REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Marker International:

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Marker
International (a Utah  corporation) and subsidiaries (the "Company") as of March
31,  1998 and 1997,  and the  related  consolidated  statements  of  operations,
shareholders'  equity and cash  flows for each of the three  years in the period
ended March 31, 1998. 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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Marker  International  and
subsidiaries  as of March 31, 1998 and 1997,  and the results of its  operations
and its cash  flows for each of the three  years in the period  ended  March 31,
1998 in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has incurred a net loss of $17.3 million for
the year  ended  March 31,  1998,  and as of March 31,  1998 had an  accumulated
deficit of $16.5  million.  In addition,  the Company  currently has  inadequate
working capital to fund operations and service repayment of debt. The Company is
also not in  compliance  with  certain  covenants  of its U.S.  bank credit line
agreement  and the bank has  notified  the  Company  on June 26,  1998 they have
thirty  days to cure  this  situation.  All of these  and  other  matters  raise
substantial  doubt as to the Company's  ability to continue as a going  concern.
Management's plans in regards to these matters are also described in Note 1. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.



ARTHUR ANDERSEN LLP


Salt Lake City, Utah
May 14,  1998,  except with  respect to the matters
      discussed in Note 1 to which the date is June 26, 1998


                                      F-1
<PAGE>


                      MARKER INTERNATIONAL AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          AS OF MARCH 31, 1998 and 1997
                             (Dollars in Thousands)
--------------------------------------------------------------------------------

                                     ASSETS


                                                            1998         1997
                                                         ---------    ---------

CURRENT ASSETS:
  Cash and cash equivalents                              $   4,241    $  13,532
  Accounts receivable, net of allowance for doubtful
   accounts of $1,697 and $2,139, respectively              31,710       26,279
  Inventories                                               37,223       33,849
  Prepaid and other current assets                           4,440        4,611
                                                         ---------    ---------
          Total current assets                              77,614       78,271
                                                         ---------    ---------



PROPERTY, PLANT AND EQUIPMENT:
  Land                                                       1,050        1,050
  Building and improvements                                  7,581        7,356
  Machinery and equipment                                   21,222       25,302
  Furniture, fixtures and office equipment                   4,582        4,511
                                                         ---------    ---------
                                                            34,435       38,219
  Less accumulated depreciation                            (16,733)     (18,941)
                                                         ---------    ---------
         Net property, plant and equipment                  17,702       19,278
                                                         ---------    ---------
INTANGIBLE ASSETS, net of accumulated amortization           8,322       17,475
                                                         ---------    ---------
OTHER ASSETS                                                 1,482        2,116
                                                         ---------    ---------
                                                         $ 105,120    $ 117,140
                                                         =========    =========


           The accompanying notes to consolidated financial statements
           are an integral part of these consolidated balance sheets.


                                      F-2
<PAGE>


                      MARKER INTERNATIONAL AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)
                          AS OF MARCH 31, 1998 and 1997
                (Dollars in Thousands, Except Per Share Amounts)
--------------------------------------------------------------------------------

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                          
                                                             1998         1997
                                                         ---------    ---------
CURRENT LIABILITIES:
  Notes payable to banks                                 $  48,645    $  38,930
  Current maturities of long-term debt                       3,512        3,038
  Current maturities of Series A Bonds, issued to a
     related party                                           4,500         --
  Accounts payable                                           6,381        5,393
  Other current liabilities                                  7,830        9,785
                                                         ---------    ---------
          Total current liabilities                         70,868       57,146
                                                         ---------    ---------

LONG-TERM DEBT, net of current maturities                   14,898       16,487
                                                         ---------    ---------
SERIES A BONDS, net of current maturities, issued
   to a related party                                        5,500       10,000
                                                         ---------    ---------
MINORITY INTEREST                                            1,447        1,810
                                                         ---------    ---------
COMMITMENTS AND CONTINGENCIES (Note 4)

SHAREHOLDERS' EQUITY:
  Preferred stock, $0.01 par value, 5,000,000 shares
     authorized and none issued                               --           --
  Common stock, $0.01 par value, 25,000,000
    shares authorized and issued, shares outstanding
    11,130,577 and 11,129,127, respectively                    111          111
   Additional paid-in capital                               36,299       36,293
   (Accumulated deficit) retained earnings                 (16,471)         858
   Cumulative foreign currency translation adjustments      (7,532)      (5,565)
                                                         ---------    ---------
         Total shareholders' equity                         12,407       31,697
                                                         ---------    ---------
                                                         $ 105,120    $ 117,140
                                                         =========    =========

           The accompanying notes to consolidated financial statements
           are an integral part of these consolidated balance sheets.

                                      F-3
<PAGE>

<TABLE>

                      MARKER INTERNATIONAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 and 1996
                (Dollars in Thousands, Except Per Share Amounts)
--------------------------------------------------------------------------------
<CAPTION>

                                                            1998         1997         1996
                                                         ---------    ---------    ---------

<S>                                                         <C>         <C>           <C>   
NET SALES                                                   94,271      126,403       87,911
COST OF SALES                                               63,917       80,531       52,608
                                                         ---------    ---------    ---------
GROSS PROFIT                                                30,354       45,872       35,303
                                                         ---------    ---------    ---------
OPERATING EXPENSES:
   Selling                                                  15,315       15,553       14,592
   General and administrative                               11,447       12,840       10,559
   Research and development                                  3,951        3,141        2,762
   Warehousing and shipping                                  2,255        1,827        1,566
   Amortization of goodwill and intangibles                    735          621         --
   Loss from write down of goodwill and intangibles ..       8,000         --           --
                                                         ---------    ---------    ---------
                                                            41,703       33,982       29,479
                                                         ---------    ---------    ---------
OPERATING (LOSS) INCOME                                    (11,349)      11,890        5,824
                                                         ---------    ---------    ---------
OTHER INCOME (EXPENSE):
  Interest expense                                          (5,794)      (5,104)      (5,193)
  Equity in (loss) income of unconsolidated subsidiary        --           (281)       1,595
  Other, net                                                   152        1,274        2,072
                                                         ---------    ---------    ---------
                                                            (5,642)      (4,111)      (1,526)
                                                         ---------    ---------    ---------

(LOSS) INCOME BEFORE INCOME TAXES, MINORITY
   INTEREST AND CUMULATIVE EFFECT OF
   ACCOUNTING CHANGE                                       (16,991)       7,779        4,298
PROVISION FOR INCOME TAXES                                    (522)      (1,656)        (609)
MINORITY INTEREST                                              184       (1,521)        --
                                                         ---------    ---------    ---------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF
   ACCOUNTING CHANGE                                       (17,329)       4,602        3,689

CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
   NET OF TAX                                                 --           --           (266)
                                                         ---------    ---------    ---------
NET (LOSS) INCOME                                        $ (17,329)   $   4,602    $   3,423
                                                         =========    =========    =========
NET (LOSS) INCOME PER
    COMMON SHARE:
      Basic                                              $   (1.56)   $    0.45    $    0.41
                                                         =========    =========    =========
      Diluted                                            $   (1.56)   $    0.45    $    0.40
                                                         =========    =========    =========
</TABLE>




           The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.

                                F-4
<PAGE>

<TABLE>

               MARKER INTERNATIONAL AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               (Dollars in Thousands, Except Shares)
--------------------------------------------------------------------------------
<CAPTION>
                                                                         

                                                                                       Cumulative
                                                                                        Foreign
                                                           Additional     Accumulated   Currency          Total      
                                      Common Stock          Paid-in        Earnings    Translation     Shareholders'
                                    Shares    Amount        Capital        (Deficit)   Adjustments   Equity (Deficit)
                                    ------    ------        -------        ---------   -----------   ----------------
<S>                               <C>         <C>          <C>          <C>           <C>           <C>       
BALANCE, MARCH 31, 1995           8,446,877   $       84   $   21,524   $   (4,716)   $    1,432    $   18,324
  Common stock options
  exercised                           1,000         --              7         --            --               7
  Net income                           --           --           --          3,423          --           3,423
  Translation adjustments              --           --           --           --            (986)         (986)
                                 ----------   ----------   ----------   ----------    ----------    ----------
BALANCE, MARCH 31, 1996           8,447,877           84       21,531       (1,293)          446        20,768
  Secondary public offering of
   common stock, net              2,680,000           27       14,753         --            --          14,780
  Common stock options
   exercised                          1,250         --              9         --            --               9
  Adjustment for change in
  reporting period of
  consolidated subsidiary              --           --           --         (2,451)         --          (2,451)
  Net income                           --           --           --          4,602          --           4,602
  Translation adjustments              --           --           --           --          (6,011)       (6,011)
                                 ----------   ----------   ----------   ----------    ----------    ----------
BALANCE, MARCH 31, 199           11,129,127          111       36,293          858        (5,565)       31,697
  Common stock options                1,450         --              6         --            --               6
  Net loss                             --           --           --        (17,329)         --         (17,329)
  Translation adjustments              --           --           --           --          (1,967)       (1,967)
                                 ----------   ----------   ----------   ----------    ----------    ----------
BALANCE, MARCH 31, 1998          11,130,577   $      111   $   36,299   $  (16,471)   $   (7,532)   $   12,407
                                 ==========   ==========   ==========   ==========    ==========    ==========

</TABLE>

    The accompanying notes to consolidated financial statements
       are an integral part of these consolidated statements.

    
                                      F-5
<PAGE>
<TABLE>

                      MARKER INTERNATIONAL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 and 1996
                Increase (Decrease) in Cash and Cash Equivalents
                             (Dollars in Thousands)
--------------------------------------------------------------------------------

<CAPTION>

                                                                             

                                                                 1998        1997        1996
                                                               --------    --------    --------

<S>                                                           <C>         <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                           $(17,329)   $  4,602    $  3,423
  Adjustments to reconcile net (loss) income to net cash
    (used in) provided by operating activities:
       Minority interest                                          (183)      1,521        --
       Depreciation and amortization                             5,200       4,386       3,131
       Equity in loss (income) of unconsolidated subsidiary       --           281      (1,595)
       Loss from consolidated subsidiary resulting from
         change in reporting period (Note 7                       --        (3,063)       --
       Loss from write down of goodwill and intangibles          8,000        --          --
       Loss (gain) on sale of property, plant and equipment        (92)        444        --
       Change in assets and liabilities (net of amounts
         acquired):
         Accounts receivable, net                               (6,302)     (3,109)       (753)
         Inventories                                            (5,721)     (3,596)     (7,127)
         Prepaid and other assets                                  131       2,876        (317)
         Accounts payable                                          842      (1,015)         45
         Other liabilities                                        (369)        875         684
                                                              --------    --------    --------

NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES                                                     (15,823)      4,202      (2,509)
                                                              --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                    (7,138)    (10,269)     (4,380)
  Equity investment in DNR                                        --          --        (5,325)
  Majority purchase of DNR, net of cash acquired ($5,263) .       --       (14,560)       --
  Proceeds from disposition of equipment                         3,898         143         361
                                                              --------    --------    --------
NET CASH USED IN INVESTING ACTIVITIES                           (3,240)    (24,686)     (9,344)
                                                              --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings on notes payable to banks                      11,860      12,060       3,833
  Issuance of common stock, net of issuance costs                 --        14,780        --
  Proceeds from common stock options exercised                       6           9           7
  Proceeds from issuance of long-term debt                       3,094      10,385       8,037
  Redemption of Series A Bonds                                    --        (3,500)     (3,500)
  Principal payments on long-term debt                          (3,299)     (3,176)     (3,262)
                                                              --------    --------    --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                       11,661      30,558       5,115
                                                              --------    --------    --------
Effect of foreign exchange rate changes on cash                 (1,889)     (2,731)        646
                                                              --------    --------    --------
Net increase (decrease) in cash and cash equivalents            (9,291)      7,343      (6,092)

Cash and cash equivalents at beginning of year                  13,532       6,189      12,281
                                                              --------    --------    --------
CASH AND CASH EQUIVALENTS AT END OF YEAR                      $  4,241    $ 13,532    $  6,189
                                                              ========    ========    ========
</TABLE>



           The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.


                                      F-6
<PAGE>


NOTE 1.  NATURE OF OPERATIONS, LIQUIDITY AND SUMMARY OF
         SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

         Marker  International  ("Marker" or the "Company") is a holding company
which  operates  through its  subsidiaries,  Marker  Deutschland  GmbH  ("Marker
Germany"),  Marker USA, Marker Japan Co., Ltd. ("Marker Japan"),  Marker Austria
GmbH ("Marker Austria") and Marker Canada, Ltd. ("Marker Canada"). Substantially
all of the Company's ski bindings are manufactured by Marker Germany, which also
distributes  bindings  in  Germany,  to  subsidiaries  of  the  Company  and  to
independent  distributors  in  countries  where  the  Company  does  not  have a
distribution subsidiary. Marker Ltd., also a subsidiary of the Company, designs,
distributes  and sells to retailers the Company's  clothing,  gloves and luggage
products for skiing and other recreational activities. The principal markets for
the Company's products are North America, Europe and Asia.

         In addition,  Marker  International,  through its 80% owned subsidiary,
DNR Sportsystem Ltd. ("DNR"), and its wholly-owned  subsidiaries,  DNR USA, Inc.
("DNR USA"),  DNR North America,  Inc. ("DNR North  America") and DNR Japan Co.,
Ltd.  ("DNR  Japan"),  is a designer,  developer,  manufacturer  and marketer of
snowboards,  Interface Step-in  SystemsTM,  traditional  snowboard  bindings and
snowboard  boots.  DNR  Sportsystem  Ltd.  designs,   develops  and  distributes
snowboards  and  related   products.   DNR  USA   manufactures   snowboards  for
distribution  under the Santa  Cruz(TM) and  Marker(TM)  brand names.  DNR North
America  and DNR  Japan,  through  their  own  sales  force  market  snowboards,
Interface Step-in SystemsTM,  snowboard bindings and boots directly to retailers
in the United States and Japan, respectively.

         The Company's  financial  statements for the year ended March 31, 1998,
have been prepared on a going concern basis,  which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business.  The Company incurred a net loss of approximately $17.3 million for
the year  ended  March  31,  1998 and as of March  31,  1998 had an  accumulated
deficit of approximately $16.5 million. Also, at March 31, 1998, the Company was
not in  compliance  with certain  financial  covenants  under the line of credit
agreement  with a U.S.  bank with  outstanding  borrowings of $24.9 million (see
Note 2).

         Subsequent  to year end,  the Company has  notified  such bank that the
Company believes it has insufficient  cash to fund its obligations.  The Company
requested that the bank increase the $25 million  credit line (the "U.S.  Credit
Line")  by up to $10 to $12  million.  On June 26,  1998 the bank  notified  the
Company that it was  unwilling to increase the $25 million  credit line and that
the Company  should seek to cure the  non-compliance  within 30 days.  While the


                                      F-7
<PAGE>
         Company  and the bank  are  discussing  alternatives  to  mitigate  the
Company's  financial  difficulties,  there can be no assurance that satisfactory
agreements  will be reached  between  the  Company  and  current or  prospective
lenders.  In the  event  that  the  non-compliance  is not  cured,  the bank may
exercise  its rights to demand  payment of all amounts  and/or  foreclose on the
Company's assets wich are pledged as collateral under the agreement, which could
also lead to cross-defaults  under the Company's other credit  arrangements (see
Note 2). In that event,  there can be no assurance that the Company will be able
to continue as a going concern.

         In May 1998, the Company's  Board of Directors  retained an independent
firm to assist the Company in developing and implementing a restructuring  plan,
while negotiating a refinancing with its lenders. In addition, on June 23, 1998,
the Board of  Directors  authorized  the  disposal  of the  Company's  snowboard
manufacturing operations if such disposal were subsequently determined by senior
management  to be in the best  interests of the Company.  The Board of Directors
retained  an   independent   firm  to  assist  the  Company  in  developing  and
implementing a  restructuring  plan,  while  negotiating a refinancing  with its
lenders.

         The Company is in the process of  evaluating  the  financial  impact of
these  events  which could vary  significantly  depending on whether the Company
decides to totally dispose of its entire snowboard business.  At March 31, 1998,
the Company had total consolidated assets related to its snowboard operations of
approximately  $25.2  million,  which  included  approximately  $7.9  million of
goodwill. In addition, at March 31, 1998, the Company's snowboard  manufacturing
equipment is under a seven year  operating  lease with  remaining  minimum lease
payments of $3.0 million.  There can be no assurance  that future  benefits from
these asset amounts will be realized in light of the events  described above, or
that  additional  liabilities  and costs will not arise  that are not  presently
reflected in the March 31, 1998 consolidated  financial  statements.  All of the
above could have a material  adverse  effect on the  financial  condition of the
Company.

         In  addition,  subsequent  to year  end,  in  accordance  with the bond
agreements,  the Series A Bondholder  exercised  its  redemption  privilege  and
called for payment of one Series A-1 bond for $2.0 million,  due October 1, 1998
and one Series A-2 bond for $2.5 million, due December 16, 1998 (see Note 3).

         Although the Company is seeking alternatives which, among other things,
include  restructuring the Company,  obtaining  additional financing or entering
into a new business alliance, there can be no assurance that the Company will be
successful  in  such  endeavors.  Accordingly,  the  Company  may not be able to
continue as a going  concern and,  among other  things,  could be forced to seek
protection  from its  creditors.  The  financial  statements  do not include any
adjustments  relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.

Pervasiveness of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and


                                      F-8
<PAGE>


assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Consolidation

         The consolidated  financial  statements  include the accounts of Marker
International  and its  subsidiaries.  All  material  intercompany  accounts and
transactions have been eliminated in consolidation.

Foreign Currency Translation

              The functional  currency for the Company's  foreign  operations is
the applicable local currency:  Marker Germany - Deutsch Marks, Marker Japan and
DNR Japan - Japanese Yen,  Marker Canada - Canadian  Dollars,  Marker  Austria -
Austrian  Schillings  and DNR  Sportsystem  Ltd. - Swiss  Francs.  The financial
statements  of  foreign   subsidiaries  are  translated  into  U.S.  Dollars  in
accordance  with Statement of Financial  Accounting  Standards  ("SFAS") No. 52.
Assets and liabilities of foreign  subsidiaries are translated into U.S. Dollars
at the applicable rates of exchange at the end of the reporting  period.  Income
and expense  items are  translated  at the  weighted  average  rates of exchange
prevailing  during the period.  Translation  gains and losses are reflected as a
separate  component of  shareholders'  equity as  "cumulative  foreign  currency
translation adjustments."

Cash and Cash Equivalents

         Cash  and cash  equivalents  include  investments  in  certificates  of
deposit with original maturities of less than 30 days. As of March 31, 1998, the
Company has granted a security  interest in a $2.0  million time deposit held in
the Company's  name at a United States branch of a German bank.  This deposit is
restricted for use as collateral on borrowings from such bank.

Accounts Receivable

         The Company has certain sales  programs which result in the majority of
the annual net sales  occurring  in the second and third  fiscal  quarters.  The
balance of the  annual  net sales  occurs  primarily  during  the fourth  fiscal
quarter. In accordance with industry practice,  the Company grants payment terms
to its  customers in excess of 30 days.  As of March 31,  1998,  the Company has
certain  accounts  receivable  from  customers  which are not due for over eight
months.


                                      F-9
<PAGE>



Inventories

         Inventories  include direct  materials,  direct labor and manufacturing
overhead  costs and are  recorded  at the  lower of cost  (using  the  first-in,
first-out method) or market. The major classes of inventories are as follows (in
thousands):
                                                              
                                March 31,
                          ---------------------
                          1998            1997
                        -------         -------
Raw materials           $ 1,411         $ 1,054
Work in process           2,306           2,739
Finished goods           33,506          30,056
                        -------         -------
                        $37,223         $33,849
                        =======         =======

Property, Plant and Equipment

         Property, plant and equipment are recorded at cost. Major additions and
improvements are capitalized,  while costs for minor  replacements,  maintenance
and repairs  that do not  increase  the useful life of an asset are  expensed as
incurred.

         For financial  reporting  purposes,  the provision for depreciation and
amortization is determined using the straight-line  method based on the expected
remaining economic useful lives of the assets as follows:

                           Description                         Useful Lives
                           -----------                         ------------
                  Machinery and equipment                      2 - 10 years
                  Furniture, fixtures and office equipment     2 - 10 years
                  Building and improvements                    2 - 30 years

         For the year ended March 31,  1997,  the Company  capitalized  interest
costs totaling approximately $237,000,  related to the construction of corporate
facilities. No interest was capitalized during fiscal 1998.

Accounting for the Impairment of Long-Lived Assets

         The Company accounts for impairment of long-lived  assets in accordance
with SFAS No. 121,  "Accounting  for  Impairment  of  Long-Lived  Assets and for
Long-Lived  Assets to be Disposed  Of".  SFAS No. 121 requires  that  long-lived
assets be  reviewed  for  impairment  when  events or changes  in  circumstances
indicate  that the book value of an asset may not be  recoverable.  The  Company
evaluates,  at each balance sheet date,  whether events and  circumstances  have
occurred that indicate possible impairment. In accordance with SFAS No. 121, the
Company  uses an estimate of future  undiscounted  net cash flows of the related
asset over the remaining life in measuring  whether the assets are  recoverable.


                                      F-10
<PAGE>


Intangible Assets

         Intangible  assets  consist  of  goodwill,  trade  names  and  licenses
resulting from the Company's  acquisition of DNR (See Note 7). Intangible assets
are  amortized  using the  straight-line  method over lives ranging from 5 to 30
years.

         As a result of the settled Sims  arbitration (See Legal Matters in Note
4) the  Company  evaluated  its  intangible  assets  (goodwill,  trade names and
licenses) for  impairment.  In accordance  with SFAS 121, an impairment  loss of
$8.0 million has been recognized in order to properly state intangible assets at
their estimated fair value. At March 31, 1998 and 1997, accumulated amortization
of intangible assets totaled approximately $1.3 million and $0.6 million.

Revenue Recognition

         Revenue is recognized when a product is shipped to the customer.

Advertising

         Prior to fiscal 1996, the Company capitalized certain advertising costs
and amortized  those costs over the period for which the revenue  related to the
costs was recognized.  During fiscal 1996, the Company adopted the provisions of
Statement of Position  93-7,  Reporting on  Advertising  Costs,  which  requires
advertising  costs to be expensed the first time the advertising  takes place or
when incurred.  The Company has elected to expense  advertising  costs the first
time the  advertising  takes place.  In fiscal 1996,  the  cumulative  effect of
adopting  this change in  accounting  principle,  net of the related  income tax
effect, was approximately $266,000.

         For the years ended March 31, 1998, 1997 and 1996, advertising expenses
totaled   approximately   $  4.4  million,   $3.3  million  and  $4.2   million,
respectively.

Income Taxes

         The Company  recognizes  deferred  income tax assets or liabilities for
expected  future tax  consequences  of events that have been  recognized  in the
financial  statements  or tax returns in different  periods.  Under this method,
deferred  income  tax  assets  or  liabilities  are  determined  based  upon the
difference  between the financial and income tax bases of assets and liabilities
using enacted tax rates  expected to apply when  differences  are expected to be
settled or realized.


                                      F-11
<PAGE>


Fair Value of Financial Instruments

         The fair value of the Company's  long-term debt is approximately  $17.5
million at March 31,  1998.  The book value of all other  financial  instruments
approximates  fair value except for derivatives (See Note 8). The estimated fair
values have been determined using appropriate  market  information and valuation
methodologies.

Earnings per Share

         The Company  adopted the  provisions  of SFAS No.  128,  "Earnings  per
Share" which specifies the computation, presentation and disclosure requirements
for earnings per share ("EPS").  Basic net income (loss) per common share (Basic
EPS)  excludes  dilution  and is computed by dividing  net income  (loss) by the
weighted average number of common shares  outstanding  during the year.  Diluted
net income (loss) per common share (Diluted EPS) reflects the potential dilution
that could occur if stock options were exercised or converted into common stock.
The  computation  of Diluted EPS does not assume  exercise of stock options that
would have an  antidilutive  effect on net income (loss) per common  share.  Net
income  (loss) per common  share  amounts  have been  restated  for all  periods
presented.

         The following is a reconciliation of the numerators and denominators of
the basic and diluted EPS computations (in thousands, except per-share amounts):
<TABLE>
<CAPTION>

                                1998                             1997                           1996
                      -----------------------------     --------------------------    ----------------------------
                      (Loss)    Shares     Per-Share    Income    Shares  Per-Share   Income    Shares    Per-Share
                      (Num.)   (Denom.)      Amount     (Num.)   (Denom.)   Amount    (Num.)   (Denom.)    Amount
                      ------   --------      ------     ------   --------   ------    ------   --------    ------

<S>                 <C>         <C>        <C>      <C>        <C>        <C>       <C>        <C>        <C>     
Basic EPS           $(17,329)   $ 11,130   $  (1.56)$  4,602   $ 10,285   $   0.45  $  3,423   $  8,447   $   0.41
 Dilutive options       --          --          --       --          51        --        --         148        --
                    --------    --------   ---------  --------   --------   -------   --------   --------   ------
Diluted EPS         $(17,329)   $ 11,130      (1.56)   4,602     10,336       0.45     3,423      8,595       0.40
                    ========    ========   =========  ========   ========   =======   ========   ========   ======
</TABLE>

         For  fiscal  year  1996,  the  per  share  information  related  to the
cumulative effect of accounting change for both Basic and Diluted EPS was a loss
of $(0.03) per share.

     For the years ended March 31, 1998 and 1997, there were outstanding options
and warrants to purchase a total of  1,099,175  and  1,058,000  shares of common
stock,  respectively,  that were not included in the computation of Diluted EPS.
For fiscal year 1997, certain options and warrants were not included because the
exercise  prices of such  options and  warrants  were  greater  than the average
market  price of common  shares.  For fiscal year 1998 the options and  warrants
were not included because the Company incurred a net loss.


                                      F-12
<PAGE>

Recent Accounting Pronouncements

         In June 1997, the Financial  Accounting Standards Board issued SFAS No.
130  "Reporting  Comprehensive  Income"  and SFAS  No.  131  "Disclosures  about
Segments  of  an  Enterpise  and  Related  Information".  SFAS  130  establishes
standards  for  the  reporting  and  display  of  comprehensive  income  and its
components and SFAS 131 establishes new standards for public companies to report
information about their operating  segments,  products and services,  geographic
areas and major  customers.  Both  statements  are  effective for the Company in
fiscal 1999.

                                      F-13
<PAGE>

NOTE 2.  NOTES PAYABLE TO BANKS AND LONG-TERM DEBT

         Notes  payable to banks at March 31,  1998 and 1997,  consisted  of the
following:

                                                              1998          1997
                                                            ---------       ----
                                                                 (in thousands)
Credit  arrangement  with  three  German  banks,   with
   maximum  borrowing of DM  79,000,000  ($42,740,000).
   The arrangement  provides for maximum  borrowings at
   the bank's base rate or a combination  of borrowings
   at  the   bank's   base  rate  with  DM   71,000,000
   ($38,412,000) maximum available for Euroloans and DM
   8,000,000 ($4,328,000) available as a revolving line
   of credit.  The line of credit  includes  provisions
   for   discounting   customer  notes  with  recourse.
   Amounts  outstanding under these credit arrangements
   at March 31, 1998  consisted of Euroloans (net of DM
   678,000   current    account)   of   DM   35,822,000
   ($19,379,000),  bearing  interest rates ranging from
   4.44% to 5.00%  subject to an interest rate swap for
   the initial DM 10,000,000  ($5,410,000) which limits
   the  interest  rate to a  maximum  rate of 6.25% and
   subject  to  an  interest   cap  for  DM   5,000,000
   ($2,705,000)  which  limits the  interest  rate to a
   maximum rate of 6.00%. Borrowings are secured by the
   accounts  receivable,  inventory  and  equipment  of
   Marker   Germany  and  are   guaranteed   by  Marker
   International and Marker USA. The agreement with two
   of the banks extends through July 1998, and with the
   other bank until further notice.                         $ 19,379    $ 17,507
                                                                                
Credit  arrangements  with three Japanese  banks,  with                         
   maximum     borrowing    of    YEN     1,450,000,000                         
   ($10,884,000).  At March 31, 1998,  YEN  420,000,000                         
   ($3,152,500)  of borrowings  were  outstanding  with                         
   interest  rates ranging from 1.63% to 2.25%,  due in                         
   installments  at various  dates  through March 1999;                         
   YEN 200,000,000  ($1,501,200)  secured by the assets                         
   of a director  of the  Company  and YEN  220,000,000                         
   ($1,651,300) guaranteed by Marker International.            3,153       8,647
                                                                                
Line of credit with a U.S. bank,  maximum borrowings of                         
   $25,000,000, subject to a borrowing base limitation.                         
   Interest  at the bank's  prime rate  (8.50% at March                         
   31,  1998)  secured by the accounts  receivable  and                         
   inventory   of  Marker  USA  and  Marker  Ltd.   and                         
   guaranteed  by  Marker  International.  The  line of                         
   credit agreement expires August 1998.                      24,901      12,776
                                                                                
                                                                                
Credit  arrangement  with  a  Canadian  bank,   maximum                         
   borrowings of CND$3,000,000  ($2,113,500).  At March                         
   31,    1998,    CND$1,720,000    ($1,211,740)    was                         
   outstanding.  Interest  accrues at the bank's  prime                         
   rate plus 0.75% (7.25% at March 31,  1998).  Amounts                         
   are  secured  by  inventory  of  Marker  Canada  and                         
   guaranteed by Marker  International  and Marker USA.                         
   The line of credit agreement expires March 1999.            1,212           0
                                                               -----       -----
                                                            $48,645      $38,930
                                                             =======      ======
                                                            

         For the years  ended  March 31,  1998 and 1997,  the  weighted  average
interest rate on short-term  borrowings  outstanding at year end was 6.5 percent
and  5.2  percent,   respectively,   the  maximum  short-term  borrowing  amount





                                      F-14
<PAGE>


outstanding during such years was $74.2 million and $68.3 million, respectively,
the  average  amount  outstanding  during the years was $58.8  million and $51.2
million,  respectively, and the weighted average interest rate during such years
was 6.1 percent  and 5.2  percent,  respectively.  As  discussed  in Note 1, the
Company was not in compliance with certain financial covenants under the line of
credit with a U.S. bank with outstanding borrowings of $24.9 million which could
also lead to cross-defaults  under the Company's other credit arrangements which
are guaranteed by Marker  International and/or Marker USA. This matter and other
matters could have a material and adverse  impact on the financial  condition of
the Company (see Note 1).

         Long-term debt at March 31, 1998 and 1997 consisted of the following:

                                                                            
                                                                1998       1997
                                                             ---------     ----
                                                                 (in thousands)
Notes  payable  to two  German  banks,  interest  rates
   ranging  from  4.95% to 7.50%,  due in  installments
   through June 2007,  secured by accounts  receivable,
   inventory  and  equipment  of  Marker   Germany  and
   guaranteed by $ Marker International and Marker USA       $ 5,518    $ 5,282

Note  payable  to a U.S.  bank,  interest  at 8.75% due
   October 1999,  secured by the inventory and accounts
   receivable   of  Marker  USA  and  Marker  Ltd.  and
   guaranteed by Marker International                          4,500      5,000

Note  payable  to  a  U.S.  branch  of a  German  bank,
   interest  at 4.81%,  due April  2001,  secured  by a
   $2,000,000  time deposit held in the Company's  name
   at the bank                                                 3,941      4,349

Note payable to a U.S.  bank,  interest at 9.7%, due in
   monthly installments through July 2004, secured by a                   
   building                                                    1,318      1,461
                                                                               
                                                                           
Notes  payable to an  insurance  company,  interest  at
   8.09%, due in installments through May 2012, secured
   by a building                                               2,184      2,250

Note payable to a Japanese bank, interest at 2.13%, due
   in installments  through  November 2000,  secured by
   the assets of a director of the Company                       562        818
                   

Other                                                            387        365
                                                                 ---        --- 
                                                              18,410     19,525
Less current maturities                                       (3,512)    (3,038)
                                                              ------     ------
                                                            $ 14,898   $ 16,487
                                                              ======     ======

 The following are scheduled principal maturities of long-term debt as
           of March 31, 1998 (in thousands):

                                Year Ending March 31,              Amount
                                ---------------------              ------
                                1999                             $ 3,512
                                2000                               6,366
                                2001                               4,319
                                2002                                 675
                                2003                                 417
                                Thereafter                         3,121
                                                                   -----
                                                                $ 18,410
                                                                ========


                         F-15
<PAGE>


         Total cash paid for  interest  during the years ended  March 31,  1998,
1997  and  1996  was  approximately  $5,492,000,   $5,276,000,  and  $5,172,000,
respectively.  Included in total cash  payments  for  interest are Series A Bond
(See Note 3) interest payments which totaled approximately $936,000,  $1,253,000
and $1,556,000 for the years ended March 31, 1998, 1997 and 1996, respectively.


NOTE 3. BONDS

         The  holder of the  Series  A-1,  A-2 and A-3 bonds  (collectively  the
"Series A Bonds") is a Japanese  corporation (the "Bondholder")  controlled by a
director of the Company.  The Series A Bonds are subject to redemption  upon not
less  than 30 days'  prior  notice,  in whole or in part,  at the  option of the
Company.

Series A-1 Bonds

The Series A-1 bonds had an original  aggregate  face value of $8.0  million and
bear  interest,  payable  semi-annually  on  September  30 and  March 31, at the
effective  borrowing  rate for the Bondholder  (the  "Japanese Bank Rate").  The
effective  Japanese  Bank Rate at March 31,  1998 and 1997 was 7.97  percent and
6.79 percent,  respectively. The average effective Japanese Bank Rate during the
years  ended  March  31,  1998  and  1997  was  7.3  percent  and  6.6  percent,
respectively. During the fiscal years ended March 31, 1998 and 1997, $0 and $1.0
million of the Series A-1 bonds  outstanding  may be redeemed  according  to the
following schedule:

                                                                          
                                    Redemption                 Face Amount 
        Notice On or After         On or After               to be Redeemed
        ------------------         -----------               -------------- 
           April 1, 1998         October 1, 1998              $2,000,000
        
           April 1, 1999         October 1, 1999              $2,000,000

Series A-2 Bonds

         The  Series  A-2 bonds had an  original  aggregate  face value of $10.0
million and bear interest,  payable  semi-annually on September 30 and March 31,
at the  Japanese  Bank Rate plus  three  percent  of the face value of the bonds
outstanding.  The effective  Japanese Bank Rate on Series A-2 bonds at March 31,
1998 and 1997 was 10.97 percent and 9.79 percent, respectively.  During the year


                                      F-16
<PAGE>



ended March 31, 1998 and 1997,  $0 and $2.5 million of the Series A-2 bonds were
redeemed by the Bondholder, respectively. The Bondholder of the Series A-2 bonds
may redeem the remaining bonds according to the following schedule:

                                   
                                   
                                                                        
                                  Redemption                Face Amount 
      Notice On or After         On or After              to be Redeemed       
      ------------------         -----------              --------------       
        June 16, 1998         December 16, 1998            $2,500,000
     
        June 16, 1999         December 16, 1999            $2,500,000

Series A-3 Bond

         The Series A-3 bond has an aggregate  face value amount of $1.0 million
and bears interest,  payable  semi-annually on September 30 and March 31, at the
Japanese Bank Rate plus three percent of the face value of the bond outstanding.
The  effective  Japanese  Bank Rate on the Series A-3 bond at March 31, 1998 and
1997 was 10.97 percent and 9.79  percent,  respectively.  The  Bondholder of the
Series A-3 bond may redeem  the bond by  providing  six  months,  prior  written
notice on or after June 16, 1999 for redemption on or after December 16, 1999.

NOTE 4.  COMMITMENTS AND CONTINGENCIES

Letters of Credit

     The Company has available letters of credit with a U.S. bank of $2,500,000.
Letters of credit totaling  approximately  $502,000 were outstanding as of March
31, 1998.

Leases

     The Company is committed under various long-term  noncancellable  operating
leases requiring minimum annual rentals as follows (in thousands):

                           
                           Year Ending March 31,                  Amount
                           ---------------------                  ------
                           1999                                  $2,560    
                           2000                                   2,235 
                           2001                                   1,752 
                           2002                                   1,632 
                           2003                                   1,561 
                           Thereafter                             9,819 
                                                                  ----- 
                                                                $ 19,559
                                                                  ======


                                      F-17
<PAGE>


         Rent and lease expense was approximately  $2,791,000,  $3,176,000,  and
$3,572,000 for the years ended March 31, 1998, 1997 and 1996, respectively.

During  June  1997,  the  Company  entered  into an  agreement  for the sale and
leaseback of the Company's  machinery  and equipment of its snowboard  facility.
The Company has an option to purchase  such  facility for $790,000 at expiration
of the lease.  The lease is classified as an operating  lease in accordance with
SFAS No.  13,  "Accounting  for  Leases".  The net  book  value  and  associated
depreciation  of the machinery and equipment of  approximately  $2.8 million was
removed from the accounts.  The gain realized on the sale approximating $176,000
has been  deferred  and will be credited to income as rent  expense  adjustments
over the lease term.

Discounted Notes Receivable

         Marker  Japan  was  contingently  liable  for  discounted  trade  notes
receivable on a full  recourse  basis of  approximately  $3,753,000 at March 31,
1998. These notes receivable mature in various amounts through July 1998.

Royalty Agreements

         During fiscal year 1998,  the Company  renewed its  agreement  with the
Salt Lake  Organizing  Committee for the 2002 Olympic Winter Games ("SLOC") as a
licensee  for the sale of apparel  with the imprint of the 2002  Olympic  Winter
Games to be held in Salt Lake City.  The Company was again awarded  licenses for
both winter and summer  apparel with the current  agreements  extending  through
December 31, 1998.

         DNR Sportsystem  Ltd. is party to a license  agreement (the "Santa Cruz
License") with California  based N.H.S.,  Inc.  ("Santa  Cruz").  The Santa Cruz
License may be  terminated  on May 31,  2001,  upon one year's  prior  notice by
either party,  and unless so  terminated,  will continue for successive two year
periods.  Among other things, the Santa Cruz License requires that DNR pay Santa
Cruz  certain  royalties  as a  percentage  of DNR's  gross sales  arising  from
products sold under the Santa CruzTM brand name.  Royalties related to the Santa
Cruz  License  agreement  ranged from 2% to 6% of sales.  DNR  incurred  royalty
expenses of approximately $271,000 in fiscal 1998.

Legal Matters

         On March 18, 1998,  Thomas P. Sims  ("Sims") and the Company  agreed to
end their then on-going  arbitration  proceedings  and to release all claims and
counterclaims against each other with no monetary exchange. The settlement ended
all disputes between Sims, Sims Sports, Inc., Marker International,  and related


                                      F-18
<PAGE>


parties  which  began in September,  1996.  The  disputes  related to a license
agreement between Sims and DNR for the production and distribution of snowboards
and related products bearing the Sims trademark.

         In the  opinion of the  Company,  neither  the  Company  nor any of its
subsidiaries  is currently a party to or subject to any other  material  pending
legal  proceedings.  The nature of the sports of skiing and snowboarding  entail
inherent risks of injury. It is expected that the Company from time to time will
be subject to claims and lawsuits as a result of the nature of its business. The
Company maintains insurance that it believes meets industry standards to protect
itself against product liability claims.  The adequacy of the insurance coverage
and reserves  established by the Company to cover known, as well as incurred but
unknown,  product liability claims are evaluated at the end of each fiscal year.
There can be no  assurance,  however,  that such  coverages or reserves  will be
sufficient  protection  against  any future  legal  proceedings  (including  any
related payments, settlements or costs).

         In September 1995, the Company,  along with other significant companies
in its  business,  received a letter from the  Department of Justice (the "DOJ")
explaining  that the  pricing  practices  of the  various  companies  in the ski
industry  were being  reviewed.  Although to date the  Company has not  received
additional  correspondence  from the DOJ, there can be no assurance that the DOJ
will not pursue these matters further.



NOTE 5. INCOME TAXES

         The  Company's  subsidiaries  file  tax  returns  in  their  applicable
jurisdictions. U.S. income tax is not provided on unrepatriated foreign earnings
because  management  considers such amounts to be permanently  invested  abroad.
Management has deemed it  impracticable  to determine the amount of unrecognized
deferred tax liability on earnings  which are  considered  permanently  invested
abroad.  However,  the  Company  has  provided  for  U.S.  income  taxes  on the
undistributed earnings of its investment in DNR prior to June 26, 1996, while it
was an unconsolidated subsidiary.

         The domestic and foreign  components of income (loss) before  provision
for  income  taxes for the years  ended  March 31,  1998,  1997 and 1996 were as
follows (in thousands):

                                                                             
                              1998        1997          1996
                              ----        ----          ----
         Domestic         $ (4,206)    $ (2,551)    $    386
         Foreign           (12,602)       8,809        3,912
                          --------     --------     --------
                          $(16,808)       6,258        4,298
                          ========        =====        =====

 


                                      F-19
<PAGE>


         The Company's  (benefit) provision for income taxes for the years ended
March 31, 1998, 1997 and 1996 consisted of the following (in
thousands):

                                                 
                                                                            
                                   1998               1997                1996
                                   ----               ----                ----
                     Current:
                      Federal    $   --             $    15             $    15
                      State            4                 30                   7
                      Foreign        261              1,945               1,210
                                    ----            -------             -------
                                     265              1,990               1,232
                     Deferred        257               (334)               (623)
                                    ----            -------             -------
                                  $  522            $ 1,656             $   609
                                 =======            =======             =======
                                                                        


         For the years  ended  March 31,  1997 and 1996,  the  federal and state
current  provisions for income taxes are presented net of the benefits  realized
from  operating  loss  carryforwards  which totaled  approximately  $166,000 and
$123,000,  respectively.  In addition, the fiscal 1996 foreign current provision
for income taxes is  presented  net of benefits  realized  from  operating  loss
carryforwards of approximately $213,000.

         The  (benefit)  provision  for income taxes as a  percentage  of income
before  provision for income taxes differed from the statutory  federal rate due
to the following:

                                                                               
                                                          1998     1997     1996
                                                          ----     ----     ----
Statutory federal income tax rate                       (34.0%)   34.0%    34.0%
State income taxes net of federal income tax benefit      --       0.3      0.6
Change in deferred tax asset valuation allowance         16.1     (5.3)   (20.2)
Foreign earnings taxed at different rates                20.8     (2.3)    12.1
Investment in unconsolidated subsidiary                   --      (1.9)   (12.6)
Other                                                     0.2      1.7      0.3
                                                         ----     ----     ----
                                                         (3.1%)   26.5%    14.2%
                                                          ====    ====     ====


                                      F-20
<PAGE>


         The components of the net deferred tax assets and  liabilities at March
31, 1998 and 1997 were as follows (in thousands):


                                                                                
                                                                                
                                                                                
                                                               1998        1997
                                                             -------    --------
Deferred tax assets:
   Intercompany profit                                       $ 1,028    $   801
   Domestic net operating loss carryforwards                     852         67
   Foreign net operating loss carryforwards                      673       --
   Allowance for doubtful accounts                               278        410
   Accrued expense reserves                                      795        625
   Foreign tax credits and tax attribute carryforwards           435        190
   Other                                                         274        376
                                                             -------    -------
      Total deferred tax assets                                4,335      2,469
Valuation allowance                                           (3,085)      (428)
                                                             -------    -------
                                                               1,250      2,041
                                                             -------    -------
Deferred tax liabilities:
   Equity investment                                            (139)      (139)
   Other                                                        (154)      (356)
                                                             -------    -------
      Total deferred tax liabilities                            (293)      (495)
                                                             -------    -------
      Net deferred tax assets                                $   957    $ 1,546
                                                             =======    =======



         The  recognition  of  deferred  tax  assets  is  based  upon  judgments
regarding  the  potential  realization  of such assets in the  future.  Although
realization is not assured,  management believes it is more likely than not that
a portion of the net deferred tax asset will be realized.

         As of March 31, 1998,  the Company has domestic tax net operating  loss
carryforwards  of  approximately  $2,291,000  which  begin to expire in 2006 and
foreign tax net operating loss  carryforwards of approximately  $1,500,000 which
begin to expire in 2003.  Additionally,  as of March 31,  1998,  the Company has
domestic foreign tax credits, general business credits,  charitable contribution
carryforward and alternative minimum tax credits of $160,000,  $32,000, $109,000
and $82,000 respectively.

         Cash paid for income taxes in the years ended March 31, 1998,  1997 and
1996 was approximately $1,569,000, $1,216,000 and $1,114,000, respectively.


                                      F-21
<PAGE>



NOTE 6. COMMON STOCK TRANSACTIONS

Stock Offering

         On July 23, 1996, the Company closed its Secondary  Public  Offering of
the Company's common stock. In connection therewith, the Company
issued  2,680,000  shares of common stock.  The Company  received  aggregate net
proceeds of approximately $14.8 million.  The Company utilized such net proceeds
to partly finance the purchase of additional shares of DNR.

Warrants

         In connection  with the Company's  Initial Public  Offering held during
fiscal  1995,  the  Company  issued to the  representative  of the  underwriters
nontransferable  warrants  to  purchase  231,500  shares  of the  common  stock,
exercisable for a period of four years  commencing in August 1995 at an exercise
price  of  $8.75.  Accordingly,   at  March  31,  1998,  173,625  warrants  were
exercisable.   The  warrants  provide  for  registration  rights,  anti-dilution
protection and other  customary  terms.  No warrants were  exercised  during the
fiscal year ended March 31, 1998.

Stock Option Plan

         During  fiscal  1995,  the  Company   established  a  nonqualified  and
incentive  stock option plan (the "Stock  Option  Plan").  The Stock Option Plan
provides for the  issuance of a maximum of  2,500,000  shares of common stock to
officers, directors,  consultants and other key employees. The Stock Option Plan
allows for the grant of incentive or nonqualified options and is administered by
the Board of  Directors.  Incentive  options  are  granted  at not less than 100
percent of the fair market value of the  underlying  common stock on the date of
the grant.  The aggregate fair market value of shares which may be purchased for
the first time during any calendar  year  pursuant to an incentive  stock option
grant may not exceed $100,000.  Nonqualified  stock options will be granted at a
price as  determined by the Board of  Directors.  No stock  options  granted are
exercisable after ten years from the date of grant.


                                      F-22
<PAGE>

For the years ended March 31, 1998, 1997 and 1996, the Company had the following
stock option activity:

            
                                                                               
                                                                 Weighted Avg. 
            Year Ended March 31, 1998            Amount         Exercise Price 
            -------------------------            ------         -------------- 
            Options Granted                      22,500              $ 4.08
            Options Exercised                    (1,450)               4.13
            Options Expired/Forfeited           (53,750)               4.46
            Options Outstanding                 844,800                4.86
            Options Exercisable                 476,172                4.63

            Year Ended March 31, 1997
            -------------------------
            Options Granted                     236,000              $ 5.42
            Options Exercised                    (1,250)               7.13
            Options Expired/Forfeited           (44,250)               6.83
            Options Canceled                   (169,000)               5.75
            Options Outstanding                 877,500                6.46
            Options Exercisable                 277,750                6.96

            Year Ended March 31, 1996
            -------------------------
            Options Granted                     359,500              $ 5.91
            Options Exercised                    (1,000)               7.13
            Options Expired/Forfeited           (25,000)               6.95
            Options Outstanding                 856,000                6.62
            Options Exercisable                 125,375                7.13

         On April 15, 1997, the Board of Directors amended the exercise price of
468,500  options  originally  granted on November 1, 1994 at an option  price of
$7.13 per share to $4.13 per  share,  which  was the  closing  price for  Marker
common stock on April 15, 1997.

         The Company has adopted the  disclosure-only  provisions  of  Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no  compensation  expense has been recognized for the Stock Option
Plan.  Had  compensation  cost  for  the  Company's  stock  option  awards  been
determined in accordance  with the provisions of SFAS No. 123, the Company's net
income and earnings  per share would have been reduced to the pro forma  amounts
indicated below:


                                      F-23
<PAGE>
<TABLE>
<CAPTION>


                                                        
                                                       1998       1997         1996
                                                       ----       ----         ----
     
<S>                                                 <C>         <C>        <C>      
Net (Loss) Income - As Reported (in thousands)      $(17,329)   $  4,602   $   3,423
Net (Loss) Income - Pro Forma (in thousands)        $(18,495)   $  4,190   $   3,265

Earnings (Loss) per Share - As Reported             $  (1.56)   $   0.45   $    0.40
Earnings (Loss) per Share - Pro Forma               $  (1.66)   $   0.41   $    0.38

</TABLE>

         The  following  information  applies  to the  options  outstanding  and
exercisable  at March 31, 1998:  672,300 of the 844,500  options  outstanding at
March 31, 1998 have exercise  prices  between  $4.00 and $5.75,  with a weighted
average exercise price of $4.55, and a weighted  average  remaining  contractual
life  of  7.1  years  of  which  approximately  389,922  of  these  options  are
exercisable,  and the remaining  172,500  options have exercise  prices  between
$6.00 and $6.50, with a weighted average exercise price of $6.05, and a weighted
average remaining contractual life of 7.2 years of which approximately 86,250 of
these options are exercisable; their weighted average exercise price is $6.05.

         Because the Statement 123 method of accounting  has not been applied to
options  granted prior to April 1, 1995,  the  resulting pro forma  compensation
cost may not be  representative  of that to be  expected  in future  years.  The
weighted  average fair value of options granted under the Company's stock option
plans during fiscal years ended March 31, 1998, 1997, and 1996 were estimated at
$2.44,  $4.27  and  $4.37,  respectively,   on  the  date  of  grant  using  the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions  for grants in fiscal 1998,  1997 and 1996,  respectively:  dividend
yield of 0%, expected  volatility of 77.4%,  78.0% and 78.0%  respectively,  and
expected lives of 6 years for all years; and a risk free rate of return of 6.7%,
6.3%  and  6.6%,  and an  assumed  forfeiture  rate  of  1.2%,  2.3%  and  7.9%,
respectively.  The  estimated  fair value of  options  granted is subject to the
assumptions made and if the assumptions were to change, the estimated fair value
amounts could be significantly different. The weighted average fair value of the
options exercised during fiscal 1998, 1997 and 1996 was $4.33 for all years.


NOTE 7.  INVESTMENT IN SUBSIDIARY

         On June 30, 1995, the Company acquired 25% of the common shares of DNR,
a Swiss  Corporation,  for approximately $5.4 million in cash. On June 26, 1996,
the  Company  acquired  an  additional  55%  of the  common  shares  of DNR  for
approximately  $19.8 million.  In connection with the 55% purchase,  the Company
acquired the following: assets at fair value of $24.1 million (including cash of
$5.3 million) and assumed liabilities of $4.2 million. This acquisition has been
accounted  for  using  the  purchase  method.  As a result  of the  acquisition,


                                      F-24
<PAGE>


Marker's  total  ownership of DNR increased to 80%.  Prior to its 80% ownership,
the Company accounted for its then 25% investment in DNR using the equity method
of accounting.

         Prior to March 31, 1997,  DNR had a calendar year end, and as a foreign
entity did not have the same reporting  requirements as the Company.  Consistent
with prior reporting  periods,  the Company used a 90-day lag in reporting DNR's
financial  information.  As such,  DNR's  operating  results  for its year ended
December 31, 1996 were included in Marker's fiscal year ended March 31, 1997. On
March 31, 1997,  Marker  elected to eliminate  the 90-day  reporting lag and, as
such,  recorded a one time  adjustment  to retained  earnings  relating to DNR's
operating results for the period January 1, 1997 to March 31, 1997,  effectively
making DNR's  current  reporting  period the same as that of the Company and its
other  consolidated  subsidiaries.  For the period January 1, 1997 through March
31, 1997,  Marker's  adjustment to retained  earnings was $2.45  million,  which
represented  80% of DNR's  net loss for that same  period.  DNR had net sales of
$1.3 million for the period January 1, 1997 through March 31, 1997.

         For the period January 1, 1996 through  December 31, 1996, DNR reported
net sales of $49.7 million,  operating  income of $6.7 million and net income of
$6.4 million.  However, the Company's actual benefit from the 1996 DNR operating
results  was  reduced  by its  proportional  share  of  non-ownership  (minority
interest) which varied  throughout the reporting  period,  amortization  expense
resulting from goodwill created by the purchase of DNR and significant  interest
expense incurred by the Company relating to the purchase.

         The  following  unaudited pro forma  information  presents a summary of
consolidated  results of  operations  of the Company had owned 80% of DNR at the
beginning of fiscal 1997 and 1996. Pro forma  adjustments have been made to give
effect to amortization  of goodwill,  interest  expense on acquisition  debt and
certain  other  adjustments.  The pro  forma  results  have  been  prepared  for
comparative  purposes only.  They do not purport to be indicative of the results
of operations  which  actually  would have resulted had the Company owned 80% of
DNR for the  entire  fiscal  years  1997  and  1996,  or of  future  results  of
operations of the consolidated entities.

(Unaudited and in thousands, except per share amounts)       For the Year ended
                                                                  March 31,
                                                                  ---------
                                                                  
                                                          1997            1996
                                                          ----            ----
Net Sales                                              $131,354         $131,949
Operating income                                          9,497           11,653
Net income                                                3,531            5,186
Net income per common share                            $   0.32         $   0.47



                                      F-25
<PAGE>



NOTE 8.  DERIVATIVE FINANCIAL INSTRUMENTS


         Derivative financial instruments held by the Company are generally used
to manage  well-defined  foreign exchange and interest rate risks which occur in
the normal  course of  business.  From time to time the Company has entered into
derivatives that require speculative accounting treatment.

Foreign Exchange Contracts

         Forward  foreign  exchange  contracts are used by the Company to reduce
the potential impact of unfavorable fluctuations in foreign exchange
rates. The Company has commitments to buy and sell foreign  currencies  relating
to  foreign  exchange  contracts  in  order  to hedge  against  future  currency
fluctuations.

         The Company has available, through its credit arrangement with a German
bank, the ability to enter into forward foreign exchange contracts
to purchase up to the  equivalent of DM 70.0 million.  In addition,  the Company
has the ability to enter into forward foreign exchange contracts with two United
States banks to purchase,  in the  aggregate,  up to the  equivalent  of US$80.0
million.

         The Company holds forward  exchange  contracts to purchase German marks
with Japanese Yen, Canadian Dollars and U.S.  Dollars,  and to sell Japanese Yen
and U.S. Dollars for Italian Lira. The contracts mature at various dates through
March 2000.  The  outstanding  forward  exchange  purchase and sale contracts at
March 31, 1998,  including those  accounted for as speculative  contracts are as
follows:

                                                                              
          Selling                   Buying                     Contracted   
          Amount                    Amount                     Forward Rate 
          ------                    ------                     ------------ 
      (Y) 915,035,000           DM  14,000,000               61.765 - 68.870
      CND$ 3,035,482            DM   3,700,000                1.112 - 1.342
       $   71,683,255           DM 124,806,300               1.5417 - 1.8306
       L 750,000,000              (Y) 46,153,846                 16.25
       L. 400,000,000                 $ 234,811                 1703.5



         Counterparties  to the foreign  exchange  contracts are typically major
international  financial  institutions.  The Company does not  anticipate a loss
resulting  from any credit risk of these  institutions.  At March 31, 1998,  the
fair  value  of the  foreign  exchange  contracts  treated  as  hedges  of  firm
commitments  indicates a potential  loss of $1.1 million,  which  represents the
total deferred loss on such contracts.  The Company's  theoretical risk in these
transactions is the cost of replacing,  at current market rates, these contracts
in the event of default by the  counterparty.  Management  believes  the risk of
incurring such losses is remote.


                                      F-26
<PAGE>


         During  fiscal  years  ended  March  31,  1997 and  1996,  the  Company
purchased and sold options and forward foreign exchange contracts, respectively,
which were not accounted  for as hedges.  As a result,  the Company  recorded in
other  income  net  gains  of  approximately  $0.8  million  and  $1.0  million,
respectively. During fiscal year 1998 the Company recorded net unrealized losses
of $1.3 million in other income net, related to speculative contracts.

Interest Rate Swap Agreement

         The Company has entered into an interest  rate swap and  interest  rate
cap agreement to reduce the impact of changes in interest  rates on its variable
rate revolving  credit  agreement (See Note 2). The  differential  to be paid or
received on the  agreements  is  recognized  over the term of the  agreement  as
either an increase or decrease of interest  expense.  As of March 31, 1998,  the
net  unrealized  loss on this agreement was  approximately  $85,300 (DM 157,600)
which is the estimated  amount that the financial  institution  would receive in
order for the Company to terminate the swap agreement as of March 31, 1998.


NOTE 9. RELATED PARTY TRANSACTIONS

         During  fiscal years 1998,  1997 and 1996,  Marker Japan  purchased ski
bindings and services  totaling  approximately  $92,000,  $93,000,  and $13,000,
respectively,  from Isomura Seisakusho KK ("Isomura  Seisakusho"),  a company of
which  Eiichi  Isomura,  a  shareholder  and  director  of the  Company,  is the
president, director and owner of more than ten percent of the outstanding stock.
At March 31,  1998,  1997 and 1996,  the net  account  receivable  from  Isomura
Seisakusho  was  approximately  $0.4  million,  $0.4  million and $0.5  million,
respectively.

         At March 31, 1998, the Company had outstanding  credit  arrangements in
an aggregate amount equal to approximately U.S. $3.7 million payable to Japanese
banks. Of these amounts, approximately $2.1 million was secured by assets of Mr.
Isomura.

         Marker  Japan  leases  office  space  in  Tokyo,   Japan  and  receives
distribution  services from Isomura Sangyo, a company of which Eiichi Isomura, a
shareholder and director of the Company, is the president, director and owner of
more than ten percent of the outstanding stock. In connection therewith, for the
fiscal years 1998,  1997 and 1996,  Marker Japan made payments to Isomura Sangyo
totaling approximately $280,000, $287,000 and $428,000 respectively.

         The Company purchased  insurance  through an insurance broker,  Acordia
Northwest Inc., of which Graham S. Anderson,  a director of the Company, is also



                                      F-27
<PAGE>

a director. The Company incurred approximately $745,000,  $851,000, and $746,000
of premiums for such insurance during fiscal 1998, 1997 and 1996,  respectively.

         DNR purchased  snowboards  from an affiliated  entity,  of which Gregor
Furrer & Partner  Holding  AG, a  minority  shareholder  of DNR,  is a  partner.
Snowboards purchased from the related party totaled approximately $5,935,000 and
$21,453,000 during 1998 and 1997, respectively.


NOTE 10. BENEFIT PLAN

         The Company  sponsors a qualified  retirement plan under Section 401(k)
of the Internal Revenue Code which covers  substantially  all eligible  domestic
employees.  Under the terms of the plan, each  participant may elect to defer up
to the annual statutory limit of eligible  compensation.  The Company matches 50
percent of each participant's  contribution up to 4 percent of the participant's
eligible  compensation.  During the years ended March 31,  1998,  1997 and 1996,
employer  contributions  totaled  approximately  $56,000,  $47,000 and  $41,000,
respectively.


                                      F-28
<PAGE>

NOTE 11.  INTERNATIONAL OPERATIONS

         The  Company's  operations  involve  a  single  industry  segment.  The
Company's three geographic regions are North America, Europe and Asia. Net sales
to  affiliates  consist  primarily  of  inventory  transactions  and are made at
transfer prices which approximate prices charged to unaffiliated customers.  The
following is a summary of the Company's  operations by geographic region for the
years ended March 31, 1998, 1997 and 1996 (in thousands):

                                                            
                                                                                
                                                1998         1997         1996
                                            ---------    ---------    ---------
Net Sales to Unaffiliated Customers:

   North America                            $  44,196    $  39,477    $  40,702
   Europe                                      37,726       73,927       30,245
   Asia                                        12,349       12,999       16,964
                                            ---------    ---------    ---------
         Total Consolidated                 $  94,271    $ 126,403    $  87,911
                                            =========    =========    =========

Export Sales From Europe to Asia:           $   1,552    $   1,677    $   1,649
                                            =========    =========    =========
Net Sales to Affiliates:
   North America                            $   1,925    $     375    $     515
   Europe                                      37,341       36,426       42,905
   Asia                                          --           --             22
                                            ---------    ---------    ---------
         Total                              $  39,266    $  36,801    $  43,442
                                            =========    =========    =========
Operating (Loss) Income:
   North America                            $    (737)   $     (96)   $   2,681
    Europe                                     (9,564)      11,711        4,064
   Asia                                          (431)         308         (389)
      Eliminations                               (617)         (33)        (532)
                                            ---------    ---------    ---------

         Total Consolidated                 $ (11,349)   $  11,890    $   5,824
                                            =========    =========    =========
Identifiable Assets:
    North America                           $  60,056    $  52,742    $  37,072
   Europe                                      61,221       70,020       50,339
   Asia                                        13,132       13,653       14,814
      Eliminations                            (29,289)     (19,275)     (14,960)
                                            ---------    ---------    ---------
         Total Consolidated                $ 105,120    $ 117,140    $  87,265
                                            =========    =========    =========


                                      F-29
<PAGE>


NOTE 12.  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)


         The following is selected quarterly financial data for the fiscal years
ended March 31, 1998 and 1997 (in thousands except per share amounts):

                                             
                                      First       Second     Third       Fourth
                                     Quarter      Quarter   Quarter      Quarter
                                     -------      -------   -------      -------
1998
Net Sales                            $ 2,271    $ 29,009   $  39,362   $ 23,629
                                     =======    ========   =========   ========
Gross Profit                             183       9,335      13,967      6,869
                                     =======    ========   =========   ========
Net (Loss) Income                     (5,055)     (1,046)      2,938    (14,166)
                                     =======    ========   =========   ========
Net (Loss) Income Per Common Share

        Basic                          (0.45)      (0.09)       0.26      (1.28)
                                     =======    ========   =========   ========
        Diluted
                                       (0.45)      (0.09)       0.26      (1.28)
                                     =======    ========   =========   ========


1997
Net Sales                            $ 1,624    $ 31,600   $  60,305   $ 32,874
                                     =======    ========   =========   ========
Gross Profit                             781      12,437      20,649     12,005
                                     =======    ========   =========   ========

Net (Loss) Income                     (3,960)      2,884       5,418        260
                                     =======    ========   =========   ========

Net (Loss) Income Per Common Share
        Basic                          (0.47)       0.28        0.49       0.02
                                     =======    ========   =========   ========
        Diluted                        (0.47)       0.28        0.48       0.02
                                     =======    ========   =========   ========




                                      F-30