SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended July 31, 2001

                                       OR

                        Commission file number 000-28499

                         JAGGED EDGE MOUNTAIN GEAR, INC.
                     --------------------------------------
             (Exact name of registrant as specified in its charter)

            COLORADO                                   84-144-8778
            --------                                   -----------
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                   Identification Number)

55 E. 100 S. Moab, UT                                     84532
---------------------------------------                   -----
(Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (435) 259-8900

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $.001 PER SHARE

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X ] No [ ]

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]


      The issuer's revenues for its most recent fiscal year were $3,190,761

  As of November 13, 2001, the aggregate market value of the registrant's voting
stock held by non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such stock was
approximately $621,800.

  As of November 13, 2001, the number of shares of the registrant's Common Stock
outstanding was 17,759,978.



<PAGE>



                                     PART I

Item 1.  Business.

                                     GENERAL

This Annual Report on Form 10-KSB contains forward-looking statements that
involve risks and uncertainties. The statements contained herein that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, including without
limitation statements regarding the Company's expectations, beliefs, intentions
or strategies regarding the future. All forward-looking statements included in
this document or incorporated by reference herein are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Actual results,
events, or performance could differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors, including those
set forth in "Factors that may Affect the Company's Business," and elsewhere
herein.

Jagged Edge Mountain Gear, Inc., a Colorado corporation, (NASDAQ OTC Bulletin
Board (OTCBB) - JEMG) was originally formed as a Utah LLC and was converted to a
Colorado Corporation on July 27, 1997. Jagged Edge Mountain Gear, Inc. ("JEMG"
or the "Company"), designs, produces and distributes technically sophisticated
outdoor clothing and accessories, using high-performance fabrics, for outdoor
sports activities under the name Jagged Edge Mountain Gear. The Company
currently owns and operates three retail stores under the name Jagged Edge
Mountain Gear, a wholesale division, a retail catalog mail-order division and a
retail Internet site. The retail stores are all located in Colorado ski resort
towns. The catalog and Internet site cover a national market. Wholesale sales
are both domestic and international.

During the fiscal year ended July 31, 2001, the Company was not involved in any
bankruptcy, receivership or similar proceeding nor did it engage in any material
reclassification, or consolidation. During that period, the Company did not
dispose of any material amounts of its assets other than in the ordinary course
of its business.

As a result of significant losses from operations and working capital shortages,
Jagged Edge Mountain Gear, Inc.'s independent accountants have included a going
concern qualification in their audit opinion. See "Management's Discussion and
Analysis" for the Company's discussion of its financial condition and results of
operations.

The  Company's  primary  means of  distribution  of its products  are:

     o    Retail, through its own stores.
     o    Catalog mail order sales.
     o    Wholesale, through its wholesale division, supplying retail and
          wholesale accounts in both the US and overseas.
     o    E-commerce, through the Company's own website and through affil
          iations with major web portals.

The Company introduces a line consisting of new and revised products
approximately every six months. Each season, there are at least 60 products in
the line. The lines are shown and offered at national trade shows.

The Company's management believes that Jagged Edge Mountain Gear is one of the
world's premier brands of high-performance outdoor apparel, offering technical
superiority in fabrics, materials and construction coupled with a price point
below that of its' competition.

<PAGE>


                                INDUSTRY OVERVIEW

Climbers, skiers and serious outdoor enthusiasts have used technical outdoors
apparel and accessories historically. In recent years, these products have
become increasingly popular among a broader group of consumers. The Company
believes that this growth has been the result mainly of the following:

     o    An increase in outdoor recreational activities by the general
          population.
     o    A shift in consumer preferences leading to a growing demand for highly
          functional products rather than fashion-oriented products.
     o    Growing acceptances of outdoor apparel as casual wear.
     o    An increase in the technical sophistication of products in this field
          at an affordable price.

The trend towards more active outdoor lifestyles is demonstrated by increased
participation in a variety of outdoor activities such as snowboarding, skiing,
rock climbing, camping, hiking and backpacking. A 1997 survey by the Travel
Industry Association of America indicated that one-half of U.S. adults, or 74
million people, have taken an adventure travel trip in the past five years. Of
these, 31 million engaged in "hard" adventure activities like whitewater
rafting, scuba diving and mountain climbing. In addition, even individuals who
do not participate in outdoor activities, or require the functionality of a
high-performance product have increasingly worn outdoor or rugged apparel as
casual clothing. Casual wear in general also has become increasingly popular,
particularly in the workplace.

The Company believes that consumers are demonstrating an increasing preference
for functional, performance-oriented products. Consumer purchase decisions are
often driven as much by a desire to create a particular perception of them as
healthy and active as by an actual need for these products. An example of this
trend is the growing popularity of sport utility vehicles, which have become one
of the fastest growing segments of the automotive industry despite the fact that
less than 2% of owners of such vehicles ever venture off paved streets or
utilize the 4-wheel drive.

                                COMPANY OVERVIEW

The Company is a designer, distributor and marketer of technically sophisticated
outdoor apparel and rugged sportswear under the Jagged Edge Mountain Gear brand
name. Over the past 11 years, the Company has built a strong and widely
recognized reputation for high-quality, innovative and technically sophisticated
products, which management believes has established Jagged Edge Mountain Gear as
a respected premier specialty brand of outdoor apparel.

The Company offers a broad range of high-performance, technically sophisticated
outdoor apparel and accessories. The Company's goal is to offer the most
technically advanced products in its field. The Company designs many of its
products for extreme applications such as high altitude mountaineering, rock and
ice climbing, and back-country skiing. While management acknowledges that only a
small fraction of consumers who buy the Company's products purchase them
exclusively for participation in such activities, the ability of its products to
achieve high levels of performance under extreme conditions reinforces the
Jagged Edge Mountain Gear brand identity.

Jagged Edge Mountain Gear's corporate headquarters were located in Telluride,
Colorado, an upscale ski resort mountain town until May, 2001. At that time the
Company's management team made a decision to relocate its corporate and
administrative staff, and its headquarters are now located in Moab, Utah. Moab
is located in the heart of what is referred to as the "canyon country" of
southeastern Utah. Geographically Moab is the only town in Utah located on the
Colorado River, and is a town renown for its varied outdoor activities and
proximity to some of the best skiing, hiking, rock climbing, mountain biking,
and rafting in the world. It is also home to several world class athletes who
personify the Jagged Edge image. In addition to the economic benefits of moving
to Moab, the Company's management team feels that this outdoors town reflects
exactly what gives Jagged Edge its identity. The Company still owns and manages
its three Colorado retail stores.

<PAGE>

                                    PRODUCTS

The Company designs, manufactures, and sells a broad range of outerwear under
the brand name Jagged Edge Mountain Gear. The Company's products are often used
in severe weather and other extreme or adverse conditions. The Company product
lines include the flagship Telluride Mountain series - considered by many to be
the finest available, a new Gold Hill series - more moderately priced skiwear,
yet still full featured, and the Tectonic, North Wind, Jannu, and Cold Mountain
Windbloc series. Each series is designed and developed for specific weather
conditions and end use, and is produced with a target demographic in mind. The
Company strives to offer products at moderate price-points that appeal to a
broad consumer base; are higher in quality than many competitive products while
incorporating materials and technologies to create the most technically advanced
designs. Additionally, through the Company's retail locations the Company also
sells products that compliment the Jagged Edge line including accessories,
rugged footwear and other items. As a result of the more than 10 years of
experience gained as a provider of outdoor apparel, the Company believes it has
achieved and is recognized for the highest level of authenticity in the outdoor
apparel industry.

Management believes that its dedication to producing high-quality, innovative
and technically sophisticated products is exemplified by its marketing
statement, "The Journey is the Destination." The Journey represents the Daoist
philosophy of promoting the experience. The philosophy is not focusing on
achieving a summit, but promotes everything that goes on in one's heart, body
and mind. This simple, yet profound statement is the foundation for the
Company's corporate culture and differentiates Jagged Edge Mountain Gear from
any other company in the outdoor apparel industry.

Jagged Edge Mountain Gear products are original designs and carry a warranty
against defects in materials and workmanship. To date warranty claims for
product defects have been immaterial, but the Company cannot assure that future
claims will not increase. Further, in the event that the Company experiences
problems with product quality or reliability, its reputation as a provider of
high-quality products could suffer, which could have a material adverse effect
on the Company's business.


Outerwear:

The Company's outerwear products are organized into various product series and
categories, as described above. The Company's outerwear is designed to provide
protection from various combinations of cold, wet and windy conditions and to
accommodate the range of motion required for the most extreme outdoor
activities. In addition, many of the Company's outerwear products are designed
to adapt to varying conditions and situations, taking into account the
unpredictability of the weather and the fact that some outdoor activities
alternate between periods of extreme exertion and total rest, requiring a proper
balance between ventilation and insulation. Each year, the Company enhances its
outerwear lines by adding new products and design innovations. This year, for
example, the Company introduced its Tectonic series of outerwear garments.
Designed with skiing and snowboarding specifically in mind, these jackets and
pants are superb for all types of harsh weather activity. The price point is set
in a range that should appeal to a broader market segment. In the Fall 2000
Skiing Magazine equipment issue, Jagged Edge Mountain Gear was described as the
provider of garments, which should be worn to "fit in" with the local ski town
populations.

Accessories:

The Company offers various non-Jagged Edge accessories, soft goods and rugged
footwear for sale through its retail store locations. Backpacks, bags, maps,
other brand name clothing, hats, gloves/mittens, goggles and sunglasses are
items comprising this class of sales. These items are intended to complement the
Jagged Edge brand and translate into add-on sales in the retail locations.

<PAGE>


                        RESEARCH, DESIGN AND DEVELOPMENT

The Company's lead designer, along with other management and staff, bring more
than 30 years of experience individually, of mountaineering, rock and ice
climbing, trekking, and skiing trips. Through actual use of the Company's
products in extreme conditions, and building product based on "real use" for
superior function, the brand has achieved the highest level of authenticity in
the outdoor apparel industry.

The Company's goal is to offer the most technically advanced products in its
class and to establish standards for quality, performance, and price in each of
the Company's product categories. The Company evaluates consumer trends,
monitoring the needs and desires of customers, and works internally and with its
suppliers to further develop products to enhance product designs.

The Company regularly reviews its product lines and actively seeks input from a
variety of sources, including elite athletes, retailers, magazine reviews,
consumers and fabric suppliers.

                             MARKETING AND PROMOTION

The Company's goal is to increase brand awareness by projecting a high quality,
technically sophisticated and authentic image that appeals to core users and
serious outdoor enthusiasts, as well as to a broader segment of consumers. The
Company conveys such an image by featuring climbers, explorers and skiers using
the Company's products on high altitude expeditions and picturesque rock and ice
climbs. The Company's marketing materials utilize language and images that,
while directed to the extreme athlete, appeal to a broader segment of consumers.

The Company believes that it has obtained a high level of brand awareness and
loyalty from the extreme users of its products. In order to bolster brand
loyalty and to further enhance its authentic image, the Company has in place a
national print advertising campaign specifically targeting the skiing and
climbing audience. Print ads have run, or currently will be running in Skiing,
Powder, Backcountry, Rock and Ice, Climbing, Couloir, and other sports oriented
publications, which target the demographic population the Company feels purchase
its products. Moreover, gear reviews have been recently written in Climbing
Magazine, Outside, Hooked On The Outdoors, Skiing, Outdoor Retailer and other
magazines, all touting the excellence of the Jagged Edge garments.

The Company founders, Margaret A. Quenemoen (President/CEO), and Paula S.
Quenemoen (Executive Vice President), identical twin sisters, are well known in
the industry. Quite frequently, they are invited to discuss entrepreneurship or
other topics on various radio talk shows, or to participate in various
mountaineering presentations throughout the region. In the past the women have
also been featured on "Small Business 2000" a PBS television documentary, and
were the primary case study described in the Nahavandi & Malekzadeh textbook
"Organizational Behavior"; Prentice Hall, Copyright 1999. This textbook also
featured the Company in a 45-minute video presentation, an accompaniment to the
textbook. The Company believes this participation enhances the Jagged Edge
Mountain Gear image and further identifies Company management as users, testers,
and designers of the Company's technical outerwear.

                             SALES AND DISTRIBUTION

The Company currently markets its products through four primary sales divisions,
and each sales division contributes differing gross profit percentages to the
Company. 1) Jagged Edge owned and operated retail stores, 2) The retail catalog
division, 3) The Company's wholesale distribution network, and 4) The Company's
internet web site and other sales affiliations. Other revenue sources are
immaterial.

        o       Jagged Edge Retail Stores. Jagged Edge owned and operated retail
                store net sales were approximately $1,355,600 or 43% of total
                gross product sales during FY2001.
        o       Wholesale Distribution. The wholesale distribution network net
                sales were approximately $1,163,700 or 36% during FY2001. The
                wholesale division distributes product both domestically and
                internationally. International sales were approximately
                $164,400 and $253,300 during FY2001 an FY2000, respectively.

<PAGE>


        o       Retail Catalog Division.  The retail catalog division net sales
                were approximately $650,700 or 20%  of total gross sales
                during FY2001.
        o       Internet and other sales and revenue sources accounted for the
                bulk of remaining sales, approximately $58,000 or 1% during
                FY2001.

Company Operated Retail Stores

The Company's three retail stores are an important component of its marketing
and product development strategies and provide a targeted environment to
merchandise and sell Jagged Edge Mountain Gear product lines. Located in year
round ski resort communities, these stores carry a broad range of Jagged Edge
Mountain Gear products and complementary accessories from other manufacturers.
The Company believes that as a result of its ability to control the visual
presentation and product assortment in its retail stores, these stores help
build brand awareness and introduce consumers to a broad range of Jagged Edge
Mountain Gear products. These stores also provide a means for the Company to
test the appeal of new products and merchandising techniques. By working closely
with store personnel, many of whom are outdoor enthusiasts, the Company also
obtains customer feedback that influences product design and development.

The Company's retail stores are located in the following Colorado towns:
Telluride,(flagship store), Breckenridge, and Crested Butte. Although the
Company considers its retail stores to be an important aspect of its brand name
strategy, the Company currently has no plans to open additional retail stores,
although no assurances can be given.

Wholesale Sales

The Company's wholesale customers for FY2001 consisted, primarily; of large
specialty outdoor product retailers such as REI, and small independently owned
skiing or mountaineering specialty shops. The Company sells its products to
approximately 175 wholesale customers in the United States, representing an
estimated 150 storefronts. Internationally, the Company sells to approximately
25 wholesale distributors and brokers, representing an unknown amount of
storefronts.

The Company maintains a small service department to handle the repair or
replacement of defective or damaged merchandise.


Retail Catalog Division

The Jagged Edge Mountain Gear retail catalog division was located in the Jagged
Edge warehouse facility in Telluride, Colorado during the FY2001 season. For the
FY2001 season the Company printed and mailed approximately 475,000 full color
fall / winter catalogs. The mailings were to sent to a targeted customer
demographic provided by an independent agency that the Company felt best
represented its customer base.

The winter catalog  experienced an approximate 1.5% return rate with an average
order of $89. The Company did not publish a summer catalog. Management feels
that the fall / winter 2001 catalog was a tremendous success, delivering
substantially increased sales coupled with premium sales margins. During the
upcoming fall / winter season FY2002 the Company is printing and mailing 725,000
catalogs. Through more concentrated "add-on" sales and "systems" sales the
Company expects an overall return rate near 2.0% and $110.00 per order average,
although no assurances can be given.

Third-party carriers ship all of the Company's products. Primary carriers
include UPS, Federal Express, and US Postal service.

<PAGE>


Fluctuations in Sales

Sales of the Company's products historically have fluctuated due to conditions
beyond the Company's control, such as seasonality, climatic conditions, and
economic cycles. Variables such as weather patterns, poor or late ski seasons,
economic cycles, and other conditions that affect consumer spending in resort
communities, can have a significant effect on Company revenues. The Company's
results of operations may also vary from quarter to quarter as a result of,
among other things, the amount and timing of shipments to wholesale customers,
product received from overseas suppliers, and the timing of Company advertising
and marketing expenditures. In particular, since the Company sells its technical
mountain gear to skiers in the three resort towns in which it operates retail
stores, as well as through other retailers located in winter resorts, each
year's timing of, and amount of snowfall has a significant effect on customer
traffic and sales. On the positive side, sports enthusiasts in other geographic
areas, through retails stores supplied by the wholesale division, and in the
summer months in Colorado, continue to purchase Jagged Edge Mountain Gear year
round.

Warranty

Jagged Edge Mountain Gear products are warranted for defects in materials and
workmanship. Defects are repaired by the Company at the Company's cost, if the
applicable conditions to the warranty are satisfied. The Company historically
has incurred immaterial warranty costs and recognizes warranty expense at the
time of repair.

                            INTERNATIONAL OPERATIONS

The Company's business is subject to the risks generally associated with doing
business abroad. These risks include adverse fluctuations in currency exchange
rates (particularly those of the U.S. dollar against certain foreign
currencies), changes in import duties or quotas, the imposition of taxes or
other charges on imports, the impact of foreign government regulation, political
unrest, disruption or delays of shipment and changes in economic conditions in
countries in which the Company's suppliers are located.


                           SOURCING AND MANUFACTURING

Sources of Raw Materials

The Company has well-established relationships with several major suppliers of
materials in the marketplace. To diversify dependence on one of the two primary
fleece suppliers, orders have been historically divided between Huntington and
Malden Mills. Additionally, by creating garments in unrelated fabric
technologies, dependence on these major suppliers reduces the Company's exposure
and risk.

Orders for fabric, and to a lesser extent for completed garments, are typically
placed 6-9 months prior to the beginning of each sales season and only limited
re-ordering for fabric is possible after orders are placed. This long lead-time
is typical for the industry and requires accuracy in product sales forecasting
and cash flow management. Since a sales forecast will never be 100% correct,
some items will be short and some items will be over at the end of the year.
Factors that can affect sales are international, national, state and local
economies, weather conditions throughout the country, fashion trends, and other
uncontrollable factors.

The Company sources production of its products from unaffiliated manufacturers
primarily located in Canada, Korea, Sri Lanka, Japan, and the United States. The
Company believes that it has good relationships with its suppliers and
manufacturers and has the ability to secure the necessary capacity to meet any
foreseeable increase in demand for its products.

<PAGE>


To ensure that products manufactured for the Company are consistent with its
quality standards, the Company manages all key aspects of the production
process, including establishing product specifications, selecting the materials
to be used and the suppliers of such materials, and negotiating the prices for
such materials.

The Company has no long-term contracts with its manufacturing sources, and it
competes with other companies for production facilities and federal import quota
capacity. None of the manufacturers used by the Company produce the Company's
products exclusively. The Company has occasionally received, and may in the
future receive, shipments of products from manufacturers that fail to conform to
the Company's quality control standards. Any disruption in the Company's ability
to obtain manufacturing services could have a material adverse effect on the
Company's business.

The Company requires its independent manufacturers to operate in compliance with
applicable laws and regulations. Although the Company's internal and vendor
operating guidelines promote ethical business practices and the Company's
personnel periodically visit and monitor the operations of its independent
manufacturers, the Company does not control these vendors or their labor
practices. The violation of labor or other laws by an independent manufacturer
of the Company, or the divergence of an independent manufacturer's labor
practices from those generally accepted as ethical in the United States, could
result in adverse publicity for the Company and could have a material adverse
effect on the Company.

The Company imports a significant portion of its merchandise from contract
manufacturers located in the Far East, including China. From time to time, the
U.S. government has considered imposing punitive tariffs on apparel and other
exports from China. The imposition of any such tariffs could disrupt the supply
of the Company's products, which could have a material adverse effect on the
Company's results of operations.

                         MANAGEMENT INFORMATION SYSTEMS

During FY2001, The Company's management team planned to complete a computer
conversion and installation of a new integrated management information system as
discussed in the Form 10-KSB for the year ended July 31, 2000. Due to numerous
factors the computer conversion was stopped and a settlement was reached with
the outside consulting firm hired to perform this conversion. The Company is
currently operating with an upgraded version of its original software.

                                   COMPETITION

The Company's industry is intensely competitive, with several other
manufacturers of technical outdoor clothing competing in the national and
international marketplace. Moreover, there are now other non-technical clothing
companies entering the outerwear market. Jagged Edge Mountain Gear's primary
competitors include Patagonia, The North Face, Marmot, Mountain Hardware, Sierra
Designs and other technical outerwear manufacturers. The Company is still a
relatively small player in the industry, but has built strong brand name
recognition. The Company is recognized as a highly creative producer of
innovative and functional products. Through expected growth in revenues in the
Jagged Edge Mountain Gear retail stores, direct mail order catalog, wholesale
distribution, and the web site, Jagged Edge Mountain Gear expects that it will
continue to expand its market share, although there can be no assurance given
that this will happen.

The markets for the Company's products are highly competitive, with competition
based primarily on price, quality, brand name recognition (marketing) and
service. Although management believes that it does not compete directly with any
single company with respect to its entire range of products, the Company does
have significant competitors within each product category. In addition, as the
Company expands its product lines and offers products at a broader range of
price points, it will likely come into competition with additional outdoor
apparel and equipment companies. While the Company believes that it has been
able to compete successfully because of its brand image and recognition, the
broad range and quality of its products, and its selective distribution and
customer service policies, including the warranty its products carry, there can
be no assurance that the Company will be able to maintain or increase its market
share in the future.

<PAGE>


Consumer demand for the Company's products may be adversely affected, if
consumer interest in outdoor activities does not grow or declines. In addition,
competitors may have more resources to advertise and market their products,
capturing additional market share. If the Company is unable to respond
successfully to changes in consumer preferences, or if consumer preferences
shift toward competing products or away from the Company's product categories
altogether, the Company's business would be adversely affected. The Company
cannot assure future growth or consumer demand for its products. If consumer
interest in outdoor activities grows, more competitors, who are better financed,
may enter the market.

                            TRADEMARKS AND LICENSING

The Company has two trademarks registered with the United States Patent and
Trademark Office: "Jagged Edge Mountain Gear" and "Jagged Edge."

Jagged Edge Mountain Gear registered and owns the "JAGGED EDGE" trademark in
Japan.

The Company owns the domain name for its web site jagged-edge.com and has
recently purchased the domain name jaggededge.com.

Because of the popularity of many of the Company's products and their strong
brand identity and distinctive designs, The Company maintains an aggressive
program of trademark enforcement and cooperation with domestic and foreign
customs officials and other authorities, and will continue to vigorously defend
its trademarks against infringement. There is no assurance that the Company's
efforts to stop or reduce any copying or counterfeiting of its trademarks or
products will be successful, that the Company's trademarks will not violate the
proprietary rights of others, or that the Company will be able to avoid or
successfully defend challenges to its trademarks or other intellectual property
in the United States or abroad.

                                    EMPLOYEES

As of July 31, 2001, the Company had five non-retail store employees. In
addition, the Company had 10 retail store employees. These numbers fluctuate
significantly during "on" and "off" seasons.


Item 2.  Properties.

The principal executive, administrative and warehousing offices of the Company
were located at 52 Pilot Knob, Telluride Colorado, 81435 until May 2001. The
Company's management team made a strategic decision to move the corporate
headquarters to Moab, Utah due to spiraling costs associated with the Telluride
location. The general location, use and approximate size of the Company's
principal locations, all of which are leased, are set forth below:

<TABLE>
<CAPTION>


LOCATION                                          USE                 MONTHLY LEASE
--------                                          ---                 -------------
<S>                                               <C>                     <C>                         <C>
ACTIVE LEASES:
55 E. 100 S., Moab, UT 48532                  Administrative              $900/mo                   Expires: May 2002
129 W. Colo. Ave., Telluride, CO 81435        Retail                     $3,272/mo                 Expires: May 15, 2005
326 Main Street, Breckenridge, CO 80424       Retail                     $4,890/mo                 Expires: Sep. 1, 2002
201 Elk Avenue, Crested Butte CO 81224        Retail                     $4,103/mo                 Expires: June 2, 2015

EXPIRED OR TERMINATED:
52 Pilot Knob Lane, Telluride CO 81435        Corporate, Warehousing     $3,600/mo
Termination agreement reached with landlord.  Terminated May 2001.
612 Main Street, Ouray CO 81427               Retail                     $950/mo                   Expired: Feb. 28, 2001

565 Mt. Village Blvd, Mt Village, CO 81435    Retail                     $553/mo
Termination agreement reached with landlord.
</TABLE>


<PAGE>

Sublease of Location:

Ouray, CO: 612 Main Street, Ouray CO 81427
As of March 1, 2000, this location was sublet for the remaining term of the
Lease during the fiscal year.

Change of Location:

In May, 2001 the Telluride, CO corporate office was closed and replaced with the
Moab, Utah corporate office. The lease on the Telluride office was terminated.

Option to Purchase:

Jagged Edge Headquarters: 52 Pilot Knob Lane, Telluride CO 81435
The Company's  lease  contained an option to purchase the  property.  The option
expired June 1, 2000 and was not exercised.

Termination of Lease:

In October, 2000 the Company reached an agreement with the leasor of the
Telluride Mountain Village property. The lease on the property was terminated in
fiscal 2001.

Competitive Conditions

Jagged Edge Mountain Gear may experience competitive real estate market
conditions at the expiration of one or more of its leases. It is possible that
renewal may become difficult or economically unfavorable, however that has not
been the experience historically.

Insurance

The Company carries a comprehensive commercial business insurance policy
consisting of a commercial package, commercial auto, commercial umbrella, inland
marine, and workers' compensation coverage for the Company. The package provides
coverage for each of the Jagged Edge Mountain Gear retail locations.


Jagged Edge Mountain Gear Locations: Address, Square Footage, and Annual Rent:


CURRENTLY ACTIVE LEASES:
Jagged Edge Mountain Gear
Corporate Offices, Moab, UT: 55 E. 100 S., Moab, UT 84532
Area Square Feet: 1,100
Annual Rent: $10,800

Telluride, CO: 129 W. Colo. Avenue, Telluride, CO 81435
Area Square Feet: 1,838
Annual Rent: $39,300

Breckenridge, CO: 326 Main Street, Breckenridge, CO 80424
Area Square Feet: 1,100
Annual Rent: $58,700

<PAGE>


Crested Butte, CO: 201 Elk Avenue, Crested Butte CO 81224
Area Square Feet: 1,400
Annual Rent: $49,236

Gross Annual Current Rental:

The gross annual rental represented by Jagged Edge Mountain Gear leases totals
approximately $158,036.


TERMINATED LEASES DURING FISCAL YEAR:
Jagged Edge Mountain Gear Corporate
Offices:  52 Pilot Knob Lane,  Telluride CO 81435
Area Square Feet: 5,000
Annual Rent: $43,200

Ouray, CO: 612 Main Street, Ouray CO 81427
Area Square Feet: 1,000
Annual Rent: $11,400

Mountain Village, CO: 565 Mt. Village Blvd, Mountain Village, CO 81435
Area Square Feet: 689
Annual Rent: $6,600


Item 3.  Legal Proceedings.

None

Item 4.  Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the year ended
July 31, 2001.




<PAGE>




                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

     (a) Market Information
     ----------------------

The Company's common stock is quoted on the Over The Counter Bulletin Board
(OTCBB) under the symbol JEMG.

The quotations shown below were compiled by Jagged Edge Mountain Gear (JEMG)
from monthly statistical reports supplied by OTCBB and other reliable sources.
All quotes represent bid and ask prices or averages and may not necessarily
represent actual transactions in common stock.

                                             High                 Low
                                             ---------------------------
Fiscal Year Ended
July 31, 2001
-------------------
First Quarter *(08/2000-10/2000)              $ 0.38             $ 0.19
Second Quarter (11/2000-01/2001)                0.20               0.03
Third Quarter  (02/2001-04/2001)                0.28               0.05
Fourth Quarter (05/2001-07/2001)                0.10               0.05


Fiscal Year Ended
July 31, 2000
-------------------
First Quarter  (08/1999-10/1999)              $ 0.57               0.30
Second Quarter (11/1999-01/2000)                0.60               0.20
Third Quarter  (02/2000-04/2000)                0.50               0.20
Fourth Quarter (05/2000-07/2000)                0.33               0.22

* The OTC began quoting the Company's common stock on July 6, 1998.

These quotations reflect inter-dealer prices, without retail mark-up, markdown
or commission and may not represent actual transactions.

     (b) Holders
     -----------

As of July 31, 2001 and July 31,2000 the Company had approximately 150 and 152
holders of record for its common stock respectively, not including an unknown
number of beneficial holders in street name.

     (c) Dividends
     -------------

Because of its need to retain its cash for operations and the lack of a positive
cash flow, the Company has never paid a dividend with respect to its common
stock and does not intend to pay such a dividend in the foreseeable future. At
this time the Company intends to retain all earnings if and when derived, for
use in its business.

     (d) Common Stock
     ----------------

Each share of common stock is entitled to one vote for each share held of
record. All shares of common stock will participate equally in dividends when
and if declared by the Board of Directors. The shares of common stock have no
preference, conversion, exchange, preemptive or cumulative rights.

<PAGE>


     (e) Options & Warrants
     ----------------------

In December 1999, the Board of Directors adopted the Jagged Edge Mountain Gear,
Inc. Stock Plan (the "Plan") as a means to award incentive stock options,
non-qualified stock options and restricted stock to employees, potential
employees, directors, consultants and other independent contractors, and
reserved 5 million shares of common stock for issuance under the Plan. The Board
of Directors is the administrator of the Plan.

During fiscal 2001, options to purchase common stock of the Company were granted
two consultants, a convertible note holder, a former lender, and an officer.
Information with respect to the stock options is summarized as follows:

                                             Shares         Weighted Average
                                          Under Option       Exercise Price
                                          ------------       --------------

Outstanding, July 31, 2000                      --                --
  Granted                                  2,900,000          $   .12
  Exercised                                     --                --
                                           ---------          -------
Outstanding, July 31, 2001                 2,900,000          $   .12
                                           =========          =======

The options, all of which are exercisable on July 31, 2001, expire as follows:
                                                  Shares
                                               Under Option     Exercise Price
                                               ------------     --------------

    September 11, 2003                             400,000           $.28
    May 15, 2003                                   500,000            .10
    June 1, 2006                                 2,000,000            .10
                                                 ---------
                                                 2,900,000
                                                 =========

In addition, options to purchase 3 million shares were granted an investment
group in fiscal 2000. The option agreement provides the investors an option to
acquire up to one million shares of common stock each year at 75%, 80% and 85%
of the average bid price for the 60 day trading period prior to exercise during
fiscal 2001, 2002 and 2003, respectively. On August 20, 2001 the investment
group exercised the option for the first option period.

     (f) Preferred Stock
     -------------------

As of this date, no preferred shares have been issued.

     (g) Common Stock Material Rights
     --------------------------------

All Common Stock will participate equally in net assets on liquidation.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

This report on Form 10-KSB, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Certain statements contained in this
report using the term "may," "expects to," and other terms denoting future
possibilities, are forward looking statements. These statements include, but are
not limited to, those statements relating to development of new products, the
financial condition of Jagged Edge Mountain Gear, Inc., and the ability to
increase distribution of the Company's products. The accuracy of these
statements cannot be guaranteed as they are subject to a variety of risks, which
are beyond the Company's ability to predict or control, and which may cause
actual results to differ materially from the projections or estimates contained
herein. These risks are described in this Item 6, and also elsewhere in this
Form 10-KSB. The business and economic risks faced by the Company and the
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors as described herein.

As discussed in Note B to the financial statements, the Company has suffered
recurring losses, negative cash flows from operations and resulting working

<PAGE>


capital shortages. The Company had, at July 31, 2001, negative working capital
of approximately $52,900. The report of the Company's independent accountants
that accompanies the financial statements contains a going concern
qualification. Unless the Company can obtain suitable significant additional
equity or debt, there is substantial doubt as to the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
described in this Item 6. The financial statements do not include any
adjustments to reflect the possible future effect the possible future effect on
the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

Senior management has taken a number of significant steps to restructure and
streamline the Company's management, infrastructure, product line, product
costing, and expense structure to better match and monitor individual revenue
and cost centers. The Company has implemented personnel policies directly
addressing the hiring of, and retention of, quality management staff and outside
consultants to help guide the Company through and beyond the current year. This
restructuring will enable senior management to significantly improve their
analysis and management of the Company's operations on a center-by-center basis,
and reduce or eliminate non-performing or non-critical areas. Management's
expectations that gross margins would improve materially were realized as gross
profit margins for the period ended July 31, 2001 were 41% versus 25% for the
comparative twelve month period. During fiscal 2002, the overall profitability
of the Company is expected to improve due to continuing control over the
Company's various cost centers. The Company cannot offer any assurance, however,
that profitability will, in fact, increase.

Due to the fundamental requirement for the Company to achieve positive cash flow
from operations and net income, the Company will continue to direct its
management efforts toward reviewing and improving product profit margins,
throughout the Company lines, and increasing revenues from the sale of products
with higher profit margins. To continue the Company's objective of curtailing
operating losses, negative cash flow from operations and further liquidity
erosion, management is continually reviewing product profit margins and general
expense accounts, and will reduce or eliminate all non-essential expenditures.
Purchasing procedures and inventory control measures are also now in place, or
are being implemented to ensure minimized product costs and to avoid excess
inventory levels.

The Company experienced positive cash flow from operations of $50,300 for the
twelve-month period ended July 31, 2001 versus a negative cash flow from
operations of $767,000 for the comparative period ended July 31, 2000. A
significant factor leading to positive cash flows in fiscal 2001 was through the
reduction of inventory levels. During FY2000, cash flow deficits were reduced
predominantly by the sale of common stock. The Company's ability to fund its
future operations will be dependent upon achieving profitability, maintaining
stable inventory levels, generating and maintaining positive cash flow from
operations, or by raising additional debt or equity.

Unless the Company is able to accomplish one or more of the above, it may be
facing significant working capital shortages through FY2002 and beyond.
Management of the Company does not believe that its existing capital resources
are sufficient for the 2002 fiscal year if it continues to grow revenues and
expenses in proportion to what it experienced during FY2001 and is required to
repay its debt according to existing scheduled maturities. The Company is
currently seeking additional debt or equity capital to augment its working
capital position, or an arrangement with another company, although no assurances
can be made as to the availability of such debt or equity capital or if it can
be obtained at prices and terms that are in the best interest of the Company and
its shareholders. If the Company is able to raise additional debt or equity
capital, it would allow the Company to fund its operating losses until such time
as its restructuring efforts result in a level of positive cash flow or
profitability, although no assurance of that occurring can be given.

If the Company is not able to obtain additional suitable debt or equity capital
it will continue its efforts in reducing the size and operating expense of the

<PAGE>


organization in the form of personnel and facilities in order to slow its growth
and downsize the operation to such an extent that it can continue to operate off
its own internally generated cash flow. No assurance can be given as to the
success of such measures or whether they could be accomplished in a time frame
that would allow the Company to remain an ongoing entity.


Liquidity and Capital Resources
--------------------------------

During the fiscal year ended July 31, 2001, the Company's current ratio (current
assets/current liabilities) Declined to 0.91 as compared to 1.25 at July 31,
2000. Net working capital decreased to a deficit of $53,000 at July 31, 2001
from $198,000 at July 31, 2000. The Company's cash balances increased to
$200,163 at July 31, 2001, from $64,300 at July 31, 2000.

Principal changes in the components of net working capital for the fiscal year
ended July 31, 2001 as compared to fiscal year ended July 31, 2000 consist of:
<TABLE>
<CAPTION>


                                                                                               ----------------------
                                                                                               Change From FY2000 to
                                                  %                       %                            FY2001
                                                                                               ----------------------
Working Capital Components:                     Total      FY2001       Total      FY2000                 $
                                                -----      ------       -----      ------                 -

<S>                                               <C>        <C>           <C>       <C>          <C>
Cash & cash equivalents                           39%        200,163       7%        64,277       $     135,886
Trade receivables                                  3%         14,904       3%        28,854       $     (13,950)
Other receivable                                   0%             -0       3%        29,341       $     (29,341)
Inventories                                       57%        288,467      87%       851,087       $    (562,620)
Pre-paid expenses                                  1%          4,894       0%         2,977       $       1,917
                                              ----------------------------------------------     ---------------------
Current Assets                                   100%        508,428     100%       976,536            (468,108)

Accounts payable and accrued liabilities          66%        370,680      68%       526,909       $    (156,229)
Current maturities of notes payable               20%        113,564      23%       181,157       $     (67,593)
Other current payables                            14%         77,165       9%        70,461       $       6,704
                                              ----------------------------------------------     ---------------------
Current Liabilities                              100%        561,409     100%       778,527            (217,118)

                                                     ----------------        ---------------     ---------------------
Working Capital                                       $     (52,981)            $   198,001         $   (250,990)
                                                     ================        ===============     =====================

</TABLE>



The principal reasons for the decrease in working capital during FY2001 are the
following: A decrease in the amount of finished goods inventory at July 31, 2001
by $562,620 to $288,467 from $851,087 in the comparative period ended July 31,
2000. An increase in cash balances to $200,163 from $64,277. A reduction in
total current liabilities of $217,118 over the comparative period.

Throughout the fiscal year ended July 31, 2001 and beyond, Management has taken
substantive measures to reduce expenses by decreasing the number of sales,
marketing, and administrative personnel, movement of the Company corporate
headquarters to Moab, Utah, outsourcing catalog fulfillment, along with general
expense cuts in sales and marketing costs. Management feels that these actions,
coupled with the Company's improved product profit margins have had a
significant effect on the Company's reduced net loss. The Company cannot offer
any assurance, however, that these improvements will continue to translate to
the bottom line, or profitability will, in fact, increase due to these measures.


Sale of Restricted Stock
------------------------

During the fiscal year ended July 31, 2001 the Company did not sell any shares
of common stock to raise additional capital. The Company did issue a convertible
note to raise $255,000 cash at the end of April, 2001. During the comparative
fiscal year ended July 31, 2000 the Company received net proceeds of $898,970
from the sale of 3,913,834 shares of the Company's common stock to accredited
investors pursuant to Sections 4(2) and 4(6) of The Securities Act.

<PAGE>


The Company is exposed to market risks, which include foreign currency risks,
interest rate risks and inflation risk. The Company does not engage in financial
transactions for trading or speculative purposes.


Foreign Currency Exchange Rate Risk
-----------------------------------

The Company's inventory purchases from contract manufacturers in the Far East
are denominated in United States dollars; however, purchase prices for the
Company's products may be impacted by fluctuations in the exchange rate between
the United States dollar and the local currencies of the contract manufacturers,
which may have the effect of increasing the Company's cost of goods in the
future.

In addition, the Company's sales and purchases in Japan and Canada are
denominated at the time of order commitment, in the United States dollar, which
may have a negative impact on order completion or fulfillment or the rate of
growth of sales in those countries if the U.S. dollar were to strengthen
significantly versus the related foreign currency. Due to the number of foreign
currencies involved and the fact that not all of these foreign currencies
fluctuate in the same manner against the United States dollar, the Company
cannot quantify in any meaningful way the potential effect of such fluctuations
on future income. Furthermore, the Company may be affected by economic and
political conditions in each of the countries in which it transacts business.
Risks associated with operating in the international arena include:

     o    Economic instability, including the possible revaluation of
          currencies.
     o    Extreme currency exchange fluctuations. The Company has not entered
          into foreign currency forward and option contracts to manage exposure
          to certain foreign currency commitments.
     o    Changes to import or export regulations (including quotas).
     o    Labor or civil unrest.
     o    In certain parts of the world, political instability.

The Company has not as yet been materially affected by any such risks, but
cannot predict the likelihood of such developments occurring or the impact of
any such risks to the future profitability of the Company.


Interest Rate Risk
-------------------

The interest payable on some of the Company's loans is based on variable
interest rates and therefore affected by changes in market interest rates. If
interest rates on existing variable rate debt rises due to increases in the
prime rate, the Company's results from operations and cash flows would be
impacted, although the Company believes, not materially.

Inflation Risk
--------------

The Company believes that the relatively moderate rates of inflation over the
last three years in the United States, where it primarily competes, have not had
a significant effect on its net sales or results of operations. Higher rates of
inflation have been experienced in a number of foreign countries in which the
Company's products are manufactured, but this has not had a material effect on
the Company's net sales or results of operations. In the past, the Company has
been able to offset its cost increases by negotiation, increasing selling prices
or changing suppliers.


Results of Operations.

Jagged Edge Mountain Gear operations resulted in a reduced net loss before
extraordinary income of approximately $(698,737) during FY2001 as compared to a
loss of $(1,160,700) during FY2000; an improvement of $461,985. Net loss per

<PAGE>


share before extraordinary income for FY2001 and FY2000 was $(0.04) and $(0.08),
respectively.. Net loss after extraordinary income of $98,190 was approximately
$(600,547) during FY2001 as compared to a net loss of $(1,160,700) for FY2000.
Net loss per share after extraordinary items for FY2001 and FY2000 was $(0.04)
and $(0.08), respectively. Management attributes the reduced net loss from
operations during FY2001 primarily to the following factors. o The effect of the
closure of two retail store locations which had been operating at a loss -
Telluride Mountain Village and Ouray. Elimination of these store expenses had a
positive impact on the Company bottom line. o Accounting charges taken during
FY2000 for inventory reserves, and product sample write-offs of approximately
$125,000. o Increased catalog sales at full product margins. Management believes
that the increased catalog mailings and response rates resulted in higher
catalog sales ($650,680 during FY2001 versus $394,076 during FY2000). o Reduced
product discounting. o Stabilization of cost inefficiencies associated with a
rapid expansion of the Company during FY1999 and FY2000.

The Company recognized extraordinary income of $98,190 due to the settlement of
certain liabilities with a leasing company and trade vendors.

Revenues
--------
Jagged Edge Mountain Gear total net product sales for all sales divisions during
FY2001 and FY2000 were approximately $3,190,761 and $2,739,050 respectively, for
an increase of $451,711 or 16%.

Retail store gross sales for FY2001 and FY2000 were approximately $1,355,560 and
$1,408,210 respectively, for a decrease of $(52,650) or (4)%. For FY2001 and
FY2000 retail store gross sales comprised 43% and 52% of total product sales,
respectively. The primary reason retail sales were down from FY2000 is the
retail store closings of the Ouray and Mountain Village, Colorado locations
during March and April 2000, and the subsequent sales volume loss from those
locations.

Wholesale division gross sales for FY2001 and FY2000 were approximately
$1,163,689 and $1,004,209 respectively, for an increase of $159,480 or 16%. For
FY2001 and FY2000 wholesale division gross sales comprised 37% and 37% of
total product sales, respectively. FY2001 and FY2000 international wholesale
sales (primarily to Japanese customers) totaled $164,369 and $253,300,
respectively. .

Catalog and mail order division gross sales for FY2001 and FY2000 were
approximately $650,681 and $394,076 respectively, for an increase of $256,605 or
65%. For FY2001 and FY2000 catalog and mail order division sales comprised 20%
and 14% of total product sales, respectively.

Sales returns for FY2001 and FY2000 totaled $37,206 and $107,315 respectively,
for a decrease in returns of $70,110 or 65%. Sales divisions in this analysis do
not break down data for sales returns.


The following table is provided as an aid to further understand Company sales.

<TABLE>
<CAPTION>
                                                                                            -----------------------
                                            %                       %                       Change From FY2000 to
                                                                                                    FY2001
                                                                                            -----------------------
Revenues:                                 Total         FY2001       Total      FY2000          %          $
                                          -----         ------       -----      ------          -          -

<S>                                        <C>     <C>              <C>    <C>                   <C>   <C>
 Retail Division                           43%     $1,355,560       52%    $1,408,209           -4%    $ (52,649)
 Wholesale Division                        37%      1,163,689       37%     1,004,209           16%    $ 159,480
 Mail Order Division                       21%        650,681       15%       394,076           65%    $ 256,605
                                        ---------------------------------------------    -----------------------
Total Gross Sales Revenues                101%      3,169,930      104%     2,806,494           13%      363,436
  Less: Returns                            -1%        (37,206)      -4%      (107,315)          -6%      (70,110)
                                        ---------------------------------------------    -----------------------
Net Sales Revenues                        100%      3,132,724      100%     2,699,179           16%      433,546
Shipping & Freight Collected                2%         58,037        2%        39,872           46%       18,165
                                        ---------------------------------------------    -----------------------
All Revenues                              102%     $3,190,761      102%    $2,739,050           17%    $ 451.711
                                        =============================================    =======================
</TABLE>

Management believes that contribution margins from these divisions will continue
to improve as the percentage of sales costs and expenses are decreased and
brought in line with existing and projected revenues by division. There can be
no assurance these positive changes will ever result in an increase in cash flow
from the Company's operations or net income (as compared to the Company's
historical net losses).

Cost of Goods Sold
------------------

The Company's total product cost of sales for all sales divisions during FY2001
and FY2000 were approximately $1,869,655 and $2,041,852 or 59% and 75%
respectively, of sales for a decrease in product cost of $172,197 or 8%.

Management believes that cost of sales as a percent of sales decreased to 59%,
from 75% of total sales due primarily to higher margin catalog mail order sales,
additionally, overall discounting within sales divisions was minimized or
controlled, which contributed to this increased margin.


Selling & Marketing Expenses
----------------------------
Selling and marketing expenses for FY2001 and FY2000 were approximately $970,781
and $1,153,306 respectively, for a decrease of $182,525 or 16%.

The  $182,525 decrease  in  selling  and  marketing   expenses  in  FY2001  was
attributable to the reduction of sales/marketing personnel, including
commissioned sales representatives, and a decrease in national magazine print
advertisements. During the first quarter of FY2001, the number of
sales/marketing personnel was reduced as well as marketing expenditures. The
catalog printing and mailing costs for the fiscal year of approximately $252,877
was essentially equivalent to the FY2000 costs incurred for both fall / winter
and spring / summer catalogs. Management feels that return on mail order
expenditures was excellent.

General and Administrative Expenses
---------------------------------

General and  administrative  expenses  for FY2001 and FY2000 were  approximately
$836,591 and $612,752 for an increase of $223,839 or 37%. The increase in
general and administrative expenses in FY2001 is primarily attributable to
additional payroll and consulting costs incurred, moving expenses related to the
relocation to Moab, Utah, and a general increase in administrative expense
proportionate to increased sales.

Interest Expense
----------------

Interest expense for FY2001 and FY2000 totaled $69,118 and $47,711 respectively,
or an increase of $21,407 or 45%. Interest expense increased due to additonal
borrowings. Interest expense includes non-cash charges for the value of stock
options in fiscal 2001 of $34,206 and the fair market value of common stock
issued as payment for interest expense of $2,205 and $41,794 in fiscal 2001 and
2000, respectively.

<PAGE>



Item 7. Financial Statements.

The following consolidated financial statements are filed as a part of this Form
10-KSB and are included immediately following the signature page.

Report of Independent Public Accountants (Page F-2)

Balance Sheet - July 31, 2001 (Page F-3)

Statement of Operations - Years ended July 31, 2001 and 2000
(Page F-4)

Statements of Cash Flows - Years ended July 31, 2001 and 2000 (Page F-5)

Statement of Stockholders' Equity - Years ended July 31, 2001 and 2000 (Page
F-6)

Notes to Financial Statements (Page F-7)

<PAGE>


Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.

Changes in Registrant's Certifying Accountant


None.


                               PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons of the
Company; Compliance With Section 16(a) of the Exchange Act.

         (a) Identification of Directors and Executive Officers.
         -------------------------------------------------------

The following table sets forth certain information regarding the directors and
executive officers of Jagged Edge Mountain Gear, Inc. (the "Company"):

Name                    Age             Position
------------------      ---      -----------------------

Margaret A. Quenemoen   40       President / Director
55 E. 100 S.
Moab, UT 84532

Paula S. Quenemoen      40       Executive VP / Director
55 E. 100 S.
Moab, UT 84532

No arrangement exists between any of the above officers and directors pursuant
to which any one of those persons was elected to such office or position. All
directors were elected by the shareholders, and have held their positions since
the founding of the Company.

Directors hold office until the next meeting of shareholders and until a
successor is elected and qualified, or until their resignation.

Executive officers are elected at annual meetings of the Board of Directors.
Each such officer holds office for one year or until a successor has been duly
elected and qualified or until death, resignation or removal. No director of the
Company is a director of another company having securities registered under
Section 12 of the Securities Exchange Act of 1934 or a company registered under
the Investment Company Act of 1940.

<PAGE>


MARGARET A. QUENEMOEN, President, Director, and founder of the Company. In 1998,
Ms. Quenemoen was a finalist for the Ernst and Young Entrepreneur of the Year
Award. Margaret's organizational skills are demonstrated by her competent
overseeing all departments and aspects of the Company including design and
strategy. She steers and directs the Company, devising Company plans and goals.
Ms. Quenemoen works closely with bankers, lawyers and other advisors. Previous
employment includes an outerwear production management position at Odyssey of
America in 1992, overseeing 100 plus employees. Margaret graduated from the
University of Colorado at Boulder with a BA in Economics. Ms. Quenemoen has
served as a director of the Company since its inception. Ms. Quenemoen holds no
directorships in any other companies.

PAULA S. QUENEMOEN, Executive Vice President, Director. Ms. Quenemoen began with
Jagged Edge Mountain Gear in 1993. Her position encompasses all areas of
management, with special emphasis placed on catalog production and design, web
site development, wholesale development and trade shows. Ms. Quenemoen oversees
the image and marketing of the Company. Ms. Quenemoen's business experience
includes working as an international offshore buyer in China for Occidental
Petroleum. Her fluent Chinese and contacts in China have been utilized in
establishing relationships with manufacturers in China and Hong Kong. She
graduated from the University of Utah with BA majors in Asian Studies and
Political Science, a Minor in Chinese and a Certificate of International
Relations. Ms. Quenemoen has served as a director of the Company since its
inception. Ms. Quenemoen holds no other directorships in any companies.

         (b) Identification of Certain Significant Employees.
         ----------------------------------------------------

Members of senior management who make significant contributions to Jagged Edge
Mountain Gear, Inc include:

CRAIG K. CARR, Chief Financial Officer
Mr. Carr was hired as the Company's Chief Financial Officer in August 2000. He
graduated from Metropolitan State College of Denver with a B.S. in accounting,
and from the University of Colorado at Boulder with an MBA. Mr. Carr is a
Certified Public Accountant (CPA) and Certified Management Accountant (CMA).

He is responsible for all financial areas of the Company including audits, bank
relations, budgeting and forecasting, implementing strategic plans, information
systems, financial analysis, human resources, SEC reporting and all day-to-day
financial operations.

His background includes over 20 years diversified experience as CFO / Controller
in companies such as Ocean Pacific Childrenswear, Crested Butte Mountain Resort,
and Western Horizon Resorts, all Colorado based companies.

JORDAN CAMPBELL, Marketing and PR Manager
Mr.  Campbell  joined  the  Company  in June of  1999.  He  graduated  from  the
University   of  Colorado  in  1990  with  a  B.A.   degree  in  marketing   and
communication.

He brings to the Company extensive knowledge and experience in promoting outdoor
garments to retailers and the public.

Mr. Campbell was Promotions Manager with The North Face, Inc. from 1998 to 1999.
From 1997 to 1998 Mr. Campbell was the Marketing  Director for Boulder  Mountain
Sports. From 1992 to 1997 he was Outreach Director with REI.

ERIC GILMORE, Lead Designer and Production Manager
Mr. Gilmore has been the Company's lead outerwear and clothing designer since
1997. He specs designs, sources materials, oversees production, and is an expert
in high tech fabrics. He also acts as liaison between the Canadian, Asian and
domestic clothing factories, and the Company. Mr. Gilmore joined the Company
from Eastern Mountain Sports, where he was Product Developer and Designer from
1993 to 1997.

<PAGE>


     (c) Family relationships.
     -------------------------

Margaret A. Quenemoen, CEO / President, and Paula S. Quenemoen, Executive Vice
President, form the entire Board of Directors.

     (d) Involvement in Certain Legal Proceedings.
     ---------------------------------------------

During the past five years, no Director, Executive Officer, Promoter or Control
Person of the Company has:

1)   Filed or has had filed against him a petition under the federal bankruptcy
     laws or any state insolvency law, nor has a receiver, fiscal agent or
     similar officer been appointed by a court for the business or property of
     such person, or any partnership in which he was a general partner, or any
     corporation or business association of which he was an executive officer at
     or within two years before such filings;
2)   Been convicted in a criminal proceeding or is a named subject of a pending
     criminal proceeding (excluding traffic violations and other minor
     offenses);
3)   Been the subject of any order, judgment, or decree, not subsequently
     reversed, suspended or vacated, of any court of competent jurisdiction,
     permanently or temporarily enjoining such person from, or otherwise
     limiting his involvement in any type of business, securities or banking
     activities.
4)   Been found by a court of competent jurisdiction in a civil action, the
     Securities and Exchange Commission or the Commodity Futures Trading
     Commission to have violated any federal or state securities or commodities
     law, which judgment has not been reversed, suspended, or vacated.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and officers and persons who own more than ten
percent of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Directors, officers and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
filed.

Item 10.  Executive Compensation.
          -----------------------

Margaret A. Quenemoen, President / CEO is paid $50,000 cash compensation
annually for all services performed on behalf the Company No cash, stock or
other compensation plan currently exists for Ms. Quenemoen. No assurances can be
given that this arrangement will not change at a future date.

Paula S. Quenemoen, Executive Vice-President is paid $50,000 cash compensation
annually for all services performed on behalf the Company. The Company also pays
approximately $320 per month for the Company car used by Ms. Quenemoen. No cash,
stock or other compensation plan currently exists for Ms. Quenemoen. No
assurances can be given that this arrangement will not change at a future date.
<TABLE>
<CAPTION>


NAME / POSITION              FISCAL                                 OTHER      RESTRICTED    ALL CASH
                             YEAR       SALARY        BONUS         COMP.        STOCK         COMP.
-------------------------------------------------------------------------------------------------------

<S>                          <C>         <C>       <C>           <C>            <C>          <C>
Margaret A. Quenemoen        2001        43,385    $        0    $    6,000             0    $   49,385
President / CEO              2000        15,600    $        0    $   16,080             0    $   31,680
                             1999    $   15,000    $        0    $   14,100             0    $   29,100
                             1998    $    7,346    $        0    $   10,115             0    $   17,461
                             1997    $   15,703    $        0    $    6,740     4,236,000    $   22,443


Paula S. Quenemoen           2001    $   45,185    $        0    $    5,446             0    $   50,631
Executive VP                 2000    $   24,960    $        0    $   11,040             0    $   36,000
                             1999    $   24,960    $        0    $    7,080             0    $   31,840
                             1998    $   24,960    $        0    $    6,615             0    $   31,575
                             1997    $   14,825    $        0    $    4,480     2,824,000    $   19,305
</TABLE>

     (b) Stock Option Plans.
     -----------------------

In summary, the Jagged Edge Mountain Gear, Inc. Stock Plan (the "Plan") is used
as a means whereby the Company may, through awards of stock options within the
meaning of section 422 of the Code:

     o    Provide employees of the Company with additional incentive to promote
          the success of the Company's and encourage such employees to remain
          employed with the Company.
     o    Provide incentive for potential employees to accept employment with
          the Company.
     o    Provide directors of the Company who are not also employees of the
          Company, and consultants and other independent contractors who provide
          services to the Company, with additional incentive to promote the
          success of the Company's business.

The laws of the State of Colorado govern the construction and operation of the
Plan.

Stock Subject to the Plan.

The aggregate number of shares of the Company's $.001 par value Common Stock
that may be issued under Options or as Restricted Stock under this Plan may not
exceed 5,000,000 shares of Common Stock. If any awards terminate or expire, as
to any number of shares, new Options, and Restricted Stock may thereafter be
awarded with respect to such shares.

No Participant may be granted awards under the Plan in any calendar year in
respect of more than 500,000 shares of Common stock. Option terms may vary, but
are typically for periods from five to ten years.

The Board shall administer the Plan. In addition to any other powers set forth
in this Plan, the Board has the exclusive authority:

     o    To construe and interpret the Plan, and to remedy any ambigui- ties or
          inconsistencies therein.
     o    To establish, amend and rescind appropriate rules and regula- tions
          relating to the Plan.
     o    To determine the individuals who will receive awards of Options or
          Restricted Stock, the times when they will receive them, the number of
          shares to be subject to each award and the Option Price, payment
          terms, payment method, and expiration date applicable to each award.


     (c) Long-Term incentive compensation plans.
     -------------------------------------------

The Company has no long term incentive compensation plans.

     (d) Other Compensation
     ----------------------

There are no plans to pay bonuses or deferred compensation to employees of the
Company.

<PAGE>


The Company  provides access to a medical  insurance plan,  which provides major
Medical, dental and basic term life insurance for its employees. The Company
also provides access to other types of coverage such as supplemental life,
disability, and other insurance plans for the benefit of its employees, but at
the employee's expense.

     (e) Compensation of Directors
     -----------------------------

General. The Company's directors have not been paid cash compensation for any
directors meeting attended by them. To date, the directors have waived their
right to receive director's fees. No assurances can be given that this
arrangement will not change at a future date.

Indemnification Agreements. The Company's bylaws provide for indemnification of
officers, directors, employees and agents to the fullest extent permitted by
Colorado law. The Company carries no Directors and Officers (D&O) insurance
policy.

The Company has no other arrangements pursuant to which it compensates its
directors for acting in their capacities as such.

     (f) Employee Contracts and Change of Control Provisions
     --------------------------------------------------------

The Company currently has no employment contracts with its two executive
officers. The Company has no compensatory arrangement which may result from a
change-of-control of the Company or a change in any executive officers
responsibilities

     (g) Re-pricing of Options
     -------------------------

No options were re-priced during the fiscal year.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

     (a) and (b) Security ownership of certain beneficial owners and management.
     --------------------------------------------------------------------------

At July 31, 2001, the Company had only one class of outstanding voting
securities, its common stock. The following table sets forth information as of
October 31, 2001 with respect to the ownership of the Company's Common Stock for
all directors, individually, all officers and directors as a group, and all
beneficial owners of more than five percent of the Common Stock. The following
shareholders have sole voting and investment power with respect to the shares,
unless it has been indicated otherwise.

Name of beneficial         Shares owned              * Percent
Owner                      Beneficially (1)           Of Class
------------------         ----------------          ---------

Margaret A. Quenemoen         4,196,000                23.6%
55 E. 100 S.
Moab, UT  84532

Paula S. Quenemoen            2,824,000                15.9%
55 e. 100 S.
Moab, UT 84532

Top Summit, LLC               3,000,000                16.9%
P.O. Box 1971
Colorado Springs, CO  80971

All officers and directors
as a group (two persons)      7,020,000 (1)             39.5%

* Percent of class based upon shares outstanding on November 13, 2001 of
17,764,478.

<PAGE>


(1)  As used in this section, the term beneficial ownership with respect to a
     security is defined by Rule 13d-3 under the Securities Exchange Act of 1934
     as consisting of sole or shared voting power (including the power to vote
     or direct the vote) and/or sole or shared investment power (including the
     power to dispose or direct the disposition) with respect to the security
     through any contract, arrangement, understanding, relationship or
     otherwise. Unless otherwise indicated, beneficial ownership is of record
     and consists of sole voting and investment power.

     (c) Changes in Control.
     -----------------------

The Company knows of no arrangement, the operation of which may, at a subsequent
date, result in change in control of the Company.

Item 12. Certain Relationships and Related Transactions.

Eileen W. Cotro-Manes, mother of the Quenemoen sisters is a shareholder with
ownership listed below:

Eileen W. Cotro-Manes
1899 Wellington Circle
Salt Lake City, Utah 84117

Common stock (Restricted), 300,000 shares

<PAGE>


Item 13. Exhibits and Reports on Form 8-K.

     (a) Exhibits
     ------------

     The following is a complete list of exhibits filed as part of this Annual
Report on Form 10-KSB, which Exhibits are incorporated herein.

Exhibit
Number        Description
-------       -----------

3.1(k)        Articles of Incorporation*

3.2(n)        Bylaws*

10.3(j)       1999 Stock Option Plan*

*  Incorporated by reference to Form 10-SB and amendments thereto File No.
   028499, filed December 14, 1999.



                                   SIGNATURES
                                   ----------

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: November 13, 2001          JAGGED EDGE MOUNTAIN GEAR, INC.



                                   By: /s/ Margaret A. Quenemoen
                                       -----------------------------------------
                                           Margaret A. Quenemoen,
                                           President

                                   By: /s/ Paula S. Quenemoen
                                           -------------------------------------
                                           Paula S. Quenemoen
                                           Executive Vice President



In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.



November 13, 2001                   /s/ Margaret A. Quenemoen
                                    -----------------------------------------
                                        Margaret Quenemoen
                                        Principal Executive Officer and Director

November 13, 2001                   /s/ Paula S. Quenemoen
                                   ------------------- ----------------------
                                        Paula S. Quenemoen
                                        Executive Vice President and Director



<PAGE>



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

September 27, 2001

To the Board of Directors
Jagged Edge Mountain Gear, Inc.
Moab, Utah

We have audited the accompanying balance sheet of Jagged Edge Mountain Gear,
Inc. as of July 31, 2001, and the related statements of operations,
stockholders' equity and cash flows for the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of Amercia. Those standards require that we plan and
perform the audits 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 Jagged Edge Mountain Gear, Inc.
at July 31, 2001, and the results of its operations and its cash flows for the
two years then ended, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been presented assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
discussed in Note B to the financial statements, the Company has incurred
significant recurring losses and has a substantial liquidity shortage as of July
31, 2001. As a consequence, the Company requires significant additional
financing to satisfy outstanding obligations and continue operations. Unless the
Company successfully obtains suitable significant additional financing there is
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note B. The
financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.



/s/ OATLEY & HANSEN, P.C.
Greenwood Village, Colorado


                                      F-2

<PAGE>


                         JAGGED EDGE MOUNTAIN GEAR, INC.
                                  BALANCE SHEET
                                  July 31, 2001

                                     ASSETS
Current Assets
Cash                                                                $   200,163
Accounts receivable, less allowance for
   doubtful accounts of $45,000                                          14,904
Other receivables                                                          --
Inventories                                                             288,467
Prepaid expenses and other                                                4,894
                                                                    -----------

Total Current Assets                                                    508,428
                                                                    -----------

Equipment and Leasehold Improvements, net                               113,806

Other Assets
Trade name, net                                                          17,667
Deposits                                                                 11,361
                                                                    -----------

Total Assets                                                        $   651,262
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued liabilities                            $   370,680
Credit cards payable                                                     77,165
Current portion of long-term debt                                       113,564
                                                                    -----------

Total Current Liabilities                                               561,409
                                                                    -----------

Long-Term Debt, net of current portion                                  255,000
                                                                    -----------

Total Liabilities                                                       816,409
                                                                    -----------

Stockholders' Equity
Preferred stock $.001 par value;
  10 million shares authorized,
  none issued                                                              --
Common stock $.001 par value;
  50 million shares authorized,
  16,759,978 shares issued and outstanding                               16,760
Additional paid-in capital                                            2,332,409
Accumulated (deficit)                                                (2,514,316)
                                                                    -----------
Total Stockholders' Equity                                             (165,147)
                                                                    -----------

Total Liabilities and Stockholders' Equity                          $   651,262
                                                                    ===========


                            See accompanying notes.

                                      F-3
<PAGE>

                         JAGGED EDGE MOUNTAIN GEAR, INC.
                             STATEMENT OF OPERATIONS
                        Year Ended July 31, 2001 and 2000

                                                           2001            2000
                                                   ------------    ------------

Sales                                              $  3,190,761    $  2,739,050
Cost of Goods Sold                                    1,869,655       2,041,852

                                                   ------------    ------------
Gross Profit                                          1,321,106         697,198
                                                   ------------    ------------

Operating Expenses
Selling                                                 970,781       1,153,306
General and administrative                              880,468         612,752
Depreciation and amortization                            69,940          44,151
                                                   ------------    ------------

                                                      1,921,189       1,810,209
                                                   ------------    ------------

Operating loss                                         (600,083)     (1,113,011)

Other Income (Expense)
Interest expense                                       (103,324)        (47,711)
Loss on retirement of vehicles and other                 (5,501)           --
Other income                                             10,171            --
                                                   ------------    ------------

Loss Before Extraordinary Income and Income Tax        (698,737)     (1,160,722)

Extraordinary Income, settlement of liabilities          98,190            --
                                                   ------------    ------------

Loss Before Income Tax                                 (600,547)     (1,160,722)

Provision for Income Tax                                   --              --
                                                   ------------    ------------

Net (Loss)                                         $   (600,547)   $ (1,160,722)
                                                   ============    ============


Basic and Diluted (Loss) Per Share
Loss Before Extraordinary Income                   $      (0.04)   $      (0.08)
Extraordinary Income                                       --              --
                                                   ------------    ------------
Net (Loss)                                         $      (0.04)   $      (0.08)
                                                   ============    ============

Weighted Average Shares                              16,750,978      14,323,232
                                                   ============    ============

                                      F-4



<PAGE>
<TABLE>
<CAPTION>


                              JAGGED EDGE MOUNTAIN GEAR, INC.
                                  STATEMENT OF CASH FLOWS
                           Year Ended July 31, 2001 and 2000

                                                                 2001           2000
                                                          -----------    -----------
<S>                                                       <C>            <C>
Cash Flows from Operating Activities:
Net (loss)                                                $  (600,547)   $(1,160,722)
Extraordinary income - settlement of debt less value of
  stock options issued to settle debt (Note B)               (139,698)          --
Value of stock options issued for services and interest        78,083           --
Depreciation and amortization                                  69,940         44,151
Loss on retirement of vehicles                                  5,501           --
Common stock issued as compensation                              --           10,494
Common stock issued in lieu of interest                         2,205         41,794
Changes in assets and liabilities
Decrease in accounts receivable                                13,950          3,798
Decrease in settlement receivable                                --          100,000
Decrease in inventories                                       562,620         15,471
Decrease (increase) in prepaid
 expenses and other current assets                             27,424         (2,452)
Increase in accounts payable and accrued liabilities           24,144        175,012
Increase in credit cards payable                                6,704          5,481
                                                          -----------    -----------

Net Cash Used by Operating Activities                          50,326       (766,973)
                                                          -----------    -----------

Cash Flows from Investing Activities
Proceeds from sale of vehicle                                     500           --
Deposits                                                        2,351          9,410
Purchase of equipment                                            --          (27,569)
Acquisition of trade name                                        --          (10,000)
                                                          -----------    -----------

Net Cash Used by Investing Activities                           2,851        (28,159)
                                                          -----------    -----------

Cash Flows from Financing Activities
Proceeds from long-term debt                                  255,000         10,000
Proceeds from short-term borrowings                           539,773           --
Payments on notes payable and long-term debt                 (712,064)       (92,167)
Proceeds from issuance of stock                                  --          898,970
                                                          -----------    -----------

Net Cash Provided by Financing Activities                      82,709        816,803
                                                          -----------    -----------

Decrease in Cash and Cash Equivalents                         135,886         21,671

Cash and Cash Equivalents - Beginning of Year                  64,277         42,606
                                                          -----------    -----------

Cash and Cash Equivalents - End of Year                   $   200,163    $    64,277
                                                          ===========    ===========
                                                          $      --
Supplemental disclosures:
Cash paid for interest                                    $    59,993    $    17,741
Non-cash transactions -
   Stock options issued (Note F)                              121,960           --
   Stock issued to acquire trade name (Note C)                   --           10,000


                            See accompanying notes.

                                      F-5


<PAGE>


                                                    JAGGED EDGE MOUNTAIN GEAR, INC.
                                              STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                                    Year Ended July 31, 2001 and 2000

                                               Common Stock                  Subscribed Common       Additional
                                         -------------------------        -----------------------     Paid-In      Accumulated
                                           Shares        Amount            Shares       Amount        Capital       (Deficit)
                                           ------        ------            ------       ------        -------       ---------

Balances, July 31, 1999                  13,306,638    $    13,307         13,395    $        13    $ 1,250,426   $  (753,047)

Issuance of Stock:

   Cash                                   3,913,834

   For interest                             123,750            124           --             --           41,670          --

   Employee compensation                     37,972             38           --             --           10,456          --

   Partial payment to acquire                  --
      trade name (Note C)                    22,222             22           --             --            9,978

Issuance of stock previously
   subscribed                                13,395             13        (13,395)           (13)          --            --

Settlement of dispute (Note H)             (642,500)          (643)          --             --              643          --

Stock over-issued in 1999
   returned                                 (33,333)           (33)          --             --               33          --

Net (loss)                                     --             --             --             --             --      (1,160,722)
                                        -----------    -----------    -----------    -----------    -----------   -----------
Balances, July 31, 2000                  16,741,978         16,742           --             --        2,208,262    (1,913,769)

Stock issued for interest                    18,000             18           --             --            2,187          --

Stock options issued consultants
  and lenders in lieu of interest              --             --             --             --          121,960          --

Net (loss)                                     --             --             --             --             --        (600,547)
                                        -----------    -----------    -----------    -----------    -----------   -----------

Balances, July 31, 2001                  16,759,978    $    16,760    $      --      $      --      $ 2,332,409   $(2,514,316)
                                        ===========    ===========    ===========    ===========    ===========   ===========


                                                         See accompanying notes.

                                                                    F-6

</TABLE>

<PAGE>


                         JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE A - ORGANIZATION AND NATURE OF BUSINESS
Jagged Edge Mountain Gear, Inc. (the "Company"), incorporated in Colorado July
27, 1997, is engaged in the design, production, marketing and selling of
technical outdoor clothing and accessories using high-performance fabrics. Sales
are made through three Colorado retail ski resorts stores, mail-order catalog,
internet, and wholesale to other retail vendors. The Company moved its corporate
offices to Moab, Utah in April 2001.


NOTE B - BASIS OF PRESENTATION
Going Concern Consideration
The Company has incurred significant recurring losses since inception. This,
coupled with a shortage of liquidity at July 31, 2001, raises substantial doubt
about its ability to continue as a going concern. As a consequence, the Company
requires significant additional financing to satisfy outstanding obligations and
continue operations. Unless the Company successfully obtains suitable
significant additional financing there is substantial doubt about the Company's
ability to continue as a going concern. Plans to reduce losses include
increasing sales through greater distribution of mail order catalogs and
reducing general and administrative costs, including payroll and rent. The
success of these plans will directly affect the Company's ability to meet its
obligations.

Extraordinary Income
During fiscal 2001, the Company settled trade obligations and a capital lease
totaling $183,575 less than the amounts recorded in prior years. The
settlements, less a consultant's fee of $41,508 paid in cash and stock options
to purchase 500,000 shares of common stock valued at $43,877 are classified as
extraordinary income in the accompanying statement of operations (a net of
$98,190).

NOTE C - SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant areas requiring the use of management estimates
are determination of the allowance for doubtful accounts receivable, valuation
of inventory, assessment of realization of intangible assets, useful asset lives
for depreciation and amortization, valuation of stock issued for services and
interest and valuation of deferred tax assets. Actual results could differ from
those estimates and changes in such estimates may affect amounts reported in
future periods.

Revenue Recognition
The Company recognizes retail sales revenue at the point of sale. For wholesale,
mail order and Internet sales, revenue is recognized upon shipment.

Customers returning merchandise within thirty days of the sale can receive cash
or merchandise at their option. For returns from thirty to sixty days after the
sale, the Company will accept exchanges for credit or merchandise. Factory
damaged merchandise is repaired or replaced at the Company's discretion. The
Company records these transactions when merchandise is returned, replaced or
repaired. Historically, returns, replacements and repairs have been
insignificant.

Credit Policy
Credit is granted to qualifying commercial customers in the ordinary course of
business. Payment terms generally specify a due date 60 days after invoicing.

Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market.
Management monitors quantities of inventory to determine over and under stock
situations at the Company's retail stores and warehouse. When inventory is
identified as obsolete, it is segregated and adjusted to lower of cost or
salvage value. As of July 31, 2001, inventories consisted of the following:

    Raw materials                                             $102,338
    Finished goods                                             186,129
                                                              --------
                                                              $288,467
                                                              ========

                                      F-7
<PAGE>

                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


Leasehold Improvements and Equipment
Equipment and leasehold improvements are stated at cost. Equipment is
depreciated using the straight-line method over the estimated economic life.
Leasehold improvements are amortized over the lesser of the lease term or the
economic life of the improvements using the straight-line method. As of July 31,
2001, equipment and leasehold improvements consist of the following:

    Office fixtures and equipment                             $135,060
    Leasehold improvements                                     101,261
    Vehicles                                                    23,890
                                                              --------
                                                               260,211
    Accumulated depreciation                                  (146,405)
                                                              --------
                                                              $113,806
                                                              ========

Depreciation expense for fiscal 2001 and 2000 was $67,940 and $43,818.

The average estimated useful lives are as follows: leasehold improvements, 5
years; office fixtures and equipment, 3 years; and, autos 3 years.

Trade Name
The Company uses a distinctive trademark including the words "Jagged Edge"(TM)
on all of its products. Prior to cancellation in June 2000, the trade name was
used pursuant to a royalty agreement with an individual, and in fiscal 2001 and
2000, royalties of $ -0- and $1,500 were paid, respectively. In June 2000, the
Company acquired the trade name from the individual for $20,000: $10,000 cash
and 22,220 shares of common stock valued at $10,000. The cost of the trade name
is being amortized on a straight-line basis over an estimated useful life of 10
years.

Advertising and Catalog Expense
The Company expenses all advertising and catalog costs when incurred.
Advertising expense in fiscal 2001 and 2000 was approximately $43,000 and
$28,000 and outside costs incurred in the production and mailing of catalogs
were $253,000 and $293,000, respectively.

Research and Development
All research and development costs are expensed when incurred.

Income Taxes
Income taxes are calculated using the liability method specified by SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred liabilities are determined based on the
difference between the financial statement carrying amounts and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance to the extent realization is uncertain. (See Note G.)

Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) by
the weighted average number of shares common stock outstanding during each
period. Diluted earnings per share are computed on the basis of the average
number of common shares outstanding plus the dilutive effect of convertible
debt, stock options and warrants. The basic and the dilutive earnings per share
are the same in fiscal 2001 and 2000 since the Company had net losses and
inclusion of the effect of stock options would be anti-dilutive.

Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less, as
well as demand deposits, to be cash equivalents.

                                      F-8

<PAGE>


                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


Long-Lived Assets
Long-lived assets, such as intangible assets and property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value. No
write-downs were necessary for fiscal 2001 or 2000.

Concentrations
The Company's customers are not concentrated in any specific geographic region;
however its retail stores are all in ski resort areas of Colorado. At July 31,
2001 and 2000, no single customer accounted for a significant amount of accounts
receivable. During fiscal 2001 and 2000 sales to two different wholesale
customers were approximately 16% and 18% of total sales. International wholesale
sales approximated 5% and 9% of sales in fiscal 2001 and 2000.

In fiscal 2001 the Company purchased approximately 29% of its inventory from a
single supplier; however management believes there are alternative sources of
supply at competitive prices.

The Company maintains cash accounts at several financial institutions. The
balances, at times, may exceed federally insured limits. At July 31, 2001, the
Company had cash on deposit in one bank exceeding the insured limit by
approximately $86,000.


Effect of New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, Business Combinations, ("SFAS No.
141"). SFAS No. 141 addresses financial reporting for business combinations and
supersedes Accounting Principles Board ("APB") Opinion No. 16, Business
Combinations, and SFAS No. 38, Accounting for Preacquisition Contingencies of
Purchased Enterprises. SFAS No. 141 generally requires business combinations to
be accounted for using the purchase method. The pronouncement is effective for
business combinations occurring after June 30, 2001. Concurrent with the
issuance of SFAS No. 141, the FASB issued SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 sets forth financial accounting and reporting
for acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, Intangible Assets. The provisions of SFAS No. 142 are effective December 31,
2001. The Company has not had any business combinations in the periods reported
on, does not have any recorded goodwill and does not anticipate that adoption of
these pronouncements will result in any impact on its reported financial
position or results of operations.

In March 2000, the FASB issued Financial Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion 25. Interpretation No. 44 is effective July 1, 2000. Interpretation No.
44 clarifies the application of APB Opinion 25 for various matters,
specifically: the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of a previously fixed stock option or award; and the accounting for an
exchange of stock compensation awards in a business combination. Management does
not believe that the adoption of Interpretation No. 44 will have any impact on
its reported financial position or results of operations.

In March 2000, the FASB's Emerging Issues Task Force ("EITF") reached a
consensus on EITF 00-2, Accounting for Web Site Development Costs. EITF 00-2
discusses how an entity should account for costs incurred to develop a web site.
The EITF is effective in the first quarter of fiscal 2001. Management does not
believe that the adoption of EITF 00-2 will have a material impact on the
Company's reported financial position or results of operations.

                                      F-9

<PAGE>


                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


In December 1999, The Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") 101, Revenue Recognition in Financial Statements.
The SAB summarizes certain of the SEC's views in applying generally accepted
accounting principles to revenue recognition in financial statements. In June
2000, the SEC issued SAB 101B, which delays the implementation date of SAB 101
until no later than the fourth fiscal quarter of fiscal years beginning after
December 15, 1999. The Company believes that its revenue recognition practices
are in conformity with the guidelines in SAB 101, as revised.

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
(as amended by SFAS No. 137) requires companies to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. The Company does not presently enter into any
transactions involving derivative financial instruments and, does not anticipate
the new standard will have any effect on its financial statements for the
foreseeable future.

Reclassifications
Certain reclassifications were made to fiscal 2000 balances to conform to the
fiscal 2001 presentation.


NOTE D - NOTES PAYABLE
Notes payable consists of the following at July 31, 2001:

     Convertible promissory note payable to an individual,
        dated April 30, 2001, monthly interest payments at
        10%, due April 30, 2003. Secured by the Company's
        trademarks, brand names, intellectual property
        rights, product designs and specifications, and
        furniture and fixtures. Redeemable at the option of
        the Company upon change in control of the Company.
        Principal and interest convertible at the option of
        the holder into shares of Company common stock at
        approximately $.10 per share. The lender also
        received options to purchase 500,000 shares of
        common stock as consideration for making the loan
        (Note F). The agreement also precludes payment of
        dividends, stock splits or redemptions, merger, or
        issuance of options in excess of 7% of total
        outstanding common stock.                                     $ 255,000

     Loan from stockholder November 6, 1998, interest at 10%
        and 1,500 shares of common stock each month the loan
        is outstanding, indefinite due date.                            100,000

     Note to stockholder, interest at 8.00%, due March 31,
        2002, unsecured.                                                 10,000

     Note payable to bank, monthly payments including
        interest at 9.75% of $320, due December 15, 2002,
        collateralized by vehicle.                                        3,564
                                                                       --------

                                                                        368,564
     Less current maturities                                           (113,564)
                                                                       --------
     Long term maturities                                              $255,000
                                                                       ========


Future maturities of long-term debt are as follows:

               Fiscal year ending July 31,
                2002                                                  $ 113,564
                2003                                                    255,000
                                                                      ---------
                                                                      $ 368,564
                                                                      =========

During August and September 2000, the Company borrowed $475,000 on a short-term
basis from an individual. The loan provided for interest at 1 1/4% and was
secured by inventory. In fiscal 2001, the loan was paid in full. As
consideration for making the loan, the lender was granted options to purchase
400,000 shares of common stock at $.28 per share (Note F).

                                      F-10

<PAGE>


                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE E - COMMON STOCK
As of July 31, 2001, one note payable agreement requires monthly issuances of
1,500 shares of common stock in partial payment of interest. During fiscal 2001
and 2000, 18,000 shares and 123,750 shares were issued in lieu of interest
totaling $2,205 and $41,794, respectively.

During fiscal 2000, the Company sold 2 million shares and stock options for 3
million shares to an outside investment group for $400,000(Note F).

During the fiscal 2000, the Company issued 37,972 shares of restricted common
stock with an aggregate market value of $10,494 to employees and others as
compensation for services.


NOTE F - STOCK OPTIONS
In December 1999, the Board of Directors adopted the Jagged Edge Mountain Gear,
Inc. Stock Plan (the "Plan") as a means to award incentive stock options,
non-qualified stock options and restricted stock to employees, potential
employees, directors, consultants and other independent contractors, and
reserved 5 million shares of common stock for issuance under the Plan. The Board
of Directors is the administrator of the Plan.

During fiscal 2001, options to purchase common stock of the Company were granted
two consultants, the convertible note holder (Note D), a former lender (Note D),
and an officer. Information with respect to the stock options is summarized as
follows:

                                                   Shares      Weighted Average
                                             Under Option        Exercise Price
                                             ------------        --------------
    Outstanding, July 31, 2000                          -           $      -
      Granted                                   2,900,000                .12
      Exercised                                         -                  -
                                                ---------           --------
    Outstanding, July 31, 2001                  2,900,000           $    .12
                                                =========           ========

The options, all of which are exercisable on July 31, 2001, expire as follows:

                                                  Shares
                                             Under Option        Exercise Price
                                             ------------        --------------
    September 11, 2003                            400,000              $.28
    May 15, 2003                                  500,000               .10
    June 1, 2006                                2,000,000               .10
                                                ---------
                                                2,900,000
                                                =========

The value of options granted to lenders is amortized over the period of the
related loan. The value of the options granted the consultants and lenders were
computed using the Black-Scholes method (see below) and charged as follows:

    General and administrative expense          $  43,877
    Extraordinary income (Note B)                  43,877
    Interest expense                               34,206
                                                ---------
                                                $ 121,960
                                                =========

In addition, options to purchase 3 million shares were granted an outside
investment group in fiscal 2000 (Note E). The option agreement provides the
investors an option to acquire up to one million shares of common stock each
year at 75%, 80% and 85% of the average bid price for the 60 day trading period
prior to exercise during fiscal 2001, 2002 and 2003, respectively. On August 20,
2001 the investment group exercised the initial option at $.04 per share for a
total of $40,000.

Pro Forma Stock Based Compensation
Pro forma information regarding net income (loss) and net income (loss) per
common share is required by SFAS 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant



                                      F-11

<PAGE>

                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS

using the Black-Scholes option-pricing model with the following weighted average
assumptions:
                                                                   2001
                                                                   ----
      Risk-free interest rate                                      4.5%
      Dividend yield                                               None
      Volatility factor                                            199%
      Weighted average expected life                          60 Months


The Black-Scholes valuation model was developed for use in estimating the fair
value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma net income (loss) and net income (loss) per common share were as follows:

                                                                2001
                                                                ----
      Net Income (Loss) - Reported                          $(600,547)
      Net Income (Loss) - Pro Forma                          (603,472)

      Net Income (Loss) Per Common Share - Reported             $(.04)
      Net Income (Loss) Per Common Share - Pro Forma             (.04)

      Weighted average fair value of options granted             $.09

The pro forma amounts may not be representative of future disclosures since the
estimated fair value of stock options is amortized to expense over the vesting
period and additional options may be granted in future years.


NOTE G - INCOME TAXES
The Company utilizes the asset and liability approach for financial accounting
and reporting for income taxes. The primary objectives of accounting for income
taxes are to a) recognize the amount of tax payable for the current fiscal year,
and b) recognize the amount of deferred tax liability or asset for the future
tax consequences of events that have been reflected in the Company's financial
statements or tax returns.

The Company did not record a provision for corporate taxes in the statement of
operations due to cumulative net operating losses, which substantially accounts
for the deferred tax asset described below.

Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Deferred tax assets consisted
of the following at July 31, 2001:

      Deferred tax assets:
        Net operating loss carryforwards                     $ 493,000
        Less valuation allowance                              (493,000)
                                                             ---------
      Deferred tax asset, net                                $    -
                                                             =========


The valuation allowance was increased by $118,000 in fiscal 2001.

The difference between income taxes at the federal tax rate and the effective
tax rate was as follows for fiscal 2001 and 2000:

                                                      2001         2000
                                                      ----         ----
      Computed at the federal tax rate                (20)%        (20)%
      Increase in valuation allowance                  20           20
                                                      ----         ----
      Effective rate, net                              - %          - %
                                                      ====         ====


                                      F-12
<PAGE>

                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


As of July 31, 2000, the Company had net operating loss carryforwards totaling
approximately $2,469,000 resulting from operating losses. The amount of net
operating loss carryforwards that may be utilized to offset future taxable
income, when earned, may be subject to certain limitations, based upon changes
in the ownership of the Company's common stock. The loss carryforwards expire in
various amounts from 2013 through 2021.


NOTE H - COMMITMENTS AND CONTINGENCIES
Purchase Commitments
As of July 31, 2001, the Company had firm outstanding inventory purchase
commitments totaling approximately $988,000 for the forthcoming fall and winter
sales season.

Operating Leases
The Company leases its retail stores and office space. Total rental expense for
2001 and 2000 was approximately $199,000 and $193,000, respectively. The
following summarizes future minimum lease payments for operating leases:

                Year Ending
                 July 31,
                -----------
                2002                                         $ 154,053
                2003                                           137,327
                2004                                           103,501
                2005                                           108,061
                2006                                            62,230
                2007-2011                                      284,986
                2012                                            51,220
                                                             ---------
                                                             $ 901,378
                                                             =========

Settlement of Capital Lease
On June 30, 2000, the Company entered into a capital lease to finance a
networked computer system. Components of the system were placed in service in
the first quarter of fiscal 2001. The cost of the total system, $125,280, was
recorded as property and equipment as of July 31, 2000. During fiscal 2001, the
Company negotiated a $65,936 settlement with the lessor for outstanding amounts
owed and returned components totaling $46,902. The amount foregone by the
lessor, $12,442 is included in extraordinary income in the accompanying
statement of operations.

Settlement of Dispute
October 15, 1999, the Company settled a dispute with former legal counsel. The
settlement provided for payment of $100,000 by the attorney and a relinquishment
of 642,500 shares of common stock. The receivable was collected and stock
returned to the Company during 2000.


NOTE I - RELATED PARTY TRANSACTIONS
During fiscal 2001, the Company borrowed a total of $47,488 for short-term
capital needs from a relative of two officers of the Company. The loans were
made on an unsecured basis with interest at 8%. The loans and related interest
were repaid during the year as well as $10,000 owed the same individual on July
31, 2000.


NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount for accounts receivable, accounts payable and accrued
expenses approximates fair value because of the short-term maturities of these
instruments. The fair value of notes payable approximates fair value because of
the market rate of interest on the debt.

The determinations of fair value discussed above are subjective in nature and
involve uncertainties and significant matters of judgment and do not include
income tax considerations. Therefore the results cannot be determined with
precision and cannot be substantiated by comparison to independent market values
and may not be realized in actual sale or settlement of the instruments.

                                      F-13

<PAGE>

                        JAGGED EDGE MOUNTAIN GEAR, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE K - SIGNIFICANT FOURTH QUARTER ADJUSTMENT
During the fourth quarter of fiscal 2001, the Company increased its reserve for
uncollectible accounts receivable by $40,000. Also during the fourth quarter,
$121,960 of expenses was recognized for the issuance of stock options (Note F),
of which $31,063 were for options issued prior to the fourth quarter.



                                      F-14