SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

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

                  For the Fiscal Year Ended September 30, 2002

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                         Commission file number 0-20757

                           TRAVIS BOATS & MOTORS, INC.
             (Exact name of registrant as specified in its charter)


                                      TEXAS

                         (State or other jurisdiction of
                         incorporation or organization)
                                   74-2024798

                                (I.R.S. Employer
                             Identification Number)
               12116 Jekel Circle, Suite 102, Austin, Texas 78727

                    (Address of principal executive offices)


       Registrant's telephone number, including area code: (512) 347-8787
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 Par Value

                                (Title of class)


         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  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 Report on Form 10-K or
any amendment to this Report on Form 10-K.
                                           ------

         The aggregate  market value of the voting stock (which  consists solely
of  shares of Common  Stock)  held by  non-affiliates  of the  Registrant  as of
January 17,  2003,  (based upon the last  reported  price of $.55 per share) was
approximately $1,584,467 on such date.


         The number of shares of the issuer's  Common Stock,  par value $.01 per
share,  outstanding  as of January 17, 2003 was  4,329,727,  of which  2,880,849
shares were held by non-affiliates.


         Documents  Incorporated by Reference:  Portions of  Registrant's  Proxy
Statement  relating  to the 2003  Annual  Meeting  of  Shareholders,  have  been
incorporated by reference herein (Part III).




<PAGE>


                  TRAVIS BOATS & MOTORS, INC. AND SUBSIDIARIES

                               REPORT ON FORM 10-K

                                TABLE OF CONTENTS
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RISK FACTORS......................................................................................................1


PART I ...........................................................................................................7

   Item 1.  Business  ............................................................................................7

   Item 2.  Properties ..........................................................................................18

   Item 3.  Legal Proceedings ...................................................................................19

   Item 4.  Submission of Matters to a Vote of Security Holders .................................................19

PART II   .......................................................................................................19

   Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters ................................19

   Item 6.  Selected Financial Data .............................................................................20

   Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations ...............21

   Item 7A  Quantitative and Qualitative Disclosures About Market Risk ..........................................35

   Item 8.  Financial Statements ................................................................................36

   Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................36

PART III  .......................................................................................................36

   Item 10.  Directors and Executive Officers ...................................................................36

   Item 11.  Executive Compensation .............................................................................36

   Item 12.  Security Ownership of Certain Beneficial Owners and Management .....................................36

   Item 13.  Certain Relationships and Related Transactions .....................................................36

PART IV  ........................................................................................................36

   Item 14.  Controls and Procedures.............................................................................36

   Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K ....................................37

             Consolidated Financial Statements .................................................................F-1
             Report of Independent Auditors  ...................................................................F-2
             Consolidated Balance Sheets  ......................................................................F-3
             Consolidated Statements of Operations  ............................................................F-5
             Consolidated Statements of Stockholders' Equity  ..................................................F-6
             Consolidated Statements of Cash Flows  ............................................................F-7
             Notes to Consolidated Financial Statements ........................................................F-8

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                                  Risk Factors

         Some  of  the   information  in  this  Report  on  Form  10-K  contains
forward-looking statements that involve substantial risks and uncertainties. You
can identify these statements by  forward-looking  words such as "may",  "will",
"expect", "anticipate",  "believe", "estimate", and "continue" or similar words.
You should read statements  that contain these words carefully  because they (1)
discuss our future  expectations;  (2) contain projections of our future results
of  operations  or of  our  future  financial  condition;  or  (3)  state  other
"forward-looking"  information.  We believe it is important to  communicate  our
expectations to people that may be interested.  However,  unexpected  events may
arise in the future that we are not able to predict or control. The risk factors
that we describe in this section,  as well as any other  cautionary  language in
this Report on Form 10-K, give examples of the types of  uncertainties  that may
cause our actual  performance  to differ  materially  from the  expectations  we
describe in our forward-looking  statements.  You should know that if the events
described in this section and elsewhere in this Report on Form 10-K occur,  they
could have a material  adverse  effect on our  business,  operating  results and
financial condition.

     Execution  of  Restructure  Plans.  The  Company  anticipates  that it will
require  additional  working capital or financing to fund operations for certain
periods  during at least the first two  quarters  of its fiscal  2003  year.  We
believe that our anticipated cash needs exceed amounts otherwise available under
current inventory borrowing  agreements,  our cash balances and under the recent
agreements  relative  to the Note (as  defined  herein).  (See  Risk  Factors  -
"Operating  Losses and Reduced  Financing have  Jeopardized our Cash Flow") This
projected  cash flow  shortfall is  influenced  in part by our seasonal  trends,
which include  historically low sales levels during the October through December
periods.  Also, the seasonal lull normally  experienced at the end of a calendar
year was compounded at the end of 2002 by continued economic  uncertainty,  weak
industry  sales trends,  and certain  revised  borrowing  terms on our inventory
borrowing agreements which have had the effect of reducing our cash balances and
borrowing availability.

         In recognition of this issue, we have (i) negotiated  interim financing
as discussed below,  (ii) developed  management  plans to  significantly  reduce
expense levels,  (iii) entered into various  agreements with a major shareholder
as discussed below, and (iv) formed a special  Operating  Committee of our Board
of Directors as discussed below. The Operating  Committee will have authority to
oversee the overall  financial  operations of the Company  (including  all store
level and management operating expenses, employee headcount, inventory reduction
measures and other relevant  expenses or initiatives)  and to review weekly cash
flows.

         We  took  these  actions  to  create  a  plan  to (i)  stop,  or in the
alternative,  materially reduce the operating losses experienced during the past
two fiscal  years,  and (ii) to allow the Company to work towards  building cash
reserves  during the 2003 fiscal year that will  potentially  be  sufficient  to
alleviate,   or  alternatively   reduce,   similar  off-season  working  capital
shortages. Key components of this plan include interaction with management,  the
Operating Committee, our lenders and our key vendors to reach plans that provide
for a  collaborative  effort  to  reach  attainable  ratio  levels  in our  debt
agreements  and to enhance  cash flow.  We plan to enhance  cash flow by,  among
other initiatives,  carefully  reducing (i) variable  expenses,  including those
expenses  related to payroll  and  benefits;  (ii)  reviewing  additional  store
locations  for closure that are not expected to  contribute to cash flows or are
in markets that can  reasonably be served by other nearby Travis  Boating Center
locations and (iii) improve sales  management to speed the pace of reductions in
both new and used aged inventories which have historically tied up our cash flow
as a result of our inability to borrow funds against those products.

         The  restructure  plans,  along  with  detailed  plans for our  ongoing
borrowing needs, are to be approved by our Operating  Committee and submitted to
our various lenders prior to April 30, 2003.  Accordingly,  the restructure plan
is an integral  component in  improving  our cash flows and in  negotiating  new
borrowing agreements, however there is no assurance that our plans will succeed,
or in the event that they do succeed, that they will be sufficient to offset our
net losses, improve our cash flow or provide a basis for the continuation of our
financing.  (See Risk Factors -  "Operating  Losses and Reduced  Financing  have
Jeopardized our Cash Flow").

         Operating Losses and Reduced  Financing have Jeopardized our Cash Flow.
As a part of our  search for  additional  financing  to reduce  our  anticipated
shortfalls in cash flow prior to the impact of positive cash flows  historically
beginning  in  March  of each  selling  season,  we  entered  into a short  term
financing  agreement (the "Note") with TMRC, L.L.P ("TMRC" or "Tracker") and our
current senior  inventory  finance  lenders to provide our Company with up to an

                                       1
<PAGE>

additional $1.5 million in financing through April 30, 2003. The initial advance
under the Note was  $600,000.  A second  advance of $645,000 was  requested  and
received  on January  16,  2003,  but there is no  guarantee  of any  additional
funding since the financing pursuant to the Note is subject to discontinuance at
any time by any of the lenders.  Each of the lenders under the Note has the sole
discretion  regarding any future advancement of additional funds under the Note.
Further,  there is no guarantee that our cash  requirements  will not exceed the
amount which  otherwise  could be borrowed  under the Note.  As security for the
Note,  we have pledged our federal  income tax returns  towards the repayment of
any  amounts  outstanding  under  the  Note.  (See  Risk  Factors  -  "Financing
Arrangements" and "Income Tax Refunds Pledged as Security").

         As a condition  to the Note,  we reached an  agreement  with our senior
inventory  finance  lenders to amend our inventory  borrowing  agreements to (i)
waive various current  defaults,  (ii) modify certain  covenants and terms,  and
(iii) to extend the  maturity  date under  those  agreements  from the  original
expiration  date of January 31, 2003 to a new expiration date of April 30, 2003,
unless  otherwise  terminated  earlier  in  accordance  with  the  terms  of the
agreements. Due to the Company's need for ongoing inventory financing to support
working  capital and  operations,  we will  continue to work towards a long-term
extension of the  inventory  borrowing  agreements  beyond the maturity  date of
April 30, 2003. However, there is no assurance that negotiations with our senior
inventory  finance lenders will result in an extension of the current  inventory
borrowing  agreements  or in  new  financing  arrangements.  There  is  also  no
assurance  that these or  alternative  inventory  borrowing  agreements  will be
available  to the  Company  or that such  financing,  if  available,  will be in
amounts or have terms and  conditions  sufficient to provide  necessary  working
capital to the Company.  (See Risk factors - "Execution of  Restructure  Plan").
Failure by the Company to reach an agreement with its senior  inventory  finance
lenders to extend the inventory  borrowing  agreements  could have the effect of
requiring  the  Company  to (i) seek  additional  capital;  (ii)  only  purchase
inventory from manufacturers  willing to execute repurchase  agreements with our
lenders;  (iii) reduce our inventory purchase  commitments to a level consistent
with financial accommodations available to us, (iv) sell or liquidate additional
assets to raise cash balances, or (v) secure alternative financing.  Our failure
or inability to renew or complete alternative financing  arrangements with terms
and conditions at least as favorable as currently in place for the Company could
jeopardize  our  financial  stability  and force us to further  restructure  our
operations,  or  possibly  to  suspend  operations  until a plan of  alternative
financing  is  achieved.  Accordingly,  the  lack  of  sufficient  financing  or
suspension  of our  operations  could  result in our  inability to continue as a
going concern or result in our seeking  bankruptcy  protection  while we further
restructure  our  operations.   (See  Note  14  -  "Subsequent  Events"  in  the
consolidated  audited  financial  statements  of the Company  and notes  thereto
included elsewhere in this Report on Form 10-K).

         We are Out of Compliance on Certain Loan  Agreements  and Have Been Out
of  Compliance on Others.  We have  completed the last two fiscal years with net
losses.  As a result of these net  losses,  we have been out of  compliance,  at
various times, on certain loan agreement requirements of our inventory borrowing
agreements  and real estate loans.  These have occurred  because we did not have
the amount of net earnings or cash flow required under our loan  agreements.  We
have  negotiated  short term waivers  discussed  above on terms of our inventory
borrowing  agreements;  however we are also  currently  not in  compliance  with
financial  covenants  of a loan  agreement  on certain  real  estate  loans with
Hibernia  National  Bank  ("Hibernia")  requiring (i) minimum cash flow and (ii)
minimum tangible net worth.

         Our inability to continue to (i) negotiate waivers, (ii) to restructure
these loans,  or (iii) operate  without  being in  compliance  would result in a
significant and severe financial impact on our business,  operating  results and
financial  condition.  It would  also  result  in a  concurrent  default  on our
inventory  borrowing  agreements.  Accordingly,  the  Company  is seeking to (i)
refinance  these loans with other lenders  based upon the favorable  loan amount
(approximately  $7.0  million as of September  30, 2002) to appraised  valuation
(approximately  $12.3  million as of  September  30, 2002) based on the lender's
third party  appraisals of the real estate securing the loan; (ii) sell the real
estate  in a  sale/leaseback  transaction,  or (iii)  sell the real  estate  and
relocate the effected store locations to alternative leased locations.  There is
no  guarantee  that the Company  will be able to  renegotiate  these  loans,  to
refinance  the loans or to sell the real  estate,  and,  even if the  Company is
successful,  that the  terms of any  re-negotiation,  refinance  or sale will be
acceptable  to the  Company  or  result  in  proceeds  sufficient  to repay  the
indebtedness.  This could  jeopardize  our  financial  stability and force us to
further  restructure our operations,  or possibly to suspend  operations until a
plan of alternative financing is achieved. Such an action could result in our

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Company  being  unable  to  continue  as a  going  concern.  (See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital Resources";  and Note 1 - "Basis of Presentation" and Note
14 - "Subsequent Events" in the consolidated audited financial statements of the
Company and notes thereto included elsewhere in this Report on Form 10-K).

         Change of  Control.  As of January 7, 2003,  as a result of a series of
agreements (the  "Agreements")  with our senior  inventory  finance lenders (the
"Senior  Lenders")  and Tracker,  Tracker has assumed  effective  control of the
Company.  The  Agreements  give Tracker the right to designate four of the seven
members of the Board of Directors of the  Company,  the right to acquire  shares
from certain insiders of the Company, voting control of a majority of the voting
power of the outstanding  securities of the Company through a voting trust, and,
together with the Senior Lenders,  provide short-term  advance-type financing to
address  the  current  operating  needs of the  Company.  (See  Risk  Factors  -
"Operating Losses and Reduced Financing have Jeopardized our Cash Flow".)

         Under  the  terms  of the  Agreements,  Tracker  now has the  right  to
designate  four of seven  members of the Company's  Board of Directors.  Tracker
currently  has  two  representatives  on the  Board  of  Directors  pursuant  to
Tracker's  ownership of 80,000 shares of the Company's Series A Preferred Stock,
and has not yet designated two additional  representatives.  The Agreements also
call for the formation of a  three-member  Operating  Committee of the Company's
Board, to be made up of a majority of members designated by Tracker. The initial
members of the Operating  Committee,  as  designated by Tracker,  are Kenneth N.
Burroughs, Richard Birnbaum, and Robert Ring (each of whom is a current director
of our Company).  The  Operating  Committee  will have  authority to oversee the
overall  financial  operations  of the  Company  (including  all store level and
management operating expenses, employee headcount,  inventory reduction measures
and other relevant  expenses or initiatives)  and to review weekly cash flows to
determine  whether  additional  borrowings  are  necessary  under the Note.  The
composition  of a majority of the Board of  Directors  and the entire  Operating
Committee,  effective  as of January 7, 2003,  is to be  determined  by Tracker.
There is no assurance  that Tracker will continue to make  management  decisions
similar to the current  Board of Directors,  nor is there any assurance  that it
will  direct the  Operating  Committee  to request  additional  funding  for the
Company.  A  decision  by the  Operating  Committee  not to  request  additional
funding, lender refusal to grant requests that are submitted or our inability to
increase the amount of  financing  to cover  unanticipated  or  additional  cash
shortfalls could result in financial instability for the Company. This financial
instability  could  result in our  Company  being  unable to continue as a going
concern.

         Prior to the  Agreements,  pursuant  to its  holding  80,000  shares of
Series A  Preferred  Stock,  Tracker  beneficially  owned  approximately  43% or
3,252,825 shares of the Company's common stock on a fully-diluted,  as-converted
basis.  As a  result  of the  Agreements,  Tracker  now has  voting  control  of
approximately  53% or 4,082,534 shares on a fully-diluted,  as-converted  basis.
This voting control was obtained  through a proxy granted by an insider covering
202,643 shares of common stock and through the creation of a newly-formed voting
trust, to be controlled by a trustee designated by Tracker (the "Voting Trust").
Deposited  in the Voting  Trust are all of the  securities  held by Tracker  and
insider  shareholders  Robert Siddons  (director),  owner of 292,866 shares, and
Mark Walton (President and Chairman),  owner of 334,200 shares.  The term of the
Voting  Trust is five years,  but is subject to earlier  termination  if Tracker
otherwise  becomes the holder of 55% or more of the common  stock of our Company
on a  fully-diluted,  as-converted  basis.  The  existence or  expiration of the
Voting Trust does not restrict Tracker's ability to acquire additional shares of
the Company from third  parties nor of the insiders to sell such shares  subject
to terms of the Voting Trust.  This change in the voting  control of our Company
could result in changes in (i) the  management,  operations  or direction of our
Company,  (ii) the type of inventory products stocked or the presentation of the
product,  or (iii)  numerous  other aspects of our  operation or Travis  Edition
product line. Such changes could produce  financial  instability in our Company.
This financial  instability could result in our Company being unable to continue
as a going concern.

         In order to ensure that Tracker  maintains its voting control position,
each Company  insider who  purchased  Convertible  Notes from our Company in the
aggregate  amount of $1,300,000  on or about  December 14, 2001 (at a conversion
price of $2.4594 per share of common  stock) also has agreed not to convert such
notes at any time prior to November  15,  2004,  and that any shares that may be
acquired upon conversion after such date shall be deposited into and governed by
the Voting  Trust.  Further,  various  insiders of our Company  cancelled  stock
options  covering,  in the  aggregate,  237,198  shares of the Company's  common
stock.

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<PAGE>

         Tracker  has also  acquired,  for a period  of 90  days,  the  right to
purchase Voting Trust certificates (representing certain of the shares deposited
into the  Voting  Trust) at a  purchase  price of $1.20 per share  from  Messrs.
Walton and Siddons. During this option period, Tracker has the right to purchase
the  lesser of (a) the  number of shares  (pro rata  among  Messrs.  Walton  and
Siddons) required to give Tracker effective control of 51% or more of the common
stock of the Company on a fully-diluted,  as if converted,  basis, or (b) 30% of
Messrs. Walton's and Siddons' respective holdings of our common stock. (See Note
14 - "Subsequent Events" in the consolidated audited financial statements of the
Company and notes thereto included elsewhere in this Report on Form 10-K).

         Financing  Arrangements.  Under  the  terms of the  Agreements,  Travis
secured from Tracker and its Senior Lenders an aggregate amount of $1,245,000 as
advances under the Note described above in Risk Factors - "Operating  Losses and
Reduced Financing have Jeopardized our Cash Flow." Total potential  availability
under  the Note is $1.5  million,  and the Note was  based  upon  advancing  the
Company a portion of the refund amount  expected to be received  pursuant to the
filing  of  its  calendar  year  2002  federal  tax  return.  The  Note  matures
concurrently with our inventory borrowing agreements on April 30, 2003. There is
no assurance that the Company will receive additional  financing under the Note,
nor is there any  assurance  that the Senior  Lenders  will  extend the  current
inventory borrowing agreements beyond the maturity date of April 30, 2003.

         The Note will be administered by the newly-formed  Operating  Committee
of the  Company's  Board  of  Directors  (described  above,  and  controlled  by
Tracker).  This Committee will have the authority to request  additional  funds,
pursuant to the Note, from the lenders. Upon a request for funding,  Tracker and
the Senior  Lenders  may,  in their  individual  sole and  absolute  discretion,
advance the additional funds requested. There is no assurance that the Operating
Committee will request  additional  funds, or that Tracker or the Senior Lenders
will agree to advance the additional funds requested. A failure by the Operating
Committee  to request  funds,  or by  Tracker  or the Senior  Lenders to advance
additional funds, could have the effect of jeopardizing the Company's  financial
stability.  This financial  instability could result in our Company being unable
to continue as a going concern.

         The  Company  believes  that it will be able to repay  any  outstanding
balance  remaining under the Note with the amounts  expected to be received from
its 2002 federal tax return.  Failure to achieve additional financing from other
sources,   failure  to  negotiate  the  extension  of  its  inventory  borrowing
agreements,  or the receipt of funds from the Company's  2002 federal tax return
(i)  after  the  Note's  maturity  date of April  30,  2003 or (ii) in an amount
insufficient  to pay the balance of the Note could  result in the default on the
Note and of our inventory borrowing  agreements.  This default may result in the
demand for immediate or  accelerated  payment in full of all debts,  which could
cause financial  instability in our Company.  This financial  instability  could
result in our Company being unable to continue as a going concern.

         Income Tax Refunds Pledged as Security.  Borrowings  under the Note are
secured by all of the Company's  claims to any monies currently due or to become
due to the Company from the federal  government arising from any application for
an income tax refund for the 2002  calendar or any tax year.  Consequently,  any
refund(s)   received  by  the  Company  must  be  applied  against  any  amounts
outstanding under the Note. Based upon the Company's tax estimates,  it believes
that a refund of  approximately  $1.8 million will be received during the second
calendar  quarter  of 2003.  There is no  guarantee  that the  amount of the tax
refund  received by the Company will be sufficient to pay off the balance of the
Note.  Receipt of  substantially  less than the  expected  amount could have the
effect  of  jeopardizing  the  Company's  financial  stability.  This  financial
instability  could  result in our  Company  being  unable to continue as a going
concern.

         Our Income Tax Refunds Could Become Limited. We have received,  and for
the calendar year 2002 tax return expect to receive,  income tax refunds because
of our net losses.  However,  we are only eligible to receive  refunds up to the
amounts  of taxes we have  paid  during  certain  prior  years.  Because  of our
significant  net losses during the years 2002 and 2001,  once we file our annual
2002 federal  income tax return we will no longer be able to claim refunds since
we may exhaust the  federal  income  taxes we paid in prior years (we have a tax
year end of December  31).  Also,  under current  federal  income tax law we are
limited to two years of carryback of any net operating losses incurred after our
2002 tax year and there were no federal  income  taxes  paid,  or expected to be

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<PAGE>

paid,  during  this  two year  carryback  period.  Consequently,  if we have net
operating losses for the year ended December 31, 2003 or thereafter,  our refund
claims may  exceed  the amount of income  taxes we have paid in during the prior
period available for the carry-back of taxes and our tax refund could be reduced
in part or in full.  Since we rely on the tax refunds for  operating  cash flow,
our inability to continue to receive tax refunds  could have a material  adverse
effect on our  business,  financial  condition  and  results of  operations  and
prospects resulting in financial  instability and our inability to continue as a
going concern.  (See Risk Factors - "Income Tax Refunds Pledged as Security" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -  Liquidity  and  Capital  Resources.";  and  Note  1 -  "Basis  of
Presentation" in the consolidated  audited  financial  statements of the Company
and notes thereto included elsewhere in this Report on Form 10-K).

         Our Auditors Have Audited our Financial Statements and Express Doubt as
to our  Ability  to  Continue  to  Operate  as a Going  Concern.  Our  financial
statements are audited by the accounting  firm, Ernst & Young LLP. Ernst & Young
LLP has included a "going concern"  explanatory  paragraph in its opinion on our
financial  statements for the fiscal year ended September 30, 2002,  which cites
uncertainty  as to our  Company's  ability  to  continue  to  operate as a going
concern  without  additional  capital  or  the  successful  refinancing  of  our
indebtedness,  is  the  result  of our  Company's  operating  losses;  inventory
borrowing  agreements expiring in April 2003 and our non-compliance with certain
covenants of loan agreements. Since our current and prospective lenders, certain
investors and vendors rely on our audited financial statements, our inability to
continue to borrow money at terms and  conditions  as currently  available to us
or,  in the  alternative,  to  refinance  our  loans at as  favorable  terms and
conditions,  could have a material  adverse  effect on our  business,  financial
condition and results of operations  and prospects.  This financial  instability
could result in our Company  being unable to continue as a going  concern.  (See
Risk Factors - "Our Substantial  Indebtedness  Could Restrict Our Operations and
Make  Us  More  Vulnerable  to  Adverse  Economic  Conditions"  ,  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital  Resources"  and Note 1 - "Basis of  Presentation"  in the
consolidated  audited  financial  statements  of the Company  and notes  thereto
included elsewhere in this Report on Form 10-K).

         We Must Comply With Listing  Requirements  for the NASDAQ Stock Market.
We transferred  our common stock to the Nasdaq Small Cap Market  effective as of
October 25, 2002. We requested  the transfer  because our Company did not comply
with all of the  requirements  for  trading on the Nasdaq  National  Market.  We
believe that the closing price of $.55 per share for our common stock on January
17,  2003 is below  the  compliance  standard  of the  minimum  $1.00  bid price
required by the Nasdaq Small Cap Market. Our continued inability to maintain the
required share price range or other requirements for trading on the Nasdaq Small
Cap Market could result in our common stock being  delisted and not eligible for
trading on the Nasdaq Stock Market.  Since we rely on the Nasdaq Stock Market to
offer trading of our common stock, our inability to continue on the Nasdaq Stock
Market  could  have  a  material  adverse  effect  on  our  business,  financial
condition,  the  price of our  common  stock and the  ability  of  investors  to
purchase or sell our common  stock.  (See Risk Factors - "Our Stock Price May be
Volatile").

         General Economic Conditions in the United States and in the Areas Where
We  Have  Stores  Affect  Our  Sales.  Our  industry,  like  many  other  retail
industries,  depends on the local,  regional and national economy. High interest
rates,  high fuel  prices,  unfavorable  economic  developments,  volatility  or
declines in the stock market or consumer confidence levels, fears over terrorism
or possible military deployments,  changes to the tax law such as the imposition
of a luxury  tax or (with  respect  to a  specific  region)  a major  employer's
decision to reduce its  workforce can all  significantly  decrease the amount of
money  consumers are willing to spend on  discretionary  activities.  When these
situations arise,  consumers often decide not to purchase relatively  expensive,
"luxury" items like recreational boats. For example,  our Company's sales levels
declined and our Company  recorded  significant  net losses during both the 2002
and 2001  fiscal  years due, in part,  to the United  States  experiencing  weak
economic  conditions  (such as  rising  unemployment  levels,  reduced  consumer
confidence  and volatile  stock  markets).  From 1988 to 1990, our business also
suffered dramatically because of the declines in the financial,  oil and gas and
real estate markets in Texas. If the current economic  downturn  continues or if
similar  downturns in the national or in local economies arise in the future, we
may suffer  significant  additional  operating  losses.  (See Note 1 - "Basis of
Presentation" in the consolidated  audited  financial  statements of the Company
and notes thereto included elsewhere in this Report on Form 10-K).

                                       5
<PAGE>

         Changes in federal and state tax laws, such as the imposition of luxury
or excise taxes on new boat purchases also could influence  consumers' decisions
to purchase  products we sell and could have a negative effect on our sales. For
example, during 1991 and 1992 the federal government imposed a luxury tax on new
recreational  boats with sales  prices in excess of  $100,000.  This  luxury tax
coincided  with a sharp  decline in boating  industry  sales during the 1991 and
1992 periods. Any of these experiences would likely result in a material adverse
effect on our business, our operating results and our financial condition.  This
financial  instability could result in our Company being unable to continue as a
going concern.

         We Depend on Strong Sales in the First Half of the Year.  Our business,
and  the  recreational  boating  industry  in  general,  is very  seasonal.  Our
strongest sales period has historically begun in January,  because many boat and
recreation  shows are held in that month.  In the past,  strong sales demand has
continued  from January  through the summer  months.  Of our average  annual net
sales over the last three fiscal years,  over 27% occurred in the quarter ending
March 31 and over 37% occurred in the quarter ending June 30. With the exception
of our store locations in Florida,  our sales are generally  significantly lower
in the quarter  ending  December 31.  Because the overall  sales levels (in most
stores) in the  December  quarter  are much less than in the months  with warmer
weather,  we generally  have a substantial  operating loss in the quarter ending
December 31.  Because of the  historical  difference in sales levels in the warm
spring and summer months,  versus the cold fall and winter months,  if our sales
in the  months  of  January  through  June are weak as a  result  of  lackluster
consumer demand,  timing of boat shows, bad weather or lack of inventory we will
likely suffer significant  operating losses. This experience would likely result
in a material  adverse  effect on our business,  our  operating  results and our
financial condition.  (See Risk Factors - "Our Sales Depend on Good Weather" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations.")

         Our  Sales  Depend  on Good  Weather.  Our  business  also  depends  on
favorable weather conditions.  For example,  too much or too little rain, either
of which may result in dangerous or inconvenient  boating conditions,  can force
lakes,  rivers or other  boating  areas to close for safety  issues and severely
limit our sales. A long winter can also shorten our selling  season.  Hurricanes
and other storms could result in the  disruption of our  operations or result in
damage to our inventories and facilities.  Bad weather  conditions in the future
may  decrease  customer  demand for our boats,  which may decrease our sales and
could significantly lower the trading price of our common stock.

         Our Insurance May Not Reimburse Us for Certain Damage or Disasters.  We
purchase insurance for storm damage and other risk events, but (i) the amount of
insurance  purchased,  and (ii) the  coverage  we  purchase  or are  eligible to
purchase, may not repay us for all weather related damages or disruptions to our
sales levels or store  operations.  Also,  deductible levels available to us may
result in large out of  pocket  expenses  prior to us  obtaining  any  available
insurance  coverages.  Our  store  locations  in FEMA  Flood  Zones  do not have
insurance  coverage on inventory  damages  resulting from floods or rising water
since FEMA  policies do not provide  coverage  for  inventory  that is stored or
located outdoors.  Consequently, we must relocate inventory from these locations
in the event of hurricanes or other storms. In the event that we are not able to
secure adequate  insurance  coverage or if we suffer losses that are not covered
by our  insurance  policies  it may lead to a  material  adverse  effect  on our
business, our operating results and our financial condition.

         We have not opened New Stores  Recently and Much of our Past Growth has
been the result of  Acquiring  and Opening New Stores.  We have grown  primarily
through the  acquisition of  recreational  boat  dealerships.  We began with one
store in Texas in 1979  and,  from  that date  through  March  2000 we opened or
acquired  new  stores  in  Alabama,  Arkansas,   Florida,  Georgia,   Louisiana,
Mississippi,  Oklahoma,  Tennessee  and  Texas.  However,  we have not opened or
acquired any new store  locations since March 2000. (See Risk Factors - "We Have
Reduced our Store Count by Closing Store Locations".)

         Our comparable  store sales (which are sales in stores that are open in
the same  location for at least two  consecutive  years)  decreased by 11.6% and
6.1% in fiscal 2001 and 2002, respectively. We expect our comparable store sales
to continue to fluctuate from the unstable market  conditions which impacted the
United  States and the marine  industry  during our 2002 fiscal year.  (See Risk
Factors - "General  Economic  Conditions  in the United  States and in the Areas
Where We Have Stores Affect Our Sales.")

                                       6
<PAGE>

         Our  borrowing  and  certain  other  agreements  require  us to receive
approvals prior to opening or acquiring new store locations.  Therefore,  we may
only make  acquisitions  depending  upon,  among  other  things,  our  financial
strength at the time of a proposed  acquisition and our ability to finance these
transactions within the terms of our borrowing agreements.  In the event that we
complete  acquisitions or open new store  locations,  our success will depend on
our financial  strength,  our ability to hire and retain qualified employees and
our ability to identify markets in which we can successfully  sell our products.
Our success  will also depend on our ability to liquidate  the acquired  store's
remaining  inventory,  to convert the store  facility to a Travis Boating Center
superstore and to attract new customers to the store after the conversion.  (See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital Resources.")

         Besides  acquiring  existing  stores and  converting  them into  Travis
Boating  Centers,  we may build new  stores in cities or towns  that do not have
other boat retailers that we can purchase or would like to purchase. Our success
in  building  and  operating  new  facilities  will  depend on whether we obtain
reliable information about each potential market, such as how many and what type
of boats have previously  been sold in the market.  We must then be certain that
the prices of our boats are competitive  with other boat dealers that sell boats
in the market so that we can sell enough boats to operate our store  profitably.
We cannot  promise  or be certain  we when will open or close new  stores.  (See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital Resources.")

         We Have  Reduced our Store Count by Closing  Store  Locations.  We have
closed three store  locations  in fiscal 2002 and two store  locations in fiscal
2001 because the store  locations had low sales volumes and were not  profitable
to operate.  We may close  additional  store  locations that are not profitable,
(ii) that are not able to reach our desired level of sales or profits,  or (iii)
to reduce our cash  expenditures.  Inventory  from  closed  store  locations  is
transferred to other nearby stores that we operate. The expenses of transferring
and disposing of the  inventory and other assets from closed store  locations is
an  additional  expense to us and may lead to a material  adverse  effect on our
business, our operating results and our financial condition.

         Our Substantial  Indebtedness Could Restrict Our Operations and Make Us
More Vulnerable to Adverse Economic Conditions. We have had and will continue to
have a significant amount of indebtedness. Our general working capital needs and
borrowing agreement covenants (such as maximum debt/worth ratios and minimum net
worth  levels)  may require us to secure  significant  additional  capital.  Any
borrowings to finance future working capital requirements,  capital expenditures
or  acquisitions  could make us more  vulnerable to a sustained  downturn in our
operating results,  a sustained downturn in economic  conditions or increases in
interest rates on portions of our debt that have variable interest rates.

         Our ability to make payments on our indebtedness depends on our ability
to  generate  cash  flow in the  future.  If our cash flow  from  operations  is
insufficient to meet our debt service or working capital requirements,  we could
be  required  to sell  additional  equity  or  debt  securities,  refinance  our
obligations or dispose of assets in order to meet our debt service requirements.
Adequate  financing  may not be  available  if and when we need it or may not be
available on terms acceptable to us. Our failure to achieve  required  financial
and  other  covenants  in  our  borrowing  agreements  or to  obtain  sufficient
financing on favorable terms and conditions could have a material adverse effect
on our business,  financial  condition and results of operations  and prospects.
Also, our inventory borrowing  agreements expire in April of 2003. The inability
of our Company to renew these agreements or to secure alternative financing with
similar terms would have a material  adverse  effect on our business,  financial
condition and results of operations  and prospects.  This financial  instability
could result in our Company  being unable to continue as a going  concern.  (See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -  Liquidity  and  Capital   Resources"  and  Note  1  -  "Basis  of
Presentation"  and Note 14 -  "Subsequent  Events" in the  consolidated  audited
financial statements of the Company and notes thereto included elsewhere in this
Report on Form 10-K).

         We May Issue  Securities That Will Dilute Our Current  Shareholders and
Impact  our  Earnings  Per  Share.   On  December  14,  2001,  we  entered  into
Subordinated  Convertible loan transactions totaling $4.3 million. The loans are
unsecured  with a term of 36 months and accrue  interest at 10.75%,  fixed.  The
principal and interest  amounts  payable on the loans is  subordinated,  in most
circumstances,  to our  borrowing  agreements  with certain of our lenders.  The

                                       7
<PAGE>

loans may be repaid by the Company,  and if we do not redeem the loans, they can
be  converted  by the holders  into shares of our common  stock,  subject to the
terms of the Voting  Trust,  at a conversion  price of  approximately  $2.46 per
share. (See Risk Factors - "Change of Control.")

         On March  13,  2002,  we  entered  into an  agreement  whereby  Tracker
purchased  80,000  shares of newly  created 6% Series A  Cumulative  Convertible
Preferred Stock (the "Preferred  Stock") in the Company.  The issue price of the
Preferred Stock was $100 per share.  Each share can be converted into our common
stock at a conversion  price of approximately  $2.46 per share.  Tracker paid us
$8.0 million in the aggregate to purchase 80,000 shares of the Preferred  Stock.
We used $5.0  million  for general  working  capital  purposes  and we used $3.0
million to prepay portions of the subordinated  convertible loans as required by
Tracker. If we raise additional equity capital or finance future working capital
requirements,  in whole or in part,  through the issuance of  additional  common
stock or debt  instruments  convertible  into our  common  stock,  our  existing
shareholders would experience  dilution and our earnings per share would also be
impacted by the issuance of additional  shares of capital stock.  Also,  certain
provisions  in  our  (i)  Preferred  Stock  agreements  and  (ii)   Subordinated
Convertible loans require us to issue additional shares or reduce the conversion
price of the  shares to be issued in the event  that we offer  shares in another
transaction at a lower price or with more favorable  terms.  (See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital  Resources" and  "Subsequent  Events" in the  consolidated
audited financial statements of the Company and notes thereto included elsewhere
in this Report on Form 10-K).

         If We Issue More  Stock,  Our Stock  Price May  Decline.  The sale of a
large  number of shares of our common  stock in the public  market  could have a
material  adverse effect on the market price of our common stock.  As of January
17,  2003,  we own  or  control,  together  with  our  officers  and  directors,
approximately   862,778  shares,  or  approximately   20%,  of  our  issued  and
outstanding common stock.

         As of January 17, 2003, Tracker owns or controls  approximately  80,000
shares  of our  Series A  preferred  Stock and  controls  the  voting  rights to
approximately  an  additional  829,708  shares of common  stock.  The  shares of
Preferred  Stock owned by Tracker may be converted into 3,252,826  shares of our
common  stock.   In  this  event,   Tracker  would  have  voting   control  over
approximately  53% of our issued and  outstanding  common shares  (excluding the
effect of options outstanding or other contingently issuable shares).

         The sale of a large  portion of these  shares may decrease the price of
our common stock.  (See Risk Factors - "We May Issue Additional  Securities That
Will  Dilute Our Current  Shareholders  and Impact our  Earnings  Per Share" and
"Change of Control").

         Our Suppliers  Could Increase the Prices They Charge Us or Could Decide
Not  Sell  to  Us.  We  have  entered  into  dealer   agreements  with  our  key
manufacturers.   Most  of  these   agreements   are  renewable  each  year,  are
non-exclusive  and contain other  conditions  that are standard in the industry.
Because of our relationship with these  manufacturers and the significant amount
of product we purchase,  we receive volume price  discounts and other  favorable
terms;  however,  the manufacturers may change the prices they charge us for any
reason at any time or could decide not to sell their products to us. Also, since
we have closed store  locations and have  experienced  declines in sales we have
purchased  less  inventory  from  most  suppliers.  This  may  result  in  price
increases,  reduced availability of product or reductions in volume discounts. A
change in manufacturer's prices, their decisions not to sell to us or changes in
industry  regulations  could have a  material  adverse  effect on our  business,
financial  conditions  and results of  operations.  (See Risk Factors - "We Have
Reduced our Store Count by Closing Store Locations and Risk Factors - We Rely on
a Few Manufacturers for Almost All of our Boat Purchases.)

         We Rely on a Few  Manufacturers  for Almost All of our Boat  Purchases.
Our  success  depends  to a  significant  extent on the  continued  quality  and
popularity of the products we sell. We also buy much of our boat  inventory from
Genmar  Industries,  Inc.,  or  "Genmar".  For  example,  in fiscal year 2001 we
purchased  41.6%,  and in  fiscal  year  2002 we  purchased  35.6% of our  total
inventory  from Genmar.  The  purchases of boats from this supplier are based on
the  volume  price  discounts  and other  terms of  various,  primarily  annual,
agreements. In addition, we purchase a large percentage of the annual production
of several other boat manufacturers.

                                       8
<PAGE>

         If our sales increase, our key manufacturers may need to increase their
production  or we may need to locate  other  sources to purchase  boats or other
products we sell. If our suppliers are unable to produce more inventory,  decide
not to renew their  contracts with us or decide to stop production and we cannot
find  alternative  inventory  suppliers at similar quality and prices,  we would
experience inventory shortfalls which, if severe enough, could cause significant
disruptions  and  delays  in  our  sales  and,  therefore,  harm  our  financial
condition. In addition the timing,  structure,  and amount of manufacturer sales
incentives could impact the timing and profitability of our sales.

         We  have  Inventory  from  Defunct   Manufacturers   and   Discontinued
Inventory. Several of the manufacturers represented by our Company have gone out
of  business,   have   discontinued   operations  or  have  had  their  products
discontinued from being represented by our Company. Inventory remaining in stock
from  these  manufacturers  is  subject  to risk  for lack of  customer  demand,
unavailability of a manufacturer warranty and other limiting factors potentially
diminishing  its market value.  Inventories  are carried at the lower of cost or
market.  Cost for boats,  motors and trailers is  determined  using the specific
identification  method. If the carrying amount of our inventory exceeds its fair
value,  we write down our inventory to its fair value. We utilize our historical
experience  and current  sales  trends as the basis for  valuing our  inventory.
Changes in market  conditions,  lower than expected customer demand,  closing of
additional  store locations and changing  technology or features could result in
additional  obsolete  inventory  that is  unsaleable or only saleable at reduced
prices, which could require additional inventory reserve provisions.

         Such  events and market  conditions  include but are not limited to the
following: 1) deteriorating financial condition of the manufacturer resulting in
discontinuance and lack of manufacturer's  warranty for certain boats, motors or
other products,  2) introduction of new models or product lines by manufacturers
resulting  in less  demand  for  previous  models or product  lines,  3) Company
initiatives  to promote  unit sales and reduce  inventory  levels for new and/or
used  inventory by reducing  sales prices,  and 4) Competing  boat  retailers in
various markets in which the Company operates may offer sales incentives such as
price reductions.

         Our Success Will Depend on How Well We Manage Our Inventory and Product
Growth.  We have  substantially  reduced our inventory levels. We have developed
consolidated  purchase orders and a business plan for inventory that we call our
Master Business Plan.  These  procedures  were designed to closely  regulate and
coordinate  our  inventory  levels,  increase  inventory  turns and  improve our
liquidity.  Although we believe  that our systems,  procedures  and controls are
adequate to continue to support this process,  we cannot assure that this is the
case.  Our inability to manage our inventory  would result in a significant  and
severe  financial  impact  on our  business,  operating  results  and  financial
condition.

         As a result  of the  Change  of  Control  effective  January  7,  2003,
outlined  above,  Tracker has assumed  effective  control of the  Company.  This
change  in the  control  of our  Company  could  result  in  changes  (i) in the
management  style or  direction  of our  Company,  (ii)  the  type of  inventory
products  stocked or the  presentation  of the product,  or (iii) numerous other
aspects of our  operation or Travis  Edition  product  line.  Such changes could
produce financial instability in our Company.

         If Our  Products  are  Defective,  We Could be Sued.  Because  we sell,
service and custom package boats, motors and other boating equipment,  we may be
exposed  to  lawsuits  for  personal  injury and  property  damage if any of our
products are defective,  cause personal  injuries or result in property  damage.
Manufacturers  that we purchase  products from  generally  maintain  product and
general  liability   insurance  and  we  carry  third  party  product  liability
insurance.  We have  avoided any  significant  liability  for these risks in the
past.  However,  if a situation arises in which a claim is not covered under our
insurance  policy or is covered under our policy but exceeds the policy  limits,
it could  have a  significant  and  material  adverse  effect  on our  business,
operating  results  and  financial  condition.  (see  Risk  Factors  - "We  have
Inventory from Defunct Manufacturers and Discontinued Inventory".)

         Certain  Laws and  Contracts  May Keep Us From  Entering New Markets or
Selling  New  Products.   We  may  be  required  to  obtain  the  permission  of
manufacturers  to sell their  product  before we enter new  markets or before we
sell new or competitive  products in our existing markets.  If our manufacturers
do not give us permission to sell their  products in markets where we operate or

                                       9
<PAGE>

plan to  operate,  we may be forced to find  alternative  supply  sources  or to
abandon our plan.  Besides  these  manufacturers'  restrictions,  there are also
legal  restrictions  on our  business.  For  example,  the state of Oklahoma has
adopted laws that restrict the locations of competing boat dealers.  While these
types of laws are not  common,  they  could  have a  significant  effect  on our
industry if other states pass similar restrictions.

         We  May  Not  Be  Able  To  Respond   Effectively  To  The  Significant
Competition We Face. We operate in very competitive conditions.  We must compete
generally with other businesses trying to sell  discretionary  consumer products
and also face  intense  competition  from other  recreational  boat  dealers for
customers,  quality  products,  store  locations  and boat show  space.  We rely
heavily on boat shows to generate  sales. If we are limited in or prevented from
participating  in boat shows,  it could have a negative  effect on our business,
financial condition and results of operations.

         Within our industry,  our competitors include many single location boat
dealers and several  large  dealer  groups.  We compete  based on the quality of
available products, the price and value of the products we sell and our customer
service.  To a lesser  extent,  we also compete with national  specialty  marine
stores, catalog retailers,  sporting good stores and mass merchants,  especially
with respect to parts and accessories.  We face  significant  competition in the
markets where we currently operate and the areas  surrounding those markets.  We
believe that the trend in the boating  industry is for  manufacturers to include
more  features as  standard  equipment  on boats,  to offer  greater  rebates or
subsidies  and for other  dealers  to offer  packages  comparable  to our Travis
Edition  boat  packages.  Some of our  competitors,  especially  those that sell
yachts or boating  accessories,  are large national or regional  chains that may
have substantially greater financial,  marketing and other resources than we do.
We cannot give any assurances that we will be able to effectively compete in the
retail boating industry in the future.

         Much Of Our Income Is from  Financing,  Insurance and Extended  Service
Contracts, Which Is Dependent On Third Party Lenders and Insurance Companies. We
receive a substantial  amount of our income from the fees we receive from banks,
other lending  companies,  insurance  companies and vendors  providing  extended
service contracts.  We call this type of income Finance and Insurance income, or
F&I income.  If our customers  desire to borrow money to finance the purchase of
their boat,  we help the  customers  obtain the  financing by referring  them to
certain  banks that have offered to provide  financing for boat  purchases.  The
lender  pays a fee to our company for each loan that they are able to provide as
a result of our customer referral.

         When we sell  boats we also  offer our  customers  the  opportunity  to
purchase  (i) a Service  Contract  that  generally  provides up to four years of
additional  warranty  coverage on their  boat's  motor after the  manufacturer's
original  warranty  expires,  and (ii) various types of insurance  policies that
will  provide  money to pay a customer's  boat loan if the  customer  dies or is
physically disabled.  We sell these products as a broker for unrelated companies
that specialize in these types of issues, and we are paid a fee for each product
that we sell.  Since we only broker these products on behalf of unrelated  third
parties,  our  responsibility  and financial  risk for paying claims or expenses
that are eligible to be insured by these  Service  Contracts or other  insurance
policies is limited.

         F&I income was 2.9% and 3.3% of our net sales in fiscal  years 2002 and
2001,  respectively.  This  arrangement  carries several  potential  risks.  For
example,  the  lenders we arrange  financing  through  may decide to lend to our
customers directly rather than to work through us. If the customer goes directly
to the bank to apply for a loan to  purchase  their boat we would not  receive a
fee for referral. Second, the lenders we currently refer customers to may change
the amount of fees paid or the criteria they use to make loan  decisions,  which
could reduce the number of customers that we can refer.  Also, our customers may
use the Internet or other electronic methods to find financing alternatives.  If
either of these events occur, we would lose a significant  portion of our income
and profit. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

         Our Management Team or Direction of Operations may Change.  As a result
of the Change of Control effective January 7, 2003, outlined above,  Tracker has
assumed  effective  control of the Company.  There is no assurance  that Tracker
will retain the current  management or officers of the Company.  A change in the
management  or  officers  of our  Company  could  result in  changes  (i) in the

                                       10
<PAGE>

management  style or  direction  of our  Company,  (ii)  the  type of  inventory
products  stocked or the  presentation  of the product,  or (iii) numerous other
aspects of our  operation or Travis  Edition  product  line.  Such changes could
produce financial  instability in our Company.  This financial instability could
result in our Company  being  unable to continue as a going  concern.  (See Risk
Factors - "Change of Control").

         We have  purchased and are the  beneficiary  of key-man life  insurance
policies on our President,  Mr. Walton,  and our Chief  Financial  Officer,  Mr.
Perrine in the amount of $1,000,000,  each, and on our Executive Vice President,
Mr. Spradling in the amount of $500,000.  However,  if any of these employees or
other key employees died, became disabled or left Travis Boats for other reasons
and were not replaced with individuals of similar or greater  experience levels,
their loss could have a significant  negative  effect on our  operations and our
financial performance.

         Our Stock Price May be  Volatile.  The price of our common stock may be
highly  volatile for several  reasons.  First, a limited number of shares of our
stock are owned by the public.  This may effect trading patterns which generally
occur  when a  greater  number of  shares  are  traded.  Second,  the  quarterly
variations in our operating results, as discussed previously,  may result in the
increase or decrease of our stock price. Third,  independent parties may release
information  regarding  pending  legislation,  analysts'  estimates  or  general
economic  or market  conditions  that effect the price of our stock.  Also,  our
stock price may be effected by the demand and the overall market  performance of
small  capitalization  stocks.  Any of these  situations  may have a significant
effect on the  price of our  common  stock or our  ability  to raise  additional
equity.  (See  Risk  Factors - "If We Issue  More  Stock,  Our  Stock  Price May
Decline.";  Risk Factors - "We May Issue Securities That Will Dilute Our Current
Shareholders and Impact our Earnings Per Share."; Risk Factors - "We Must Comply
With  Listing  Requirements  for the NASDAQ  Stock  Market."  and  "Management's
Discussion and Analysis of Financial Condition and Results of Operations.")

         Our  Corporate  Documents  May  Prevent or  Inhibit a  Takeover  of the
Company. Our Articles of Incorporation permit us to issue up to 1,000,000 shares
of preferred stock, either all at once or in a series of issuances. Our Board of
Directors has the power to set the terms of this  preferred  stock.  We recently
issued  80,000  shares  of  Series A  preferred  stock.  If we issue  additional
preferred  stock,  it could delay or prevent a change in control of the company.
Also, our Articles of  Incorporation  permit the Board of Directors to determine
the number of  directors  and do not  specify a maximum or minimum  number.  Our
Bylaws  currently  provide  that the Board of  Directors  is divided  into three
classes with  staggered  terms,  however one class is  currently  set at two (2)
individuals  and these board  positions  have been granted to the holders of the
Series A preferred  stock  (Tracker)  for so long as at least  25,000  shares of
preferred  stock  remain  outstanding.  Additionally,  under  the  terms  of the
Agreements,  Tracker now has the right to designate four of seven members of the
Company's  Board of  Directors.  Tracker,  as holder of the  Series A  Preferred
Stock, currently has two representatives on the Board of Directors,  and has not
yet designated two additional representatives.  (See Risk Factors - "If We Issue
More Stock,  Our Stock Price May Decline" and "We May Issue Securities That Will
Dilute Our Current Shareholders and Impact our Earnings Per Share.")


                                     PART I

Some of the  information  in this Report on Form 10-K,  including  statements in
"Item 1.  Business",  and  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations"  contain  forward-looking  statements  that
involve  substantial risks and uncertainties.  You can identify these statements
by  forward-looking  words  such  as  "may",  "will",  "expect",   "anticipate",
"believe",  "estimate",  and  "continue"  or  similar  words.  You  should  read
statements  that  contain  these words  carefully  because  they (1) discuss our
future expectations; (2) contain projections of our future results of operations
or  of  our  future  financial  condition;  (3)  state  other  "forward-looking"
information.  We believe it is  important to  communicate  our  expectations  to
people  that may be  interested.  However,  unexpected  events  may arise in the
future that we are not able to predict or control.  Among the factors that could
cause actual results to differ  materially  are:  general  economic  conditions,
competition and government  regulations,  as well as the risks and uncertainties
discussed in this Report on Form 10-K, and the uncertainties set forth from time
to time in the Company's  other public reports,  filings and public  statements.

                                       11
<PAGE>

All  forward-looking  statements  in this  Report  on Form  10-K  are  expressly
qualified in their entirety by the cautionary statements in this paragraph.

Item 1.  Business

         General - Travis Boats & Motors, Inc. ("Travis Boats", the "Company" or
"we") is a  leading  multi-state  superstore  retailer  of  recreational  boats,
motors,  trailers and related marine  accessories in the southern United States.
Our Company,  currently  operates 34 stores under the name Travis Boating Center
in  Texas  (8),  Arkansas  (3),  Louisiana  (4),  Alabama  (1),  Tennessee  (5),
Mississippi (1), Florida (10), Georgia (1) and Oklahoma (1).

         We  seek to  differentiate  ourselves  from  competitors  by  providing
customers  a  unique  superstore  shopping  experience  that  showcases  a broad
selection of high quality boats, motors, trailers and related marine accessories
at firm,  clearly  posted low  prices.  Each  superstore  also  offers  complete
customer  service  and  support,   including  in-house  financing  programs  and
full-service repair facilities staffed by factory-trained mechanics.

         History -Travis Boats was incorporated as a Texas  corporation in 1979.
As used herein and unless otherwise  required by the context,  the terms "Travis
Boats",  the "Company"  and "we" shall mean Travis Boats & Motors,  Inc. and its
direct and indirect subsidiaries.

         Since our founding in 1979 as a single  retail store in Austin,  Texas,
we have grown both through  acquisitions and the opening of new "start-up" store
locations. During the 1980s, we expanded into San Antonio, Texas, purchased land
and built a new  store  facility.  After  this,  we  purchased  additional  boat
retailers  that  operated  stores in the Texas  markets of  Midland,  Dallas and
Abilene.  It was  during  this  early  period  of  store  growth  that we  began
developing  the  systems  necessary  to  manage  a  multi-store   operation  and
maximizing our inventory  purchases to obtain  increased volume  discounts.  Our
success  in  operating  numerous  stores  and  maximizing  volume  discounts  on
inventory  purchases  led to the  introduction  of our  own  proprietary  Travis
Edition  packaging  concept and our philosophy of clearly posting price signs on
each of our Travis Edition boats held for sale.

         We sell  approximately  75 different  types of Travis Edition models of
brand-name fishing,  water-skiing and general recreational boats, such as family
ski boats,  off-shore  fishing boats,  personal  watercraft,  cabin cruisers and
yachts up to  approximately  50 feet in length.  We also sell motors,  trailers,
accessories  and  related  equipment.  Although we sell  pleasure  boats at many
different  retail  prices,  we  attempt  to price  our  product  to  maintain  a
consistent  gross profit  percentage for each of our Travis Edition models.  See
"Business Strategy - Travis Edition Concept."

         We study sales trends from the cities and states where we operate store
locations.  We  use  the  information  from  this  data  to  custom  design  and
pre-package combinations of popular brand-name boats, such as Larson, Wellcraft,
Scarab,  Bayliner,  Fisher,  ProCraft,  Fishmaster,  Ranger and  Starcraft  with
outboard motors generally manufactured by Suzuki or Brunswick Corporation, along
with trailers and numerous accessories, under our own proprietary Travis Edition
label.  These  signature  Travis  Edition  packages,  which account for the vast
majority  of  total  new  boat  sales,  have  been  designed  and  developed  in
coordination with the manufacturers  and often include  distinguishing  features
and  accessories  that  have  historically  been  unavailable  to,  or listed as
optional,  by many of our  competitors.  We also sell  yachts,  such as  Carver,
Crownline and  Martinique  that range in length from 25 feet to over 50 feet. By
providing many different types of boats with many types of standard features, we
attempt to offer the customer an exceptional boat at a competitive price that is
ready for immediate use and enjoyment.

         We believe  that our  Company  offers a  selection  of boat,  motor and
trailer  packages that fall within the price range of the majority of all boats,
motors and trailers sold in the United States.  Our Travis Edition  product line
generally  consists  of  boat  packages  priced  from  $7,500  to  $75,000  with
approximate  even  distribution  within  this price  range.  Our yachts can have
prices  above  $500,000.   While  most  of  our  sales  have  historically  been
concentrated  on boats with retail  sales  prices  from  $7,500 to  $75,000,  we

                                       12
<PAGE>

believe  that as the Company  continues  to operate in Florida and enters  other
markets along the Gulf of Mexico or other new coastal areas,  that the number of
off-shore fishing boats,  cabin cruisers and yachts will continue to increase as
a  percentage  of our net  sales.  Our  management  believes  that by  combining
flexible  financing  arrangements  with many types of boats  having  broad price
ranges,  that we are able to offer boat  packages to  customers  with  different
purchasing budgets and varying income levels.

         Execution of Restructure  Plans - The Company  anticipates that it will
require  additional  working capital or financing to fund operations for certain
periods  during at least the first two  quarters  of its fiscal  2003  year.  We
believe that our anticipated cash needs exceed amounts otherwise available under
current inventory borrowing agreements or our cash balances. This projected cash
flow  shortfall is  influenced  in part by our seasonal  trends,  which  include
historically low sales levels during the October through December periods. Also,
the  seasonal  lull  normally  experienced  at the end of a  calendar  year  was
compounded at the end of 2002 by continued economic  uncertainty,  weak industry
sales trends,  and certain revised  borrowing  terms on our inventory  borrowing
agreements which have had the effect of reducing our cash balances and borrowing
availability.

         In recognition of this issue, we have (i) negotiated interim financing,
(ii) developed  management plans to significantly  reduce expense levels,  (iii)
entered  into various  agreements  with a major  shareholder,  and (iv) formed a
special Operating  Committee of our Board of Directors.  The Operating Committee
will have authority to oversee the overall  financial  operations of the Company
(including  all  store  level  and  management   operating  expenses,   employee
headcount,   inventory   reduction  measures  and  other  relevant  expenses  or
initiatives) and to review weekly cash flows.  (See Risk Factors - "Execution of
Restructure Plans").

         We  took  these  actions  to  create  a  plan  to (i)  stop,  or in the
alternative,  materially reduce the operating losses experienced during the past
two fiscal  years,  and (ii) to allow the Company to work towards  building cash
reserves  during the 2003 fiscal year that will  potentially  be  sufficient  to
alleviate,   or  alternatively   reduce,   similar  off-season  working  capital
shortages. Key components of this plan include interaction with management,  the
Operating Committee, our lenders and our key vendors to reach plans that provide
for a  collaborative  effort  to  reach  attainable  ratio  levels  in our  debt
agreements  and to enhance  cash flow.  We plan to enhance  cash flow by,  among
other initiatives,  carefully  reducing (i) variable  expenses,  including those
expenses  related to payroll  and  benefits;  (ii)  reviewing  additional  store
locations  for closure that are not expected to  contribute to cash flows or are
in markets that can  reasonably be served by other nearby Travis  Boating Center
locations and (iii) improve sales  management to speed the pace of reductions in
both new and used aged inventories which have historically tied up our cash flow
as a result of our inability to borrow funds against those products.

         The  restructure  plans,  along  with  detailed  plans for our  ongoing
borrowing needs, are to be approved by our Operating  Committee and submitted to
our various lenders prior to April 30, 2003.  Accordingly,  the restructure plan
is an integral  component in  improving  our cash flows and in  negotiating  new
borrowing agreements, however there is no assurance that our plans will succeed,
or in the event that they do succeed, that they will be sufficient to offset our
net losses, improve our cash flow or provide a basis for the continuation of our
financing.  (See Risk Factors -  "Operating  Losses and Reduced  Financing  have
Jeopardized our Cash Flow").

         Business  Strategy  -  We  have  developed  a  multi-state,  superstore
strategy  to  offer  for  sale  a  wide  selection  of  recreational  boats  and
accessories  . Our  objective is to establish our Company as one of the dominant
retailers of recreational boats, motors,  trailers and marine accessories in the
southern United States.  Therefore,  our strategy includes  increasing  customer
service levels,  market share  penetration and sales at existing store locations
and possibly further  expansion of the number and size of our store locations in
the southern United States while also  maintaining a focus on possible cities in
other  regions.  Our  merchandising  strategy is based on  offering  customers a
comprehensive  selection of quality,  brand name boats and boating products in a
comfortable  superstore  environment.  We  intend  to  continue  to build  brand
identity  by  placing  our  Travis  Edition  name on the many  types of  boating
packages that we sell. We also use  advertising,  open houses,  our web site and
other types of marketing  events to increase our name recognition and our market
share.  See Risk  Factors - "We have not opened New Stores  Recently and Much of
our Past Growth has been the result of Acquiring and Opening New Stores".

                                       13
<PAGE>

         Our business  operations  emphasize  the  following key elements of our
business strategy:

         Travis Boating  Center  superstore.  Travis Boating Center  superstores
generally  have a distinctive  and stylish  trade dress  accented with deep blue
awnings,  a nautical neon building  decoration,  expansive glass storefronts and
brightly  lit  interiors.   Management  estimates  the  average  store  size  at
approximately  21,000  square  feet and  located  on 3 - 5 acres  of  land.  The
superstore  locations  present  customers  with a broad array of boats and often
over  9,000  parts and  accessories  in a clean,  well-stocked,  air-conditioned
shopping environment. All boats are typically displayed fully rigged with motor,
trailer and a complete  accessory package allowing for the customer's  immediate
purchase and enjoyment.  Professionally-trained  mechanics operate service bays,
providing customers with complete maintenance and repair services.

         Travis Edition  concept.  We gather and use extensive  market research,
combined with the design resources of our  manufacturers,  to develop our custom
Travis Edition boating packages. Our significant purchasing power and consequent
ability to coordinate  designs with our  manufacturers  has enabled us to obtain
products directly from the factory at low prices,  along with favorable delivery
schedules  and  with   distinguishing   features  and   accessories   that  have
historically been unavailable to, or listed as optional by many competitors.  At
our store locations we often also add certain additional  features after receipt
of the product to enhance our Travis Edition packages.  Each Travis Edition is a
complete,  full-feature package, including the boat, motor, trailer and numerous
additional  accessories  and  design  features  often not found on  competitors'
products, thus providing our customers with superior value. These features often
may include  enhanced  styling  such as  additional  exterior  colors,  complete
instrumentation  in  dashboards,  transoms  warrantied  for life,  canopy  tops,
trolling motors, upgraded interiors with stereos, wood grain dashboards, in-dash
depth  finders,  stainless  steel motor  propellers and enhanced hull design not
available on other models.  Our Travis Edition boats are often identified by the
Company's   attractive   private   label  logo,   as  well  as  the   respective
manufacturer's logo.

         Unlike most  recreational  boat dealers,  we place firm sales prices on
each of our Travis Edition  packages and generally  maintain that same price for
the entire model year. These prices are advertised and clearly posted on each of
our boats so that the  customer  receives  the same price at any Travis  Boating
Center. We believe this selling  philosophy  reduces customer anxiety associated
with  bargaining or  negotiation  and offers our  customer's  prices at or below
prices that they generally might receive from our  competitors.  We also believe
this pricing  strategy and  low-pressure  sales style provides the customer with
the comfort and  confidence of having  received a better boat with more features
at a lower price than may have been obtained through negotiations at competitive
stores.  Our  management  believes,  this  approach has promoted  good  customer
relationships  and enhanced our reputation in the industry as a leading provider
of quality and value.

         Acquisitions.  We did not  complete  any  acquisitions  in fiscal years
2002, 2001 or 2000.

         Boat Show  Participation.  We also  participate in numerous boat shows,
typically  held in January  through  March,  in each of the  markets in which we
operate and in certain other  markets near our stores.  These shows are normally
held at convention centers or at on-the-water  locations,  with all area dealers
purchasing space to display their respective product offerings.  We believe that
boat  shows  and other  offsite  promotions  generate  a  significant  amount of
interest in our Travis  Edition  products and often have an immediate  impact on
sales at a  nominal  incremental  cost.  Although  total  boat  show  sales  are
difficult to assess,  management  attributes a significant portion of the second
fiscal quarter's net sales to such shows.

         F&I Products. In addition to our Travis Edition boat packages, we offer
our customers the ability to purchase  extended service  contracts and insurance
coverages, including credit life and accident/disability coverages (collectively
"F&I Products").  The extended service contracts provide customers with coverage
for mechanical engine breakdown for a period (usually 36 or 48 months) beginning
after  the  stated  warranty  term of the  original  manufacturer  expires.  The
insurance coverages provide the customer with funds to repay a portion or all of
their boat loan in the event of death, disability or other covered event.

         Since we have business relationships with numerous financial lenders we
also  offer to assist  our  customers  in  obtaining  financing  for their  boat
purchase.  If the customer  purchases F&I Products or utilizes financing we have

                                       14
<PAGE>

helped arrange,  we earn commissions based upon our total volume of sales or the
amount of mark-up we charge over the cost of the products.  F&I Products account
for a substantial  portion of the our income, the most significant  component of
which is the income  resulting  from fees  earned  assisting  our  customers  in
obtaining  financing  for  their  purchases.  Each of the F&I  Products  and the
financial  assistance  is  done on  behalf  of  unrelated  third  parties  which
generally include large financial institutions and insurance companies.

Operations

         Purchasing.  We are also among the  largest  domestic  volume  buyer of
boats from many of the boat  manufacturers  that we represent.  As a result,  we
have  built  close   relationships  with  many  of  our   manufacturers.   These
relationships  have allowed us to have substantial input into the design process
for the new  boats  that  are  introduced  in our  markets  each  year by  these
manufacturers.  This design input and coordination  with our  manufacturers is a
primary factor in the pricing, selection and types of the Travis Edition boating
packages that we offer for sale in our store locations.

         We  typically  deal  with  each  of  our  manufacturers  pursuant  to a
non-exclusive dealer agreement.  These dealer agreements are usually for one (1)
year in term  and they  typically  do not  contain  any  contractual  provisions
concerning product pricing or purchasing levels. The wholesale prices charged to
us by our  manufacturers  are  generally set each year for the entire model year
(usually  summer to  summer),  but may be  changed  at the  manufacturer's  sole
discretion.  However, historically we have had multi-year agreements to purchase
boats with Genmar  Industries,  Inc.  Currently,  most of the Genmar  agreements
expire in the 2003 fiscal year or have moved to annual expirations.

         Approximately 35.6% and 41.6% of our net purchases in fiscal years 2002
and 2001,  respectively,  were products manufactured by boat manufacturers owned
by Genmar.  The significant amount of purchases from Genmar is primarily related
to the store locations that we operate in Florida which sell Genmar's  Wellcraft
and Carver products. Other Genmar boat lines that we purchase include the brands
Larson, AquaSport, Scarab and Ranger.

         We also  entered  into a  multi-year  agreement  with a  subsidiary  of
Tracker  Marine  during fiscal 2002 to purchase  certain types of boats.  During
fiscal 2002, we purchased approximately 3.6% of our net inventory purchases from
Tracker.

         The  agreements  with  each   manufacturer   generally  include  volume
discounts  from the then  prevailing  dealer  base price over the entire term of
each  respective  agreement.  Although  these  dealer  agreements  have  varying
expiration dates,  each agreement  generally may be canceled by either party for
various reasons including our failure to purchase a certain amount of product or
the failure by the  manufacturer  to provide a certain amount of product that we
desire to purchase.

         The Company's right to display, advertise or sell some product lines in
certain markets,  including the Internet, may be restricted by arrangements with
certain  manufacturers.  (See Risk Factors - "We Rely on a Few Manufacturers for
Almost All of our Boat Purchases").

         Floor plan  financing.  We purchase  most of our inventory by borrowing
money on our floor plan and other borrowing  agreements.  The seasonal nature of
the  recreational  boating  industry  impacts the  production  schedules  of the
manufacturers  that produce marine products.  During the fall and winter months,
retail sales of recreational  boats diminish  significantly as compared to sales
during the warm  spring  and summer  months.  To  provide  recreational  boating
retailers, such as Travis Boats, extra incentive to purchase boating products in
the "off-season," manufacturers typically offer product for sale at a price that
includes an  interest  subsidy or other  discount.  Since  retail  boat  dealers
typically  utilize  floor plan  financing to provide the working  capital  funds
needed to purchase  inventory,  the  interest  subsidy is intended to assist the
retail dealer in stocking the product until the selling season. The terms of the
interest  subsidy  or  assistance  vary  by  manufacturer,  with  virtually  all

                                       15
<PAGE>

manufacturers in the marine industry offering such programs. Management believes
that the types of  financing  arrangements  we utilize are  standard  within the
industry.  As of September 30, 2002,  the Company and its  subsidiaries  owed an
aggregate of  approximately  $50.9  million to our lenders  under our floor plan
financing  agreements.

         Competition.  We  operate  in  a  highly  competitive  environment.  In
addition to facing  competition  generally from many other businesses seeking to
attract discretionary spending dollars, the recreational boat industry itself is
highly  fragmented,  resulting in intense  competition for customers,  access to
quality  products,  access  to boat  show  space in new  markets  and  access to
suitable store  locations.  Our Company relies heavily on boat shows to generate
sales.  If, for any reason,  we were unable to  participate in boat shows in our
existing or targeted  markets,  it could have a material  adverse  effect on our
business, financial condition and results of operations.

         Our  primary  competition  is from  boat  dealers  operating  a  single
location or several  locations in a single state and, to a lesser  degree,  with
national specialty marine stores,  catalog retailers,  sporting goods stores and
mass  merchants,  particularly  with  respect to parts and  accessories.  Dealer
competition,  which includes one other publicly traded  multi-state  retailer of
recreational  boats,  continues  to increase  based on the quality of  available
products, the price and value of the products and heightened attention levels to
customer  service.  There is  significant  competition  both  within  markets we
currently serve and in surrounding  markets.  While we generally compete in each
of our markets with retailers of brands of boats not sold by the Company in that
market, it is common for other competitive  retailers to sell the same brands of
outboard  motors.  Management  believes  that a  trend  in the  industry  is for
independent  dealers  to  attempt  to form  alliances  or  buyer's  groups,  for
manufacturers  to include  more  features  as  standard  equipment  on boats and
consequently,  and for  competitive  dealers  to offer  packages  comparable  in
features  and  price to those  that we offer as our  Travis  Edition  lines.  In
addition, several of our competitors, especially those selling yachts or boating
accessories,  are large national or regional chains that may have  substantially
greater  financial,  marketing and other  resources than we may deploy.  Private
sales of used  boats also  represent  a source of  competition.  There can be no
assurance  that we will be able to compete  successfully  in the  retail  marine
industry  in the  future.  See  Risk  Factors  - "We May Not Be Able To  Respond
Effectively To The Significant Competition We Face".

         Impact of Environmental and Other Regulatory Issues. Our operations are
subject to  regulation,  reporting and licensing by various  federal,  state and
local  governmental  agencies and we are subject to their  respective  statutes,
ordinances and regulations. The failure to satisfy these requirements could have
a material  adverse effect on our business,  financial  condition and results of
operations.

         On October 31, 1994, the U.S.  Environmental  Protection Agency ("EPA")
announced  proposed  emissions  regulations  for  outboard  marine  motors.  The
proposed  regulations  would  require a 75%  average  reduction  in  hydrocarbon
emissions for outboard motors and set standards for carbon monoxide and nitrogen
oxide emissions as well.  Under the proposed  regulations,  manufacturers  began
phasing  in low  emission  models in 1998 and had  approximately  nine  years to
achieve full compliance.  Certain states, such as California,  are proposing and
adopting legislation that would require low emission outboards and other engines
on certain bodies of water or more aggressive  phase-in  schedules than the EPA.
Based on these  regulations  and  public  demand  for  cleaner  burning  motors,
outboard  motor  manufacturers,   such  as  Suzuki  and  Brunswick,  have  begun
distribution for the new EPA compliant  outboard motors. The boat models we sold
with the new EPA  compliant  outboards  in fiscal 2002 and 2001  generally  were
priced  approximately $2,000 higher than those with traditional outboard motors.
Management  anticipates retail prices to generally be from $500 to $1,500 higher
for  the  new EPA  compliant  outboards  depending  on the  motor's  horsepower.
Management  believes  that the higher  retail  costs will be somewhat  offset by
enhanced fuel efficiency and acceleration  speed, as well as possible reductions
of  maintenance  costs  of the new  EPA  compliant  outboard  motors.  Costs  of
comparable new models, if materially more expensive than previous models, or the
manufacturer's  inability to deliver responsive,  fuel efficient outboard motors
that comply with EPA  requirements,  could have a material adverse effect on our
business, financial condition and results of operations.

                                       16
<PAGE>

         In the ordinary  course of our business,  we are required to dispose of
certain waste  products that are regulated by state or federal  agencies.  These
products include waste motor oil, tires, batteries and certain paints. It is our
policy to use appropriately licensed waste disposal firms to handle this refuse.
If there were improper disposal of these products,  it could result in us facing
potential liability,  fees, fines or other penalties.  Although we do not own or
operate any  underground  petroleum  storage tanks,  we currently  lease several
properties  containing  above-ground  tanks,  which are subject to registration,
testing and governmental regulation.

         Additionally, certain states have required or are considering requiring
a license in order to operate a recreational boat or personal watercraft.  While
such  licensing   requirements  are  not  expected  to  be  unduly  restrictive,
regulations may discourage potential first-time buyers,  thereby limiting future
sales,  which could have a material  adverse  effect on our business,  financial
condition and results of operations.

         Trademarks  and service  marks.  We have received a registered  federal
trademark for our corporate logo, which includes the name Travis Boating Center.
We also have trademark  applications  pending with the U.S. Patent and Trademark
Office for the names "Travis  Edition" and for the overall  appearance and trade
dress of our Travis  Boating Center  superstore.  There can be no assurance that
any of these applications will be granted.  However,  based on a number of years
of use,  we believe  that we have  certain  common law rights to these  marks at
least in our  current  market  areas.  Notwithstanding  the  foregoing,  we have
entered  into an agreement  with a marine  dealership  operating  in  Knoxville,
Tennessee  not to use the names  "Travis,"  "Travis  Boating  Center" or "Travis
Edition" in certain types of uses or situations within Knoxville,  Tennessee and
a 50 mile radius therefrom.

         Web    site.    We    operate    a   Web    site    under    the   name
"travisboatingcenter.com"   and   own  the  URL  for   this   name,   the   name
"boatorder.com" and numerous derivations of these names.

         Employees.  As of  September  30,  2002,  our  staff  consisted  of 553
employees,  534 of whom are full time.  The  full-time  employees  include 34 in
store level management and 46 in corporate  administration  and management.  The
Company is not a party to any collective  bargaining agreements and is not aware
of any efforts to unionize its  employees.  We consider the  relations  with our
employees to be good.

        As of December 30, 2002, our staff  consisted of 512 employees,  498 of
whom are full time. The full-time employees include 34 in store level management
and 44 in corporate administration and management.  The Company has, and expects
to continue,  to reduce headcount by lay-off's,  attrition and job consolidation
in an effort to reduce operating expenses.







                                       17
<PAGE>

Item 2.  Properties

         We lease our corporate offices which are located at 12116 Jekel Circle,
Suite 102,  Austin,  Texas.  We also own numerous  other Travis  Boating  Center
locations.  The remaining facilities are leased under leases with original lease
terms  generally  ranging  from five to ten  years  with  additional  multi-year
renewal  options.  Our leases  typically call for payment of a fixed rent and in
most of the leases we are also responsible for the payment of real estate taxes,
insurance, repairs and maintenance.

         The chart below reflects the status and approximate size of the various
Travis Boating Center locations operated as of January 17, 2003.
<TABLE>
<CAPTION>

                                          Building          Land        Owned or          Year of Market
             Location                  Square Footage*    Acreage*       Leased               Entry
<S>                                        <C>              <C>          <C>                   <C>

Austin, Texas(1)....................       20,000           3.5           Owned                1979
San Antonio, Texas(1)...............       34,500           6.5           Owned                1982
Midland, Texas(1)...................       18,750           3.8           Owned                1982
Dallas, Texas(1)....................       20,000           4.2           Owned                1983
Abilene, Texas(2)...................       24,250           3.7           Owned                1989
Houston, Texas(2)...................       15,100           3.0          Leased                1991
Baton Rouge, Louisiana(2)...........       33,200           7.5           Owned                1992
Beaumont, Texas(2)..................       25,500           6.5           Owned                1994
Arlington, Texas(2).................       31,000           6.0          Leased                1995
Heber Springs, Arkansas(2)..........       26,000           9.0          Leased                1995
Hot Springs, Arkansas(2)............       20,510           3.0           Owned                1995
New Iberia, Louisiana(3)............       24,000           3.3          Leased                1995
Florence, Alabama(2)................       22,500           6.0          Leased                1996
Winchester, Tennessee(2)............       28,000           3.5          Leased                1996
St. Rose, Louisiana(2)..............       30,000           3.5          Leased                1997
Pascagoula, Mississippi(2)..........       28,000           4.1           Owned                1997
Key Largo, Florida(3)...............        3,000           4.2           Owned                1997
Key Largo, Florida(3)(4)............        3,000           2.4           Owned                1999
Ft. Walton Beach Fl. - Sales(3).....        7,000           2.9          Leased                1997
Ft. Walton Beach Fl.- Service(3)(4).        7,500           2.0          Leased                1997
Hendersonville, Tennessee(2)........       31,320           3.6          Leased                1997
Gwinnett, Georgia(1)................       25,000           5.0           Owned                1997
Claremore, Oklahoma(3)..............       15,000           2.0           Owned                1998
Bossier City, Louisiana(2)..........       30,000           8.6           Owned                1998
Knoxville, Tennessee(2).............       30,000           6.5          Leased                1998
Little Rock, Arkansas(3)............       16,400           3.0           Owned                1999
Longwood, Florida(3)................       10,000           3.1          Leased                1999
Clearwater, Florida(2)..............       21,000           5.0           Owned                1999
Jacksonville, Florida(3)............        8,000           1.5          Leased                1999
Bradenton, Florida(3)...............       20,000           5.0          Leased                1999
Englewood, Florida(3)...............        3,000           4.5          Leased                1999
Memphis, Tennessee(2)...............       24,000           4.3          Leased                1999
Pickwick Dam, Tennessee(2)..........       48,000           5.0          Leased                1999
Ft. Myers, Florida(3)...............        6,000           4.0          Leased                1999
Stuart, Florida(2)..................       29,000           4.0          Leased                2000
Pompano, Florida(3).................        6,000           1.0          Leased                2000
--------------------------
<FN>
*   Square footage and acreage are approximate.
(1) Newly constructed superstore.
(2) Facility  acquired/leased  and converted to superstore.
(3) Acquired/leased facility
(4) Locations in Key Largo,  Florida and Ft.  Walton,  Florida  operate  service
    facilities  at  separate  locations  in close  proximity  to the main  sales
    location.
</FN>
</TABLE>



                                       18
<PAGE>

Item 3.  Legal Proceedings

         The Company is not a party to any material legal  proceedings.  We are,
however,  involved in various legal proceedings arising out of our operations in
the  ordinary  course of  business.  We  believe  that the  outcome  of all such
proceedings,  even if determined  adversely,  would not have a material  adverse
effect on our business, financial condition or results of operations.

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

         The Company's 2002 Annual Meeting of Stockholders was held on September
27, 2002.  The  following  nominees were  re-elected  to the Company's  Board of
Directors  to serve as Class "B"  directors  for a three year term  expiring  in
2005,  or until  their  successors  are elected  and  qualified,  or until their
earlier resignation or removal.
<TABLE>
<CAPTION>

Nominee                    Votes in Favor        Opposed         Abstain        Broker Non-Vote
-------                    --------------        -------         -------        ---------------
<S>                           <C>                  <C>            <C>              <C>

Mark T. Walton                7,008,354 (1)        -0-            387,935          -0-
Robert C. Siddons             7,376,054 (1)        -0-             20,235          -0-
</TABLE>

         The  following  directors'  terms of  office  continued  after the 2002
Annual Meeting of Stockholders:  Ronnie L. Spradling, Richard Birnbaum and James
Karides.  Additionally,  director's Kenneth Burroughs and Robert Ring,  remained
directors  pursuant to the terms of the Series A Preferred  Stock  issued by the
Company in March 2002.  Pursuant to the  Agreements  described  in this  report,
Tracker has the right to  designate  two  additional  directors  to the Board of
Directors (Kenneth Burroughs and Robert Ring are current designees  representing
Tracker  on the  Board of  Directors).  (See also  Risk  Factors  -  "Change  in
Control").

         The following issue was also voted upon by the Company stockholders:
To ratify Ernst & Young, LLP as the independent  certified public accountants of
the Company for the fiscal year ended September 30, 2002.
<TABLE>
<CAPTION>

                            Votes in Favor       Opposed         Abstained      Broker Non-Vote
                            --------------       --------        ---------      ---------------
                              <S>                 <C>                <C>               <C>

                              7,383,829 (1)       12,400             -0-               500
<FN>
(1)      Shares voted  included  4,259,289 of the  Company's  common  shares and
         80,000  shares  of  Series A  preferred  stock  with  voting  rights of
         3,137,000 common shares. Total shares voted were therefore 7,396,289.
</FN>
</TABLE>

There was no additional business conducted at the meeting.

                                    PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters

         Our common  stock  trades on the Nasdaq  Stock Market under the symbol:
TRVS.  As of January 17, 2003, we believe our shares are  beneficially  owned by
more than 400  shareholders.  On January 17, 2003, the last reported sales price
of the common  stock on the NASDAQ  SmallCap  Stock  Market  System was $.55 per
share.

         The following table sets forth for the period indicated, on a per share
basis, the range of high and low sales prices for our common stock during fiscal
years 2002 and 2001 as quoted by the  NASDAQ.  These  price  quotations  reflect
inter-dealer  prices,  without  adjustment  for retail  mark-ups,  mark-downs or
commissions and may not necessarily represent actual transactions:
<TABLE>
<CAPTION>

                                     Fiscal 2002 Sales Price               Fiscal 2001 Sales Price
                                     -----------------------               -----------------------
        Quarter Ended             High         Low        Ending       High         Low        Ending
        -------------             ------       -----      -------      -----        ----       ------
<S>                               <C>         <C>         <C>          <C>         <C>          <C>

December 31....................   $2.50       $1.75       $1.94        $3.75       $2.50        $2.75
March 31.......................   $3.02       $1.75       $2.50        $4.125      $2.375       $3.375
June 30........................   $2.95       $1.40       $1.90        $3.50       $2.16        $2.70
September 30...................   $1.94       $1.05       $1.18        $2.90       $1.96        $2.20
</TABLE>


                                       19
<PAGE>

         We have never  declared or paid cash  dividends on our Common Stock and
presently  have  no  plans  to do  so.  However,  we are  obligated  to pay a 6%
cumulative  dividend on the 80,000 shares of $100 par value,  Series A Preferred
Stock  issued by us during  fiscal  2002.  The  Preferred  dividend  is  payable
quarterly in arrears and all payments of the preferred  dividends are subject to
approval of our senior inventory lenders.  As of the date of this report on Form
10-K, we have not paid the dividends due for the quarters ended September 30 and
December  31,  2002.  The holder of our Series A  Preferred  Stock has agreed to
waive the  penalties  for late payment on such  dividends as of the date of this
report on Form 10-K,  however there can be no assurance that the holder will not
impose late fees or other default  remedies at a future date (see Risk Factors -
"Operating  Losses and Reduced  Financing have Jeopardized our Cash Flow" ). Any
change in our dividend policy on our Common Stock will be at the sole discretion
of our  Board of  Directors  and will  depend  on our  profitability,  financial
condition,  capital needs, future loan covenants,  general economic  conditions,
future prospects and other factors deemed relevant by the Board of Directors. We
currently  intend to retain  earnings for use in the  operation and expansion of
our business and do not anticipate  paying cash dividends on our Common Stock in
the foreseeable  future.  Certain covenants  contained in our loan and preferred
stock agreements also effectively  restrict the payment of any dividends without
prior consent.

Item 6.           Selected Financial Data

         The following  selected  consolidated  financial  information should be
read in  conjunction  with and is  qualified in its entirety by reference to the
consolidated  financial  statements  of the Company and the notes  thereto,  and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations, included elsewhere in this Report on Form 10-K:
<TABLE>
<CAPTION>

                                                        FISCAL YEAR ENDED SEPTEMBER 30,

                                                         1998(1)(7)   1999(1)(7)     2000(1)(7)    2001(1)(7)   2002(1)(7)
                                                         ----------   ----------     ----------    ----------   ----------
                                                       (in thousands, except store, per store and per share data)
<S>                                                      <C>          <C>           <C>           <C>           <C>

Consolidated Statement of  Operations Data:
Net sales..........................................      $  131,740   $  182,259    $  217,718    $  198,539    $ 176,523
Gross profit.......................................          34,901       46,634        53,309        46,379       37,072
Selling, general and administrative expense........          22,630       30,978        42,326        41,492       38,979
Store closing costs................................              --           --            --           321           --
Operating income...................................          11,011       13,689         8,338         1,660      (4,386)
Interest expense ..................................           2,310        3,808         6,848         6,533        4,018
Income/(loss) before cumulative effect of
accounting change and extraordinary loss on
extinguishment of debt.............................           5,563        6,573           897       (3,281)     (10,134)
Preferred stock dividends..........................              --           --            --            --          187
Cumulative effect of accounting change, net........              --           --            --            --        6,528
Extraordinary loss on extinguishment of debt, net..              --           --            --            --          130
Net income/(loss) attributable to common
shareholders.......................................           5,563        6,573           897       (3,281)     (16,792)
Basic earnings/(loss) per share before cumulative
effect of accounting change and extraordinary
item...............................................        $   1.31     $   1.53    $      .20    $    (.75)    $  (2.33)
Diluted earnings/(loss) per share before cumulative
effect of accounting change and extraordinary
item...............................................        $   1.26     $   1.49    $      .20    $    (.75)    $  (2.33)
Preferred stock dividends..........................              --           --            --            --        (.05)
Cumulative effect of accounting change.............              --           --            --            --       (1.50)
Extraordinary loss on extinguishment of debt.......              --           --            --            --        (.03)
Basic earnings/(loss) per share....................        $   1.31     $   1.53    $      .20    $    (.75)    $  (3.91)
Diluted earnings/(loss) per share..................        $   1.26     $   1.49    $      .20    $    (.75)    $  (3.91)
Weighted avg. common shares outstanding - basic....           4,250        4,291         4,403         4,375        4,345
Weighted avg. common shares outstanding -diluted...           4,417        4,409         4,446         4,375        4,345
Store Data:
  Stores open at period end........................              24           38            39            37           34
  Average sales per store(2).......................        $  6,383     $  6,055    $    5,630    $    5,252    $   5,117
  Percentage increase (decrease) in comparable store
   sales(3) .......................................             6.6%         1.9%       (1.1%)       (11.6%)       (6.1%)



                                       20
<PAGE>

<CAPTION>

                                                       FISCAL YEAR ENDED SEPTEMBER 30,

                                                 1998         1999     2000(4)       2001 (5)     2002 (6)
                                                 ----         ----     -------       --------     --------
                                                                        (In thousands)
<S>                                           <C>          <C>         <C>            <C>          <C>

Consolidated Balance Sheet Data:
  Cash and cash equivalents............       $ 4,618      $ 4,125     $ 2,971        $ 1,388      $ 4,253
  Working capital......................        16,392       12,117      10,948         11,958        8,540
  Total assets.........................        69,116      125,931     129,647        113,680       95,432
  Short-term debt, including current
    maturities of notes payable........        26,105       69,547      77,895         61,078       58,410
  Notes payable less current maturities.        4,980        6,897       6,015          9,375        4,525
  Stockholders' equity.................        30,433       37,592      39,552         36,149       26,936



                                       19
<PAGE>

<FN>
(1)  The Consolidated  Statement of Operations Data and the Consolidated Balance
     Sheet Data for the fiscal years ended September 30, 1998,  1999, 2000, 2001
     and  2002  has  been  derived  from  the  audited  consolidated   financial
     statements  of the Company.  Store data has been derived from the Company's
     unaudited internal operating statements.
(2)  Includes only those stores open for the entire preceding 12-month period.
(3)  New stores or upgraded facilities are included in the comparable store base
     at the beginning of the store's thirteenth complete month of operations.
(4)  Included in the current  liabilities,  which reduce  working  capital,  are
     balloon  payments due pursuant to the terms of two real estate loans,  with
     one payment of  approximately  $3.0 million due in  November,  2000 and one
     payment of $597,000 due in June, 2001.  These loans were refinanced  during
     fiscal 2001.
(5)  Included in the current  liabilities,  which reduce  working  capital,  are
     balloon  payments due pursuant to the terms of two real estate loans,  with
     one payment of approximately $577,000 due in December, 2001 and one payment
     of $584,000 due in January, 2002. These loans were refinanced during fiscal
     2002.
(6)  Included in the current  liabilities,  which reduce  working  capital,  are
     balloon  payments due  pursuant to the terms of a real estate loan,  with a
     payment of approximately  $529,000 due in January,  2003 and  approximately
     $6.4 million in real estate loans with a single  lender that are  currently
     in default of certain financial covenants.
(7)  Includes the  operations of acquired store  locations from each  respective
     date of acquisition. See "Management's Discussion and Analysis of Financial
     Condition and Results of Operations."
</FN>
</TABLE>


Item 7.   Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations

Application of Critical Accounting Policies

         We have  identified  the  policies  below as critical  to our  business
operations and the  understanding  of our results of operations.  The impact and
any  associated  risks related to these  policies on our business  operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations  when such  policies  affect our reported and expected
financial results.

         In the ordinary course of business,  we have made a number of estimates
and assumptions relating to the reporting of results of operations and financial
condition in the  preparation  of our financial  statements  in conformity  with
accounting  principles  generally  accepted  in the United  States.  We base our
estimates on  historical  experience  and on various other  assumptions  that we
believe are reasonable under the  circumstances.  The results form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not  readily   apparent  from  other   sources.   Actual  results  could  differ
significantly  from those estimates under different  assumptions and conditions.
We believe that the following  discussion addresses our most critical accounting
policies,  which are  those  that are most  important  to the  portrayal  of our
financial  condition and results of operations  and require our most  difficult,
subjective,  and  complex  judgments,  often  as a  result  of the  need to make
estimates about the effect of matters that are inherently uncertain.

                                       21
<PAGE>

Revenue Recognition

         We record  revenue on sales of boats,  motors,  trailers,  and  related
watersport  parts and accessories upon delivery to or acceptance by the customer
at the closing of the transaction. We record revenues from service operations at
the time repair or service work is completed.

         We refer  customers  to various  financial  institutions  to assist the
customers  in obtaining  financing  for their boat  purchase.  For each loan the
financial  institutions are able to fund as a result of the referral, we receive
a fee.  Revenue  that we earn for  financing  referrals is  recognized  when the
related boat sale is recognized.  The fee amount is generally  based on the loan
amount  and the term.  Generally,  we must  return a portion  of the fee  amount
received if the customer repays the loan or defaults on the loan within a period
of up to 180 days from the initial loan date. We record such refunds,  which are
not significant, in the month in which they occur.

         Revenues from insurance and extended service agreements are recorded at
the time such  agreements are executed which  generally  coincides with the date
the boat,  motor and trailer is  delivered.  Such  revenues are not deferred and
amortized over the life of the insurance or extended service agreement policies,
because  we  sell  such   policies   on  behalf  of  third   party   vendors  or
administrators. At the time of sale, we record income for insurance and extended
service  agreements  net of the  related  fee  that is  paid to the  third-party
vendors or administrators.  Since our Company's  inception,  we have incurred no
additional costs related to insurance or extended service  agreements beyond the
fees paid to the third party vendors at the time of sale.

Allowance for Doubtful Accounts.

         Accounts  receivables  consist  primarily of amounts due from financial
institutions  upon sales contract  funding,  amounts due from  manufacturers  or
vendors under rebate programs,  amounts due from  manufacturers or vendors under
warranty  programs  and amounts due from  customers  for  services.  The Company
routinely  evaluates  the  collectibility  of  accounts  receivable  focusing on
amounts due from  manufacturers,  vendors  and  customers.  If events  occur and
market  conditions  change,   causing  collectibility  of  outstanding  accounts
receivable to become unlikely,  the Company records an increase to its allowance
for doubtful  accounts.  The Company  evaluates the probability of collection of
outstanding  accounts receivable based several factors which include but are not
limited to the following:  1) age of the  outstanding  accounts  receivable,  2)
financial condition of the manufacturer,  vendor or customer, and 3) discussions
or  correspondence  with the  manufacturer,  vendor  or  customer.  The  Company
determines  the  allowance  for  doubtful  accounts  based  upon  both  specific
identification and a general allowance for accounts  outstanding for a specified
period of time.

Inventory Valuation

         Our  inventories  consist  of  boats,  motors,   trailers  and  related
watersport parts and  accessories.  Inventories are carried at the lower of cost
or market.  Cost for boats, motors and trailers is determined using the specific
identification  method.  Cost for parts and accessories is determined  using the
first-in,  first-out method. If the carrying amount of our inventory exceeds its
fair  value,  we write down our  inventory  to its fair  value.  We utilize  our
historical  experience  and current  sales  trends as the basis for our lower of
cost or market  analysis.  Changes in market  conditions,  lower  than  expected
customer demand,  closing of additional store locations and changing  technology
or features could result in additional  obsolete inventory that is unsaleable or
only  saleable at reduced  prices,  which  could  require  additional  inventory
reserve provisions.

         Such  events and market  conditions  include but are not limited to the
following: 1) deteriorating financial condition of the manufacturer resulting in
discontinuance and lack of manufacturer's  warranty for certain boats, motors or
other products,  2) introduction of new models or product lines by manufacturers
resulting  in less  demand  for  previous  models or product  lines,  3) Company
initiatives  to promote  unit sales and reduce  inventory  levels for new and/or
used  inventory by reducing  sales prices,  and 4) Competing  boat  retailers in
various markets in which the Company operates may offer sales incentives such as
price reductions.

                                       22
<PAGE>

Goodwill and Other Intangibles

         We adopted SFAS No. 142,  Goodwill and Other  Intangible  Assets ("SFAS
142")  effective  October 1, 2001.  SFAS 142 provides that separable  intangible
assets that have finite lives will  continue to be  amortized  over their useful
lives and that goodwill and indefinite-lived intangible assets will no longer be
amortized but will be reviewed for impairment  annually,  or more  frequently if
impairment  indicators  arise.  With the  adoption of the  Statement,  we ceased
amortization  of  goodwill as of October 1, 2001.  The  Company  operates as one
reporting unit for goodwill impairment testing.

         In accordance with SFAS 142, we completed goodwill  impairment tests as
required.  The tests  involved the use of  estimates  related to the fair market
value of the business with which the goodwill is associated.  As a result of the
transitional impairment test, which considered factors including the significant
negative  industry and economic  trends  impacting  current  operations  and our
market  capitalization  relative to our net book value,  the Company  recorded a
non-cash,  after tax charge of $6.5 million as a cumulative effect of accounting
change as of October 1, 2001.  The  non-cash,  after tax charge  resulted in the
elimination of the entire goodwill balance from our balance sheet.

Income Taxes

         In accordance with Statement of Financial Accounting Standards No. 109,
Accounting  for Income Taxes,  deferred  income taxes are provided for temporary
differences  between the basis of assets and liabilities for financial reporting
purposes and for income tax return purposes. The Company routinely evaluates its
recorded  deferred  tax assets to  determine  whether it is more likely than not
that such  deferred  tax  assets  will be  realized.  During the  quarter  ended
September  30, 2002,  the Company  determined  that for deferred tax assets that
could not be  realized by  carryback  to prior tax years it was more likely than
not that such  deferred tax assets would not be realized and  accordingly a full
valuation allowance was necessary for these deferred tax assets.

Other

         For a more  comprehensive  list of our accounting  policies,  including
those  which  involve  varying  degrees of  judgment,  see Note 2 - "Summary  of
Significant   Accounting   Policies"  in  the  consolidated   audited  financial
statements of the Company and notes thereto included elsewhere in this Report on
Form 10-K.

Results of Operations

         The  following  discussion  should  be read  in  conjunction  with  the
consolidated  financial statements of our Company and the notes thereto included
elsewhere in this Report on Form 10-K.  The  discussion  in this section of this
Report on Form 10-K contains  forward-looking  statements that involve risks and
uncertainties.  Our actual results could differ  materially from those discussed
herein.  Factors that could cause or contribute to such differences include, but
are not limited to, those  discussed in this section,  those  discussed in "Risk
Factors" and those discussed elsewhere in this Report on Form 10-K.

         The  following  table  sets  forth for the  periods  indicated  certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>

                                           FISCAL YEAR ENDED SEPTEMBER 30,


                                                                 2000           2001           2002
                                                                 ------         ----           ----
<S>                                                             <C>            <C>            <C>
Net sales.............................................          100.0%         100.0%         100.0%
Costs of goods sold...................................           75.5           76.6           79.0
                                                       ----------------------------------------------
Gross profit..........................................           24.5           23.4           21.0
Selling, general and administrative expenses..........           19.4           20.9           22.1
Operating income/(loss)...............................            3.8            0.8           (2.5)

                                       23
<PAGE>

Interest expense......................................            3.1            3.3            2.3
Other income/ (expense)...............................            0.0            0.0            0.0
                                                       ----------------------------------------------
Income/(loss) before income taxes, cumulative effect of
accounting change and extraordinary item..............            0.7           (2.4)          (4.7)
Income tax (expense)/benefit..........................           (0.3)           0.8           (1.0)
                                                       ----------------------------------------------
Income/(loss) before cumulative effect of accounting
change and extraordinary item.........................            0.4%         (1.7%)         (5.7%)
                                                       ==============================================
Cumulative effect of accounting change, net...........            0.0           0.0           (3.7)
Extraordinary loss on extinguishment of debt, net......           0.0           0.0           (.10)
Preferred stock dividends..............................           0.0           0.0           (.10)
Net income/(loss) attributable to common shareholders..           0.4%         (1.7%)         (9.6%)
                                                       ==============================================

</TABLE>







                                       24
<PAGE>

Fiscal Year Ended September 30, 2002 Compared to the Fiscal Year Ended September
30, 2001

Net sales.  Net sales for the fiscal year ended  September  30, 2002 were $176.5
million,  a decrease of approximately  $22.0 million or 11.1% from the net sales
of $198.5 million for the fiscal year ended September 30, 2001.

         Comparable  store  sales  declined  by 6.1% (33 stores in base) for the
fiscal year ended  September 30, 2002 compared to a decrease of 11.6% (32 stores
in base) during the prior fiscal  year.  Management  believes the decline in net
sales and the decrease in comparable  store sales was related to various factors
including,  but not limited to, fewer  stores in  operation,  erratic  levels of
consumer  confidence and employment  uncertainty,  combined with persistent weak
economic and industry  conditions.  The decrease in net sales for the year ended
September  30, 2002  included  $14.4 million in reduced sales as a result of the
impact of fewer stores in operation (34 versus 37).

         Included  within  net  sales is  revenue  that we earn  related  to F&I
Products.  The Company,  through  relationships  with various national and local
lenders, is able to place financing for its customers' boating purchases.  These
lenders  allow  us to  "sell"  the loan at a rate  higher  than a  minimum  rate
established  by each such lender,  and the we earn fees based on the  percentage
increase in the loan rate over the lender's minimum rate (the rate "spread"). We
sell these loans  without  recourse,  except that in certain  instances  we must
return the fees earned if the customer  repays the loan or defaults in the first
120-180  days.   We  also  sell,  as  a  broker,   certain  types  of  insurance
(property/casualty,  credit life, disability) and extended service contracts. We
may also sell these products at amounts over a minimum established cost and earn
income based upon the profit over the minimum established cost.

         Net  sales   attributable  to  F&I  Products   decreased  by  22.7%  to
approximately  $5.1 million in fiscal 2001 from $6.6 million in fiscal 2002.  In
fiscal 2002, F&I income as a percentage of net sales also decreased to 2.9% from
3.3% in  fiscal  2001  due  primarily  to (i)  lower  overall  net  sales,  (ii)
reductions in overall yields paid by lenders for  originating  customer  finance
contracts, (iii) competitive pressures on finance rates (which resulted in lower
net spreads  achieved in the  placement  of  customer  financing)  and (iv) with
regard to our store locations in Arkansas,  certain "caps" or limits on interest
rates allowed to be charged by lenders in Arkansas.  Decreases in the percentage
of customers  buying these  products  (which is referred to as  "sell-through"),
particularly  by  purchasers  of the larger,  more  expensive  boats and reduced
customer demand for certain insurance  products have also been limiting factors.
Based on these  circumstances  and recent attempts by certain  manufacturers  to
enhance certain manufacturer warranty products, we believe that net sales of F&I
products may continue to decline somewhat for an indefinite period,  although we
believe that they will ultimately stabilize.

         Gross  profit.  For the fiscal year ended,  September  30, 2002,  gross
profit  decreased  20.1% to $37.1 million from $46.4 million in the prior fiscal
year. Gross profit, as a percent of sales,  decreased to 21.0% from 23.4% during
the same period.

         The  decrease in total gross  profit,  both in actual  dollars and as a
percent  of net sales,  was  primarily  related to (i) the  decline in net sales
during the periods and (ii) the inventory valuation allowance required to reduce
the basis in certain aged or  discontinued  inventories to reflect  obsolescence
and current market  values.  The increase in inventory  valuation  allowance was
approximately  $956,000 of which a substantial  portion was recorded  during the
quarter  ended  September 30, 2002 as we focused on  initiatives  to reduce both
levels of inventory and  outstanding  indebtedness.  Inventory  values have been
impacted  by the  declines  in sales and the  overall  softness  of sales in the
marine industry. Also, in an effort to stimulate sales, we offered certain sales
incentives and  participated  in  manufacturer  sponsored  rebate programs in an
effort (i) to reduce certain non-current  inventory levels and (ii) to stimulate
sales in response to weak economic and industry  conditions.  We believe that we
may continue to experience erratic levels of overall gross profit margins during
the 2003 fiscal year  resulting,  in part, to (i)  introductions  of certain new
Travis  Edition  product lines and (ii)  continued  emphasis on  incentives  and
marketing    promotions    to    stimulate    sales   of   both    current   and
non-current/discontinued  inventory  models.  While these programs have impacted
gross profit, we have been successful in reducing overall inventory levels.  Our
inventory  levels were  approximately  $57.0  million as of  September  30, 2002
versus $65.2  million as of  September  30, 2001.  (See  "Liquidity  and Capital
Resources" and Risk Factors - "We have Inventory from Defunct  Manufacturers and
Discontinued Inventory".)

                                       25
<PAGE>


         The decline in net sales attributable to F&I Products has also impacted
the  gross  profit  margin.  Net  sales  of these  F&I  Products,  which  have a
significant  impact on the gross profit  margin,  contributed  $5.1 million,  or
13.7%,  of total gross profit in fiscal 2002,  as compared to $6.6  million,  or
14.2%,  of total gross profit for fiscal  2001.  Net sales  attributable  to F&I
Products are reported on a net basis and therefore all of such sales  contribute
directly to our gross profit. The costs associated with the sale of F&I Products
are included in selling, general and administrative expenses.

         Selling,  general and  administrative  expenses.  Selling,  general and
administrative  expenses  decreased  to $39.0  million in fiscal 2002 from $41.5
million in the prior fiscal year. During the prior 2001 fiscal year, we also had
expenses of approximately  $321,000 related to closing of the store locations in
Miami,  Florida and Huntsville,  Alabama.  Selling,  general and  administrative
expenses,  as a percent of net sales,  were 22.1% in fiscal  2002,  compared  to
20.9% in fiscal 2001.

The decrease in selling, general and administrative expenses, in actual dollars,
for the fiscal year ended  September  30, 2002 versus the prior  fiscal year was
primarily    attributable    to   the    reduction   in   wages,    commissions,
travel/entertainment  expenses  and the  overall  decline in net sales.  We have
managed   headcount   primarily   through   attrition  and  selective   position
consolidation.  The  reduction  in overall  expenses  was offset by increases in
certain expenses,  primarily insurance expense and a substantial increase in bad
debt expense related to reserves on certain accounts receivable. The decrease in
selling, general and administrative expenses for the fiscal year ended September
30, 2002  versus the prior year was  partially  offset by an  increase  bad debt
expense  of  approximately  $1.5  million  of which a  substantial  portion  was
recorded  during the quarter  ended  September  30,  2002.  Despite our enhanced
collection  efforts,  we  continue  to  experience  delays in  collections  from
manufacturers,  vendors  and  customers  due  to  both  deteriorating  financial
condition  of these  parties  and a  general  economic  downturn  in the  marine
industry.  Although  we  continue  to  pursue  collection  of these  outstanding
accounts  receivable,  we believed an increase  in the  allowance  for  doubtful
accounts was warranted to reflect our most recent  assessment of the probability
of collection.

         Depreciation and Amortization  Expenses.  Depreciation and amortization
expenses  decreased  to $2.5  million in fiscal  2002 from $2.9  million for the
prior fiscal year.  Depreciation and amortization  expenses, as a percent of net
sales, decreased to 1.4% in fiscal 2002 from 1.5% for the prior fiscal year.

         The decrease in depreciation and amortization expenses,  both in actual
dollars  and as a  percent  of net  sales,  was  primarily  attributable  to our
adoption of SFAS 142 effective on October 1, 2001. Pursuant to the adoption,  we
discontinued the amortization of goodwill. Accordingly, our amortization expense
was $458,000 and $887,000 in fiscal year 2002 and 2001, respectively.

         Interest expense.  Interest expense decreased to $4.0 million in fiscal
2002 from $6.5 million in the prior fiscal year.  Interest expense  decreased to
2.3% from 3.3% of net sales in fiscal years 2002 and fiscal 2001, respectively.

         The decreased interest expense, both in actual dollars and as a percent
of net sales,  was primarily the result of  significantly  lower balances on our
inventory based lines of credit due to the significant  reductions in the levels
of inventory  held. We have  successfully  reduced  inventory  levels to reflect
sales trends and as a result of our prior  implementation  of a Master  Business
Plan that requires  pre-approved  purchase  orders for all inventory  purchases.
Interest  expense also  benefited  from the decreases in our variable  borrowing
rates  relative to the same period of the prior year resulting from the numerous
reductions in the prime rate during the 2002 calendar year.

         We anticipate  continuing to utilize significant amounts of third party
financing sources to support our inventories and other assets.  Accordingly,  we
are  subject to the impact of  increases  in interest  expenses  and other costs
associated with such borrowings. See "Risk Factors--Our Substantial Indebtedness

                                       26
<PAGE>

Could Restrict Our Operations  and Make Us More  Vulnerable to Adverse  Economic
Conditions" and "Quantitative and Qualitative Disclosures About Market Risk."

         Income Taxes.  Our effective income tax benefit rate for the year ended
September 30, 2002 applicable to the operating loss, was reduced by the creation
of a valuation  allowance in the  approximate  amount of $3.5 million,  that was
recorded  against our deferred  income tax assets  during the fourth  quarter of
fiscal  2002.  The  valuation  allowances  were  recorded  due to  uncertainties
surrounding  the recovery of income tax assets against  taxable income in future
periods.  Beginning with the quarter ending March 31, 2003, we do not anticipate
recognizing  income  tax  benefits  on our  books  from  future  losses,  due to
uncertainties   associated   with  the   utilization   of  the  operating   loss
carry-forwards  in future periods.  We have pledged,  as collateral,  the amount
expected to be received from our 2002 federal tax return  against a $1.5 million
advance  type note we entered into during  January  2003.  Accordingly,  amounts
received from the projected tax return will be used by the Company for repayment
of this loan.  (See Risk  Factors -  "Financing  Arrangements"  and  "Income Tax
Refunds Pledged as Security").

         Net loss.  For the fiscal year ended  September 30, 2002,  the Company,
after preferred  stock dividends of $187,000,  reported a net loss (prior to the
effect  of the  cumulative  accounting  change  and  the  extraordinary  loss on
extinguishment  of debt) of $10.3  million  ($2.38 per basic and diluted  share)
compared to a net loss of $3.3  million  ($.75 per basic and diluted  share) for
the  prior  2001  fiscal  year.  (See Note 1 - "Basis  of  Presentation"  in the
consolidated  audited  financial  statements  of the Company  and notes  thereto
included elsewhere in this Report on Form 10-K).

         Inclusive of the impact of the cumulative  effect of accounting  change
and the extraordinary  loss on extinguishment of debt, we reported a net loss of
approximately  $17.0  million  ($3.91 per basic and diluted  share) for the 2002
fiscal year.  The net loss from the  cumulative  effect of accounting  change is
from our  adoption of SFAS 142,  "Goodwill  and Other  Intangible  Assets" as of
October  1, 2001.  The  application  of the  transition  provisions  of this new
accounting  standard  required us to take a non-cash,  non-recurring,  after-tax
charge of  approximately  $6.5 million  effective as of October 2001. The charge
eliminated our goodwill accounts.


Fiscal Year Ended September 30, 2001 Compared to the Fiscal Year Ended September
30, 2000

         Net sales.  Net sales for the fiscal year ended September 30, 2001 were
$198.5 million,  a decrease of approximately  $19.2 million or 8.8% from the net
sales of $217.7 million for the fiscal year ended September 30, 2000.

         Comparable  store  sales  declined by 11.6% (32 stores in base) for the
fiscal year ended  September  30, 2001 compared to a decrease of 1.1% (18 stores
in base) during the prior fiscal  year.  Management  believes the decline in net
sales and the decrease in comparable  store sales was related to various factors
including, but not limited to, erratic levels of consumer confidence, persistent
weak economic and industry  conditions and high fuel prices.  In certain markets
these factors have been exaggerated by weather  conditions related to the severe
impact of tropical storm Allison along the Texas and Louisiana  coastlines.  Net
sales were also  impacted by (i) a significant  percentage  decline in net sales
specifically  during the month of  September  2001 and (ii) the closing of store
locations in Miami, Florida and Huntsville, Alabama during our fourth quarter of
fiscal 2001.  Prior to their closing,  the Miami and Huntsville  store locations
had combined sales of approximately  $4.2 million during fiscal 2001 compared to
net sales of $7.5  million in the prior fiscal  year.  In reviewing  these store
locations,  we determined that each store had a sales overlap with certain other
Travis Boating Center  locations and that we could likely more cost  effectively
serve our customers through such alternate store locations.

         Included  within  net  sales is  revenue  that we earn  related  to F&I
Products.  The Company,  through  relationships  with various national and local
lenders, is able to place financing for its customers' boating purchases.  These
lenders  allow  us to  "sell"  the loan at a rate  higher  than a  minimum  rate
established  by each  such  lender,  and we earn  fees  based on the  percentage
increase in the loan rate over the lender's minimum rate (the rate "spread"). We
sell these loans  without  recourse,  except that in certain  instances  we must
return the fees earned if the customer  repays the loan or defaults in the first
120-180   days.   We  also  sell  as  a  broker,   certain  types  of  insurance

                                       27
<PAGE>

(property/casualty,  credit life, disability) and extended service contracts. We
also sell these  products at amounts  over a minimum  established  cost and earn
income based upon the profit over the minimum established cost.

         Net  sales   attributable  to  F&I  Products   decreased  by  20.5%  to
approximately  $6.6 million in fiscal 2001 from $8.3 million in fiscal 2000.  In
fiscal 2001, F&I income as a percentage of net sales also decreased to 3.3% from
3.8% in  fiscal  2000  due  primarily  to (i)  lower  overall  net  sales,  (ii)
reductions in overall yields paid by lenders for  originating  customer  finance
contracts, (iii) competitive pressures on finance rates (which resulted in lower
net spreads  achieved in the  placement  of  customer  financing)  and (iv) with
regard to our store locations in Arkansas,  certain "caps" or limits on interest
rates allowed to be charged by lenders in Arkansas.  Decreases in the percentage
of customers  buying these  products  (which is referred to as  "sell-through"),
particularly  by  purchasers  of the larger,  more  expensive  boats and reduced
customer demand for certain insurance  products have also been limiting factors.
Based on these  circumstances  and recent attempts by certain  manufacturers  to
enhance certain manufacturer warranty products, we believe that net sales of F&I
products may continue to decline prior to ultimately stabilizing.

         Gross  profit.  For the fiscal year ended,  September  30, 2001,  gross
profit  decreased  13.0% to $46.4 million from $53.3 million in the prior fiscal
year. Gross profit, as a percent of sales,  decreased to 24.5% from 23.4% during
the same period.

         The decrease in gross profit,  both in actual  dollars and as a percent
of  net  sales,  was  primarily  related  to  the  Company  and  certain  of our
manufacturers  offering  additional  incentives and rebates on various models of
boats and  outboard  engines.  The  manufacturer  incentives  and  rebates  were
developed by the  manufacturers  as part of an effort to stimulate  sales due to
overall weak  industry  sales  performance.  Additionally,  we  developed  other
incentives  as  part  of  its  ongoing  inventory   reduction  plan  implemented
previously during the summer of the prior 2000 fiscal year. While these programs
have impacted gross profit,  we were  successful in reducing  overall  inventory
levels.  Our inventory levels were  approximately  $65.2 million as of September
30, 2001 versus $78.1  million as of  September  30, 2000.  See  "Liquidity  and
Capital Resources."

         The decline in net sales attributable to F&I Products has also impacted
the  gross  profit  margin.  Net  sales  of these  F&I  Products,  which  have a
significant  impact on the gross profit  margin,  contributed  $6.6 million,  or
14.2%,  of total gross profit in fiscal 2001,  as compared to $8.3  million,  or
15.6%,  of total gross profit for fiscal  2000.  Net sales  attributable  to F&I
Products are reported on a net basis and therefore all of such sales  contribute
directly to our gross profit. The costs associated with the sale of F&I Products
are included in selling, general and administrative expenses.

         Selling,  general and  administrative  expenses.  Selling,  general and
administrative  expenses  decreased  to $41.5  million in fiscal 2001 from $42.3
million in the prior  fiscal  year.  During  fiscal 2001 we also had expenses of
approximately  $321,000  related  to closing  of the store  locations  in Miami,
Florida and Huntsville,  Alabama.  Selling, general and administrative expenses,
as a percent  of net  sales,  were 20.9% in fiscal  2001,  compared  to 19.4% in
fiscal 2000.

The decrease in selling,  general and administrative  expenses in actual dollars
for the fiscal year ended  September  30, 2001 versus the prior  fiscal year was
primarily   attributable   to  the   reduction   in   wages,   commissions   and
travel/entertainment  expenses.  We have  reduced  headcount  primarily  through
attrition  and  selective  position  consolidation.  The  reduction  in  overall
expenses  was  offset  by  increases  in  certain  expenses  such as  utilities,
insurance,  fuel  costs,  rent/lease  expense  and bad debt  expense  related to
reserves on certain accounts receivable.

         Depreciation and Amortization  Expenses.  Depreciation and amortization
expenses  increased  to $2.9  million in fiscal  2001 from $2.6  million for the
prior fiscal year.  Depreciation and amortization  expenses, as a percent of net
sales, increased to 1.5% in fiscal 2001 from 1.2% for prior fiscal year.

         The increase in depreciation and amortization expenses,  both in actual
dollars  and as a  percent  of net  sales,  was  primarily  attributable  to the
depreciation  expenses  of our  recently  completed  superstore  location in San
Antonio,  Texas,  substantial  renovations  to  the  Clearwater,  Florida  store
location and other improvements to our asset infrastructure.

                                       28
<PAGE>


         Interest expense.  Interest expense decreased to $6.5 million in fiscal
2001 from $6.8  million in the prior  fiscal  year.  However,  interest  expense
increased  to 3.3% from 3.1% of net sales in fiscal  years 2001 and fiscal 2000,
respectively,  primarily as a result of the overall decline in net sales for the
2001 fiscal year.

         Interest  expense  in  actual  dollars,   was  positively  impacted  by
decreases in our short term borrowing  rates and inventory debt levels  relative
to the prior fiscal year. The decrease in interest  expense was somewhat  offset
by the incremental  interest  expense  incurred on the additional long term debt
related  to our new  superstore  in San  Antonio,  Texas and other  real  estate
holdings.

         We anticipate  continuing to utilize significant amounts of third party
financing sources to support our inventories and other assets.  Accordingly,  we
are  subject to the impact of  increases  in interest  expenses  and other costs
associated with such borrowings. See "Risk Factors--Our Substantial Indebtedness
Could Restrict Our Operations  and Make Us More  Vulnerable to Adverse  Economic
Conditions" and "Quantitative and Qualitative Disclosures About Market Risk."

         Net income/(loss).  The Company posted a net loss of approximately $3.3
million for fiscal 2001 versus a net income of approximately  $897,000 in fiscal
2000 primarily due to the above described  declines in net sales and total gross
profit margins. See - "Quarterly Data and Seasonality".

         The following table sets forth certain  unaudited  quarterly  financial
data for each of our last eight quarters and such data expressed as a percentage
of our net sales for the respective  quarters.  The information has been derived
from unaudited financial statements that, in the opinion of management,  reflect
all adjustments  (consisting only of normal recurring adjustments) necessary for
a fair presentation of such quarterly information. The operating results for any
quarter are not  necessarily  indicative  of the results to be expected  for any
future period.






                                       29
<PAGE>


<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
                                                        Fiscal Year 2001                         Fiscal Year 2002
                                                        ----------------                         ----------------
                                                   For the Three Months Ended               For the Three Months Ended
                                                  Dec 31    Mar 31   June 30  Sept 30    Dec 31    Mar 31   June 30   Sept 30
-------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>      <C>        <C>       <C>        <C>       <C>       <C>       <C>

Net sales....................................   $ 24,084 $ 57,521   $73,455   $ 43,480   $ 20,666  $ 47,388  $ 67,825  $ 40,644
Gross profit.................................      5,778   13,998    17,620      8,984      4,065    10,469    15,211     7,327
Selling, general and administrative expense..      8,379   10,264    11,984     10,866      7,314     9,010    10,850    11,805
Store Closing Costs..........................         --       --        --        321         --        --        --        --
Operating income/(loss)......................     (3,301)   3,010     4,916    (2,964)    (3,876)       843     3,736   (5,089)
Interest expense.............................      1,847    1,926     1,619     1,141       1,039     1,116     1,054       809
Income/(loss) before cumulative effect of
accounting change and extraordinary loss on
extinguishment of debt.......................     (3,256)     790     2,096    (2,911)    (3,104)     (160)     1,707   (8,577)
Preferred stock dividends....................          --      --       --          --         --        --      (67)     (120)
Cumulative effect of accounting change, net..          --      --       --          --    (6,528)        --        --        --
Extraordinary loss on extinguishment of debt,
net..........................................          --      --       --          --         --        --     (130)        --
Net income/(loss) attributable to
shareholders.................................    (3,256)     790    2,096      (2,911)   (9,632)     (160)     1,577   (8,697)
Basic earnings/(loss) per share before
cumulative effect of accounting change and
extraordinary item...........................       (.74)     .18      .48        (.67)     (.71)     (.04)       .38    (1.98)
Diluted earnings/(loss) per share before
cumulative effect of accounting change and
extraordinary item...........................       (.74)     .18      .48        (.67)     (.71)     (.04)       .27    (1.98)
Preferred stock dividends....................          --      --       --           --        --        --        --     (.03)
Cumulative effect of accounting change, net..          --      --       --           --    (1.50)        --        --        --
Extraordinary loss on extinguishment of debt,
net..........................................          --      --       --           --        --        --     (.02)        --
Basic earnings/(loss) per share attributable
to common shareholders.......................       (.74)     .18      .48        (.67)    (2.21)     (.04)      .35     (2.01)
Diluted earnings/(loss) per share............       (.74)     .18      .48        (.67)    (2.21)     (.04)      .25     (2.01)
Weighted avg. common shares outstanding -
basic........................................       4,387   4,378    4,371        4,363     4,355     4,348    4,344      4,334
Weighted avg. common shares outstanding
-diluted.....................................       4,387   4,378    4,373        4,363     4,355     4,348    6,522      4,334

<CAPTION>

-----------------------------------------------------------------------------------------------------------------
                                                                  As a Percentage of Net Sales
-----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>     <C>      <C>          <C>       <C>       <C>      <C>        <C>

Net sales.....................................      100.0%  100.0%   100.0%       100.0%    100.0%    100.0%   100.0%     100.0%
Gross profit..................................       24.0    24.3     24.0         20.7      19.7      22.1     22.4       18.0
Selling, general and administrative expense...       34.8    17.8     16.3         25.0      35.4      19.0     16.0       29.0
Operating income/(loss).......................      (13.7)    5.2      6.7         (6.8)    (18.8)      1.8     5.5       (12.5)
Interest expense..............................        7.7     3.3      2.2          2.6       5.0       2.4     1.6         2.0
Income/(loss) before cumulative effect of
accounting change and extraordinary loss on
extinguishment of debt........................      (13.5)    1.4      2.9         (6.7)    (15.0)      0.3     2.4       (21.4)
Cumulative effect of accounting change, net...          --     --       --            --    (31.6)       --      --           --
Extraordinary loss on extinguishment of
debt,net......................................          --     --       --            --       --        --     0.1           --
Income/(loss) attributable to common
shareholders..................................      (13.5)    1.4      2.9         (6.7)    (46.6)      0.3     2.3       (21.4)
</TABLE>


         Our  business,  as well as the sales demand for various types of boats,
tends to be highly  seasonal.  Our  strongest  sales  period  begins in January,
because  many boat and  recreation  shows are held in that month.  Strong  sales
demand  continues from January through the summer months.  Of our average annual
net sales over the last three  fiscal  years,  over 27%  occurred in the quarter
ending  March 31 and over 37%  occurred in the quarter  ending June 30. With the
exception  of  our  store   locations  in  Florida,   our  sales  are  generally
significantly lower in the quarter ending December 31. Because the overall sales
levels (in most stores) in the December quarter are much less than in the months
with warmer  weather,  we generally  have a  substantial  operating  loss in the
quarter  ending  December 31.  Because of the  difference in sales levels in the
warm spring and summer months,  versus the cold fall and winter  months,  if our
sales in the months of January  through June are weak as a result of  lackluster
consumer demand,  timing of boat shows, bad weather or lack of inventory we will
likely suffer significant operating losses.

         Our  business  is also  significantly  affected  by  weather  patterns.
Weather  conditions that are  unseasonable  or unusual may adversely  affect our
results  of  operations.  For  example,  drought  conditions  or merely  reduced
rainfall  levels,  as well as  excessive  rain,  may  affect our sale of boating

                                       30
<PAGE>

packages and related products and  accessories.  See "Risk Factors -We Depend on
Strong  Sales in the  First  Half of the  Year"  and "Our  Sales  Depend on Good
Weather."

         Quarterly  results may  fluctuate  due to many  factors.  Some of these
factors  include,  weather  conditions,  timing of special  events  such as boat
shows,  availability  of product and the opening or closing of store  locations.
Accordingly,  the results for any quarterly  period may not be indicative of the
expected results for any other quarterly period.

         The results for the  quarters  ended  September  30, 2002 and 2001 were
negatively  impacted  by  certain  events  including  the  expenses  related  to
establishment of reserve allowances on certain inventories,  deferred tax assets
and accounts receivable.

Liquidity and Capital Resources

         Contractual Commitments and Commercial Commitments

         The  following  table sets forth a summary of our material  contractual
obligations and commercial commitments as of September 30, 2002:
<TABLE>
<CAPTION>

Year Ended September 30,                Line of      Long-Term     Convertible    Operating      Total
(000's)                                 Credit          Debt          Notes        Leases
----------------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>          <C>           <C>           <C>

2003                                 $  50,949 (1)    $ 7,460 (2)                $   3,009     $  61,418
2004                                                    1,332                        2,353         3,685
2005                                                      301      $  1,300          1,663         3,264
2006                                                      227                        1,232         1,459
2007                                                      482                          343           825
Thereafter                                                884                          277         1,161
                                     -------------- ------------- -------------- ------------ ------------
Total                                $  50,949        $10,686      $  1,300      $   8,877     $  71,812
                                     ============== ============= ============== ============ ============
<FN>
(1)           Our inventory  borrowing  agreements,  which originated in January
              2000, mature in April 2003.

(2)           Includes  $6.4 million in real estate  loans with a single  lender
              which have been  re-classified as current for financial  reporting
              since  we are  out  of  compliance  with  certain  financial  loan
              covenants and the loans are subject to demand for repayment  prior
              to their originally scheduled dates of maturity.
</FN>
</TABLE>


         Our short-term  cash needs are primarily for working capital to support
operations,  including inventory  requirements,  off-season  liquidity and store
infrastructure. These short-term cash needs have historically been financed with
cash from operations and further supplemented by borrowings under our floor plan
and revolving credit lines (collectively the "borrowing agreements"). During the
fiscal year ended  September 30, 2002, we also increased  working capital by the
issuance  of $4.3  million  in  subordinated  convertible  notes (of which  $3.0
million was repaid in June of 2002) and $8.0 million from the issuance of 80,000
shares of Series A preferred stock.

         At September 30, 2002, we had approximately  $4.3 million in cash, $9.7
million in  accounts  receivable  (primarily  contracts  in transit  from sales,
manufacturer  rebates  receivable and other amounts due from  manufacturers) and
$57.0 million in inventories. Contracts in transit are amounts receivable from a
customer  or a  customer's  financial  institution  related  to that  customer's
purchase of a boat.  These asset  balances  were  offset by  approximately  $5.5
million of accounts payable and accrued  liabilities,  $50.9 million outstanding
under our  borrowing  agreements  and $7.5  million in  short-term  indebtedness
including  (i) current  maturities  of notes  payable of  $496,000;  (ii) a real
estate loan in the amount of $529,000 with a balloon  payment due at maturity in
January 2003 and (iii) $6.4  million in real estate  loans with a single  lender
which have been  re-classified  as current for financial  reporting since we are

                                       31
<PAGE>

out of  compliance  with  certain  financial  loan  covenants  and the loans are
subject to demand for repayment  prior to their  originally  scheduled  dates of
maturity.  (See  Risk  Factors  - "We  are Out of  Compliance  on  Certain  Loan
Agreements and have Been Out of Compliance on Others").

         As of September 30, 2002, the aggregate  maximum borrowing limits under
our  borrowing  agreements  was  $70.0  million,  respectively  (see  Note  14 -
"Subsequent  Events" in the  consolidated  audited  financial  statements of the
Company and notes thereto included elsewhere in this Report on Form 10-K).

         At September 30, 2002,  we had working  capital of  approximately  $8.5
million.  Working capital,  as of that date, was reduced by our net loss and the
aforementioned $7.5 million, in short term indebtedness  classified as a current
liability.

         In  fiscal  2002,  operating  activities  provided  cash  flows of $3.9
million due  primarily  to the  decrease of $8.2  million in  inventories  (as a
result of our  continued  emphasis on inventory  reduction  strategies)  and the
collection of the income taxes recoverable.  These amounts were offset partially
by the net loss of $17.0 million, the cumulative effect of accounting change and
a $1.8 million decrease in accounts payable.

         In fiscal  2001,  operating  activities  provided  cash  flows of $13.5
million due  primarily to the  decrease of $12.9  million in  inventories  (as a
result of our  inventory  reduction  strategies)  and net  increases in accounts
payable and the collection of the income taxes  recoverable.  These amounts were
offset  partially  by the  net  loss  of  $3.3  million,  decreases  in  accrued
liabilities and prepaid expenses.

         Investing activities in fiscal 2002 utilized cash flows of $1.2 million
due  primarily to the purchase and  replacement  of assets used in operations of
the  store  locations.  These  activities  were  primarily  funded  through  our
borrowing agreements and internal cash flows.

         Financing  activities  in fiscal  2002  provided  cash flows of $61,000
primarily from the net proceeds of the issuance of Series A preferred  stock and
convertible  subordinated  notes, offset by the repayment of amounts outstanding
under our borrowing agreements and under a $3.0 million convertible subordinated
note.  The  repayments  under the borrowing  agreements  were generally from the
proceeds of our net reduction in overall  inventory levels during the period. We
finance  substantially  all of our  inventory and working  capital  requirements
pursuant  to  borrowing  agreements  entered  into  in  January  2000  with  two
commercial  finance  companies -- Transamerica  Commercial  Finance  Corporation
("TCFC") and GE Commercial  Distribution  Finance  Corporation  ("GE") (formerly
known as Deutsche Financial Services Corporation ("DFS")). The agreements, which
currently  have maturity dates of April 2003,  have been amended  numerous times
(See  Note  14 -  "Subsequent  Events"  in the  consolidated  audited  financial
statements of the Company and notes thereto included elsewhere in this Report on
Form 10-K).  The agreements  contain  substantially  similar terms and financial
ratio based covenant requirements.  The maximum aggregate borrowing availability
as of September 30, 2002 was limited to a maximum credit limit of $70 million at
various prime based or LIBOR based interest rates (varying from 4.75% to 4.8% at
September 30, 2002). Borrowings under the agreements are pursuant to a borrowing
base,  or specific  floor plan,  advancing  formula  and are used  primarily  to
finance  inventory  purchases  and for  general  working  capital  requirements.
Substantially  all  inventory,   accounts   receivable,   furniture,   fixtures,
equipment,  real estate (junior liens) and intangible assets collateralize these
borrowing  agreements.  The terms of the borrowing  agreements also provide for:
(i)  fees for  administrative  monitoring,  (ii)  fees for  unused  portions  of
available credit,  and (iii) pre-payment fees in the event of our termination of
such floor plans prior to their stated original  maturity  dates.  The borrowing
agreements  also include  restrictive  loan agreements  containing  various loan
covenants  and  borrowing  restrictions,   including  minimum  financial  ratios
(governing net worth,  current assets,  debt to worth  percentages and cash flow
coverage  requirements  based upon  interest  expense and monthly  principal and
interest payments on debts). Acquisitions, the payment of common stock dividends
or repurchases of our common stock are also substantially  limited without prior
consent.  Effective  with the  results  of  operations  for the three and twelve
months ended September 30, 2002, we were in violation of several financial ratio
covenants  and,  subsequent  to  such  time,  became  in  violation  of  payment
requirements for sold and matured inventory.

                                       32
<PAGE>

         Effective on December 30th and 31st,  2002, we entered into Amended and
Restated  borrowing  agreements  (the  "Amended  Agreements")  with  our  senior
inventory lenders, TCFC and GE, (formerly "DFS").

     The Amended  Agreements  included,  but were not limited to, the  following
components:
1.       Extension of the maturity date of the respective  borrowing  agreements
         from January 31, 2003 to April 30, 2003.
2.       Waiver of certain  financial,  reporting and payment defaults as of the
         date of the Amended Agreements.  The financial default waivers included
         the  re-establishment  and  modification  of new financial ratio levels
         based upon our current and anticipated  financial  performance  through
         the maturity date of April 30, 2003. The waived reporting  requirements
         provided us time to finalize  our audit  report and report on Form 10-K
         for the fiscal  year  ended  September  30,  2002.  The waived  payment
         defaults  were the  result  of our  failure  to repay  certain  amounts
         scheduled  to  be  paid   according  to  the  terms  of  the  borrowing
         agreements,  including the timely payment of amounts for sold inventory
         and scheduled amounts for certain matured inventory. The waivers of the
         payment  defaults were  accommodated by the lenders  revising the terms
         under the Amended Agreements to temporarily advance certain funds to us
         on inventory assets  (primarily  certain new and used aged inventories)
         that  previously  were not  eligible  assets upon which we could borrow
         funds.  Repayment of the amounts  resulting from the payment default is
         required upon the earlier of, (i) the sale of such inventory  providing
         the basis for the temporary advance, (ii) the receipt by the Company of
         its projected  calendar year 2002 federal  income tax refund,  or (iii)
         April 30, 2003.
3.       An  "Intercreditor  Agreement" by and among TCFC,  GE and TMRC,  L.L.P.
         (the owner of the  Company's  outstanding  shares of Series A Preferred
         Stock) to each,  individually,  provide the Company up to an additional
         $500,000  of  conditional  funding  (collectively  $1.5  million).  The
         requirement  of any party to advance  funds under this  agreement is at
         each participant's  sole and individual  discretion.  Accordingly,  the
         Company is not guaranteed any advances;  or to the extent  advances are
         made; any future or additional advances. Funds may only be used for the
         general  working  capital  expenses of the  Company.  As of January 17,
         2003, the Company has received $415,000 from each of TCFC, GE and TMRC,
         L.L.P.   (collectively   $1,245,000)  as  advances   pursuant  to  this
         agreement.  (See Risk Factors  "Operating  Losses and Reduced Financing
         have  Jeopardized  our Cash Flow" and Note 14 - "Subsequent  Events" in
         the consolidated  audited financial statements of the Company and notes
         thereto included elsewhere in this Report on Form 10-K).

         We pursued this  transaction  and financing  because of our belief that
current and anticipated cash needs through April,  2003 exceed amounts otherwise
available to be borrowed under our current credit  facilities  with TCFC and GE.
This  projected  shortfall is  influenced  in part by our seasonal  trends which
include  historically  low sales  levels  during the  October  through  December
periods.  The seasonal lull normally  experienced  at the end of a calendar year
was  compounded  at the end of  2002 by  continued  economic  uncertainty,  weak
industry sales trends,  and certain  revised  borrowing terms which have had the
effect of reducing our borrowing base during this period.

         Based upon management's  initial Fiscal 2003 operating plan,  including
the (i) sale/leaseback or refinancing of certain assets, (ii) closing additional
store  locations,  (iii)  further  reducing  staff  levels  and,  if  necessary,
benefits,  (iv)  reducing  expenses or  renegotiating  fixed  payments  plus the
availability  under its borrowing  agreements and the additional $1.5 million in
conditional  funding,  management  believes that there is potential liquidity to
fund our  operations  and to make  required  principal  payments  under  the two
borrowing  agreements  and other  outstanding  debt through the maturity date of
April 30, 2003.  However,  material  shortfalls  or variances  from  anticipated
performance  or the timing of certain  expenses or revenues  could require us to
seek further amendment to the amended borrowing  agreements or alternate sources
of financing.  (See Risk Factors  "Operating  Losses and Reduced  Financing have
Jeopardized  our Cash Flow";  Risk  Factors  "Change of  Control";  Risk Factors
"Financing   Arrangements"   and  Note  1  -  "Basis  of  Presentation"  in  the
consolidated  audited  financial  statements  of the Company  and notes  thereto
included elsewhere in this Report on Form 10-K).

         During the period prior to the  expiration of our  inventory  borrowing
agreements  on April 30, 2003,  we will be revising our business plan to support
our required financing  arrangements for the remainder of fiscal 2003 and beyond
either with our current  lenders or from other  sources.  There is no  assurance
that  renewal  of the  borrowing  agreements  will  be  possible,  that  further
amendments  are  available  to the  Company  or that we  will be  successful  in
obtaining adequate financing arrangements from these or alternate sources.

                                       33
<PAGE>

         As of the date of this  report on Form 10-K,  management  believes  the
Company to be in compliance with all other terms and conditions of its borrowing
agreements  and all proposed terms and  conditions  established  pursuant to the
aforementioned waivers except as follows:

         We are currently not in compliance  with financial  covenants of a loan
agreement on certain real estate loans with Hibernia  National Bank ("Hibernia")
requiring  (i) minimum cash flow and (ii) minimum  tangible net worth.  The loan
agreement requires:

         Minimum Cash Flow (as defined in the agreement) must exceed 1.5 to 1.0.
Based  upon  the  Company's  financial  results  as of  September  30,  2002 the
Company's ratio is .01 to 1.0 and as such is not in compliance.

         Minimum  Tangible Net Worth (as defined in the  agreement)  must exceed
$27.5 million.  Based upon the Company's  financial  results as of September 30,
2002 the  Company's  tangible  net worth is $25.8  million and as such is not in
compliance.

         Our inability to continue to (i) negotiate waivers, (ii) to restructure
these loans,  or (iii) operate  without  being in  compliance  would result in a
significant and severe financial impact on our business,  operating  results and
financial  condition.  Also,  continued  defaults or future  defaults  under the
Hibernia loan agreement would result in a default under our inventory  borrowing
agreements.  The  default on this or other debt of the Company  could  result in
financial  instability  as a result of changes in  borrowing  terms,  demand for
immediate  repayment or repossession of collateral.  This financial  instability
could  result in our Company  being  unable to  continue as a going  concern and
suspend  operations,  with one alternative  being to seek  protection  under the
appropriate  Federal  Bankruptcy   procedures.   If  our  Company  declares  for
bankruptcy protection under Chapter 11, existing shareholder  investments may be
diluted  substantially  or be completely  lost through  satisfaction of creditor
claims.  If a Chapter 11  reorganization  is not successful,  our Company may be
forced  into  Chapter 7, in which case  shareholders  may lose their  investment
completely.  (See Note 1 - "Basis  of  Presentation"  and Note 14 -  "Subsequent
Events" in the  consolidated  audited  financial  statements  of the Company and
notes thereto included elsewhere in this Report on Form 10-K).

         As of September  30,  2002,  $50.9  million was drawn on the  borrowing
agreements and we could borrow (i) zero for general  working  capital  purposes,
and (ii) an  additional  $19.1  million  solely for the  purchase of  additional
inventories.  As we  purchase  inventory,  the amount  purchased  increases  the
borrowing base  availability  and typically the Company makes a determination to
borrow.  Various  manufacturers  provide us or our lenders with interest expense
assistance  under the inventory  borrowing  agreements in order to subsidize the
carrying cost of inventory.  Accordingly, no interest expense is recorded during
portions of the year (generally August through May) for certain borrowings under
these agreements. Discontinuance of these agreements could result in an increase
to interest expense.

         Merchandise  inventories  were $57.0  million  and $65.2  million as of
September 30, 2002 and 2001, respectively.  Accounts receivable, on a net basis,
decreased  by  approximately  $1.7  million to $9.7 million at the end of fiscal
2002 from the same time one year earlier due to collection of receivables and an
increase in the  allowance.  Noncompete  agreements  decreased by  approximately
$450,000 to $1.2  million in fiscal 2002 due to the  scheduled  amortization  of
this  asset,  pursuant  to the  adoption  of SFAS No.  142,  Goodwill  and Other
Intangible  Assets  ("SFAS 142")  effective as of October 1, 2002. In accordance
with SFAS 142, we completed  goodwill  impairment  tests as required.  The tests
involved the use of  estimates  related to the fair market value of the business
with  which  the  goodwill  is  associated.  As a  result  of  the  transitional
impairment  test, which considered  factors  including the significant  negative
industry  and  economic  trends  impacting  current  operations  and our  market
capitalization relative to our net book value, we recorded a non-cash, after tax
charge of $6.5 million as a cumulative effect of accounting change as of October
1, 2001.  The  non-cash,  after tax charge  resulted in the  elimination  of the
entire goodwill balance from our balance sheet.

         We had capital  expenditures  of  approximately  $1.1 million in fiscal
2002 and approximately $1.5 million in fiscal 2001. Capital  expenditures during
fiscal 2002 and 2001 were  primarily  used for the purchase and  replacement  of

                                       34
<PAGE>

assets used in operations  of the store  locations.  These capital  expenditures
were funded through our borrowing agreements and internal cash flows.

New Accounting Standards

         In August  2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
Retirement  Obligations".  SFAS No. 143  establishes  accounting  standards  for
recognition  and measurement of a liability for an asset  retirement  obligation
and the  associated  asset  retirement  cost.  SFAS  No.  143 is  effective  for
financial  statements  relating to fiscal years  beginning  after June 15, 2002.
There was no material impact from adoption of this statement on October 1, 2002.

         In October  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets".  SFAS No. 144  addresses  the
financial accounting and reporting for the impairment of long-lived assets. SFAS
144 is effective  for  financial  statements  issued for fiscal years  beginning
after  December 15,  2001.  There was no material  impact from  adoption of this
statement on October 1, 2002.

         In  April  2002,  the  Financial   Accounting  Standards  Board  issued
Statement of  Financial  Accounting  Standards  No. 145,  Rescission  of SFAS 4,
"Reporting Gains and Losses from Extinguishment of Debt", Rescission of SFAS 44,
"Accounting  for Intangible  Assets of Motor  Carriers",  Rescission of SFAS 64,
"Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements", Amendment of
SFAS 13, "Accounting for Leases", and Technical Corrections (SFAS 145). SFAS 145
also  amends  other  existing  authoritative   pronouncements  to  make  various
technical  corrections,  clarify meanings, or describe their applicability under
changed  conditions.  We do not expect SFAS 145 to have a material effect on our
financial  statements except for the reclassification of the extraordinary items
recorded in fiscal 2002 to operating expenses.

         In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or  Disposal  Activities"  (SFAS 146).  SFAS 146  addresses  the  financial
accounting  and  reporting  for the  costs  associated  with  exit  or  disposal
activities.  SFAS 146 is  effective  for exit or  disposal  activities  that are
initiated  after December 31, 2002. We do not expect SFAS 146 to have a material
effect on our financial statements.

         In  November  2002,  the  Emerging  Issues  Task  Force  (EITF)  of the
Financial  Accounting  Standards  Board  reached a consensus on issue No. 02-16,
"Accounting by a Reseller for Cash Consideration  Received from a Vendor".  EITF
02-16  establishes the accounting  standards for the recognition and measurement
of cash  consideration  paid by a vendor to a reseller.  EITF 02-16 is effective
for interim period financial  statements beginning after December 15, 2002, with
early adoption  permitted.  We have not yet determined the impact,  if any, EITF
02-16 will have on our financial statements.

Inflation

         The Company  believes that  inflation  generally has not had a material
impact on its operations or liquidity to date.

Item 7A.  Quantitative And Qualitative Disclosures About Market Risk

         At  September  30, 2002,  approximately  89.6% of the  Company's  notes
payable  and other short term  obligations  bear  interest  at  variable  rates,
generally  tied to a reference  rate such as the LIBOR rate or the prime rate of
interest of certain banks.  During the fiscal year ended September 30, 2002, the
average  rate of interest of such  variable  rates was 5.10%.  Increases  in the
variable interest rates would result in increased interest expense and decreased
earnings and cashflow.  Assuming the same level of borrowings for the year ended
September 30, 2002, which averaged  approximately  $69.0 million, an increase of
2% in the average  rate of interest  would  result in an increase in fiscal 2002
interest  expense of  approximately  $1.4  million and an increase in the fiscal

                                       35
<PAGE>

2002  net  loss.  After-tax  cashflow  would  have  decreased  by  approximately
$896,000. Conversely, a decrease in the average rate of interest would result in
decreased  interest  expense and a decrease in net loss and  improved  after-tax
cashflow.

Item 8.  Financial Statements

         For the financial  statements and  supplementary  data required by this
Item 8, see the Index to Consolidated Financial Statements and Schedules.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

         Not applicable.

                                    PART III

Item 10. Directors and Executive Officers

         There is incorporated herein by reference that portion of the Company's
proxy  statement  for the 2003  Annual  Meeting of  Shareholders  which  appears
therein  under the captions  "Item 1: Election of  Directors"  and  "Information
Concerning Directors."

Item 11. Executive Compensation

         There is  incorporated in this Item 11 by reference that portion of the
Company's definitive proxy statement for the 2003 Annual Meeting of Shareholders
which appears under the caption "Executive Compensation."

Item 12. Security Ownership of Certain Beneficial Owners and Management

         There is  incorporated in this Item 12 by reference that portion of the
Company's definitive proxy statement for the 2003 Annual Meeting of Shareholders
which appears under the caption "Securities Holdings of Principal  Shareholders,
Directors, Nominees and Officers."

Item 13. Certain Relationships and Related Transactions

         During the fiscal year ended  September 30, 2002 the Company  purchased
approximately $3.8 million , or 3.6% of its inventory  purchases from affiliates
of Tracker.  There is  incorporated in this Item 13 by reference that portion of
the  Company's  definitive  proxy  statement  for the  2003  Annual  Meeting  of
Shareholders which appears under the captions "Certain Relationships and Related
Transactions" and "Compensation Committee Interlocks and Insider Participation."


                                    PART IV

Item 14. Controls and Procedures

         Within  the 90 days  prior to the date of filing  this Form  10-K,  the
Company   performed  an  evaluation,   under  the   supervision   and  with  the
participation  of  the  Company's  management,  including  the  Company's  Chief
Executive   Officer  and  the  Company's   Chief  Financial   Officer,   of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures.  Based upon that  evaluation,  the  Company's  Chief  Executive
Officer and the Company's Chief Financial  Officer  concluded that the Company's
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to the  Company  required to be included in the
Company's periodic SEC filings.

                                       36
<PAGE>

         There  have  been no  significant  changes  in the  Company's  internal
controls or in other factors which could significantly  affect internal controls
subsequent to the date the Company carried out its evaluation.


Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements - The following consolidated financial statements of
the  Company  are  included  following  the  Index  to  Consolidated   Financial
Statements and Schedules on page F-1 of this Report.

     Report of Independent Auditors................               F-2
     Consolidated Balance Sheets...................               F-3
     Consolidated Statements of Operations.........               F-5
     Consolidated Statements of Stockholders' Equity              F-6
     Consolidated Statements of Cash Flows.........               F-7
     Notes to Consolidated Financial Statements....               F-9

(a) 2. Financial  Statement  Schedules - All schedules have been omitted because
they are not applicable, not required under the instructions, or the information
requested is set forth in the consolidated financial statements or related notes
thereto.

(a) 3. Exhibits - The following  Exhibits are  incorporated  by reference to the
filing or are included following the Index to Exhibits.
<TABLE>
<CAPTION>

                                INDEX TO EXHIBITS

         (a)   Exhibits:
<S>                <C>

3.1                --Restated Articles of Incorporation of the Registrant, as amended.(1)
3.2                --Restated Bylaws of the Registrant, as amended.(1)
4.1                --A copy of the Travis Boats & Motors,  Inc.  Statement of Designations of 6% Series A
                   Cumulative Convertible Preferred  Stock  dated March 12,  2002. (9)
4.2                --Warrant to Purchase  Series A Preferred Stock of  Travis  Boats &  Motors,  Inc. (9)
4.3                Travis  Boats & Motors,  Inc.  Amended and  Restated Statement  of  Designations  of 6%
                   Series  A  Cumulative  Convertible Preferred  Stock dated April 8, 2002. (10)
9.1                --Voting Trust Agreement, dated as of January 7, 2003, by and between Travis Boats & Motors,
                   Inc., and TMRC, L.L.P. (11)
10.2(a)            --[Intentionally left blank]
10.2(b)            --Dealer Agreement dated as of October 13, 1995, between the Company and Outboard
                      Marine Corporation.(1)
10.3 , 10.4        --[Intentionally left blank]
10.5(a,b)          --[Intentionally left blank]
10.6(a,b)          --[Intentionally left blank]
10.7(a,b)          --[Intentionally left blank]
10.8(a - i)        --[Intentionally left blank]
10.9(a,b,c)        --[Intentionally left blank]
10.10(a,b)         --[Intentionally left blank]
10.11 - 10.14      --[Intentionally left blank]
10.15              --Asset Purchase Agreement dated as of September 20, 1995, by and among Red River
                     Marine, Inc., Red River Marine, Inc. #2, and TBC Arkansas, Inc.(1)
10.16              --Promissory Note dated September 20, 1995, in the original principal amount of $800,000,
                      Payable by TBC Arkansas, Inc. to Benny Hargrove.(1)
10.17(a)           --Promissory  Note dated as of September  20, 1995, in the
                      original  principal amount of $462,145.53,  payable by TBC
                      Arkansas, Inc. to Red River Marine, Inc. #2.(1)

                                       37
<PAGE>

10.17(b)           --Mortgage With Power of Sale (Realty) dated September 20, 1995, from TBC Arkansas, Inc.
                      to Red River Marine, Inc. #2.(1)
10.18              --Promissory Note dated September 20, 1995, in the original principal amount of
                      $230,177.16, payable by TBC Arkansas, Inc. to Red River Marine, Inc. and Red River
                      Marine, Inc. #2.(1)
10.19              --Promissory Note dated September 20, 1995, in the original principal amount of $108,750,
                      Payable by TBC Arkansas, Inc. to Red River Marine, Inc. and Red River Marine, Inc. #2.(1)
10.20              --Travis Boats and Motors, Inc. 1995 Incentive Plan.(1)
10.21              --[Intentionally left blank]
10.22              --Form of Option Agreement dated May 17, 1995, between the Company and Michael B.
                     Perrine, Ronnie L. Spradling and Mark T. Walton.(1)
10.23              --Form of  Indemnification  Agreement  for  Directors  and Officers of the
                     Company.(1)
10.24              --Management  Agreement dated December 14, 1995, by and among TBC Management, Ltd.,
                      the Company and its subsidiaries.(1)
10.25              --[Intentionally left blank]
10.26(a,c)         --[Intentionally left blank]
10.27(a)           --Second Modification and Extension Agreement dated April 26, 1994, between the Company
                     and NationsBank of Texas, N.A.(1)
10.27(b)           --"504" Note dated April 28, 1994, in the original principal amount of $454,000, payable by
                      the Company to Cen-Tex Certified Development Corporation.(1)
10.27(c)           --[Intentionally left blank]
10.27(d)           --Deed of Trust dated April 28, 1994, from the Company to Wm. H. Harrison, Jr., Trustee.(1)
10.28              --[Intentionally left blank]
10.29(a - d)       --[Intentionally left blank]
10.30              --Asset Purchase Agreement dated as of November 1, 1996 between Travis Boating Center
                      Tennessee, Inc. and Tri-Lakes Marine, Inc.(2)
10.31              --Asset Purchase Agreement dated as of November 1, 1996 between Travis Boating Center
                     Alabama, Inc. and Tri-Lakes Marine, Inc.(2)
10.32              --Asset Purchase Agreement dated as of February 19, 1997 between Travis Boating Center
                       Louisiana, Inc. and Bent's Marine, Inc.(3)
10.33              --Asset Purchase Agreement dated as of August 1, 1997 between Travis Boating Center
                      Mississippi, Inc. and McLeod Marine, Inc.(4)
10.34              --Stock Purchase Agreement dated as of September 30, 1997 among Travis Boating Center
                     Florida, Inc. and Frederic D. Pace and John W. Reinhold providing for the purchase of
                     100% of the common stock of Adventure Boat Brokerage, Inc. (4)
10.35              --Stock Purchase Agreement dated as of September 30, 1997 among Travis Boating Center
                     Florida, Inc. and  John W. Reinhold providing for the purchase of 100% of the common
                     stock of Adventure Marine & Outdoors, Inc.(4)
10.36              --Stock Purchase Agreement dated as of September 30, 1997 among Travis Boating Center
                     Florida, Inc. and  Frederic D. Pace and John W. Reinhold providing for the purchase of
                     100% of the common stock of Adventure Marine South, Inc.(4)
10.37              --[Intentionally left blank]
10.38              --Asset Purchase Agreement dated as of November 20, 1997 between Travis Boating
                     Center Tennessee, Inc. and Southeastern Marine Group, Inc.(4)
10.39              --Travis Boats & Motors, Inc. 1995 Incentive Plan.(5)
10.40              --Employment Agreement dated November 16, 1999 between TBC Management, Ltd. and
                     Mark T. Walton.(7)
10.41              --Employment Agreement dated November  16, 1999 between TBC Management, Ltd. and
                      Michael B. Perrine.(7)
10.42              --Employment Agreement dated November 16, 1999 between TBC Management, Ltd. and
                      Ronald L. Spradling.(7)
10.43              --Wellcraft Master Dealer Agreement effective September 29. 1998 between the Company
                      and Wellcraft Marine Corp. (7)

                                       38
<PAGE>

10.44              --Aquasport Master Dealer Agreement effective September 29, 1998 between the Company
                     and Aquasport, a division of Wellcraft Marine Corp. (7)
10.45              --Outboard Marine Corporation Private Label/Retail Store Agreement dated November 13,
                     1998 between the Company and Outboard Marine Corporation.(7)
10.46              --Product Supply Agreement dated June 29, 1999 between the Company, its subsidiaries
                     and Mercury Marine, a division of Brunswick Corporation. (7)
10.47              --Larson Master Dealer Agreement effective September 29, 1999 between the Company and
                     Larson/Glastron Boats, Inc. (7)
10.48              --Loan and Security Agreement, dated as of January 31, 2000, between Travis Boats &
                     Motors, Inc., along with certain of its subsidiaries, and Deutsche Financial Services
                     corporation related to a Credit Facility of up to $60,000,000.00. (6)
10.49              --Loan and Security Agreement dated as of January 31, 2000,
                     by and between Transamerica  Commercial Finance Corporation
                     along with certain of its  subsidiaries,  and  Transamerica
                     Commercial Finance  Corporation related to a line of credit
                     with a maximum credit amount of $50,000,000.00 (6)
10.50              --First Amendment to Loan and Security Agreement, dated January 31, 2000, by and between
                     Deutsche Financial Services Corporation and Travis Boats & Motors, Inc., along with
                     certain of its subsidiaries. (6)
10.51              --Letter, dated December 29, 2000, to TBC Management, Inc. from Transamerica Commercial
                     Finance Corporation. (6)
10.52              --TBC Management Ltd. Part I Amendment to Employment Agreement with Mark T. Walton.(8)
10.53              --TBC Management Ltd. Part I Amendment to Employment Agreement with Ronnie L. Spradling.(8)
10.54              --TBC Management Ltd. Part I Amendment to Employment Agreement with Michael B. Perrine.(8)
10.55              --Consent and Waiver by and between Travis Boats & Motors, Inc. and Brunswick Corporation
                     (Re: Deutsche Financial Services Corporation), dated as of December 14, 2001.
10.56              --Consent and Waiver by and between Travis Boats & Motors, Inc. and Brunswick Corporation
                     (Re: Transamerica Commercial Finance Corporation), dated as of December 14, 2001.
10.57              --Amended and Restated Loan and Security Agreement between Travis Boats & Motors, Inc. and
                     Deutsche Financial Services Corporation, dated as of December 10, 2001.
10.58              --Amendment No. 2 to Travis Boats & Motors, Inc. Loan and Security Agreement by and
                     between  the Company and  Transamerica  Commercial  Finance
                     Corporation, dated as of December 14, 2001.
10.59              --Subordination Agreement - Travis Boats & Motors, Inc. Indebtedness to Brunswick
                     Corporation by and between those parties (Re:  Transamerica Commercial Finance
                     Corporation), dated as of December 14, 2001.
10.60              --Subordination Agreement - Travis Boats & Motors, Inc. Indebtedness to Brunswick
                     Corporation  by and between  those  parties  (Re:  Deutsche
                     Financial Corporation), dated as of December 14, 2001.
10.61              --Subordination Agreement - Travis Boats & Motors, Inc. Indebtedness to Shareholder
                     Purchasers  by and between  those  parties  (Re:  Brunswick
                     Corporation), dated as of December 14, 2001.
10.62              --Subordination Agreement - Travis Boats & Motors, Inc. Indebtedness to Shareholder
                     Purchasers by and between those parties (Re:  Transamerica Commercial Finance
                     Corporation), dated as of December 14, 2001.
10.63              --Subordination Agreement - Travis Boats & Motors, Inc. Indebtedness to Shareholder
                     Purchasers by and between those parties (Re:  Deutsche Financial Services Corporation),
                     dated as of December 14, 2001.
10.64              --Convertible Subordinated Promissory Note by and between those parties (Travis Boats &
                     Motors, Inc. to Brunswick Corporation), dated as of December 14, 2001.

                                       39
<PAGE>

10.65              --Travis Boats & Motors, Inc. Subordinated Note Purchase Agreement between Travis Boats &
                     Motors, Inc. and Brunswick Corporation, dated as of December 14, 2001.
10.66              --Travis Boats & Motors, Inc. Subordinated Note Purchase Agreement between Travis Boats &
                     Motors, Inc. and Shareholder Purchasers, dated as of December 14, 2001.
10.67              --Form of Convertible Subordinated Promissory Note (Travis Boats & Motors, Inc. to
                     Shareholder Purchaser), dated as of December 14, 2001.
10.68              --Preferred  Stock and Warrant  Purchase Agreement,  by and  between  Travis  Boats &
                     Motors, Inc.,  and TMRC,  L.L.P.,  dated March 13,  2002. (9)
10.69              --Tracker/Travis  Master Dealer  Agreement  (Master Dealer Supply Agreement),  by and
                     between Travis Boats & Motors, Inc., and Tracker Marine,  L.L.C., dated March 13, 2002.
                     (12)
10.70              --TBC Management, Ltd. Amendment No. 2 to Employment Agreement with Mark T. Walton, dated
                     March 13, 2002. (9)
10.71              -- TBC Management, Ltd. Amendment No. 2 to Employment Agreement with Michael B. Perrine,
                      dated March 13, 2002. (9)
10.72              -- TBC Management, Ltd. Amendment No. 2 to Employment Agreement with Ronald L. Spradling,
                      dated March 13, 2002. (9)
10.73              -- Amendment No. 3 to Travis Boats & Motors, Inc. Loan and Security Agreement by and
                      between Travis Boats & Motors, Inc. and Transamerica Commercial Finance Corporation,
                      dated March 13, 2002. (9)
10.74              -- Consent and Waiver by and between Travis Boats &  Motors, Inc. and Transamerica
                      Commercial  Finance Corporation (Re: Tracker Marine L.L.C.), dated as of  March 7, 2002.
                      (9)
10.75              -- Consent and Waiver by and between Travis Boats & Motors, Inc. and Deutsche Financial
                      Services Corporation (Re: Tracker Marine L.L.C.), dated as of March 7, 2002. (9)
10.76              -- Consent and Waiver by and between Travis Boats & Motors, Inc. and Hibernia National Bank
                      (Re: Tracker Marine L.L.C.), dated as of March 12, 2002. (9)
10.77              -- Term Sheet, dated January 7, 2003, by and between Travis Boats & Motors, Inc., and TMRC,
                      L.L.P.(11)
10.78              -- Loan and Security Agreement, dated as of January 7, 2003, by and between Travis Boats &
                      Motors, Inc., and TMRC, L.L.P. (11)
10.79              -- Amendment Regarding Amended and Restated Loan and Security Agreement by and among Travis
                      Boats & Motors, Inc., certain of its subsidiaries, and GE Commercial Distribution
                      Finance Corporation, formerly known as Deutsche Financial Services Corporation ("CDF").
                      (11)
10.80              -- Amendment No. 4 to Travis Boats & Motors, Inc., Loan and Security Agreement, by and
                      between Travis Boats & Motors, Inc., and Transamerica Commercial Finance Corporation.
                      (11)
10.81              -- Security Agreement - Tax Refund, by and between Travis Boats & Motors, Inc., and
                      Transamerica Commercial Finance Corporation, as agent for Transamerica Commercial
                      Finance Corporation, GE Commercial Distribution Finance Corporation and TMRC, L.L.P. (11)
10.82              -- Assignment of Tax Claim, given by Travis Boats & Motors, Inc., to Transamerica
                      Commercial Finance Corporation, as agent for Transamerica Commercial Finance
                      Corporation, GE Commercial Distribution Finance Corporation and TMRC, L.L.P. (11)
10.83              -- Option Agreement dated January 7, 2003, by and between Mark T. Walton and TMRC, L.L.P.
                      (11)
10.84              -- Option Agreement dated January 7, 2003, by and between Robert C. Siddons and TMRC,
                      L.L.P. (11)
10.85              -- Intercreditor Agreement (Travis Tax Refund), by and among Transamerica Commercial
                      Finance Corporation, TMRC, L.L.P., GE Commercial Distribution Finance Corporation and
                      Transamerica Commercial Finance Corporation as tax refund agent. (11)

                                       40
<PAGE>

10.86              -- Stock Option Cancellation Agreement dated January 7, 2003, by and between Travis Boats &
                      Motors, Inc., and Michael B. Perrine. (11)
10.87              -- Stock Option Cancellation Agreement dated January 7, 2003, by and between Travis Boats &
                      Motors, Inc., and Mark T. Walton. (11)
10.88              -- Stock Option Cancellation Agreement dated January 7, 2003, by and between Travis Boats &
                      Motors, Inc., and Ronnie L. Spradling. (11)
10.89              -- Stock Option Cancellation Agreement dated January 7, 2003, by and between Travis Boats &
                      Motors, Inc., and Richard Birnbaum. (11)
10.90              -- Amendment No. 3 to Employment Agreement, by and between Ronald L. Spradling and TBC
                      Management, Ltd., a Texas limited partnership, and agreed to and accepted by Travis
                      Boats & Motors, Inc., a Texas corporation. (11)
10.91              -- Amendment No. 3 to Employment Agreement, by and between Mark T. Walton and TBC
                      Management, Ltd., a Texas limited partnership, and agreed to and accepted by Travis
                      Boats & Motors, Inc., a Texas corporation. (11)
10.92              -- Amendment No. 3 to Employment Agreement, by and between Michael B. Perrine and TBC
                      Management, Ltd., a Texas limited partnership, and agreed to and accepted by Travis
                      Boats & Motors, Inc., a Texas corporation. (11)
11.1               -- Travis Boats & Motors, Inc., Earnings Press Release dated December 31, 2002. (11)
21.1               -- List of Subsidiaries of Registrant.(7)
23.1               -- Consent of Independent Auditors.
99.4               -- Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Mark T.
                      Walton.
99.5               -- Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Michael B.
                      Perrine.


<FN>
(1)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 effective June 26, 1996 (File No. 333-03283).
(2)  Incorporated by reference to the Company's Annual Report on Form 10-K filed
     with the Commission on December 31, 1996 (File No. 000-20757).
(3)  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     filed May 15, 1997 (File No. 000-20757).
(4)  Incorporated by reference to the Company's Annual Report on Form 10-K filed
     December 29, 1997 (File No. 000-20757).
(5)  Incorporated by reference to the Company Registration Statement on Form S-8
     (File No. 333-41981).
(6)  Portions  of  this  exhibit  have  been  omitted  and  are  subject  to  an
     application  for   confidential   treatment   filed   separately  with  the
     Commission.
(7)  Incorporated  by reference to the  Company's  Annual  Report on Form 10-K/A
     filed with the Commission on January 13, 2000 (File No. 600-20757).
(8)  Incorporated by reference to the Company's Annual Report on Form 10-Q filed
     with the Commission on August 14, 2001 (File No. 000-20757).
(9)  Incorporated  by reference  to the  Company's  Periodic  Report on Form 8-K
     filed with the Commission on March 13, 2002.
(10) Incorporated  by reference to the Company's  Periodic  Report on Form 8-K/A
     filed with the Commission on April 17, 2002.
(11) Incorporated  by reference  to the  Company's  Periodic  Report on Form 8-K
     filed with the Commission on January 15, 2003.
(12) Incorporated  by reference to the Company's  Periodic  Report on Form 8-K/A
     filed with the Commission on July 12, 2002.


</FN>
</TABLE>


                                       41
<PAGE>

         No annual report or proxy material has been sent to security holders as
of the date of this  Report  on Form  10-K;  however,  the  Company  anticipates
sending  the annual  report  and proxy  materials  on or before  any  applicable
deadlines.  When such a report and proxy materials are furnished, the Registrant
will furnish copies of such materials to the Commission.

                                   SIGNATURES

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

                                           Travis Boats & Motors, Inc.
Date:  January 20, 2003                    By:  /s/ MARK T. WALTON
                                             ----------------------------------
                                                     Mark T. Walton
                                             Chairman of the Board and President



                      POWER OF ATTORNEY TO SIGN AMENDMENTS

         KNOW ALL BY THESE PRESENTS,  that each person whose  signature  appears
below does  hereby  constitute  and  appoint  Mark T. Walton his true and lawful
attorney-in-fact  and agent for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments to the Travis Boats & Motors, Inc.
Annual Report on Form 10-K for the year ending  September 30, 2002,  and to file
the  same,  with  all  exhibits  thereto,  and  other  documents  in  connection
therewith,  with the  Securities  and Exchange  Commission,  granting  unto said
attorney-in-fact  and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully,  to all intents and purposes,  as they
or he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents, or any of them, may lawfully do or cause to be done
by virtue hereof.  This Power of Attorney has been signed below by the following
persons in the capacities and on the dates indicated.

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Name                                   Title                                       Date Signed
----                                   -----                                       -----------
<S>                                   <C>                                          <C>

/S/ MARK T. WALTON                    Chairman of the Board, President and
---------------------------           Director (Principal Executive Officer)       January 20, 2003
Mark T. Walton

/S/ MICHAEL B. PERRINE                Chief Financial Officer, Secretary and
---------------------------           Treasurer (Principal Financial and           January 20, 2003
Michael B. Perrine                    Accounting Officer)

/S/ RONNIE L. SPRADLING               Executive Vice President-New Store
---------------------------           Development, Director                        January 20, 2003
Ronnie L. Spradling

/S/ RICHARD BIRNBAUM
---------------------------
Richard Birnbaum                       Director                                    January 20, 2003

/S/ KENNETH BURROUGHS
---------------------------
Kenneth Burroughs                      Director                                    January 20, 2003

/s/ JAMES P. KARIDES, CPA
---------------------------
James P. Karides, CPA                  Director                                    January 20, 2003

/S/ ROBERT L. RING
---------------------------
Robert L. Ring                         Director                                    January 20, 2003

/S/ ROBERT C. SIDDONS
---------------------------
Robert C. Siddons                      Director                                    January 20, 2003


</TABLE>




                                       42
<PAGE>


                                  CERTIFICATION

I, Mark T. Walton certify that:

1.   I have  reviewed  this annual report on Form 10-K of Travis Boats & Motors,
     Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial condition,  results of operations, and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the  registrant  and have:  a)
     Designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;  b) Evaluated the  effectiveness of the  registrant's  disclosure
     controls  and  procedures  as of a date  within 90 days prior to the filing
     date of this annual  report (the  "Evaluation  Date");  and c) Presented in
     this  annual  report  our  conclusions   about  the  effectiveness  of  the
     disclosure  controls  and  procedures  based  on our  evaluation  as of the
     Evaluation Date;

5.   The registrant's other certifying  officer and  I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent  functions):  a) All  significant  deficiencies in the design or
     operation  of  internal   controls   which  could   adversely   affect  the
     registrant's ability to record,  process,  summarize,  and report financial
     data  and  have  identified  for the  registrant's  auditors  any  material
     weaknesses in internal controls; and b) Any fraud, whether or not material,
     that involves  management or other employees who have a significant role in
     the registrant's internal controls; and

6.   The  registrant's  other  certifying  officer  and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.

                                    /s/ Mark T. Walton
                                    -------------------------------------
                                    Mark T. Walton, President and Chairman

Date: January 20, 2003








                                       39
<PAGE>


                                  CERTIFICATION

I, Michael B. Perrine certify that:

1.   I have  reviewed  this annual report on Form 10-K of Travis Boats & Motors,
     Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial condition,  results of operations, and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officer   and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the  registrant  and have:  a)
     Designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;  b) Evaluated the  effectiveness of the  registrant's  disclosure
     controls  and  procedures  as of a date  within 90 days prior to the filing
     date of this annual  report (the  "Evaluation  Date");  and c) Presented in
     this  annual  report  our  conclusions   about  the  effectiveness  of  the
     disclosure  controls  and  procedures  based  on our  evaluation  as of the
     Evaluation Date;

5.   The registrant's other certifying  officer  and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent  functions):  a) All  significant  deficiencies in the design or
     operation  of  internal   controls   which  could   adversely   affect  the
     registrant's ability to record,  process,  summarize,  and report financial
     data  and  have  identified  for the  registrant's  auditors  any  material
     weaknesses in internal controls; and b) Any fraud, whether or not material,
     that involves  management or other employees who have a significant role in
     the registrant's internal controls; and

6.   The  registrant's  other  certifying  officer  and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.

                                    /s/ Michael B. Perrine
                                    ---------------------------------------
                                    Michael B. Perrine, Chief Financial
                                    Officer, Secretary and Treasurer

Date: January 20, 2003









                                       40
<PAGE>




                  Travis Boats & Motors, Inc. and Subsidiaries

                        Consolidated Financial Statements


Years ended September 30, 2002, 2001 and 2000

                                    Contents


Report of Independent Auditors............................................F-2

Audited Consolidated Financial Statements

Consolidated Balance Sheets...............................................F-3

Consolidated Statements of Operations.....................................F-5

Consolidated Statements of Stockholders' Equity...........................F-6

Consolidated Statements of Cash Flows.....................................F-7

Notes to Consolidated Financial Statements................................F-8






                                       F-1
<PAGE>


                         Report of Independent Auditors

The Board of Directors
Travis Boats & Motors, Inc.  and Subsidiaries


We have audited the accompanying  consolidated  balance sheets of Travis Boats &
Motors, Inc. and Subsidiaries as of September 30, 2002 and 2001, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the three years in the period ended September 30, 2002.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of Travis Boats &
Motors,  Inc.  and  Subsidiaries  as of  September  30,  2002  and  2001 and the
consolidated  results of their  operations  and their cash flows for each of the
three  years  in the  period  ended  September  30,  2002,  in  conformity  with
accounting principles generally accepted in the United States.

The accompanying  financial  statements have been prepared  assuming that Travis
Boats & Motors, Inc. will continue as a going concern.  The Company has incurred
recurring  operating  losses and has  expressed  concerns  that current  working
capital  demands may exceed cash  resources.  In  addition,  the Company has not
complied  with certain  covenants  of loan  agreements  with its lenders.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  Management's  plans in regard to these matters are described in
Note 1. The financial  statements do not include any  adjustments to reflect the
possible future effects on the  recoverability  and  classification of assets or
the amounts and  classifications of liabilities that may result from the outcome
of this uncertainty.

                              /s/ Ernst & Young LLP

Austin, Texas

November 22, 2002,
except for Notes 1, 4, 5 and 14, as to which the date is January 7, 2003















                                       F-2


<PAGE>


                  Travis Boats & Motors, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                        (in thousands, except share data)

<TABLE>
<CAPTION>


                                                                                       September 30,
                                                                                2002                    2001
                                                                           ---------------          -------------
<S>                                                                               <C>                   <C>

Assets
Current assets:
Cash and cash equivalents                                                          $4,253                 $1,388
Accounts receivable, net of allowance for doubtful accounts
of $2,058 in 2002 and $527 in 2001                                                  9,681                 11,351
Prepaid expenses                                                                    1,009                    779
Income taxes recoverable and deferred tax asset                                       611                  1,432
Inventories                                                                        56,957                 65,164
                                                                           ---------------          -------------

Total current assets                                                               72,511                 80,114

Property and equipment:
     Land                                                                           5,982                  5,982
     Buildings and improvements                                                    15,899                 15,485
     Furniture, fixtures and equipment                                              9,327                  8,762
                                                                           ---------------          -------------
                                                                                   31,208                 30,229

Less accumulated depreciation                                                     (9,820)                (7,887)
                                                                           ---------------          -------------
                                                                                   21,388                 22,342

Deferred tax asset                                                                     --                    488

Goodwill, net of accumulated amortization of  $1,396 in 2001                           --                  8,809

Noncompete agreements,  net of accumulated amortization of $2,061 in 2002           1,149                  1,607
and $1,603 in 2001

Other assets                                                                          384                    320
                                                                           ---------------          -------------
Total assets                                                                      $95,432               $113,680
                                                                           ===============          =============

See accompanying notes.


</TABLE>







                                       F-3


<PAGE>


<TABLE>
<CAPTION>

                                                                                        September 30,
                                                                                  2002                  2001
                                                                              -------------         -------------
<S>                                                                                <C>                  <C>
Liabilities
Current liabilities:

     Accounts payable                                                               $4,122                $5,875

     Accrued liabilities                                                             1,439                 1,203

     Floor plan and revolving lines of credit payable                               50,949                58,874

     Current portion of notes payable and other short term obligations               1,025                 2,204
     Notes payable in default, classified as short term obligations                  6,436                   ---

Total current liabilities                                                           63,971                68,156

     Notes payable, less current option                                              3,225                 9,375
     Convertible notes                                                               1,300                   ---

Stockholders' equity:
     Series A Preferred stock, $100 par value,  1,000,000 shares authorized,         8,000                    __
     80,000  shares and 0 shares  issued and  outstanding  at September  30,
     2002 and 2001, respectively
     Common stock, $.01 par value,  50,000,000 shares authorized,  4,329,727            43                    44
     and 4,359,027  shares issued and  outstanding at September 30, 2002 and
     2001, respectively

Paid-in capital                                                                     15,109                15,342

Retained earnings                                                                    3,784                20,763
                                                                              -------------         -------------

Total stockholders' equity                                                          26,936                36,149

                                                                              -------------         -------------
Total liabilities and stockholders' equity                                         $95,432              $113,680
                                                                              =============         =============

See accompanying notes.





</TABLE>



                                       F-4


<PAGE>


                  Travis Boats & Motors, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                        (in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                 Year ended September 30,
                                                                              2002         2001         2000
                                                                           --------------------------------------
<S>                                                                          <C>          <C>          <C>

Net sales.................................................................   $176,523     $198,539     $217,718

Cost of sales.............................................................   $139,451     $152,160      164,409
                                                                           --------------------------------------

Gross profit..............................................................     37,072       46,379       53,309

Selling, general and administrative expenses..............................     38,984       41,492       42,326
Store closing costs.......................................................        ---          321          ---
Depreciation and amortization.............................................      2,474        2,906        2,645
                                                                           --------------------------------------
                                                                               41,458       44,719       44,971

Operating income/(loss)...................................................    (4,386)        1,660        8,338

Interest expense..........................................................    (4,018)      (6,533)      (6,848)

Other income/(expense)....................................................         39           43          (26)
                                                                           --------------------------------------

Income/(loss) before income taxes, cumulative effect of accounting
       change and extraordinary item......................................    (8,365)      (4,830)        1,464

Income tax (expense)/benefit..............................................    (1,769)        1,549        (567)
                                                                           --------------------------------------

Income/(loss) before cumulative effect of accounting change
        and extraordinary item............................................  $(10,134)     $(3,281)         $897
                                                                           ======================================

Cumulative effect of accounting change, net of taxes of $2,281............    (6,528)          ---          ---
Extraordinary loss on extinguishment of debt, net of taxes of $76.........      (130)          ---          ---
                                                                           --------------------------------------
     Net income/(loss)....................................................  $(16,792)     $(3,281)         $897
                                                                           ======================================

Preferred stock dividends.................................................      (187)          ---          ---
                                                                           --------------------------------------
     Net income/(loss) attributable to common shareholders................  $(16,979)     $(3,281)         $897
                                                                           ======================================

Basic/Diluted Earnings/(Loss) per share:
Income/(loss) before cumulative effect of accounting change
        And extraordinary item............................................    $(2.33)       $(.75)         $.20
Preferred stock dividends.................................................      (.05)
Cumulative effect of accounting change....................................     (1.50)          ---          ---
Extraordinary loss on extinguishment of debt..............................      (.03)          ---          ---
                                                                           --------------------------------------
     Net income/(loss)....................................................    $(3.91)       $(.75)         $.20
                                                                           ======================================

See accompanying notes.
</TABLE>


                                      F-5
<PAGE>

                  Travis Boats & Motors, Inc. and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                                 (in thousands)

<TABLE>
<CAPTION>

                                           Common                                           Paid-in    Retained
                                                                                            Capital    Earnings      Total
                                                                  Preferred
                                           Shares      Amount      Shares       Amount
                                         ------------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>         <C>       <C>          <C>        <C>

Balance at September 30, 1999                  4,326       $ 43        -----       $ ----    $14,402       23,147     37,592
                                         ------------------------------------------------------------------------------------

     Issuance of common stock                      2      -----        -----        -----         22        -----         22
     Issuance of common stock in
     purchase of business                         86          1                                1,099        -----      1,100
     Repurchase and cancellation of
     common stock                               (15)      -----        -----        -----       (59)        -----       (59)

Net income                                     -----      -----        -----        -----      -----          897        897

                                         ------------------------------------------------------------------------------------
Balance at September 30, 2000                  4,399         44        -----        -----     15,464       24,044     39,552
                                         ------------------------------------------------------------------------------------

     Repurchase and cancellation of
     common stock                               (40)      -----        -----        -----      (122)        -----      (122)

Net loss                                       -----      -----        -----        -----      -----      (3,281)    (3,281)

                                         ------------------------------------------------------------------------------------
Balance at September 30, 2001                  4,359        $44        -----        -----    $15,342      $20,763    $36,149
                                         ------------------------------------------------------------------------------------

       Repurchase and cancellation of
       common stock                             (29)        (1)        -----        -----       (55)        -----       (56)
       Issuance  of Series A  preferred
       stock                                   -----      -----           80        8,000      (178)        -----      7,822
       Preferred stock dividends               -----      -----        -----        -----      -----        (187)      (187)

Net loss                                       -----      -----        -----        -----      -----     (16,792)   (16,792)

                                         ------------------------------------------------------------------------------------
Balance at September 30, 2002                  4,330        $43           80       $8,000    $15,109      $ 3,784    $26,936
                                         ------------------------------------------------------------------------------------

See accompanying notes.

</TABLE>


                                      F-6
<PAGE>






                  Travis Boats & Motors, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                  Year Ended September 30,
                                                                                2002         2001        2000
                                                                             ------------------------------------
<S>                                                                            <C>         <C>           <C>
Operating activities
Net income/(loss)                                                              $(16,792)   $ (3,281)        $897
Adjustments to reconcile net income/(loss) to net cash
provided by (used in) operating activities:
     Depreciation                                                                  2,016       2,018       1,791
     Amortization                                                                    458         888         854
     Cumulative effect of accounting change, net                                   6,528          --          --
     Deferred income taxes                                                           595       (320)        (18)
     Changes in operating assets and liabilities:
       Accounts receivable                                                         1,670         265         805
       Prepaid expenses                                                            (230)         144         254
       Inventories                                                                 8,208      12,915     (2,379)
       Other assets                                                                 (64)        (74)        (47)
       Accounts payable                                                          (1,753)       1,516         746
       Accrued liabilities                                                           236       (623)     (1,502)
       Income taxes recoverable/income tax payable                                 2,995          43     (4,188)
                                                                             ------------------------------------

Net cash provided by (used in) operating activities                                3,867      13,491     (2,787)

Investing activities
Purchase of businesses                                                               ---         ---     (1,034)
Purchase of property and equipment                                               (1,063)     (1,495)     (4,762)
                                                                             ------------------------------------

Net cash used in investing activities                                            (1,063)     (1,495)     (5,796)

Financing activities

Net increase (decrease) in notes payable and other short-term obligations      $ (8,818)  $ (13,457)      $7,466
Proceeds from issuance of convertible subordinated notes                           4,300
Repayments of convertible subordinated notes                                     (3,000)        --            --
Net proceeds from issuance of preferred stock                                      7,822        --            --
Net proceeds (payments) from issuance (repurchase) of common stock                  (56)       (122)        (37)
Preferred stock dividends                                                          (187)        --            --
                                                                            -------------------------------------

Net cash provided by (used in) financing activities                                   61    (13,579)       7,429
Change in cash and cash equivalents                                                2,865     (1,583)     (1,154)
Cash and cash equivalents, beginning of year                                       1,388       2,971       4,125
                                                                            -------------------------------------

                                                                            -------------------------------------
Cash and cash equivalents, end of year                                            $4,253      $1,388      $2,971
                                                                            =====================================

<CAPTION>

Supplemental Disclosure of Debt and Stock Issued in Purchase of Business
-----------------------------------------------------------------------------
                                                                                  Year Ended September 30,
                                                                                2002        2001        2000
                                                                            -------------------------------------
<S>                                                                                <C>         <C>        <C>

Debt issued in purchase of businesses                                              $ ---       $ ---      $ ---
Stock issued in purchase of businesses                                             $ ---       $ ---      $1,100

See accompanying notes.
</TABLE>

                                      F-7

<PAGE>

                  Travis Boats & Motors, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements


1.     Basis of Presentation

         The Company  finances  substantially  all of its  inventory and working
capital requirements  pursuant to inventory borrowing agreements entered into in
January 2000 with two commercial finance companies. The agreements have maturity
dates of April 30, 2003 (see Note 14 - "Subsequent Events"). As of September 30,
2002, the Company was in violation of certain  financial,  reporting and payment
covenants  pursuant  to such  agreements  primarily  as a  result  of  recurring
operating  losses.  Management has also expressed  concerns that current working
capital demands may exceed cash resources.  These conditions  raise  substantial
doubt as to the Company's ability to continue as a going concern.  The financial
statements do not include any adjustments to reflect the possible future effects
on  the   recoverability  and  classification  of  assets  or  the  amounts  and
classifications  of  liabilities  that  may  result  from  the  outcome  of this
uncertainty.

         Effective  December 30 and 31, 2002,  the Company  entered into amended
and restated  inventory  borrowing  agreements with these two commercial finance
companies  which  extended  the  maturity  date  of  the  respective   borrowing
agreements  to April 30, 2003 (see Note 14). The amended and restated  inventory
borrowing  agreements  also waived  financial,  reporting  and payment  defaults
through the date of the agreement and established  new financial  covenant ratio
levels based upon the  Company's  current and  anticipated  performance  through
April  30,  2003.  In  connection  with  the  amended  and  restated   borrowing
agreements, the Company also entered into an agreement with these two commercial
finance  companies and the Company's major shareholder which would provide up to
an additional $1.5 million of conditional funding.  Management believes that the
Company will be able to meet financial covenants  established in the amended and
restated  borrowing  agreements based upon the Company's current and anticipated
performance through April 30, 2003. Upon maturity of the borrowing agreements on
April 30,  2003,  the Company  plans to  negotiate  either an  extension  of the
existing  borrowing  agreements  or new borrowing  agreements  that will provide
financing  terms  similar to the current  agreements.  However,  the  successful
achievement of these objectives is uncertain,  and the failure to meet financial
covenants  or to  extend  or renew  borrowing  agreements  upon  maturity  would
significantly  impact the  Company's  ability to purchase  inventory and conduct
operations at its intended level.

2.  Summary of Significant Accounting Policies

Description of Business

Travis  Boats & Motors,  Inc.  (the  "Company")  based in  Austin,  Texas,  is a
retailer of boats,  motors,  trailers and related  watersport  accessories.  The
Company operates, in one reportable segment, at locations in the southern region
of the United States.

Description of Consolidation

     Travis Boats & Motors,  Inc. (the "Company")  based in Austin,  Texas, is a
retailer of boats,  motors,  trailers and related  watersport  accessories.  The
Company operates, in one reportable segment, at locations in the southern region
of the United States.

         The  consolidated  financial  statements  include  the  accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.


                                      F-8
<PAGE>


2.   Summary of Significant Accounting Policies (continued)

Use of Estimates

         The  preparation of financial  statements in conformity with accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

Revenue Recognition

         The Company records revenue on sales of boats,  motors,  trailers,  and
related  watersport  parts and accessories upon delivery to or acceptance by the
customer at the closing of the  transaction.  The Company records  revenues from
service operations at the time repair or service work is completed.

         The Company  refers  customers  to various  financial  institutions  to
assist the customers in obtaining  financing for their boat  purchase.  For each
loan the  financial  institutions  are able to fund as a result of the referral,
the  Company  receives  a fee.  Revenue  earned  by the  Company  for  financing
referrals is recognized when the related boat sale is recognized. The fee amount
is generally based on the loan amount and the term. Generally,  the Company must
return a portion of the fee amount  received if the customer  repays the loan or
defaults  on the loan  within a period of up to 180 days from the  initial  loan
date. The Company records such refunds, which are not significant,  in the month
in which they occur.

         Revenues from insurance and extended service agreements are recorded at
the time such  agreements are executed which  generally  coincides with the date
the boat,  motor and trailer is  delivered.  Such  revenues are not deferred and
amortized over the life of the insurance or extended service agreement policies,
because the  Company  sells such  policies  on behalf of third party  vendors or
administrators. At the time of sale, the Company records a fee for insurance and
extended  service  agreements  net  of the  related  fee  that  is  paid  to the
third-party  vendors or  administrators.  Since its  inception,  the Company has
incurred no additional costs related to insurance or extended service agreements
beyond the fees paid to the third party vendors at the time of sale.

Cash and Cash Equivalents

         The Company considers all investments with maturities of ninety days or
less when purchased to be cash equivalents.

Fair Value of Financial Instruments

         The carrying amount of the Company's financial  instruments,  including
cash and cash  equivalents,  accounts  receivable,  accounts  payable  and notes
payable  approximates  fair value due to either their short-term nature or their
variable interest rate.

Accounts Receivable

         Accounts receivable potentially expose the Company to concentrations of
credit risk, as defined by the Statement of Financial  Accounting  Standards No.
105,  Disclosure of Information  about Financial  Instruments  with  Off-Balance
Sheet  Risk and  Financial  Instruments  with  Concentrations  of  Credit  Risk.
Accounts receivable consist primarily of amounts due from financial institutions
upon sales contract funding,  amounts due from vendors under rebate programs and
amounts due from vendors for services provided under warranty programs.


                                       F-9

<PAGE>

2.       Summary of Significant Accounting Policies (continued)

         Allowance for Doubtful Accounts

         Accounts  receivables  consist  primarily of amounts due from financial
institutions  upon sales contract  funding,  amounts due from  manufacturers  or
vendors under rebate programs,  amounts due from  manufacturers or vendors under
warranty  programs  and amounts due from  customers  for  services.  The Company
routinely  evaluates  the  collectibility  of  accounts  receivable  focusing on
amounts due from  manufacturers,  vendors  and  customers.  If events  occur and
market  conditions  change,   causing  collectibility  of  outstanding  accounts
receivable to become unlikely,  the Company records an increase to its allowance
for doubtful  accounts.  The Company  evaluates the probability of collection of
outstanding  accounts receivable based several factors which include but are not
limited to the following:  1) age of the  outstanding  accounts  receivable,  2)
financial condition of the manufacturer,  vendor or customer, and 3) discussions
or  correspondence  with the  manufacturer,  vendor  or  customer.  The  Company
determines  the  allowance  for  doubtful  accounts  based  upon  both  specific
identification and a general allowance for accounts  outstanding for a specified
period of time.

         The  accounts  receivable  balances  consisted  of  the  following  (in
thousands):

                                                    September 30,
                                                  2002          2001
                                             -----------------------------

Trade receivables                                   $ 4,712       $ 4,584
Amounts due from manufacturers                        6,377         6,691
Other receivables                                       650           603
Allowance for doubtful accounts                     (2,058)         (527)
                                             -----------------------------
                                                     $9,681       $11,351
                                             =============================


Activity in the  Company's  allowance  for  doubtful  accounts is as follows (in
thousands):


Balance at September 30, 1999                                        $247
                                                               -------------
     Additions charged to costs and expenses                          187
     Write-offs of uncollectible accounts                           (156)

--------------------------------------------------------------------------------

Balance at September 30, 2000                                        $278
                                                               -------------
     Additions charged to costs and expenses                          479
     Write-offs of uncollectible accounts                           (230)

--------------------------------------------------------------------------------

Balance at September 30, 2001                                        $527
                                                               -------------
     Additions charged to costs and expenses                        2,030
     Write-offs of uncollectible accounts                           (499)


                                                               -------------
Balance at September 30, 2002                                      $2,058
                                                               =============


                                      F-10
<PAGE>




2. Summary of Significant Accounting Policies (continued)


Inventories

         Inventories consist of boats,  motors,  trailers and related watersport
parts and  accessories.  Inventories are carried at the lower of cost or market.
Cost  for  boats,   motors  and  trailers  is  determined   using  the  specific
identification  method.  Cost for parts and accessories is determined  using the
first-in,  first-out method. If the carrying amount of our inventory exceeds its
fair  value,  we write down our  inventory  to its fair  value.  We utilize  our
historical  experience  and current  sales  trends as the basis for our lower of
cost or market  analysis.  Changes in market  conditions,  lower  than  expected
customer demand,  closing of additional store locations and changing  technology
or features could result in additional  obsolete inventory that is unsaleable or
only  saleable at reduced  prices,  which  could  require  additional  inventory
reserve provisions.

         Such  events and market  conditions  include but are not limited to the
following: 1) deteriorating financial condition of the manufacturer resulting in
discontinuance and lack of manufacturer's  warranty for certain boats, motors or
other products,  2) introduction of new models or product lines by manufacturers
resulting  in less  demand  for  previous  models or product  lines,  3) Company
initiatives  to promote  unit sales and reduce  inventory  levels for new and/or
used  inventory by reducing  sales prices,  and 4) Competing  boat  retailers in
various markets in which the Company operates may offer sales incentives such as
price reductions.

Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                    September 30,
                                                              2002                 2001
                                                          -------------       ---------------
<S>                                                            <C>                   <C>

New boats, motors and trailers                                 $47,120               $53,596

Used boats, motors and trailers                                  5,071                 5,330

Parts, accessories and other                                     6,179                 6,722

Valuation allowance                                            (1,413)                 (484)
                                                          -------------       ---------------

                                                               $56,957               $65,164
                                                          =============       ===============

</TABLE>


                                      F-11




<PAGE>



2. Summary of Significant Accounting Policies (continued)

Inventories (continued ):

Activity  in the  Company's  inventory  valuation  allowance  is as follows  (in
thousands):
<TABLE>
<CAPTION>
<S>                                                                           <C>

Balance at September 30, 1999                                                 $379
                                                                      -------------
     Additions charged to costs and expenses                                    38
     Inventory write-offs                                                      -0-

Balance at September 30, 2000                                                  417
                                                                      -------------
     Additions charged to costs and expenses                                   155
     Inventory write-offs                                                     (88)

Balance at September 30, 2001                                                  484
                                                                      -------------
     Additions charged to costs and expenses                                   956
     Inventory write-offs                                                     (27)
                                                                      -------------
Balance at September 30, 2002                                               $1,413
                                                                      =============

</TABLE>

Property and Equipment

         Property and equipment are stated at cost.  Provisions for depreciation
are determined using the double-declining balance and straight-line methods. The
Company  uses  estimated  useful  lives  of  5 -  20  years  for  buildings  and
improvements and 5 - 10 years for furniture, fixtures and equipment.

Income Taxes

         In accordance with Statement of Financial Accounting Standards No. 109,
Accounting  for Income Taxes,  deferred  income taxes are provided for temporary
differences  between the basis of assets and liabilities for financial reporting
purposes and for income tax return purposes. The Company routinely evaluates its
recorded  deferred  tax assets to  determine  whether it is more likely than not
that such  deferred  tax  assets  will be  realized.  During the  quarter  ended
September  30, 2002,  the Company  determined  that for deferred tax assets that
could not be  realized by  carryback  to prior tax years it was more likely than
not that such  deferred tax assets would not be realized and  accordingly a full
valuation allowance was necessary for these deferred tax assets.

Intangible Assets

         Amounts assigned to intangible assets are amortized over the respective
estimated useful lives using the straight-line method as follows:
<TABLE>
<CAPTION>
         <S>                                            <C>

         Noncompete agreements  --  7 years             Goodwill --  25 years (prior to fiscal 2002)
</TABLE>

         Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for Impairment of Long-Lived  Assets and  Long-Lived  Assets to be Disposed of,"
requires that  long-lived  assets be reviewed for impairment  whenever events or
changes  in  circumstances  indicate  that the  carrying  amount of the asset in
question may not be recoverable.  The Company groups  long-lived assets by store
location for  purposes of assessing  the  recoverability  of carrying  value and
measuring potential impairment.

         The Company adopted SFAS No. 142,  Goodwill and Other Intangible Assets
("SFAS  142")  effective  October  1, 2001.  SFAS 142  provides  that  separable
intangible  assets that have finite  lives will  continue to be  amortized  over
their useful lives and that goodwill and indefinite-lived intangible assets will
no longer be amortized  but will be reviewed for  impairment  annually,  or more
frequently if impairment indicators arise. The Company operates as one reporting
unit for goodwill impairment testing.

                                      F-12

<PAGE>


2. Summary of Significant Accounting Policies (continued)

Pre-opening Costs

         Pre-opening  costs  related  to new store  locations  are  expensed  as
incurred.

Significant Suppliers

         The Company has  historically  purchased  substantially  all of its new
outboard motors for use on its Travis Edition boat packages from a limited group
of  manufacturers.  During the 2002,  2001 and 2000 fiscal  years this  included
outboard motors purchased from American Suzuki Motor Corporation  (fiscal 2002),
Brunswick Corporation (fiscal 2000-2002) and Outboard Marine Corporation (fiscal
2000).

         Approximately   36%,  42%  and  33%  of  the  Company's  net  purchases
(including  product  purchased in  acquisitions)  in fiscal 2002, 2001 and 2000,
respectively, were manufactured by boat suppliers owned by Genmar Holdings.

Advertising Costs

         Advertising  costs are  expensed  as  incurred  and were  approximately
$1,435,000,  $2,295,000 and $2,618,000  during the fiscal years ended  September
30, 2002, 2001 and 2000, respectively.

Reclassifications

         Certain  amounts in the 2001 and 2000  financial  statements  have been
reclassified  to  conform  with  the   classifications  in  the  2002  financial
statements  with  no  effect  on  previously   reported  net   income/(loss)  or
stockholders' equity.


                                      F-13
<PAGE>


3.  Earnings/(Loss) Per Share
<TABLE>
<CAPTION>

                                                                                  Year Ended September 30,
                                                                                2002         2001        2000
                                                                             ------------------------------------
                                                                          (in  thousands,  except  per  share data)
<S>                                                                          <C>           <C>            <C>
Numerator:
     Net income/(loss) before cumulative effect of accounting
       change and extraordinary item                                         $(10,134)     $ (3,281)      $  897
       Cumulative effect of accounting change, net of tax                      (6,528)          --          --
       Extraordinary loss on extinguishment of debt, net of tax                  (130)          --          --
                                                                             ------------ ----------- -----------
       Net income/(loss)                                                     $(16,792)     $ (3,281)      $  897
                                                                             ============ =========== ===========
       Preferred stock dividends                                                 (187)          --          --
                                                                             ------------ ----------- -----------
       Net income/(loss) attributable to common shareholders                 $(16,979)     $ (3,281)      $  897
                                                                             ============ =========== ===========

Denominator:
     Denominator - basic earnings/(loss) per share - weighted
        average shares                                                       $  4,345      $  4,375       $4,403
Effect of dilutive securities:
     Employee stock options                                                           --          --          43

     Denominator for diluted earnings/(loss) per share - adjusted
                                                                             ------------ ----------- -----------
     weighted average shares and assumed conversions                            4,345         4,375        4,446

Basic and Diluted earnings/(loss) per share before cumulative effect
       of accounting change and extraordinary item                           $  (2.33)      $ (.75)       $  .20
       Cumulative effect of accounting change, net of tax                       (1.50)          --          --
       Extraordinary loss on extinguishment of debt, net of tax                  (.03)          --          --
        Preferred stock dividends                                                (.05)          --          --
                                                                              ----------- ----------- -----------
Basic and Diluted earnings/(loss) per share attributable to
Common shareholders                                                          $  (3.91)      $ (.75)       $  .20
                                                                              =========== =========== ===========
</TABLE>


         Options to purchase the following  shares of common stock were excluded
from the computation of diluted EPS for the years ended September 30, 2002, 2001
and 2000 as such shares would be  anti-dilutive  since the exercise price of the
options was greater than the average market price of the Company's  common stock
during the respective fiscal year.

<TABLE>
<CAPTION>

       Fiscal Year         Excluded Options            Weighted Average       Weighted Average Contractual
                                                       Exercises Prices              Life in Years
-------------------------- ------------------------ ------------------------ -------------------------------
          <S>                      <C>                      <C>                           <C>

          2002                     311,298                  $ 5.14                        6.09
          2001                     404,964                  $ 6.80                        6.67
          2000                     164,766                  $ 14.40                       6.93
</TABLE>

         The chart above also  excludes  the impact of 528,584  shares of common
stock subject to issuance  pursuant to $1.3 million in  outstanding  convertible
subordinated  notes and  3,252,826  shares of common  stock  subject to issuance
pursuant  to the 80,000  shares of Series A  preferred  stock as the  conversion
price exceeds the Company's average market price of its common stock.


                                      F-14
<PAGE>


4.  Goodwill and Other Intangibles

         The Company adopted SFAS No. 142,  Goodwill and Other Intangible Assets
("SFAS  142")  effective  October  1, 2001.  SFAS 142  provides  that  separable
intangible  assets that have finite  lives will  continue to be  amortized  over
their useful lives and that goodwill and indefinite-lived intangible assets will
no longer be amortized  but will be reviewed for  impairment  annually,  or more
frequently if impairment indicators arise. The Company operates as one reporting
unit for goodwill impairment testing.

         In accordance with SFAS 142, the Company completed goodwill  impairment
tests as required.  The tests involved the use of estimates  related to the fair
market value of the business with which the goodwill is associated.  As a result
of the transitional  impairment test,  which  considered  factors  including the
significant  negative industry and economic trends impacting current  operations
and our  market  capitalization  relative  to our net book  value,  the  Company
recorded a non-cash,  after tax charge of $6.5  million  (charge of $8.8 million
less tax effect of $2.3 million) as a cumulative  effect of accounting change as
of October 1, 2001. The non-cash,  after tax charge  resulted in the elimination
of the entire goodwill balance from the Company's balance sheet.


         Net  income/(loss) and  earnings/(loss)  per share for the fiscal years
ended September 30, 2002, 2001 and 2000 adjusted to exclude amortization expense
(net of income taxes) is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                        Fiscal Year  Ended

                                                                     September 30,
                                                                2002          2001           2000
                                                             -----------    ----------     ----------
<S>                                                           <C>           <C>             <C>


Net income/(loss)......................................       $ (16,792)    $ (3,281)       $   897
Cumulative effect of accounting change.................            6,528          --             --
Goodwill amortization, net of tax......................               --          259           242
                                                             -----------    ----------     ----------
Adjusted net income/(loss).............................       $ (10,264)    $  (3,022)      $ 1,139
                                                             ===========    ==========     ==========

Net income/(loss) before extraordinary item as
reported...............................................       $ (16,922)    $  (3,281)      $   897
Cumulative effect of accounting change.................            6,528          --             --
Goodwill amortization, net of tax......................               --           259          242
                                                             -----------    ----------     ----------
Adjusted net income/(loss).............................       $ (10,394)    $  (3,022)      $ 1,139
                                                             ===========    ==========     ==========


Earnings/(loss) per share Basic and Diluted:
 Reported net income/(loss) attributable to common.....       $   (3.91)    $   (0.75)      $  0.20
      Cumulative effect of accounting change...........             1.50          --             --
      Goodwill amortization, net of tax................              --           0.06         0.05
                                                             -----------    ----------     ----------
 Adjusted net income/(loss) attributable to common
shareholders before cumulative effect of accounting
change and extraordinary item..........................       $   (2.41)      $ (0.69)      $  0.25
                                                             ===========    ==========     ==========

</TABLE>

         In  addition,   the  intangible   asset   established  for  non-compete
agreements  remains  subject to  amortization  in accordance  with SFAS 141. The
gross carrying amount related to non-compete agreements was $3,229,000 while the
associated  accumulated  amortization  balance at September  30, 2002,  2001 and
2000, respectively, was $2,061,000, $1,603,000 and $1,162,000, respectively. The
aggregate  amortization  expense was  $464,000,  $410,000  and  $395,000 for the
fiscal years ended  September 30, 2002, 2001 and 2000,  respectively.  Estimated
amortization expense for the next five fiscal years is approximately $415,000 in
2003; $385,000 in 2004; $235,000 in 2005, $118,000 in 2006 and $0 in 2007.


                                      F-15
<PAGE>




5.  Notes Payable and Other Short-Term Obligations

         The Company  finances  substantially  all of its  inventory and working
capital requirements  pursuant to inventory borrowing agreements entered into in
January 2000 with two commercial finance companies.  The agreements,  which have
maturity  dates of April 30, 2003 (see Note 14 - "Subsequent  Events"),  contain
substantially similar terms and financial ratio based covenant requirements. The
maximum aggregate borrowing availability as of September 30, 2002 was limited to
a maximum  credit  limit of $70  million at various  prime  based or LIBOR based
interest rates  (varying from 4.75% to 4.82% at September 30, 2002).  Borrowings
under the agreements  are pursuant to a borrowing  base, or specific floor plan,
advancing formula and are used primarily to finance inventory  purchases and for
general  working capital  requirements.  Substantially  all inventory,  accounts
receivable,  furniture,  fixtures, equipment and intangible assets collateralize
these  agreements.  Pursuant to certain waivers and  restructuring  of covenants
under these  inventory  borrowing  agreements  during the 2002 fiscal year,  the
Company also granted junior liens on its real estate holdings as collateral.

         The terms of the inventory  borrowing  agreements also provide for: (i)
fees for administrative  monitoring,  (ii) fees for unused portions of available
credit, and (iii) pre-payment fees in the event of the Company's  termination of
these agreements prior to their stated maturity dates. The borrowing  agreements
also contain  various  loan  covenants  and  borrowing  restrictions,  including
minimum  ratios and a  substantial  limitation  as to  acquisitions,  payment of
common stock dividends or significant  repurchases of the Company's common stock
without prior consent.

         Various  manufacturers  provide the Company interest expense assistance
under the  borrowing  agreements  in order to  subsidize  the  carrying  cost of
inventory.  Accordingly,  no interest expense is recorded during portions of the
year (August through May) for certain borrowings under these arrangements.

         As of  September  30,  2002,  the Company was in  violation  of certain
financial,  reporting and payment covenants pursuant to the inventory  borrowing
agreements. Effective December 30 and 31, 2002, the Company entered into amended
and restated  inventory  borrowing  agreements with these two commercial finance
companies which extended the maturity date of the respective agreements to April
30, 2003 (see Note 14 - "Subsequent Events"). The amended and restated inventory
borrowing  agreements  also waived  financial,  reporting  and payment  defaults
through the date of the agreement and established  new financial  covenant ratio
levels based upon the  Company's  current and  anticipated  performance  through
April 30, 2003. In connection with the amended and restated inventory  borrowing
agreements, the Company also entered into an agreement with these two commercial
finance  companies  and a significant  shareholder  which would provide up to an
additional  $1.5 million of conditional  funding.  Management  believes that the
financial covenants  established in the amended and restated inventory borrowing
agreements  will be achieved  based upon the Company's  current and  anticipated
performance  through  April 30,  2003.  Due to the  Company's  need for  ongoing
inventory  financing to support working capital and operations,  management will
continue  to work  towards a  long-term  extension  of the  inventory  borrowing
agreements  beyond the  maturity  date of April 30, 2003.  However,  there is no
assurance that  negotiations  with these two commercial  finance  companies will
result in an extension of the current inventory  borrowing  agreements or in new
financing arrangements.

         The Company was also out of compliance  with certain  provisions of its
real estate loan  agreements as of September 30, 2002. The  provisions  included
violation  of a  minimum  cash  flow  ratio  and a  minimum  tangible  net worth
agreement. The inability of the Company to (i) meet financial covenants, (ii) to
extend or renew these  borrowing  agreements or real estate loans upon maturity,
or (iii) to obtain acceptable  alternative  financing would significantly impact
the  Company's  ability to  purchase  inventory  and conduct  operations  at its
current or intended level.





                                      F-16
<PAGE>



5. Notes Payable and Other Short-Term Obligations (continued)

The weighted average  interest rate on the borrowing  arrangements and the floor
plan payables  outstanding  as of September 30, 2002 and 2001 was 4.9% and 6.8%,
respectively.

         Notes payable and other short-term obligations consist of the following
(in thousands):
<TABLE>
<CAPTION>

                                                                                  September 30,
                                                                                 2002        2001
                                                                              ----------- -----------
<S>                                                                             <C>         <C>

Notes payable to commercial  finance  companies  under  revolving
and floor plan line of credit agreements with interest ranging
from 0% to the rate of 4.82%  with a stated maturity date
of April 30, 2003.                                                              $ 50,949    $ 58,874

Notes payable (see summary data below)                                            11,986      11,579

                                                                              ----------- -----------
Total notes payable and other short-term obligations                            $ 62,935    $ 70,453
                                                                              ----------- -----------
Less revolving and floor plan credit agreements                                 (50,949)    (58,874)
Less real estate notes with balloon payments                                       (529)     (1,161)
Less real estate notes classified as current                                     (6,436)         ---
Less current portion of notes payable                                              (496)     (1,043)
                                                                              ----------- -----------
                                                                                (58,410)    (61,078)
                                                                              ----------- -----------
Total notes payable, less current portion                                       $ 4,525     $  9,375
                                                                              =========== ===========

Notes Payable Summary Data
Mortgage notes payable to various banks,  organizations and individuals
secured by deeds of trust  with  interest  ranging  from 6.0% to 8.85%,
due in  monthly principal and interest installments ranging from
$1,899 to $39,745, maturing beginning in January 2003.                          $ 10,160    $ 10,691

Notes payable to various banks,  finance companies and a corporation
secured by certain  vehicles,  equipment and leasehold  improvements
with interest ranging from 3.99% to 11.0%, due in monthly principal and
interest  installments ranging from $209 to $3,106, maturing beginning
in June 2004.                                                                        304         196

Acquisition  related notes payable to individuals and corporations with
interest ranging from 7.5% to 8.75%, due in monthly  principal and interest
installments ranging from $2,587 to $12,770, maturing beginning in November
2002.  These notes are unsecured.                                                    222         692

Convertible notes payable in varying amounts to certain officers,
directors and other  individuals with interest rates of 10.75%,  fixed.
Payments are interest only  until  maturity  in  December  2004.   The
notes  are   subordinated   in substantially  all respects to the commercial
finance  companies  providing the Company's revolving and floor plan financing.
At any time prior to maturity, the notes may be converted into the Company's
common stock at a conversion price of $2.4594 per share.                           1,300         ---
                                                                              ----------- -----------

Total notes payable                                                             $ 11,986    $ 11,579
                                                                              =========== ===========

</TABLE>


                                      F-17
<PAGE>


5. Notes Payable and Other Short-Term Obligations (continued)

         At  September  30,  2002  and  2001,   approximately  89.6%  and  91.4%
respectively  of the Company's  notes payable and other  short-term  obligations
bear interest at variable rates,  generally tied to a reference rate such as the
prime rate of interest of certain banks. Accordingly,  the Company believes that
the  carrying  amount of the notes  payables  and other  short term  obligations
approximates their fair value.

         Interest paid approximates interest expense during 2002, 2001 and 2000.

         Aggregate annual maturities  required on notes payable at September 30,
2002 are as follows (in thousands):

Year Ending September 30
---------------------------------------
2003                                              $7,460 (1)
2004                                               1,332
2005                                               1,601
2006                                                 227
2007                                                 482
Thereafter                                           884

                                        -------------------
                                                $11,986
                                        ===================

(1)Includes  $6.4 million in real estate  loans with a single  lender which have
been  re-classified as current for financial  reporting since the Company is out
of compliance  with financial loan covenants and the loans are subject to demand
for repayment prior to their originally scheduled dates of maturity.

6.  Extinguishment of Debt

         The Company recorded an extraordinary loss of $130,000, net of taxes of
$76,000  on the  June  10,  2002  repayment  of  the  $3.0  million  convertible
subordinated  promissory note  originally  issued on December 14, 2001 (see Note
9). The  extraordinary  loss was the result of a 5%  prepayment  fee paid on the
outstanding  principal balance of $3.0 million,  plus the expensing of the legal
and consulting fees that were attributable to the $3.0 million note.

7.  Leases

         The Company leases various retail facilities, dock space, vehicles, and
computer  software  under  third  party  operating  leases.   Rent  expense  was
$3,441,000 in 2002, $3,841,000 in 2001 and $3,524,000 in 2000.

         Future  minimum  payments  under  non-cancelable  operating  leases  at
September 30, 2002 are as follows for each of the years ending  September 30 (in
thousands):

                  Year Ending September 30
                  -------------------------------
                  2003                                           $3,009
                  2004                                            2,353
                  2005                                            1,663
                  2006                                            1,232
                  2007                                              343
                  Thereafter                                        277


                                      F-18
<PAGE>

         Generally,  the leases for facilities  provide for renewals for various
periods at stipulated rates. Additionally, leases on retail facilities generally
are  "triple-net"  with the  Company  being  responsible  for  payment of taxes,
insurance and repair expenses.

8.  Income Taxes


Significant components of the Company's provision (benefit) for income taxes are
as follows (in thousands):


                                                    Year Ended December 31
                                              ----------------------------------
                                                 2002         2001        2000
                                              ----------------------------------

Current expense/(benefit):
  Federal                                     $  (1,087)    $  (1,100)   $  507
  State                                             (96)         (129)       79
                                              ----------------------------------
Total current expense/(benefit)                  (1,183)       (1,229)      586
                                              ----------------------------------
Deferred expense/(benefit)
  Federal                                           547          (320)     (19)
  State                                              48              -        -
                                              ----------------------------------
Total deferred expense/(benefit)                    595          (320)     (19)
                                              ----------------------------------
Total provision/(benefit) for income taxes    $   (588)     $   (1,549)  $ 567
                                              ==================================


The  Company's  provision for income taxes differs from the expected tax expense
(benefit)  amount computed by applying the statutory  federal income tax rate of
34% to income before taxes due to the following:

                                        Year Ended September 30,
                                     -------------------------------
                                     2002        2001           2000
                                    ---------------------------------

Federal statutory rate              $ (5,909)   $(1,642)      $   498
State taxes, net of federal benefit     (454)      (129)           79
Other                                  1,176        222           (10)
Valuation allowance                    4,599          -             -
                                    ----------------------------------
                                    $   (588)   $(1,549)      $   567


Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred taxes are as follows (in thousands):

                                                        September 30,
                                                     2002          2001
                                                ---------------------------
Deferred tax assets:
  Book over tax depreciation/amortization        $  3,582      $   488
  Reserves and allowances                           1,017          107
                                                ---------------------------
Net deferred tax assets                             4,599          595
Valuation allowance for net deferred tax assets    (4,599)           -
                                                ---------------------------
Net deferred taxes                               $     -       $   595
                                                ===========================


The Company has established a valuation  allowance equal to the net deferred tax
asset due to  uncertainties  regarding  the  realization  of deferred tax assets
against   future  taxable   income.   The  valuation   allowance   increased  by
approximately $4.6 million during the year ended September 30, 2002.

Income taxes paid/(received) were approximately ($1,500,000),  ($1,200,000), and
$1,850,000  in the fiscal  years  ended  September  30,  2002,  2001,  and 2000,
respectively. The Company believes that the current income tax benefit component
of its 2002 provision is recoverable  from the carryback of net operating losses
against federal taxable income in prior years.

                                      F-19
<PAGE>



9.   Stockholders' Equity

CONVERTIBLE SUBORDINATED NOTES

         Effective   December  14,   2001,   the  Company   issued   Convertible
Subordinated  Notes (the "Notes") in an aggregate amount of $4,300,000 issued in
the form of a $3.0 million Note plus other Notes in the aggregate amount of $1.3
million. The Notes are unsecured with a term of 36 months and have rates ranging
from prime + 2%, adjusted quarterly to 10.75%, fixed. The principal and interest
amounts payable pursuant to the Notes are  subordinated,  in  substantially  all
respects,  to the Company's  borrowing  agreements  with the commercial  finance
companies providing inventory and working capital financing for the Company. The
Notes are redeemable by the Company, and if not redeemed the principal amount of
the Notes may be converted by the holders into the  Company's  common stock at a
conversion price of approximately $2.46 per share.

         On June 10, 2002, the Company,  prepaid in full, the principal balance,
accrued  interest and the required 5%  prepayment  fee to the holder of the $3.0
million Note.  The proceeds for repayment of the $3.0 million Note were received
pursuant to the preferred stock transaction described below.

SERIES A PREFERRED STOCK

         On June 13, 2002,  the Company  entered  into an  agreement  with TMRC,
L.L.P.  ("Tracker"),  a wholly-owned  subsidiary of Tracker Marine,  L.L.C.,  to
issue Tracker 50,000 shares of newly created 6% Series A Cumulative  Convertible
Preferred Stock (the "Preferred Stock") in the Company. The Company also granted
Tracker a warrant (the  "Warrant") to acquire  30,000  additional  shares of the
Preferred Stock. The issue price of the Preferred Stock was $100 per share. Each
share may be converted into the Company's  common stock at a conversion price of
approximately $2.46 per share.

         Prior to June 30, 2002,  Tracker funded  $5,000,000 to purchase  50,000
shares of the Preferred Stock.  Tracker also exercised the Warrant and purchased
30,000  shares  issued  thereto for an  additional  $3,000,000.  Pursuant to the
requirements of the Warrant,  the proceeds from the exercise ($3.0 million) were
used to pay off the $3.0 million Note described above.

INCENTIVE STOCK OPTION PLAN

         The Company has an  Incentive  Stock  Option  Plan (the  "Plan")  which
originally  provided for the issuance of up to 200,000  shares of the  Company's
common  stock.  The Plan provides for the granting of options  (incentive  stock
options or non-statutory),  stock  appreciation  rights and restricted shares to
officers,  key  employees,  non-employee  directors and  consultants to purchase
shares of the Company's common stock. No stock appreciation rights or restricted
shares have been issued under the Plan.  Options vest generally over a five year
period and expire in ten years from the date of grant.

         In  March  1998,  the  Company  amended  the Plan to  provide  that the
aggregate  number of shares of common  stock  that may be issued or  transferred
pursuant to awards  under the Plan shall  increase  automatically  effective  on
April 1 of each calendar year for the duration of the Plan so that the aggregate
number of shares of common stock that may be issued or  transferred  pursuant to
awards  under the Plan is equal to 10% of the  total  number of shares of common
stock issued and outstanding on April 1 of that year.

         Notwithstanding  this  provision,  the amendment  provides that (i) the
aggregate  number of shares of common  stock  that may be issued or  transferred
pursuant  to awards  under the Plan  shall not be reduced in the event the total
number of shares  issued  and  outstanding  decreases  in any year,  or (ii) the
aggregate  number of shares of common  stock  that may be issued or  transferred
pursuant to awards  under the Plan shall not exceed  1,000,000  shares of common
stock over the life of the Plan.

                                      F-20
<PAGE>


9. Stockholders' Equity (continued)

Total option activity for the years ended September 30, 2002, 2001 and 2000:
<TABLE>
<CAPTION>

                                         Number of Shares     Range of Exercise Prices   Wtd Avg Exercise Price
                                         -------------------- -------------------------- ---------------------------
<S>                                                 <C>              <C>                                     <C>


Outstanding at September 30, 1999                    319,281             $5.25 - $22.50                      $11.84
                                         --------------------
     Granted                                         161,900             $3.1825-$9.375                       $6.22
     Exercised                                       (2,000)                      $9.00                       $9.00
     Forfeited                                      (88,050)             $4.00 - $22.50                      $13.19

Outstanding at September 30, 2000                    391,131           $3.8125 - $22.50                       $9.20
                                         --------------------
     Granted                                          82,333              $2.70 - $4.00                       $3.07
     Exercised                                           ---                        ---                         ---
     Forfeited                                      (68,500)             $4.00 - $22.50                      $16.00

Outstanding at September 30, 2001                    404,964            $2.70 - $22.375                       $6.80
                                         --------------------
     Granted                                          40,000              $2.45 - $2.50                       $2.49
     Exercised                                           ---                        ---                         ---
     Forfeited                                     (133,666)             $2.70 - $20.00                       $9.38
                                         --------------------
Outstanding at September 30, 2002                    311,298            $2.45 - $22.375                       $5.14
                                         ====================

                                         --------------------
Exercisable at September 30, 2002                    252,698            $2.50 - $22.375                       $4.16
                                         ====================

Options available for grant at
September 30, 2002                                   123,355
                                          -------------------
Common stock reserved for issuance
At September 30, 2002                                434,653
                                          -------------------
</TABLE>

         The weighted-average remaining contractual life of options at September
30, 2002 and 2001 is approximately 6.09 years and 6.67 years, respectively.


                                      F-21
<PAGE>




9. Stockholders' Equity (continued)

Options outstanding at September 30, 2002, are comprised of the following:
<TABLE>
<CAPTION>

                     Outstanding                                                     Exercisable
------------------------------------------------------------------------- -----------------------------------
                                                            Weighted
                         Weighted         Weighted          Average
 Range of Exercise       Average          Average         Contractual         Weighted
       Prices            Options      Exercise Prices    Life in Years    Average Options   Exercise Price
------------------------------------------------------------------------- -----------------------------------
    <S>                      <C>                <C>                 <C>            <C>                <C>

       $2.45 - $4.00          91,333             $2.82              8.94            72,333             $2.77
       $5.25 - $5.75         195,865             $5.47              4.81           159,865             $5.41
     $8.875 - $10.50          19,600             $9.44              5.75            16,600             $9.54
    $15.00 - $22.375           4,500            $19.10              5.52             3,900            $18.78
------------------------------------------------------------------------- -----------------------------------

     $2.45 - $22.375         311,298             $5.14              6.09           252,698             $4.16
</TABLE>

         The Company has elected to follow  Accounting  Principles Board No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related interpretations
in accounting for its employee stock options  because,  as discussed  below, the
alternative  fair value  accounting  provided for under FASB  Statement No. 123,
"Accounting  for  Stock-Based  Compensation"  (Statement  123),  requires use of
option  valuation  models that were not  developed  for use in valuing  employee
stock  options.  Under  APB 25,  because  the  exercise  price of the  Company's
employee stock options  equals the market price of the  underlying  stock on the
date of grant, no compensation expense is recognized.

         The  assumptions  used  by the  Company  to  determine  the  pro  forma
information  regarding net income/(loss) and  earnings/(loss) per share required
by Statement No. 123 are as follows using the Black-Scholes model:

                                             Year Ended September 30,
                                         2002          2001          2000
                                    --------------------------------------------

Risk-free interest rate                      3.00%         3.00%          6.50%
Dividend yield                                  0%            0%             0%
Expected life                              5 years       5 years        5 years
Volatility                                   67.7%         65.2%          64.5%




                                      F-22
<PAGE>






9. Stockholders' Equity (continued)

The pro forma amounts under Statement No. 123 are as follows:
<TABLE>
<CAPTION>

                                                                          Year Ended September 30,
                                                                       2002        2001         2000
                                                                    -------------------------------------
<S>                                                                  <C>           <C>            <C>

Net income/(loss) attributable to common shareholders as
Reported (000's)                                                     $ (16,979)    $ (3,281)      $ 897
Pro forma net income/loss attributable to common
Shareholders (000's)                                                 $ (17,294)    $ (3,460)      $ 738
Diluted EPS - as reported                                            $   (3.91)    $  (0.75)      $ 0.20
Pro forma - Diluted EPS                                              $   (3.98)    $  (0.79)      $ 0.17

</TABLE>

         The compensation  expense associated with the fair value of the options
calculated  in  2002,  2001 and 2000 is not  necessarily  representative  of the
potential effects on reported net income/(loss) in future years.

10.  Common Stock Repurchase Program

         During  fiscal 2000,  the Company  established  a program to repurchase
outstanding shares of its common stock in the open market from time to time. The
Company has made  purchases of its common stock pursuant to this program and has
retired all such common shares  repurchased.  Repurchased shares of common stock
consisted of the following:

                                               Year Ended September 30,
                                            2002         2001        2000
                                        ---------------------------------------

Shares Repurchased (000's)                         29          40           15
Total Purchase Price (000's)                      $56        $123          $59
                                        ---------------------------------------
Average Price per Share                         $1.90       $3.07        $3.92
                                        =======================================


11.  Commitments and Contingencies

         The Company is currently  involved in several matters regarding pending
or threatened  litigation in the normal course of business.  Management does not
expect the  ultimate  resolution  of these  matters  to have a material  adverse
effect on the Company's consolidated financial statements.

12.  Benefit Plan

         The  Company has a 401(k)  retirement  plan which is  available  to all
full-time  employees.  The  Company  may,  in  its  discretion,   make  matching
contributions into the plan. The Company did not make matching  contributions to
the plan in the years ended  September 30, 2002, 2001 and 2000 and plan expenses
during the same period were not significant.


                                      F-23

<PAGE>



13.  New Accounting Pronouncements

         In August  2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
Retirement  Obligations".  SFAS No. 143  establishes  accounting  standards  for
recognition  and measurement of a liability for an asset  retirement  obligation
and the  associated  asset  retirement  cost.  SFAS  No.  143 is  effective  for
financial  statements  relating to fiscal years  beginning  after June 15, 2002.
There was no material impact from adoption of this statement on October 1, 2002.

         In October  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets".  SFAS No. 144  addresses  the
financial accounting and reporting for the impairment of long-lived assets. SFAS
144 is effective  for  financial  statements  issued for fiscal years  beginning
after  December 15,  2001.  There was no material  impact from  adoption of this
statement on October 1, 2002.

         In  April  2002,  the  Financial   Accounting  Standards  Board  issued
Statement of  Financial  Accounting  Standards  No. 145,  Rescission  of SFAS 4,
"Reporting Gains and Losses from Extinguishment of Debt", Rescission of SFAS 44,
"Accounting  for Intangible  Assets of Motor  Carriers",  Rescission of SFAS 64,
"Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements", Amendment of
SFAS 13, "Accounting for Leases", and Technical Corrections (SFAS 145). SFAS 145
also  amends  other  existing  authoritative   pronouncements  to  make  various
technical  corrections,  clarify meanings, or describe their applicability under
changed  conditions.  We do not expect SFAS 145 to have a material effect on our
financial  statements except for the reclassification of the extraordinary items
recorded in fiscal 2002 to operating expenses.

         In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or  Disposal  Activities"  (SFAS 146).  SFAS 146  addresses  the  financial
accounting  and  reporting  for the  costs  associated  with  exit  or  disposal
activities.  SFAS 146 is  effective  for exit or  disposal  activities  that are
initiated  after December 31, 2002. We do not expect SFAS 146 to have a material
effect on our financial statements.

         In  November  2002,  the  Emerging  Issues  Task  Force  (EITF)  of the
Financial  Accounting  Standards  Board  reached a consensus on issue No. 02-16,
"Accounting by a Reseller for Cash Consideration  Received from a Vendor".  EITF
02-16  establishes the accounting  standards for the recognition and measurement
of cash  consideration  paid by a vendor to a reseller.  EITF 02-16 is effective
for interim period financial  statements beginning after December 15, 2002, with
early adoption  permitted.  We have not yet determined the impact,  if any, EITF
02-16 will have on our financial statements.


14.       Subsequent Events

     Effective on December 30 and 31, 2002, the Company entered into Amended and
Restated  borrowing  agreements  (the  "Amended  Agreements")  with  its  senior
inventory  lenders,  Transamerica  Commercial Finance  Corporation  ("TCFC") and
General Electric Commercial  Distribution Finance Corporation ("GE"),  (formerly
known as Deutsche Financial Services Corporation).

     The Amended  Agreements  included,  but were not limited to, the  following
components:

1.   Extended the maturity  date of the  respective  borrowing  agreements  from
     January 31, 2003 to April 30, 2003.
2.   Waived certain financial,  reporting and payment defaults as of the date of
     the  Amended  Agreements.   The  financial  default  waivers  included  the
     re-establishment  and modification of new financial ratio levels based upon
     the Company's  current and anticipated  financial  performance  through the
     maturity date of April 30, 2003. The waived reporting requirements provided
     the Company  time to finalize  its audit report and report on Form 10-K for
     the fiscal year ended September 30, 2002. The waived payment  defaults were
     the result of the Company's  failure to repay certain amounts  scheduled to
     be paid according to the terms of the borrowing  agreements,  including the
     timely  payment of amounts for sold  inventory  and  scheduled  amounts for
     certain

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<PAGE>

14.      Subsequent Events (continued)

     matured inventory. The waivers of the payment defaults were accommodated by
     the lenders revising the terms under the Amended  Agreements to temporarily
     advance certain funds to the Company on inventory assets (primarily certain
     new and used aged  inventories)  that  previously  were not eligible assets
     upon  which the  Company  could  borrow  funds.  Repayment  of the  amounts
     resulting from the payment default is required upon the earlier of, (i) the
     sale of such inventory providing the basis for the temporary advance,  (ii)
     the  receipt by the Company of its  projected  calendar  year 2002  federal
     income tax refund, or (iii) April 30, 2003.

3.   An  "Intercreditor  Agreement" by and among TCFC, GE and TMRC,  L.L.P. (the
     owner of the Company's  outstanding  shares of Series A Preferred Stock) to
     each,  individually,  provide the Company up to an  additional  $500,000 of
     conditional  funding  (collectively  $1.5 million).  The requirement of any
     party to advance funds under this agreement is at each  participant's  sole
     and individual discretion.  Accordingly,  the Company is not guaranteed any
     advances;  or to the extent  advances  are made;  any future or  additional
     advances.  Funds may only be used for the general working capital  expenses
     of the Company.  As of January 17, 2003, the Company has received  $415,000
     from  each of  TCFC,  GE and  TMRC,  L.L.P.  (collectively  $1,245,000)  as
     advances pursuant to this agreement.

     Effective as of January 7, 2003,  pursuant to the Agreement discussed below
with TMRC,  L.L.P.  the Company  cancelled stock options  previously held by the
following individuals:  Mark T. Walton,  President and Chairman -- 50,267 shares
Ronnie L.  Spradling,  Executive  Vice  President  -- 76,933  shares  Michael B.
Perrine,  Chief  Financial  Officer,  Secretary  and  Treasurer -- 76,665 shares
Richard  Birnbaum,  Director  - 33,333  shares The total of these  shares  would
reduce those shares reflected in Note 9 "Stockholders' Equity" above.

     Effective as of January 7, 2003 the Company;  certain of its management and
certain  shareholders or other "insiders"  entered into various  agreements with
TMRC, L.L.P. The agreements were a requirement of, and an integral component of,
TCFC and GE granting the Amended and Restated Borrowing  Agreements as discussed
above and the Intercreditor  Agreement allowing for the Company to conditionally
receive the $1.5 million in additional funding subject to each lender's sole and
individual discretion. The agreements entered into include, but were not limited
to, the following:

1.   Loan and Security  Agreement,  dated as of January 7, 2003,  by and between
     Travis Boats & Motors, Inc., and TMRC, L.L.P.
2.   Term  Sheet,  dated as of January  7, 2003 by and  between  Travis  Boats &
     Motors, Inc., and TMRC, L.L.P. granting among other items, the following:
     (i)  TMRC,  L.L.P.  the right to form an Operating  Committee  comprised of
          members  designated by TMRC,  L.L.P. to oversee the overall  financial
          operations of the Company and to review weekly cash flows to determine
          whether  additional  borrowings are necessary  under the agreements to
          provide up to the $1.5  million in  conditional  fundings as discussed
          above.
     (ii) TMRC,  L.L.P.  the right to designate a total of four of seven members
          of the  Company's  Board of  Directors.  Pursuant  to the terms of the
          Series A Preferred Stock held by TMRC, L.L.P., they currently have two
          representatives  on the Board of Directors  and as of the date of this
          report have not yet designated two additional representatives.
3.   Various agreements with certain (i) "inside"  shareholders and (ii) holders
     of the Company's subordinated convertible notes. These agreements, combined
     with the  cancellation  of stock  options as discussed  above,  gives TMRC,
     L.L.P.  voting control of the Company by providing them the ability to vote
     approximately 53% or the equivalent of 4,082,534 shares on a fully-diluted,
     as-converted  basis.  Prior to these agreements,  TMRC, L.L.P  beneficially
     owned  approximately  43% or the  equivalent  of  3,252,825  shares  of the
     Company's  common stock on a  fully-diluted,  as-converted  basis. As such,
     subsequent  to January 7,  2003,  TMRC,  L.L.P.  effectively  controls  the
     Company.




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