Incentive Plan*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Nominating Agreement by and between Citi Trends, Inc.
    and Hampshire Equity Partners II, L.P.**</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Citi Trends, Inc. Code of Business Conduct***</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP*****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Paul Hastings, Janofsky&nbsp;&#38; Walker LLP
    (included in Exhibit&nbsp;5.1)*****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney*****</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 33%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to the Registration Statement on
    Form&nbsp;S-1 (File No.&nbsp;333-123028) filed with the
    Securities and Exchange Commission on February&nbsp;28, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;**&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to Amendment No.&nbsp;1 to the
    Registration Statement on Form&nbsp;S-1 (File
    No.&nbsp;333-123028) filed with the Securities and Exchange
    Commission on April&nbsp;7, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;***&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to Amendment No.&nbsp;2 to the
    Registration Statement on Form&nbsp;S-1 (File
    No.&nbsp;333-123028) filed with the Securities and Exchange
    Commission on April&nbsp;29, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;****&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to the Current Report on
    <FONT style="white-space: nowrap">Form&nbsp;8-K</FONT> (File
    No.&nbsp;<FONT style="white-space: nowrap">000-51315)</FONT>
    filed with the Securities and Exchange Commission on
    December&nbsp;30, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*****&nbsp;</TD>
    <TD align="left">
    Filed herewith.</TD>
</TR>

<TR valign="top">
    <TD>******&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;For purposes of determining any liability under the
    Securities Act of 1933, as amended, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance upon Rule&nbsp;430A and contained in a
    form of prospectus filed by the registrant pursuant to Rule
    424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act of
    1933, as amended, shall be deemed to be part of this
    registration statement as of the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;For the purpose of determining any liability under the
    Securities Act of 1933, as amended, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Signatures</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed on its
behalf by the undersigned, thereunto duly authorized, in The
City of New York, State of New York, on the 5th of January, 2006.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    CITI TRENDS, INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">R. Edward Anderson
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid solid black; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R. Edward Anderson</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Chief Executive
    Officer (Principal Executive Officer)</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">Thomas W. Stoltz
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid solid black; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thomas W. Stoltz</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Chief Financial
    Officer (Principal Financial and Accounting Officer)</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registrant&#146;s Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 11pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">R. Edward Anderson<BR>
    <HR size="1" noshade></FONT>R. Edward Anderson,<BR>
    on behalf of himself as well as Attorney-in-Fact</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer (Principal Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;5, 2006</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Thomas W. Stoltz<BR>
    <HR size="1" noshade></FONT>Thomas W. Stoltz,<BR>
    on behalf of himself as well as Attorney-in-Fact</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer (Principal Financial and Accounting
    Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January 5, 2006</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <HR size="1" noshade></FONT>Gregory P. Flynn</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January 5, 2006</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <HR size="1" noshade></FONT>John S. Lupo</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January 5, 2006</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <HR size="1" noshade></FONT>Patricia M. Luzier</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January 5, 2006</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    <HR size="1" noshade></FONT>Tracy L. Noll</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January 5, 2006</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    *By:&nbsp;/s/ <FONT style="font-variant:SMALL-CAPS">R. Edward
    Anderson<BR>
    <HR size="1" noshade></FONT>R. Edward Anderson<BR>
    Attorney-in-Fact</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    *By:&nbsp;/s/ <FONT style="font-variant:SMALL-CAPS">Thomas W.
    Stoltz<BR>
    <HR size="1" noshade></FONT>Thomas W. Stoltz Attorney- in-Fact</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Exhibit&nbsp;Index</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement******</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Certificate of Incorporation*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated By-laws*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen certificate for shares of common stock, $.01 par
    value***</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Paul, Hastings, Janofsky&nbsp;&#38; Walker LLP*****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement by and between R.
    Edward Anderson and Citi Trends, Inc., dated as of
    December&nbsp;30, 2005****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Employment Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of December&nbsp;30,
    2005****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Loan and Security Agreement, dated as of April&nbsp;2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Loan and Security Agreement, dated as of
    June&nbsp;28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Loan and Security Agreement, dated as of
    November&nbsp;30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Loan and Security Agreement, dated as of
    February&nbsp;9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated as of September&nbsp;30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $3.0 Million Promissory Note of Citi Trends, Inc. payable to
    Bank of America issued on June&nbsp;21, 2004*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of 2005 Long Term Incentive Plan*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD align="left" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Nominating Agreement by and between Citi Trends, Inc.
    and Hampshire Equity Partners II, L.P.**</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Citi Trends, Inc. Code of Business Conduct***</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP*****</TD>
</TR>

</TABLE>
</CENTER>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
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<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Paul Hastings, Janofsky&nbsp;&#38; Walker LLP
    (included in Exhibit&nbsp;5.1)*****</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on signature page hereto)*****</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 33%; border-top: 1.0pt solid solid black; font-size: 1pt">&nbsp;</DIV>
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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to the Registration Statement on
    Form&nbsp;S-1 (File No.&nbsp;333-123028) filed with the
    Securities and Exchange Commission on February&nbsp;28, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;**&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to Amendment No.&nbsp;1 to the
    Registration Statement on Form&nbsp;S-1 (File
    No.&nbsp;333-123028) filed with the Securities and Exchange
    Commission on April&nbsp;7, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;***&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to Amendment No.&nbsp;2 to the
    Registration Statement on Form&nbsp;S-1 (File
    No.&nbsp;333-123028) filed with the Securities and Exchange
    Commission on April&nbsp;29, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;****&nbsp;</TD>
    <TD align="left">
    Previously filed as an exhibit to the Current Report on
    <FONT style="white-space: nowrap">Form&nbsp;8-K</FONT> (File
    No.&nbsp;000-51315) filed with the Securities and Exchange
    Commission on December&nbsp;30, 2005.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*****&nbsp;</TD>
    <TD align="left">
    Filed herewith.</TD>
</TR>

<TR valign="top">
    <TD>******&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>
</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y09649sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1147327}]
{"company-data": {"conformed-name": "Citi Trends Inc", "cik": "0001318484", "assigned-sic": "5600", "irs-number": "522150697"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-130863", "film-number": "06510424"}, "business-address": {"street1": "102 FAHM STREET", "city": "SAVANNAH", "state": "GA", "zip": "31401", "phone": "912-236-1561"}, "mail-address": {"street1": "102 FAHM STREET", "city": "SAVANNAH", "state": "GA", "zip": "31401"}}
FORM S-1
Table of Contents
As filed with the Securities and Exchange Commission on
January 5, 2006
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
CITI TRENDS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
5600
52-2150697
(State or other jurisdiction of
incorporation or organization
(Primary standard industrial
classification code number)
(IRS employer
identification number)
102 Fahm Street
Savannah, Georgia 31401
(912) 236-1561
(Address, including zip code, and telephone number, including
area code, of
registrant's principal executive offices)
R. Edward Anderson
Chief Executive Officer
Citi Trends, Inc.
102 Fahm Street
Savannah, Georgia 31401
(912) 236-1561
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William F. Schwitter, Esq.
Wm. David Chalk, Esq.
Paul, Hastings, Janofsky & Walker LLP
DLA Piper Rudnick Gray Cary US LLP
75 East 55th Street
6225 Smith Avenue
New York, New York 10022
Baltimore, Maryland 21209
(212) 318-6000
(410) 580-3000
(212) 319-4090 (fax)
(410) 580-3001 (fax)
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this Form is a post effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Amount to be
Proposed Maximum
Amount of
Securities to be Registered
Registered
Aggregate Offering Price
(1)(2)
Registration Fee
Common Stock, par value $.01 per share
1,725,000
$69,000,000
$7,383.00
(1)
Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule 457(c) under the Securities Act of
    1933, as amended, based on the average of the high and low
    prices of the common stock as reported by the Nasdaq National
    Market on December 28, 2005.
(2)
Includes shares of common stock subject to the
    underwriters' over-allotment option.
Table of Contents
The information in
this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and we
are not soliciting offers to buy these securities in any state
where the offer or sale is not
permitted.
Subject to Completion, Dated
January 5, 2006
1,500,000 Shares
Common Stock
$             per
share
The selling stockholders of Citi Trends, Inc. identified in this
prospectus are offering 1,500,000 shares of our common
stock. We will not receive any of the proceeds from the sale of
shares of common stock by the selling stockholders.
Our shares of common stock are listed for trading on the Nasdaq
National Market under the symbol "CTRN." On
January 4, 2006, the last reported sale price of our common
stock on the Nasdaq National Market was $41.85 per share.
Investing in the common stock involves risks. See "Risk
Factors" beginning on page 7.
Per Share
Total
Price to the public
$
$
Underwriting discount
Proceeds to the selling stockholders
The selling stockholders have granted an option to the
underwriters to purchase up to a maximum of 225,000 additional
shares of our common stock from the selling stockholders within
30 days following the date of this prospectus to cover
over-allotments, if any.
The underwriters expect to deliver the shares in New York, New
York on or about January      ,
2006
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
CIBC World Markets
Piper Jaffray
SG Cowen & Co.
Wachovia Securities
The date of this prospectus is
January      , 2006
Table of Contents
LOGO
MAP OF STORE LOCATIONS
PICTURE OF FRONT OF STORE
Table of Contents
Page
Prospectus Summary
1
Risk Factors
7
Special Note Regarding Forward-Looking
    Statements
17
Use of Proceeds
18
Price Range of Our Common Stock
18
Dividend Policy
18
Capitalization
19
Selected Financial and Operating Data
20
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
22
Business
38
Management
48
Related Party Transactions
62
Principal and Selling Stockholders
63
Description of Capital Stock
65
Shares Eligible for Future Sale
69
Underwriting
71
Legal Matters
74
Experts
74
Where You Can Find More Information
74
Index to Financial Statements
F-1
EX-5.1: OPINION OF PAUL, HASTINGS, JANOFSKY & WALKER LLP
EX-23.1: CONSENT OF KPMG LLP
-i-
Table of Contents
Prospectus Summary
This summary highlights information contained in other parts
    of this prospectus, and because it is only a summary, it does
    not contain all of the information that you should consider
    before buying shares. You should read the entire prospectus
    carefully, including the risk factors and financial statements.
    All share numbers in this prospectus reflect a 26-for-one stock
    split of our common stock, which was effected on May 11,
    2005. Our fiscal year ends on the Saturday closest to
    January 31, and, except as otherwise provided, references
    in this prospectus to a fiscal year mean the 52- or
53-week
period ended on
    the Saturday closest to January 31 of the succeeding year.
    Fiscal 2004, for example, refers to the fiscal year ended
    January 29, 2005.
Citi Trends, Inc.
We are a rapidly growing, value-priced retailer of urban fashion
    apparel and accessories for the entire family. We offer quality,
    branded merchandise for men, women and children, including
    products from nationally recognized brands, as well as private
    label products and a limited assortment of home décor
    items. Our merchandise offerings are designed to appeal to the
    preferences of fashion conscious consumers, particularly
    African-Americans. Through strong relationships with our
    suppliers, we believe that we are able to offer our products at
    compelling values. We seek to provide nationally recognized
    branded merchandise at 20% to 60% discounts to department and
    specialty stores' regular prices.
We operate 236 stores (including two stores currently closed due
    to hurricane damage) in both urban and rural markets in fourteen
    states. Originally, our stores were located in the Southeast,
    and during late fiscal 2004 and fiscal 2005 we expanded into the
    Mid-Atlantic region, the Midwest and Texas. Our stores average
    approximately 9,000 square feet of selling space, and our stores
    opened since the beginning of fiscal 2003 average approximately
    10,500 square feet of selling space. Our stores are generally
    located in neighborhood strip shopping centers that are
    convenient to low and moderate income consumers. These locations
    allow us to serve our customers at rents that we believe are
    attractive, and combined with our differentiated merchandise
    assortment, compelling value proposition and efficient operating
    model, enable us to generate strong returns on store
    investments. Our new stores typically return our initial unit
    investment within 12 to 14 months.
Our predecessor was founded in 1946 and grew to become a chain
    of family apparel stores operating in the Southeast under the
    Allied Department Stores name. In 1999, our chain of stores,
    then consisting of 85 stores throughout the Southeast, was
    acquired by Hampshire Equity Partners II, L.P., a private equity
    firm. Our management team implemented several strategies that
    have driven our success including refining our merchandise
    offerings with a focus on urban fashions for the entire family,
    accelerating and completing the remodeling of virtually all of
    the 85 acquired stores, and executing an aggressive new store
    growth plan. We
•
grew our store base from 85 stores at the time of the
    acquisition to 236 stores as of January 4, 2006;
•
increased average sales per store from $0.8 million in
    fiscal 2000 to $1.1 million in fiscal 2004;
•
generated comparable store sales increases in each of the past
    five fiscal years;
•
increased net sales from $80.9 million in fiscal 2000 to
    $203.4 million in fiscal 2004, representing a compound
    annual growth rate of 25.9%; and
•
increased net income from $1.2 million in fiscal 2000 to
    $7.3 million in fiscal 2004.
We have continued our rapid growth in fiscal 2005 with net sales
    increasing 40.7% to $193.0 million in the first nine months
    of fiscal 2005 from $137.1 million in the first nine months
    of fiscal 2004. Net income grew 165.6% to $6.3 million in
    the first nine months of fiscal 2005 versus $2.4 million in
    the first nine months of fiscal 2004. Our comparable store sales
    increased 6.9%, 11.5% and 25.0%, respectively, in each of the
    first three quarters of fiscal 2005 compared to 3.5%, 0.3% and
    3.0%, respectively, in each of the first three quarters of
    fiscal 2004. As discussed more fully below in "—Recent
    Developments" and in "Management's Discussion and
    Analysis of Financial Condition and Results of Operations—
    Overview," following Hurricanes
1
Table of Contents
Katrina, Rita and Wilma, we experienced a significant increase
    in sales since September of fiscal 2005 in our store locations
    in the markets directly affected by the hurricanes and in
    contiguous markets. This increase more than offset the sales
    lost on the days certain of our stores were closed due to the
    hurricanes. This positive post-hurricane impact has begun to
    dissipate, and we anticipate that the magnitude of this trend
    will continue to diminish over time.
Our goal is to be the leading value-priced retailer of urban
    fashion apparel and accessories. We believe the following
    business strengths differentiate us from our competitors and are
    important to our success.
•
focus on providing a timely and fashionable assortment of urban
    apparel and accessories;
•
superior value proposition, with nationally recognized brands
    offered at 20% to 60% discounts to department and specialty
    stores' regular prices;
•
merchandise mix that appeals to the entire family,
    distinguishing our stores from many competitors that focus only
    on women and reducing our exposure to fashion trends and demand
    cycles in any single category;
•
strong and flexible sourcing relationships managed by our
    20-plus member buying team, staffed by individuals with an
    average of more than 20 years of retail experience;
•
attractive fashion presentation and store environment similar to
    a specialty apparel retailer, rather than a typical off-price
    store; and
•
highly profitable store model.
Our growth strategy is to open stores in new and existing
    markets, as well as to increase sales in existing stores. Adding
    stores in the markets we currently serve enables us to benefit
    from enhanced name recognition and achieve advertising and
    operating synergies, and entering new markets opens additional
    growth opportunities. For fiscal 2005, we have opened 36 new
    stores thus far and have no additional openings planned. We
    expect to open 42 to 45 new stores in fiscal 2006. Approximately
    90% of the new stores we intend to open in fiscal 2006 will be
    located in states we currently serve. We intend to increase
    comparable store sales primarily through merchandising
    enhancements and the expansion of product categories such as
    home décor and intimate apparel.
Recent Developments
Our strong operating and financial momentum continued in the
    first two months of the fourth quarter of fiscal 2005. As
    discussed in this section and in "Management's
    Discussion and Analysis of Financial Condition and Results of
    Operations—Overview", following Hurricanes Katrina,
    Rita and Wilma we experienced a significant increase in sales in
    our store locations in the markets directly affected by the
    hurricanes and in contiguous markets. This increase more than
    offset the sales lost on the days certain of our stores were
    closed for one or more days due to the hurricanes.
•
We expect that net sales for the four-week period ended
    November 26, 2005 increased 43.5% to $24.7 million
    compared with $17.2 million for the four-week period ended
    November 27, 2004. We expect that comparable store sales
    increased 26.0% for the four-week period ended November 26,
    2005 compared with a 0.9% increase in the prior-year period. We
    expect further that comparable store sales in the non-affected
    markets increased approximately 18.1% for the four-week period
    ended November 26, 2005 compared to the prior year period.
•
Likewise, we expect that our net sales for the five-week period
    ended December 31, 2005 increased 46.4% to
    $51.3 million compared with $35.0 million for the
    five-week period ended January 1, 2005. We expect that
    comparable store sales increased 21.4% for the five-week period
    ended December 31, 2005 compared with a 4.3% increase in
    the prior-year period. We expect further that comparable store
    sales in the non-affected markets increased approximately 15.3%
    for the five-week period ended December 31, 2005 compared
    to the prior year period.
2
Table of Contents
The preceding financial information contains our expectations
    relating to our results of operations for two of the months of
    the fourth quarter of fiscal 2005. Our actual results could
    differ from these expectations. Factors that could cause our
    actual results to differ from these expectations include
    possible accounting adjustments resulting from our quarter-end
    accounting and review procedures and other factors, including
    those described under "Special Note Regarding
    Forward-Looking Statements."
Corporate Information
We are incorporated in Delaware, and our principal executive
    offices are located at 102 Fahm Street, Savannah, Georgia 31401.
    Our telephone number is (912) 236-1561 and website address
    is www.cititrends.com. Information contained in, or accessible
    through, our website does not constitute part of this prospectus.
3
Table of Contents
The Offering
Common stock offered by the selling stockholders
1,500,000 shares
Common stock to be outstanding after the offering
13,012,715 shares
Use of proceeds
The selling stockholders will receive all of the net proceeds
    from the sale of shares of our common stock offered by this
    prospectus. We will not receive any of the proceeds from the
    sale of shares of common stock offered by this prospectus.
Nasdaq National Market Symbol
"CTRN"
Unless otherwise stated, information in this prospectus assumes:
•
a 26-for-one stock split of our common stock, which was effected
    on May 11, 2005;
•
no exercise of outstanding options to purchase
    1,574,133 shares of common stock outstanding as of
    January 4, 2006, at a weighted average exercise price of
    $2.60 per share, other than the 376,612 options to be exercised
    by certain selling stockholders in connection with this
    offering; and
•
no exercise of the underwriters' over-allotment option.
4
Table of Contents
Summary Financial and Operating Data
The following table provides summary financial and operating
data for each of the fiscal years in the five-year period ended
January 29, 2005 and for the nine months ended
October 29, 2005 and October 30, 2004, including:
(a) our statement of income data for each such period,
(b) additional operating data for each such period and
(c) our balance sheet data as of October 29, 2005. The
statement of income data for fiscal 2002, fiscal 2003 and fiscal
2004 are derived from our audited financial statements included
elsewhere in this prospectus that have been audited by KPMG LLP,
an independent registered public accounting firm. The statement
of income data for fiscal 2000 and fiscal 2001 are derived from
our audited financial statements that are not included in this
prospectus. The statement of income data for the nine months
ended October 29, 2005 and October 30, 2004 are
derived from our unaudited condensed interim financial
statements included elsewhere in this prospectus. The unaudited
condensed financial statements for the nine months ended
October 29, 2005 and October 30, 2004 have been
prepared on the same basis as our audited financial statements
and include, in the opinion of management, all adjustments,
consisting of normal recurring accruals that management
considers necessary for a fair presentation of the financial
information set forth in those statements. Results of operations
for the interim periods are not necessarily indicative of the
results that might be expected for any other interim period or
for an entire period. The summary financial and operating data
set forth below should be read in conjunction with, and are
qualified in their entirety by reference to, the sections of
this prospectus entitled "Selected Financial and Operating
Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our
financial statements and related notes included elsewhere in
this prospectus. Historical results are not necessarily
indicative of results to be expected for any future period.
Fiscal Year Ended
(1)
Nine Months Ended
February 3,
February 2,
February 1,
January 31,
January 29,
October 30,
October 29,
2001
2002
2003
2004
2005
2004
2005
(dollars in thousands, except per share amounts)
(unaudited)
Statement of Income Data:
Net sales
$
80,939
$
97,933
$
124,951
$
157,198
$
203,442
$
137,129
$
192,961
Cost of sales
51,762
62,050
77,807
98,145
127,308
86,288
119,039
Gross profit
29,177
35,883
47,144
59,053
76,134
50,841
73,922
Selling, general and administrative expenses
26,834
31,405
38,760
48,845
63,594
46,440
64,281
Income from operations
2,343
4,478
8,385
10,208
12,540
4,401
9,641
Interest expense (income),
    net
(2)
787
455
256
563
732
557
(197
)
Income before income taxes
1,556
4,023
8,129
9,645
11,808
3,844
9,838
Provision for income taxes
358
1,566
3,101
3,727
4,551
1,480
3,560
Net income
$
1,198
$
2,457
$
5,028
$
5,918
$
7,257
$
2,364
$
6,278
Net income per common share:
Basic
$
0.09
$
0.23
$
0.51
$
0.62
$
0.78
$
0.25
$
0.55
Diluted
$
0.09
$
0.22
$
0.44
$
0.54
$
0.67
$
0.22
$
0.49
Weighted average shares used to compute net income per share:
Basic
9,269,000
9,219,167
9,295,000
9,295,000
9,302,800
9,305,400
11,348,502
Diluted
9,269,000
9,791,999
10,757,110
10,771,410
10,879,388
10,945,038
12,847,419
Additional Operating Data:
Number of stores:
Opened during period
23
12
16
25
40
35
26
Closed during period
0
4
2
1
1
1
0
(3)
Open at end of period
115
123
137
161
200
195
226
(4)
Selling square footage at end of period
786,534
891,843
1,043,713
1,290,039
1,715,943
1,663,597
2,017,014
Comparable store sales
    increase
(5)
17.6%
6.5%
14.6%
5.7%
3.0%
2.3%
14.1%
(6)
Average sales per
    store
(7)
$
782
$
823
$
961
$
1,055
$
1,127
$
770
$
906
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As of
October 29,
2005
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
9,371
Total assets
125,378
Total liabilities
52,585
Total stockholders' equity
72,793
(1)
Our fiscal year ends on the Saturday closest to January 31 of
    each year. Fiscal years 2001, 2002, 2003 and 2004 comprise
    52 weeks. Fiscal year 2000 comprises 53 weeks.
(2)
Our Series A Preferred Stock, which was redeemed using a
    portion of the net proceeds from our initial public offering,
    was reclassified as debt as of the second quarter of fiscal
    2003, in accordance with the Financial Accounting Standards
    Board's ("FASB") Statement of Financial
    Accounting Standards ("SFAS") No. 150, Accounting
    for Certain Financial Instruments with Characteristics of both
    Liabilities and Equity. The amount of dividends treated as
    interest expense was $100,000 for the nine months ended
    October 29, 2005, $324,450 in fiscal 2004, $189,000 in
    fiscal 2003 and none in fiscal 2002.
(3)
Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.
(4)
The number of stores open at the end of the period includes four
    stores closed as of October 29, 2005, as a result of
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.
(5)
Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.
(6)
This data includes the positive impact of sales as a result of
    Hurricanes Katrina, Rita and Wilma during the months of
    September and October.
(7)
Average sales per store is defined as net sales divided by the
    average of stores open at the end of the prior period and stores
    open at the end of the current period.
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Risk Factors
An investment in shares of our common stock involves a high
degree of risk. You should consider carefully the following
information about these risks, together with the other
information contained in this prospectus, before you decide
whether to buy our common stock. The occurrence of any of the
following risks could have a material adverse effect on our
business, financial condition and results of operations.
Risks Relating to Citi Trends, Inc.
Our success depends on our ability to anticipate, identify
and respond rapidly to changes in consumers' fashion
tastes, and our failure to evaluate adequately fashion trends
could have a material adverse effect on our business, financial
condition and results of operations.
The apparel industry in general and our core customer market in
particular are subject to rapidly evolving fashion trends and
shifting consumer demands. Accordingly, our success is heavily
dependent on our ability to anticipate, identify and capitalize
on emerging fashion trends, including products, styles and
materials that will appeal to our target consumers. Our failure
to anticipate, identify or react appropriately to changes in
styles, trends, brand preferences or desired image preferences
is likely to lead to lower demand for our merchandise, which
could cause, among other things, sales declines, excess
inventories and higher markdowns. The inaccuracy of our
forecasts regarding fashion trends could have a material adverse
effect on our business, financial condition and results of
operations.
If we are unsuccessful in competing with our retail apparel
competitors, our market share could decline or our growth could
be impaired and, as a result, our financial results could
suffer.
The retail apparel market is highly competitive, with few
barriers to entry. We compete against a diverse group of
retailers, including national off-price apparel chains such as
The TJX Companies, Inc., or TJX Companies, Burlington Coat
Factory Warehouse Corp., or Burlington Coat Factory, and Ross
Stores, Inc., or Ross Stores; mass merchants such as Wal-Mart
and Kmart; smaller discount retail chains that only sell
women's products, such as Rainbow, Dots, Fashion Cents,
It's Fashions (a subsidiary of The Cato Corporation) and
Simply Fashions; and general merchandise discount stores and
dollar stores, which offer a variety of products, including
apparel, for the value-conscious consumer. We also compete
against local off-price and specialty retail stores, regional
retail chains, traditional department stores, and Internet and
other direct retailers.
The level of competition we face from these retailers varies
depending on the product segment, as many of our competitors do
not offer apparel for the entire family. Our greatest
competition is generally in women's apparel. Many of our
competitors are larger than we are and have substantially
greater resources than we do and, as a result, may be able to
adapt better to changing market conditions, exploit new
opportunities, exert greater pricing pressures on suppliers and
open new stores more quickly and effectively than we can. Many
of these retailers have better name recognition among consumers
than we have and purchase significantly more merchandise from
vendors. These retailers may be able to purchase branded
merchandise that we cannot purchase because of their name
recognition and relationships with suppliers, or they may be
able to purchase branded merchandise with better pricing
concessions than we receive. Our local and regional competitors
have extensive knowledge of the consumer base and may be able to
garner more loyalty from customers than we can. In addition, our
online competitors enjoy a retailing advantage over us as we
have only recently completed the upgrade of our website to
enable Internet sales of selected urban branded apparel provided
by third parties. If the consumer base we serve is satisfied
with the selection, quality and price of our competitors'
products, consumers may decide not to shop in our stores.
Additionally, if our existing competitors or other retailers
decide to focus more on our core customers, particularly
African-Americans consumers, we may have greater difficulty in
competing effectively, our business and results of operations
could be adversely affected, and the market price of our common
stock could suffer.
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The retail industry periodically has experienced consolidation
and other ownership changes. In the future, other United States
or foreign retailers may consolidate, undergo restructurings or
reorganizations, or realign their affiliations. Any of these
developments could result in our competitors increasing their
buying power or market visibility. These developments may cause
us to lose market share and could have a material adverse effect
on our sales, revenues and results of operations.
We could experience a reduction in sales and revenues or
reduced cash flows if we are unable to fulfill our current and
future merchandising needs.
We depend on our suppliers for the continued availability and
satisfactory quality of our merchandise. Most of our suppliers
could discontinue selling to us at any time. Additionally, if
the manufacturers or other owners of brands or trademarks
terminate the license agreements under which some of our
suppliers sell us products, we may be unable to obtain
replacement merchandise of comparable fashion appeal or quality,
in the same quantities or at the same prices. If we lose the
services of one or more of our significant suppliers or one or
more of them fail to meet our merchandising needs, we may be
unable to obtain replacement merchandise in a timely manner. If
our existing suppliers cannot meet our increased needs and we
cannot locate alternative supply sources, we may be unable to
obtain sufficient quantities of the most popular items of the
nationally recognized brands at attractive prices, which could
negatively impact our sales, revenues and results of operations.
As an apparel retailer, we rely on numerous third parties in
the supply chain to produce and deliver the products that we
sell, and our business may be negatively impacted by their
failure to comply with applicable law.
As an importer and retailer of goods, we rely on numerous third
parties to supply the products that we sell. Violations of law
by our importers, buying agents, manufacturers or distributors
could result in delays in shipments and receipt of goods and
could subject us to fines or other penalties, any of which could
restrict our business activities, increase our operating
expenses or cause our revenues to decline. Further, we are
susceptible to the receipt of counterfeit brands or unlicensed
goods. We could incur liability with manufacturers or other
owners of the brands or trademarked products if we inadvertently
receive and sell counterfeit brands or unlicensed goods and,
therefore, is important that we establish relationships with
reputable vendors to prevent the possibility that we
inadvertently receive counterfeit brands or unlicensed goods.
Although we have a quality assurance team to check merchandise
in an effort to assure that we purchase only authentic brands
and licensed goods and are careful in selecting our vendors, we
may receive products that we are prohibited from selling or
incur liability for selling counterfeit brands or unlicensed
goods, which could increase our operating expenses and cause our
net income to decline.
If our growth strategy is unsuccessful, our financial
condition and results of operation could suffer and the market
price of our common stock could decline.
Our ability to continue to increase our net sales and earnings
depends, in large part, on opening new stores and operating our
new and existing stores profitably. We opened 40 new stores in
fiscal 2004. For fiscal 2005, we have opened 36 new stores thus
far and have no additional openings planned. We expect to open
42 to 45 new stores in fiscal 2006. If we are unable to open all
of these stores or operate them profitability, we may not
achieve our forecasted sales and earnings growth targets.
Additionally, growth of our store base will place increased
demands on our operating, managerial and administrative
resources and may lead to management and operating
inefficiencies, including merchandising, personnel, distribution
and integration problems. These demands and inefficiencies may
cause deterioration in the financial performance of our
individual stores and, therefore, our entire business.
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We would experience increased operating costs and limited
amounts of growth if we are unable to obtain reasonably priced
financing.
We may need to raise additional debt or equity capital in the
future to open new stores, to respond to competitive pressures
or to respond to unforeseen financial requirements. We may not
be able to obtain additional capital on commercially reasonable
terms or at all. Our inability to obtain reasonably priced
financing could create increased operating costs and diminished
levels of growth, as we could be forced to incur indebtedness
with above-market interest rates or with substantial restrictive
covenants, issue equity securities that dilute the ownership
interests of existing stockholders or scale back our operations
and/or store growth strategy.
A significant disruption to our distribution process or
southeastern retail locations could have a material adverse
effect on our business, financial condition and results of
operations.
Our ability to distribute merchandise to our store locations in
a timely manner is essential to the efficient and profitable
operation of our business. We have two distribution centers
located in Savannah, Georgia, one of which also serves as our
corporate headquarters, and our recently acquired distribution
center in Darlington, South Carolina. Together, these facilities
provide distribution capacity to support twice our current sales
volume. Any natural disaster or other disruption to the
operation of any of these facilities due to fire, hurricane,
other natural disaster or any other cause or our inability to
continue the timely and efficient build out of our Darlington,
South Carolina distribution center could damage a significant
portion of our inventory or impair our ability to stock our
stores and process product returns to suppliers adequately.
In addition, the southeastern United States, where our three
distribution centers are located, is vulnerable to significant
damage or destruction from hurricanes and tropical storms.
Although we maintain insurance on our stores and other
facilities, the economic effects of a natural disaster that
affects our distribution centers and/or a significant number of
our stores could increase our operating expenses, impair our
cash flows and reduce our revenues, which could negatively
impact the market price of our common stock.
Hurricanes Katrina, Rita and Wilma have temporarily increased
our sales in our store locations in the affected markets and
contiguous markets.
Hurricanes Katrina, Rita and Wilma, which caused damage to areas
of the Gulf Coast region of the United States during the period
of August 2005 to October 2005, impacted our stores in Alabama,
Florida, Mississippi, Louisiana and Texas. Thirty-eight of our
stores were closed for one or more days due to the hurricanes.
Two existing stores have not reopened as of January 4,
2006. In addition, one store scheduled to open in September 2005
was heavily damaged by Hurricane Katrina and remains unopened.
Following Hurricanes Katrina, Rita and Wilma, we experienced an
increase in sales in our store locations in the markets directly
affected by Hurricanes Katrina, Rita and Wilma and in contiguous
markets. We believe that these sales increases resulted directly
from aid distributed to our customers and the need for our
customers to replace lost or damaged clothing and other items.
These sales increases have begun to dissipate, and we anticipate
that the magnitude of these increases will continue to diminish
over time and that we will not continue to increase or maintain
our sales at the levels achieved in the months of September,
October, November and December in fiscal 2005.
The future contribution of stores affected by the hurricanes to
our results of operations will depend on the recovery of the
local economy in general in the hurricane impacted areas of the
Gulf Coast region. A natural disaster producing the devastation
of Hurricane Katrina is unprecedented in recent U.S. history,
and the recovery of the local economies and impacted industries
in the affected regions will to a certain extent depend on the
leadership and actions of federal, state and local governments,
which are beyond our control. We can provide no assurance as to
the timing and ultimate success of recovery efforts led by
federal, state and local governments. In addition, the long-term
impact of the hurricanes, such as lack of housing, unemployment
or increases in gasoline prices, may disproportionately affect
many of our customers in the Gulf Coast region.
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Our net sales, inventory levels and earnings fluctuate on a
seasonal basis, which makes our business more susceptible to
adverse events that occur during those seasons.
Our net sales and earnings are disproportionately higher during
the first and fourth quarters each year due to the importance of
the spring selling season, which includes Easter, and the fall
selling season, which includes Christmas. Factors negatively
affecting us during the first and fourth quarters, including
adverse weather and unfavorable economic conditions, will have a
greater adverse effect on our financial condition than if our
business were less seasonal.
In order to prepare for the spring and fall selling seasons, we
must order and keep in stock significantly more merchandise than
during other parts of the year. This seasonality makes our
business more susceptible to the risk that our inventory will
not satisfy actual consumer demand. Any unanticipated demand
imbalances during these peak shopping seasons could require us
either to sell excess inventory at a substantial markdown or
fail to satisfy our consumers. In either event, our net sales
and gross margins may be lower than historical levels, which
could have a material adverse effect on our business, financial
condition and results of operations.
We experience fluctuations and variability in our comparable
store sales and quarterly results of operations and, as a
result, the market price of our common stock may fluctuate or
decline substantially.
Our comparable store sales and quarterly results have fluctuated
significantly in the past based on a number of economic,
seasonal and competitive factors, and we expect them to continue
to fluctuate in the future. Since the beginning of fiscal 2003,
our quarter-to-quarter comparable store sales have ranged from
an increase of 0.3% to an increase of 25.0%. The largest of
these increases was due to the unusually high customer traffic
following Hurricanes Katrina, Rita and Wilma. In addition, we
may be unable to maintain historical levels of comparable store
sales as we execute our growth strategy and expand our business.
This variability could cause our comparable store sales and
quarterly results to fall below the expectations of securities
analysts or investors, which could result in volatility of the
market price of our common stock. If our comparable store sales
and quarterly results fail to meet the expectations of the
market generally, the market price of our common stock could
decline substantially.
Our sales and revenues could decline as a result of general
economic and other factors outside of our control, such as
changes in consumer spending patterns and declines in employment
levels.
Downturns, or the expectation of a downturn, in general economic
conditions could adversely affect consumer spending patterns,
our sales and our results of operations. Because apparel
generally is a discretionary purchase, declines in consumer
spending patterns may have a more negative effect on apparel
retailers than some other retailers. Therefore, we may not be
able to maintain our historical rate of growth in revenues and
earnings, or remain as profitable, if there is a decline in
consumer spending patterns. In addition, since the majority of
our stores are located in the southeastern United States, our
operations are more susceptible to regional factors than the
operations of our more geographically diversified competitors.
Therefore, any adverse economic conditions that have a
disproportionate effect on the southeastern United States could
have a greater negative effect on our sales, revenues and
results of operations than on retailers with a more
geographically diversified store base.
Our failure to protect our trademarks could have a negative
effect on our brand image and limit our ability to penetrate new
markets.
We believe that our "Citi Trends" trademark is
integral to our store design and our success in building
consumer loyalty to our brand. We have registered this trademark
with the U.S. Patent and Trademark Office. We have also
registered, or applied for registration of, additional
trademarks with the U.S. Patent and Trademark Office that we
believe are important to our business. We cannot assure you that
these registrations will prevent imitation of our name,
merchandising concept, store design or private label merchandise
or the
10
Table of Contents
infringement of our other intellectual property rights by
others. Imitation of our name, concept, store design or
merchandise in a manner that projects lesser quality or carries
a negative connotation of our brand image could have a material
adverse effect on our business, financial condition and results
of operations.
In addition, we cannot assure you that others will not try to
block the manufacture or sale of our private label merchandise
by claiming that our merchandise violates their trademarks or
other proprietary rights since other entities may have rights to
trademarks that contain the word "Citi" or may have
rights in similar or competing marks for apparel and/or
accessories. Although we cannot currently estimate the
likelihood of success of any such lawsuit or ultimate resolution
of such a conflict, such a controversy could have a material
adverse effect on our business, financial condition and results
of operations.
Our failure to implement and maintain effective internal
controls in our business could have a material adverse effect on
our business, financial condition, results of operations and
stock price.
We are in the process of documenting and testing our internal
control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002.
Section 404 requires annual management assessments of the
effectiveness of our internal controls over financial reporting
and a report by our independent auditors addressing these
assessments. We may be required to be in compliance with
Section 404 as early as the time we file our annual report
for fiscal 2006 with the Securities and Exchange Commission, or
the Commission. During the course of our testing, we may
identify deficiencies in our internal controls, which we may be
unable to correct in time to meet the deadline imposed by the
Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain
the adequacy of our internal controls, we may be unable to
conclude on an ongoing basis that we have effective internal
controls over financial reporting. Moreover, effective internal
controls, particularly those related to revenue recognition, are
necessary for us to produce reliable financial reports and are
important in our effort to prevent financial fraud. If we cannot
produce reliable financial reports or prevent fraud, our
business, financial condition and results of operations could be
harmed, investors could lose confidence in our reported
financial information, the market price of our stock could
decline significantly and we may be unable to obtain additional
financing to operate and expand our business.
Several of our stores have been substantially damaged by
Hurricanes Katrina, Rita and Wilma. There can be no assurance
that our losses from the hurricanes will be completely covered
by our insurance.
We estimate that Hurricanes Katrina, Rita and Wilma caused total
damages of approximately $1.2 million in our stores located
in five of the fourteen states in which we currently operate
stores. In addition, thirty-eight of our stores were closed for
one or more days due to the hurricanes, of which two existing
stores have not reopened as of January 4, 2006. We are
seeking to recover most of our damages attributable to the
hurricanes from insurance under the insurance policies that we
maintain. There can be no assurance that our losses from
property damage will be offset by the proceeds of insurance
obtained under our insurance policies.
Adverse trade restrictions may disrupt our supply of
merchandise. We also face various risks because much of our
merchandise is imported from abroad.
We purchase the products we sell directly from over 1,000
vendors, and a substantial portion of this merchandise is
manufactured outside of the United States and imported by our
vendors from countries such as China and other areas of the Far
East, including Taiwan and the Philippines. The countries in
which our merchandise currently is manufactured or may be
manufactured in the future could become subject to new trade
restrictions imposed by the United States or other foreign
governments. Trade restrictions, including increased tariffs or
quotas, embargoes, and customs restrictions, against apparel
items, as well as United States or foreign labor strikes, work
stoppages or boycotts, could increase the cost or reduce the
supply of apparel available to us and have a material adverse
effect on our business, financial condition and results of
operations. In addition, our merchandise supply could be
impacted if our vendors' imports become subject to existing
or future duties and quotas, or if our vendors face increased
competition from other companies for production facilities,
import quota capacity and shipping capacity.
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Table of Contents
We also face a variety of other risks generally associated with
relying on vendors that do business in foreign markets and
import merchandise from abroad, such as:
•
political instability or the threat of terrorism, in particular
    in countries where our vendors source merchandise such as Taiwan
    and the Philippines;
•
enhanced security measures at United States and foreign ports,
    which could delay delivery of imports;
•
imposition of new or supplemental duties, taxes, and other
    charges on imports;
•
delayed receipt or non-delivery of goods due to the failure of
    foreign-source suppliers to comply with applicable import
    regulations;
•
delayed receipt or non-delivery of goods due to organized labor
    strikes or unexpected or significant port congestion at United
    States ports; and
•
local business practice and political issues, including issues
    relating to compliance with domestic or international labor
    standards, which may result in adverse publicity.
The United States may impose new initiatives that adversely
affect the trading status of countries where apparel is
manufactured. These initiatives may include retaliatory duties
or other trade sanctions that, if enacted, would increase the
cost of products imported from countries where our vendors
acquire merchandise. Any of these factors could have a material
adverse effect on our sales, revenues and results of operations.
The removal of import quotas on textiles and clothing in the
future may adversely affect our merchandise supply, impact our
sales and reduce our cash flows.
On January 1, 2005, in accordance with the World Trade
Organization, or the WTO, Agreement on Textiles and Clothing,
the import quotas on textiles and clothing manufactured by
countries that are members of the WTO were eliminated.
Subsequently, the United States and Europe experienced a surge
of imported goods from China, a country that benefited from the
removal of the quotas. In response, the United States initially
implemented new quotas against various textile and apparel items
from China and ultimately negotiated an agreement with the
Chinese government. The agreement between the United States and
China went into effect in November 2005 and will continue in
effect through December 31, 2008. During that time, China
has agreed to specified quota limits on most textile and apparel
products, and the United States has agreed to use restraint in
exercising its right to impose additional safeguards. Beginning
in January 2009, the U.S.-China agreement and the quotas against
Chinese apparel will expire. At that point, the United States
would still have the ability to impose safeguards under the WTO
Agreement on Textiles and Clothing although the requirements for
doing so will be more stringent. The situation in 2009
potentially could be similar to the experience in 2005, with
import surges and a cycle of safeguards and negotiations. This
could create logistical delays in our ability to maintain
required inventory levels and alter cost differentials between
vendors that source domestically and vendors that source more
extensively from overseas. We believe this could lower the cost
of apparel products and thereby reduce our average dollar amount
of sales per customer in our stores. Additionally, retaliatory
trade actions could cause a disruption of the supply chain of
products from foreign markets, difficulty in predicting
accurately the prices of merchandise to be imported from a
particular country and adverse effects on our merchandise
supply, sales and cash flows.
We depend on the experience and expertise of our senior
management team and key employees, and the loss of the services
of R. Edward Anderson or George A. Bellino could have
a material adverse effect on our business strategy, operating
costs, financial condition and results of operations.
The success of our business is dependent upon the close
supervision of all aspects of our business by our senior
management, particularly the operation of our stores, the
selection of our merchandise and the site selection for new
stores. In addition, we do not have a non-competition agreement
with R. Edward Anderson, our Chief Executive Officer, and
our non-competition agreement with George A. Bellino,
our President and Chief Merchandising Officer, will expire on
December 31, 2006. Accordingly, they could leave us and
begin to work for one of our competitors, and, if we lose the
services of Mr. Anderson or Mr. Bellino, it could
12
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have a material adverse effect on our business strategy,
operating costs, financial condition and results of operations.
Failure to attract, train, assimilate and retain skilled
personnel could have a material adverse effect on our growth
strategy and our financial condition.
Like most retailers, we experience significant employee turnover
rates, particularly among store sales associates and managers,
and our continued growth will require us to hire and train even
more new personnel. We therefore must continually attract, hire
and train new personnel to meet our staffing needs. We
constantly compete for qualified personnel with companies in our
industry and in other industries. A significant increase in the
turnover rate among our store sales associates and managers
would increase our recruiting and training costs and could
decrease our operating efficiency and productivity. If we are
unable to retain our employees or attract, train, assimilate or
retain other skilled personnel in the future, we may not be able
to service our customers as effectively, thus reducing our
ability to continue our growth and to operate our existing
stores as profitably as we have in the past.
Increases in the minimum wage could have a material adverse
effect on our business, financial condition and results of
operations.
From time to time, legislative proposals are made to increase
the minimum wage in the United States, as well as certain
individual states. Wage rates for many of our employees are at
or slightly above the minimum wage. As federal and/or state
minimum wage rates increase, we may need to increase not only
the wage rates of our minimum wage employees but the wages paid
to our other hourly employees as well. Any increase in the cost
of our labor could have a material adverse effect on our
operating costs, financial condition and results of operations.
If legal proceedings to which we are a party result in an
adverse judgment against us, it could have a material adverse
effect on our business, financial condition and results of
operations.
We are from time to time involved in various legal proceedings
incidental to the conduct of our business. Such claims may be
made by our customers, employees or former employees and could
have a material adverse effect on our business, financial
condition and results of operation. We are not currently aware
of any legal proceedings pending or threatened against us that
we expect to have a material adverse effect on our business,
financial condition and results of operations.
Any failure of our management information systems or the
inability of third parties to continue to upgrade and maintain
the systems could have a material adverse effect on our
business, financial condition and results of operations.
We depend on the accuracy, reliability and proper functioning of
our management information systems, including systems used to
track our sales and facilitate inventory management. We also
rely on our management information systems for merchandise
planning, replenishment and markdowns, and other key business
functions. These functions enhance our ability to optimize sales
while limiting markdowns and reducing inventory risk through
properly marking down slow-selling styles, reordering existing
styles and effectively distributing new inventory to our stores.
We do not currently have redundant systems for all functions
performed by our management information systems. Any
interruption in these systems could impair our ability to manage
our inventory effectively, which could have a material adverse
effect on our business, financial condition and results of
operations. To support our growth, we will need to expand our
management information systems, and our failure to link and
maintain these systems adequately could have a material adverse
effect on our business, financial condition and results of
operations.
We depend on third-party suppliers to maintain and periodically
upgrade our management information systems, including the
software programs supporting our inventory management functions.
This software is
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licensed to us by third-party suppliers. If any of these
suppliers is unable to continue to maintain and upgrade these
software programs and if we are unable to convert to alternate
systems in an efficient and timely manner, it could result in a
material adverse effect on our business, financial condition and
results of operations.
Our ability to attract consumers to our stores depends on the
success of the strip shopping centers and downtown business
districts where our stores are located.
We locate our stores in strip shopping centers, street front
locations and downtown business districts where we believe our
consumers and potential consumers shop. The success of an
individual store can depend on favorable placement within a
given strip shopping center or business district. We cannot
control the development of alternative shopping destinations
near our existing stores or the availability or cost of real
estate within existing or new shopping destinations. If our
store locations fail to attract sufficient consumer traffic or
we are unable to locate replacement locations on terms
acceptable to us, our business, results of operations, and
financial condition could suffer. If one or more of the anchor
tenants located in the strip shopping centers or business
districts where our stores are located close or leave, or if
there is significant deterioration of the surrounding areas in
which our stores are located, our business, results of
operations and financial condition may be adversely affected.
Risks Relating to this Offering of Common Stock
Our stock price is volatile, and you may lose all or a part
of your investment.
Our stock price is volatile. From our initial public offering in
May 2005 through January 4, 2006, the trading price of our
common stock has ranged from $14.00 to $43.66 per share. As a
result of this volatility, investors may not be able to sell
their common stock at or above their respective purchase prices.
The market price for our common stock may be influenced by many
factors, including:
•
actual or anticipated fluctuations in our operating results;
•
changes in securities analysts' recommendations or
    estimates of our financial performance;
•
publication of research reports by analysts;
•
changes in market valuations of companies similar to ours;
•
announcements by us, our competitors or other retailers;
•
the trading volume of our common stock in the public market;
•
changes in economic conditions;
•
financial market conditions; and
•
the realization of some or all of the risks described in this
    section entitled "Risk Factors."
In addition, the stock markets have experienced significant
price and trading volume fluctuations from time to time, and the
market prices of the equity securities of retailers have been
extremely volatile and have recently experienced sharp price and
trading volume changes. These broad market fluctuations may
adversely affect the market price of our common stock.
There may be sales of substantial amounts of our common stock
after this offering, which would cause our stock price to
fall.
Our current stockholders hold a substantial number of shares
that they will be able to sell in the public market in the near
future. As of January 4, 2006, 13,012,715 shares of our
common stock were outstanding. As of January 4, 2006,
1,574,133 additional shares of our common stock were
subject to outstanding stock options, of which 376,612 will be
exercised by certain selling stockholders in connection with
this offering. All of the shares sold in this offering and all
of the shares issued and sold in our initial public offering,
are freely tradeable, except for any shares acquired by holders
who are subject to market stand-off provisions or
14
Table of Contents
lock-up agreements entered into in connection with this
offering, or by any of our "affiliates," as that term
is defined in Rule 144 promulgated under the Securities Act
of 1933, as amended, which generally includes officers,
directors and 10% or greater stockholders. The remaining
7,491,827 shares of our common stock held by existing
stockholders are restricted shares, which may be sold in the
public market only if they are registered or if they qualify for
an exemption from registration under Rules 144 or 701
promulgated under the Securities Act of 1933, as amended. Sales
of a significant portion of the shares of our common stock
outstanding after this offering will continue to be restricted
as a result of securities laws or contractual arrangements,
including lock-up agreements entered into between our directors
and officers and the representatives of the underwriters in this
offering. These lock-up agreements restrict holders'
ability to transfer their stock for 90 days after the date
of this prospectus. These lock-up agreements cover 7,579,884
fully diluted shares of our common stock. The managing
underwriter may, however, waive the lock-up period at any time
for any stockholder who is party to a lock-up agreement. Sales
of a substantial number of shares of our common stock after this
offering, or after the expiration or waiver of applicable
lock-up periods, could cause our stock price to fall and/or
impair our ability to raise capital through the sale of
additional stock.
A significant amount of our common stock is concentrated in
the hands of one of our existing stockholders whose interests
may not coincide with yours.
Upon the completion of our initial public offering, Hampshire
Equity Partners II, L.P. and certain of its affiliates,
together Hampshire Equity Partners, owned, on a fully diluted
basis, approximately 58% of our common stock and will own, on a
fully diluted basis, approximately 46.0% of our common stock
after this offering. As a result, Hampshire Equity Partners has
an ability to exercise control over matters requiring
stockholder approval. These matters include the election of
directors and the approval of significant corporate
transactions, including potential mergers, consolidations or
sales of all or substantially all of our assets. Hampshire
Equity Partners II, L.P. has one representative, our
current Chairman of the Board, on our five member board of
directors. In connection with our initial public offering, we
entered into a nominating agreement with Hampshire Equity
Partners II, L.P. pursuant to which we, acting through our
nominating and corporate governance committee, agreed, subject
to the requirements of our directors' fiduciary duties,
that (i) Hampshire Equity Partners II, L.P. is
entitled to designate two directors to be nominated for election
to our board of directors as long as Hampshire Equity
Partners II, L.P. owns in the aggregate at least 40% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering or
(ii) Hampshire Equity Partners II, L.P. is entitled to
designate one director to be nominated for election to our board
of directors as long as Hampshire Equity Partners II, L.P.
owns in the aggregate less than 40% and at least 15% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering. If at any time
Hampshire Equity Partners II, L.P. owns less than 15% of
the shares of our common stock which it owned immediately prior
to the consummation of our initial public offering, it will not
have the right to nominate any directors for election to our
board of directors. Your interests as a holder of the common
stock may differ from the interests of Hampshire Equity Partners.
Securities analysts may not continue to cover our common
stock or they may issue negative reports, and this may have a
negative impact on the price of our common stock.
The trading market for our common stock relies, in part, on the
research and reports that industry or financial analysts publish
about our company or our industry. Public statements by these
securities analysts may affect our stock price. If any of the
analysts who cover us downgrades the rating of our common stock,
our common stock price would likely decline. If any of these
analysts ceases coverage of our common stock, we could lose
visibility in the market, which in turn could cause our common
stock price to decline. Further, if no analysts continue to
cover our common stock, the lack of research coverage may
depress the market price of our common stock.
In addition, recently-adopted rules mandated by the
Sarbanes-Oxley Act of 2002 and a global settlement with the
Commission have caused a number of fundamental changes in how
securities analysts are reviewed and compensated. In particular,
many investment banking firms are now required to contract with
independent
15
Table of Contents
financial analysts for their stock research. In this
environment, it may be difficult for companies with smaller
market capitalizations, such as our company, to attract
independent financial analysts to cover them, which could have a
negative effect on the market price of our common stock.
We do not currently intend to pay dividends on our common
stock.
We have never declared or paid any cash dividends on our common
stock and do not currently intend to do so for the foreseeable
future. We currently intend to invest our future earnings, if
any, to fund our growth. Therefore, you are not likely to
receive any dividends on your common stock for the foreseeable
future.
Provisions in our certificate of incorporation and by-laws
and Delaware law may delay or prevent our acquisition by a third
party.
Our second amended and restated certificate of incorporation and
amended and restated by-laws contain several provisions that may
make it more difficult for a third party to acquire control of
us without the approval of our board of directors. These
provisions include, among other things, a classified board of
directors, advance notice for raising business or making
nominations at stockholder meetings and "blank check"
preferred stock. Blank check preferred stock enables our board
of directors, without stockholder approval, to designate and
issue additional series of preferred stock with such dividend,
liquidation, conversion, voting or other rights, including
convertible securities with no limitations on conversion, as our
board of directors may determine, including rights to dividends
and proceeds in a liquidation that are senior to the common
stock.
We are also subject to several provisions of the Delaware
General Corporation Law that could delay, prevent or deter a
merger, acquisition, tender offer, proxy contest or other
transaction that might otherwise result in our stockholders
receiving a premium over the market price for their common stock
or may otherwise be in the best interests of our stockholders.
You should refer to the section entitled "Description of
Capital Stock" for more information.
Our costs have increased and may continue to increase as a
result of being a public company, and complying with regulations
applicable to public companies may adversely affect our
business.
As a public company, we have incurred and will continue to incur
significant legal, accounting and other expenses that we did not
incur as a private company. In addition, the Sarbanes-Oxley Act
of 2002, as well as new rules subsequently implemented by the
SEC and the Nasdaq National Market, have required changes in the
corporate governance practices of public companies. We expect
these new rules and regulations to increase significantly our
legal and financial compliance costs and to make some activities
more time-consuming and costly. For example, in connection with
becoming a public company, we created additional board
committees and adopted policies regarding internal controls and
disclosure controls and procedures. In addition, we are in the
process of evaluating our internal control structure in relation
to Section 404 of the Sarbanes-Oxley Act and, pursuant to
this section, we may be required to include management and
auditor reports on internal controls over financial reporting as
part of our annual report for the year ending fiscal 2006. We
will incur additional costs in, and dedicate significant
resources toward, complying with these requirements, which may
divert management's attention from, and which may in turn
adversely affect, our business. We also expect these new laws,
rules and regulations to make it more difficult and more
expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the
same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified persons to serve on our
board of directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these new
laws, rules and regulations, and we cannot predict or estimate
the amount of additional costs we may incur or the timing of
such costs. The costs of compliance or our failure to comply
with these laws, rules and regulations could adversely affect
our financial condition, results of operation and the price of
our common stock.
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Table of Contents
Special Note Regarding Forward-Looking Statements
We have made forward-looking statements in this prospectus,
including in the sections entitled "Prospectus
Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of
Operation" and "Business." All statements other
than historical facts contained in this prospectus, including
statements regarding our future financial position, business
policy and plans and objectives of management for future
operations, are forward-looking statements. The words
"believe," "may," "could,"
"estimate," "continue,"
"anticipate," "intend," "expect"
and similar expressions, as they relate to us, are intended to
identify forward-looking statements. For example, our statements
to the effect that we intend to open a specified number of new
stores, our expectations regarding our net sales for the months
of November and December, our expectations of comparable store
sales increases for the four-week period ended November 26,
2005 and the five-week period ended December 31, 2005 and
our expectations of comparable store sales increases in markets
not affected by Hurricanes Katrina, Rita and Wilma for the same
periods, that we intend to increase comparable store sales and
our expectations as to the effects of our adoption of
SFAS 123R on our compensation costs, constitute
forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections
about future events, including, among other things:
•
implementation of our growth strategy;
•
our ability to anticipate and respond to fashion trends;
•
competition in our markets;
•
consumer spending patterns;
•
actions of our competitors or anchor tenants in the strip
    shopping centers where our stores are located;
•
anticipated fluctuations in our operating results; and
•
economic conditions in general, and the recovery of local
    economies in areas impacted by Hurricanes Katrina, Rita and
    Wilma.
These forward-looking statements are subject to a number of
risks, uncertainties and assumptions described in the section
entitled "Risk Factors" and elsewhere in this
prospectus.
Because forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely upon forward-looking statements
as predictions of future events. The events and circumstances
reflected in the forward-looking statements may not be achieved
or occur and actual results could differ materially from those
projected in the forward-looking statements. Except as required
by applicable law, including the securities laws of the United
States and the rules and regulations of the Commission, we do
not plan to publicly update or revise any forward-looking
statements contained herein after we distribute this prospectus,
whether as a result of any new information, future events or
otherwise.
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Table of Contents
Use of Proceeds
The selling stockholders will receive all of the net proceeds
from the sale of shares of our common stock offered by this
prospectus. We will not receive any of the proceeds from the
sale of shares of common stock offered by this prospectus.
Price Range of Our Common Stock
Our common stock has been quoted on the Nasdaq National Market
under the symbol "CTRN" since our initial public
offering on May 17, 2005. The following table shows the
high and low per share prices or our common stock for the
periods indicated.
Fiscal 2005
High
Low
Second Quarter (beginning May 17, 2005)
$
28.40
$
14.00
Third Quarter
30.00
20.20
Fourth Quarter (through January 4, 2006)
43.66
27.54
On January 4, 2006, the last reported sale price of our
common stock on the Nasdaq National Market was $41.85 per share.
On January 4, 2006, there were six holders of record
of our common stock.
Dividend Policy
We have never declared or paid any cash dividends on our common
stock and do not intend to pay any cash dividends on our common
stock in the foreseeable future. We currently intend to retain
any future earnings to finance the expansion of our business and
for general corporate purposes. Our board of directors has the
authority to declare and pay dividends on our common stock, in
its discretion, so long as there are funds legally available to
do so.
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Table of Contents
Capitalization
The table below sets forth our cash and cash equivalents and our
capitalization as of October 29, 2005. You should read this
information together with the sections of this prospectus
entitled "Selected Financial and Operating Data" and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial
statements and related notes appearing elsewhere in this
prospectus.
As of
October 29, 2005
(unaudited)
(in thousands,
except share and
per share amounts)
Cash and cash equivalents
$
9,371
Capital lease obligations (including current portion)
$
1,289
Stockholders' equity:
Common stock, $.01 par value per share, 20,000,000 shares
    authorized, 13,034,270 issued and 12,868,520 outstanding
130
Additional paid-in capital
46,720
Retained earnings
26,107
Treasury stock
(165
)
Total stockholders' equity
72,793
Total capitalization
$
74,082
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Table of Contents
Selected Financial and Operating Data
The following table provides selected financial and operating
data for each of the fiscal years in the five-year period ended
January 29, 2005 and for the nine months ended
October 29, 2005 and October 30, 2004, including:
(a) our statement of income data for each such period,
(b) additional operating data for each such period and
(c) our balance sheet data as of the end of each such
period. The statement of income data for fiscal 2002, fiscal
2003 and fiscal 2004, and the balance sheet data as of
January 31, 2004 and January 29, 2005 are derived from
our audited financial statements included elsewhere in this
prospectus that have been audited by KPMG LLP, an independent
registered public accounting firm. The statement of income data
for fiscal 2000 and fiscal 2001 and the balance sheet data as of
January 29, 2000, February 3, 2001, February 2,
2002 and February 1, 2003 are derived from our audited
financial statements that are not included in this prospectus.
We have also included data for the nine months ended
October 30, 2004 and October 29, 2005 from our
unaudited condensed interim financial statements included
elsewhere in this prospectus. The unaudited condensed financial
statements for the nine months ended October 29, 2005 and
October 30, 2004 have been prepared on the same basis as
our audited financial statements and include, in the opinion of
management, all adjustments, consisting of normal recurring
accruals that management considers necessary for a fair
presentation of the financial information set forth in those
statements. Results of operations for the interim periods are
not necessarily indicative of the results that might be expected
for any other interim period or for an entire period. The
selected financial and operating data set forth below should be
read in conjunction with, and are qualified in their entirety by
reference to, the section of this prospectus entitled
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial
statements and related notes included elsewhere in this
prospectus. Historical results are not necessarily indicative of
results to be expected for any future period.
Fiscal Year Ended
(1)
Nine Months Ended
February 3,
February 2,
February 1,
January 31,
January 29,
October 30,
October 29,
2001
2002
2003
2004
2005
2004
2005
(dollars in thousands, except per share amounts)
(unaudited)
Statement of Income Data:
Net sales
$
80,939
$
97,933
$
124,951
$
157,198
$
203,442
$
137,129
$
192,961
Cost of sales
51,762
62,050
77,807
98,145
127,308
86,288
119,039
Gross profit
29,177
35,883
47,144
59,053
76,134
50,841
73,922
Selling, general and administrative expenses
26,834
31,405
38,760
48,845
63,594
46,440
64,281
Income from operations
2,343
4,478
8,385
10,208
12,540
4,401
9,641
Interest expense (income), net
(2)
787
455
256
563
732
557
(197
)
Income before income taxes
1,556
4,023
8,129
9,645
11,808
3,844
9,838
Provision for income taxes
358
1,566
3,101
3,727
4,551
1,480
3,560
Net income
$
1,198
$
2,457
$
5,028
$
5,918
$
7,257
$
2,364
$
6,278
Net income per common share:
Basic
$
0.09
$
0.23
$
0.51
$
0.62
$
0.78
$
0.25
$
0.55
Diluted
$
0.09
$
0.22
$
0.44
$
0.54
$
0.67
$
0.22
$
0.49
Weighted average shares used to compute net income per share:
Basic
9,269,000
9,219,167
9,295,000
9,295,000
9,302,800
9,305,400
11,348,502
Diluted
9,269,000
9,791,999
10,757,110
10,771,410
10,879,388
10,945,038
12,847,419
Additional Operating Data:
Number of stores:
Opened during period
23
12
16
25
40
35
26
Closed during period
—
4
2
1
1
1
0
(3)
Open at end of period
115
123
137
161
200
195
226
(4)
Selling square footage at end of period
786,534
891,843
1,043,713
1,290,039
1,715,943
1,663,597
2,017,014
Comparable store sales increase
(5)
17.6%
6.5%
14.6%
5.7%
3.0%
2.3%
14.1%
(6)
Average sales per
    store
(7)
$
782
$
823
$
961
$
1,055
$
1,127
$
770
$
906
Balance Sheet Data:
Cash and cash equivalents
$
1,496
$
4,098
$
5,825
$
9,954
$
11,801
$
2,156
$
9,371
Total assets
25,023
29,733
36,127
49,213
70,790
63,825
125,378
Total liabilities
21,552
23,997
25,529
32,709
47,025
44,966
52,585
Total stockholders' equity
3,471
5,736
10,598
16,504
23,765
18,859
72,793
(footnotes on following page)
20
Table of Contents
(1)
Our fiscal year ends on the Saturday closest to January 31 of
    each year. Fiscal years 2001, 2002, 2003 and 2004 comprise
    52 weeks. Fiscal year 2000 comprises 53 weeks.
(2)
Our Series A Preferred Stock, which was redeemed using a
    portion of the net proceeds from our initial public offering,
    was reclassified as debt as of the second quarter of fiscal
    2003, in accordance with the Financial Accounting Standards
    Board's ("FASB") Statement of Financial
    Accounting Standards ("SFAS") No. 150, Accounting
    for Certain Financial Instruments with Characteristics of both
    Liabilities and Equity. The amount of dividends treated as
    interest expense was $100,000 for the nine months ended
    October 29, 2005, $324,450 in fiscal 2004, $189,000 in
    fiscal 2003 and none in fiscal 2002.
(3)
Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.
(4)
The number of stores open at the end of the period includes four
    stores closed as of October 29, 2005, as a result of the
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.
(5)
Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.
(6)
This data includes the positive impact of positive sales as a
    result of Hurricanes Katrina, Rita and Wilma during the months
    of September and October.
(7)
Average sales per store is defined as net sales divided by the
    average of stores open at the end of the prior period and stores
    open at the end of the current period.
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Table of Contents
Management's Discussion and Analysis of Financial
Condition
and Results of Operations
You should read the following discussion and analysis of our
financial condition and results of operations in conjunction
with the section entitled "Selected Financial and Operating
Data" and our audited and unaudited financial statements
and the respective related notes included elsewhere in this
prospectus. This discussion may contain forward-looking
statements that involve risks and uncertainties. As a result of
many factors, such as those set forth under the sections
entitled "Risk Factors" and "Special
Note Regarding Forward-Looking Statements" and
elsewhere in this prospectus, our actual results may differ
materially from those anticipated in these forward-looking
statements.
Overview
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. Our merchandise
offerings are designed to appeal to the preferences of fashion
conscious consumers, particularly African-Americans. Originally
our stores were located in the Southeast, and during late fiscal
2004 and fiscal 2005 we expanded into the Mid-Atlantic region,
the Midwest and Texas. We operate 236 stores in both urban and
rural markets in fourteen states, with two stores still closed
due to Hurricanes Katrina, Rita and Wilma.
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores was
acquired by Hampshire Equity Partners II, L.P., a private equity
firm. Since the acquisition, our management team has implemented
a focused merchandising and operating model to differentiate our
stores and serve our core customers more effectively.
Specifically, we concentrated the merchandise offerings on more
urban fashion apparel for the entire family and increased the
offering of nationally recognized brands. We also accelerated a
remodeling campaign to upgrade the acquired store base and
create a more appealing shopping environment in our stores. By
the end of fiscal 2003, virtually all of the acquired stores had
been remodeled and, in some cases, expanded. These initiatives
resulted in increases in comparable store sales. We expect that
the impact of our remodel, relocate and expansion initiatives
will be far less significant in the future and that the primary
causes of any increased comparable store sales will result from
merchandising enhancements or the expansion of certain product
categories, such as home decor and intimate apparel.
During the third quarter of fiscal 2005, our comparable store
sales have benefited from additional customer purchases that we
believe are related to Hurricanes Katrina, Rita and Wilma. These
hurricanes caused extensive damage to areas of the Gulf Coast of
the United States and impacted some of our stores in Alabama,
Florida, Mississippi, Louisiana and Texas. Thirty-eight of our
stores were closed for one or more days due to the hurricanes.
Two existing stores have not reopened as of January 4,
2006. In addition, one store scheduled to open in September 2005
was heavily damaged by Hurricane Katrina and remains unopened.
In regions impacted by the hurricanes, however, the subsequent
sales from the stores that we have reopened, as well as sales
from stores located nearby, have more than offset the sales lost
on the days the stores affected were closed, positively
impacting our comparable store sales. We believe, however, that
sales increases in our stores located in markets directly
affected by the hurricanes and in contiguous markets resulted
directly from aid distributed to our customers and the need for
our customers to replace lost or damaged clothing and other
items. These sales increases have begun to dissipate. We
anticipate that the magnitude of these increases will continue
to diminish over time and that we will not continue to increase
or maintain our sales or comparable store sales at the levels
achieved in the months of September, October, November and
December in fiscal 2005.
On May 18, 2005, we completed our initial public offering,
in which we issued and sold 2,700,000 shares of our common stock
and certain selling stockholders sold 1,150,000 shares of our
common stock, at $14.00 per share. In addition, we received
notice on May 27, 2005, that the underwriters had exercised
the over-allotment option granted in connection with our initial
public offering, pursuant to which we issued and sold an
additional 577,500 shares on June 1, 2005. We received
gross proceeds of approximately $45.9 million and
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incurred approximately $4.8 million in expenses in
connection with the initial public offering and over-allotment
option, for net proceeds of approximately $41.1 million. We
did not receive any proceeds from the sale of the shares by the
selling stockholders in the initial public offering.
We are continuing to pursue an aggressive store growth strategy
and believe that the addition of new stores will be the primary
source of future growth. In fiscal 2003 and fiscal 2004, we
opened 25 and 40 stores, respectively. During this period, we
entered the Baltimore, Houston, Norfolk and Washington, D.C.
markets, where we opened a total of 15 new stores. We have
continued to expand in fiscal 2005, opening 36 new stores thus
far with no additional openings planned and entering the
Cincinnati, Dallas, Louisville and Miami markets. We expect to
open 42 to 45 new stores in fiscal 2006. Approximately 90% of
the new stores we intend to open in fiscal 2006 will be located
in states that we currently serve.
Our new store expansion is fueled by store economics that we
believe to be very attractive. From an investment perspective,
we seek to design stores that are inviting and easy to shop,
while limiting start up and fixturing costs. We also have
relatively low store operating costs. Our real estate approach
is focused on strip shopping center sites within low to moderate
income neighborhoods, and we generally utilize previously
occupied store sites rather than newly constructed sites. As a
result, we are usually able to secure sites with substantial
customer traffic at attractive lease terms. Our ongoing
advertising expenses are also low, with a significant amount of
advertising focused on new store openings.
Our stores generate rapid payback of investment. The average
investment for the 65 stores opened in fiscal 2003 and fiscal
2004, including leasehold improvements, equipment, fixturing,
cost of inventory to stock the store (net of accounts payables),
and pre-opening store expenses, was approximately $280,000.
These 65 stores generated average sales of $1.4 million and
average store operating profit (defined as store operating
revenues less cost of sales and store operating expenses which
is comprised of payroll, occupancy, advertising and other
operating costs) of approximately $230,000 during their first
12 months of operation.
We measure our performance using key operating statistics. One
of our main performance measures is comparable store sales
growth. We define a comparable store as a store that has been
open for an entire fiscal year. Therefore, a store will not be
considered a comparable store until its
13
th
month of operation at the earliest or its
24
th
month at the latest. As an example, all stores opened in fiscal
2003 and fiscal 2004 were not considered comparable stores in
fiscal 2004. Relocated and expanded stores are included in the
comparable store sales results. We also use other operating
statistics, most notably average sales per store. As we
typically occupy existing space in established shopping centers
rather than sites built specifically for our stores, our store
square footage (and therefore sales per square foot) varies by
store. We focus on the overall store sales volume as the
critical driver of profitability. Our average sales per store
has increased as we have driven comparable store sales and
opened new stores which are generally larger than our existing
stores. Our average sales per store have increased from
$0.8 million in fiscal 2000 to $1.1 million in fiscal
2004, and from $770,000 in the nine months ended
October 30, 2004 to $906,000 in the nine months ended
October 29, 2005. In addition to sales, we measure gross
margin percentage and store operating expenses, with a
particular focus on labor as a percentage of sales. These
results translate into store level contribution, which we use to
evaluate overall performance of each individual store. Finally,
we monitor corporate expenses against budgeted amounts.
In October 2005, we purchased an approximately 286,500 square
foot distribution center in Darlington, South Carolina that is
situated on 90 acres of land. To date we have paid approximately
$1.6 million of the $3 million to $4 million in
total we expect to spend on acquisition costs and for capital
improvements necessary to prepare the location for full
operation. We began receiving and processing shipments from this
new distribution location in the fourth quarter of fiscal 2005.
We expect this facility, together with our two locations in
Savannah, to provide us the capacity to double our existing
sales volume.
Our cash requirements are primarily for working capital, opening
of new stores, remodeling of existing stores and improvements to
our information systems. Historically we have met these cash
requirements from cash flow from operations, short-term trade
credit and borrowings under our revolving lines of credit,
long-term debt and capital leases.
23
Table of Contents
In December 2004, the FASB issued a revision to
SFAS No. 123,
Accounting for Stock-Based
Compensation
. SFAS No. 123R replaces
SFAS No. 123 and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees
, and establishes
standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. The
impact of adopting SFAS No. 123R will be dependent on
numerous factors including, but not limited to, the valuation
model chosen by us to value stock-based awards, the assumed
award forfeiture rate, the accounting policies adopted
concerning the method of recognizing the fair value of awards
over the requisite service period and the transition method
chosen for adopting SFAS No. 123R. We have
preliminarily estimated the effects of adoption of
SFAS No. 123R will result in an additional
compensation expense of $1.0 million to $1.5 million
in fiscal 2006 and a yet to be determined additional
compensation expense in fiscal 2007.
We are documenting and testing our internal control procedures
in order to comply with the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002. Section 404 requires annual
management assessments of the effectiveness of our internal
controls over financial reporting and reports by our independent
auditors. We may be required to comply with Section 404 as
early as the time we file our annual report for fiscal 2006 with
the Commission. During this time period specific internal
controls may be identified as being deficient. We plan to
remediate any identified deficiencies and comply with our
Section 404 obligations before the deadline.
Basis of the Presentation
Net sales consist of store sales, net of returns by customers,
and layaway fees. Cost of sales consists of the cost of products
we sell and associated freight costs. Selling, general and
administrative expense is comprised of store costs, including
salaries and store occupancy costs, handling costs, corporate
and distribution center costs and advertising costs. We operate
on a 52- or 53-week fiscal year, which ends on the Saturday
closest to January 31. Each of our fiscal quarters consists of
four 13-week periods, with an extra week added on to the fourth
quarter every five to six years. Our last three fiscal years
ended on February 1, 2003, January 31, 2004 and
January 29, 2005 and each included 52 weeks.
Results of Operations
The following discussion of our financial performance is based
on the condensed financial statements set forth elsewhere in
this prospectus. The nature of our business is seasonal.
Historically, sales in the first and fourth quarters have been
higher than sales achieved in the second and third quarters of
the fiscal year. Expenses, and to a greater extent operating
income, vary by quarter. Results of a period shorter than a full
year may not be indicative of results expected for the entire
year. Furthermore, the seasonal nature of our business may
affect comparisons between periods.
24
Table of Contents
Net Sales and Additional Operating Data.
The following
table sets forth, for the periods indicated, selected statement
of income data expressed both in dollars and as a percentage of
net sales:
Fiscal Year Ended
Thirty-Nine Weeks Ended
February 1,
January 31,
January 29,
October 30,
October 29,
2003
2004
2005
2004
2005
(dollars in thousands)
(unaudited)
Statement of Income Data
Net sales
$
124,951
100.0%
$
157,198
100.0%
$
203,442
100.0%
$
137,129
100%
$
192,961
100%
Cost of sales
77,807
62.3
98,145
62.4
127,308
62.6
86,288
62.9
119,039
61.7
Gross profit
47,144
37.7
59,053
37.6
76,134
37.4
50,841
37.1
73,922
38.3
Selling, general and administrative expenses
38,760
31.0
48,845
31.1
63,594
31.3
46,440
33.9
64,281
33.3
Income from operations
8,385
6.7
10,208
6.5
12,540
6.1
4,401
3.2
9,641
5.0
Interest expense (income), net
256
0.2
563
0.4
732
0.3
557
0.4
(197
)
(0.1
)
Income before income taxes
8,129
6.5
9,645
6.1
11,808
5.8
3,844
2.8
9,838
5.1
Provision for income taxes
3,101
2.5
3,727
2.4
4,551
2.2
1,480
1.1
3,560
1.8
Net income
$
5,028
4.0%
$
5,918
3.8%
$
7,257
3.6%
$
2,364
1.7%
$
6,278
3.3%
The following table provides information, for the periods
indicated, about the number of total stores open at the
beginning of the period, stores opened and closed during each
period and the total stores open at the end of each period and
comparable store sales for the periods:
Fiscal Year Ended
Thirty-Nine Weeks Ended
February 1,
January 31,
January 29,
October 30,
October 29,
2003
2004
2005
2004
2005
Total stores open, beginning of period
123
137
161
161
200
New stores
16
25
40
35
26
Closed stores
2
1
1
1
0
(1)
Total stores open, end of period
137
161
200
195
226
(2)
Comparable store sales
    increase
(3)
14.6%
5.7%
3.0%
2.3%
14.1%
(1)
Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.
(2)
The number of stores open at the end of the period includes four
    stores closed as of October 29, 2005, as a result of
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.
(3)
Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.
Thirty-Nine Weeks Ended October 29, 2005 Compared to
Thirty-Nine Weeks Ended October 30, 2004
Net Sales.
Net sales increased $55.8 million, or
40.7%, to $193.0 million for the thirty-nine weeks ended
October 29, 2005 from $137.1 million in the
thirty-nine weeks ended October 30, 2004. The increase in
net sales was primarily due to 31 new store openings since
October 30, 2004 and a comparable store sales increase of
14.1% for the thirty-nine weeks ended October 29, 2005
compared to the thirty-nine weeks ended October 30, 2004.
The 31 stores opened since October 30, 2004 accounted
for $21.6 million of the total increase in sales, the 35
stores opened between February 1, 2004 and October 30,
2004 accounted for $17.3 million and the 158 comparable
stores contributed $16.9 million of the increase in sales.
Four stores were expanded and/or relocated since
October 30, 2004, all of which, occurred in the thirty-nine
weeks ended October 29, 2005. The increase in comparable
store sales was primarily from an increase in customer
transactions which was due in part to improved sales trends from
the increasing consumer preference for branded goods. Comparable
store sales for the thirty-nine weeks ended October 29,
2005 also were positively impacted by post-hurricane sales in
September and October. Federal Emergency Management Act vouchers
and other one-time assistance enabled many of our customers to
purchase sizeable amounts of apparel and
25
Table of Contents
other items to replace what had been lost. While the hurricanes
have had a negative effect on us by causing 38 stores to be
closed for one day or more during the thirty-nine weeks ended
October 29, 2005, the subsequent sales increases after the
stores have reopened has more than offset the sales missed on
those lost days. Stores located in areas contiguous to the
stores affected directly by the hurricanes have also shown a
dramatic increase in their sales for the thirty-nine weeks ended
October 29, 2005. We believe that sales increases in our
stores located in markets directly affected by the hurricanes
and in contiguous markets resulted directly from aid distributed
to our customers and the need for our customers to replace lost
or damaged clothing and other items. These sales increases have
begun to dissipate. We anticipate that the magnitude of these
increases will continue to diminish in the thirteen weeks ended
January 28, 2006, and that we will not continue to increase
or maintain our sales at the levels achieved in the months of
September, October, November and December in fiscal 2005.
Gross Profit.
Gross profit increased $23.1 million,
or 45.4%, to $73.9 million in the thirty-nine weeks ended
October 29, 2005 from $50.8 million in the thirty-nine
weeks ended October 30, 2004. The increase in gross profit
is primarily a result of the strong sales increases. As a
percentage of net sales, gross profit increased to 38.3% in the
thirty-nine weeks ended October 29, 2005 from 37.1% in the
thirty-nine weeks ended October 30, 2004. This increase, as
a percentage of net sales, was primarily due to reduced markdown
rates which was a result of well balanced inventories and strong
sales increases in the thirty-nine weeks ended October 29,
2005 compared to the thirty-nine weeks ended October 30,
2004.
Selling, General and Administrative Expense.
Selling,
general and administrative expenses increased
$17.8 million, or 38.4%, to $64.3 million in the
thirty-nine weeks ended October 29, 2005 from
$46.4 million in the thirty-nine weeks ended
October 30, 2004. The increase in these expenses was due
primarily to additional store level, distribution and corporate
costs arising from the opening of 31 new stores since
October 30, 2004, the payment of a $1.2 million fee to
terminate the consulting agreement with Hampshire Equity
Partners II, L.P. and property losses from Hurricanes
Katrina, Rita and Wilma, which we anticipate will total
approximately $700,000 net of insurance recoveries in the
thirty-nine weeks ended October 29, 2005. Selling, general
and administrative costs increased additionally due to costs
associated with being a public company of approximately
$700,000. Selling, general and administrative expense as a
percentage of net sales decreased to 33.3% in the thirty-nine
weeks ended October 29, 2005 from 33.9% in the thirty-nine
weeks ended October 30, 2004
.
The decrease as a
percentage of net sales was primarily due to our strong
comparable sales growth and the fixed nature of the selling,
general and administrative expenses. In addition, this decrease
is in part due to a prior year charge in the thirty-nine weeks
ended October 30, 2004 of approximately $300,000 for
additional vacation pay accrual pursuant to a change in our
vacation policy.
Interest Income.
Interest income increased to
approximately $499,000 in the thirty-nine weeks ended
October 29, 2005 from approximately $16,700 in the
thirty-nine weeks ended October 30, 2004. The increase in
interest income was due primarily to interest income earned on
proceeds from our initial public offering.
Interest Expense
. Interest expense decreased 47.4% to
approximately $302,000 in the thirty-nine weeks ended
October 29, 2005 from approximately $574,000 in the
thirty-nine weeks ended October 30, 2004. The decrease in
interest expense was due primarily to the redemption of our
preferred shares subject to mandatory redemption, the absence of
any borrowings under the line of credit and repaying in full our
mortgage on the Fahm Street headquarters and distribution center.
Provision for Income Taxes.
The provision for income
taxes increased to approximately $3.6 million in the
thirty-nine weeks ended October 29, 2005 from
$1.5 million in the thirty-nine weeks ended
October 30, 2004. The effective income tax rates for fiscal
2005 and fiscal 2004 were 36.2%, and 38.5%, respectively. The
tax rate decreased in fiscal 2005 as a result of tax exempt
investments, a qualification to utilize job tax credits and a
reduction in non-deductible preferred stock dividends.
Net Income.
Net income increased 165.6% to
$6.3 million in the thirty-nine weeks ended
October 29, 2005 from $2.4 million in the thirty-nine
weeks ended October 30, 2004. The increase in net income
was due to the factors discussed previously.
26
Table of Contents
Fiscal 2004 Compared to Fiscal 2003
Net Sales.
Net sales increased $46.2 million, or
29.4%, to $203.4 million for fiscal 2004 from
$157.2 million for fiscal 2003. The increase resulted
primarily from net sales of $63.2 million in fiscal 2004
from stores opened during fiscal 2004 and fiscal 2003 as
compared to net sales of $20.9 million in fiscal 2003 from
stores opened in fiscal 2003. In addition, the increase was due
to a comparable store sales increase of $4.0 million, or
3.0%. The increase in comparable store sales resulted, in part,
from an increase in the number of customer transactions and
average items per sale, partially offset by a decrease in the
average price of an item sold. Remodeled and relocated stores
accounted for less of the growth of comparable store sales in
fiscal 2004 (only about 0.3% of the 3% growth) due to fewer
stores being relocated and remodeled during the year.
Gross Profit.
Gross profit increased $17.1 million,
or 28.9%, to $76.1 million for fiscal 2004 from
$59.1 million for fiscal 2003. The increase resulted
primarily from the operation of new stores opened in fiscal 2004
and the full period impact of new stores opened during fiscal
2003, partially offset by a decrease in gross profit margin.
Gross profit as a percentage of sales was 37.4% for fiscal 2004
compared to 37.6% for fiscal 2003. Gross margins decreased as a
result of higher inbound and outbound freight costs primarily
due to fuel surcharges. Our gross margins may not be comparable
to other retailers as we include distribution center,
advertising and promotional costs in our selling, general and
administrative expenses, while certain other retailers deduct
these costs directly from their gross margin.
Selling, General and Administrative Expenses.
Selling,
general and administrative expenses increased
$14.7 million, or 30.2%, to $63.6 million for fiscal
2004 from $48.8 million for fiscal 2003. This increase was
caused primarily by store level, distribution and corporate
costs associated with the growing store base and the full period
impact of new stores opened in fiscal 2003. As a percentage of
net sales, selling, general and administrative expenses
increased to 31.3% for fiscal 2004 from 31.1% for fiscal 2003.
The increase was partially driven by approximately $360,000 of
additional vacation pay accrual pursuant to a change in our
vacation policy.
Interest Expense.
Interest expense increased
approximately $169,000 for fiscal 2004 to approximately $732,000
compared to approximately $563,000 for fiscal 2003. The increase
was primarily the result of the adoption of
SFAS No. 150, which increased interest expense by the
inclusion of dividends on mandatory redeemable obligations that
were previously deducted from equity as dividends, and increased
borrowings related to the cost of new stores during the period,
inclusive of inventory. We adopted SFAS No. 150 on
July 6, 2003, and dividends treated as interest expense in
fiscal 2004 and fiscal 2003 were approximately $324,000 and
approximately $189,000, respectively.
Provision for Income Taxes.
The provision for income
taxes increased approximately $824,000 for fiscal 2004 to
$4.6 million compared to $3.7 million for fiscal 2003.
Our effective tax rate was 38.5% and 38.6% for fiscal 2004 and
fiscal 2003, respectively.
Net Income.
Net income increased to $7.3 million for
fiscal 2004 from $5.9 million as a result of the factors
discussed above.
Fiscal 2003 Compared to Fiscal 2002
Net Sales.
Net sales increased $32.2 million, or
25.8%, to $157.2 million for fiscal 2003 from
$125.0 million for fiscal 2002. The increase resulted
primarily from net sales of $38.6 million in fiscal 2003
from stores opened during fiscal 2003 and fiscal 2002 as
compared to net sales of $10.8 million in fiscal 2002 from
stores opened in fiscal 2002. In addition, the increase was due
to a comparable store sales increase of $6.1 million, or
5.7%. The increase in comparable store sales resulted, in part,
from an increase in the number of customer transactions and
average items per sale, partially offset by a decrease in
average price of an item sold. In addition, in fiscal 2002, we
took over shoe operations in our stores from a third party
licensee that had previously managed the shoe merchandise and
paid us a commission on sales. As a result of this purchase, we
recognized shoe sales as part of net sales (amounting to
$3.8 million in fiscal 2003) instead
27
Table of Contents
of recognizing only the commissions as an increase to operating
income. The increase in comparable store sales in fiscal 2003
benefited from the full year impact of this change. The increase
was also caused by the impact of increased sales from stores
that were relocated and remodeled during the two-year period,
with such stores accounting for approximately one-third of the
5.7% comparable store sales increase.
Gross Profit.
Gross profit increased $11.9 million,
or 25.3%, to $59.1 million for fiscal 2003 from
$47.1 million for fiscal 2002. The increase resulted
primarily from the operation of 25 new stores opened in fiscal
2003 and the full year impact of 16 new stores opened during
fiscal 2002. Gross margin was 37.6% for fiscal 2003 compared to
37.7% for fiscal 2002. The decrease resulted from higher freight
costs.
Selling, General and Administrative Expenses.
Selling,
general and administrative expenses increased
$10.1 million, or 26.0%, to $48.8 million for fiscal
2003 from $38.8 million for fiscal 2002. As a percentage of
net sales, selling, general and administrative expenses
increased to 31.1% for fiscal 2003 from 31.0% for fiscal 2002.
The dollar increase was caused primarily by increases in store
level expenses, distribution costs and corporate costs
associated with the growing store base and full period impact of
new stores opened during fiscal 2002.
Interest Expense.
Interest expense increased
approximately $308,000 for fiscal 2003 to approximately
$563,000, compared to approximately $256,000 for fiscal 2002.
The increase was primarily the result of our adoption of
SFAS No. 150, which increased interest expense by the
inclusion of dividends on mandatory redeemable obligations that
were previously deducted from equity as dividends, increased
borrowings related to the costs of opening new stores during the
year, and the full year impact of the purchase of, and mortgage
on, the office and distribution facility in Savannah, Georgia.
The amount of dividends treated as interest expense in fiscal
2003 was approximately $189,000 and none in fiscal 2002.
Provision for Income Taxes.
The provision for income
taxes increased approximately $626,000 for fiscal 2003 to
$3.7 million, compared to $3.1 million for fiscal
2002. Our effective tax rate was 38.6% and 38.1% for fiscal 2003
and fiscal 2002, respectively. The rate increased in fiscal 2003
due to reclassifying nondeductible preferred stock dividends as
interest expense with the adoption of SFAS No. 150 in
July 2003.
Net Income.
Net income increased to $5.9 million for
fiscal 2003 from $5.0 million in fiscal 2002 as a result of
the factors discussed above.
Quarterly Results of Operations
The following table sets forth our unaudited quarterly results
of operations for fiscal 2003 and fiscal 2004 and the
thirty-nine weeks ended October 29, 2005. Each quarterly
period presented below consists of 13 weeks, and the
information includes our statement of income data for each such
period and additional operating data for each such period. In
the opinion of management, these unaudited interim financial
data have been prepared on the same basis as the audited
financial statements and reflect all adjustments (consisting
only of normal recurring adjustments) and fairly present the
financial information disclosed for these periods. The interim
financial data set forth below should be read in conjunction
with, and are qualified in their entirety by reference to, the
audited financial statements and related notes included
elsewhere in this prospectus. The results of operations for
historical periods are not necessarily indicative of results for
any future period.
Due to the importance of the spring selling season, which
includes Easter, and the fall selling season, which includes
Christmas, the first and fourth fiscal quarters have
historically contributed, and we expect they will continue to
have a significant contribution to our profitability for our
entire fiscal year. As a result, any factors negatively
affecting us in any year during the first and fourth fiscal
quarters, including adverse weather and unfavorable economic
conditions, could have a material adverse effect on our
financial condition and results of operations for the entire
year.
Our quarterly results of operations also may fluctuate based
upon such factors as the timing of holiday seasons, the number
and timing of new store openings, the amount of store preopening
expenses, the amount of net sales contributed by new and
existing stores, the mix of products sold, the timing and level
of
28
Table of Contents
markdowns, store closings, remodels and relocations, competitive
factors, weather and general economic conditions.
May 3,
Aug. 2,
Nov. 1,
Jan. 31,
May 1,
July 31,
Oct. 30,
Jan. 29,
Apr. 30,
July 30,
Oct. 29,
2003
2004
2003
2004
2004
2004
2004
2005
2005
2005
2005
(dollars in thousands, except per share amounts; unaudited)
Statement of Income Data:
Net sales
$
37,575
$
34,209
$
36,168
$
49,246
$
48,069
$
43,011
$
46,049
$
66,313
$
63,616
$
59,449
$
69,895
Cost of sales
22,023
22,452
22,991
30,679
29,034
28,095
29,159
41,020
38,482
37,682
42,873
Gross profit
15,552
11,757
13,177
18,567
19,035
14,916
16,890
25,293
25,134
21,767
27,022
Selling, general and administrative expenses
11,719
11,655
12,558
12,913
15,221
14,806
16,413
17,154
19,758
21,271
23,252
Income from operations
3,833
102
619
5,654
3,814
110
477
8,139
5,376
496
3,770
Interest expense (income), net
57
98
160
248
173
176
208
175
111
(55
)
(252
)
Earnings (loss) before income taxes
3,776
4
459
5,406
3,641
(66
)
269
7,964
5,265
551
4,022
Income tax expense (benefit)
1,459
1
177
2,090
1,402
(25
)
104
3,070
2,000
170
1,390
Net income (loss)
$
2,317
$
2
$
282
$
3,316
$
2,239
$
(41
)
$
165
$
4,894
$
3,265
$
381
$
2,632
Net income (loss) per common share:
Basic
$
0.24
$
(0.01
)
$
0.03
$
0.36
$
0.24
$
(0.00
)
$
0.02
$
0.53
$
0.35
$
0.03
$
0.21
Diluted
$
0.21
$
(0.00
)
$
0.03
$
0.31
$
0.21
$
(0.00
)
$
0.02
$
0.45
$
0.30
$
0.03
$
0.18
Weighted average shares used to compute net income per share:
Basic
9,295,000
9,295,000
9,295,000
9,295,000
9,305,400
9,310,600
9,300,200
9,295,000
9,295,000
11,925,307
12,825,199
Diluted
10,814,502
10,794,447
10,810,836
10,834,839
10,867,016
10,875,182
10,864,496
10,902,736
10,986,959
13,587,400
14,379,974
Additional Operating Data:
Number of stores:
Open, beginning of quarter
137
147
154
159
161
178
182
195
200
214
221
Opened during quarter
10
7
6
2
17
5
13
5
14
7
5
Closed during
    quarter
(1)
—
—
—
—
—
1
—
—
—
—
—
Total open at end of
    period
(2)
147
154
159
161
178
182
195
200
214
221
226
Comparable store sales
    Increase
(3)
3.2%
5.6%
9.6%
5.2%
3.5%
0.3%
3.0%
4.6%
6.9%
11.5%
25.0%
(4)
(1)
Stores closed for one or more days due to Hurricanes Katrina,
    Rita and Wilma are not included in this item.
(2)
The number of stores open at the end of the period includes four
    stores closed as of October 29, 2005, as a result of
    Hurricanes Katrina, Rita and Wilma, two of which have since been
    re-opened.
(3)
Stores included in the comparable store sales calculation for
    any period are those stores that were opened prior to the
    beginning of the preceding fiscal year and were still open at
    the end of such period. Relocated stores and expanded stores are
    included in the comparable store sales results.
(4)
Comparable store sales in this period benefited from strong
    sales in hurricane affected areas. Comparable store sales in
    areas not affected by the hurricanes were approximately 18.1%
    for the period.
Liquidity and Capital Resources
Our cash requirements are primarily for working capital,
construction of new stores, remodeling of existing stores and
the improvement of our information systems. Prior to the initial
public offering, these cash requirements had been met from cash
flow from operations, short-term trade credit and borrowings
under our revolving lines of credit, long-term debt and capital
leases.
On May 18, 2005, we completed our initial public offering
of our common stock, as a result of which we issued and sold
2,700,000 shares of common stock at $14.00 per share. In
addition, we received notice on May 27, 2005, that the
underwriters had exercised the over-allotment option, pursuant
to which we issued and sold an additional 577,500 shares on
June 1, 2005. Upon completing the offering and the
over-allotment option granted in connection with our initial
public offering, we received gross proceeds of approximately
$45.9 million and incurred approximately $4.8 million
in expenses in connection with our initial public offering, for
net proceeds of approximately $41.1 million. In addition,
1,150,000 shares of common stock were sold in our initial public
offering by certain of our selling stockholders, for which we
received no proceeds. As a result, upon the closing of the
offering, there were 12,602,154 shares of common stock
outstanding.
Following the closing of our initial public offering on
May 23, 2005, each of our 3,605 shares of mandatory
redeemable preferred stock were redeemed and extinguished for
approximately $3.6 million, and we repaid in full our
mortgage on the Fahm Street headquarters and distribution center
in the amount of approximately $1.5 million.
Using a portion of the proceeds from our initial public offering
and cash flow from operations, we purchased a distribution
center in Darlington, South Carolina in the thirteen weeks
ending October 29, 2005.
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Discussion of Cash Flows
Thirty-Nine Weeks Ended October 29, 2005 and
October 30, 2004
At October 29, 2005, we had total cash, cash equivalents
and marketable securities of $42.0 million compared with
total cash and cash equivalents of $11.8 million at
January 29, 2005. The most significant factors in the
change in our net liquidity position during the first
thirty-nine weeks of 2005 were the proceeds from our initial
public offering, positive net income from operations adjusted
for depreciation and other non-cash charges, offset by the
purchase of additional inventory and capital expenditures to
open new stores and purchase our distribution center in
Darlington, South Carolina.
Inventory represented approximately 43% of our total assets as
of October 29, 2005. Management's ability to manage
our inventory can have a significant impact on our cash flows
from operations during a given interim period or fiscal year. In
addition, inventory purchases can be somewhat seasonal in
nature, such as the purchase of warm-weather or
Christmas-related merchandise.
Cash Flows Provided by (Used in) Operating Activities
.
Net cash provided by (used in) operating activities was
$3.1 million in the thirty-nine weeks ended
October 29, 2005 compared to ($5.3) million in the
thirty-nine weeks ended October 30, 2004. The main sources
of cash provided during the thirty-nine weeks ended
October 29, 2005 was net income adjusted for depreciation
and other non-cash charges of $12.3 million, increases in
accrued expenses of $2.6 million, increases in accrued
compensation of $2.5 million and deposits taken on layaway
transactions of $1.2 million. Uses of cash consisted of the
net increase in net inventory of $11.1 million, a
$3.7 million change in the net income tax
receivable/payable, and an approximately $580,000 increase in
prepaid assets and other current assets related to insurance
receivables for property damages from Hurricanes Katrina, Rita
and Wilma.
Cash Flows Used in Investing Activities.
Cash used in
investing activities was $41.0 million in the thirty-nine
weeks ended October 29, 2005 compared to $6.2 million
in the thirty-nine weeks ended October 30, 2004. Net cash
used in investing activities increased during the thirty-nine
weeks ended October 29, 2005 compared to the thirty-nine
weeks ended October 30, 2004 primarily because of the
investment of $32.6 million of cash proceeds from the IPO
in municipal auction rate securities. We also made capital
expenditures in the amount of $8.9 million in the
thirty-nine weeks ended October 29, 2005 for the purchase
of the distribution center in Darlington, South Carolina,
purchase of property and equipment for the build out of 26 new
stores, four relocations and remodels, and other general
corporate purposes compared to $6.9 million in the
thirty-nine weeks ended October 30, 2004 used for the
purchase of property and equipment for the build out of 35 new
stores, three relocations and remodels and other general
corporate purposes. Approximately $988,000 of our capital
expenditures on new stores in the thirty-nine weeks ended
October 29, 2005 will be reimbursed to us by the landlords
of the leased properties. These tenant improvement dollars will
be amortized over the life of the individual store's lease
as a reduction to occupancy expense.
Cash Flows Provided by Financing Activities.
Cash
provided by financing activities was $35.5 million in the
thirty-nine weeks ended October 29, 2005 and
$3.8 million in the thirty-nine weeks ended
October 30, 2004. Financing activities in the thirty-nine
weeks ended October 29, 2005 included the receipt of
$41.3 million from the initial public offering and
subsequent option exercises by employees, payment of
$3.6 million redeeming the preferred shares subject to
mandatory redemption, the $1.5 million payoff of the
mortgage on the Fahm Street headquarters and distribution center
and scheduled repayments of approximately $758,000 on
outstanding capital leases.
Fiscal 2004 and Fiscal 2003
For fiscal 2004, cash and cash equivalents increased by
$1.8 million to $11.8 million from $10.0 million
at the end of fiscal 2003. The primary contributor to the
increase in cash and cash equivalents was $12.7 million
provided by operating activities, partially offset by
$8.6 million used in investing activities, primarily to
open new stores, and $2.2 million used in financing
activities, primarily to make dividend payments to holders of
mandatory redeemable stock and repayment on long-term debt and
capital lease obligations.
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For fiscal 2003, cash and cash equivalents increased by
$4.2 million to $10.0 million from $5.8 million
at the end of fiscal 2002. The primary contributor to the
increase in cash and cash equivalents was $11.2 million of
cash provided by operations, partially offset by
$6.1 million used in investing activities, primarily to
open new stores.
Net cash provided by operating activities was $12.7 million
for fiscal 2004 and $11.2 million for fiscal 2003. Net cash
provided by operating activities increased in fiscal 2004
attributable to net income of $7.3 million, depreciation,
amortization and other non-cash charges of $5.2 million and
approximately $155,000 provided by net operating assets and
liabilities. Cash flow from net operating assets and liabilities
in fiscal 2004 was largely attributable to the investment in
inventory, net of accounts payable, offset by the increase in
accrued expenses and income tax payable. In fiscal 2004 this
change in net inventory position (inventory less accounts
payable) resulted in a use of cash of $4.9 million. The
change in net inventory position in fiscal 2004 reflects the
opening of 40 stores and an increase in inventory levels in
preparation for a mid-March Easter season in fiscal 2005.
Accrued expenses increased $2.8 million due to additional
accruals for rent and landlord allowances, sales taxes, freight,
professional fees and other expenses. Income tax payable
increased $2.1 million due to our change of method of
paying installments on income tax.
Net cash used in investing activities was $8.6 million for
fiscal 2004, and $6.1 million for fiscal 2003. Net cash
used in investing activities increased in fiscal 2004 compared
to fiscal 2003 because we purchased additional property and
equipment to open 40 new stores compared to 25 new stores in the
prior year. Net cash used in investing activities was
$6.1 million for fiscal 2003, and $5.9 million for
fiscal 2002. Net cash used in investing activities increased in
fiscal 2003 compared to fiscal 2002 because we purchased
additional property and equipment to open 25 new stores compared
to 16 new stores in the prior year.
Net cash used in financing activities was $2.2 million for
fiscal 2004 and approximately $942,000 for fiscal 2003. Net cash
used in financing activities for fiscal 2004 was attributable to
$1.4 million in payments on preferred stock dividends and
approximately $831,000 for payments on capital lease obligations
and mortgage payments on our Fahm Street facility. Net cash used
in financing activities was approximately $942,000 for fiscal
2003 and $2.8 million for fiscal 2002. Net cash used in
financing activities for fiscal 2003 was attributable to
payments on capital lease obligations and mortgage payments on
our Fahm Street facility. Until required for other purposes, we
maintain our cash and cash equivalents in deposit accounts or
highly liquid investments with remaining maturities of
90 days or less at the time of purchase.
Liquidity Sources, Requirements and Contractual Cash
Requirements and Commitments
Our principal sources of liquidity consist of: (i) cash,
cash equivalents and marketable securities (which equaled
$42.0 million as of October 29, 2005); (ii) a
secured line of credit with a maximum available borrowing of
$25.0 million subject to our inventory levels (with
availability of $25 million and none drawn down as of
October 29, 2005); (iii) an unsecured line of credit
with a maximum available borrowing of $3.0 million subject
to our inventory levels (with availability of $3.0 million
and none drawn down as of October 29, 2005); (iv) cash
generated from operations on an ongoing basis as we sell our
merchandise inventory; and (v) trade credit. Short-term
trade credit represents a significant source of financing for
our inventory purchases. Trade credit arises from customary
payment terms and trade practices with our vendors. Our
management regularly reviews the adequacy of credit available to
us from our vendors. Historically, our principal liquidity
requirements have been to meet our working capital and capital
expenditure needs.
We believe that our sources of liquidity will be sufficient to
fund our operations and anticipated capital expenditures for at
least the next 24 months. Our ability to fund these
requirements and comply with the financial covenants under our
secured lines of credit will depend on our cash flow, which in
turn is subject to prevailing economic conditions and financial,
business and other factors, some of which are beyond our
control. In addition, as part of our strategy, we intend to
continue to open new stores, which will require additional
capital. We cannot assure you that additional capital or other
sources of liquidity will be available on terms acceptable to
us, or at all.
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We anticipate that our capital expenditures for the fourth
quarter of fiscal 2005 will be approximately $2.6 million.
We anticipate that our capital expenditures will be
approximately $13 million to $15 million for fiscal
2006. These expenditures will relate to the purchase of property
and equipment for the 42 to 45 stores we plan to open in fiscal
2006, the addition of more office space and the continued
buildout of our Darlington, South Carolina distribution center.
We plan to finance these capital expenditures with cash flow
from operations.
The following table discloses aggregate information about our
contractual obligations as of October 29, 2005 and the
periods in which payments are due:
Payments Due by Period
Less than
More than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in thousands)
Contractual obligations:
Capital leases
$
1,412
$
801
$
611
$
—
$
—
Operating
    leases
(1)
38,430
11,017
17,937
8,935
541
Purchase obligations
57,117
57,117
—
—
—
Total contractual cash obligations
$
96,959
$
68,935
$
18,548
$
8,935
$
541
(1)
Represents fixed minimum rentals in stores and does not include
    incremental rents which are computed as a percentage of net
    sales. For example, in fiscal 2004 incremental percentage rent
    was approximately $723,000, which represented 8.6% of total rent
    expense.
Indebtedness.
We have a revolving line of credit secured
by substantially all of our assets pursuant to which we pay
customary fees. This secured line of credit expires in April
2007. This secured line of credit provides for aggregate cash
borrowings and the issuance of letters of credit up to the
lesser of $25.0 million or our borrowing base (which was
approximately $25 million at October 29, 2005), with a
letter of credit sub-limit of $2.0 million. Borrowings
under this secured line of credit bear interest at the prime
rate plus a spread or LIBOR plus a spread, at our election,
based on conditions in the credit agreement. As of
October 29, 2005, we had no outstanding borrowings on the
line of credit, and no outstanding letters of credit. Under the
terms of the credit agreement, we are required to maintain a
minimum tangible net worth.
In September 2003, we entered into an annual unsecured revolving
line of credit with Bank of America that was renewed in June
2004. The line of credit provides for aggregate cash borrowings
up to $3.0 million to be used for general operating
purposes. Borrowings under the credit agreement bear interest at
LIBOR plus a spread. At October 29, 2005, there was no
balance on this revolving line of credit.
We borrow funds under these revolving lines of credit from time
to time and subsequently repay such borrowings with available
cash generated from operations.
Capital Leases.
We have capital lease obligations that
financed the purchase of our computer equipment. At
October 29, 2005, our capital lease obligations were
$1.3 million. These obligations have maturity dates ranging
from March 2005 to December 2007. The interest rates on these
obligations range from 7.2% to 13.0%. All of these obligations
are secured by the computer equipment.
Operating Leases.
We lease our stores under operating
leases, which generally have an initial term of five years with
one five-year renewal option. The typical store lease requires a
combination of both fixed monthly rentals and rentals computed
as percentage of net sales after a certain sales threshold has
been met. For the thirty-nine weeks ended October 29, 2005,
rental expense was $8.6 million compared to
$6.4 million for the thirty-nine weeks ended
October 30, 2004 (including approximately $840,000 and
$540,000 of percentage rent, respectively).
Purchase Obligations.
As of October 29, 2005, we had
purchase obligations of $57.0 million, all of which were
for less than one year. These purchase obligations primarily
consist of outstanding merchandise orders.
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Off-Balance Sheet Arrangements.
Other than the store
operating leases described above, we do not have any off-balance
sheet arrangements.
Outstanding Stock Options
As of October 29, 2005, we had outstanding vested options
to purchase approximately 1,430,228 shares of common stock, at a
weighted average exercise price of $0.78 per share, and
outstanding unvested options to purchase 286,900 shares of
common stock, at a weighted average price of $10.64 per share.
The per share value of each share of common stock underlying the
vested and unvested options, based on the difference between the
exercise price per option and the estimated fair market value of
the shares at the dates of the grant of the options (also
referred to as intrinsic value), ranges from $0 to $4.20 per
share.
For all stock option grants prior to fiscal 2005, the fair
market values of the shares at the dates of grant were
originally estimated by our board of directors, with input from
management. We did not obtain contemporaneous valuations by an
unrelated valuation specialist because we based our valuation on
comparable private company market multiple analyses. We used a
consistent formula based on our twelve-month rolling EBITDA,
defined as earnings before taxes, interest, depreciation and
amortization, multiplied by a private company multiple less
outstanding debt. We believe this formula removes uncertainties
associated with asset based valuation methodologies and
methodologies based on estimated future revenues and costs. For
grants in fiscal 2005, stock options were granted under this
plan at the market price on the grant date and generally vest
ratably over a four-year period. All stock options granted under
this plan have a ten-year life subject to earlier termination
upon death, disability or cessation of employment.
Significant Factors Contributing to the Difference between
Fair Value as of the Date of Each Grant and the IPO Price
.
As disclosed more fully in Note 8 to the Consolidated
Financial Statements, we granted stock options during fiscal
2004 with a fair value of $9.55 per share for the first quarter,
$10.25 per share for the second quarter and $11.05 per share for
the third quarter. Factors that contributed to the difference
between the fair value of those grants and our initial public
offering price are:
•
the increased private company valuation of the company that
    occurred subsequent to the date of the grants but previous to
    the initial public offering based on earnings and cash flows;
•
the span of time between grant dates and the time of the initial
    public offering;
•
the fact that private company valuations are normally based on
    historical performance while a public company's are based
    on future expected earnings;
•
the uncertainty of our future cash flow and earnings at the date
    of the grants;
•
our dependence on results in the fourth quarter of fiscal 2004,
    which had not been completed at the date of the grants and which
    accounted for approximately 67% of our net income for fiscal
    2004;
•
increased same store sales when compared with the same periods
    from previous years; (the continued growth in our store base;
•
increased average sales per store;
•
the continued growth in our store base;
•
our expanded geographic footprint; and
•
our determination in December 2004 to initiate the process of an
    initial public offering and begin drafting a registration
    statement.
The intrinsic value exceeded the exercise price established at
the date of each grant by the following amounts: $3.01 per share
for those options granted in the first quarter of fiscal 2004,
$3.44 per share for those options granted in the second quarter
of fiscal 2004 and $4.20 per share for those options granted in
the third quarter of fiscal 2004.
Based on the closing price of $27.40 per share on
October 29, 2005, the intrinsic value of the options
outstanding on October 29, 2005 was $47.0 million, of
which $39.1 million related to vested options and
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$7.9 million related to unvested options. Although it is
reasonable to conclude that the completion of this offering will
add value to the shares because they will have increased
liquidity and marketability, the amount of additional value can
be measured with neither precision nor certainty.
Our board of directors has authorized awards for our management
employees in the form of stock option grants. See
"Management—2005 Long Term Incentive Plan—Initial
Grants."
Critical Accounting Policies
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. We believe the following critical
accounting policies describe the more significant judgments and
estimates used in the preparation of our financial statements:
Revenue Recognition
While our recognition of revenue is predominantly derived from
routine retail transactions and does not involve significant
judgment, revenue recognition represents an important accounting
policy of ours. We recognize retail sales at the time the
customer takes possession of the merchandise and purchases are
paid for less an allowance for returns. We allow for returns up
to 10 days after the date of sales and the estimate for
returns is based on actual observed return activity 10 days
after the period ends. Revenue from layaway sales is recognized
when the customer has paid for and received the merchandise.
However, revenue from the $2.00 service charge for participating
in the program and from the $5.00 re-stocking fee, if charged as
part of the layaway program, is recognized at the time of
payment. All sales are from cash, check or major credit card
company transactions.
Inventory
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. Inherent in the
retail inventory calculation are certain significant management
judgments and estimates including, among others, merchandise
markups, markdowns and shrinkage, which impact the ending
inventory valuation at cost as well as resulting gross margins.
We estimate a shrinkage reserve for the period between the last
physical count and the balance sheet date. The estimate for the
shrinkage reserve can be affected by changes in actual shrinkage
trends. We believe the first-in first-out retail inventory
method results in an inventory valuation that is fairly stated.
Many retailers have arrangements with vendors that provide for
rebates and allowances under certain conditions, which
ultimately affect the value of the inventory. We have not
entered into such arrangements with our vendors.
Property and Equipment, net
We have a significant investment in property and equipment.
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (primarily three to five years for computer equipment and
furniture, fixtures and equipment, five years for leasehold
improvements, and 15 years for buildings) of the related
assets or the relevant lease term, whichever is shorter. Any
reduction in these estimated useful lives would result in a
higher annual depreciation expense for the related assets.
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Impairment of Long-Lived Assets
We continually evaluate whether events and changes in
circumstances warrant revised estimates of the useful lives or
recognition of an impairment loss for intangible assets. Future
adverse changes in market and legal conditions, or poor
operating results of underlying assets could result in losses or
an inability to recover the carrying value of the intangible
asset, thereby possibly requiring an impairment charge in the
future. If facts and circumstances indicate that a long-lived
asset, including property and equipment, may be impaired, the
carrying value is reviewed. If this review indicates that the
carrying value of the asset will not be recovered as determined
based on projected undiscounted cash flows related to the asset
over its remaining life, the carrying value of the asset is
reduced to its estimated fair value. Impairment losses in the
future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
our estimates for net sales, gross profit and store expenses are
not realized, future assessments of recoverability could result
in impairment charges.
Stock-Based Compensation
We apply the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion
No. 25,
Accounting for Stock Issued to Employees,
and related interpretations including FASB interpretation
(FIN) No. 44,
Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion
No. 25
, to account for our fixed-plan stock options.
Under this method, compensation expense is recorded on the date
of grant only if the current fair value of the underlying stock
exceeds the exercise price. We recognize the fair value of stock
rights granted to non-employees in the accompanying financial
statements. SFAS No. 123, Accounting for Stock-Based
Compensation, and SFAS No. 148,
Accounting for
Stock-Based Compensation—Transition and Disclosure, an
amendment of FASB Statement No. 123
, establishes
accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation
plans. As permitted by existing accounting standards, we have
elected to continue to apply the intrinsic-value-based method of
accounting described above, and have adopted only the disclosure
requirements of SFAS No. 123, as amended. Pro forma
information regarding net income and net income per share is
required in order to show our net income as if we had accounted
for employee stock options under the fair value method of
SFAS No. 123,
Accounting for Stock-Based
Compensation,
as amended by SFAS No. 148,
Accounting for Stock-Based Compensation—Transition
Disclosure
. This information is contained in Notes 2
and 8 to our financial statements. The fair values of options
and shares issued pursuant to our option plan at each grant date
were estimated using the Black-Scholes option pricing model.
Operating Leases
We lease substantially all of our store properties and accounts
for the leases as operating leases in accordance with
SFAS No. 13,
Accounting for Leases.
Many lease
agreements contain tenant improvement allowances, rent holidays,
rent escalation clauses and/or contingent rent provisions. For
purposes of recognizing incentives and minimum rental expenses
on a straight-line basis over the terms of the leases, we use
the date of initial possession to begin amortization, which is
generally when we enter the space and begin to make improvements
in preparation of intended use.
For scheduled rent escalation clauses during the lease terms or
for rental payments commencing "rent holidays" at a
date other than the date of initial occupancy, we record minimum
rental expenses on a straight-line basis over the terms of the
leases. For tenant improvement allowances we record a deferred
rent liability on the consolidated balance sheets and amortize
the deferred rent over the terms of the leases.
Certain leases provide for contingent rents that are not
measurable at inception. These contingent rents are primarily
based on a percentage of sales that are in excess of a
predetermined level. These amounts are excluded from minimum
rent and are included in the determination of total rent expense
when it is probable that the expense has been incurred and the
amount is reasonably estimable.
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Table of Contents
Accounting for Income Taxes
We account for income taxes in accordance with
SFAS No. 109,
Accounting for Income Taxes
. The
computation of income taxes is subject to estimation due to the
judgment required and the uncertainty related to the
recoverability of deferred tax assets or the outcome of tax
audits. We adjust our income tax provision in the period it is
determined that actual results will differ from our estimates.
Tax law and rate changes are reflected in the income tax
provision in which such changes are enacted.
The above listing is not intended to be a comprehensive list of
all our accounting policies. In many cases the accounting
treatment of a particular transaction is specifically dictated
by generally accepted accounting principles, with no need for
management's judgment in their application. There are also
areas in which management's judgment in selecting any
available alternative would not produce a materially different
result.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to financial market risks related to changes in
interest rates connected with our revolving lines of credit,
which bear interest at variable rates. We cannot predict market
fluctuations in interest rates. As a result, future results may
differ materially from estimated results due to adverse changes
in interest rates or debt availability. A hypothetical 100 basis
point increase in prevailing market interest rates would not
have materially impacted our financial position, results of
operations, cash flows for fiscal 2004. We do not engage in
financial transactions for trading or speculative purposes, and
we have not entered into any interest rate hedging contracts.
We source all of our product from apparel markets in the United
States and, therefore, are not subject to fluctuations in
foreign currency exchange rates. We have not entered into
forward contracts to hedge against fluctuations in foreign
currency prices.
If we were to begin sourcing product directly from overseas, our
risk management policy would allow us to utilize foreign
currency forward and option contracts to manage currency
exposures. If we were to enter into hedging contracts, we
anticipate that the contracts would have maturities of less than
three months and would settle before the end of each quarterly
period. Additionally, we do not expect to enter into any hedging
contracts for trading or speculative purposes.
In June 2005 we began investing excess cash in auction rate
securities. These securities are highly liquid, variable-rate
debt securities. While the underlying security has a long-term
nominal maturity, the interest rate is reset through dutch
auctions that are typically held every 35 days, creating a
short-term instrument. Due to the short-term nature of these
investments, we believe that we do not have material exposure to
changes in the fair value of our investments as a result of
changes in interest rates. Declines in interest rates, however,
will reduce future investment income. We do not enter into
investments for trading or speculative purposes.
Recently Issued Accounting Standards
In December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets
. SFAS No. 153
amends APB Opinion No. 29,
Accounting for Nonmonetary
Transactions,
which requires that exchanges of nonmonetary
assets be measured based on the fair value of the assets
exchanged, but which includes certain exceptions to that
principle. SFAS No. 153 eliminates the exception from
APB Opinion No. 29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have a commercial
substance. SFAS No. 153 is effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after
June 15, 2005. The adoption of SFAS No. 153 is
not expected to have a material impact on our consolidated
financial position or results of operations.
In December 2004, the FASB issued a revision to
SFAS No. 123,
Accounting for Stock-Based
Compensation
. SFAS No. 123R replaces
SFAS No. 123 and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees,
and establishes
standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services.
SFAS No. 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions and is effective as of the
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beginning of the first annual period that begins after
June 15, 2005 for public entities that do not file as small
business issuers. We have illustrated the effect on our earnings
as if we had adopted the fair value method of accounting for
stock-based compensation under SFAS No. 123. This
information is contained in notes 2 and 8 to our financial
statements. The fair values of options and shares issued
pursuant to our option plan at each grant date were estimated
using the Black-Scholes option pricing model. The fair
value-based method of SFAS No. 123 is similar in most
respects to the fair value-based method under
SFAS No. 123R, although the election of certain
methods within the applicable transition rules of
SFAS No. 123R may affect the impact on our
consolidated financial position or results of operations. The
impact of adopting SFAS No. 123R will be dependent on
numerous factors including, but not limited to, the valuation
model chosen by us to value stock-based awards, the assumed
award forfeiture rate, the accounting policies adopted
concerning the method of recognizing the fair value of awards
over the requisite service period and the transition method
chosen for adopting SFAS No. 123R. We have
preliminarily estimated the effects of adoption of
SFAS No. 123R will result in an additional
compensation expense of $1.0 million to $1.5 million
in fiscal 2006 and a yet to be determined additional
compensation expense in fiscal 2007.
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Business
We are a rapidly growing, value-priced retailer of urban fashion
apparel and accessories for the entire family. We offer quality,
branded products from nationally recognized brands, as well as
private label products and a limited assortment of home
décor items. Our merchandise offerings are designed to
appeal to the preferences of fashion conscious consumers,
particularly African-Americans. We believe that we provide our
merchandise at compelling values. We seek to provide nationally
recognized branded merchandise at 20% to 60% discounts to
department and specialty stores' regular prices. Our stores
average approximately 9,000 square feet of selling space and are
typically located in neighborhood shopping centers that are
convenient to low to moderate income customers. Originally our
stores were located in the Southeast, and during late fiscal
2004 and fiscal 2005 we expanded into the Mid-Atlantic region,
the Midwest and Texas. We operate 236 stores (including two
stores currently closed due to the recent hurricanes) in both
urban and rural markets in fourteen states. For fiscal 2005, we
have opened 36 new stores and have no additional openings
planned. We expect to open 42 to 45 new stores in fiscal 2006.
Approximately 90% of the new stores we intend to open in fiscal
2006 will be located in states that we currently serve.
Our predecessor was founded in 1946 and grew to become a chain
of family apparel stores operating in the Southeast under the
Allied Department Stores name. In 1999, our chain of stores,
then consisting of 85 stores throughout the Southeast, was
acquired by Hampshire Equity Partners II, L.P., a private equity
firm. Our management team has implemented several strategies
designed to differentiate our stores, improve our operating and
financial performance and position us for growth, including:
•
focusing our merchandise offerings on more urban fashion apparel
    for the entire family, with greater emphasis on nationally
    recognized brands;
•
accelerating and completing the remodeling of virtually all of
    the 85 stores acquired in 1999 to create a more appealing
    shopping environment;
•
refining our new store model and implementing a real estate
    approach focused on locating stores in low to moderate income
    neighborhoods close to our core customers;
•
rebranding our stores and our company to Citi Trends in order to
    convey more effectively our positioning to consumers;
•
investing in infrastructure to support growth, including opening
    an additional distribution center and installing new point of
    sale systems in all of our stores; and
•
implementing an aggressive growth strategy, including entering
    several new markets such as Baltimore, Houston, Norfolk,
    Washington, D.C. and, most recently, Cincinnati, Dallas,
    Louisville and Miami.
Industry
According to NPD Fashionworld, a division of the NPD Group, or
NPD, a nationally recognized firm that specializes in apparel
research, based on Consumer Panel Estimated Data, retail sales
of off-price apparel totaled $16.5 billion in the U.S. in
2004, an increase of more than 15% from 2003. The popularity of
this segment continues to grow, with off-price retailers
accounting for 9.5% of overall retail apparel sales in the U.S.
in 2004, versus 8.6% in 2003 and 8.2% in 2002, according to NPD.
The off-price apparel market is dominated by large format,
national apparel companies, such as TJX Companies, Burlington
Coat Factory and Ross Stores. Our management believes that these
retailers generally target more affluent consumers and seek to
achieve high volumes by serving the fashion needs of a broad
segment of the population. Mass merchants and general
merchandise discount retailers, such as Wal-Mart and Kmart, also
offer apparel at reduced prices, but we believe that they
generally focus on basic apparel and are less fashion oriented.
As a result, we believe there is significant demand for a value
retailer that addresses the market of low to moderate income
consumers generally and, particularly, African-American and other
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minority consumers who seek value-priced, urban fashion apparel
and accessories. We believe this market benefits from several
favorable characteristics, including:
Growing Market with Favorable Demographics.
Based on U.S.
Census Bureau data, approximately 31% of the U.S. population was
non-white in 2000 versus approximately 20% in 1980. According to
U.S. Census Bureau data this percentage is estimated to
increase to approximately 35% by 2010. African-Americans
represented 12.7% of the population as of 2000, which is
expected to increase to 13.1% in 2010, based upon U.S. Census
Bureau data.
Significant Spending on Apparel.
According to the Selig
Center for Economic Growth at The University of Georgia the
combined U.S. buying power of non-whites grew from
$454.3 billion in 1990 to approximately $956.4 billion
in 2000. During that period, buying power for African-Americans
grew from $318.1 billion to $590.2 billion and is
estimated by the Selig Center to grow approximately 70% to
$1.0 trillion in 2010.
We believe our core customers are more fashion oriented, which
results in a greater propensity to purchase apparel. According
to the U.S. Department of Labor, African-Americans spend 4.6% of
their annual income on apparel and related products and
services, compared to 3.2% for the U.S. population as a whole.
Expansion of Urban Apparel Brands.
In recent years, a
series of nationally recognized urban brands, often associated
with hip-hop and rap musicians, has emerged and gained
significant popularity. These brands offer distinctive, urban
apparel designed to appeal to African-American consumers, as
well as to the broader population. Sales from 13 national urban
apparel brands tracked by NPD totaled approximately
$1.9 billion in 2004, an increase of approximately 46% from
2003.
Business Strengths
Our goal is to be the leading value-priced retailer of urban
fashion apparel and accessories. We believe the following
business strengths differentiate us from our competitors and are
important to our success:
Focus on Urban Fashion Mix.
We focus our merchandise on
urban fashions, which we believe appeals to our core customers.
We do not attempt to dictate trends, but rather devote
considerable effort to identifying emerging trends and ensuring
that our apparel assortment is considered timely and fashionable
in the urban market. Our merchandising staff tests new
merchandise before reordering and actively manages the mix of
brands and products in our stores to keep our offering fresh and
minimize markdowns.
Superior Value Proposition.
As a value-priced retailer,
we seek to offer first quality, fashionable merchandise at
compelling prices. We seek to provide nationally recognized
brands at 20% to 60% discounts to department and specialty
stores' regular prices. We also offer products under our
proprietary brands such as Citi Steps, Diva Blue and Urban
Sophistication. These private labels enable us to expand product
selection, offer fashion merchandise at lower prices and enhance
our product offerings.
Merchandise Mix that Appeals to the Entire Family.
We
merchandise our stores to create a destination environment
capable of meeting the fashion needs of the entire
value-conscious family. Each store offers a wide variety of
products for men and women, as well as infants, toddlers, boys
and girls. Our stores feature sportswear, dresses, plus-sized
apparel, outerwear, footwear and accessories, as well as a
limited assortment of home décor items. We believe that the
breadth of our merchandise distinguishes our stores from many
competitors that offer urban apparel primarily for women, and
reduces our exposure to fashion trends and demand cycles in any
single category.
Strong and Flexible Sourcing Relationships.
We maintain
strong sourcing relationships with a large group of suppliers.
We have purchased merchandise from more than 1,000 vendors in
the past twelve months. Purchasing is controlled by our 20-plus
member buying team located at our Savannah, Georgia headquarters
and in New York, New York, and our buyers have an average of
more than 20 years of retail experience. We purchase
merchandise through planned programs with vendors at reduced
prices and opportunistically through close-outs, with the
majority of our merchandise purchased for the current season and
a limited quantity held
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for sale in future seasons. To foster our vendor relationships,
we pay vendors promptly and do not ask for typical retail
concessions such as promotional and markdown allowances or
delivery concessions such as drop shipments to stores.
Attractive Fashion Presentation and Store Environment.
We
seek to provide a fashion-focused shopping environment that is
similar to a specialty apparel retailer, rather than a typical
off-price store. Products from nationally recognized brands are
prominently displayed by brand, rather than by size, on
dedicated, four-way fixtures featuring multiple sizes and
styles. The remaining merchandise is arranged on hanging racks.
All stores are carpeted and well-lit, with most featuring a
sound system that plays urban adult and urban contemporary music
throughout the store. Nearly all of our stores have either been
opened or remodeled in the past six years.
Highly Profitable Store Model.
We operate a proven and
efficient store model that delivers strong cash flow and store
level return on investment. We locate stores in high traffic
strip shopping centers that are convenient to low and moderate
income neighborhoods. We generally utilize previously occupied
store sites. This approach enables us to generate substantial
traffic at attractive rents. Similarly, our advertising expenses
are low as we do not rely on promotion-driven sales but rather
seek to build our reputation for value through everyday low
prices. At the same time, from an investment perspective, we
seek to design stores that are inviting and easy to shop, while
limiting startup and fixturing costs. As a result, our stores
generate rapid payback of investments, typically within 12 to
14 months.
Growth Strategy
Our growth strategy is to open stores in new and existing
markets, as well as to increase sales in existing stores. Adding
stores in the markets we currently serve often enables us to
benefit from enhanced name recognition and achieve advertising
and operating synergies. In fiscal 2003 and fiscal 2004, we
opened 25 and 40 stores, respectively, and entered the
Baltimore, Houston, Norfolk and Washington, D.C. markets.
For fiscal 2005, we have opened 36 new stores thus far and have
no additional openings planned, and we entered the Cincinnati,
Dallas, Louisville and Miami markets. We expect to open 42 to 45
new stores in fiscal 2006. Approximately 90% of the new stores
we intend to open in fiscal 2006 will be located in states we
currently serve.
We intend to increase comparable store sales by increasing the
assortment and amount of inventory in existing merchandise
categories for which recent sales and/or sales trends are
encouraging. We also intend to increase comparable store sales
through the expansion of adjacent product categories such as
home décor and intimate apparel. In order to expand such
developing categories, we added a dedicated buyer in home
décor in fiscal 2005 and upgraded our buying capabilities
and focus within the intimate apparel category.
Store Operations
Store Format.
Our existing 236 stores' average
selling space is approximately 9,000 square feet, which allows
us space and flexibility to departmentalize our stores and
provide directed traffic patterns. New stores opened since the
beginning of fiscal 2003 average approximately 10,500 square
feet of selling space, which is larger than our historical store
base. As a result of these new stores, as well as due to the
remodeling and expansion of existing stores, our average square
footage of selling space per store has increased from
approximately 7,600 at the end of fiscal 2002 to its current
level.
We arrange our stores in a racetrack format with women's
sportswear, our most attractive and fashion current merchandise,
in the center of each store, and complementary categories
adjacent to those items. Men's and boy's apparel is
displayed on one side of the store while dresses, footwear and
accessories are displayed on the other side. Merchandise for
infants, toddlers and girls is displayed along the back of the
store. Impulse items, such as jewelry and sunglasses, are
featured near the checkout area. Products from nationally
recognized brands are prominently displayed on four way racks at
the front of each department. The
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remaining merchandise is displayed on hanging racks and
occasionally on table displays. Large hanging signs identify
each category location. The unobstructed floor plan allows the
customer to see virtually all of the different product areas
from the store entrance and provides us the flexibility easily
to expand and contract departments in response to consumer
demand, seasonality and merchandise availability. Virtually all
of our inventory is displayed on the selling floor. Our prices
are clearly marked and often have the comparative retail-selling
price noted on the price tag.
Store Management.
Store operations are managed by our
Vice President of Store Operations, three regional managers and
26 district managers, each of whom typically manages eight to
ten stores. Our typical store is staffed with a store manager,
two or three assistant managers and seven to eight part time
sales associates, all of whom rotate work days on a shift basis.
District managers and store managers participate in a bonus
program based on achieving predetermined levels of sales and
profits. The district managers also participate in bonus
programs based on achieving targeted payroll costs. Our regional
managers participate in a bonus program based on a rollup of the
district managers' bonuses. The assistant managers and
sales associates are compensated on an hourly basis with
incentives. Moreover, we recognize individual performance
through internal promotions and provide extensive opportunities
for advancement, particularly given our rapid growth.
We place significant emphasis on loss prevention in order to
control inventory shrinkage. Our initiatives include electronic
tags on all of our products, training and education of store
personnel on loss prevention issues, digital video camera
systems, alarm systems and motion detectors in the stores. We
also capture extensive point-of-sale data and maintain systems
that monitor returns, voids and employee sales, and produce
trend and exception reports to assist us in identifying
shrinkage issues. We have a centralized loss prevention team
that focuses exclusively on implementation of these initiatives
and specifically on stores that have experienced above average
levels of shrinkage.
Employee Training.
Our employees are critical to
achieving our goals, and we strive to hire employees with high
energy levels and motivation. We have well-established store
operating policies and procedures and an extensive 90-day
in-store training program for new store managers and assistant
managers. Our sales associates also participate in a 30-day
customer service and store procedures training program, which is
designed to enable them to assist customers in a friendly,
helpful manner.
Layaway Program.
We offer a layaway program that allows
customers to purchase merchandise by initially paying a 20%
deposit together with a $2.00 service charge. The customer then
makes additional payments every two weeks and has 60 days
within which to complete the purchase. If the purchase is not
completed, the customer receives a merchandise credit for
amounts paid less a $5.00 re-stocking fee and the service
charge. Sales under our layaway program accounted for
approximately 13% of our total sales in fiscal 2004.
Store Economics.
We believe we benefit from attractive
store-level economics. The average investment for the 65 stores
we opened in fiscal 2003 and fiscal 2004, including leasehold
improvements, equipment, fixturing, cost of inventory to stock
the store (net of accounts payable) and pre-opening store
expenses, was approximately $280,000. These 65 stores generated
average sales of $1.4 million and average store operating
profit (defined as store operating revenue less cost of sales
and store operating expenses which is comprised of payroll,
occupancy, advertising and other operating costs) of
approximately $230,000 during their first twelve months of
operation.
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Store Locations
As of January 4, 2006, we operated 236 stores (including
two stores, one in Belle Glade, Florida and one in New Orleans,
Louisiana, currently closed due to the recent hurricanes)
located in fourteen states. Our stores are primarily located in
strip shopping centers and downtown business districts. We have
no franchising relationships as all of our stores are
company-operated. The table below sets forth the number of
stores in each of these fourteen states and the specific markets
within each such state in which we operated at least two stores
as of January 4, 2006:
Alabama—19
Birmingham—4
Montgomery—2
Mobile—2
Single
store locations—11
Arkansas—5
Little
Rock—3
Single
store locations—2
Florida—16
Jacksonville—3
Orlando—2
Tampa—2
Single
store locations—9
Georgia—48
Albany—2
Atlanta—9
Augusta—3
Macon—3
Savannah—2
Single
store locations—29
Kentucky—1
Louisiana—22
Baton
Rouge—2
Monroe—2
New
Orleans—2
Shreveport—3
Single
store locations—13
Maryland—3
Baltimore—2
Single
store locations—1
Mississippi—19
Jackson—2
Single
store locations—17
North Carolina—31
Charlotte—3
Durham—2
Fayetteville—2
Greensboro—2
Winston-Salem—2
Single
store locations—20
Ohio—1
South Carolina—32
Charleston—2
Columbia—2
Orangeburg—2
Single
store locations—26
Tennessee—10
Memphis—6
Nashville—2
Single
store locations—2
Texas—16
Dallas-Fort
Worth—3
Houston—8
Single
store locations—5
Virginia—13
Norfolk—7
Richmond—4
Single
store locations—2
Site Selection.
Cost-effective store locations are an
important part of our profitability model. Accordingly, we look
for second and third use store locations that offer attractive
rents, but also meet our demographic and economic criteria.
In selecting a location, we target both urban and rural markets.
Demographic criteria used in site selection include
concentrations of our core consumers. In addition, we require
convenient site accessibility, as well as strong co-tenants,
such as food stores, dollar stores, rent-to-own stores and other
apparel stores. We prepare detailed demographic studies and pro
forma financial statements for each prospective store location.
Our economic criteria for a site include specific store-level
profitability and return on capital invested.
We have a dedicated real estate management team responsible for
new store site selection. Our group has identified a significant
number of target sites in existing strip shopping centers and
off-mall locations with appropriate market characteristics in
both new and existing markets. We opened a total of 65 new
stores in fiscal 2003 and fiscal 2004. We have opened 36 new
stores in fiscal 2005 and expect to open 42 to 45 new stores in
fiscal 2006. We have funded our store openings with a portion of
the net proceeds from our initial public offering and cash flow
from operations.
Shortly after we sign a new store lease, our store construction
department prepares the store by installing fixtures, signs,
dressing rooms, checkout counters, cash register systems and
other items. Once we take possession of a store site, we can
open the store within approximately three to four weeks.
Product Merchandising and Pricing
Merchandising.
Our merchandising policy is to offer high
quality, branded products at attractive prices for the entire
value-conscious family. We seek to maintain a diverse assortment
of first quality, in-season
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merchandise that appeals to the distinctive tastes and
preferences of our core customers. Approximately 35% to 40% of
our sales are typically represented by nationally recognized
brands that we purchase from approximately 30 to 50 vendors. We
also offer a wide variety of products from less recognized
brands that represent approximately 60% of sales. The remaining
10% of sales represent private label products under our
proprietary brands such as Citi Steps, Diva Blue and Urban
Sophistication. Our private label products enable us to expand
product selection, offer merchandise at lower prices and enhance
our product offerings.
Our merchandise includes apparel, accessories and home
décor. Within apparel, we offer men's, women's,
which includes dresses, sportswear and plus size offerings, and
children's, which includes offerings for infants, toddlers,
boys and girls. We also offer accessories, which includes
intimate apparel, handbags, hats, jewelry, footwear, toys, belts
and sleepwear, as well as a limited assortment of home
décor, which includes giftware, lamps, pictures, mirrors
and figurines.
The following table sets forth our approximate merchandise
assortment by classification as a percentage of net sales for
the thirty-nine weeks ended October 29, 2005. We have made
an estimate for layaways based on total layaway transactions
still outstanding as of October 29, 2005.
Percentage of
Net Sales
Women's
38%
Children's
26%
Men's
21%
Accessories
13%
Home décor
2%
Pricing.
We purchase our merchandise at low prices and
mark prices up less than department or specialty stores. We seek
to provide our nationally recognized brands at prices 20% to 60%
below regular retail prices available in department stores and
specialty stores, and that product offering validates both our
value and fashion positioning to our consumers. We also consider
the price-to-value relationships of our non-branded products to
be strong. Our basic pricing strategy is everyday low prices.
Our discount from the suggested retail price is usually
reflected on the price tag. We review each department in our
stores at least monthly for possible markdowns based on sales
rates and fashion seasons to promote faster turnover of
inventory and to accelerate the flow of current merchandise. Our
return policy permits any customer the right to return
merchandise within ten days of purchase and receive a cash
refund if they have a receipt, unless such item was purchased in
a closeout or discount in which case we will only permit a
merchandise exchange. We believe that our practice in this
regard is more restrictive when compared to other apparel
retailers.
Sourcing and Allocation
Our merchandising department oversees the sourcing and
allocation of merchandise to our stores, which allows us to
utilize volume purchase discounts and maintain control over our
inventory. We source our merchandise from over 1,000 vendors,
consisting of domestic manufacturers and importers. For the
thirty-nine weeks ended October 29, 2005, no vendor
represented over 6% of our net sales. Our President and Chief
Merchandising Officer supervises our 18 member planning and
allocation team, as well as our buying team which is comprised
of four merchandise managers and 19 buyers. Consistent with our
plan to grow the intimate apparel and home décor
categories, we added a dedicated buyer in home décor in
fiscal 2005 and upgraded our buying capabilities and focus in
intimate apparel.
Our buyers have an average of more than 20 years of
experience in the retail business and have developed
long-standing relationships with many of our vendors, including
those controlling the distribution of branded apparel. These
buyers are responsible for maintaining vendor relationships,
securing high quality, fashionable merchandise that meets our
margin requirements and identifying and responding to emerging
fashion trends. Our buyers, who are based in Savannah and New
York, accomplish this by traveling to the major United States
apparel markets regularly, visiting our major manufacturers and
attending national and regional apparel
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trade shows, including urban-focused trade shows. We also retain
the services of two independent fashion consulting firms,
Barbara Fields Buying and Henry Donegar Associates, that monitor
market trends.
Our buyers purchase merchandise in styles, sizes and quantities
to meet inventory levels developed by our planning staff. We
work closely with our suppliers and are able to differentiate
ourselves by our willingness to purchase less than a full
assortment of styles, colors and sizes and by our policy of
paying promptly and not asking for typical retail concessions
such as promotional and markdown allowances. Our purchasing
department utilizes several buying techniques that enable us to
offer to consumers branded and other merchandise at everyday low
prices. The majority of the nationally recognized branded
products we sell are purchased in-season and represent our
vendors' excess inventories resulting from production or
retailer order cancellations. We generally purchase later in the
merchandising buying cycle than department and specialty stores.
This allows us to take advantage of imbalances between
retailers' demands for specific merchandise and
manufacturers' supply of that merchandise. We also purchase
merchandise from some vendors in advance of the selling season
at reduced prices. Occasionally, we purchase merchandise on an
opportunistic basis, which we then "pack and hold" for
sale three to nine months later. Where possible, we seek to
purchase items based on style or color in limited quantities on
a test basis with the right to reorder as needed. Finally, we
purchase private label merchandise that we source to our
specifications.
As is customary in the industry, we do not enter into long-term
contracts with any of our suppliers. While we believe we may
encounter delays if we change suppliers, we believe alternate
sources of merchandise for all product categories are available
at comparable prices.
We allocate merchandise across our store base according to
store-level demand. Our merchandising staff utilizes a
centralized management system to monitor merchandise purchasing,
allocation and sales in order to maximize inventory turnover,
identify and respond to changing product demands and determine
the timing of mark-downs to our merchandise. Our buyers also
regularly review the age and condition of our merchandise and
manage both the reordering and clearance processes. In addition,
our merchandising team communicates with our regional, district
and store managers to ascertain regional and store-level
conditions and to better ensure that our product mix meets our
consumers' demands in terms of quality, fashion, price and
availability.
Advertising and Marketing
Our advertising goal is to build the "Citi Trends"
brand and promote consumers' association of our brand with
value, quality, fashion and everyday low prices. We generally
focus our advertising efforts during the Easter, back-to-school
and Christmas seasons. This advertising consists of radio
commercials on local hip-hop radio stations that highlight our
brands, our value and our everyday low prices. We also do
in-store advertising that includes window signs designated for
special purposes, such as seasonal events and clearance periods,
and taped audio advertisements co-mingled with our in-store
music programs. Signs change in color, quantity and theme every
three to six weeks. For store grand openings, we typically seek
to create community awareness and consumer excitement through
radio advertising preceding and during the grand opening and by
creating an on-site event with local radio personalities
broadcasting from the new location. We also distribute
promotional items such as gift certificates and shopping sprees
in connection with our grand openings.
Our marketing efforts center on promoting our everyday low
prices and on demonstrating the strong price-to-value
relationship of our products to our consumers. We do not utilize
promotional advertising. Our merchandise is priced so that our
competition rarely has lower prices. In the limited situations
where our competition offers the same merchandise at a lower
price, we will match the price.
Distribution
All merchandise sold in our stores is shipped directly from our
distribution centers in Savannah, Georgia and our distribution
center in Darlington, South Carolina. In October 2005, we
purchased our Darlington facility which is situated on 90 acres
of land. To date we have paid approximately $1.6 million of
the $3 million to
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$4 million in total we expect to spend on acquisition costs
and for capital improvements necessary to prepare the location
for full operation. We began receiving and processing shipments
from this new distribution location in the fourth quarter of
fiscal 2005. We will continue our physical renovation and
updating of the distribution center, which has the same
technology and information systems as our other distribution
centers.
All work necessary to prepare the merchandise to be sales-floor
ready is performed in our distribution centers. Some of our
merchandise comes from vendors pre-ticketed and pre-packed and
can be shipped directly from the distribution centers to our
stores without repacking. However, most merchandise has to be
price ticketed and repacked in store shipping units before being
shipped to the stores.
We generally ship merchandise from our distribution centers to
stores daily, but approximately 40 of our smaller volume stores
receive merchandise every other day. We use United Parcel
Service, Inc. and FedEx Corporation to ship merchandise to our
stores. Our two distribution centers in Savannah have a combined
approximately 240,000 square feet, including approximately
20,000 square feet of office space. Our Darlington, South
Carolina facility has approximately 286,500 square feet. We
expect these facilities to provide us the capacity to double our
existing sales volume.
Quality control reviews of every merchandise receipt are
performed by a dedicated team at our distribution centers. These
teams are responsible for working with our vendors and
manufacturers to ensure consistent and superior quality across
all merchandise categories. Nearly all of our merchandise is
purchased from recognized domestic manufacturers and importers,
which reduces our risk of inadvertently handling counterfeit
items.
Information Technology and Systems
We have information systems in place to support each of our
business functions. We purchased our enterprise software from
Island Pacific, a primary software provider to the retail
industry. Our computer platform is an IBM AS400. The Island
Pacific software supports the following business functions:
purchasing, purchase order management, price and markdown
management, distribution, merchandise allocation, general
ledger, accounts payable and sales audit.
The Island Pacific merchandise system captures and reports sales
and inventory by item, by store and by day. This information
allows our merchandising team to evaluate merchandise
performance in considerable detail with high levels of
precision. Over the last four years we have enhanced the Island
Pacific software, particularly to enhance merchandise allocation
and distribution functions. In 2004, we purchased and installed
Buyers Toolbox software to aid our merchandise planning and
allocation functions.
Our stores use point-of-sale software from DataVantage, a
division of MICROS Systems, Inc., to run our store cash
registers. The system uses bar code scanners at checkout to
capture item sales. It also supports end-of-day processing and
automatically transmits sales and transaction data to Savannah
each night. Additionally, the software supports store time clock
and payroll functions. To facilitate marking down and
re-ticketing merchandise, employees in our stores use hand-held
scanners that read the correct item price and prepare new price
tickets for merchandise. Our DataVantage software also enables
us to sort and review transaction data and generate exception
and other database reporting to assist in loss prevention.
We had planned to complete installation of the latest upgrade to
the DataVantage software. We, however, experienced delays
implementing the upgrade and now plan to complete installation
of the upgrade by the end of fiscal 2006. The new software will
enable improved and less costly telecommunications between our
stores and our corporate headquarters. The upgrade will also
provide improved credit and debit card processing, store e-mail
and more reliable data transmissions to our home office systems.
We believe that our information systems, with upgrades and
updates over time, are adequate to support our operations for
the foreseeable future.
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Competition
The markets we serve are highly competitive. The principal
methods of competition in our retail business are fashion,
assortment, pricing and presentation. We believe we have a
competitive advantage in our offering of fashionable brands at
everyday low prices. We compete against a diverse group of
retailers including national off-price retailers, mass
merchants, smaller specialty retailers and dollar stores. The
off-price retail companies with which we compete include TJX
Companies, Burlington Coat Factory and Ross Stores. In
particular, TJX Companies' A.J. Wright stores target
moderate income consumers. Ross Stores has recently launched a
similar concept targeting lower income consumers, called
dd's DISCOUNTS. We believe our strategy of appealing to
African-American consumers and offering urban apparel products
allows us to compete successfully with these retailers. We also
believe we offer a more inviting store format than the off-price
retailers, including our use of carpeted floors and more
prominently displayed brands. We also compete with a group of
smaller specialty retailers that only sell women's
products, such as Rainbow, Dots, Fashion Cents, It's
Fashions and Simply Fashions. Our mass merchant competitors
include Wal-Mart and Kmart. These chains do not focus on fashion
apparel and, within their apparel offering, lack the urban focus
that we believe differentiates our offering and appeals to our
core customers. Similarly, while some of the dollar store chains
offer apparel, they typically offer a more limited selection
focused on basic apparel needs.
Intellectual Property
We regard our trademarks and service marks as having significant
value and as being important to our marketing efforts. We have
registered the "Citi Trends" trademark with the U.S.
Patent and Trademark Office on the Principal Register as both a
trademark for retail department store services and as a
trademark for clothing. We have also registered the following
trademarks with the U.S. Patent and Trademark Office on the
Principal Register: "Citi Club," "Citi
Express," "Citi Knights," "Citi Nite,"
"Citi Steps," "Citi Trends Fashion for
Less," "Citi Women," "CT Sport,"
"Diva Blue," "Lil Citi Man," "Lil
Ms Hollywood," "Univer Soul", "Urban
Sophistication" and "Vintage Harlem." Our policy
is to pursue registration of our marks and to oppose vigorously
infringement of our marks.
Properties
All our existing 236 stores, totaling approximately
2.6 million gross square feet, are leased under operating
leases. Additionally, as of January 4, 2006, we have signed
leases for 11 new stores to be opened during fiscal 2006
aggregating approximately 150,000 total gross square feet. Our
typical store lease is for five years with an option to extend
our lease term for an additional five-year period, and all but
one lease requires us to pay percentage rent and increases in
specified site-related charges. Nearly all of our store leases
provide us the right to cancel following an initial three-year
period in the event the store does not meet pre-determined sales
levels.
We own an approximately 170,000 square foot facility located on
Fahm Street in Savannah, Georgia, which serves as our
headquarters and one of our three distribution centers. This
facility is financed under a mortgage which was repaid with a
portion of the proceeds from our initial public offering. We
currently lease the land and building for our distribution
center located on Coleman Boulevard. The lease for this
distribution center expires in September 2006, with options to
renew for up to three more years. On October 19, 2005, we
acquired an approximately 286,500 square foot distribution
center in Darlington, South Carolina. We began to receive
shipments into the new facility in December. In addition, we
currently lease 1,200 square feet in New York City, which is
used for buyer operations and meetings with vendors.
Employees
As of January 4, 2006, we had approximately 1,120 full-time
and approximately 1,600 part-time employees. Of these employees,
approximately 2,295 are employed in our stores and the remainder
are employed in our
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distribution centers and corporate offices. We are not a party
to any collective bargaining agreements, and none of our
employees is represented by a labor union.
Legal Proceedings
We are from time to time involved in various legal proceedings
incidental to the conduct of our business, including claims by
our customers, employees or former employees. Such claims could
have a material adverse effect on our business, financial
condition and results of operation. We, however, are not aware
of any legal proceedings pending or threatened against us that
we expected to have a material adverse effect on our business,
financial condition or results of operation.
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Management
Executive Officers and Directors
The following table sets forth information regarding our
executive officers and directors and their ages as of
January 4, 2006:
Name
Age
Position
R. Edward Anderson
55
Chief Executive Officer and Director
George A. Bellino
58
President and Chief Merchandising Officer
Thomas W. Stoltz
44
Chief Financial Officer
James A. Dunn
49
Vice President of Store Operations
Gregory P. Flynn
49
Chairman of the Board of Directors
John S. Lupo
59
Director
Patricia M. Luzier
55
Director
Tracy L. Noll
57
Director
R. Edward Anderson.
Mr. Anderson has served as
our Chief Executive Officer and as a director since December
2001. Prior to his current responsibilities, Mr. Anderson
served as Executive Vice President and Chief Financial Officer
of Variety Wholesalers, our previous owner, from December 1997
to December 2001. From 1978 to 1994, Mr. Anderson served as
Chief Financial Officer of Rose's Stores, Inc., a discount
retailer. In August 1994, Mr. Anderson was promoted to
Chief Executive Officer and served in this position until
December 1997. Mr. Anderson also served as the Chairman of
the Board of Directors of Rose's Stores, Inc. from August
1994 to December 1997.
George A. Bellino.
Mr. Bellino has served as our
President and Chief Merchandising Officer since December 2001
and served as a director from April 1999 to May 2005.
Mr. Bellino served as our Chief Executive Officer and
President from April 1999 to December 2001. From January 1997 to
March 1999, Mr. Bellino served as President of our
predecessor company. From June 1992 to December 1996,
Mr. Bellino served as the Vice President of Merchandising
at Pennsylvania Fashions, a privately held off-price apparel
chain. From June 1990 to October 1991, Mr. Bellino served
as President of General Textiles / Family Bargain Center, a
retail apparel chain.
Thomas W. Stoltz.
Mr. Stoltz has served as our Chief
Financial Officer since September 2000. From January 1999 to
August 2000, Mr. Stoltz served as Chief Financial Officer
of Sharon Luggage and Gifts, a privately held retailer. From
August 1996 to December 1998, Mr. Stoltz served as the
Chief Financial Officer and Vice President of Finance of Factory
Card Outlet, a greeting card retailer. Mr. Stoltz is a
certified public accountant licensed in North Carolina and a
member of the American Institute of Certified Public Accountants.
James A. Dunn.
Mr. Dunn has served as our Vice
President of Store Operations since April 2001. From January to
April 2001, Mr. Dunn was our Director of Training and
Development and from January 2000 to January 2001 was one of our
Regional Managers. Prior to joining us, Mr. Dunn was a
Store Manager at Staples from January 1999 to December 2000.
Prior to that Mr. Dunn was a Regional Manager at Dress
Barn, where he supervised 77 stores and 10 district sales
managers.
Gregory P. Flynn.
Mr. Flynn has served as our
Chairman of the board of directors since 2001 and as a member of
the compensation committee since 2001. Mr. Flynn is also a
member of the nominating and corporate governance committee.
Mr. Flynn is currently a Managing Partner of Hampshire
Equity Partners II, L.P. and Hampshire Equity Partners III, L.P.
and has been associated with Hampshire since 1996. Hampshire
Equity Partners II, L.P. and certain of its affiliates are
selling stockholders in this offering. From 1994 to 1996,
Mr. Flynn served as a Managing Partner of ING Equity
Partners, L.P.
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John S. Lupo.
Mr. Lupo has served as a director
since May 2003, and is the Chairman of the compensation
committee, as well as a member of the audit committee and the
nominating and corporate governance committee.
Mr. Lupo is a principal in the consulting firm Renaissance
Partners, LLC, which he joined in February 2000. From November
1998 until December 1999, Mr. Lupo served as Executive Vice
President of Basset Furniture. From October 1996 until October
1998, Mr. Lupo served as the Chief Operating Officer of the
International Division of Wal-Mart Stores Inc., and from
September 1990 until September 1996, Mr. Lupo served as
Senior Vice President and General Merchandise Manager of
Wal-Mart Stores Inc. Mr. Lupo is a director for Spectrum
Brands (formerly known as Rayovac Corp.), a public reporting
company, and serves on their Compensation and Corporate
Governance and Nominating Committees.
Tracy L. Noll.
Mr. Noll has served as a director
since July 2000 and is the Chairman of the audit committee, as
well as a member of the compensation committee and the
nominating and corporate governance committee. Mr. Noll is
currently a private investor based in Dallas, Texas. He served
as President and Chief Operating Officer of National Dairy
Holdings, L.P. from April 2001 to September 2003. He served as
Executive Vice President of Suiza Foods Corporation, a public
reporting company, from September 1994 until March 2001,
including serving as Chief Financial Officer from September 1994
until July 1997. He served as Vice President and Chief Financial
Officer of Morningstar Foods Inc., a public reporting company,
from April 1988 until June 1994. Mr. Noll currently serves
as a Director and is Chairman of the Audit Committee of Reddy
Ice Group, Inc., a public reporting company.
Patricia M. Luzier.
Ms. Luzier has served as a
director since November 30, 2005 and is the Chairman of the
nominating and corporate governance committee, as well as a
member of the audit committee and the compensation committee.
Ms. Luzier was previously the Senior Vice President and
Chief Administrative Officer of Cole National Corporation, a
public reporting specialty retailer, from 1999 until October
2004. She served as Senior Vice President, Human Resources and
Administration for HomePlace Group, Inc. from 1998 until 1999.
She also served as Senior Vice President of Human Resources with
Vicorp Restaurants, Inc. from 1994 until 1998. Ms. Luzier
currently serves as a Director for Dale Carnegie and Associates
and serves on their Compensation Committee.
Each of our executive officers serves at the discretion of the
board of directors and holds office until his successor is
elected and qualified or until his earlier resignation or
removal. There are no family relationships among any of our
directors or executive officers.
Board of Directors Composition
Our board of directors consists of five directors divided into
three classes, three of which are "independent" under
the rules of the Nasdaq National Market. Mr. Flynn is the
only Hampshire Equity Partners nominated director, and the three
independent directors are Messrs. Noll and Lupo and
Ms. Luzier.
Our second amended and restated certificate of incorporation
divides our board into three classes having staggered terms,
with one of such classes being elected each year for a new
three-year term. Class I directors have an initial term
expiring in 2006, Class II directors have an initial term
expiring in 2007 and Class III directors have an initial
term expiring in 2008. Class I is comprised of
Ms. Luzier. Class II is comprised of Messrs. Noll
and Lupo. Class III is comprised of Messrs. Flynn and
Anderson.
In connection with our initial public offering, we entered into
a nominating agreement with Hampshire Equity Partners II,
L.P. pursuant to which we, acting through our nominating and
corporate governance committee, agreed, subject to the
requirements of our directors' fiduciary duties, that
(i) Hampshire Equity Partners II, L.P. is entitled to
designate two directors to be nominated for election to our
board of directors as long as Hampshire Equity Partners II,
L.P. owns in the aggregate at least 40% of the shares of our
common stock which it owned immediately prior to the
consummation of our initial public offering or
(ii) Hampshire Equity Partners  II, L.P. is
entitled to designate one director to be nominated for election
to our board of directors as long as Hampshire Equity
Partners  II, L.P. owns in the aggregate less than 40%
and at least 15% of the
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shares of our common stock which it owned immediately prior to
the consummation of our initial public offering. If at any time
Hampshire Equity Partners  II, L.P. owns less than 15%
of the shares of our common stock which it owned immediately
prior to the consummation of our initial public offering, it
will not have the right to nominate any directors for election
to our board of directors. See "Related Party
Transactions—Nominating Agreement".
Board of Directors Committees
Our board of directors has established an audit committee, a
compensation committee and a nominating and corporate governance
committee.
Audit Committee
The audit committee, currently consisting of Messrs. Noll
and Lupo and Ms. Luzier, reviews our internal accounting
procedures and consults with and reviews the services provided
by our independent registered public accountants. Mr. Noll
is the Chairman of the audit committee and qualifies as an
"audit committee financial expert" for purposes of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act. The principal duties and responsibilities of our audit
committee are to:
•
have direct responsibility for the selection, compensation,
    retention, replacement and oversight of the work of our
    independent auditors, including prescribing what services are
    allowable and approve in advance all services provided by the
    auditors;
•
set clear hiring policies for employees or former employees of
    the independent auditors;
•
review all proposed company hires formerly employed by the
    independent auditors;
•
have direct responsibility for ensuring its receipt from the
    independent auditors at least annually of a formal written
    statement delineating all relationships between the auditor and
    us, consistent with Independence Standards Board Standard
    No. 1;
•
discuss with the independent directors any disclosed
    relationships or services that may impact the objectivity and
    independence of the auditor and for taking, or recommending that
    the full board of directors take, appropriate action to oversee
    the independence of the independent auditor;
•
discuss with the internal auditors and the independent auditors
    the overall scope and plans for their respective audits,
    including the adequacy of staffing, compensation and resources;
•
review, at least annually, the results and scope of the audit
    and other services provided by our independent auditors and
    discuss any audit problems or difficulties and management's
    response;
•
review our annual audited financial statement and quarterly
    financial statements and discuss the statements with management
    and the independent auditors (including disclosures in our
    Exchange Act reports in response to Item 303,
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations", of
    Regulation S-K);
•
review and discuss with management, the internal auditors and
    the independent auditors the adequacy and effectiveness of our
    internal controls, including our ability to monitor and manage
    business risk, legal and ethical compliance programs and
    financial reporting;
•
review and discuss separately with the internal auditors and the
    independent auditors, with and without management present, the
    results of their examinations;
•
review our compliance with legal and regulatory independence;
•
review and discuss our interim financial statements and the
    earnings press releases prior to the filing of our quarterly
    reports on Form 10-Q, as well as financial information and
    earnings guidance provided to analysts and rating agencies;
•
review and discuss our risk assessment and risk management
    policies;
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•
prepare an audit committee report required by the Commission to
    be included in our annual proxy statement;
•
engage independent counsel and other advisors to assist the
    audit committee in carrying out its duties;
•
review and approve all related party transactions consistent
    with the rules applied to companies listed on the Nasdaq
    National Market; and
•
establish procedures regarding complaints received by us or our
    employees regarding accounting, accounting controls or
    accounting matters.
The audit committee is required to report regularly to our board
of directors to discuss any issues that arise with respect to
the quality or integrity of our financial statements, our
compliance with legal or regulatory requirements, the
performance and independence of our independent auditors, or the
performance of the internal audit function.
Compensation Committee
The compensation committee, consisting of Messrs. Lupo,
Noll and Flynn and Ms. Luzier, reviews and determines the
compensation and benefits of all of our officers, establishes
and reviews general policies relating to the compensation and
benefits of all of our employees, and administers our long-term
incentive plan. Mr. Lupo is the Chairman of the
compensation committee. The principal duties and
responsibilities of our compensation committee are to:
•
review and approve corporate goals and objectives relevant to
    our Chief Executive Officer's and other named executive
    officers' compensation;
•
evaluate the Chief Executive Officer's performance in light
    of these goals and objectives;
•
either as a committee, or together with the other independent
    directors, determine and approve the Chief Executive
    Officer's compensation;
•
make recommendations to our board of directors regarding the
    salaries, incentive compensation plans and equity-based plans
    for our employees; and
•
produce a compensation committee report on executive
    compensation as required by the Commission to be included in our
    annual proxy statements or annual reports on Form 10-K
    filed with the Commission.
Compensation Committee Interlocks and Insider
    Participation
Prior to establishing the compensation committee, the board of
directors as a whole performed the functions delegated to the
compensation committee. No member of our current compensation
committee serves or has ever served as one of our officers or
employees. None of our executive officers serves or has ever
served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers
serving on our board of directors or compensation committee.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee currently
consists of Messrs. Lupo, Noll and Flynn and
Ms. Luzier. Ms. Luzier is the Chair of the nominating
and corporate governance committee. The principal duties and
responsibilities of our nominating and corporate governance
committee are to:
•
identify individuals qualified to become board members,
    consistent with criteria approved by the board of directors;
•
recommend the individuals identified be selected as nominees at
    annual meetings of our stockholders;
•
develop and recommend to the board of directors a set of
    corporate governance principles applicable to us; and
•
oversee the evaluation of the board of directors and management.
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Code of Business Conduct
We have adopted a written code of business conduct applicable to
our directors, officers and employees in accordance with the
rules of the Nasdaq National Market and the Commission. Our code
of business conduct is designed to deter wrongdoing and to
promote:
•
honest and ethical conduct;
•
full, fair, accurate, timely and understandable disclosure in
    reports and documents that we file with the Commission and in
    our other public communications;
•
compliance with applicable laws, rules and regulations,
    including insider trading compliance; and
•
accountability for adherence to the code and prompt internal
    reporting of violations of the code, including illegal or
    unethical behavior regarding accounting or auditing practices.
Our code is available on our website at www.cititrends.com.
Director Compensation
Our independent directors currently receive a $24,000 annual
retainer, $2,500 per meeting attended and an annual award of
2,500 options with an exercise price set to the fair market
value of our common stock on the date of grant as compensation
from us for their services as members of the board of directors.
A director who serves as the chairman of the audit committee
receives an $8,000 annual retainer and a director who serves as
chair of the compensation committee receives a $2,000 annual
retainer. All non-employee directors also receive $500 for
attendance at each committee meeting. We reimburse all of our
directors for out-of-pocket expenses in connection with
attendance at board of directors and committee meetings.
Executive Compensation
The following table sets forth a summary of the compensation
paid during fiscal 2004 to our Chief Executive Officer and our
four most highly compensated executive officers, together
referred to as our named executive officers:
Summary Compensation Table
Long-Term
Annual Compensation
(1)
Compensation
Securities
Name and Principal Position
Fiscal Year
Salary
Bonus
Underlying Options
R. Edward Anderson
2004
$
327,693
$
144,000
$
619
Chief Executive Officer
George A. Bellino
2004
$
248,077
$
114,000
$
1,342
President and Chief Merchandising Officer
Thomas W. Stoltz
2004
$
173,769
$
40,000
—
Chief Financial Officer
James A. Dunn
2004
$
140,769
$
39,900
—
Vice President of Store Operations
(1)
Excludes perquisites and other benefits, which for each named
    individual are less than 10% of the sum of such
    individual's annual salary and bonus.
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Stock Option Grants
The following table contains summary information regarding stock
option grants made during fiscal 2004 by us to the named
executive officers. We also granted stock options to purchase
shares of common stock to certain of our employees and to our
current stockholders, including Hampshire Equity
Partners II, L.P. All options were granted at fair market
value of our common stock, as determined by our board of
directors, on the grant date.
Option Grants In Last Fiscal Year
Potential Realizable
Value at Assumed
Number of
% of Total
Rates of Stock Price
Securities
Options
Exercise
Appreciation for
Underlying
Granted to
Price
Option Term
(1)
Options
Employees in
Per
Expiration
Name
Granted
Fiscal Year
Share
Date
5%
10%
R. Edward Anderson
312
0.3
%
$
6.85
10/30/14
$
4,978
$
9,192
George A. Bellino
676
0.7
%
$
6.85
10/30/14
$
10,785
$
19,917
Thomas W. Stoltz
—
—
James A. Dunn
—
—
(1)
Potential realizable value is based upon the initial public
    offering price of our common stock of $14.00. Potential
    realizable values are net of exercise price, but before taxes
    associated with exercise. Amounts representing hypothetical
    gains are those that could be achieved if options are exercised
    at the end of the option term. The assumed 5% and 10% rates of
    stock price appreciation are provided in accordance with rules
    of the Commission, based on the initial public offering price of
    $14.00 per share and do not represent our estimate or projection
    of the future stock price.
Year-End Option Values
The following table provides information about the number and
value of unexercised options to purchase common stock held on
January 29, 2005 by the named executive officers. There was
no public market for our common stock on January 29, 2005.
Accordingly, we have calculated the values of the unexercised
options on the basis of the initial public offering price of
$14.00 per share, less the applicable exercise price, multiplied
by the number of shares acquired upon exercise. None of the
named executive officers exercised any stock options in fiscal
2004.
Fiscal Year End Option Values
Number of Securities Underlying
Value of Unsecured In-the-
Unexercised Options at Fiscal Year End
Money Options
(1)
Name
Total
Exercisable
Unexercisable
Exercisable
Unexercisable
R. Edward Anderson
437,502
437,502
—
$
5,955,495
$
—
George A. Bellino
361,504
361,504
—
4,916,615
—
Thomas W. Stoltz
78,000
78,000
—
1,062,360
—
James A. Dunn
65,000
51,350
13,650
699,387
185,913
(1)
The options were granted under our Amended and Restated 1999
    Stock Option Plan. These options generally vest in equal
    installments over four years from the date of grant and are
    generally exercisable up to ten years from the date of grant.
    The fair value of the options granted during the year ended
    January 29, 2005 was $2.50 using the Black-Scholes
    option-pricing model, with weighted average assumptions: no
    dividend yield; 50% expected volatility; 2.50% risk-free
    interest rate; ten year expected life and a 10% forfeiture rate.
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2005 Long-Term Incentive Plan
Our board of directors and stockholders adopted the 2005
Long-Term Incentive Plan to replace our Amended and Restated
1999 Stock Option Plan. The 2005 Long-Term Incentive Plan
enables our key employees and directors to acquire and maintain
stock ownership, thereby strengthening their commitment to our
success and their desire to remain with us, focusing their
attention on managing as an equity owner and aligning their
interests with those of our stockholders. In addition, the plan
is intended to attract and retain key employees, which, together
with the key directors, we refer to collectively as eligible
persons, and to provide incentives and rewards for superior
performance that will ultimately lead to our profitable growth.
The plan was approved by a majority of our stockholders on
April 8, 2005. As of January 4, 2006, options to
purchase up to 1,416,133 shares of our common stock remained
outstanding under the Amended and Restated 1999 Stock Option
Plan. Due to the adoption of the new plan, the Amended and
Restated 1999 Stock Option Plan was terminated and no additional
options was granted under that plan.
The principal features of our incentive plan are described in
summary form below.
Shares Subject to the Plan
The incentive plan provides that no more than 1,300,000 shares
of our common stock may be issued pursuant to awards under the
incentive plan; provided that, in the aggregate, no more than
50% of the total shares of our common stock can be made the
subject of an award other than as options under the incentive
plan. These shares of our common stock will be authorized but
unissued shares in such amounts as determined by the board of
directors. However, the amount of shares of our common stock
granted to an individual in any calendar year period can not
exceed 5% of the total number of reserved shares of common
stock. Also, in any calendar year period, the maximum dollar
amount of cash or the fair market value of common stock that any
individual can receive in connection with performance units can
not exceed $2.5 million. The number of shares of our common
stock available for awards, as well as the terms of outstanding
awards, are subject to adjustment as provided in the incentive
plan for stock splits, stock dividends, recapitalizations,
mergers, consolidations, liquidations, changes in corporate
structure and other similar events. Awards that may be granted
under the incentive plan include stock options, stock
appreciation rights (SARs), restricted shares, performance
units, performance shares and director's shares. Upon the
granting of an award to an individual, the number of shares of
common stock available shall be reduced depending on the type of
award granted, as provided in the incentive plan.
The shares of our common stock subject to any award that
expires, terminates or is cancelled, is settled in cash, or is
forfeited or becomes unexercisable, will again be available for
subsequent awards, except as prohibited by law.
Administration
Our compensation committee administers the incentive plan. With
respect to decisions involving an award to a reporting person
within the meaning of Rule 16a-2 under the Exchange Act,
the committee is to consist of two or more directors who are
disinterested within the meaning of Rule 16b-3 under the
Exchange Act. With respect to decisions involving an award
intended to satisfy the requirements of section 162(m) of the
Internal Revenue Code, the committee is to consist solely of two
or more directors who are "outside directors" for
purposes of that code section. We satisfy these requirements as
our compensation committee is comprised of three independent
directors.
Subject to the terms of the incentive plan, the committee has
express authority to determine the eligible persons who will
receive awards, when such awards will be granted, the number of
shares of our common stock, units, or SARs to be covered by each
award, the relationship between awards and the terms and
conditions of awards. The committee has broad discretion to
prescribe, amend, and rescind rules relating to the incentive
plan and its administration, to interpret and construe the
incentive plan and the terms of all award agreements, and to
take all actions necessary or advisable to administer the
incentive plan. Within the
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limits of the incentive plan, the committee may accelerate the
vesting of any awards, allow the exercise of unvested awards,
and may modify, replace, cancel, or renew them.
The incentive plan provides that the determination of the
committee on all matters relating to awards and the incentive
plan are final. The incentive plan also releases members of the
committee from liability for good faith actions associated with
the administration of the incentive plan.
Eligibility
The committee may grant options that are intended to qualify as
incentive stock options, which we refer to as ISOs, only to
employees, and may grant all other awards to employees or any
nonemployee director. The incentive plan and the discussion
below use the term "grantee" to refer to an eligible
person who has received an award under the incentive plan.
Although the incentive plan provides the general provisions of
our available awards, upon the determination by the committee of
the type and amount of award to be granted to a grantee, the
eligible grantee will enter into an agreement with us specifying
the specific terms of the award to be granted. Each type of
award (i.e., stock option, restricted share, performance units
and performance shares) is governed by a separate agreement that
describes the respective terms governing such award, such as the
exercise date, term and expiration, restrictions, value, form
and timing of payment.
Stock Options
Stock options granted under the incentive plan provide grantees
with the right to purchase shares of our common stock at a
predetermined exercise price. The committee may grant stock
options that are intended to qualify as ISOs, or stock options
that are not intended to so qualify, which we refer to as
non-ISOs. The incentive plan also provides that ISO treatment
may not be available for stock options that become first
exercisable in any calendar year to the extent the value of the
underlying shares that are the subject of the stock option
exceed $100,000, based upon the fair market value of the shares
of our common stock on the stock option grant date. Any ISO
shall be granted within ten years from the earlier of the date
the incentive plan is adopted by our board of directors or the
date the incentive plan is approved by our stockholders.
Stock Appreciation Rights (SARs)
A SAR generally permits a grantee to receive, upon exercise,
shares of our common stock equal in value to the excess of
(i) the fair market value, on the date of exercise, of the
shares of our common stock with respect to which the SAR is
being exercised, over (ii) the exercise price of the SAR
for such shares. The committee may grant SARs in tandem with
stock options, or independently of them. The committee has the
discretion to grant SARs to any eligible employee or nonemployee
director.
Exercise Price for Stock Options and SARs
The exercise price of non-ISOs and SARs may not be less than
100% of the fair market value of our common stock on the grant
date of the award. The exercise price of ISOs may not be less
than 110% of the fair market value of our common stock on the
grant date of the award for owners who own more than 10% of our
shares of common stock on the grant date. For ISOs granted to
other participants and for options intended to be exempt from
Internal Revenue Code Section 162(m) limitations, the
exercise price may not be less than 100% of the fair market
value of our common stock on the grant date. With respect to
stock options and SARs, payment of the exercise price may be
made in any of the following forms, or combination of them:
shares of unrestricted stock held by the grantee for at least
six months (or a lesser period as determined by the committee)
prior to the exercise of the option or SAR, based upon its fair
market value on the day preceding the date of exercise, or
through simultaneous sale through a broker of unrestricted stock
acquired on exercise. The exercise price of any option and SAR
must be determined by the committee no later than the date of
grant of such option or SAR and the exercise price shall be paid
in full at the time of the exercise.
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Exercise and Term of Options and SARs
The committee will determine the times, circumstances and
conditions under which a stock option or SAR may be exercisable.
Unless provided otherwise in the applicable award agreement,
each option or SAR shall be exercisable in one or more
installments commencing on or after the first anniversary of the
grant date; provided, however, that all options or SARs shall
become fully vested and exercisable upon a change of control, as
defined in the incentive plan. To the extent exercisable in
accordance with the agreement granting them, a stock option or
SAR may be exercised in whole or in part, and from time to time
during its term, subject to earlier termination relating to a
holder's termination of employment or service as may be
determined by the committee at the time of the grant. The term
during which grantees may exercise stock options and SARs may
not exceed ten years from the date of grant or five years in the
case of ISOs granted to employees who, at the time of grant, own
more than 10% of our outstanding shares of common stock;
provided that, an option (excluding ISOs) may, upon the death of
the holder of such option, be exercised for up to one year
following the date of the holder's death, even if the
period extends beyond the ten year limit.
Options and SARs granted to nonemployee directors will be
exercisable with respect to one-third of the underlying shares
on each of the first, second and third anniversaries of the
grant date and will have a term of not more than ten years. If a
nonemployee director ceases to serve as a director, any option
or SAR granted to such director shall be exercisable during its
remaining term, to the extent that the option or SAR was
exercisable on the date the nonemployee director ceased to be a
director.
Restricted Shares
Under the incentive plan, the committee may grant restricted
shares that are forfeitable until certain vesting requirements
are met. For restricted shares, the incentive plan provides the
committee with discretion to determine the per share purchase
price of such shares, which can not be less than the minimum
consideration (as defined in the incentive plan generally as the
par value of a share of common stock), and the terms and
conditions under which a grantee's interests in such awards
become vested. The incentive plan also provides the committee
with discretion to determine whether the payment of dividends
declared on the shares should be deferred and held by us until
restrictions on the shares lapse, whether dividends should be
reinvested in additional shares of restricted shares subject to
certain restrictions and terms, whether interest will be
credited to the account of such holder for dividends not
reinvested and whether dividends issued on the restricted shares
should be treated as additional restricted shares. Payment of
the purchase price for shares of restricted stock shall be made
in full by the grantee before the delivery of such shares and,
in any event, no later than ten days after the grant date for
such shares. This payment may be made in cash or, with prior
approval of the committee and subject to certain conditions,
shares of restricted or unrestricted stock owned by the grantee.
Under the incentive plan, the committee has discretion to
provide in the award agreement that all or any portion of a
grantee's award of restricted shares shall be forfeited
(a) upon the grantee's termination of employment
within a specified time period, (b) if specified
performance goals are not satisfied by us or the grantee within
a specified time period or (c) if any other listed
restriction in the governing award agreement is not satisfied.
If a share of restricted stock is forfeited, then the grantee
shall be deemed to have resold such share to us at a specified
price, we shall pay the grantee the amount due as soon as
possible, but no later than 90 days after forfeiture, and
the share of restricted stock shall cease to be outstanding.
Performance Awards
The incentive plan authorizes the committee to grant
performance-based awards in the form of performance units and
performance shares that are "performance compensation
awards" that are intended to be exempt from Internal
Revenue Code Section 162(m) limitations unless otherwise
designated in the applicable award agreement. In either case,
unless otherwise specified in the award agreement, upon the
achievement, within the specified period of time, of the
performance objectives, a performance unit shall be deemed
exercised on the date on which it first becomes exercisable.
Performance units are payable in cash or restricted stock,
except that the committee may decide to pay benefits wholly or
partly in stock delivered to the grantee or
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credited to a specified brokerage account. For performance
shares, unless otherwise specified in the award agreement or by
the committee, upon the achievement within the specified period
of time of the performance objectives, grantees shall be awarded
shares of restricted stock or common stock, unless the committee
decides to pay cash in lieu of stock, based upon the number of
percentage shares specified in the award agreement multiplied by
the performance percentage achieved. The committee decides the
length of performance periods, but the periods may not be less
than one year nor more than 5 years. Any performance shares
with respect to which the performance goals have not been
achieved at the end of the performance period shall expire.
With respect to performance compensation awards, the incentive
plan requires that the committee specify in writing the
performance period to which the award relates, and an objective
formula by which to measure whether and the extent to which the
award is earned on the basis of the level of performance
achieved with respect to one or more performance measures. Once
established for a performance period, the performance measures
and performance formula applicable to the award may not be
amended or modified in a manner that would cause the
compensation payable under the award to fail to constitute
performance-based compensation under Internal Revenue Code
Section 162(m).
Under the incentive plan, the possible performance measures to
be used by the committee for performance compensation awards
include stock price, basic earnings per share, operating income,
return on equity or assets, cash flow, earnings before interest,
taxes, depreciation and amortization, revenues, overall revenues
or sales growth, expense reduction or management, market
position, total income, return on net assets, economic value
added, stockholder value added, cash flow return on investment,
net operating profit, net operating profit after tax, return on
capital and return on invested capital. Each measure will be, to
the extent applicable, determined in accordance with generally
accepted accounting principles as consistently applied by us, or
such other standard applied by the committee and, if so
determined by the committee, and in the case of a performance
compensation award, to the extent permitted under Internal
Revenue Code Section 162(m), adjusted to reflect the impact
of specified corporate transactions, special charges, foreign
currency effects, accounting or tax law changes and other
extraordinary or nonrecurring events. Performance measures may
vary from performance period to performance period, and from
grantee to grantee, and may be established on a stand-alone
basis, in tandem or in the alternative.
Tandem Awards
The committee may grant and identify any award with another
award granted under the incentive plan, on terms and conditions
set forth by the committee.
Initial Awards
Our board of directors authorized awards for our management
employees in the form of stock option grants. Our fiscal 2005
grants were as follows: options to purchase 168,000, 4,000 and
2,500 shares of common stock at the exercise price of $14.00,
$26.03 and $35.75 per share, respectively. These grants were
awarded as follows: options to purchase 28,000, 11,000, 6,000,
5,000 and 119,500 shares of common stock were awarded to
Messrs. Anderson, Bellino, Stoltz, Dunn and all management
employees as a group (approximately 60 employees), respectively.
Independent board members received options to purchase 5,000
shares of common stock for their services in fiscal 2005.
Income Tax Withholding
As a condition for the issuance of shares of our common stock
pursuant to awards, the incentive plan requires satisfaction of
any applicable federal, state, local, or foreign withholding tax
obligations that may arise in connection with the award or the
issuance of shares of our common stock.
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Transferability
Unless set forth in the agreement evidencing the award, awards
(other than an award of restricted stock) may not be assigned or
transferred except by will or the laws of descent and
distribution or, in the case of an option other than an ISO,
pursuant to a domestic relations order as defined under
Rule 16a-12 under the Exchange Act. An option may be
exercised during the lifetime of the grantee only by that
grantee or his or her guardian, legal representatives or, except
as would cause an ISO to lose such status, by a bankruptcy
trustee. Notwithstanding the foregoing, the committee may set
forth in the agreement evidencing the award (other than an ISO)
that the award may be transferred to an immediate family member,
or related trust or related partnership. The terms of an award
shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the grantee.
Each share of restricted stock shall be nontransferable until
such share becomes non-forfeitable.
Certain Corporate Transactions
With respect to any award which relates to stock, in the event
of our liquidation or dissolution or merger or consolidation
with another entity, the incentive plan and awards issued
thereunder shall continue in effect in accordance with their
terms, except that following any of these events either
(a) each outstanding award shall be treated as provided for
in the agreement entered into in connection with the event or
(b) if not so provided in the agreement entered into in
connection with the event, a grantee shall be entitled to
receive with respect to each share of stock subject to the
outstanding award, upon the vesting, payment or exercise of the
award the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a share of
stock was entitled to receive in connection with that certain
event.
The applicable award agreement pertaining to each award shall
set forth the terms and conditions applicable to such award upon
a termination of employment of any grantee by us, which, except
for awards granted to nonemployee directors, shall be as the
committee may, in its discretion, determine at the time the
award is granted or thereafter.
Term of Plan; Amendments and Termination
The term of the incentive plan is ten years from April 8,
2005, the date it was approved by our board of directors and
stockholders, or at such earlier time as our board of directors
may determine. Our board of directors may from time to time,
amend or modify the incentive plan without the approval of our
stockholders, unless stockholder approval is required
(a) to retain ISO treatment under the Internal Revenue
Code, (b) to permit transactions in stock under the
incentive plan to be exempt from liability under
Section 16(b) of the Exchange Act or (c) under the
listing requirements of any securities exchange on which any of
our equity securities are listed.
Governing Law
Except where preempted by federal law, the law of the State of
Georgia shall be controlling in all matters relating to the
incentive plan, without giving effect to the conflicts of law
principles thereof.
Employment Agreements
Set forth below are summaries of all of our employment
agreements and arrangements with our named executive officers.
The following summaries do not contain all of the terms of the
agreements they summarize, and we refer you to the agreements,
which are incorporated by reference into this registration
statement of which this prospectus forms a part, for a complete
understanding of the terms thereof. See "Where You Can Find
More Information."
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Table of Contents
Amended and Restated Employment Agreement with R. Edward
Anderson
On December 29, 2005, we entered into an amended and
restated employment agreement with Mr. Anderson, pursuant
to which Mr. Anderson continues as our Chief Executive
Officer on an at will basis and as a member of our board of
directors.
Compensation
The agreement provides that Mr. Anderson will receive an
annual base salary of $340,000 (not including perquisites) and
will be eligible to earn a bonus at the sole discretion of our
board of directors.
Severance
The agreement provides that in the event that Mr. Anderson
is terminated for any reason other than for "cause,"
he is entitled to severance pay of six months base salary to be
paid in equal amounts over a period of six months.
"Cause" as defined in the agreement means
Mr. Anderson's:
•
commission of a willful act of fraud or dishonesty, the purpose
    or effect of which, in the board's sole determination,
    materially and adversely affects us;
•
conviction of a felony or a crime involving embezzlement,
    conversion of property or moral turpitude (whether by plea of
nolo contendere
or otherwise);
•
engaging in willful or reckless misconduct or gross negligence
    in connection with any property or activity of ours, the purpose
    or effect of which, in the board's sole determination,
    materially and adversely affects us;
•
material breach of any of his obligations as a stockholder or
    otherwise under our organizational documents; provided that
    Mr. Anderson has been given written notice by the board of
    such breach and 30 days from such notice fails to cure the
    breach; or
•
failure or refusal to perform any material duty or
    responsibility under his agreement or a board determination that
    Mr. Anderson has breached his fiduciary obligations to us;
    provided that Mr. Anderson has been given written notice by
    the board of such failure, refusal or breach and 30 days
    from such notice fails to cure such failure, refusal or breach.
Amended and Restated Employment Agreement with George A.
Bellino
On December 29, 2005, we entered into an amended and
restated employment agreement with Mr. Bellino, pursuant to
which Mr. Bellino continues as our President and Chief
Merchandising Officer on an at will basis.
Compensation
The agreement provides that Mr. Bellino will receive an
annual base salary of $245,000 (not including perquisites) and
will be eligible to earn a bonus at the sole discretion of our
board of directors.
Severance
The agreement provides that in the event that Mr. Bellino
is terminated for any reason other than for "cause,"
he is entitled to severance pay of six months base salary to be
paid in equal amounts over a period of six months.
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"Cause" as defined in the agreement means
Mr. Bellino's:
•
commission of a willful act of fraud or dishonesty, the purpose
    or effect of which, in the board's sole determination,
    materially and adversely affects us;
•
conviction of a felony or a crime involving embezzlement,
    conversion of property or moral turpitude (whether by plea of
nolo contendere
or otherwise);
•
engaging in willful or reckless misconduct or gross negligence
    in connection with any property or activity of ours, the purpose
    or effect of which, in the board's sole determination,
    materially and adversely affects us;
•
material breach of any of his obligations as a stockholder or
    otherwise under our organizational documents; provided that
    Mr. Bellino has been given written notice by the board of
    such breach and 30 days from such notice fails to cure the
    breach; or
•
failure or refusal to perform any material duty or
    responsibility under his agreement or a board determination that
    Mr. Bellino has breached his fiduciary obligations to us;
    provided that Mr. Bellino has been given written notice by
    the board of such failure, refusal or breach and 30 days
    from such notice fails to cure such failure, refusal or breach.
Non-Interference
From the date of his agreement until December 31, 2006,
Mr. Bellino has agreed not to, without our consent, own,
manage, operate, control, invest or acquire an interest in, or
otherwise engage or participate in, whether as a proprietor,
partner, stockholder, lender, director, officer, employee, joint
venturer, investor, lessor, agent, representative or other
participant, any business which competes with us in any state
where we operate.
Limitation of Liability and Indemnification of Officers and
Directors
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our second amended and restated
certificate of incorporation and our amended and restated
by-laws that limit or eliminate the personal liability of our
directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably
available to them. Consequently, a director will not be
personally liable to us or our stockholders for monetary damages
or breach of fiduciary duty as a director, except for liability
for:
•
any breach of the director's duty of loyalty to us or our
    stockholders;
•
any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends; or
•
any transaction from which the director derived an improper
    personal benefit.
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the full extent permitted under Delaware law.
As permitted by the Delaware General Corporation Law, our
amended and restated by-laws provide that:
•
we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;
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•
we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions; and
•
the rights provided in our by-laws are not exclusive.
At present, there is no pending litigation or proceeding
involving any of our directors, officers, employees or agents in
which indemnification by us is sought, nor are we aware of any
threatened litigation or proceeding that may result in a claim
for indemnification.
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Table of Contents
Related Party Transactions
Management Consulting Agreement
We were a party to an Amended and Restated Management Consulting
Agreement, or the consulting agreement, effective as of
February 1, 2004 with Hampshire Management Company LLC, or
the consultant, which is an affiliate of one of the selling
stockholders, pursuant to which it provided us with certain
consulting services related to, but not limited to, our
financial affairs, relationships with our lenders, stockholders
and other third-party associates or affiliates, and the
expansion of our business.
In connection with our initial public offering, the parties
terminated the consulting agreement and we paid the consultant a
one time termination fee of $1.2 million in the second
quarter of fiscal 2005.
Stockholders Agreement
Prior to our initial public offering, Hampshire Equity Partners
II, L.P., George Bellino and certain management stockholders
were party to a Stockholders Agreement, dated as of
April 13, 1999, or the stockholders agreement. The
stockholders agreement provided, among other things, that four
members of our board of directors were designated by Hampshire
Equity Partners and its affiliates, the stockholders agreed
generally not to transfer their shares and the management
stockholders were granted tag-along rights in the event of a
sale of more than 50% of our stock. We agreed to register shares
of our common stock held by the stockholders under certain
circumstances and agreed that Hampshire Equity Partners would
include its shares of common stock in an initial public offering
of our common stock. In connection with our initial public
offering, we terminated the stockholders agreement in its
entirety.
Registration Rights Agreement
In connection with our initial public offering, we entered into
a registration rights agreement with Hampshire Equity
Partners II, L.P., who will hold 5,744,282 shares, or
approximately 39.4%, of our shares of common stock on a fully
diluted basis following the consummation of this offering.
Pursuant to the terms and provisions of the registration rights
agreement, Hampshire Equity Partners II, L.P. will have the
right from time to time, subject to certain restrictions, to
cause us to register its shares of common stock for sale under
the Securities Act of 1933, as amended, on Form S-1 or, if
available, on Form S-3 or any similar short-form
registration statement. In addition, if at any time we register
additional shares of common stock, Hampshire Equity
Partners II, L.P. will be entitled to include its shares of
common stock in the registration statement relating to that
offering. If our subsequent registration is made pursuant to an
underwritten offering, Hampshire Equity Partners II, L.P.
must sell its registrable securities to the underwriters
selected by us if they choose to participate in that
registration.
Nominating Agreement
In connection with our initial public offering, we entered into
a nominating agreement with Hampshire Equity Partners II,
L.P. pursuant to which we, acting through our nominating and
corporate governance committee, agreed, subject to the
requirements of our directors' fiduciary duties, that
(i) Hampshire Equity Partners II, L.P. is entitled to
designate up to two directors to be nominated for election to
our board of directors as long as Hampshire Equity
Partners II, L.P. owns in the aggregate at least 40% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering or
(ii) Hampshire Equity Partners II, L.P. is entitled to
designate one director to be nominated for election to our board
of directors as long as Hampshire Equity Partners II, L.P.
owns in the aggregate less than 40% and at least 15% of the
shares of our common stock which it owned immediately prior to
the consummation of our initial public offering. If at any time
Hampshire Equity Partners II, L.P. owns less than 15%, it
will not have the right to nominate any directors for election
to our board of directors.
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Principal and Selling Stockholders
The following table sets forth information known to us with
respect to the beneficial ownership of our common stock as of
January 4, 2006, and as adjusted to reflect the sale of
1,500,000 shares of common stock in this offering by selling
stockholders, for the following persons:
•
each stockholder known by us to own beneficially more than 5% of
    our common stock;
•
each of our directors and named executive officers;
•
all directors and executive officers as a group; and
•
each of the selling stockholders.
This table lists applicable percentage ownership based on
13,012,715 shares of common stock outstanding as of
January 4, 2006, and also lists applicable percentage
ownership based on shares of common stock outstanding after
completion of this offering.
We have determined beneficial ownership in the table in
accordance with the rules of the Commission. In computing the
number of shares beneficially owned by a person and the
percentage ownership of that person, we have deemed shares of
common stock subject to options held by that person that are
currently exercisable or will become exercisable within
60 days of January 4, 2006 to be outstanding, but we
have not deemed these shares to be outstanding for computing the
percentage ownership of any other person. To our knowledge,
except as set forth in the footnotes below, each stockholder
identified in the table possesses sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by that stockholder. Unless otherwise
indicated, the address of all listed stockholders is
c/o Citi Trends, Inc., 102 Fahm Street, Savannah,
Georgia 31401.
Number of
Number of
Shares
Percentage
Shares
Beneficially
of Shares
Percentage of
Beneficially
Number of
Owned
Outstanding
Shares
Owned Prior
Shares Being
After the
Before the
Outstanding After
Name of Beneficial Owner
to the Offering
Offered
Offering
Offering
the Offering
Directors and Named Executive Officers:
R. Edward Anderson
Chief Executive Officer and Director
466,665
(1)
125,000
341,665
3.5
%
2.5
%
George A. Bellino
President and Chief Merchandising Officer
491,072
(2)
125,000
366,072
3.7
%
2.7
%
Thomas W. Stoltz
Chief Financial Officer
68,917
(3)
20,000
48,917
*
*
James A. Dunn
Vice President of Store Operations
57,431
(3)
20,000
37,431
*
*
Tracy L. Noll
Director
90,064
(4)
20,000
70,064
*
*
John S. Lupo
Director
5,200
(3)
0
5,200
*
*
Gregory P.
    Flynn
(5)
Director
7,900,535
1,190,000
6,710,535
60.4
%
51.3
%
Patricia M. Luzier
Director
0
0
0
*
*
Directors and executive officers as a group (eight persons)
9,079,884
1,500,000
7,579,884
64.6
%
53.9
%
5% Stockholder:
Hampshire Equity Partners (as
    defined)
(6)
7,900,535
1,190,000
6,710,535
60.4
%
51.3
%
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(1)
Includes 29,163 shares of common stock and
    437,502 options to purchase shares of common stock that are
    currently exercisable or will become exercisable within
    60 days of January 4, 2006.
(2)
Includes 129,568 shares of common stock and 361,504 options
    to purchase shares of common stock that are currently
    exercisable or will become exercisable within 60 days of
    January 4, 2006.
(3)
Consists of options to purchase shares of common stock that are
    currently exercisable or will become exercisable within
    60 days of January 4, 2006.
(4)
Includes 45,500 shares of common stock and
    44,564 options to purchase shares of common stock that are
    currently exercisable or will become exercisable within
    60 days of January 4, 2006.
(5)
Mr. Flynn is the Vice President of Lexington Equity
    Partners II, Inc., the general partner of Hampshire Equity
    Partners II, L.P., and is deemed to beneficially own the shares
    of common stock held by Hampshire Equity Partners (as defined in
    footnote 6 below). Mr. Flynn has disclaimed beneficial
    ownership of the shares of common stock held by Hampshire Equity
    Partners.
(6)
Hampshire Equity Partners refers to Hampshire Equity Partners
    II, L.P., Hampshire Equity Partners Cayman D.B. II, LP and
    Hampshire Equity Partners Cayman II, LP. Hampshire Equity
    Partners II, L.P. currently owns 6,762,933 shares of our
    common stock, which includes 66,612 options to purchase
    shares of common stock that are currently exercisable or will
    become exercisable within 60 days of January 4, 2006,
    and is offering to sell 1,018,652 shares in this offering.
    Hampshire Equity Partners Cayman D.B. II, L.P. currently owns
    1,115,296 shares of our common stock and is offering to
    sell 167,989 shares in this offering. Hampshire Equity
    Partners Cayman II, L.P. currently owns 22,306 shares of
    our common stock and is offering to sell 3,359 shares in
    this offering. Lexington Equity Partners II, L.P. is the general
    partner of Hampshire Equity Partners II, L.P. Lexington Equity
    Partners Cayman II, L.P. is the general partner of each of
    Hampshire Equity Partners Cayman D.B. II, LP and Hampshire
    Equity Partners Cayman II, LP. The general partner of each of
    Lexington Equity Partners II, L.P. and Lexington Equity Partners
    Cayman II, L.P. is Lexington Equity Partners II, Inc., which has
    ultimate voting and investment control over the shares of our
    common stock held by Hampshire Equity Partners. Tracey Rudd, an
    employee of an affiliate of Hampshire Equity Partners, is the
    President of Lexington Equity Partners II, Inc. and
    Mr. Flynn, one of our directors, is the Vice President of
    Lexington Equity Partners II, Inc. The address for each of
    Hampshire Equity Partners II, L.P., Hampshire Equity Partners
    Cayman D.B. II, LP and Hampshire Equity Partners Cayman II, LP
    is 520 Madison Avenue, New York, New York 10022.
*
Less than 1%.
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Description of Capital Stock
General
We are authorized to issue 20,000,000 shares of common stock,
$0.01 par value per share, and 5,000 shares of undesignated
preferred stock, $0.01 par value per share. The following
description of our capital stock does not purport to be complete
and is subject to, and qualified in its entirety by, our second
amended and restated certificate of incorporation and amended
and restated by-laws, which were previously filed as exhibits to
our registration statement filed in connection with our initial
public offering.
Common Stock
Dividend Rights.
Subject to preferences that may apply to
shares of preferred stock outstanding at the time, the holders
of outstanding shares of common stock are entitled to receive
dividends out of assets legally available at the time and in the
amounts as our board of directors may from time to time
determine.
Voting Rights.
Each common stockholder is entitled to one
vote for each share of common stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the
election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for
election.
No Preemptive or Similar Rights.
No holder of our common
stock is entitled to preemptive rights to subscribe for any
shares of capital stock and our common stock is not subject to
conversion or redemption.
Right to Receive Liquidation Distributions.
Upon our
liquidation, dissolution or winding-up, the assets legally
available for distribution to our stockholders are distributable
ratably among the holders of our common stock and any
participating preferred stock outstanding at that time, after
payment of liquidation preferences, if any, on any outstanding
preferred stock and payment of other claims of creditors. Each
outstanding share of common stock is, and all shares of common
stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.
Preferred Stock
No shares of, and no securities convertible into, our preferred
stock are outstanding.
Under our second amended and restated certificate of
incorporation our board of directors is authorized, subject to
the limits imposed by the Delaware General Corporation Law, but
without further action by our stockholders, to issue shares of
preferred stock in one or more series, to establish from time to
time the number of shares to be included in each series, to fix
the rights, preferences and privileges of the shares of each
wholly unissued series and any of its qualifications,
limitations and restrictions. Our board of directors can also
increase or decrease the number of any series, but not below the
number of shares of that series then outstanding, without any
further vote or action by our stockholders.
Our board of directors may authorize the issuance of preferred
stock with voting or conversion rights that adversely affect the
voting power or other rights of our common stockholders. The
issuance of preferred stock, while providing flexibility in
connection with possible acquisitions, financings and other
corporate purposes, could have the effect of delaying, deferring
or preventing our change in control and may cause the market
price of our common stock to decline or impair the voting and
other rights of the holders of our common stock. We have no
current plans to issue any shares of preferred stock.
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Anti-Takeover Effects of Various Provisions of the Delaware
General Corporation Law and Our Second Amended and Restated
Certificate of Incorporation and Our Amended and Restated
By-laws
Provisions of the Delaware General Corporation Law, our second
amended and restated certificate of incorporation and our
amended and restated by-laws contain provisions that may have
some anti-takeover effects and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that
might result in a premium over the market price for the shares
held by stockholders.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General
Corporation Law. Subject to specific exceptions,
Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an
"interested stockholder" for a period of three years
after the time the person became an interested stockholder,
unless:
•
the business combination, or the transaction in which the
    stockholder became an interested stockholder, is approved by our
    board of directors prior to the time the interested stockholder
    attained that status;
•
upon consummation of the transaction that resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding those shares owned by persons who are directors and
    also officers and by employee stock plans in which employee
    participants do not have the right to determine confidentially
    whether shares held subject to the plan will be tendered in a
    tender or exchange offer; or
•
at or after the time a person became an interested stockholder,
    the business combination is approved by our board of directors
    and authorized at an annual or special meeting of stockholders
    by the affirmative vote of at least two-thirds of the
    outstanding voting stock that is not owned by the interested
    stockholder.
"Business combinations" include mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder. Subject to various exceptions, in
general an "interested stockholder" is a person who,
together with his or her affiliates and associates, owns, or
within three years did own, 15% or more of the shares of the
corporation's outstanding voting stock. These restrictions
could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
In addition, provisions of our second amended and restated
certificate of incorporation and amended and restated by-laws,
which are summarized in the following paragraphs, may have an
anti-takeover effect.
Classified Board of Directors.
Our second amended and
restated certificate of incorporation divides our board into
three classes having staggered terms, with one of such classes
being elected each year for a new three-year term. Class I
directors have an initial term expiring in 2006, Class II
directors have an initial term expiring in 2007 and
Class III directors have an initial term expiring in 2008.
Class I is comprised of Ms. Luzier. Class II is
comprised of Messrs. Noll and Lupo. Class III is
comprised of Messrs. Flynn and Anderson.
Quorum Requirements; Removal of Directors.
Our second
amended and restated certificate of incorporation provides for a
minimum quorum of one-third in voting power of the outstanding
shares of our capital stock entitled to vote, except that a
minimum quorum of a majority in voting power of the outstanding
shares of our capital stock entitled to vote is necessary to
hold a vote for any director in a contested election, the
removal of a director or the filling of a vacancy on our board
of directors. Directors may be removed only for cause by the
affirmative vote of at least a majority in voting power of the
outstanding shares of our capital stock entitled to vote
generally in the election of directors.
No Cumulative Voting.
The Delaware General Corporation
Law provides that stockholders are not entitled to cumulate
votes in the election of directors unless provided for otherwise
in a company's certificate of
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incorporation. Our second amended and restated certificate of
incorporation does not grant our stockholders cumulative voting
rights.
No Stockholder Action by Written Consent; Calling of Special
Meeting of Stockholders
. Our second amended and restated
certificate of incorporation generally prohibits stockholder
action by written consent. It and our amended and restated
by-laws also provide that special meetings of our stockholders
may be called only by (1) the chairman of our board of
directors or (2) our board of directors pursuant to a
resolution approved by our board of directors or (3) our
board of directors upon a request by holders of at least 50% in
voting power of all the outstanding shares entitled to vote at
that meeting.
Advance Notice Requirements for Stockholder Proposals and
Director Nominations.
Our amended and restated by-laws
provide that stockholders seeking to bring business before or to
nominate candidates for election as directors at an annual
meeting of stockholders must provide timely notice of their
proposal in writing to the corporate secretary. To be timely, a
stockholder's notice must be delivered or mailed and
received at our principal executive offices not less than 90 nor
more than 120 days in advance of the anniversary date of
the immediately preceding annual meeting of stockholders. Our
amended and restated by-laws also specify requirements as to the
form and content of a stockholder's notice. These
provisions may impede stockholders' ability to bring
matters before an annual meeting of stockholders or make
nominations for directors at an annual meeting of stockholders.
Stockholder nominations for the election of directors at a
special meeting must be received by our corporate secretary by
the later of ten days following the day on which notice of the
date of the special meeting was mailed or public disclosure of
the date of the special meeting was made or 90 days prior
to the date that meeting is proposed to be held and not more
than 120 days prior to such meeting.
Limitations on Liability and Indemnification of Officers and
Directors.
As discussed above under
"Management-Limitation of Liability and Indemnification of
Officers and Directors," the Delaware General Corporation
Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders
for monetary damages for breaches of directors' fiduciary
duties as directors. Our second amended and restated certificate
of incorporation includes a provision that eliminates the
personal liability of directors for monetary damages for actions
taken as a director, except for liability:
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or involving intentional
    misconduct or knowing violation of law;
•
under Section 174 of the Delaware General Corporation Law
    (unlawful dividends or stock repurchases); or
•
for transactions from which the director derived improper
    personal benefit.
Our amended and restated by-laws provide that we must indemnify
and advance expenses to our directors and officers to the
fullest extent authorized by the Delaware General Corporation
Law. We are also expressly authorized to, and do, carry
directors' and officers' insurance for our directors,
officers and certain employees for some liabilities. We believe
that these indemnification provisions and insurance are useful
to attract and retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in
our amended and restated by-laws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent that, in a class action or direct suit, we pay the costs
of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
Authorized but Unissued Shares.
Our authorized but
unissued shares of common stock and preferred stock will be
available for future issuance without your approval. We may use
additional shares for a variety of
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corporate purposes, including future public offerings to raise
additional capital, corporate acquisitions and employee benefit
plans. The existence of authorized but unissued shares of common
stock and preferred stock could render more difficult or
discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
Supermajority Provisions.
The Delaware General
Corporation Law provides generally that the affirmative vote of
a majority in voting power of the outstanding shares entitled to
vote is required to amend a corporation's certificate of
incorporation, unless the certificate of incorporation requires
a greater percentage. Our second amended and restated
certificate of incorporation provides that the following
provisions in the second amended and restated certificate of
incorporation may be amended only by a vote of two-thirds or
more in voting power of all the outstanding shares of our
capital stock entitled to vote:
•
the prohibition on stockholder action by written consent;
•
the ability to call a special meeting of stockholders being
    vested solely in (1) the chairman of our board of
    directors, (2) our board of directors pursuant to a
    resolution adopted by our board of directors and (3) our
    board of directors upon a request by holders of at least 50% in
    voting power of all the outstanding shares entitled to vote at
    that meeting;
•
the provisions relating to the classification of our board of
    directors;
•
the provisions relating to the size of our board of directors;
•
the provisions relating to the quorum requirements for
    stockholder action and the removal of directors;
•
the limitation on the liability of our directors to us and our
    stockholders;
•
the provisions granting authority to our board of directors to
    amend or repeal our by-laws without a stockholder vote, as
    described in more detail in the next succeeding paragraph; and
•
the supermajority voting requirements listed above.
Our second amended and restated certificate of incorporation
grants our board of directors the authority to amend and repeal
our by-laws without a stockholder vote in any manner not
inconsistent with the laws of the State of Delaware or our
second amended and restated certificate of incorporation.
In addition, our second amended and restated certificate of
incorporation and our amended and restated by-laws provide that
the same provisions listed above and found in our amended and
restated by-laws may be amended by stockholders representing no
less than two-thirds of the voting power of all the outstanding
shares of our capital stock entitled to vote.
Listing
Our common stock is listed on the Nasdaq National Market under
the trading symbol "CTRN."
Transfer Agent and Registrar
The transfer agent and registrar for our stock is American Stock
Transfer and Trust Company. The transfer agent's
address is 59 Maiden Lane, New York, New York 10038.
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Shares Eligible for Future Sale
Future sales of substantial amounts of our common stock in the
public market could adversely affect prevailing market prices.
Furthermore, since certain shares will not be available for sale
shortly after the offering because of contractual and legal
restrictions on resale described below, sales of substantial
amounts of common stock in the public market after the
restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.
Upon completion of this offering, 13,012,715 shares of common
stock will be outstanding, assuming no exercise of currently
outstanding and exercisable options. Of these shares, the shares
sold in this offering, plus any additional shares sold upon
exercise of the underwriters' over-allotment option, and
all of the 4,427,500 shares issued and sold in our initial
public offering will be freely transferable without restriction
under the Securities Act of 1933, as amended, unless they are
held by our "affiliates" as that term is used under
the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. The remaining
7,491,827 shares of common stock held by existing
stockholders are restricted shares. In addition, upon
consummation of this offering, a total of 1,574,133 options
will be outstanding, of which 1,290,033 options will be fully
vested. Restricted shares may be sold in the public market only
if registered or if they qualify for an exemption from
registration under Rules 144 or 701 promulgated under the
Securities Act of 1933, as amended, which rules are summarized
below.
In general, under Rule 144 as in effect on the date of this
prospectus, beginning 90 days after the effective date of
this offering, our affiliates, or a person (or persons whose
shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule 144) for at least one year,
are entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the
then outstanding shares of common stock or the average weekly
trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Commission.
Sales under Rule 144 are subject to requirements relating
to the manner of sale, notice and the availability of current
public information about us. A person (or persons whose shares
are aggregated) who was not our affiliate at any time during the
90 days immediately preceding the sale and who has
beneficially owned restricted shares for at least two years is
entitled to sell such shares under Rule 144(k) without
regard to the limitations described above.
Our employees, officers, directors or consultants who purchased
or were awarded shares or options to purchase shares under a
written compensatory plan or contract are entitled to rely on
the resale provisions of Rule 701 under the Securities Act
of 1933, as amended, which permits affiliates and non-affiliates
to sell their Rule 701 shares without having to comply with
the Rule 144 holding period restrictions, in each case
commencing 90 days after the effective date of this
offering. In addition, non-affiliates may sell Rule 701
shares without complying with the public information, volume and
notice provisions of Rule 144.
On June 8, 2005, we filed a registration statement on
Form S-8 registering shares of common stock subject to
outstanding stock options or reserved for issuance under our
Amended and Restated 1999 Stock Option Plan and 2005 Long-Term
Incentive Plan. Shares issued pursuant to our Amended and
Restated 1999 Stock Option Plan and 2005 Long-Term Incentive
Plan and registered under that registration statement are,
subject to Rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, unless
such shares are subject to vesting restrictions with us or the
lock-up agreements described below.
Lock-Up Agreements
Each of our executive officers and directors and certain other
stockholders, including Hampshire Equity Partners, have agreed
to a 90-day "lock-up" with respect to our shares of
common stock and other of our securities that they beneficially
own, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable
for shares of common stock. These lock-up agreements cover
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fully diluted shares of our common stock. This means that, for a
period of 90 days following the date of this prospectus,
the lock-up period, subject to specified exceptions, such
persons may not, directly or indirectly, offer, sell, pledge or
otherwise dispose of these securities without the prior written
consent of CIBC World Markets Corp. In addition, the lock-up
period may be extended in the event that (i) we release
earnings or announce certain material news during the last
17 days of the lock-up period, or (ii) prior to the
expiration of the lock-up period, we announce that we will
release earnings during the
16-day
period beginning
on the last day of the lock-up period. The restrictions in the
lock-up agreements will not prevent such persons from
transferring their shares or other securities as distributions
to such persons' limited partners or as gifts, to members
of their immediate family or to a trust for the benefit of
themselves or member of their family or by will or intestacy,
provided, in each case, that the transferee of such shares of
other securities agrees to be locked-up to the same extent as
the person from whom they received the shares.
We have been advised by CIBC World Markets Corp. that the
release of any lock-up agreement by it will be considered on a
case-by
-case basis. The
factors considered by CIBC World Markets Corp. in any such
decision may include the length of time before the lock-up
agreement expires, the number of shares involved, the reason for
the requested release, market conditions, the trading price of
our common stock, and the identity of the person or entity
seeking the release (i.e., us or one of our affiliates,
stockholders, executive officers or directors). We have also
been advised by the underwriters that the underwriters have no
current intention of waiving the lock-ups.
Registration Rights
Pursuant to the registration rights agreement executed in
connection with our initial public offering, Hampshire Equity
Partners II, L.P. has the right to demand registration of
its shares and to include its shares in registration statements
that we file after the consummation of this offering, subject to
certain exceptions. See "Related Party Transactions—
Registration Rights Agreement."
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Underwriting
We and the selling stockholders will enter into an underwriting
agreement with the underwriters named below. CIBC World Markets
Corp., Piper Jaffray & Co., SG Cowen & Co., LLC and
Wachovia Capital Markets, LLC, are acting as the representatives
of the underwriters.
The underwriting agreement provides for the purchase of a
specific number of shares of common stock by each of the
underwriters. The underwriters' obligations are several,
which means that each underwriter is required to purchase a
specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject
to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of
shares of common stock set forth opposite its name below:
Underwriters
Number of Shares
CIBC World Markets Corp.
Piper Jaffray & Co.
SG Cowen & Co., LLC
Wachovia Capital Markets, LLC
Total
1,500,000
The underwriters have agreed to purchase all of the shares
offered by this prospectus (other than those covered by the
over-allotment option described below) if any are purchased.
Under the underwriting agreement, if an underwriter defaults in
its commitment to purchase shares, the commitments of
non-defaulting underwriters may be increased or the underwriting
agreement may be terminated, depending on the circumstances.
The shares should be ready for delivery on or about
January      , 2006 against payment in
immediately available funds. The underwriters are offering the
shares subject to various conditions and may reject all or part
of any order. The representatives have advised us and the
selling stockholders that the underwriters propose to offer the
shares directly to the public at the public offering price that
appears on the cover page of this prospectus. In addition, the
representatives may offer some of the shares to other securities
dealers at such price less a concession of
$          per
share. The underwriters may also allow, and such dealers may
reallow, a concession not in excess of
$          per
share to other dealers. After the shares are released for sale
to the public, the representatives may change the offering price
and other selling terms at various times.
The selling stockholders have granted the underwriters an
over-allotment option. This option, which is exercisable for up
to 30 days after the date of this prospectus, permits the
underwriters to purchase a maximum of 225,000 additional shares
to cover over-allotments. If the underwriters exercise all or
part of this option, they will purchase shares covered by the
option at the public offering price that appears on the cover
page of this prospectus, less the underwriting discount. If this
option is exercised in full, the total price to the public will
be approximately
$          and
the total proceeds to the selling stockholders will be
$          .
The underwriters have severally agreed that, to the extent the
over-allotment option is exercised, they will each purchase a
number of additional shares proportionate to the
underwriter's initial amount reflected in the foregoing
table.
The following table provides information regarding the amount of
the discount to be paid to the underwriters by the selling
stockholders:
Total Without
Total With Full
Exercise of Over-
Exercise of Over-
Per Share
Allotment Option
Allotment Option
Selling Stockholders
$
$
$
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We estimate that the total expenses of this offering payable by
us, excluding the underwriting discount, will be approximately
$440,900. We have agreed to bear the expenses (other than
underwriting discounts and commissions) of the selling
stockholders in connection with this offering.
We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Each of our executive officers and directors and certain other
stockholders, including Hampshire Equity Partners have agreed to
a 90-day "lock-up" with respect to our shares of
common stock and other of our securities that they beneficially
own, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable
for shares of common stock. These lock-up agreements cover
7,579,884 fully diluted shares of our common stock. This means
that for a period of 90 days following the date of this
prospectus, the lock-up period, subject to specified exceptions,
such persons may not, directly or indirectly, offer, sell,
pledge or otherwise dispose of these securities without the
prior written consent of CIBC World Markets Corp. In addition,
the lock-up period may be extended in the event that (i) we
release earnings or announce certain material news during the
last 17 days of the lock-up period, or (ii) prior to
the expiration of the lock-up period, we announce that we will
release earnings during the 16-day period beginning on the last
day of the lock-up period. The restrictions in the lock-up
agreements will not prevent such persons from transferring their
shares or other securities as distributions to such
persons' limited partners or as gifts, to members of their
immediate family or to a trust for the benefit of themselves of
member of their family or by will or intestacy, provided in each
case, that the transferee of such shares of other securities
agree to be locked-up to the same extent as the person from whom
they received the shares.
We have agreed not to issue, sell or register (other than
pursuant to a registration statement on Form S-8), or
otherwise dispose of, directly or indirectly, any of our equity
securities (or any securities convertible into, exercisable for
or exchangeable for our equity securities), except for the
issuance of equity securities pursuant to our 2005 Long-Term
Incentive Plan, during the lock-up period without the consent of
CIBC World Markets Corp. In the event that during the lock-up
period, (A) any shares are issued pursuant to our 2005 Long
Term Incentive Plan that are exercisable during the lock-up
period (other than issuances, after the consummation of this
offering, upon conversion of options outstanding as of the date
of this prospectus), or (B) any registration is effected on
Form S-8 or on any successor form relating to shares that
are exercisable during the lock-up period (other than shares
issued or issuable upon conversion of options outstanding as of
the date of this prospectus), we have agreed to obtain the
written agreement of such grantee or holder of such registered
securities that, during the lock-up period, such person will
not, without the prior written consent of CIBC World Markets
Corp., offer for sale, sell, distribute, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, or
exercise any registration rights with respect to, such shares of
our common stock (or any securities convertible into,
exercisable for, or exchangeable for such shares of our common
stock) owned by such person.
The representatives have informed us that they do not expect
discretionary sales by the underwriters to exceed five percent
of the shares offered by this prospectus.
Our common stock is listed on the Nasdaq National Market under
the symbol "CTRN." As of January 4, 2006, the
last reported price of our common stock was $41.85 per
share.
Rules of the Commission may limit the ability of the
underwriters to bid for or purchase shares before the
distribution of the shares is completed. However, the
underwriters may engage in the following activities in
accordance with the rules:
•
Stabilizing transactions—The representative may make bids
    or purchases for the purpose of pegging, fixing or maintaining
    the price of the shares, so long as stabilizing bids do not
    exceed a specified maximum.
•
Over-allotments and syndicate covering transactions—The
    underwriters may sell more shares of our common stock in
    connection with this offering than the number of shares than
    they have committed to purchase. This over-allotment creates a
    short position for the underwriters. This short sales position
    may
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involve either "covered" short sales or
    "naked" short sales. Covered short sales are short
    sales made in an amount not greater than the underwriters'
    over-allotment option to purchase additional shares in this
    offering described above. The underwriters may close out any
    covered short position either by exercising their over-allotment
    option or by purchasing shares in the open market. To determine
    how they will close the covered short position, the underwriters
    will consider, among other things, the price of shares available
    for purchase in the open market, as compared to the price at
    which they may purchase shares through the over-allotment
    option. Naked short sales are short sales in excess of the
    over-allotment option. The underwriters must close out any naked
    short position by purchasing shares in the open market. A naked
    short position is more likely to be created if the underwriters
    are concerned that, in the open market after pricing, there may
    be downward pressure on the price of the shares that could
    adversely affect investors who purchase shares in this offering.
•
Penalty bids—If the representative purchases shares in the
    open market in a stabilizing transaction or syndicate covering
    transaction, they may reclaim a selling concession from the
    underwriters and selling group members who sold those shares as
    part of this offering.
Similar to other purchase transactions, the underwriters'
purchases to cover the syndicate short sales or to stabilize the
market price of our common stock may have the effect of raising
or maintaining the market price of our common stock or
preventing or mitigating a decline in the market price of our
common stock. As a result, the price of the shares of our common
stock may be higher than the price that might otherwise exist in
the open market. The imposition of a penalty bid might also have
an effect on the price of the shares if it discourages resales
of the shares.
Neither we nor the underwriters makes any representation or
prediction as to the effect that the transactions described
above may have on the price of the shares. These transactions
may occur on the Nasdaq National Market or otherwise. If such
transactions are commenced, they may be discontinued without
notice at any time.
Congress Financial Corporation (Southwest), an affiliate of
Wachovia Capital Markets, LLC, is the lender under our credit
agreement and Wachovia Capital Markets, LLC is acting as an
underwriter in this offering. As such, Congress Financial
Corporation (Southwest) has received and will continue to
receive customary fees in connection with the credit agreement.
In addition, in the future, certain of the underwriters or their
affiliates may provide us, from time to time, with other
financial advisory or commercial or investment banking services,
for which we expect they will receive customary fees and
commissions.
Based on information provided to us by CIBC World Markets Corp.
and Hampshire Equity Partners, a managing director of CIBC World
Markets Corp. has an approximate 0.02% indirect interest in our
common stock, through ownership of limited partnership interests
in Hampshire Equity Partners II, L.P. We do not expect the
proceeds with respect to this indirect interest to exceed
$30,000 in the aggregate.
As of January 4, 2006, Hampshire Equity Partners, on a
fully diluted basis, currently holds approximately 54.2% of our
common stock and after the offering will hold, on a fully
diluted basis, approximately 46.0% of our common stock. Based
upon this ownership interest, Hampshire Equity Partners is an
"affiliate" of the company (as such term is defined
under the Securities Act of 1933, as amended) and may be deemed
to be an "underwriter" under the Securities Act of
1933, as amended. Certain of our other "affiliates"
are also selling stockholders in this offering, including
Messrs. Anderson, Bellino, Stoltz, Noll and Dunn, who are
members of management and employees of ours, and may similarly
be deemed to be "underwriters" under the Securities
Act of 1933, as amended. See "Principal and Selling
Stockholders."
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Legal Matters
The validity of the common stock offered hereby will be passed
upon for us by Paul, Hastings, Janofsky & Walker LLP, New
York, New York. DLA Piper Rudnick Gray Cary US LLP, Baltimore,
Maryland, has represented the underwriters in this offering.
Experts
The financial statements of Citi Trends, Inc. as of
January 29, 2005 and January 31, 2004 and for the
years ended January 29, 2005, January 31, 2004 and
February 1, 2003 have been included herein in reliance upon
the report of KPMG LLP, independent registered public accounting
firm, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing. The audit report
refers to the adoption of Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity" on July 6, 2003.
Where You Can Find More Information
We have filed with the Commission a registration statement on
Form S-1 under the Securities Act of 1933, as amended, to
register the shares of common stock offered in this offering. We
are required to file annual, quarterly and current reports,
proxy statements and other information with the Commission. You
may read and copy our registration statement and the attached
exhibits and schedules without charge at the public reference
room maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at
1 (800) SEC-0330
for further information on the public reference room. You may
also inspect reports, proxy and information statements and other
information that we file electronically with the Commission
without charge at its Internet site, http://www.sec.gov.
This prospectus constitutes part of the registration and does
not contain all of the information set forth in the registration
statement. Whenever a reference is made in this prospectus to
any of our contracts or other documents, the reference may not
be complete and, for a copy of the contract or document, you
should refer to the exhibits that are part of the registration
statement.
We intend to furnish our stockholders with annual reports
containing financial statements audited by our independent
registered public accountants and to make available to our
stockholders quarterly reports for the first three quarters of
each fiscal year containing unaudited interim financial
statements.
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Citi Trends, Inc.
Index to Financial Statements
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JANUARY 29,
    2005, JANUARY 31, 2004 AND FEBRUARY 1, 2003
Report of Independent Registered Public
    Accounting Firm
F-2
Balance Sheets as of January 29, 2005
    and January 31, 2004
F-3
Statements of Income for the Years Ended
    January 29, 2005, January 31, 2004 and
    February 1, 2003
F-4
Statements of Cash Flows for the Years
    Ended January 29, 2005, January 31, 2004 and
    February 1, 2003
F-5
Statements of Stockholders' Equity for
    the Years Ended January 29, 2005, January 31, 2004 and
    February 1, 2003
F-6
Notes to Financial Statements for the Years
    Ended January 29, 2005, January 31, 2004 and
    February 1, 2003
F-7
INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED
    OCTOBER 29, 2005 AND OCTOBER 30, 2004
Condensed Balance Sheets as of
    October 29, 2005 and January 29, 2005 (unaudited)
F-21
Condensed Statements of Income for the
    Thirty-nine weeks ended October 29, 2005 and
    October 30, 2004 (unaudited)
F-22
Condensed Statements of Cash Flows for the
    Thirty-nine weeks ended October 29, 2005 an
    October 30, 2004 (unaudited)
F-23
Notes to the Condensed Financial Statements
    (unaudited)
F-24
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Citi Trends, Inc.:
We have audited the accompanying balance sheets of Citi Trends,
Inc. (the "Company") as of January 29, 2005, and
January 31, 2004, and the related statements of income,
stockholders' equity, and cash flows for the fiscal years
ended January 29, 2005, January 31, 2004 and
February 1, 2003. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Citi Trends, Inc. as of January 29, 2005, and
January 31, 2004, and the results of its operations and its
cash flows for the fiscal years ended January 29, 2005,
January 31, 2004 and February 1, 2003 in conformity
with U.S. generally accepted accounting principles.
As discussed in Note 2 to the financial statements,
effective July 6, 2003 the Company adopted the provisions
of the Statement of Financial Accounting Standards No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity".
/s/     KPMG LLP
Jacksonville, Florida
March 30, 2005, except as to Note 12(c) which is as of
April 28, 2005 and Note 12(d) which is as of
May 11, 2005
F-2
Table of Contents
Citi Trends, Inc.
Balance Sheets
January 29, 2005 and January 31, 2004
January 29,
January 31,
2005
2004
Assets
Current assets:
Cash and cash equivalents
$
11,801,442
$
9,954,232
Inventory
36,172,832
22,712,369
Prepaid and other current assets
2,600,933
1,770,998
Deferred tax asset
1,139,000
530,604
Total current assets
51,714,207
34,968,203
Property and equipment, net
17,573,767
12,749,601
Goodwill
1,371,404
1,371,404
Other assets
130,182
123,992
Total assets
$
70,789,560
$
49,213,200
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under revolving lines of credit
$
—
$
—
Accounts payable
28,132,301
19,577,370
Accrued expenses
3,199,772
2,121,520
Accrued compensation
2,537,643
1,669,462
Current portion of long-term debt
78,953
74,762
Current portion of capital lease obligations
718,425
566,667
Income tax payable
2,455,247
331,342
Layaway deposits
252,791
133,028
Total current liabilities
37,375,132
24,474,151
Long-term debt, less current portion
1,526,110
1,494,302
Capital lease obligations, less current portion
688,473
494,547
Preferred shares subject to mandatory redemption
3,984,763
5,160,313
Deferred tax liability
818,000
333,445
Other long-term liabilities
2,632,113
752,574
Total liabilities
47,024,591
32,709,332
Stockholders' equity:
Common stock, $0.01 par value. Authorized 20,000,000 shares;
    9,460,750 and 9,445,150 shares issued in 2005 and 2004;
    9,295,000 shares outstanding in 2005 and 2004
3,639
3,633
Paid-in-capital
4,120,894
4,011,601
Retained earnings
19,828,629
12,571,384
Treasury stock, at cost; 165,750 and 150,150 shares in 2005 and
    2004
(164,550
)
(57,750
)
Subscription receivable
(23,643
)
(25,000
)
Total stockholders' equity
23,764,969
16,503,868
Commitments and contingencies (notes 9 and 10)
Total liabilities and stockholders' equity
$
70,789,560
$
49,213,200
See accompanying notes to financial statements.
F-3
Table of Contents
Citi Trends, Inc.
Statements of Income
Years Ended January 29, 2005, January 31, 2004 and
February 1, 2003
Fiscal
Fiscal
Fiscal
2004
2003
2002
Net sales
$
203,441,772
$
157,198,306
$
124,950,935
Cost of sales
127,307,594
98,145,216
77,806,541
Gross profit
76,134,178
59,053,090
47,144,394
Selling, general and administrative expenses
63,593,731
48,844,888
38,759,624
Income from operations
12,540,447
10,208,202
8,384,770
Interest expense, including redeemable preferred stock dividend
732,202
563,342
255,708
Income before provision for income taxes
11,808,245
9,644,860
8,129,062
Provision for income taxes
4,551,000
3,726,914
3,101,237
Net income
$
7,257,245
$
5,917,946
$
5,027,825
Basic income per common share
$
0.78
$
0.62
$
0.51
Diluted income per common share
$
0.67
$
0.54
$
0.44
Average number of shares outstanding
Basic
9,302,800
9,295,000
9,295,000
Diluted
10,879,388
10,771,410
10,757,110
See accompanying notes to financial statements
F-4
Table of Contents
Citi Trends, Inc.
Statements of Cash Flows
Years Ended January 29, 2005, January 31, 2004 and
February 1, 2003
Fiscal
Fiscal
Fiscal
2004
2003
2002
Operating activities:
Net income
$
7,257,245
$
5,917,946
$
5,027,825
Adjustment to reconcile net income to net cash provided by
    operating activities:
Dividends on preferred shares subject to mandatory redemption
324,450
189,263
—
Depreciation and amortization
4,871,682
4,032,602
3,014,549
Deferred income taxes
(123,841
)
161,883
541,742
Loss on disposal of fixed assets
80,719
23,396
93,189
Interest on Subscription Receivable
(9,643
)
—
—
Noncash compensation expense
103,299
123,273
161,882
Changes in assets and liabilities:
Inventory
(13,460,463
)
(5,669,857
)
(2,110,472
)
Prepaid and other current assets
(845,787
)
(577,991
)
374,919
Income tax receivable
—
195,068
60,795
Other assets
(29,334
)
(16,020
)
(39,294
)
Accounts payable
8,554,931
6,108,110
1,956,945
Accrued expenses and other long-term liabilities
2,823,842
647,045
576,631
Accrued compensation
868,181
(247,906
)
880,225
Income tax payable
2,123,905
331,342
—
Layaway deposits
119,763
(28,761
)
(82,278
)
Net cash provided by operating activities
12,658,949
11,189,393
10,456,658
Investing activities:
Purchase of property and equipment
(8,631,233
)
(6,117,954
)
(5,926,622
)
Financing activities:
Fee paid for continuance of revolving line of credit
—
—
(50,000
)
Borrowings under revolving line of credit
37,716,044
26,295,521
133,369,853
Repayments under revolving line of credit
(37,716,044
)
(26,295,521
)
(137,059,791
)
Repayments on long-term debt and capital lease obligations
(831,456
)
(942,054
)
(742,969
)
Proceeds from issuance of long-term debt
—
—
1,680,000
Payment of dividends on preferred shares subject to mandatory
    redemption
(1,366,050
)
—
—
Proceeds from payment of shareholder note receivable
11,000
—
—
Proceeds from sale of stock
6,000
—
—
Net cash used in financing activities
(2,180,506
)
(942,054
)
(2,802,907
)
Net increase in cash and cash equivalents
1,847,210
4,129,385
1,727,129
Cash and cash equivalents:
Beginning of period
9,954,232
5,824,847
4,097,718
End of period
$
11,801,442
$
9,954,232
$
5,824,847
Supplemental disclosures of cash flow information:
Cash paid for interest
$
518,557
$
352,933
$
255,708
Cash paid for income taxes
$
2,550,938
$
3,036,620
$
2,498,700
Supplemental disclosures of noncash activities:
Dividends accrued on redeemable preferred stock
$
—
$
135,187
$
327,713
Purchases of property and equipment financed by entering into
    capital leases
$
1,106,338
$
670,503
$
660,012
Insurance settlement not yet received related to loss of fixed
    assets and inventory related to store fire
—
192,384
—
F-5
Table of Contents
Citi Trends, Inc.
Statements of Stockholders' Equity
Years Ended January 29, 2005, January 31, 2004 and
February 1, 2003
Common Stock
Treasury Stock
Paid in
Retained
Subscription
Shares
Amount
Capital
Earnings
Shares
Amount
Receivable
Total
Balance— February 2, 2002
9,445,150
3,633
3,726,446
2,088,513
150,150
(57,750
)
(25,000
)
5,735,842
Expense recorded in connection with issuance of stock options
161,882
161,882
Accrued preferred stock dividends
(327,713
)
(327,713
)
Net income
5,027,825
5,027,825
Balance— February 1, 2003
9,445,150
3,633
3,888,328
6,788,625
150,150
(57,750
)
(25,000
)
10,597,836
Expense recorded in connection with issuance of stock options
123,273
123,273
Accrued preferred stock dividends
(135,187
)
(135,187
)
Net income
5,917,946
5,917,946
Balance— January 31, 2004
9,445,150
3,633
4,011,601
12,571,384
150,150
(57,750
)
(25,000
)
16,503,868
Exercise of stock options
15,600
6
5,994
6,000
Expense recorded in connection with issuance of stock options
103,299
103,299
Purchase of 600 shares of common stock in exchange for a
    3 year note
15,600
(106,800
)
(106,800
)
Interest recorded on subscription receivable
(9,643
)
(9,643
)
Payment received on subscription receivable
11,000
11,000
Net income
7,257,245
7,257,245
Balance— January 29, 2005
9,460,750
3,639
4,120,894
19,828,629
165,750
(164,550
)
(23,643
)
23,764,969
F-6
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements
January 29, 2005, January 31, 2004 and
February 1, 2003
(1)
Organization and Business
Citi Trends, Inc. (the "Company") is a rapidly
growing, value-priced retailer of urban fashion apparel and
accessories for the entire family. As of January 29, 2005,
the Company operated 200 stores in Alabama, Arkansas, Florida,
Georgia, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, and Virginia.
(2)
Summary of Significant Accounting Policies
(a)
Fiscal Year
The Company's fiscal year ends on the Saturday closest to
January 31 of each year. The years ended January 29, 2005,
January 31, 2004 and February 1, 2003 are referred to
as fiscal 2004, 2003 and 2002, respectively, in the accompanying
financial statements. Fiscal years 2004, 2003 and 2002 are each
comprised of 52 weeks.
(b)
Cash and Cash Equivalents
For purposes of the balance sheets and statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
(c)
Inventory
Inventory is stated at the lower of cost (first-in, first-out
basis) or market as determined by the retail inventory method
less a provision for inventory shrinkage. Under the retail
inventory method, the cost value of inventory and gross margins
are determined by calculating a cost-to-retail ratio and
applying it to the retail value of inventory. The Company
believes the first-in first-out retail inventory method results
in an inventory valuation that is fairly stated.
(d)
Property and Equipment, net
Property and equipment are stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are computed using the
straight-line method over the lesser of the estimated useful
lives (principally three to five years for computer equipment
and furniture, fixtures and equipment, five years for leasehold
improvements, and 15 years for buildings) of the related
assets or the relevant lease term, whichever is shorter.
(e)
Goodwill
Goodwill represents the excess of the purchase price over the
fair value of assets acquired. The Company adopted the
provisions of Statement of Financial Accounting Standards
("SFAS") No. 142,
Goodwill and Other
Intangible Assets,
as of February 3, 2002. Pursuant to
SFAS No. 142, goodwill acquired in a purchase business
combination and determined to have an indefinite useful life is
not amortized, but instead tested for impairment at least
annually. The Company performed this analysis at the end of
fiscal 2004 and no impairment was indicated.
F-7
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
(f)
Impairment of Long-Lived Assets
If facts and circumstances indicate that a long-lived asset,
including property and equipment, may be impaired, the carrying
value of long-lived assets is reviewed. If this review indicates
that the carrying value of the asset will not be recovered as
determined based on projected undiscounted cash flows related to
the asset over its remaining life, the carrying value of the
asset is reduced to its estimated fair value. Impairment losses
in the future are dependent on a number of factors such as site
selection and general economic trends, and thus could be
significantly different from historical results. To the extent
the Company's estimates for net sales, gross profit and
store expenses are not realized, future assessments of
recoverability could result in impairment charges.
(g)
Stock-Based Compensation
The Company applies the intrinsic-value-based method of
accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25,
Accounting for Stock
Issued to Employees,
and related interpretations including
Financial Accounting Standards Board ("FASB")
interpretation (FIN) No. 44,
Accounting for Certain
Transactions involving Stock Compensation, an interpretation of
APB Opinion No. 25
, to account for its fixed-plan stock
options. Under this method, compensation expense is recorded on
the date of grant only if the current fair value of the
underlying stock exceeds the exercise price. The Company
recognizes the fair value of stock rights granted to
non-employees in the accompanying financial statements.
SFAS No. 123,
Accounting for Stock-Based
Compensation,
and SFAS No. 148,
Accounting for
Stock-Based Compensation—Transition and Disclosure, an
amendment of FASB Statement No. 123
, establishes
accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation
plans. As permitted by existing accounting standards, the
Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS No. 123, as amended. The following table
illustrates the effect on net income for fiscal 2004, 2003 and
2002 if the fair-value-based method had been applied to all
outstanding and unvested awards in the period. Pro forma
information regarding net income and net income per share is
required in order to show our net income as if we had accounted
for employee stock options under the fair value method of
SFAS No. 123,
Accounting for Stock-Based
Compensation,
as amended by SFAS No. 148,
Accounting for
F-8
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
Stock-Based Compensation—Transition Disclosure
. The
fair values of options and shares issued pursuant to our option
plan at each grant date were estimated using the Black-Scholes
option pricing model.
2004
2003
2002
Net income, as reported
$
7,257,245
$
5,917,946
$
5,027,825
Add stock-based employee compensation expense included in
    reported net income, net of tax of $39,791, $45,855 and $62,729,
    respectively
63,508
77,415
99,153
Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $86,829, $68,120 and $47,157, respectively
(138,583
)
(114,997
)
(74,538
)
Pro forma net income
$
7,182,170
$
5,880,364
$
5,052,440
As reported basic income per common share
$
0.78
$
0.62
$
0.51
Pro forma basic income per common share
$
0.77
$
0.62
$
0.51
As reported diluted income per common share
$
0.67
$
0.54
$
0.44
Pro forma diluted income per common share
$
0.66
$
0.53
$
0.44
(h)
Revenue Recognition
Revenue from retail sales is recognized at the time of the sale,
net of an allowance for estimated returns. The Company allows
for returns up to 10 days after the date of sales and the
estimate for returns is based on actual return activity
10 days after the period ends. Revenue from layaway sales
is recognized when the customer has paid for and received the
merchandise. If the merchandise is not fully paid for within
60 days, the customer is given a refund or store credit for
merchandise payments made, less a re-stocking fee and a program
service charge. Program service charges, which are
non-refundable, are recognized in revenue when collected. All
sales are from cash, check or major credit card company
transactions. The Company does not offer company-sponsored
customer credit accounts.
(i)
Cost of Sales
Cost of sales includes the cost of inventory sold during the
period, net of discounts and allowances; purchasing costs;
transportation costs including inbound freight and internal
transfer costs. Distribution center costs, advertising and
promotional expenses are not considered a portion of cost of
sales and are included as part of selling, general and
administrative expenses.
(j)
Certain Financial Instruments with Characteristics of
    Liabilities and Equity
The Company has prospectively adopted SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
.
SFAS No. 150 establishes standards for the
classification and measurement of certain financial instruments
with characteristics of both liabilities and equity.
SFAS No. 150 also includes required disclosures for
financial instruments within its scope. For the Company,
SFAS No. 150 was effective for instruments entered
into or modified after May 1, 2003 and otherwise effective
as of February 1, 2004, except for mandatorily redeemable
financial instruments. As such, the Company adopted
F-9
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
the provisions of SFAS No. 150 for our Series A
Preferred Stock on July 6, 2003 which required the Company
to classify the Series A Preferred Stock as a liability on
our balance sheet. The effective date of SFAS No. 150
has been deferred indefinitely for certain other types of
mandatorily redeemable financial instruments. To illustrate the
effect of SFAS No. 150 the following table shows net
income if SFAS No. 150
2004
2003
2002
Net income, as reported
$
7,257,245
$
5,917,946
$
5,027,825
Add dividends on preferred shares subject to mandatory redemption
324,450
189,263
—
Pro forma net income
$
7,581,695
$
6,107,209
$
5,027,825
(k)
Earnings per Share
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
The following table provides a reconciliation of the earnings
figures used to calculate earning per share and used in
calculating diluted earnings per share for fiscal 2004, 2003 and
2002:
2004
2003
2002
Net income, as reported
$
7,257,245
$
5,917,946
$
5,027,825
Subtract dividends on preferred shares subject to mandatory
    redemption
—
135,188
324,450
Numerator for EPS calculation
$
7,257,245
$
5,782,758
$
4,703,375
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earning per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for fiscal 2004, 2003 and 2002:
2004
2003
2002
Average number of common shares outstanding
9,302,800
9,295,000
9,295,000
Incremental shares from assumed exercises of stock options
1,576,588
1,476,410
1,462,110
Average number of common shares and common stock equivalents
    outstanding
10,879,388
10,771,410
10,757,110
For fiscal 2004 and 2002 there were no options outstanding to
purchase shares of common stock excluded from the calculation of
diluted earnings per share because of antidilution. For fiscal
2003, there was an immaterial number of options outstanding to
purchase shares of common stock excluded from the calculation of
diluted earnings per share because of antidilution.
F-10
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
(l)
Advertising
The Company expenses all advertising expenditures as incurred.
Advertising expense for fiscal 2004, 2003 and 2002 was
$1,164,701, $905,872 and $618,051, respectively.
(m)
Operating Leases
We account for our store leases in accordance with
SFAS No. 13, Accounting for Leases and other
authoritative guidance. Rent expense for operating leases, which
have escalating rentals over the term of the lease, is
recognized on a straight-line basis over the initial term.
Certain of our leases contain tenant improvement allowances,
rent holidays, rent escalation clauses and/or contingent rent
provisions. Incentives, rent holidays and minimum rental
expenses are recognized on a straight-line basis over the term
of the lease based on the date of initial possession, which is
generally the date the property is available to the Company to
make improvements in preparation of its intended use.
For tenant improvement allowances, we record a deferred rent
liability on the balance sheet and amortize the deferred rent
over the term of the lease as a reduction to rent expense.
(n)
Store Opening and Closing Costs
New and relocated store opening costs are charged directly to
expense when incurred. When the Company decides to close or
relocate a store, the Company records an expense for the present
value of expected future rent payments, net of sublease income,
in the period that a store closes or relocates.
(o)
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
(p)
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(q)
Business Reporting Segments
The Company is a value-priced retailer of urban fashion apparel
and accessories for the entire family. The Company's chief
operating decision maker reviews performance and the allocation
of resources on a store by store basis. Because the Company
operates one business activity and the level of review by the
Company's chief operating decision maker is on a store by
store basis, the Company has determined that its operations
F-11
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
are within one reportable segment. Accordingly, financial
information on industry segments is omitted. All sales are to
customers and assets are located within the United States.
(r)
Other Comprehensive Income
The Company did not have any components of other comprehensive
income for fiscal 2004, 2003 and 2002.
(s)
Recently Issued Accounting Standards Not Currently
    Effective
In December 2004, the FASB issued SFAS No. 123
(revised 2004),
Share-Based Payment
.
SFAS No. 123R establishes standards for the accounting
for transactions in which an entity exchanges its equity
instruments for goods and services. SFAS No. 123R
focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment
transactions. Under SFAS No. 123R, the Company,
beginning in the third quarter of 2005, will be required to
measure the cost of employee services received in exchange for
an award of equity instruments based on the grant date fair
value of the award (with limited exceptions). The cost will be
recognized over the period during which an employee is required
to provide services in exchange for the award.
Currently, the Company discloses the estimated effect on net
income of these share-based payments in the notes to the
financial statements. The estimated fair value (cost) of
the share-based payments has historically been determined using
the Black-Scholes pricing model. As of the date of this report,
the Company had not calculated the cost of share-based payments
using the various other methods allowed by
SFAS No. 123R and has not yet decided on the method to
be used upon implementation of this standard. The actual
compensation cost resulting from share-based payments to be
included in the Company's future results of operations may
vary significantly from the amounts currently disclosed in the
notes to the financial statements.
(3)
Property and Equipment, Net
The components of property and equipment at January 29,
2005 and January 31, 2004 are as follows:
January 29,
January 31,
2005
2004
Land
$
810,000
$
810,000
Building
1,340,000
1,340,000
Leasehold improvements
12,134,815
8,885,163
Furniture, fixtures, and equipment
13,660,714
9,000,105
Computer equipment
6,535,924
4,823,922
34,481,453
24,859,190
Accumulated depreciation and amortization
16,907,686
12,109,589
$
17,573,767
$
12,749,601
Depreciation expense for fiscal 2004, 2003 and 2002 was
$4,848,537, $4,011,456 and $2,999,666, respectively. Computer
equipment held under capital leases and related accumulated
depreciation was $4,466,372 and $3,103,821, respectively, at
January 29, 2005 and $3,373,409 and $2,448,245,
respectively, at January 31, 2004.
F-12
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
(4)
Revolving Lines of Credit
The Company has a revolving line of credit secured by
substantially all of the Company's assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2007. At January 29, 2005, the line of
credit provided for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $25,000,000 or the
Company's borrowing base (approximately $23,500,000 at
January 29, 2005), as defined in the credit agreement.
Borrowings under this secured line of credit bear interest at
either the prime rate or the Eurodollar rate plus 2.25%, at the
Company's election, based on conditions in the credit
agreement. Additionally, there is a letter of credit fee of
1.25% per annum on the outstanding balance of letters of credit.
At January 29, 2005, there were no outstanding borrowings
on the revolving line of credit, nor were there any outstanding
letters of credit. Under the terms of the credit agreement, the
Company is required to maintain a minimum tangible net worth.
The Company was in compliance with this requirement at
January 29, 2005.
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that expires in
June 2005. At January 29, 2005, the line of credit provided
for aggregate cash borrowings up to $3,000,000. Borrowings under
the credit agreement bear interest at the London Interbank
Offered Rate ("LIBOR") plus 2.00%. At January 29,
2005, there were no outstanding borrowings on the unsecured
revolving line of credit.
The Company borrows funds under these revolving lines of credit
from time to time and subsequently repays such borrowings with
available cash generated from operations.
(5)
Long-term Debt and Capital Lease Obligations
Capital Leases.
The Company has capital lease obligations
that finance the purchase of its computer equipment. These
obligations have maturity dates ranging from March 2005 to
December 2007. The interest rates on these obligations range
from 7.2% to 11.5%. All of these obligations are secured by the
computer equipment.
F-13
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
As of January 29, 2005 and January 31, 2004, long-term
debt and capital lease obligations consist of the following:
January 29,
January 31,
2005
2004
Mortgage payable issued to finance purchase of land and
    building; payable in monthly installments of $14,913, including
    interest, through June 2007 with a balloon payment of $1,303,412
    due July 2007; interest at a fixed rate of 6.80%; secured by
    land and building
$
1,496,121
$
1,569,064
Non-negotiable three year junior subordinated note payable on
    September 30, 2007 issued in exchange for 600 shares of
    common stock
108,942
—
Capital lease obligations issued to finance purchase of computer
    equipment; payable in monthly installments averaging
    approximately $68,092, $45,357 and $15,889 in 2005, 2006 and
    2007, with maturity dates ranging from March 2005 to December
    2007; interest at rates ranging from 7.2% to 11.5%; secured by
    computer equipment
1,406,898
1,061,214
3,011,961
2,630,278
Less current portion of long-term debt and capital lease
    obligations
797,378
641,429
$
2,214,583
$
1,988,849
As of January 31, 2004, annual long-term debt and capital
lease obligation maturities are as follows:
Long-term
Capital Lease
Fiscal Year
Debt
Obligations
2005
$
78,953
$
801,112
2006
85,984
544,278
2007
1,440,126
182,639
1,605,063
1,528,029
Less portion attributable to future interest payments (at rates
    ranging from 7.2% to 11.5%)
—
(121,131
)
$
1,605,063
$
1,406,898
(6)
Income Taxes
The provision for income taxes for fiscal 2004, 2003 and 2002
consists of the following:
2004
2003
2002
Current:
Federal
$
3,910,115
$
2,987,496
$
2,136,445
State
764,726
577,535
423,050
4,674,841
3,565,031
2,559,495
Deferred:
Federal
(104,170
)
135,658
465,423
State
(19,671
)
26,225
76,319
(123,841
)
161,883
541,742
$
4,551,000
$
3,726,914
$
3,101,237
F-14
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
Income tax expense computed using the federal statutory rate is
reconciled to the reported income tax expense as follows for
fiscal 2004, 2003 and 2002:
2004
2003
2002
Statutory rate applied to income before income taxes
$
4,014,803
$
3,279,252
$
2,763,881
State income taxes, net of federal benefit
491,736
385,794
329,584
General business credits
(182,000
)
(161,023
)
(117,004
)
Dividends on preferred stock
110,313
66,240
—
Other
116,148
156,651
124,776
Provision for income taxes
$
4,551,000
$
3,726,914
$
3,101,237
The components of deferred tax assets and liabilities at
January 29, 2005 and January 31, 2004 are as follows:
2005
2004
Deferred tax assets:
$
518,531
$
189,682
Deferred rent amortization
850,156
572,515
Inventory capitalization
177,333
61,750
Vacation liability
171,477
129,071
Stock compensation
56,000
16,000
Other
1,773,497
969,018
Deferred tax liabilities:
Book and tax depreciation differences
(681,945
)
(188,881
)
Prepaid expenses
(462,832
)
(309,464
)
Goodwill
(170,652
)
(129,612
)
Other
(137,068
)
(143,902
)
(1,452,497
)
(771,859
)
Net deferred tax asset
$
321,000
$
197,159
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon
the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these
deductible differences. As such, a valuation allowance for
deferred tax assets was not considered necessary at
January 29, 2005 and January 29, 2004.
(7)
Preferred Shares Subject to Mandatory Redemption
The Company's Series A Preferred Stock is nonvoting
and has liquidation and dividend preferences over the common
stock. All outstanding shares of Series A Preferred Stock
can be redeemed by the Company with board of director approval,
and must be redeemed by April 2009 or earlier in the event of a
change in control or the liquidation of the Company, at a price
of $1,000 per share, plus accrued dividends. Dividends on
Series A Preferred Stock are cumulative at the rate of 9%
of the amount of capital contributed for such shares and are
payable upon the earlier of a declaration by the board of
directors or a change in control or
F-15
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
liquidation of the Company. At January 29, 2005 and
January 31, 2004 the Company had accrued interest and
dividends payable of $379,763 and $1,555,313, respectively.
During fiscal 2003, the Company's board of directors
adopted a resolution whereby the Company intends to begin
repaying its Series A Preferred Stock and all dividends
accrued thereon at a rate of $500,000 per quarter, beginning in
the second quarter of fiscal 2004. In fiscal 2004 the Company
paid dividends and interest of $1.5 million.
(8)
Stockholders' Equity
(a)
Stockholders Agreement
The Company is party to a Stockholders Agreement dated
April 13, 1999 (the "Stockholders Agreement")
with Hampshire Equity Partners II, L.P., George Bellino and
certain management stockholders. Pursuant to the Stockholders
Agreement, four members of the Company's board of directors
may be designated by the owners of the majority of the voting
stock beneficially owned by Hampshire Equity Partners and its
affiliates; the Company's stockholders have agreed
generally not to transfer their shares; the Company's
management stockholders have been granted tag-along rights in
the event of the sale of more than 50% of our common stock; the
Company's management stockholders have agreed to cooperate
in any sale of the company by Hampshire Equity Partners and the
Company has agreed to register shares of the Company's
common stock held by the stockholder parties in the event that
the Company registers additional shares of the Company's
common stock under the Securities Act, other than on a
registration statement on Form S-4 or S-8, or in connection
with an exchange offer, merger, acquisition, dividend
reinvestment plan, stock option or other employee benefit plan.
(b)
Equity Transactions with Officer
In December 2001, the Company issued options to an officer for
436,800 shares of common stock. Since the estimated fair market
value of the Company's common stock issued exceeded the
exercise price of these options on the date of grant, the
Company recognized charges to earnings during fiscal 2004, 2003
and 2002 of $44,627, $84,441 and $161,882, respectively.
Additional charges related to these options of $17,721 will be
recognized in fiscal 2005.
(c)
Equity Transactions with Majority Stockholder
In August 2003, the Company's board of directors adopted a
plan (the "Anti-Dilution Plan") whereby stock options
are to be issued to the Company's majority stockholder, as
well as certain defined members of management, in amounts
necessary to prevent the dilution of their ownership percentage
as a result of the issuance of stock options to other employees
of the Company. Options granted under this Anti-Dilution Plan
are to be issued at the estimated fair market value of the
Company's common stock on the date of grant and vest
immediately. This Anti-Dilution Plan was terminated. See
Note 12. During fiscal 2004 and 2003, the Company issued
stock options for 31,174 and 39,078 shares of common stock,
respectively, under this Anti-Dilution Plan, 29,562 and 37,050,
respectively, of which were issued to its majority stockholder.
Because the majority stockholder does not qualify as an
employee, FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation,"
required the Company to recognize a charge to earnings during
fiscal 2004 and 2003 of $58,672 and $38,832, respectively. The
fair value of the vested options was determined using the
Black-Scholes option-pricing model.
F-16
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
(d)
Stock Options
In 1999, the Company established the 1999 Citi Trends, Inc.
Stock Option Plan (the "Plan"). The Plan provides for
the grant of incentive and nonqualified options to key employees
and directors. The board of directors determines the exercise
price of option grants. Option grants generally vest in equal
installments over four years from the date of grant and are
generally exercisable up to ten years from the date of grant.
The Company has authorized up to 1,950,000 shares of common
stock for issuance under the Plan.
A summary of option activity in the Plan for fiscal 2004, 2003
and 2002 is as follows:
2004
2003
2002
Wtd Avg
Wtd Avg
Wtd Avg
Exercise
Exercise
Exercise
Shares
Price
Shares
Price
Shares
Price
Outstanding at beginning of period
1,791,374
0.77
1,728,896
0.40
1,718,496
$
0.38
Granted
124,774
6.75
192,478
3.79
46,800
2.09
Exercised
(15,600
)
0.38
—
—
—
—
Forfeited
(39,000
)
3.35
(130,000
)
0.65
(36,400
)
0.38
Outstanding end of period
1,861,548
1.12
1,791,374
0.77
1,728,896
0.40
Options exercisable end of period
1,616,498
0.67
1,383,096
0.49
962,910
$
0.38
At January 29, 2005 the range of exercise prices and
weighted-average remaining contractual life of outstanding
options was $0.38 to $6.85 and 6 years, respectively.
The following table summarizes the status of Company options
exercisable at January 29, 2005 by exercise price:
Total Intrinsic
Exercise Price &
Weighted Average
Value of Options
Fair Value of Stock
Number
Remaining
Number
at Date of
on Date of Grant
Quarter of Grant
Outstanding
Contractual Life
Exercisable
Grant
$0.38
(1)
4th Quarter 2001 and prior
1,552,096
5.4
1,498,146
$
336,000
$1.92
1st Quarter 2002
20,800
7.0
10,400
—
$2.69
2nd Quarter 2002
10,400
7.5
5,200
—
$3.62
2nd Quarter 2003
101,478
8.4
58,578
—
$3.81
3rd Quarter 2003
26,000
8.6
6,500
—
$4.46
4th Quarter 2003
26,000
8.8
6,500
—
$6.54
(2)
1st Quarter 2004
36,400
9.2
—
109,564
$6.81
(3)
2nd Quarter 2004
20,800
9.3
—
71,552
$6.85
(4)
3rd Quarter 2004
67,574
9.6
31,174
283,811
1,861,548
1,616,498
$
800,927
F-17
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
(1)
436,800 shares were granted during the 4th quarter 2001, the
    exercise price was $0.38 and the fair value of the options were
    $1.15.
(2)
36,400 shares were granted during the 1st quarter 2004, the
    exercise price was $6.54 and the fair value of the options were
    $9.55.
(3)
20,800 shares were granted during the 2nd quarter 2004, the
    exercise price was $6.81 and the fair value of the options were
    $10.25.
(4)
67,574 shares were granted during the 3rd quarter 2004, the
    exercise price was $6.85 and the fair value of the options were
    $11.05.
Since the estimated fair market value of the Company's
common stock exceeded the exercise price of the options
referenced in footnotes (2), (3) and (4) above on the
dates of their respective grants, the Company expects to
recognize charges related to these options of approximately
$83,000, $83,000, $83,000 and $26,000 in fiscal 2005, fiscal
2006, fiscal 2007 and fiscal 2008, respectively.
The fair value of options granted during the years ended
January 29, 2005, January 31, 2004 and
February 1, 2003 was $2.50, $1.31 and $0.80, respectively,
using the Black-Scholes option-pricing model, with the following
weighted average assumptions:
2005
2004
2003
Dividend yield
0.00%
0.00%
0.00%
Expected volatility
50.00%
50.00%
50.00%
Risk-free interest rate
2.50%
2.50%
3.60%
Expected life, in years
10 years
10 years
10 years
Forfeiture rate
10.00%
10.00%
10.00%
(9)
Commitments and Contingencies
The Company leases its stores under operating leases, which
generally have an initial term of five years with a five-year
renewal option. Future minimum rental payments under operating
leases having noncancelable lease terms at January 29, 2005
are as follows:
Fiscal Year:
2005
$
8,223,506
2006
7,318,638
2007
6,032,679
2008
4,706,191
2009
2,365,894
Thereafter
614,920
Total future minimum lease payments
$
29,261,828
Certain operating leases provide for fixed monthly rentals while
others provide for rentals computed as a percentage of net
sales. Certain operating leases provide for a combination of
both fixed monthly rental and rentals computed as a percentage
of net sales. Rental expense was $8,417,799, $6,363,257 and
$4,787,768 for the fiscal 2004, 2003 and 2002 (including
$723,471, $794,444 and $539,090 of percentage rent),
respectively.
The Company from time to time is involved in various legal
proceedings incidental to the conduct of its business, including
claims by customers, employees or former employees. The Company
is currently the defendant in a putative collective action
lawsuit commenced by a former employee under the Fair Labor
Standards Act. The suit is pending in District Court of the
United States for the Middle District of Alabama, Northern
Division. The plaintiff is seeking unpaid compensation and
benefits, liquidated damages, attorneys fees, costs and
injunctive relief. The case is in its early stages, and the
Company is in the process of
F-18
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
evaluating the claims made. While the Company's review of
the allegations is preliminary, it believes that its business
practices are, and were during the relevant periods, in
compliance with the law. While the Company is unable to predict
the outcome of this matter, it plans to defend this suit
vigorously.
(10)
Related Party Transactions
The Company is a party to an Amended and Restated Management
Consulting Agreement, or the consulting agreement, effective as
of February 1, 2004 with Hampshire Management Company LLC,
or the consultant, which is an affiliate of the Company's
majority stockholder, pursuant to which it provides the Company
with certain consulting services related to, but not limited to,
financial affairs, relationships with lenders, stockholders and
other third-party associates or affiliates, and the expansion of
the Company's business.
Term and Termination
The consulting agreement has a four year term and is subject to
automatic one year renewals each February 1, subject to
60 days prior notice of termination by either party. In
addition, either party has the right to terminate the consulting
agreement upon 90 days prior notice in the event of
(a) a sale of all or substantially all of our common stock
or assets, (b) a merger or consolidation in which we are
not the surviving corporation or (c) a registered public
offering of our common stock, which includes this offering. It
is expected that both parties to the consulting agreement will
waive any notice requirement for termination upon consummation
of the initial public offering.
Compensation
Under the consulting agreement, the Company pays the consultant
an annual management fee of $240,000, payable in monthly
installments. The Company agreed to indemnify the consultant,
its affiliates and associates, and each of the respective
owners, partners, officers, directors, members, employees and
agents of each, from and against any loss, liability, damage,
claim or expenses (including the fees and expenses of counsel)
relating to their performance under the consulting agreement.
Upon the consummation of the Company's IPO (see
Note 12), the Company intends to negotiate a termination of
the consulting agreement and has tentatively agreed to pay the
consultant a termination fee of $1.2 million before
December 31, 2005.
Included in operating expenses are management fees of $240,000,
$240,000 and $190,000 for fiscal 2004, 2003 and 2002,
respectively.
F-19
Table of Contents
Citi Trends, Inc.
Notes to Financial Statements—(Continued)
January 29, 2005, January 31, 2004 and
February 1, 2003
(11)
Valuation and Qualifying Accounts
The following table presents amounts that have been reserved on
the balance sheet.
Inventory
Shrinkage
Reserve
Balance at February 2, 2002
$
806,367
Additions charged to costs and expenses
2,066,634
Deductions
(1,808,188
)
Balance at February 1, 2003
$
1,064,813
Additions charged to costs and expenses
2,541,749
Deductions
(2,672,235
)
Balance at January 31, 2004
$
934,327
Additions charged to costs and expenses
2,917,053
Deductions
(2,629,883
)
Balance at January 29, 2005
$
1,221,497
Additions charged to costs and expenses is the result of
anticipated inventory shrinkage. Deductions represent actual
inventory shrinkage incurred from physical inventories taken
during the fiscal year.
(12)
Subsequent Events
(a)
Initial Public Offering
On February 28, 2005, the Company filed a Registration
Statement on Form S-1 with the Securities and Exchange
Commission to register shares in an initial public offering
("IPO"). The IPO is expected to be consummated during
the second quarter of 2005.
(b)
Long-Term Incentive Plan
On March 8, 2005 the Company adopted the 2005 Long-Term
Incentive Plan which will become effective upon the consummation
of the IPO. Under the Incentive Plan, the Company has reserved
910,000 shares of Common Stock for the grant of stock options
and other equity incentive awards.
(c)
Termination of Anti-Dilution Plan
On April 28, 2005, the Company terminated the Anti-Dilution
Plan discussed in Note 8(c).
(d)
Stock Split
In connection with the IPO, on May 11, 2005, the Board of
Directors approved a 26-for-1 stock split of the Company's
common stock. All share and per share amounts related to common
stock and stock options included in the accompanying financial
statements and footnotes have been restated to reflect the stock
split.
F-20
Table of Contents
Citi Trends, Inc.
Condensed Balance Sheets
October 29, 2005 and January 29, 2005
October 29,
January 29,
2005
2005
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
9,371,132
$
11,801,442
Marketable securities
32,581,066
—
Inventory
53,978,475
36,172,832
Prepaid and other current assets
3,388,950
2,600,933
Income tax receivable
1,285,052
—
Deferred tax asset
1,420,102
1,139,000
Total current assets
102,024,777
51,714,207
Property and equipment, net
21,796,574
17,573,767
Goodwill
1,371,404
1,371,404
Other assets
184,900
130,182
Total assets
$
125,377,655
$
70,789,560
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under revolving lines of credit
$
—
$
—
Accounts payable
34,798,307
28,132,301
Accrued expenses
5,691,159
3,199,772
Accrued compensation
5,014,246
2,537,643
Current portion of long-term debt
—
78,953
Current portion of capital lease obligations
725,291
718,425
Income taxes payable
—
2,455,247
Layaway deposits
1,494,753
252,791
Total current liabilities
47,723,756
37,375,132
Long-term debt, less current portion
—
1,526,110
Capital lease obligations, less current portion
563,565
688,473
Preferred shares subject to mandatory redemption
—
3,984,763
Deferred tax liability
1,075,690
818,000
Other long-term liabilities
3,221,896
2,632,114
Total liabilities
52,584,907
47,024,592
Stockholders' equity:
Common stock, $0.01 par value. Authorized 20,000,000; 13,034,270
    shares issued at October 29, 2005 and 9,460,750 shares
    issued at January 29, 2005; 12,868,520 shares outstanding
    at October 29, 2005 and 9,295,000 outstanding at
    January 29, 2005
130,343
94,608
Paid-in-capital
46,720,247
4,029,925
Retained earnings
26,106,708
19,828,628
Treasury stock, at cost; 165,750 shares as of October 29,
    2005 and January 29, 2005
(164,550
)
(164,550
)
Subscription receivable
—
(23,643
)
Total stockholders' equity
72,792,748
23,764,968
Commitments and contingencies (note 7)
Total liabilities and stockholders' equity
$
125,377,655
$
70,789,560
See accompanying notes to the condensed financial statements.
F-21
Table of Contents
Citi Trends, Inc.
Condensed Statements of Income
Thirty-Nine Weeks Ended October 29, 2005 and
October 30, 2004
October 29,
October 30,
2005
2004
(Unaudited)
Net sales
$
192,960,784
$
137,128,891
Cost of sales
119,038,450
86,288,238
Gross profit
73,922,334
50,840,653
Selling, general and administrative expenses
64,281,322
46,439,668
Income from operations
9,641,012
4,400,985
Interest income
499,403
16,734
Interest expense, including redeemable preferred stock dividend
(302,335
)
(574,324
)
Income before provision for income taxes
9,838,080
3,843,395
Provision for income taxes
3,560,000
1,479,707
Net income
$
6,278,080
$
2,363,688
Basic income per common share
$
0.55
$
0.25
Diluted income per common share
$
0.49
$
0.22
Average number of shares outstanding
Basic
11,348,502
9,305,400
Diluted
12,847,419
10,945,038
See accompanying notes to the condensed financial statements.
F-22
Table of Contents
Citi Trends, Inc.
Condensed Statements of Cash Flows
Thirty-nine Weeks Ended October 29, 2005 and
October 30, 2004
October 29,
October 30,
2005
2004
(Unaudited)
Operating activities:
Net income
$
6,278,080
$
2,363,688
Adjustment to reconcile net income to net cash provided by
    operating activities:
Dividends on preferred shares subject to mandatory redemption
100,308
243,338
Depreciation and amortization
4,369,232
3,587,207
Loss on disposal of property and equipment due to hurricane
    damage
161,506
—
Deferred income taxes
(23,412
)
—
Noncash compensation expense
75,531
92,142
Tax benefit on stock option exercise
1,316,621
—
Changes in assets and liabilities:
Inventory
(17,805,643
)
(17,618,342
)
Prepaid and other current assets
(576,850
)
(723,555
)
Other assets
(73,388
)
(13,071
)
Accounts payable
6,666,006
3,929,299
Accrued expenses and other long-term liabilities
2,601,051
1,969,512
Accrued compensation
2,476,603
887,067
Income tax payable/receivable
(3,740,299
)
(1,074,618
)
Layaway deposits
1,241,962
1,008,628
Net cash provided by (used in) operating activities
3,067,308
(5,348,705
)
Investing activities:
Investments in marketable securities
(32,581,066
)
—
Purchase of property and equipment
(8,431,852
)
(6,228,499
)
Net cash used in investing activities
(41,012,918
)
(6,228,499
)
Financing activities:
Gross borrowings under revolving line of credit
—
27,860,104
Gross repayments under revolving line of credit
—
(22,472,037
)
Repayments on long-term debt and capital lease obligations
(2,237,296
)
(626,077
)
Proceeds from payment of shareholder note receivable
23,691
11,000
Repayment of preferred shares subject to mandatory redemption
(3,605,000
)
(1,000,000
)
Proceeds from sale of stock
41,333,905
6,000
Net cash provided by financing activities
35,515,300
3,778,990
Net decrease in cash and cash equivalents
(2,430,310
)
(7,798,214
)
Cash and cash equivalents:
Beginning of period
11,801,442
9,954,232
End of period
$
9,371,132
$
2,156,018
Supplemental disclosure of cash flow information:
Cash paid for interest
$
664,750
$
296,900
Cash paid for income taxes
$
6,007,090
$
2,559,729
Purchases of property and equipment financed by entering into
    capital leases
$
514,191
$
670,503
See accompanying notes to the condensed financial statements.
F-23
Table of Contents
Citi Trends, Inc.
Notes to the Condensed Financial Statements (unaudited)
October 29, 2005
(1)
Basis of Presentation
The condensed balance sheet as of October 29, 2005, the
condensed statements of operations for the thirty-nine-week
periods ended October 29, 2005 and October 30, 2004,
and the condensed statements of cash flows for the thirty-nine
week periods ended October 29, 2005 and October 30,
2004 have been prepared by Citi Trends, Inc. (the
"Company"), without audit. The condensed balance sheet
at January 29, 2005 has been derived from the audited
financials statements at that date, but does not include all
required year end disclosures. In the opinion of management,
such statements include all adjustments considered necessary to
present fairly the Company's financial position as of
October 29, 2005 and January 29, 2005, and its results
of operations and cash flows at October 29, 2005 and
October 30, 2004 and for all periods presented.
Certain information and disclosures normally included in the
notes to the annual financial statements prepared in accordance
with U.S. generally accepted accounting principles have been
omitted from these condensed financial statements. The Company
suggests that you read its condensed financial statements in
conjunction with the financial statements and notes thereto
included in this prospectus.
The results of operations for the thirty-nine weeks ended
October 29, 2005 are not necessarily indicative of the
operating results that may be expected for the year ending
January 28, 2006.
(2)
Stock-Based Compensation
The Company applies the intrinsic-value-based method of
accounting prescribed by APB Opinion No. 25,
Accounting
for Stock Issued to Employees,
and related interpretations
including FASB interpretation (FIN) No. 44,
Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25
,
to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if
the current fair value of the underlying stock exceeds the
exercise price. The Company recognizes the fair value of stock
rights granted to non-employees in the accompanying condensed
financial statements. SFAS No. 123,
Accounting for
Stock-Based Compensation,
and SFAS No. 148,
Accounting for Stock-Based Compensation—Transition and
Disclosure, an amendment of FASB Statement No. 123
,
establishes accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and
the Company has adopted only the disclosure requirements of
SFAS No. 123, as amended. The following table
illustrates the effect on net income for the thirty-nine ended
October 29, 2005 and October 30, 2004 as if the
fair-value-based method had been applied to all outstanding and
unvested awards in the periods. Pro forma information regarding
net income and net income per share is required in order to
disclose the Company's net income as if it had accounted
for employee stock options under the fair value method of
SFAS No. 123,
Accounting for Stock-Based
Compensation,
as amended by SFAS No. 148,
Accounting for
F-24
Table of Contents
Stock-Based Compensation—Transition Disclosure
. The
fair values of options and shares issued pursuant to its option
plan at each grant date were estimated using the Black-Scholes
option pricing model.
Thirty-Nine Weeks
2005
2004
Net income, as reported
$
6,278,080
$
2,363,688
Add stock-based employee compensation expense included in
    reported net income, net of tax of $27,336 and $33,355,
    respectively, for the thirty-nine weeks
48,195
58,787
Deduct total stock-based employee compensation expense
    determined under fair-value-based method for all awards, net of
    tax of $98,350 and $101,582, respectively, for the thirty-nine
    weeks
(173,335
)
(179,032
)
Pro forma net income
$
6,152,940
$
2,243,443
As reported basic income per common share
$
.55
$
.25
Pro forma basic income per common share
$
.54
$
.24
As reported diluted income per common share
$
.49
$
.22
Pro forma diluted income per common share
$
.48
$
.20
(3)
Earnings per Share
Earnings per common share amounts are based on the weighted
average number of common shares outstanding and diluted earnings
per share amounts are based on the weighted average number of
common shares outstanding plus the incremental shares that would
have been outstanding upon the assumed exercise of all dilutive
stock options.
The following table provides a reconciliation of the number of
average common shares outstanding used to calculate earnings per
share to the number of common shares and common share
equivalents outstanding used in calculating diluted earnings per
share for the thirty-nine weeks ended October 29, 2005 and
October 30, 2004:
2005
2004
Average number of common shares outstanding
11,348,502
9,305,400
Incremental shares from assumed exercises of stock options
1,498,917
1,639,638
Average number of common shares and common stock equivalents
    outstanding
12,847,419
10,945,038
For the thirty-nine weeks ended October 29, 2005 and
October 30, 2004 there were 4,000 and 0 options,
respectively, outstanding to purchase shares of common stock
excluded from the calculation of diluted earnings per share
because of anti-dilution.
(4)
Marketable Securities
Marketable securities consist primarily of auction rate
municipal securities which are highly liquid, variable rate debt
securities. While the underlying security has a long-term
nominal maturity, the interest rate is periodically reset
through dutch auctions typically every thirty-five days. Since
these auction rate securities are priced and subsequently trade
at short-term intervals they are classified as current assets.
F-25
Table of Contents
The Company classifies all investments as available-for-sale.
Available-for-sale securities are carried at estimated fair
value, based on available market information, with unrealized
gains and losses, if any, reported as a component of
stockholders' equity. As a result of the resetting variable
rates, the carrying value of available-for-sale securities
approximates fair market value due to their short maturities.
For these reasons, the Company has no cumulative gross
unrealized or realized gains or losses from these investments.
All income generated from these investments was recorded as
interest income. The Company has no investments considered to be
trading securities.
(5)
Revolving Lines of Credit
The Company has a revolving line of credit secured by
substantially all of the Company's assets pursuant to which
the Company pays customary fees. This secured line of credit
expires in April 2007. At October 29, 2005, the line of
credit provided for aggregate cash borrowings and the issuance
of letters of credit up to the lesser of $25,000,000 or the
Company's borrowing base (approximately $25,000,000 at
October 29, 2005), as defined in the credit agreement.
Borrowings under this secured line of credit bear interest at
either the prime rate or the Eurodollar rate plus 2.25%, at the
Company's election, based on conditions in the credit
agreement. Additionally, there is a letter of credit fee of
1.25% per annum on the outstanding balance of letters of credit.
At October 29, 2005, there were no outstanding borrowings
on the revolving line of credit, nor were there any outstanding
letters of credit. Under the terms of the credit agreement, the
Company is required to maintain a minimum tangible net worth.
The Company was in compliance with this requirement at
October 29, 2005.
In September 2003, the Company entered into an annual unsecured
revolving line of credit with Bank of America that expires on
June 30, 2006. At October 29, 2005, the line of credit
provided for aggregate cash borrowings up to $3,000,000.
Borrowings under the credit agreement bear interest at LIBOR
plus 2.00%. At October 29, 2005, there were no outstanding
borrowings on the unsecured revolving line of credit.
(6)
Equity Transactions with Majority Stockholder
In August 2003, the Company's board of directors adopted
the Anti-Dilution Plan whereby stock options were to be issued
to the Company's majority stockholder, as well as certain
defined members of management, in amounts necessary to prevent
the dilution of their ownership percentage as a result of the
issuance of stock options to other employees of the Company.
Options granted under this Anti-Dilution Plan were to be issued
at the estimated fair market value of the Company's common
stock on the date of grant and vest immediately. On
April 28, 2005 the Company terminated the Anti-Dilution
Plan. During the thirty-nine week periods ended October 29,
2005 and October 30, 2004, the Company issued 0 and 31,174
stock options, respectively, under this Anti-Dilution Plan.
(7)
Contingencies
The Company from time to time is involved in various legal
proceedings incidental to the conduct of its business, including
claims by customers, employees or former employees. While
litigation is subject to uncertainties and the outcome of any
litigated matter is not predictable, the Company is not aware of
any legal proceedings pending or threatened against it that it
expects to have a material adverse effect on its financial
condition or results of operations.
(8)
Related Party Transactions—Management Consulting
    Agreement
The Company was a party to an Amended and Restated Management
Consultant Agreement, or the Consulting Agreement, effective as
of February 1, 2004 with Hampshire Management Company LLC,
or the Consultant, which is an affiliate of the Company's
majority stockholder, pursuant to which the Consultant provided
the Company with certain consulting services related to, but not
limited to, financial affairs, relationships with lenders,
stockholders and other third-party associates or affiliates, and
the expansion of the
F-26
Table of Contents
Company's business. In connection with the Company's
initial public offering (see note 10), the parties
terminated the Consulting Agreement and the Company paid the
Consultant a one time termination fee of $1.2 million in
the second quarter of 2005.
Included in operating expenses were management fees of $72,857
and the termination fee of $1.2 million for the thirty-nine
weeks ended October 29, 2005 and management fees of
approximately $180,000 for the thirty-nine weeks ended
October 30, 2004.
(9)
Long-Term Incentive Plan
On March 8, 2005 the Company adopted the 2005 Long-Term
Incentive Plan which became effective upon the consummation of
the initial public offering. Under the Incentive Plan, the
Company may grant up to 1.3 million shares of common stock
that may be issued for the grant of stock options and other
equity incentive awards. In the thirty-nine weeks ended
October 29, 2005, the Company issued approximately 172,000
options under this plan.
(10)
Initial Public Offering
On May 18, 2005, the Company completed the initial public
offering, or IPO, of its common stock as a result of which the
Company issued and sold 2,700,000 shares of common stock at
$14.00 per share. In addition, the Company received notice on
May 27, 2005, that the underwriters had exercised the
over-allotment option granted in connection with the IPO,
pursuant to which the Company issued and sold an additional
577,500 shares on June 1, 2005. Upon completing the
offering and the over-allotment option, the Company received
gross proceeds of approximately $45.9 million and incurred
approximately $4.8 million in expenses in connection with
the IPO, for net proceeds of approximately $41.1 million.
In addition, 1,150,000 shares of common stock were sold in the
IPO by certain selling stockholders of the Company, for which
the Company received no proceeds. As a result, upon the closing
of the offering, there were 12,602,154 shares of common stock
outstanding. The Company's common stock is listed on NASDAQ
under the symbol "CTRN".
(11)
Stock Split
In connection with the IPO, on May 11, 2005, the Board of
Directors approved a 26-for-1 stock split of the Company's
common stock. All share and per share amounts related to common
stock and stock options included in the accompanying condensed
financial statements and notes have been restated to reflect the
stock split.
(12)
Use of IPO Proceeds
The Company received net proceeds of approximately
$41.2 million from the IPO. Following the closing of the
IPO, each of the Company's 3,605 shares of mandatory
redeemable preferred stock were redeemed and extinguished for
approximately $3.6 million, and the Company repaid in full
the mortgage on its Fahm Street Headquarters and Distribution
Center in the amount of approximately $1.5 million.
Subsequent to the IPO the Company has invested approximately
$30.2 million of the proceeds in short term investments and
has spent approximately $4.3 million on capital
expenditures for new stores and approximately $1.6 million
to date for a distribution center in Darlington, South Carolina.
(13)
Recent Accounting Pronouncements
In December of 2004, the FASB issued SFAS No. 123R,
"Share-Based Payment," which replaces the requirements
under SFAS No. 123 and APB No. 25.
SFAS No. 123R sets accounting requirements for
"share-based" compensation to employees, including
employee stock purchase plans, and requires all share-based
payments, including employee stock options, to be recognized in
the financial statements of the Company based on their fair
value. It carries forward prior guidance on accounting for
awards to non-
F-27
Table of Contents
employees. The accounting for employee stock ownership plan
transactions will continue to be accounted for in accordance
with Statement of Position 93-6, while awards to most
non-employee directors will be accounted for as employee awards.
This Statement is effective for public companies that do not
file as small business issuers as of the beginning of their
first annual period beginning after June 15, 2005 (the
Statement is effective January 29, 2006 for the Company).
The impact of adopting SFAS No. 123R will be dependent
on numerous factors including, but not limited to, the valuation
model chosen by the Company to value stock-based awards; the
assumed award forfeiture rate; the accounting policies adopted
concerning the method of recognizing the fair value of awards
over the requisite service period; and the transition method
chosen for adopting SFAS No. 123R. The Company has
preliminarily estimated the effects of adoption of
SFAS No. 123R will result in an additional
compensation expense of $1.0-1.5 million in fiscal 2006.
In May, 2005, the FASB issued SFAS No. 154
"Accounting Changes and Error Corrections: a replacement of
APB Opinion No. 20 and FASB Statement No. 3."
Statement 154 requires retrospective application for voluntary
changes in accounting principle unless it is impracticable to do
so. The requirements are effective for accounting changes made
in fiscal years beginning after December 12, 2005. The
Company has assessed the impact of Statement 154, and does not
expect it to have an impact on its financial position, results
of operations or cash flows.
F-28
Table of Contents
PICTURES OF STORES
Table of Contents
1,500,000 Shares
Common Stock
PROSPECTUS
January      , 2006
CIBC World Markets
Piper Jaffray
SG Cowen & Co.
Wachovia Securities
You should rely only on information contained in this
prospectus. No dealer, salesperson or other person is authorized
to give information that is not contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in
this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.
Table of Contents
Part II
Information Not Required in Prospectus
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by the
registrant in connection with the sale of the securities being
registered. All amounts are estimates.
SEC registration fee
$
7,400
NASD filing fee
3,500
Printing
100,000
Legal fees and expenses
125,000
Accounting fees and expenses
125,000
Transfer agent and registrar fees
5,000
Miscellaneous
75,000
Total
$
440,900
Item 14.
Indemnification of Directors and Officers.
As permitted by Section 102(b)(7) of the Delaware General
Corporation Law, we have adopted provisions in our second
amended and restated certificate of incorporation and amended
and restated by-laws that limit or eliminate the personal
liability of our directors for a breach of their fiduciary duty
of care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information
reasonable available to them. Consequently, a director will not
be personally liable to us or our stockholders for monetary
damages or breach of fiduciary duty as a director except for:
•
any breach of the director's duty of loyalty to us or our
    stockholders;
•
any act or omission not in good faith or that involves
    intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends; or
•
any transaction from which the director derived an improper
    personal benefit.
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission. Our
second amended and restated certificate of incorporation also
authorizes us to indemnify our officers, directors and other
agents to the fullest extent permitted under Delaware law.
As permitted by Section 145 of the Delaware General
Corporation Law, our amended and restated by-laws provide that:
•
we may indemnify our directors, officers and employees to the
    fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions;
•
we may advance expenses to our directors, officers and employees
    in connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions; and
•
the rights provided in our amended and restated by-laws are not
    exclusive.
II-1
Table of Contents
Our second amended and restated certificate of incorporation,
attached as Exhibit 3.1 to our Registration Statement on
Form S-1 filed with the SEC on February 28, 2005, and
our amended and restated by-laws, attached as Exhibit 3.2
to our Registration Statement on Form S-1 filed with the
SEC on February 28, 2005, provide for the indemnification
provisions described above and elsewhere herein. In addition, we
have purchased a policy of directors' and officers'
liability insurance that insures our directors and officers
against the cost of defense, settlement or payment of a judgment
in some circumstances. These indemnification provisions may be
sufficiently broad to permit indemnification of our officers and
directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act of 1933, as amended
(the "1933 Act").
The form of Underwriting Agreement, to be filed by amendment,
provides for indemnification by the underwriters of us and our
officers and directors for specified liabilities, including
matters arising under the 1933 Act.
Item 15.
Recent Sales of Unregistered Securities.
Set forth below in reverse chronological order is information
regarding the number of shares of capital stock and options
issued by us since January 2003. Also included is the
consideration if any received by us for the securities.
There was no public offering in any such transaction and we
believe that each transaction was exempt from the registration
requirements of the 1933 Act, by reason of Regulation D and
Section 4(2) of the 1933 Act, based on the private nature
of the transactions and the financial sophistication of the
purchasers, all of whom had access to complete information
concerning us and acquired the securities for investment and not
with a view to the distribution thereof. In addition, we believe
that the transactions described below with respect to the
issuance of option grants and warrants to our employees and
directors were exempt from registration requirements of the 1933
Act by reason of Rule 701 promulgated thereunder.
Common Stock
In January 2004, a former employee of ours resigned with 15,600
shares of vested stock options. The employee exercised his
options in March 2004 pursuant to the provisions of our Amended
and Restated 1999 Stock Option Plan and we issued to him shares
of our common stock. In September 2004, pursuant to the terms
and conditions of our Amended and Restated 1999 Stock Option
Plan, we repurchased the 15,600 shares of common stock from him
for the then fair market value of the common stock. As
consideration we issued him a non-negotiable three year junior
subordinated note in the amount of $106,800. The common shares
we repurchased are currently held by us in treasury stock.
Options
On March 10, 2004, Messrs. Lupo and Noll received
options to purchase 2,600 shares of our common stock at an
exercise price of $6.54 per share. Also in fiscal 2004, we
granted Messrs. Anderson, Bellino and Noll options to
purchase 312, 676 and 156 shares of our common stock,
respectively, at an exercise price of $6.85 per share.
Additionally, during fiscal 2004, certain employees, including
buyers and district managers, received options to purchase an
aggregate of 88,868 shares of our common stock pursuant to the
terms of our Amended and Restated 1999 Stock Option Plan.
In August 2003, our board of directors adopted an Anti-Dilution
Plan whereby stock options are to be issued to Hampshire Equity
Partners II, L.P., as well as other common stockholders, in
amounts necessary to prevent the dilution of their ownership
percentage as a result of the issuance of stock options to our
other employees. Options granted under this Anti-Dilution Plan
are to be issued at the estimated fair market value of our
common stock on the date of grant and vest immediately. The
Anti-Dilution Plan was terminated effective on
II-2
Table of Contents
April 28, 2005. See Note 12 to our consolidated
financial statements. During fiscal 2004 and fiscal 2003, we
issued stock options for 31,174 and 39,078 shares of common
stock, respectively, under this Anti-Dilution Plan, 37,050 of
which were issued to Hampshire Equity Partners II, L.P.
Because Hampshire Equity Partners II, L.P. does not qualify
as an employee, FIN No. 44 required us to recognize a
charge to earnings during fiscal 2004 and fiscal 2003 of $58,672
and $38,832, respectively. The fair value of the vested options
was determined using the Black-Scholes option-pricing model.
Item 16.
Exhibits and Financial Statement Schedules
(a)
Exhibits
. The following exhibits are filed as
part of this registration statement:
Exhibit No.
Description
1.1
Form of Underwriting Agreement******
3.1
Form of Second Amended and Restated Certificate of Incorporation*
3.2
Form of Amended and Restated By-laws*
4.1
Specimen certificate for shares of common stock, $.01 par
    value***
5.1
Opinion of Paul, Hastings, Janofsky & Walker LLP*****
10.1
Amended and Restated Employment Agreement by and between R.
    Edward Anderson and Citi Trends, Inc., dated as of
    December 30, 2005****
10.2
Amended and Restated Employment Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of December 30,
    2005****
10.3
The Loan and Security Agreement, dated as of April 2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.*
10.4
First Amendment to Loan and Security Agreement, dated as of
    June 28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*
10.5
Second Amendment to Loan and Security Agreement, dated as of
    November 30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*
10.6
Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.*
10.7
Fourth Amendment to Loan and Security Agreement, dated as of
    February 9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.*
10.8
Lease Agreement, dated as of September 30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant*
10.9
$3.0 Million Promissory Note of Citi Trends, Inc. payable to
    Bank of America issued on June 21, 2004*
10.1
0
Form of 2005 Long Term Incentive Plan*
10.1
1
Form of Nominating Agreement by and between Citi Trends, Inc.
    and Hampshire Equity Partners II, L.P.**
II-3
Table of Contents
Exhibit No.
Description
14.1
Citi Trends, Inc. Code of Business Conduct***
23.1
Consent of KPMG LLP*****
23.2
Consent of Paul Hastings, Janofsky & Walker LLP
    (included in Exhibit 5.1)*****
24.1
Power of Attorney*****
*
Previously filed as an exhibit to the Registration Statement on
    Form S-1 (File No. 333-123028) filed with the
    Securities and Exchange Commission on February 28, 2005.
**
Previously filed as an exhibit to Amendment No. 1 to the
    Registration Statement on Form S-1 (File
    No. 333-123028) filed with the Securities and Exchange
    Commission on April 7, 2005.
***
Previously filed as an exhibit to Amendment No. 2 to the
    Registration Statement on Form S-1 (File
    No. 333-123028) filed with the Securities and Exchange
    Commission on April 29, 2005.
****
Previously filed as an exhibit to the Current Report on
Form 8-K
(File
    No.
000-51315)
filed with the Securities and Exchange Commission on
    December 30, 2005.
*****
Filed herewith.
******
To be filed by amendment.
Item 17.
Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
    Securities Act of 1933, as amended, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance upon Rule 430A and contained in a
    form of prospectus filed by the registrant pursuant to Rule
    424(b)(1) or (4) or 497(h) under the Securities Act of
    1933, as amended, shall be deemed to be part of this
    registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
    Securities Act of 1933, as amended, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
II-4
Table of Contents
Signatures
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed on its
behalf by the undersigned, thereunto duly authorized, in The
City of New York, State of New York, on the 5th of January, 2006.
CITI TRENDS, INC.
By:
/s/
R. Edward Anderson
R. Edward Anderson
Chief Executive
    Officer (Principal Executive Officer)
By:
/s/
Thomas W. Stoltz
Thomas W. Stoltz
Chief Financial
    Officer (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registrant's Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
Signature
Title
Date
/s/
R. Edward Anderson
R. Edward Anderson,
on behalf of himself as well as Attorney-in-Fact
Chief Executive Officer (Principal Executive Officer)
January 5, 2006
/s/
Thomas W. Stoltz
Thomas W. Stoltz,
on behalf of himself as well as Attorney-in-Fact
Chief Financial Officer (Principal Financial and Accounting
    Officer)
January 5, 2006
*
Gregory P. Flynn
Director
January 5, 2006
*
John S. Lupo
Director
January 5, 2006
*
Patricia M. Luzier
Director
January 5, 2006
*
Tracy L. Noll
Director
January 5, 2006
*By: /s/
R. Edward
    Anderson
R. Edward Anderson
Attorney-in-Fact
*By: /s/
Thomas W.
    Stoltz
Thomas W. Stoltz Attorney- in-Fact
II-5
Table of Contents
Exhibit Index
Exhibit No.
Description
1.1
Form of Underwriting Agreement******
3.1
Form of Second Amended and Restated Certificate of Incorporation*
3.2
Form of Amended and Restated By-laws*
4.1
Specimen certificate for shares of common stock, $.01 par
    value***
5.1
Opinion of Paul, Hastings, Janofsky & Walker LLP*****
10.1
Amended and Restated Employment Agreement by and between R.
    Edward Anderson and Citi Trends, Inc., dated as of
    December 30, 2005****
10.2
Amended and Restated Employment Agreement by and between George
    Bellino and Citi Trends, Inc., dated as of December 30,
    2005****
10.3
The Loan and Security Agreement, dated as of April 2, 1999,
    by and between Congress Financial Corporation (Southwest) and
    Allied Fashion, Inc.*
10.4
First Amendment to Loan and Security Agreement, dated as of
    June 28, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*
10.5
Second Amendment to Loan and Security Agreement, dated as of
    November 30, 2000, by and between Congress Financial
    Corporation (Southwest) and Allied Fashion, Inc.*
10.6
Third Amendment to Loan and Security Agreement, dated as of
    January 2003, by and between Congress Financial Corporation
    (Southwest) and Citi Trends, Inc.*
10.7
Fourth Amendment to Loan and Security Agreement, dated as of
    February 9, 2005, by and between Congress Financial
    Corporation (Southwest) and Citi Trends, Inc.*
10.8
Lease Agreement, dated as of September 30, 2004, by and
    between Meyer Warehouse, LLC, as landlord, and Citi Trends,
    Inc., as tenant*
10.9
$3.0 Million Promissory Note of Citi Trends, Inc. payable to
    Bank of America issued on June 21, 2004*
10.1
0
Form of 2005 Long Term Incentive Plan*
10.1
1
Form of Nominating Agreement by and between Citi Trends, Inc.
    and Hampshire Equity Partners II, L.P.**
14.1
Citi Trends, Inc. Code of Business Conduct***
23.1
Consent of KPMG LLP*****
Table of Contents
Exhibit No.
Description
23.2
Consent of Paul Hastings, Janofsky & Walker LLP
    (included in Exhibit 5.1)*****
24.1
Power of Attorney (included on signature page hereto)*****
*
Previously filed as an exhibit to the Registration Statement on
    Form S-1 (File No. 333-123028) filed with the
    Securities and Exchange Commission on February 28, 2005.
**
Previously filed as an exhibit to Amendment No. 1 to the
    Registration Statement on Form S-1 (File
    No. 333-123028) filed with the Securities and Exchange
    Commission on April 7, 2005.
***
Previously filed as an exhibit to Amendment No. 2 to the
    Registration Statement on Form S-1 (File
    No. 333-123028) filed with the Securities and Exchange
    Commission on April 29, 2005.
****
Previously filed as an exhibit to the Current Report on
Form 8-K
(File
    No. 000-51315) filed with the Securities and Exchange
    Commission on December 30, 2005.
*****
Filed herewith.
******
To be filed by amendment.