<PAGE>
                                   FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
      (Mark One)
             [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1998

                                      OR

         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                       For the transition period from        to

                        Commission file number 0-19298

                              RIDDELL SPORTS INC.
            (Exact name of registrant as specified in its charter)

           Delaware                                   22-2890400
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                    Identification No.)

          50 East 42nd Street, Suite 1808, New York, New York 10017
         (Address of principal executive offices, including zip code)

      Registrant's telephone number, including area code: (212) 808-5400

          Securities registered pursuant to Section 12(b) of the Act:
    Title of each class                Name of each exchange on which registered
            [none]                                         [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 the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [x] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]


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The Registrant hereby incorporates by reference, in response to Part III, its
Proxy Statement for its 1999 Annual Meeting of Stockholders to be filed on or
before April 30, 1999 (except to the limited extent the rules and regulations
of the Commission authorize certain sections of such Proxy Statement not to be
incorporated herein by reference, as specifically indicated in such Proxy
Statement).

The aggregate market value of the 4,890,553 shares of outstanding voting stock
held by non-affiliates of the Registrant, computed by reference to the last
sale price of the Registrant's Common Stock on March 23, 1999, is $22,007,489.

As of March 23, 1999, the Registrant had 9,258,957 shares of Common Stock,
$.01 par value per share, outstanding.


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SPECIAL CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS

         This Form 10-K contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. Such forward-looking statements are principally contained in the
sections "Part I--Item 1--Business," and "Part 2--Item 7--Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
include, without limitation, the Company's expectations and estimates as to: the
Company's dance products and services, and its retail products businesses; the
Company's ability to reduce gross margin declines; the Company's ability to
successfully address Year 2000 issues and the costs and timing of the steps it
expects to take; the Company's future financial performance, including its
ability to generate sufficient cash flow and have funds available under
borrowings to satisfy its debt service and working capital requirements; the
introduction of new products, including but not limited to the introduction of
UMBRO(Registered) branded products; the Company's ability to substantially
realize the benefits from the restructuring and various cost savings programs
that it implemented in 1998; the Company's ability to consummate its proposed
joint venture with respect to the marketing and sale of its products on the
Internet and, if such joint venture is consummated, the success of such joint
venture; and the Company's business operations in general. In addition, in those
and other portions of this Form 10- K, the words "anticipates, "believes"
"estimates," "expects," "plans," "intends" and similar words or phrases, as they
relate to the Company and its subsidiaries, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks and
uncertainties and that could cause the actual results to differ materially from
those expressed in any forward-looking statements made by the Company. The
Company does not intend to update these forward-looking statements.


                                    PART I

Item 1.  BUSINESS

GENERAL

         Riddell Sports Inc. (the "Company") is a holding company that operates
through various wholly owned subsidiaries. The Company provides institutional
sporting goods and school spirit products and services to educational and
recreational organizations through its national, direct sales force. The Company
is the leading manufacturer and reconditioner of football protective equipment
and the leading supplier of products and services to the school spirit industry.
The Company also markets miniature and full-size helmets for collectors and
licenses the Riddell(Registered) and MacGregor(Registered) trademarks for use on
athletic footwear and apparel.

         The Company was organized in April 1988 to acquire substantially all
of the assets and businesses from two subsidiaries of MacGregor Sporting
Goods, Inc. The businesses consisted of manufacturing and selling Riddell
brand football helmets and other protective products and the licensing of the
MacGregor trademark.

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         The Company believes that the Riddell brand is one of the best known
and recognizable brand names in the sporting goods industry and that its
Riddell brand football equipment is worn by more than 80% of all professional
NFL players and by more than 50% of all high school and collegiate players.
The Company is also the largest participant in the highly fragmented athletic
equipment reconditioning industry and recently began marketing athletic team
uniforms for youth, high school and college participants.

         In June 1997, the Company acquired Varsity Spirit Corporation (the
"Acquisition"). As a result of the Acquisition, the Company became a leading
designer and marketer of innovative cheerleader and dance team uniforms and
accessories for sale to the school spirit industry, as well as a leading
operator of camps for high school and college cheerleader and dance teams. The
Company promotes its Varsity brand products and services, and the school
spirit industry in general, by organizing and producing various nationally
televised cheerleading and dance team championships and other special events.
The Company also designs and markets a line of costumes for private dance
studio participants and produces regional and national dance conventions and
competitions.

         In November 1998, as more fully described in "Recent Developments"
below, the Company acquired the right, for five years, to sell UMBRO(Registered)
brand soccer related products to soccer specialty stores and other customers in
the team channel of distribution in the United States, Puerto Rico and the U.S.
Virgin Islands.

         The Company's principal offices moved to 50 East 42nd Street, Suite
1808, New York, New York 10017 (212-808-5400) in January 1999.

RECENT DEVELOPMENTS

         In November of 1998 the Company entered into a license agreement (the
"UMBRO License") with Umbro International, Inc. ("UMBRO") pursuant to which
the Company acquired the right for five years to manufacture, market and sell
UMBRO branded soccer apparel, footwear, equipment, and accessories on an
exclusive basis to the team channel of distribution throughout the United
States, Puerto Rico and the U.S. Virgin Islands. UMBRO is a privately-owned
U.K. company and its brand is one of the world's leaders in soccer, with sales
of over $500 million. It is recognized among soccer players and fans as a
superior provider of soccer apparel, footwear and equipment. The UMBRO License
is royalty-free for 1999, and the Company is required to begin paying
royalties in the year 2000, at which time it is also required to meet annual
minimum sales figures. In the event that the Company fails to meet required
minimum sales levels subsequent to 1999 for two consecutive annual periods,
UMBRO has the right to terminate the UMBRO License. The UMBRO License, which
expires in November of 2003, may be extended for an additional five years at
the Company's option on or before August 15, 2003, provided that the Company
achieves sales of at least $15 million in any twelve month period commencing
January 1, 2002 through June 30, 2003.

         Simultaneously, and in connection with execution of the UMBRO
License, the Company purchased for approximately $3.4 million certain
inventory, promotional materials and other assets.

                                                    
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Included in the assets purchased was a 15% interest in U.S.I.S.L., Inc.
("USL") and an option to increase the interest to 20%. USL, which does
business as United Soccer Leagues, is a private company which promotes soccer
in the United States and operates several minor league professional and high
level amateur soccer leagues. While the investment in USL is not significant
to the Company's financial position or results of operations, the Company
believes that the relationship with USL could be beneficial in developing
demand for the Company's new line of soccer team products.

         At the same time that the Company entered into the UMBRO License,
UMBRO simultaneously entered into a license agreement with the Signal Apparel
Company, Inc. ("Signal") for Signal to sell soccer-style apparel, footwear,
equipment and accessories bearing the UMBRO brand name in retail stores
throughout the United States. In order to coordinate UMBRO brand marketing,
the Company also entered into an expense-sharing agreement with Signal (the
"Signal Agreement") in an effort to jointly develop the UMBRO brand name in
the United States and share certain expenses. The Company previously had a
relationship with Signal independent from UMBRO; Signal was a licensee of the
Company with respect to certain casual athletic wear bearing the logos of NFL
teams and the Company's Riddell trademark.

         In the fall of 1998, the Company also commenced the manufacture,
marketing and sale of athletic game uniforms for various team sports. The
Company is seeking to broaden its product line to become a supplier of
athletic game uniforms and equipment for a wide array of sports for both male
and female participants.

         In February of 1999, the Company entered into a letter of intent with
the Data Broadcasting Corporation and Dawntreader Fund I LLP to form a joint
venture to market the Company's brands and products on the Internet. The
proposed joint venture is also intended to provide timely and relevant content
for the consumer communities that feature the Company's Riddell, Varsity and
UMBRO brands. The proposed joint venture intends to develop and maintain
various Internet-based communications and information links to its customers
and is subject to the negotiation and completion of documentation acceptable
to each of the joint venture participants. It is presently intended that Data
Broadcasting and Dawntreader Fund I LLP will provide the initial funding
required by the Internet-related joint venture and will be responsible for
implementing and operating the venture. The Company will not have any funding
obligations and will own approximately 49% of the joint venture upon
formation. The joint venture company will initially have an exclusive,
royalty-free license for all of the Company's Internet activities and the
right to use all of the Company's current trademarks on the Internet.

         As part of the Company's long term strategy, the Company implemented
several cost-cutting and facility consolidation measures in 1998. The Company
presently believes that its cost cutting measures, combined with the savings
from facility consolidations and staff reductions are likely to result in
annual savings from $2 to $3 million when fully implemented. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
below.


                                                    
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         In November 1998, the Company's Common Stock commenced trading on the
American Stock Exchange. Prior to that time, the Company's Common Stock was
quoted on the Nasdaq National Market System.

INDUSTRY SEGMENTS

         The Company operates in the following three business segments:

         Institutional products and services: This segment markets products
and services primarily through the Company's direct sales force to
institutional customers such as schools, leagues, recreational groups and
other organizations for competitive and recreational sport and spirit
activities. Operations include the manufacture and sale of athletic products
(including football helmets, and UMBRO team soccer products), spirit products
(including cheerleading and dance uniforms and accessories) and athletic
equipment reconditioning. The segment also operates cheerleader and dance team
camps, clinics and special events. The Institutional products and services
segment is the largest segment of the Company, comprising 89% of consolidated
revenues for the year ended December 31, 1998.

         Retail products: This segment markets products through retailers in
the U.S. and internationally. Most of the products sold by this segment are
sports collectible products, such as authentic and replica football helmets
which bear licensed sports team logos. The segment's operations also include
sales of certain recreational football and other athletic products sold
through consumer product retailers and distributors.

         Trademark licensing: This segment consists of the licensing of the
Company's Riddell and MacGregor trademark rights to other entities for use in
marketing products such as athletic footwear and apparel.

         The Company's reportable segments are strategic business units that
differ and are managed separately because of the nature of their markets and
channels of distribution. The Institutional products and services segment
includes the Company's institutional athletic products business unit and its
spirit (cheerleading and dance) business unit. Information about these two
business units has been combined as the units have similar economic
characteristics and other common business traits.

         The organization of the segment information presented in this report
is different from the Company's prior reports. In prior years the Company has
reported segment information along industry lines. The segment information has
been reorganized to conform with the requirements of Financial Accounting
Standard No. 131 "Disclosures About Segments of an Enterprise and Related
Information" ("FAS 131") which the Company adopted for this report. FAS 131
requires segment information to be organized under a management approach to
reflect the way an enterprise manages its business.

         See Note 16 to the Consolidated Financial Statements for net
revenues, income or loss from operations and identifiable assets attributable
to each of the Company's segments for the last three years.

                                                    
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INSTITUTIONAL SEGMENT

General

         The Company's Institutional segment markets products and services to
schools, leagues, recreational groups and other organizations for competitive
and recreational activities. The segment's products and services are sold to
these institutional customers primarily through its direct sales force. These
products and services fall into two broad lines - athletic products and
services and spirit products and services. Most of the operations relating to
the segment's athletic products and services are conducted by the business
unit which comprised the Company's institutional operations prior to the
Acquisition and which does business principally under the Riddell name. While
operations related to spirit products and services are concentrated in the
segment's business unit acquired in the Acquisition, which continues to do
business under the Varsity name.

         The Company's institutional market consists of schools and numerous
youth sports organizations and leagues. The 1998 edition of Patterson's
American Education reported that there are approximately 12,900 junior high
schools, 20,200 high schools, and 6,000 accredited colleges and universities,
community colleges, career schools and other institutions for advanced
education located throughout the United States. According to the National
Federation of State High School Associations, there are more than 6,300,000
students participating in organized athletic programs at high schools located
in the United States, and according to the National Collegiate Athletic
Association, there are approximately 330,000 students participating in
organized athletic programs at NCAA universities and colleges.

Athletic Products and Services

         Athletic Products

         The Company is the world's leading manufacturer of football helmets,
which it sells under the Riddell brand. For the years ended December 31, 1996,
1997 and 1998 sales of football helmets for competitive use constituted
approximately 9%, 8% and 9%, respectively, of the Company's consolidated
revenues (pro forma giving effect to the Acquisition in 1996 and 1997).

         The Company's Riddell brand football helmets are worn by football
players throughout the world, including players on all NFL teams, certain
other professional leagues and on most teams in the NCAA. High school teams,
however, have historically been the largest market segment for the Company's
football helmets. The Company offers several types of varsity and youth
helmets which are different in their configurations and types of padding and
other fitting features. The Company's helmets are known for their quality and
performance and meet the industry standards set by the National Operational
Committee for Safety in Athletic Equipment ("NOCSAE"). NOCSAE, an independent
entity, is organized by various participants from the sporting goods industry
which establishes industry-wide standards for protective athletic equipment.

         The Company also sells a professional and collegiate line of shoulder
pads under the Power(Registered) name and several other lines of shoulder pads
under the Riddell name . The shoulder pads are used

                                                    
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by NFL, college, high school and youth players. Football shoulder pad sales
for each of the years ended December 31, 1996, 1997 and 1998 constituted
approximately 4% of the Company's consolidated revenues (pro forma giving
effect for the Acquisition in 1996 and 1997). Riddell also sells accessory
pads, including thigh, hip, rib and knee pads.

         The Company has steadily been increasing the categories of athletic
products its sells to the institutional market. In 1998 the Company introduced
a line of custom team uniforms for high school and youth participants. In
1996, the Company introduced a line of baseball and softball products designed
for high school and college players and expanded this line to the youth market
in 1998. This line includes baseballs and softballs, protective baseball
equipment such as chest protectors, leg guards and catchers' masks and certain
other products including bases, bags and field equipment. The Company also
offers competitive and youth batting helmets including professional quality
models that are similar to the best quality products available from the
Company's competitors. All of the Company's helmets meet the standards
established by NOCSAE. In 1996 the Company also further expanded its line of
institutional products to include practicewear such as t-shirts, shorts,
fleece warm-ups and other basic athletic clothing. Practicewear was the first
broad line of products sold by the Company to the institutional market because
it was designed for both male and female athletes in all sports. The Company
offers customized silkscreen printing as an option for its practicewear line.

         UMBRO and Athletic Game Uniforms

         The Company is seeking to capitalize on its expertise and efficiency
in producing custom-made cheerleading and dance apparel in connection with its
UMBRO team soccer apparel, applying the same techniques to the design,
manufacture and delivery of soccer team apparel that it applies to its
cheerleading uniforms. The Company believes that by using the suppliers of its
Varsity cheerleader uniforms that it will be able to produce and deliver
competitively priced high quality soccer uniforms faster than its competitors.
The Company will be using a network of independent sales representatives to
market and sell the UMBRO brand soccer apparel, footwear, and equipment to the
team channel of distribution.

         In addition, in 1998 the Company also began manufacturing athletic
team uniforms for other sports. The Company believes that the manufacturing
capabilities of its cheerleader uniform operations, coupled with the breadth
and depth of its direct sales organization to schools and youth organizations
across the country, provide the Company with an opportunity to successfully
expand its product line into athletic game uniforms, which is a larger market
than its present athletic product and services line of business. The Company
believes this is a natural extension of its current product lines.

         Reconditioning

         The Company is the leading national reconditioner of football
helmets, shoulder pads and related equipment with an over 50% share of the
reconditioning market. Reconditioning typically involves the cleaning,
sanitizing, buffing or painting, and recertifying of helmets as conforming to
NOCSAE standards. The Company may also replace face guards, interior pads and
chin straps. The

                                                    
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Company also reconditions shoulder pads, as well as equipment for other
sports, including baseball and lacrosse helmets, catchers' masks and baseball
gloves. The Company's reconditioning services are sold by its institutional
sales force to the same athletic coaches responsible for equipment purchases.
The Company's reconditioning customers are primarily high schools, colleges
and youth recreational groups. Reconditioning constituted 13% of the Company's
consolidated revenues in each of the years ended December 31, 1996, 1997 and
1998 (pro forma giving effect to the Acquisition in 1996 and 1997).

Spirit Products and Services

         As a consequence of the Acquisition in June of 1997, the Company
became a leading provider of products and services to the school spirt
industry. The market for school spirit products and services has evolved and
grown with the development of youth, high school and college athletic
programs.

         Cheerleader and Dance Team Uniforms and Accessories

         The Company designs and markets cheerleader and dance team uniforms
and accessories, including sweaters, sweatshirts, jumpers, vests, skirts,
warm-up suits, t-shirts, shorts, pompons, socks, jackets, pins and gloves. The
Company markets all of its cheerleading uniforms and accessories under the
Varsity trademark. The distinctive Varsity logo patch appears on the front of
all uniforms manufactured by or for the Company. Over 125,000 catalogs are
mailed annually to schools and school spirit advisors and coaches containing
color photographs and descriptions of the Company's Varsity line of uniforms
and accessories. The Company supplements its direct sales force and catalog
sales efforts with a telemarketing sales force of 13 full and part-time
employees. Spirit uniform and accessory sales accounted for 31%, 32% and 34%
of the Company's consolidated revenues for the year ended December 31, 1996,
1997 and 1998, respectively (pro forma giving effect to the Acquisition for
1996 and 1997).

         Cheerleader and Dance Team Camps

         The Company operates cheerleader and dance team camps in the United
States. Camp enrollment has increased every year since the Camp division, part
of the Acquisition, commenced operation in 1975 with 20 cheerleading camps and
4,000 participants. During the 1998 camp season, approximately 207,000
participants (consisting of students and their coaches) attended Varsity's
Universal Cheerleader Association ("UCA") and United Spirit Association
("USA") camps, including over 7,000 participants representing colleges and
junior colleges. During 1998, cheerleading and/or dance team squads from
approximately 70% of the universities comprising the Atlantic Coast, Big East,
Big Ten, Big Twelve, Pacific 10 and Southeastern collegiate athletic
conferences attended the Company camps. The Company's camp and event revenues
accounted for 24%, 26% and 26% of the Company's consolidated revenues for the
year ended December 31, 1996, 1997 and 1998 respectively, (pro forma giving
effect to the Acquisition for 1996 and 1997).

         Camp sessions for high school and junior high school students are
held primarily in June, July and August while camp sessions for college
cheerleaders and dance team participants are held

                                                    
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primarily in August. Mascot training clinics are also provided at certain
cheerleader and dance team camps.

         A significant majority of the Company's cheerleader and dance team
camps are conducted on college or junior college campuses. The Company
contracts with the colleges and universities for provision of housing, food
and conference facilities. The camps generally are conducted over a four-day
period and are attended by resident and commuting students. The Company
generally markets the camp, establishes and collects participation fees,
registers students, provides instruction and performs all related
administrative services.

         The Company emphasizes safety and training for its cheerleaders, dance
and spirit instructors. The Company's instructors are mostly college
cheerleaders who may have previously attended a Company camp, and management
believes that its training of many of the top college cheerleading squads
augments its recruiting of high school and junior high school camp participants.
Prior to the commencement of its camps, instructors participate in an intensive
six-day training session where they are taught new cheerleading and dance
material, as well as up-to-date teaching methods and safety techniques. The
Company hires its instructors by utilizing applications given to talented camp
participants, supervisor evaluations and numerous nationwide tryouts. As a
result of this process, the Company believes it hires the most qualified and
talented instructors available.

         The Company was a founding member of and is an active participant in
the American Association of Cheerleading Coaches and Advisors ("AACCA"), an
industry trade group whose mission is to improve the quality of cheerleading
and to maintain established safety standards. In 1990, AACCA published
comprehensive certification and safety guidelines for cheerleading coaches.
The Company follows the AACCA safety guidelines in the training of its
instructional staff and in the conduct of its cheerleader and dance team camps
and competitions.

         Special Events

         The Company promotes its Varsity brand products and services, as well
as the school spirit industry, through active and visible association with the
following championships and television specials:

         o   National High School Cheerleading Championship(Registered)

         o   National Dance Team Championship(Registered)

         o   College Cheerleading and Dance Team National 
             Championship(Registered)

         o   National All Star Cheerleading Championship(Registered)

         o   Company Dance Championship(Registered)


                                                    
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         These championships and special events have been regularly televised
on the ESPN television network and have been sponsored by various companies
and products, including Nike, Unilever, Sprint, The Walt Disney World Resort,
Johnson & Johnson and Claire's Accessories.

         In addition to promoting cheerleading and dance team activities,
these championships, television specials and events are a revenue source to
the Company. In 1998, approximately 31,000 persons, including cheerleaders and
their families, participated in the Company's special events.

         Other Institutional Operations

         The Company is seeking to expand its uniform design and manufacturing
and special event expertise from cheerleading into the private dance studio
market through a venture called Company Dance. Company Dance operates weekend
dance conventions in seventeen U.S. cities and an annual championship from the
Walt Disney Resort in Orlando that is televised on ESPN. It also provides
costumes for dance recitals.

         The Company also operates a tour company, which does business as
Intropa, specializing in organizing trips for cheerleaders, bands, choirs and
orchestras, dance and theater groups and other school affiliated or performing
groups, which tour in the continental United States, Hawaii, Canada, Europe
and Israel.

Marketing, Sales and Promotion

         Athletic Products and Services

         The Company's athletic products and equipment reconditioning services
are sold directly to schools and other institutions through a direct sales
force of approximately 141 salespeople most of whom are compensated on a
percentage of sales basis and bear their own expenses. Prior to October 1994,
sales of protective athletic equipment to institutional customers had been
made through independent team sports dealers who in turn sold to schools and
other institutions. The Company now markets products to these institutional
customers on a factory-direct basis utilizing its sales force, which
previously sold only the Company's reconditioning services.

         The Company's youth football products are principally marketed to
youth recreational groups, such as parks and recreation and Pop Warner
leagues. In 1998 the Company began selling its youth products directly to
those groups through its in-house sales force. This move was part of a renewed
emphasis on the youth market which increased youth product sales in 1998. At
the same time the Company is continuing to sell youth products through retail
stores and other distributors in its Retail Segment.

         The Company maintains a promotional rights agreement with the NFL's
licensing division (the "NFL Agreement") which requires that the Company's
Riddell brand name appear on the front and on the chin strap of all of the
Company's helmets used in NFL play. The NFL Agreement further requires all
teams in the NFL to cover any indicia of brand identification of any other
manufacturers which might otherwise appear on helmets, face masks or chin
straps not manufactured

                                                    
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by the Company, but used during league play. In return, the Company agrees to
supply specified quantities of Riddell helmets, shoulder pads and related
equipment, either at no cost or at reduced cost to each NFL team which has a
requisite percentage of its roster using the Riddell helmet. Presently,
approximately 80% of NFL players wear the Company's Riddell brand football
helmets.

         The NFL Agreement, which dates back to April 1989, has a term
expiring in April 1999, which is automatically extended for unlimited
successive five-year periods thereafter, provided that the quality of the
Company's helmets remain comparable to the best available technology as
reasonably determined by the NFL. As a result, the term of the NFL Agreement
will be extended in April 1999 until April 2004. The Company also has supply
agreements with other professional leagues.

         The Company utilizes a variety of promotional techniques to build
brand awareness for the Riddell brand, but the NFL Agreement provides the
Company with a unique marketing and promotional tool. The recognition
resulting from the frequent appearance of the Riddell name on helmets in
televised football games as well as in photographs in newspapers and
magazines, such as Sports Illustrated, is viewed by management as important to
its overall sales, marketing and licensing effort. The promotional exposure
from the NFL Agreement also benefits the Company's Retail and Licensing
segments.

         To further reinforce and support the Company's brand recognition, the
Company conducts a variety of marketing and promotional events in support of
its line of athletic products. The Company participates in coaches' clinics
and equipment shows throughout the year. At these events, the Company's entire
athletic products line is displayed and promoted along with the Company's
reconditioning services.

         Spirit Products and Services

         The Company's spirit products and services are sold directly to
schools and other institutional customers through a direct sales force of
approximately 148 full time salespeople who are primarily compensated on a
percentage of sales basis and who bear their own expenses. Products and
services are also sold through catalogs and other direct mail advertising.

         The Company has developed various cross-marketing opportunities to
promote its cheerleader and dance team camps and its uniforms and accessories.
In addition to selling uniforms and accessories, the Company's direct sales
force promotes its camps and events, while the approximately 1,800 instructors
at Varsity's cheerleader and dance team camps promote sales of the Company's
Varsity merchandise. The championships, television specials and events discussed
above (See Special Events) also promote consumer awareness of Varsity and
Universal Cheerleader Association products and services, as well as cheerleader
and dance team activities in general.


                                                    
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Production

         Athletic Products

         The Company engineers, manufactures and packages all of its full
sized football and baseball batter helmets at its plant in Chicago, Illinois.
Football helmet shells are manufactured by the Company using a custom grade of
plastic resin and precision injection molding techniques. The Company's Elk
Grove, Illinois warehouse facility also has a screen printing operation which
can customize practicewear and uniforms with almost any logo, team name or
other design or numbering that a customer requests.

         Power shoulder pads are manufactured for the Company by a single
source in Canada, and the Company has a facility in Pennsylvania which can
customize these shoulder pads. All of the Company's other shoulder pads are
imported as finished products from sources in the Far East.

         The Company purchases its baseball products, other than baseball
batter helmets, from suppliers in the Far East and sources its practicewear
from four domestic suppliers. Athletic uniforms are purchased on a
made-to-order basis from domestic suppliers. The Company believes alternative
sources for all of these products are readily available. All of the Company's
sourcing from foreign countries are subject to the risks generally associated
with doing business abroad, such as governmental and economic instability,
changes in import duties, tariffs, foreign governmental regulations, foreign
currency fluctuations and shipment disruptions.

         All protective products manufactured by the Company are subjected to
at least four separate quality control procedures. Quality control inspections
for helmets are conducted when the product is molded, when liners are
inserted, when face guards are attached and when the product is finished, and
samples of all models produced are tested in accordance with NOCSAE standards.
The Company continually monitors its products for quality.

         All varsity protective football helmet shells are covered by a
five-year warranty and youth football helmet shells are covered by a
three-year warranty. Helmet liners, protective padding and shoulder pads are
covered by a one-year warranty. The cost of warranty claims has averaged under
0.2% of sales per annum over the last three years.

         Principal raw materials purchased by the Company for use in its
protective products include various custom and standard grades of resins,
plastic and foam as well as metal fasteners, paints and cardboard. Similar
materials are used in most purchased components and finished products along
with steel wire used in purchased face guard components and textile products
used in purchased practicewear and athletic uniforms. The Company relies on a
single supplier with respect to fulfilling all of its requirements for resin,
which is an integral component in the manufacture of helmets. The Company has
never experienced any difficulty in the past, and does not anticipate that it
will experience any difficulty in the near future, with respect to this single
supplier being able to fulfill all of its requirements for this raw material.
In the event that this single supplier, which is a one of the largest
industrial companies in the world, should fail for whatever reason to continue
to fulfill the Company's resin requirements, such failure could have a
material adverse effect on the

                                                    
                                    - 13 -

<PAGE>



Company. The Company has not experienced and does not expect in the near
future to experience shortages in any of its raw materials.

         The Company employs an engineering staff principally with respect to
the design, development and improvement of its helmets and shoulder pads and
to the testing of raw materials which are used in the Company's products or in
the development of new products. The Company has seven employees devoted
principally to design, development and quality and has several patents and
patents pending that are applicable to its protective products.

         Reconditioning

         The Company's reconditioning services include the sanitizing, buffing
or painting, replacing certain parts and recertifying of athletic equipment as
conforming to NOCSAE standards. These services are performed at the Company's
reconditioning facilities which are located throughout the United States. As a
policy, the Company does not recondition helmets over 10 years old.

         Cheerleading and Dance Team Uniforms and Accessories

         Cheerleading and dance team uniforms designed and marketed by the
Company are made to order. During 1998, the Company contracted for its
production requirements with nine independent garment manufacturers;. The
manufacturers provide knitting, cutting, sewing, finishing and shipping for
all orders, and the Company provides the patterns, fabrics, yarn and
manufacturing specifications and quality control supervision. The Company also
provides some cutting, knitting and lettering at two specialized production
facilities. The use of independent manufacturing facilities to fulfill the
Company's production needs affords the Company with flexibility to adjust its
production output to meet its highly seasonal selling cycle. The use of
independent manufacturers also reduces the Company's fixed costs, which the
Company believes is beneficial in a highly seasonal business. The Company
believes that the loss or termination of its relationship with any single
independent manufacturer would not have a material adverse effect on the
Company. The Company also intends to use its suppliers to produce soccer
uniforms under the UMBRO brand.

         Cheerleading accessories such as shoes, pompons and campwear are
purchased from various suppliers including Nike(Registered),
Capezio(Registered) and Converse(Registered), among others. The Company has
expanded the variety and number of accessories it markets, which has
contributed to the increase in merchandise sales revenue in recent years. The
Company believes that the loss or termination of a relationship between the
Company and any single supplier would not have a material adverse effect on
the Company.

RETAIL SEGMENT

         The Company's retail segment markets its Riddell branded products
through retailers. Most of these products are sports collectible products
which consist primarily of authentic and replica helmets of professional and
college sports teams. These helmets are offered in various miniature and
full-size models bearing the colors and logos of NFL and other professional or
collegiate teams. The Company's full-size authentic football helmets are the
same helmets used by players on these teams.

                                                    
                                    - 14 -

<PAGE>



Other sports collectible products bearing licensed team logos include lamps
and desk organizers fashioned from miniature helmets and a line of smaller,
less expensive miniature helmets tailored for the mass market. In early 1999
the Company also announced the introduction of a desk organizer bearing logos
and designs licensed from NASCAR. For the years ended December 31, 1996, 1997
and 1998 (pro forma giving effect to the Acquisition in 1996 and 1997) sales
of sports collectible products have constituted approximately 13%, 10% and 8%
of the Company's consolidated revenues.

         The Company's retail segment also includes sales of certain
recreational football and baseball products sold through retailers and
distributors in the United States and athletic products sold internationally.

         In connection with the sale of the Company's collectible helmets, NFL
Properties Inc. has granted the Company a license to use the names, symbols,
emblems, designs and colors of the member clubs of the NFL and the "League
Marks" (i.e., "National Football League," "NFL," "NFC," "AFC," "Super Bowl,"
"Pro Bowl," the "NFL Shield" design and other insignia adopted by the NFL) on
authentic and replica football helmets sold for display purposes.

Marketing Sales and Promotion

         The Company's Retail segment products are sold primarily to retail
stores, and specialty sporting goods stores and distributors through
approximately 55 independent commissioned sales representatives. The Company
strategically targets different channels of trade based on the type and price
of each retail product.

         In support of its sports collectible products, the Company has
initiated various advertising and public relations efforts. Advertisements are
placed in publications targeted toward the sports collectible industry as well
as other licensed products retailers. The Company also provides incentives to
retail outlets to advertise and display Riddell products during promotional
periods and participates in a major national sporting goods show where it
promotes these products.

         The Retail segment also benefits from the promotional exposure of the
NFL Agreement described above under the Institutional segment.

Production

         The Company engineers, manufactures and packages its full size
collectible helmets at its plant in Chicago, Illinois in a process similar to
that used for its competitive helmets. The Company purchases its miniature
helmets and other collectible products principally from two sources in China
and believes that alternative sources for these products are readily
available.

         The Company has retained a design company to assist it in developing
new retail collectible products on terms that the Company believes are
customary in the industry and from time to time works with other design
companies.


                                                    
                                    - 15 -

<PAGE>



         Athletic products sold as part of the Retail segment are manufactured
or purchased, together with similar products sold through the Institutional
segment.

         LICENSING SEGMENT

         The Company licenses its Riddell and MacGregor trademarks in various
categories, including athletic clothing and footwear. For the years ended
1996, 1997 and 1998 (pro forma giving effect to the Acquisition in 1996 and
1997), the Company's revenues from licenses of its trademarks constituted
approximately 2%, 1% and 1% of consolidated revenues.

         The Company is continually exploring additional opportunities for
licensing the MacGregor and Riddell trademarks and retains the services of an
independent licensing agent to assist the Company's efforts in this regard.

         The Licensing Segment also benefits from the promotional exposure of
the NFL Agreement described above under the Institutional Segment.

         Riddell Licensing

         The Company licenses the Riddell trademark for certain types of
athletic clothing, socks and athletic footwear.

         In 1997, pursuant to an agreement settling an action commenced
against the Company in March 1995 by the trustee for MacGregor Sporting Goods,
Inc. ("Mac I"), which filed for bankruptcy protection in 1989, and certain
other actions (the "Settlement Agreement"), the Company entered into a new
licensing agreement with its "Riddell" footwear licensee on substantially the
same terms as the previous license and assigned to certain parties to the
Settlement Agreement up to $3.0 million of royalties on a present value basis
under the existing or any future "Riddell" footwear license to the extent such
royalties are paid during the 10 year period commencing in mid-1994, which
period is subject to extension if the Company terminates the footwear license.
In January 1998, an affiliate of Enterprise Rent-A-Car Company purchased the
license and assumed the licensee's obligations under the Riddell footwear
license with a slightly higher royalty rate but otherwise on substantially the
same terms as bound the assignor.

         MacGregor Licensing

         The Company has granted Kmart Corporation a non-exclusive license for
use of the MacGregor trademark on athletic socks under a license expiring on
June 30, 2001. The Company has also granted Footstar, Inc. an exclusive
license to use the MacGregor trademark on athletic footwear sold at Kmart
stores under a license with an initial term expiring on June 30, 2001 and
renewable at Footstar's option for an additional two year period if certain
conditions are satisfied. These licenses are, in effect, renewals of a license
to Kmart which expired on June 30, 1998. Kmart did not renew portions of the
previous license which had granted Kmart use of the MacGregor trademark for
apparel, athletic bags and knapsacks.

                                                    
                                    - 16 -

<PAGE>



THE  COMPANY

Seasonality and Backlog

         The Company's operations are highly seasonal. In recent years
operations have been most profitable in the second and third quarters, with
the third quarter typically the strongest and losses have been incurred in the
first and fourth quarters. This seasonal pattern is influenced by the
following factors:

         Orders for the institutional segment's athletic products and
reconditioning services are solicited over a sales cycle that begins in the
fall of each year and continues until just before the start of a new school
year at the end of the following summer. Delivery of products and performance
of reconditioning services reach a low point in the fall of each year after
school begins and during the football playing season. These activities
contribute most to profitability in the first through third quarters of each
calender year.

         Cheerleading and dance uniforms and accessories are typically ordered
commencing late March through August and are shipped prior to or
contemporaneous with the start of the school year.

         Most of the institutional segment's camp revenues relate to its
cheerleading camps. The Company incurs costs relating to its camp business
from the fourth quarter through the second quarter as it prepares for the
upcoming camp season, while most revenue relating to camps is earned during
the June to August period.

         The retail segment's sports collectible products are sold to
retailers throughout the year. However, sales are at their peak during the
third and fourth quarters as retailers build inventory in anticipation of both
the football and the holiday shopping seasons.

         The Company believes that the sale of UMBRO branded items will also
be seasonal, substantially following the pattern of the Company's existing
institutional products as soccer, like football, is primarily a fall sport.
Soccer, however experiences a spring season as well, which may somewhat temper
the seasonality of the sale of UMBRO branded products.

         Backlog for the Company at February 28, 1999 was $17.5 million, a 42%
increase over the February 28, 1998 backlog of $12.4 million. The increase is
the result of a $3.1 million increase in the backlog for institutional
athletic products, which was up 26% to $15.3 million at February 28, 1999 and
$2.0 million of orders for the new line of UMBRO products. Backlog for sales
of cheerleading and dance uniforms and accessories is also up, but is not
meaningful because most orders are received in the second and third quarters,
while backlog for sports collectible products was $1.4 million in both 1998
and 1999.


                                                    
                                    - 17 -

<PAGE>



         Competition

         Athletic Products

         The Company's principal competitor in the football helmet market is
Schutt, manufacturer of the AIR helmet. The Company competes principally with
Bike Athletic Co., Inc., Douglas, Inc., Gear 2000, Inc. and Rawlings Sporting
Goods Company, Inc. ("Rawlings") in the football shoulder pad business, with
Diamond Sports Co., Rawlings, Wilson Sporting Goods Company and other
companies in baseball and softball products and with Champion Products, Inc.,
Russell Athletic, Inc., and other companies for practicewear and athletic game
uniforms. The Company also competes with numerous independent dealers
throughout the United States who market the competitor's products. Some of the
Company's competitors are substantially larger and have greater resources than
the Company.

         The Company believes it competes in the football market on the basis
of quality, price, reliability, service, comfort and ease of maintenance. With
respect to football and other athletic products, the Company believes that its
direct sales force provides a competitive advantage in terms of its ability to
provide superior customer service and a significant price advantage due to the
elimination of independent dealers which are used by the Company's
competitiors.

         Reconditioning

          Reconditioners compete on the basis of quality, price, reputation,
convenience and customer loyalty. Management believes that the Company is the
largest nationwide participant among the approximately 30 competitors in the
highly fragmented athletic reconditioning industry.

         Spirit Products and Services

         The Company is one of two major companies that designs and markets
cheerleader, dance team and booster club uniforms and accessories on a
national basis. In addition to the Company and its major national competitor,
National Sprit Group ("NSG"), there are many other smaller regional
competitors serving the uniform and accessories market in the United States.
The Company believes that the principal factors governing the selection of
cheerleader and dance team uniforms and accessories are the quality, variety,
design, delivery, service and, to a lesser extent, price.

         The Company is also one of two companies that annually operate a
significant number of cheerleader and dance team camps in the United States
(the other being NSG). There are also many other smaller companies and schools
that operate camps and clinics on a regional basis. The Company believes the
principal factors governing the selection of a cheerleader or dance team camp
or clinic are the reputation of the camp operator for providing quality
instruction and supervision, location, schedule and the tuition charged for
camp participation.

         Retail Collectible Products

         The Company's sports collectible products compete with a large number
and wide array of

                                                    
                                    - 18 -

<PAGE>



manufacturers and sellers of sports and other collectible and memorabilia
products, some of which have greater resources than the Company. Among its
competitors in this large marketplace are sellers of products such as
autographed photographs and uniforms and other memorabilia and manufacturers
of clothing, such as caps and jackets.

         Licensing

         Competition in the licensing of sports equipment, apparel and
footwear is substantial, and the Riddell and MacGregor brands compete with
numerous companies having significant brand recognition, many of which have
greater financial, distribution, marketing and other resources. Brand
recognition and reputation for quality are important competitive factors in
the licensing of sports apparel and footwear. Competing brands include
Adidas(Registered), Champion(Registered), Converse(Registered),
Nike(Registered), Rawlings(Registered), Reebok(Registered),
Russell(Registered) and Wilson(Registered).

Patents and Trade Secrets

         Certain of the Company's football helmet liner systems are protected
by patents and trade secrets, including a patent on its inflatable liner
expiring in 2010. Other patents on these liners expired in 1998 and certain
others will expire in 2008. The Company also has patents expiring in 2006,
2007 and 2008 on various components of its shoulder pads which improve
absorption of shock.

Trademarks and Service Marks

         The Company owns various trademarks registered with the U.S. Patent
and Trademark Office, including the following: Riddell, MacGregor, ProEdge,
Power, Air Pac, Warrior, Biolite, Maxpro, Universal Cheerleaders Association,
Varsity, United Spirit Association, National High School Cheerleading
Championship, the Universal Dance Association, Universal Dance Camps, Varsity
Spirit Fashions and The National Dance Team Championship, among others. Some
of these trademarks are also registered in certain foreign countries.

         The Company's use of the MacGregor trademark is limited by an
agreement with Global Licensing Corporation, which owns a similar McGregor
trademark. Under this agreement, the parties have agreed on certain
restrictions in the use of their respective trademarks. The Company is also
precluded from using the MacGregor trademark in connection with certain team
sports equipment sold to institutional customers because of a prior exclusive
license for this category granted to Sports Supply Group Inc. on a perpetual
royalty-free basis. The Company does not have MacGregor trademark rights to
golf products.

Governmental Regulation

         The Company's products and accessories are subject to the Federal
Consumer Product Safety Act, which empowers the Consumer Product Safety
Commission (the "CPSC") to protect consumers from hazardous sporting goods and
other articles. The CPSC has the authority to exclude from the market certain
articles which are found to be hazardous and can require a manufacturer to
repurchase

                                                    
                                    - 19 -

<PAGE>



such goods. The CPSC's determination is subject to court review. Similar local
laws exist in some states and cities in the United States, Canada and Europe.
The Company maintains a quality control program for its protective equipment
operations and other products that is designed to comply with applicable laws.
To date, none of the Company's products has been deemed to be hazardous by any
governmental agency.

         There is no national governing body regulating cheerleading and dance
team activities at the collegiate level. Although voluntary guidelines
relating to safety and sportsmanship have been issued by the NCAA and some of
the athletic conferences, to date cheerleading and dance teams are generally
free from rules and restrictions similar to those imposed on other competitive
athletics at the college level. However, if rules limiting off-season training
are applied to cheerleading and/or dance teams (similar to rules imposed by
the NCAA on certain sports), it is likely that the Company would be unable to
offer a significant number of its camps either because participants would be
prohibited from participating during the summer or because enough suitable
sites would not be available. Although the Company is not aware of any school
officially adopting these activities as a competitive sport, recognition of
cheerleading and/or dance teams as "sports" would increase the possibility
that cheerleader or dance activities may become regulated. If the Company were
restricted from providing its training programs to colleges and high schools,
or if cheerleaders and dance teams were restricted from training during the
off-season, such regulations would likely have a material adverse effect on
the Company's business and operations. However, the Company currently does not
believe that any regulation of collegiate cheerleading or dance teams as a
"sport" is forthcoming in the foreseeable future, and in the event any rules
are proposed to be adopted by athletic associations, the Company expects to
participate in the formulation of such rules to the extent permissible.

         At the high school level, some state athletic associations have
classified cheerleading as a sport and in some cases have imposed certain
restrictions on off-season practices and out-of-state travel to competitions.
However, in all cases to date, the Company has been able to work with these
state athletic associations to designate acceptable times for the cheerleaders
within these states to attend camps. The Company has also signed agreements
with several state associations to assist with sponsoring and executing
official competitions within these states. To date, state regulations have not
had a material effect on the Company's ability to conduct its normal business
activities.

         Operations at all of the Company's facilities are subject to
regulation by the Occupational Safety and Health Agency and various other
regulatory agencies.

         The Company's operations are also subject to environmental
regulations and controls. While some of the raw materials used by the Company
may be potentially hazardous, it has not received any material environmental
citations or violations and has not been required to spend significant amounts
to comply with applicable law.


                                                    
                                    - 20 -

<PAGE>



Employees

         At February 28,1999, the Company had approximately 1,250 employees.
Approximately 1,090 of these employees were employed on a full time basis and
160 were part time or temporary employees. Approximately 37 employees employed
in manufacturing at the Chicago factory are represented by the Chicago and
Central States Joint Board, Amalgamated Clothing and Textile Workers Union,
under a collective bargaining agreement which expired in January 1999 and a
new agreement has been agreed to subject to final documentation. Approximately
30 of the Company's employees working in reconditioning at the Company's New
York facility are represented by the Local #500A United Food and Commercial
Workers Union (AFL-CIO) under a collective bargaining agreement that expires
in January 2000.

         During the summer of 1998, the Company employed approximately 1,800
summer camp instructors, trainers and administrators on a seasonal basis.

         The Company believes that relations with its employees are
satisfactory.

Product Liability Proceedings and Insurance

         As part of its ongoing business, the Company is routinely a defendant
in various product liability law suits arising from personal injuries
allegedly related to the use of Riddell helmets.

         The Company maintains product liability insurance under a program
initiated in December 1994. In January 1998, the Company and its insurer
restructured this insurance program replacing the existing policy with a new
policy, extending coverage through January 2005, three years beyond the
previous policy term and providing reduced annual fixed cost with no material
change in the scope of coverage. The policy is an occurrence-based policy
providing coverage against claims currently pending against the Company and
future claims relating to injuries occurring between December 1994 and January
2005 even if such claims are filed after the end of the policy period. The
insurance program provides certain basic and excess coverages with combined
aggregate coverage of over $40,000,000 subject to the limitations described
below.

         The first level of insurance coverage under the policy provides
coverage of up to $2,250,000 per claim (with an annual limit of $4,500,000)
("Basic Coverage") in excess of an uninsured retention (deductible) of
$750,000 per occurrence. The Basic Coverage has an aggregate limit which is
currently $4,900,000, but the policy requires the Company to increase this
maximum limit to $7,700,000 by paying a fixed annual payment or by prepaying
the required premium at any time, which counts at 120% of the amount paid
toward the limit.

         The insurance program also provides for additional coverage ("Excess
Coverage"), which may be subject to certain state statutes limiting the
applicability of such coverage in certain instances, of up to $20,000,000 per
occurrence, in excess of the first $3,000,000 of each claim which is covered
by the uninsured retention and Basic Coverage, to the extent available. Claims
covered by the Excess Coverage are subject to one of two separate $20,000,000
aggregate policy limits, depending on the date of the related injury. The
first $20,000,000 aggregate limit applies to claims

                                                    
                                    - 21 -

<PAGE>



for injuries occurring prior to January 31, 1998 while claims occurring 
after January 1998, are covered under the second separate $20,000,000 
aggregate limit.

         In March 1999 a jury rendered a verdict against the Company in a
Texas product liability lawsuit for approximately $11.4 million plus interest
from February 1996. The Company intends to appeal the verdict. If the verdict
was paid in full it would be covered by the insurance described above, except
for an amount equal to the $750,000 uninsured retention. This amount, however,
is already included in the Company's balance sheet reserves. Any such payment
by the insurance company would reduce the aggregate limits of insurance
coverage available for other claims, as discussed above.

         There is no certainty that coverage will remain available to the
Company after January 2005 or that the insured amounts will be sufficient to
cover all future claims.

         The Company's product liability insurance carrier is a division of
American International Group, Inc., which has been rated A++XV by A.M. Best
Property and Casualty Insurance Rating Company.

         The Company carries general liability insurance with coverage limits
which the Company believes are adequate for its business.

         Product Liability Proceedings

         The Company has historically been a defendant in product liability
personal injury suits allegedly related to the use of football helmets
manufactured or reconditioned by subsidiaries of the Company, including suits
relating to helmets made by BSN Corp.'s helmet division prior to its
acquisition by the Company in 1991. As of March 23, 1999, three product
liability cases were pending against the Company.

         The Company has established reserves for pending product liability
claims and determines its reserves based on the level of insurance that is
available and estimates of losses and defense and settlement costs which it
anticipates would result from such claims based on information available at
the time the financial statements are issued. Due to the uncertainty involved
with estimates, actual results have at times varied substantially from earlier
estimates and could do so in the future. Accordingly, there can be no
assurance that the ultimate costs of these claims or potential future claims
will fall within the established reserves. See Note 11 to the Consolidated
Financial Statements.

Item 2:  PROPERTIES

         The Company owns its principal football helmet manufacturing facility
located in Chicago, Illinois and leases various facilities throughout the U.S.

         The Company believes its properties, machinery and equipment are
adequate for its current requirements.

                                                    
                                    - 22 -

<PAGE>







         Set forth below is certain information regarding the Company's
principal properties:

<TABLE>
<CAPTION>
                                                                                    Square      Lease
Location                                Principal Use                               Footage  Expiration Date
--------                                -------------                               -------  ---------------
<S>                              <C>                                                <C>      <C>    
New York, New York               Corporate headquarters                                 650  September 2000

Chicago, Illinois                Headquarters of Riddell, Inc.                       95,000  Owned
                                 and helmet manufacturing

Elk Grove Village,               Warehouse and distribution                          83,000  March 2000
Illinois                         center

Elyria, Ohio (1)                 Headquarters for All American                       50,000  May 2000
                                 Sports Corporation
                                 reconditioning operations and
                                 customer service

San Antonio, Texas(2)            Reconditioning                                      27,000  October 2003

Stroudsburg,                     Reconditioning and shoulder                         44,000  October 2001
Pennsylvania(2)                  pad customizing

Belton, Missouri                 Reconditioning                                       6,600  December 1999

Buffalo, New York                Warehouse                                            6,400  vacated February,
                                                                                             1999

Burgettestown,                   Reconditioning                                      17,000  September 2013
Pennsylvania

Franklin Park, Illinois          Reconditioning                                      16,000  June 2000

Fort Valley, Georgia(3)          Reconditioning                                      15,000  October 1999

Ft. Erie, Ontario,               Reconditioning                                       5,000  September 1999
Canada

New Rochelle, New                Reconditioning                                      23,000  January 2000
York

San Leandro,                     Reconditioning                                      19,600  July 2002
California

Somerville,                      Reconditioning                                       8,000  August 2000
Massachusetts

</TABLE>

                                                    
                                    - 23 -

<PAGE>


<TABLE>
<S>                              <C>                                                 <C>     <C>
Memphis, Tennessee               Headquarters for Varsity's                          63,700  November 2000
                                 Operations  and
                                 Manufacturing

Olive Branch,                    Warehouse                                           80,000  October 2000
Mississippi

Sunnyvale, California            Office/Warehouse                                    10,030  November 2000

Decatur, Georgia                 Sport Gym                                           12,000  July 1999

Carrollton, Texas                Sport Gym                                           11,050  January 2000

Bellaire, Texas                  Office                                               2,984  November 2000
</TABLE>

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

(1)      The Company has entered into a "build and lease" agreement with a new
         Landlord under which the Company will lease a new 72,000 square foot
         facility beginning in October, 1999 for a period of 15 years. The new
         landlord has agreed to assume liability for the remainder of the
         existing lease after October 1999.
(2)      Lease renewable at the Company's option for three years.  
(3)      Lease renewable at the Company's option for four years.

ITEM 3. LEGAL PROCEEDINGS

         The Company and its subsidiaries from time to time become involved in
various claims and lawsuits incidental to their businesses including without
limitation, employment related, product liability and personal injury
litigation. See Item I "Product Liability Proceedings and Insurance."

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         None.



                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

         The Company's Common Stock was quoted on the The Nasdaq National
Stock Market System under the symbol RIDL in 1997 and through November 20,
1998. Commencing November 23, 1998 the Company's Common Stock was listed on
the American Stock Exchange under the symbol RDL. As of March 18, 1999, there
were approximately 828 holders of record of the Company's Common Stock. The
following table sets forth the high and low sales prices for the Common Stock
as reported by the NASDAQ-NMS for 1997 and through November 23, 1998, and as
reported by the American Stock Exchange for the rest of 1998:

                                                    
                                    - 24 -

<PAGE>




                                    High         Low
                                    ----         ---
Year Ended December 31, 1996:
First Quarter                       5 7/8       2 7/8
Second Quarter                      6 1/8       4 1/16
Third Quarter                       5 1/2       4 1/4
Fourth Quarter                      5 1/2       4 1/4

Year Ended December 31, 1997:
First Quarter                       5 1/2       3 7/8
Second Quarter                      5 7/8       3 5/8
Third Quarter                       6           4 5/16
Fourth Quarter                      5 3/8       3 7/8

Year Ended December 31, 1998:
First Quarter                       5 5/8       4
Second Quarter                      6 3/8       4 7/8
Third Quarter                       5           3 3/4
Fourth Quarter                      6 5/8       2 5/8

         The closing sale price of the Common Stock on December 31, 1998 was
$5 5/8.

Dividend Policy

         Since its inception, the Company has not declared or paid, and does
not currently intend to declare or pay, any dividends on shares of its Common
Stock, and intends to retain future earnings for reinvestment in its business.
Any future determination to pay cash dividends will be in the discretion of
the Board of Directors and will be dependent upon the Company's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant by the Board of Directors. The Company's financing
arrangements under its revolving credit facility and the Senior Notes impose
restrictions on the Company's ability to pay cash dividends or make other
distributions on its Common Stock.

                                                    
                                    - 25 -

<PAGE>



ITEM 6.        SELECTED FINANCIAL DATA

    The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related notes
included elsewhere in this report.


<TABLE>
<CAPTION>
                   (In thousands, except per share amounts)

Operating Data (1)                                            Year Ended December 31,
                                                              -----------------------
                                             1998             1997             1996            1995            1994
                                             ----             ----             ----            ----            ----
<S>                                       <C>              <C>              <C>             <C>             <C>
Net revenues ......................       $ 186,600        $ 138,273        $  72,382       $  67,043       $  55,412
Cost of revenues ..................         113,541           80,675           38,813          35,794          29,792
                                          ---------        ---------        ---------       ---------       ---------
Gross profit ......................          73,059           57,598           33,569          31,249          25,620
Selling, general and administrative
expenses (2) ......................          64,617           46,278           27,853          25,983          28,614
Other charges .....................             925             --               --              --             1,188
                                          ---------        ---------        ---------       ---------       ---------
Income (loss) from operations .....           7,517           11,320            5,716           5,266          (4,182)
Interest expense ..................          14,656           11,879            2,763           2,795           2,001
                                          ---------        ---------        ---------       ---------       ---------
Income (loss) before taxes,
extraordinary item and cumulative
effect of changes in accounting
principles ........................          (7,139)            (559)           2,953           2,471          (6,183)
Income taxes (credits) ............            --               --                110             100          (1,250)
                                          ---------        ---------        ---------       ---------       ---------
Income (loss) before extraordinary
item (3) ..........................       $  (7,139)       $    (559)       $   2,843       $   2,371       $  (4,933)
                                          =========        =========        =========       =========       =========
Earnings (loss) per share before
extraordinary item:
      Basic .......................       $   (0.78)       $   (0.07)       $    0.35       $    0.29       $   (0.62)
      Diluted .....................       $   (0.78)           (0.07)            0.33            0.29           (0.62)
</TABLE>
                                                    
                                    - 26 -

<PAGE>



<TABLE>
<CAPTION>

Balance Sheet Data (1) (4)                                      December 31,
                                   --------------------------------------------------------------------
                                       1998           1997           1996           1995           1994
                                       ----           ----           ----           ----           ----
<S>                                <C>            <C>            <C>            <C>            <C>
Working capital ............       $ 37,963       $ 37,599       $ 25,957       $ 19,286       $ 11,036
Total assets ...............        186,211        181,761         76,361         74,125         72,252
Long-term debt, less current
portion ....................        126,900        122,500         29,984         23,600         20,168
Shareholders' equity .......         25,451         32,125         27,745         24,902         24,431
</TABLE>

----------------------------------------
1)    In June 1997 the Company acquired Varsity Spirit Corporation.

2)    In 1994 selling, general and administrative expenses included an 
      adjustment to record a $4.6 million charge for a product liability 
      litigation loss.

3)    An extraordinary item in 1995 consisted of a $1,900,000 ($0.23 per
      share) provision for costs relating to fraudulent transfer litigation.

4)    See Note 11 to the Company's consolidated financial statements relating
      to contingent liabilities.

                                                    
                                    - 27 -

<PAGE>



ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

         Overview

         The Company acquired Varsity Spirit Corporation ("Varsity") on June
19, 1997. The Varsity acquisition significantly increased the size of the
Company's business and significantly changed the Company's financial
structure. Varsity's operations include the design and marketing of
cheerleader and dance team uniforms and the operation of cheerleader and dance
team camps, clinics and special events. These operations have become a part of
the Company's institutional products and services segment.

         The Varsity acquisition significantly increased the size of the
Company's business. On a pro forma basis, revenue for the Company combined
with Varsity was $174.1 million, more than double the Company's 1996
historical stand alone revenues for the year before the Acquisition. Revenues
have since grown to $186.6 million for 1998.

         The Company's historical operating results for 1997 and 1996 do not
include Varsity's operations for the portion of the periods before the Varsity
acquisition. This makes comparisons of operating results less meaningful. In
order to overcome this limitation, the discussion and analysis that follow is
based on comparisons to operating results for 1997 and 1996 adjusted on a pro
forma basis to include Varsity's results for the period before the acquisition
and other matters related to the Varsity acquisition. The pro forma
adjustments are described in Note 2 of the Consolidated Financial Statements
included in this report.

         Operations for 1998 resulted in a net loss of $7.1 million. While the
Company achieved satisfactory performance in its core institutional business
it incurred a loss of $1.5 million relating to several new product initiatives
and suffered from weak performance in its retail and licensing segments. The
Company also incurred costs of $3.1 million relating to certain strategic
changes being undertaken to improve future profitability. These factors are
discussed in greater detail in the following paragraphs and comparisons.

         The loss of $1.5 million from new initiatives within the Company's
institutional segment included start up operations for a new line of team
soccer apparel, equipment and footwear to be marketed under the newly acquired
license to use the Umbro trademark in the United States; entry into new areas
of the school and private dance studio dance market including the Co. Dance
program; and the introduction of athletic game uniforms. These activities were
unprofitable during 1998 due to start up costs and because some activities
were started too late in the year to generate enough revenues to offset the
costs. The Company believes that the losses incurred for these activities are
valuable investments in the future and views these areas as important to its
future growth potential.


                                                    
                                    - 28 -

<PAGE>



         Operations for 1998 were also impacted by lower profits from the
trademark licensing and retail product segments. Licensing declined as the
Company's license to Kmart for MacGregor branded apparel and bags was not
renewed when it expired in June 1998, although the license was renewed for
other products. Profitability of the retail segment decreased due to a decline
in sales of sports collectible products.

         The Company also initiated a series of strategic actions in late 1998
which it believes will assist in facilitating future profitability. These
actions include the implementation of a restructuring plan involving the
consolidation of several of its reconditioning facilities and the elimination
of approximately 40 jobs including two senior positions. Together these
actions led to a $925,000 restructuring charge in 1998. The charge includes a
provision of $800,000, included in accrued liabilities at December 31, 1998,
for certain lease termination and employee severance costs, most of which will
be expended during 1999. The restructuring actions are expected to yield
annual savings of over $1.0 million after 1999, once facility closures are
completed and new centralized operations are fully implemented.

         Other strategic actions generated additional charges in excess of
$2.0 million in 1998. The charges include costs relating to changes in product
lines and marketing materials which are discussed further in the comparisons
of gross margins and selling, general and administrative expenses, below.

         Several cost saving measures were also implemented late in 1998 as
part of the Company's strategic review. Areas which should generate future
savings include negotiated vender cost reductions, consolidation of general
insurance policies and a move of the Company's corporate offices in New York
City to smaller, less costly space. The Company believes these cost savings
actions, combined with the benefits from the above mentioned restructuring
plan, should reduce the Company's costs by $2.0 to $3.0 million annually in
1999 and future years.

Year Ended December 31, 1998 compared to Pro forma Year Ended December 31, 1997

         Revenues

         Revenues for 1998 increased $12.5 million, or 7%, to $186.6 million
in comparison to pro forma revenues of $174.1 million for 1997.

         All of the Company's revenue gains came from the Institutional
segment where revenues increased 9% or $13.2 million, from $153.6 million on a
pro forma basis for 1997 to $166.8 million for 1998. Increased volume in
cheerleading and dance uniform and accessory products accounted for the
largest part of this revenue increase, registering a sales increase of $7.1
million, with most of the gain occurring in the line's core products. In
addition, camp and event revenue increased $3.7 million primarily due to a
strong increase in special event attendance. Athletic product volume increased
$2.4 million due largely to expanded offerings of athletic practice wear and a
new emphasis on the youth football market where sales had previously been
declining in recent years.


                                                    
                                    - 29 -

<PAGE>



         Revenues from the Retail segment were relatively stable with 1998
revenues of $18.1 million compared to 1997 revenues of $18 million. Sales of
athletic products to recreational team dealers and distributors increased,
offsetting declines in the sales of sports collectible products. Sales of
sports collectible products decreased due to lower demand for certain products
introduced in recent years such as miniature hockey and baseball helmets.

         Royalty income from trade trademark licensing decreased by $0.8
million to $1.6 million in 1998 in comparison to trademark licensing royalties
of $2.4 million in 1997. This decrease is attributable to the expiration in
June 1998 of a license for MacGregor branded apparel and bags with Kmart.

         Gross Profit

         Gross profit for 1998 increased to $73.1 million from $71.0 million
on a pro forma basis for 1997. Gross margins decreased as a percentage of
sales to 39.2% for 1998 from 40.8% on a pro forma basis for 1997. Gross
profits were impacted by a 1998 charge to reflect product line changes and
other strategic decisions which affected the realizable value of inventories.
This charge, along with the decrease in royalty income discussed above,
accounted for most of the decline in margins. Margins were also impacted by a
shift in the mix of products sold as most of the year's revenue gains occurred
in product lines that carry lower margins than the average of the Company's
other products.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses for 1998 increased by
$1.6 million to $64.6 million from $63.0 million on a pro forma basis for
1997. In addition to a normal level of growth related increases, expenses for
1998 included charges taken late in the year relating to strategic changes in
product lines and marketing materials as discussed above and over $2.0 million
of expenses related to the new initiatives mentioned in the overview above.

         Selling, general and administrative expenses decreased as a
percentage of sales to 34.6% for 1998 from 36.2% on a pro forma basis for
1997. However, 1997 expenses included unusual expenses from the Varsity
acquisition and the settlement of certain non-product liability litigation as
discussed below in the comparison of 1997 to 1996.

         Interest Expense

         Interest expense for 1998 increased 3%, or $0.4 million over 1997
interest computed on a pro forma basis. The increase is due to a higher level
of working capital indebtedness during the year.

         Income Taxes

         The Company did not recognize income tax benefits arising from the
1998 net loss. The unrecognized tax benefits, together with unrecognized tax
benefits arising from net operating losses

                                                    
                                    - 30 -

<PAGE>



in prior years, would be utilized with the generation of approximately $7.0
million in future pre-tax income and adjustments.

         The Company has certain nondeductible annual expenses which would be
added as adjustments to pretax income to calculate taxes. These expenses
include nondeductible amortization of approximately $2.1 million, most of
which arises from goodwill associated with the Varsity acquisition.

Pro Forma Year Ended December 31, 1997 Compared to
Pro Forma Year Ended December 31, 1996

         Revenues

         Pro forma revenues for the year ending December 31, 1997 increased
$13.3 million, or 8%, to $174.1 million from $160.8 million in 1996. The
Company achieved revenue gains in its Institutional segment while experiencing
offsetting declines in the Retail and Licensing segments.

         Institutional segment revenues increased 12%, or $16.7 million, from
$136.9 million on a pro forma basis for 1996 to $153.6 million on a pro forma
basis for 1997. Most of the gains related to the operations acquired from
Varsity. Uniforms and accessories sales increased by $7.0 million due to
volume growth. Growth in the number of summer camp participants contributed an
additional $6.0 million to camp and event revenues. Institutional sales of
athletic products and reconditioning services increased $3.7 million as the
Company experienced volume gains from its newly introduced line of athletic
practice clothing and from most of its core football protective product lines.
These gains more than offset a decline in sales of youth athletic products.

         Retail segment revenues declined by 15%, or $3.3 million, from $21.4
million for 1996 to $18.1 million for 1997. The decline was principally due to
decreased volume of sports collectible products. The Company believes the
principal reasons for the decline related to an industry-wide cautiousness in
making inventory commitments for licensed sports products.

         Royalty income Licensing in 1997 decreased by 4%, or $0.1 million.
The Company recognized gains in MacGregor royalties from Kmart and royalties
from its Riddell apparel and sock licenses. These gains were offset by royalty
declines due to the expiration of a MacGregor license with Thom McAn which had
generated $0.3 million in prior years and the cessation of royalty receipts
from the Company's Riddell footwear licensee. As described elsewhere in this
report, the Company has assigned certain future royalties from its Riddell
footwear licensee, for up to ten years, to other parties to settle certain
litigation. While the license has recently been transferred to a new licensee,
the assignment remains in place.

         Gross Profit

         Pro forma gross profit for 1997 was $71.0 million, an increase over
pro forma gross profit of $68.4 million for 1996. Gross margins, on a pro
forma basis, decreased as a percentage of revenues to 40.8% in 1997 from 42.5%
for 1996. There were several factors which influenced the

                                                    
                                    - 31 -

<PAGE>



decline in gross margin rates. Pro forma gross profit was reduced by $0.8
million of charges stemming from a revaluation of inventory in June 1997 and
included in Varsity's preacquisition results. There was an increase in freight
and overtime costs incurred in the Institutional segment's cheerleading
uniform business in order to overcome certain production delays which occurred
during the year. The decline in sales of sports collectibles discussed above
significantly impacted gross profit and the margins as these products carried
higher than average margins. Sales of the Company's new line of practice wear
reduced gross margins, as expected, since these products carry a lower margin
than the Company's historical product lines. Introduction of the practice wear
line also negatively impacted 1997 margins due to start up costs of related
screen printing operations and introductory pricing. Finally, while the volume
of the Company's reconditioning business increased, margins were down due to
higher costs associated with the initial year of reconditioning work on
equipment from new customers gained during the year and an increase in
material and parts usage.

         Selling, General and Administrative Expenses

         On a pro forma basis, selling, general and administrative expenses
for 1997 increased by $7.6 million to $63.0 million from pro forma expenses of
$55.5 for 1996. Expenses relating to various litigations (exclusive of product
liability matters) that were resolved during 1997 amounted to $2.8 million for
1997 and $1.2 million for 1996. Expenses for 1997 also included a charge of
$0.6 million relating to in-the-money Riddell stock options contractually
granted to certain of the Company's employees who previously were employed by
Varsity (as further discussed in Note 9 of the Consolidated Financial
Statements) and a charge of $0.4 million stemming from a revaluation of
receivable reserves in June 1997 that was included in Varsity's preacquisition
results. Pro forma selling, general and administrative expenses excluding
these items were relatively stable as a percentage of revenues, increasing
from 33.7% of revenues for 1996 to approximately 34.0% of revenues in 1997.

         Interest Expense

         Interest expense computed on a pro forma basis for 1997 increased 2%,
or $0.2 million over pro forma 1996 levels. The increase was principally due
to increases in base interest rates relating to the Company's revolving line
of credit. Historical interest expense, excluding any pro forma adjustments
for 1997, included a $3.0 million onetime commitment fee for bridge financing
relating to the Varsity acquisition.

         Income Taxes

         The pro forma net loss for 1997 did not include any tax benefit. Pro
forma tax expense for 1996 was reduced by the benefit of net operating loss
carryforwards available for recognition during the year. Even though the pro
forma operating results for 1996 resulted in a loss before taxes, tax expense
of approximately $0.6 million would have been included if net operating loss
carryforwards had not been available to offset the expense. The tax would have
been due to adjustments for nondeductible expenses, as discussed above in the
1998 to 1997 comparison of operating results.


                                                    
                                    - 32 -

<PAGE>



MacGregor Trademark

         The Company acquired certain rights to the MacGregor trademark as
part of an acquisition in 1988 at an allocated cost of approximately $18.0
million. The Company is amortizing the trademark rights over a period of forty
years. The unamortized cost of this asset included in intangible assets at
December 31, 1998 was approximately $13.2 million. ( See Note 7 of the
Consolidated Financial Statements). The Company considers licensing revenues
derived from the MacGregor trademark rights to be a material part of its
business. A material decline in the royalties from the MacGregor trademark
rights could have a material adverse effect on the Company's results of
operations. Furthermore, if there were a material decline in the revenues from
the MacGregor trademark, then the carrying amount of the MacGregor trademark
rights could be deemed to have been impaired. A write-down for such impairment
could have a material adverse effect on the Company's financial position and
results of operations.

Liquidity and Capital Resources

         Several factors affect the seasonality of the Company's working
capital needs. A significant portion of the products in the Company's
Institutional segment are sold throughout the year on dated payment terms,
with related receivables becoming due during the following July to October
period when the school year begins. The Company incurs costs relating to its
camp business from the fourth quarter and into the second quarter as it
prepares for the upcoming camp season, while most revenue relating to camps is
collected in the June to August period. Additionally, the Company's debt
structure impacts the seasonality of its working capital demands as the
semiannual interest payments on its $115 million of 10.5% Senior Notes come
due each January and July.

           To finance these seasonal working capital demands, the Company
maintains a credit facility consisting of a revolving line of credit. The
outstanding balance on the credit facility follows the seasonal cycles
described above, increasing during the early part of the operating cycle in
the first and second quarters of each year and then decreasing from the late
second quarter and into the fourth quarter each year as collections are used
to reduce the outstanding balance. At December 31, 1998, the outstanding
balance under the credit facility was $4.4 million. There were no outstanding
borrowings at December 31, 1997 under the credit facility.

         The Company's current debt service obligations are significant and,
accordingly, the ability of the Company to meet its debt service and other
obligations will depend on its future performance and is subject to financial,
economic and other factors, some of which are beyond the Company's control.
Furthermore, due to the seasonality of working capital demands described
above, year over year growth in the Company's business and working capital
could lead to higher debt levels in future periods until the fall of each year
when the majority of dated receivables are collected.

         The Company has been in discussions with its bankers, keeping them
informed of its operating results including the strategic changes to its
business made in 1998 and the related impact on profitability and working
capital demand. The Company has obtained modifications to its loan agreement
which included changes to certain financial covenants at December 31, 1998.
Discussions with its bankers remain ongoing regarding similar modifications
for future periods as

                                                    
                                    - 33 -

<PAGE>



well as an increase in the revolving line above the current maximum of $35
million. Increases in the line of credit are being sought to provide working
capital needed for new initiatives, primarily products to be marketed under
the new Umbro license. Based upon past experience and its relationship with
its bankers, and based upon discussions to date, the Company believes that it
will be able to obtain modifications to its loan agreements to provide for
these needs.

Year 2000 Issues

         The Company, like virtually all companies and organizations, is faced
with addressing the Year 2000 issue which relates to the possibility that
computer systems and embedded computer chips may not be able to properly
process data which utilizes dates after December 31, 1999.

         The most significant Year 2000 issues facing the Company are
associated with the computer information systems used to plan, operate and
track its business. The Company has substantially completed the process of
assessing which of its information systems are subject to Year 2000 problems.
The status of corrective action being taken to minimize the impact of Year
2000 problems on each of the Company's four major computer information systems
is as follows:

         Helmet manufacturing and Retail segment operations: Year 2000 issues
are being addressed through a program to replace existing hardware and
software. The system replacement is part of an program, initiated in early
1997, to modernize this system and upgrade its capabilities. Thirty-three
percent of the subsystems have been fully implemented and are now operational.
Testing of parts of the remainder of the system has commenced and the
implementation of the system is scheduled for completion in the second quarter
of 1999.

         Institutional athletic product distribution and reconditioning
operations: Existing system software was upgraded and modified to address Year
2000 issues. The process is complete and in the fourth quarter of 1998 the
system was tested and certified by the vendor as Year 2000 compliant.

         Spirit products: Year 2000 issues are being addressed through a
program to replace existing software. The software replacement is also part of
an overall upgrade of system capabilities. The software has been installed and
the implementation process is underway. Completion of the implementation
process is scheduled for the second half of 1999.

         Camps and events: Year 2000 issues are being addressed through
corrective modifications of existing software. This process began in 1997 and
is estimated to be 85% to 90% complete. The remainder of the corrections and
Year 2000 testing of the system, are scheduled for completion in the third
quarter of 1999.

         The Company has other minor systems relating to its business for
which Year 2000 corrective action is in various stages of completion.

         The Company also faces Year 2000 problems relating to embedded
computer chips which control equipment used within the business such as
telephone equipment and a limited amount of machinery. The Company has
completed assessments of equipment considered most susceptible to

                                                    
                                    - 34 -

<PAGE>



Year 2000 issues and repair or replacement has been arranged for equipment
found to have Year 2000 problems. The process of assessing the remaining
equipment remains ongoing.

         The Company also faces Year 2000 issues with third parties. These
third parties include customers who purchase the Company's retail products and
suppliers of raw materials and finished goods, among others. The Company's
institutional products and services are sold to a large number of schools and
other customers, making it impractical to poll them in order to determine
their Year 2000 readiness. Because this customer base is large, the potential
of a negative impact may be lowered as none of these customers individually
account for a material portion of the Company's revenues. The Company has had
discussions with certain other key customers and vendors on this issue in
order to assess the impact their Year 2000 problems might have on the Company
and plan accordingly. However, the process of communications with key
customers and vendors remains ongoing.

         Expense for Year 2000 remedial programs for the years ended December
31, 1997 and 1998 was $200,000 and $250,000, respectively. A similar level of
annual expense is anticipated for 1999. The Company has also incurred capital
expenditures for computer hardware and software related to the system
replacements described above of approximately $150,000 and $800,000 for the
years ended December 31, 1997 and 1998, respectively. These capital
expenditures include system upgrade and modernization aspects of the
replacement programs. Approximately $650,000 of similar capital expenditures
are anticipated for 1999.

         The Company's remedial actions are intended to reduce the possibility
of a disruption of the Company's business due to Year 2000 issues. While the
Company believes these actions will be successful, the issues involved are
full of complexities and uncertainties so there can be no assurance that a
disruption of its business will not occur. If a material disruption of the
Company's business were to occur it could have a material adverse impact on
the Company's results of operations, liquidity and financial condition.

         At present, the Company's Year 2000 efforts have been directed toward
the goal of reducing or eliminating the potential for Year 2000 problems. The
Company has not yet established a contingency plan that provides for alternate
procedures should any of its primary efforts fail. The Company does intend to
develop contingency plans as it assesses its progress during the remainder of
1999.

         Readers are cautioned that forward-looking statements contained in
the Year 2000 disclosure should be read in conjunction with the Company's
Special Cautionary Notice Regarding Forward-Looking Statements located at the
beginning of this Report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Item 14(a) in Part IV and page F-1 of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

                                                    
                                    - 35 -

<PAGE>



         None.

                                   PART III

         The Registrant hereby incorporates by reference in response to Part
III its Proxy Statement to be filed pursuant to Regulation 14A by April 30,
1999 (except to the limited extent the rules and regulations of the Commission
authorize certain sections of such Proxy Statement not to be incorporated
herein by reference, as specifically indicated in such Proxy Statement).

                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

         (a)(1) and (a) (2) Financial Statements and Schedules to Financial 
          Statements

                  The financial statements, notes thereto, financial statement
                  schedules and accountants' report listed in the "Index to
                  Financial Statements" on page F-1 of this Report are filed
                  as part of this Report.

         (a)(3)   Exhibits

                  The exhibits listed in the Exhibit Index attached to this
                  Report are filed as part of this Report.

         (b) Reports on Form 8-K

                  The Company filed a form 8-K on November 23, 1998, dated the
                  same date with respect to the commencement of trading of the
                  Company's Common Stock on the American Stock Exchange.

                  The Company filed a form 8-K on December 1, 1998 dated
                  November 24, 1998, with respect to the entering into of the
                  license agreement with UMBRO International, Inc., the entering
                  into of the expense sharing arrangement with Signal Apparel 
                  Company, Inc. and the resignation of an executive officer.


                                                    
                                    - 36 -

<PAGE>




                                  SIGNATURES

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

                                          RIDDELL SPORTS INC.


Dated:  March 30, 1999                   By:    /s/ DAVID MAUER
                                                ----------------------------
                                                 David Mauer
                                                 Chief Executive Officer


         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>

<S>                                        <C>                                            <C>    
/s/ DAVID MAUER                               Chief Executive Officer                         March 30, 1999
------------------------------------      and Director                 
David M. Mauer                            (Principal Executive Officer)
                                           

/s/ ROBERT  NEDERLANDER                       Chairman of the Board                           March 30, 1999
------------------------------------
Robert Nederlander

/s/ JEFFREY G. WEBB                           Vice Chairman of the Board                      March 30, 1999
------------------------------------      and President and Chief                           
Jeffrey G. Webb                           Operating Officer of       
                                          Varsity Spirit Corporation 
                                          

/s/ LEONARD TOBOROFF                          Vice President and Director                     March 30, 1999
------------------------------------
Leonard Toboroff

/s/ DAVID GROELINGER                          Executive Vice President and                    March 30, 1999
------------------------------------      Chief Financial Officer       
David Groelinger                          (Principal Financial Officer)
                                          

/s/ LAWRENCE SIMON                            Senior Vice President                           March 30, 1999
------------------------------------      (Principal Accounting Officer)     
Lawrence Simon                            

/s/ DON KORNSTEIN                             Director                                        March 30, 1999
------------------------------------ 
Don Kornstein


                                                    
                                    - 37 -

<PAGE>



/s/ JOHN MCCONNAUGHY, JR.                     Director                                        March 30, 1999
---------------------
John McConnaughy, Jr.

/s/ GLENN E. SCHEMBECHLER                     Director                                        March 30, 1999
----------------------   
Glenn E. Schembechler

---------------------                         Director                                        March ___, 1999
Arthur N. Seessel

                                                    
                                    - 38 -

<PAGE>




Item 14(c)       PART IV
                 Exhibit Index


</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER           DESCRIPTION
<S>              <C>    
2.1              Asset Purchase Agreement, dated as of April 11, 1988, among
                 Riddellink Holding Corporation, EN&T Associates, Inc.,
                 Netlink Inc., Riddell, Inc. (predecessor corporation),
                 Equilink Licensing Corp., and MacGregor Sporting Goods, Inc.,
                 as amended on April 18, 1988 (the formal trademark
                 assignments and license agreements implementing this
                 agreement are omitted) (2) and Amendment thereto, dated March
                 1992. (3)

2.2              Agreement and Plan of Merger, dated as of May 5, 1997, by and among Riddell
                 Sports Inc., Cheer Acquisition Corp. and Varsity Spirit Corporation. (31)

2.3              Asset Purchase Agreement dated as of December 1, 1994 by and between Intropa
                 International U.S.A., Inc., Elisabeth Polsterer and Varsity/Tours, Inc. (27)

2.4              Asset Purchase Agreement dated as of May 15, 1996 by and between United
                 Special Events, Inc., Michael Olmstead and Varsity USA, Inc. (26)

3.1              Amended and Restated Articles of Incorporation of Riddell Sports Inc. (20)

3.2              First Amended and Restated Bylaws of Riddell Sports Inc. (18)

3.3              Certificate of Incorporation of All American Sports Corporation (formerly known
                 as Ameracq Corp). (33)

3.4              Bylaws of All American Sports Corporation (formerly known as Ameracq Corp).
                 (33)

3.5              Certificate of Incorporation of Cheer Acquisition Corp. (33)

3.6              Bylaws of Cheer Acquisition Corp. (33)

3.7              Certificate of Incorporation of Equilink Licensing Corporation. (33)

3.8              Bylaws of Equilink Licensing Corporation. (33)

3.9              Certificate of Incorporation of Proacq Corp. (33)

3.10             Bylaws of Proacq Corp. (33)

3.11             Certificate of Incorporation of RHC Licensing Corporation. (33)

3.12             Bylaws of RHC Licensing Corporation. (33)

3.13             Amended and Restated Articles of Incorporation of Riddell, Inc. (formerly
                 known as EN&T Associates Inc.). (33)

3.14             Bylaws of Riddell, Inc. (formerly known as EN&T Associates Inc.). (33)

</TABLE>

                                                    
                                    - 39 -

<PAGE>



<TABLE>
<S>              <C>    
3.15             Amended and Restated Articles of Incorporation of Ridmark Corporation. (33)

3.16             Bylaws of Ridmark Corporation. (33)

3.17             Charter of International Logos, Inc. (33)

3.18             Bylaws of International Logos, Inc. (33)

3.19             Charter of Varsity/Intropa Tours, Inc. (33)

3.20             Bylaws of Varsity/Intropa Tours, Inc. (33)

3.21             Amended and Restated Charter of Varsity Spirit Fashions & Supplies, Inc. (33)

3.22             Bylaws of Varsity Spirit Fashions & Supplies, Inc. (33)

3.23             Amended and Restated Charter of Varsity USA, Inc. (33)

3.24             Bylaws of Varsity USA, Inc. (33)

4.1              Indenture, dated as of June 19, 1997, between Riddell,
                 certain subsidiaries of Riddell Sports Inc., as guarantors,
                 and Marine Midland Bank, as Trustee. (23)

9.1              Voting Trust Agreement dated May 1991. (2)

10.1             Settlement Agreement, dated April 9, 1981, among McGregor-Doniger Inc.,
                 Brunswick Corporation and The Equilink Corporation. (2)

10.2             1997 Stock Option Plan. (22)

10.3             License Agreement, dated as of April 18, 1988, among MacMark Corporation,
                 Netlink, Inc. and MacGregor Sporting Goods, Inc. (2) as amended July 30, 1992
                 (16) and November __, 1992. (16)

10.4             Agreement, made January 23, 1989, between Equilink Licensing Corp. and
                 Kmart Corporation, with supplemental agreements dated November 16, 1989,
                 August 30, 1990 (2), June 30, 1994 (12) and June 30, 1998 . (1)

10.5             Lease, dated November 12, 1993, between the International Brotherhood of
                 Painters and Allied Trade Union and Industry Pension Fund and Riddell, Inc.,
                 (16); and amendment dated March 20, 1995 (16); and Amendment dated
                 September 19, 1996. (21)

10.6             Lease Agreement, dated November 2, 1984 by and between ADI Real Estate
                 Joint Venture No. 2 (predecessor to The School Employees Retirement Board of
                 Ohio) and Alamo Athletics Inc. (predecessor to All American Sports
                 Corporation), and Amendments thereto, dated January 30, 1990. (3)

10.7             Lease Agreement, dated as of September 1, 1988 by and between Exeter
                 Management Corporation and All American. (3)
</TABLE>


                                                    
                                                      - 40 -

<PAGE>


<TABLE>
<S>              <C>    
10.8             Lease Agreement, dated April 1991, by and between Stroudsburg Park
                 Associates and All American Corp. (3); as amended March 31, 1995. (18)

10.9             Lease, dated as of September 1, 1968, by and between Munro M. Grant and the
                 All American Company and Extension and Amendment of Lease, dated July 11,
                 1989. (3)

10.10            Lease dated December 12, 1991, between O'Shanter Resources Inc. and All
                 American Sports, Inc. (3)

10.11            Lease, dated May 5, 1986, by and between Paul Goldstein,
                 Nathan Hoffenberg, All American and Medalist Industries, (3);
                 amendment dated January 30, 1997. (21)

10.12            Lease, dated October 28, 1987, as amended and extended by letter dated October
                 31, 1991, by and between GABT Developments Ltd. and Marcan Ltd. (a division
                 of All American ), (3); amendment dated February 6, 1997. (21)

10.13            NFL Promotional Rights Agreement, dated June 1, 1990, and General Retail
                 Licensing agreement dated March 15, 1990 and referred to in the NFL
                 Promotional Rights Agreement, each between Riddell Inc. and the National
                 Football League Properties, Inc. (2); as supplemented January 20, 1994. (9)

10.14            1991 Stock Option Plan (2) as amended by amendments described in Riddell
                 Sports Inc.'s proxy materials for its annual stockholders meetings held on August
                 20, 1992, September 30, 1993, June 27, 1996 and June 24, 1997.

10.15            License Agreement dated May 9, 1991 between MacMark
                 Corporation and MacGregor Sports Products, Inc. (2);
                 amendment dated February 1992 (3), amendment dated July 30,
                 1992, amendment dated November 1, 1992 (7) and Memorandum of
                 Understanding dated July 29, 1996 (21).

10.16            Perpetual License and Trademark Maintenance Agreements among MacMark
                 Corporation, Equilink Licensing Corporation and BSN Corp. each dated
                 February 19, 1992 (3) and amendment dated November 1, 1992 (7).

10.17            Master Agreement by and among MacGregor Sports Products, Inc., BSN Corp.
                 and MacMark Corporation dated February 19, 1992 (3); amendment No. 1 dated
                 November 1, 1992. (16)

10.18            License Agreement between Equilink Licensing Corporation and MacGregor
                 Sports Products, Inc. dated May 9, 1991; Amendment thereto dated December 3,
                 1991 (3) and Amendment dated July 30, 1992 (5); Memorandum of
                 Understanding dated July 20, 1996 (21).

10.19            Agreement, dated April 1, 1995, between Riddell, Inc. and the Amalgamated
                 Clothing Textile Workers Union AFL-CIO. (18)

</TABLE>

                                                    
                                    - 41 -

<PAGE>



<TABLE>
<S>              <C>    
10.20            Employment Agreement, dated June 22, 1992, between Riddell Sports Inc. and
                 Robert F. Nederlander (5); amended July 27, 1994 (12).

10.21            Employment Agreement, dated June 22, 1992, between Riddell Sports Inc. and
                 Leonard Toboroff (5); amended July 27, 1994. (12)

10.22            Lease, dated September 10, 1992, and Amendment, dated October
                 1, 1992, and Amendment, dated October 22, 1992, between All
                 American Sports Corporation and Ronald K. Howell d/b/a
                 Lakewood Land and Cattle Company. (6)

10.23            Lease Addendum letter, dated February 13, 1992, between All American Sports
                 Corporation and Paul Goldstein and Nathan Hoffenberg. (6)

10.24            License Agreement, dated October 1, 1992, between All American Sports
                 Corporation and NOCSAE. (7)

10.25            Employment Agreement, dated March 19, 1993, commencing March 25, 1993
                 between David Mauer and Riddell Sports Inc. (7), as amended January 17, 1994;
                 November 1, 1994 (14); November 28, 1994 (16)

10.26            Warrant to purchase 150,000 shares of Riddell Sports Inc.'s Common Stock in
                 favor of M.L.C. Partners Limited Partnership, dated January 16, 1994. (8)

10.27            Settlement agreement, dated February 15, 1994, among Riddell,
                 Inc., Riddell Sports Inc., RHC Licensing Corporation, Ridmark
                 Corporation, Pursuit Athletic Footwear, Inc., Riddell
                 Athletic Footwear, Inc., Ernie Wood, Harry Wood, Silver Eagle
                 Holdings, Ltd., Save Power, Limited, Extravest Holdings
                 Limited, Frederic Brooks, Donald Engel, Alan Tessler, Alan
                 Hirschfield, Jeffrey Steiner, Robert Nederlander, Leonard
                 Toboroff, Jeffrey Epstein, John McConnaughy, Connecticut
                 Economics Corporation, Stephen Tannen, Woodco Sports, Inc.,
                 Arthur Tse, Silver Top Limited, Billion Nominees, Limited,
                 Weston Holdings Limited. (9)

10.28            Employment Agreement, dated as of February 1, 1994, between Riddell, Inc., and
                 Dan Cougill (11), as amended February 1, 1995. (17)

10.29            Warrant to Purchase Common Stock in favor of NBD Bank N.A., dated February
                 10, 1995. (15)

10.30            Employment Agreement, dated as of March 7, 1996, between
                 Riddell Sports Inc. and David Groelinger (19), as amended
                 March 7, 1998 (34).

10.31            Note Purchase Agreement, dated October 30, 1996, between Riddell Sports Inc.
                 and Silver Oak Capital, L.L.C., as amended by letter agreement dated May 2,
                 1997. (20)

10.32            Subordinated Guaranty, dated November 8, 1996, among Riddell, Inc., Equilink
                 Licensing Corporation, and RHC Corporation, All American Sports Corporation,
                 Ridmark Corporation, Proacq Corp. and SharCo Corporation. (20)
</TABLE>


                                                    
                                    - 42 -

<PAGE>



<TABLE>
<S>              <C>    
10.33            Registration Rights Agreement, dated November 8, 1996, between Riddell Sports
                 Inc. and Silver Oak Capital L.L.C. (20)

10.34            Shareholders Agreement, dated as of May 5, 1997, between Riddell Sports Inc.,
                 Cheer Acquisition Corp. and certain shareholders of Varsity Spirit Corporation.
                 (32)

10.35            Stock Purchase Agreement, dated as of May 5, 1997, between Riddell Sports
                 Inc., Cheer Acquisition Corp. and Jeffrey G. Webb (32)

10.36            Stock Purchase Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and Gregory C. Webb (32)

10.37            Stock Purchase Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and W. Kline Boyd (32)

10.38            Stock Purchase Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and J. Kristyn Shepherd (32)

10.39            Employment Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and Jeffrey G. Webb (32)

10.40            Employment Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and Gregory C. Webb (32)

10.41            Employment Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and W. Kline Boyd (32)

10.42            Employment Agreement, dated as of May 5, 1997, between Riddell Sports Inc.
                 and J. Kristyn Shepherd (32)

10.43            Registration Rights Agreement, dated as of June 19, 1997, between Riddell
                 Sports Inc., and NationsBanc Capital Markets, Inc. and First Chicago Capital
                 Markets, Inc., as Purchasers. (23)

10.44            Credit Agreement among Riddell Sports Inc., as Borrower, the subsidiaries of
                 Riddell, as Guarantors, and the Lenders identified therein, and NBD Bank, as
                 Administrative Agent, and Nations Bank, N.A., as Documentation Agent, dated
                 as of June 19, 1997 (23), as amended March 31, 1998 (35) and December 31,
                 1998. (1)

10.45            Sales Representative Agreement between Varsity Spirit Fashions & Supplies,
                 Inc. and Stuart Educational Products, Inc., along with Security Agreement
                 between Varsity Spirit Fashions & Supplies, Inc. and Gary Stuart and Patti
                 Stuart, both individually and collectively doing business as Stuart Educational
                 Products. (24)

10.46            Programming Agreement between Universal Cheerleaders Association and
                 ESPN, Inc. (24).

</TABLE>

                                                    
                                    - 43 -

<PAGE>



<TABLE>
<S>              <C>    

10.47            Varsity Spirit Corporation 401(k) Profit Sharing Plan. (26)

10.48            Employment Agreement, dated December 1, 1994, between Varsity Spirit
                 Corporation and Deana Roberts. (27)

10.49            Service Agreement dated as of May 15, 1996 between Varsity Spirit Corporation
                 and Michael Olmstead. (28)

10.50            Settlement Agreement, dated June 20, 1997, by and among
                 Riddell Sports Inc., RHC Licensing Corporation, Riddell,
                 Inc., Equilink Licensing Corporation, Ridmark Corporation,
                 MacMark Corporation, NBD Bank, f/k/a NBD Bank, N.A., MLC
                 Partners Limited Partnership, Robert E. Nederlander, Leonard
                 Toboroff, John McConnaughy, Jr., Lisa J. Marroni, Frederic H.
                 Brooks, Connecticut Economics Corporation, Robert Weisman,
                 Bruce H. Levitt, as Bankruptcy Trustee of M. Holdings
                 Corporation, Paul Swanson, as Bankruptcy Trustee of MGS
                 Acquisition, Inc. and MacGregor Sports, Inc., Official
                 Unsecured Creditors' Committee of MacGregor Sporting Goods,
                 Inc., M. Holdings Corporation, f/k/a MacGregor Sporting Goods
                 Inc., Innovative Promotions, Inc., Ernest Wood, Jr., Harry
                 Wood, Pursuit Athletic Footwear, Inc., and Riddell Athletic
                 Footwear, Inc. (33)

10.51            License Agreement dated March 4, 1998 between Footstar Corp. and Equilink
                 Licensing Corporation (34)

10.52            Umbro License Agreement, dated as of November 23, 1998, between Umbro
                 International, Inc. and Varsity Spirit Fashions & Supplies, Inc. (1)

10.53            Asset and USISL Stock Purchase Agreement, dated as of November 1998,
                 between Umbro International, Inc. and Varsity Spirit Fashions & Supplies, Inc.
                 (1)

10.54            Signal/Riddell Expense Sharing Arrangement dated November 23, 1998, between
                 Signal Apparel Company, Inc. and Riddell Sports Inc. (1)

10.55            Industrial Lease and Agreement dated October 1, 1998, between Laphiew Gin
                 Company and Varsity Spirit Corporation. (1)

21               List of subsidiaries. (33)

23               Consent of Grant Thornton LLP regarding Riddell Sports Inc. (1)

27               Financial data schedule for December 31, 1998 and the year then ended (1).
</TABLE>

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

(1) Filed herewith. 

(2) Incorporated by reference to Riddell Sports Inc.'s Registration Statement
    on Form S-1 (Commission File No. 33-40488) effective June 27, 1991 
    (including all pre-effective amendments to the Registration Statement).


                                                    
                                    - 44 -

<PAGE>



<TABLE>
<S>          <C>    

(3)          Incorporated by reference to Riddell Sports Inc.'s Form 10-K report (Commission
             File No. 0-19298) for the year ended December 31, 1991.

(4)          Incorporated by reference to Riddell Sports Inc.'s Registration Statement on Form S-
             1 (Commission File No. 33-40488) effective June 17, 1992 (including all pre-
             effective amendments to the Registration Statement).

(5)          Incorporated by reference to Riddell Sports Inc.'s Form 10-Q
             report (Commission File No. 0-19298) for the quarter ended June
             30, 1992.

(6)          Incorporated by reference to Riddell Sports Inc.'s Form 10-Q
             report (Commission File No. 0-19298) for the quarter ended
             September 30, 1992.

(7)          Incorporated by reference to Riddell Sports Inc.'s Form 10-K report (Commission File
             No. 0-19298) filed on March 30, 1993.

(8)          Incorporated by reference to Riddell Sports Inc.'s Post Effective Amendment No. 2
             to Form S-1 Registration Statement (Commission File No. 33-47884) filed on
             January 28, 1994.

(9)          Incorporated by reference to Riddell Sports Inc.'s Form 10-K for the year ended
             December 31, 1993.
(10)         Incorporated by reference to Riddell Sports Inc.'s Form 10-K/A
             constituting Amendment No. 1 to Form 10-K for the year ended
             December 31, 1993, filed June 21, 1994.

(11)         Incorporated by reference to Riddell Sports Inc.'s Form 10-Q for
             the quarter ended March 31, 1994.

(12)         Incorporated by reference to Riddell Sports Inc.'s Form 10-Q for
             the quarter ended June 30, 1994.

(13)         Incorporated by reference to Riddell Sports Inc.'s Form 8-K filed July 3,
             1994. 

(14)         Incorporated by reference to Riddell Sports Inc.'s Form 10-Q for
             the quarter ended
             September 30, 1994.

(15)         Incorporated by reference to Riddell Sports Inc.'s Form 8-K filed January 11, 1994.

(16)         Incorporated by reference to Riddell Sports Inc.'s Form 10-K for the year ended
             December 31, 1994.

(17)         Incorporated by reference to Riddell Sports Inc.'s Form 8-K dated June 23, 1995.

(18)         Incorporated by reference to Riddell Sports Inc.'s Form 10-K for the year ended
             December 31, 1995, dated November 11, 1996.

(19)         Incorporated by reference to Riddell Sports Inc.'s Form 10-Q dated May
             14, 1996.

</TABLE>

                                                    
                                                      - 45 -

<PAGE>

<TABLE>
<S>          <C>    
(20)         Incorporated by reference to Riddell Sports Inc.'s Form 10-Q
             dated November 11, 1996.

(21)         Incorporated by reference to Riddell Sports Inc.'s Form 10-K for
             the year ended December 31, 1996.

(22)         Incorporated by reference to Riddell Sports Inc.'s Proxy
             Statement filed June 6, 1997.

(23)         Incorporated by reference to Riddell Sports Inc..'s Form 8-K dated June
             19, 1997. 

(24)         Incorporated by reference to the Varsity Spirit Corporation's
             Registration Statement
             on Form S-1 (Registration Statement No. 33-44431) filed on December 10, 1991.

(25)         Incorporated by reference to the Varsity Spirit Corporation's Amendment No. 1 to
             Registration Statement on Form S-1 (Registration Statement No. 33-44431) filed on
             January 21, 1992.

(26)         Incorporated by reference to the Varsity Spirit Corporation's
             Annual Report on Form 10-K for the year ended March 31, 1993
             (File No. 0-19790).

(27)         Incorporated by reference to the Varsity Spirit Corporation's
             Transition Report on Form 10-K for the transition period April 1,
             1994 to December 31, 1994 (File No. 0- 19790)

(28)         Incorporated by reference to the Varsity Spirit Corporation's
             Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
             (File No. 0-19790).

(29)         Incorporated by reference to the Varsity Spirit Corporation's
             Quarterly Report on Form 10-Q for the quarter ended September 30,
             1996 (File No. 0-19790).

(30)         Incorporated by reference to the Varsity Spirit Corporation's
             annual Report on Form 10-K for the year ended December 31, 1996
             (File No. 0-19790).

(31)         Incorporated by reference to Riddell Sports Inc.'s Report on Form
             8-K filed May 8, 1996.

(32)         Incorporated by reference to Varsity Spirit Corporation Schedule
             13D filed June 25, 1997.

(33)         Incorporated by reference to Riddell Sports Inc.'s Registration
             Statement on Form S- 4 (Registration No. 333-31525) filed July
             18, 1997.

(34)         Incorporated by reference to Riddell Sports Inc.'s Form 10-K
             Report for the year ended 1997 (file No. 0-19298).

(35)         Incorporated by reference to Riddell Sports Inc.'s Form 10-Q dated May
             15, 1998.
</TABLE>

                                                    
                                    - 46 -


<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                            ------
         <S>                                                                                                <C>
         Report of Independent Certified Public Accountants..........................................         F-2

         Consolidated Balance Sheets at December 31, 1998 and 1997 ..................................         F-3

         Consolidated Statements of Operations for the years ended
             December 31, 1998, 1997 and 1996 .......................................................         F-4

         Consolidated Statements of Shareholders' Equity for the years
             ended December 31, 1998, 1997 and 1996 .................................................         F-5

         Consolidated Statements of Cash Flows for the years ended
             December 31, 1998, 1997 and 1996 .......................................................         F-6

         Notes to Consolidated Financial Statements..................................................         F-7



         Financial Statement Schedules

             Report of Independent Certified Public Accountants on Schedule..........................         S-1

             Schedule II - Valuation and Qualifying Accounts.........................................         S-2

             All other financial statement schedules are omitted as the required information is 
             presented in the financial statement or the notes thereto or is not necessary.

</TABLE>
                                     F-1

<PAGE>






              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS









Board of Directors
Riddell Sports Inc.


         We have audited the accompanying consolidated balance sheets of
Riddell Sports Inc. (a Delaware corporation) and Subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the management of Riddell Sports Inc. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Riddell Sports Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.




                                                            GRANT THORNTON LLP


Chicago, Illinois
February 19, 1999, except for Note 17
  as to which the date is March 16, 1999



                                      F-2

<PAGE>



                     RIDDELL SPORTS INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                ------------------------ 
                                                                                 1998             1997
                                                                               -----------      -----------
<S>                                                                           <C>            <C>    
                                ASSETS (Note 8)
Current assets:
   Cash ..............................................................        $  1,752        $   1,011
   Accounts receivable, trade, less allowance for doubtful
     accounts ($1,302 and $824 respectively) (Note 4) ................          28,016           26,425
   Inventories (Note 5) ..............................................          28,763           24,066
   Prepaid expenses ..................................................           6,493            6,800
   Other receivables .................................................           1,644            1,562
   Deferred taxes (Note 12)...........................................           1,253            1,358
                                                                              --------        ---------
           Total current assets ......................................          67,921           61,222
Property and equipment, less accumulated depreciation (Note 6) .......           7,871            7,823
Intangible assets and deferred charges, less accumulated
   amortization (Note 7) .............................................         108,735          112,118
Other assets .........................................................           1,684              598
                                                                              --------        ---------
                                                                              $186,211        $ 181,761
                                                                              ========        =========


<CAPTION>

                     LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                          <C>              <C>              

Current liabilities:
   Accounts payable ..................................................       $  12,744        $   8,377
   Accrued liabilities (Note 11) .....................................          11,253           10,717
   Customer deposits .................................................           5,961            4,529
                                                                              --------       ----------
           Total current liabilities .................................          29,958           23,623
Long-term debt, less current portion (Note 8) ........................         126,900          122,500
Deferred taxes (Note 12) .............................................             348              453
Other liabilities (Note 11) ..........................................           3,554            3,060
Commitments and contingent liabilities (Notes 10 and 11)

Shareholders' equity (Note 9):
   Preferred stock, $.01 par; authorized 5,000,000 shares; none issued            --               --
   Common stock, $.01 par; authorized 40,000,000 shares; issued
     and outstanding 9,258,957 and 9,079,154 shares, respectively ....              93               91
   Capital in excess of par ..........................................          36,849           36,386
   Accumulated deficit ...............................................         (11,491)          (4,352)
                                                                                25,451           32,125
                                                                              --------        ---------
                                                                              $186,211        $ 181,761
                                                                              ========        =========
</TABLE>



                See notes to consolidated financial statements


                                      F-3

<PAGE>



                     RIDDELL SPORTS INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                                Years ended December 31,
                                                                                ------------------------
                                                                            1998          1997          1996
                                                                          ---------    ----------    -------
<S>                                                                       <C>          <C>           <C>    
Net revenues:
   Net sales, products and reconditioning............................      $136,283      $103,583      $69,888
   Camps and events..................................................        48,704        32,302           -
   Royalty income....................................................         1,613         2,388        2,494
                                                                          ---------    ----------    ---------
                                                                            186,600       138,273       72,382
                                                                          ---------    ----------    ---------
Costs of revenues:
   Products and reconditioning.......................................        79,611        58,718       38,813
   Camps and events..................................................        33,930        21,957           -
                                                                          ---------    ----------    --------
                                                                            113,541        80,675       38,813
                                                                          ---------    ----------    ---------
Gross profit.........................................................        73,059        57,598       33,569
Selling, general and administrative expenses.........................        64,617        46,278       27,853
Other charges........................................................           925            -            -
                                                                          ---------    ----------    --------
Income from operations...............................................         7,517        11,320        5,716
Interest expense (Note 8)............................................        14,656        11,879        2,763
                                                                          ---------    ----------    ---------
Income (loss) before taxes and extraordinary item....................        (7,139)         (559)       2,953
Income taxes.........................................................             -            -           110
                                                                          ---------    ----------    ---------
Net income (loss)....................................................       ($7,139)        ($559)      $2,843
                                                                          =========    ==========    =========

Earnings (loss) per share:
   Basic   ..........................................................        ($0.78)       ($0.07)       $0.35
   Diluted ..........................................................        ($0.78)       ($0.07)       $0.33

Weighted average number of common and
   common equivalent shares outstanding
     Basic ..........................................................         9,134         8,585        8,068
     Diluted.........................................................         9,134         8,585        8,730

</TABLE>



                See notes to consolidated financial statements


                                       F-4

<PAGE>



                      RIDDELL SPORTS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                     Retained
                                              Common Stock        Additional         earnings          Total
                                            ------------------     paid in         (Accumulated     Shareholders'
                                            Shares      Amount     capital           deficit)         equity
                                            ------      ------     ---------        ----------       -----------
                                         


<S>                                     <C>           <C>         <C>               <C>             <C>    

Balance, January 1, 1996 ...........      8,068       $     81       $ 31,457       ($ 6,636)       $ 24,902
   Net income for the year .........       --             --             --            2,843           2,843
                                       --------       --------       --------       --------        --------
Balance, December 31, 1996 .........      8,068             81         31,457         (3,793)         27,745
   Compensation in connection
     with option grants ............       --             --              559           --               559
   Issuance of common stock upon
     exercise of stock options .....         25           --               60           --                60
   Sale of common stock,
     net of costs ..................        986             10          4,310           --             4,320
   Net (loss) for the year .........       --             --             --             (559)           (559)
                                       --------       --------       --------       --------        --------
Balance, December 31, 1997 .........      9,079             91         36,386         (4,352)         32,125
   Issuance of common stock
     upon exercise of stock
     options and warrants ..........         99              1            136           --               137
   Stock issued to employees .......         81              1            327           --               328
   Net (loss) for the period .......       --             --             --           (7,139)         (7,139)
                                       --------       --------       --------       --------        --------
Balance, December 31, 1998 .........      9,259       $     93       $ 36,849       ($11,491)       $ 25,451
                                       ========       ========       ========       ========        ========

</TABLE>



                 See notes to consolidated financial statements


                                       F-5

<PAGE>



                      RIDDELL SPORTS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                  Years ended December 31, 
                                                                           --------------------------------------
                                                                             1998          1997          1996
                                                                            ---------    ----------    -------
<S>                                                                       <C>          <C>           <C>    
Cash flows from operating activities:
   Net income (loss).................................................       ($7,139)        ($559)      $2,843
   Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
     Depreciation and amortization:
       Amortization of debt issue costs..............................           803           502           15
       Other depreciation and amortization...........................         5,713         4,010        2,193
     Stock options issued............................................             -           559           -
     Compensation expense for stock issued to employees..............           199            -            -
     Provision for losses on accounts receivable.....................           929           365          436
     Change in assets and liabilities (net
      of effects from acquisitions):
       (Increase) decrease in:
         Accounts receivable, trade..................................        (2,520)        6,426       (1,482)
         Inventories.................................................        (4,697)        1,400       (1,980)
         Prepaid expenses............................................           307         2,304          (10)
         Other receivables...........................................           (82)          975          199
         Other assets................................................           212            45           39
       Increase (decrease) in:
         Accounts payable............................................         4,367        (4,010)      (1,437)
         Accrued liabilities.........................................           664          (502)      (2,842)
         Customer deposits...........................................         1,432        (6,167)      (2,558)
         Other liabilities...........................................           494          (987)          -
                                                                          ---------    ----------    --------
           Net cash provided by (used in) operating activities.......           682         4,361       (4,584)
                                                                          ---------    ----------    ---------
Cash flows from investment activities:
   Capital expenditures..............................................        (2,494)       (1,814)      (1,139)
   Acquisitions   ...................................................             -       (91,245)          -
   Umbro license acquisition fee.....................................          (500)           -            -
   Other investments.................................................        (1,298)           -            -
   Contingent "earn-out" payments on prior acquisitions..............          (187)         (166)        (174)
                                                                          ---------    ----------    ---------
           Net cash used in investing activities.....................        (4,479)      (93,225)      (1,313)
                                                                          ---------    ----------    ---------
Cash flows from financing activities:
   Net borrowings under line-of-credit agreement.....................         4,400       (17,890)         (87)
   Proceeds from issuance of long-term debt..........................             -       115,000        7,500
   Debt issue costs..................................................             -        (6,220)        (761)
   Principal payments on long-term debt:
     Shareholders....................................................             -          (439)        (871)
     Banks and other.................................................             -        (5,313)        (142)
   Proceeds from issuance of common stock............................           138         4,380           -
                                                                          ---------    ----------    --------
         Net cash provided by financing activities...................         4,538        89,518        5,639
                                                                          ---------    ----------    ---------
Net increase (decrease) in cash......................................           741           654         (258)
Cash, beginning......................................................         1,011           357          615
                                                                          ---------    ----------    ---------
Cash, ending.........................................................        $1,752        $1,011         $357
                                                                          =========    ==========    =========

</TABLE>
                 See notes to consolidated financial statements


                                         F-6

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Summary of significant accounting policies:

         Principles of consolidation: The consolidated financial statements
include the accounts of Riddell Sports Inc. and its wholly-owned subsidiaries
(the "Company"). All significant intercompany accounts and transactions have
been eliminated.

         Business: The Company provides institutional sporting goods and 
school spirit products and services to educational and recreational
organizations through its national, direct sales force. The Company is the
leading manufacturer and reconditioner of football protective equipment and the
leading supplier of products and services to the school spirit industry. The
Company also markets miniature and full-size helmets for collectors and licenses
the Riddell and MacGregor trademarks for use on athletic footwear and apparel.
The Company operates primarily throughout the United States.

         Inventories: Inventories are stated at the lower of cost (determined 
on a first-in, first-out basis) or market and include material, labor and
factory overhead.

         Property and equipment: Property and equipment are stated at cost.
Depreciation is being computed using the straight-line method over the
estimated useful lives (principally 30 years for buildings and improvements
and 3 to 7 years for machinery and equipment) of the related assets.

         Intangible assets and deferred charges: Debt issue costs are
amortized to interest expense over the term of the related debt. Other
intangibles and deferred charges are being amortized by the straight-line
method over their respective estimated lives.

         Long-lived assets including goodwill and other intangible assets are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, the related assets'
carrying value is compared to the undiscounted estimated future cash flows
from the related operations.

         Income taxes: Deferred tax liabilities and assets are recognized for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities (excluding non-deductible goodwill) using
enacted tax rates in effect for the years in which the differences are
expected to become recoverable or payable.

         Revenues: Sales of products and reconditioning are generally recorded
upon shipment to customers. Camp and event revenues are recognized over the
term of the respective activity. Royalty income is generally recorded by the
Company when earned based upon contracts with licensees. These contracts
provide for royalties based upon the licensee's sales or purchases of covered
products, subject to periodic minimum amounts of royalties.

         Estimates: In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses for the periods reported. Actual results could differ from those
estimates. Estimates relating to contingent liabilities are further discussed
in Note 11.


                                       F-7

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         Concentration of credit risk: The Company earns the majority of its
revenues from sales to schools and other institutions. The Company maintains
reserves for potential losses on receivables from these institutions, as well
as receivables from other customers, and such losses have not exceeded
managements expectations.

         Earnings (loss) per share: Basic earnings (loss) per share is
computed by dividing earnings (loss) by the weighted average number of
outstanding common shares. Diluted earnings per share is computed by adjusting
earnings for effect of the assumed conversion of dilutive securities and
dividing the result by the weighted average number of common shares and common
equivalent shares relating to dilutive securities. Only outstanding shares are
considered in computing diluted loss per share. A reconciliation between the
numerators and denominators for these calculations follows:

<TABLE>
<CAPTION>

                                                                              Years ended December 31,
                                                                          ----------------------------------
                                                                            1998          1997        1996
                                                                          ---------    ----------    -------
                                                                                       (In thousands)
<S>                                                                       <C>          <C>           <C>    
  Earnings (loss) - numerator:
     Net income (loss)                                                      ($7,139)       ($ 559)     $ 2,843
     Effect of assumed conversion, when dilutive,
       of convertible debt - interest savings net of tax                        -              -            61
                                                                          ---------    ----------    ---------
             Numerator for diluted per share computation                    ($7,139)       ($ 559)      $2,904
                                                                          =========    ==========    =========

  Shares - denominator:
     Weighted average number of outstanding common shares                     9,134         8,585        8,068
     Weighted average common equivalent shares:
       Options and warrants, assumed exercise of dilutive options and
         warrants, net of treasury shares which could have been purchased from
         the proceeds of
         the assumed exercise based on average market prices                     -             -           480
       Convertible debt, assumed conversion when dilutive                        -             -           182
                                                                          ---------    ----------    ---------
             Denominator for diluted per share computation                    9,134         8,585        8,730
                                                                          =========    ==========    =========
</TABLE>

         The convertible debt, which has been outstanding since November 1996,
is described in Note 8 below. Options and warrants are described in Note 9
below. Options and warrants to purchase 89,500 shares of common stock with a
weighted average exercise price of $10.29 which were outstanding at December
31, 1996 were excluded from the computation of diluted earnings per share for
1996 as their inclusion would not have been dilutive because their exercise
prices were greater than the average market price of common shares for the
year.

         Segment information: Effective December 31, 1998, the Company adopted 
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosure About
Segments of an Enterprise and Related Information." SFAS No. 131 supersedes SFAS
No. 14, "Financial Reporting for Segments of a Business Enterprise", replacing
the "industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS No. 131 also requires disclosures about
products and services, geographic areas, and major customers. 1996 and 1997
segment disclosure have been restated to conform to SFAS No. 131.

         Capitalized software: Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use", is
effective for fiscal years beginning after December


                                       F-8

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15, 1998. SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use. The Company plans to adopt
SOP 98-1 beginning January 1, 1999.

2.   Acquisition

     On June 19, 1997 the Company acquired Varsity Spirit Corporation
("Varsity"). Varsity is a leading supplier of cheerleader and dance team
uniforms and accessories to the youth, junior high, high school and college
markets. Varsity is also a leading operator of cheerleader and dance team
camps, clinics and special events. The net purchase price of approximately
$91.2 million, including costs of the acquisition, was paid in cash, and the
acquisition has been accounted for under the purchase method. The purchase
price was allocated based on estimated fair values at the date of acquisition.
This resulted in an excess of the purchase price over the net assets acquired
of $74.8 million, which has been recorded as goodwill and is being amortized
on a straight-line basis over 40 years. A summary of the allocation of the
purchase price to assets acquired based on their estimated fair values
follows:

<TABLE>
<CAPTION>

                                                                 (In thousands)
         <S>                                                      <C>
         Purchase price including costs and
           liabilities paid at closing                                   $95,548
         Less, cash acquired                                              (4,303)
                                                                     -----------
         Net cash cost                                                    91,245
         Current liabilities assumed                                      23,068
         Less, acquired assets:
             Current assets, excluding cash                              (35,055)
             Property and Equipment                                       (3,926)
             Other assets                                                   (577)
                                                                     -----------
         Excess cost over net
           assets acquired (goodwill)                                   $ 74,755
                                                                       =========
</TABLE>

         The operating results of Varsity have been included in the
consolidated statements of operations from the date of acquisition. The
following pro forma information presents the combined operations of the
Company and Varsity as if the acquisition, and relating financing transactions
discussed in Note 8, had occurred at the beginning of each of the periods
presented:

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                                     1997               1996
                                                                -------------         --------
                                                        (In thousands, except per share amounts)
         <S>                                            <C>                           <C>                   

         Net revenues                                                $174,084          $160,831
         Cost of revenues                                             103,076            92,426
                                                                    ----------       -----------
         Gross profit                                                  71,008            68,405
         Selling, general and administrative expenses                  63,048            55,469
                                                                    ---------       -----------
         Income from operations                                         7,960            12,936
         Interest expense                                              14,230            13,988
                                                                    ---------       -----------
         Income (loss) before taxes                                    (6,270)           (1,052)
         Income taxes                                                      -                 -
                                                                    ---------       ----------
         Net income (loss)                                            ($6,270)          ($1,052)
                                                                    =========       ===========
         Earnings (loss) per share:
                  Basic                                                ($0.69)           ($0.12)
                  Diluted                                              ($0.69)           ($0.12)

         Depreciation and amortization                                 $5,588            $5,142
</TABLE>

                                       F-9

<PAGE>


                      RIDDELL SPORTS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         These pro forma results have been presented for comparative purposes
only and include the following pro forma adjustments (amounts shown in
thousands and relate to the years ended December 31, 1997 and 1996,
respectively): (1) additional amortization expense as a result of goodwill
arising from the acquisition ($789 and $1,616); (2) salary increases relating
to contracts entered into in conjunction with the transactions ($75 and $150);
(3) elimination of costs incurred by Varsity in maintaining its status as a
separate public corporation ($165 and $443); (4) adjustments of certain
expenses incurred by the Company or Varsity based on programs existing within
the other company ($38 and $95); (5) elimination of one time charges arising
from the transaction for redeeming Varsity stock options ($4,783 for 1997
only), a change in control payment ($250 for 1997 only) and bridge loan
commitment fees ($3,000 for 1997 only); (6) additional interest on acquisition
debt and related debt changes ($5,401 and $11,391); and (7) the tax effect of
the above ($1,728 credit elimination and $3,524 expense elimination). The pro
forma results are not necessarily indicative of results that would have
occurred had the combination been effected at the dates indicated nor of
future operating results of the combined operations.


3.        UMBRO license

         In November 1998, the Company entered into an license agreement (the
"Umbro License") with Umbro International, Inc. ("UMBRO") pursuant to which
the Company acquired the right for five years to manufacture, market and sell
UMBRO brand soccer team apparel, footwear, equipment, and accessories on an
exclusive basis to the team channel of distribution throughout the United
States, Puerto Rico and the U.S. Virgin Islands. The Umbro License is
royalty-free for 1999. The Company is required to begin paying royalties in
the year 2000, at which time it is also required to meet annual minimum sales
figures. In the event that the Company fails to meet required minimum sales
levels subsequent to 1999 for two consecutive annual periods, UMBRO has the
right to terminate the Umbro License. The Umbro License, which expires in
November of 2003, may be extended for an additional five years at the
Company's option on or before August 15, 2003, provided that the Company
achieves certain performance levels. Simultaneously, the Company acquired
certain inventory, promotional material and a 15% interest in U.S.I.S.L.,
Inc., an organization that promotes soccer in the United States, with an
option to increase its ownership to 20%. The Company incurred costs and
expenses approximating $3.4 million allocated as follows:

                                                                (In thousands)

         Investment in U.S.I.S.L.,  Inc.                                 $300
         License Rights                                                   500
         Inventories                                                    2,500
         Other                                                            100
                                                                -------------
                                                                       $3,400
                                                                =============
4.       Receivables

         Accounts receivable include unbilled shipments of approximately
$1,678 and $1,157 at December 31, 1998 and 1997, respectively, principally
relating to Varsity's business. It is the Company's policy to record revenues
when the related goods have been shipped. Unbilled shipments represent
receivables for shipments that have not yet been invoiced. These amounts
relate principally to partial shipments to customers who are not invoiced
until their order is shipped in its entirety or customers with orders
containing other terms that require a deferral in the issuance of an invoice.
Management believes that substantially all of these unbilled receivables will
be invoiced within the current sales season.


                                       F-10

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.       Inventories:

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                   December 31,
                                                            -------------------------                                     
                                                              1998           1997
                                                           -----------    -----------
                                                                  (In thousands)
                  <S>                                     <C>                    <C>    

                  Finished goods                                $16,584          $12,691
                  Work-in-process                                 2,769            3,571
                  Raw materials                                   9,410            7,804
                                                          -------------    -------------
                                                                $28,763          $24,066
                                                          =============    =============

</TABLE>

6.       Property and equipment:

         Property and equipment consist of the following:

<TABLE>
<Capion>
                                                                    December 31,
                                                               ------------------------                        
                                                                 1998             1997
                                                               ----------       ---------
                                                                   (In thousands)
         <S>                                                   <C>               <C>    
         Land                                                  $    207         $   207
         Building and improvements                                1,527           1,428
         Machinery and equipment                                 13,350          10,955
                                                          -------------    ------------
                                                                 15,084          12,590
         Less accumulated depreciation                            7,213           4,767
                                                          -------------    ------------
                                                                $ 7,871          $7,823
                                                          =============    =============

</TABLE>

         Depreciation expense relating to all property and equipment amounted
to $2,446,000, $1,423,000, and $598,000 the years ended December 31, 1998,
1997 and 1996, respectively.


7.       Intangible assets and deferred charges:

         Intangible assets and deferred charges consist of the following:
<TABLE>
<CAPTION>
                                              Estimated
                                                 Lives                 December 31,
                                               in years            1998             1997
                                               --------         -----------       ------
                                                                       (In thousands)
<S>                                            <C>             <C>               <C>    
         MacGregor trademark rights               40            $18,040          $18,040
         MacGregor license agreements              8                -              2,030
         Trademarks                               40              3,250            3,250
         Goodwill                                 40             91,479           91,292
         Debt issue costs                          8              6,981            6,981
         Other                                  7 to 10           2,843            3,773
                                                              ---------        ---------
                                                                122,593          125,366
         Less accumulated amortization                           13,858           13,248
                                                              ---------        ---------
                                                               $108,735         $112,118
                                                              =========        =========
</TABLE>

                                       F-11

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.       Long-Term Debt:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                   ----------------------  
                                                                                    1998           1997
                                                                                  ----------    ----------
                                                                                       (In thousands)
<S>                                                                             <C>             <C>    

Outstanding balance under a credit facility expiring in 2002,                    $     4,400    $       -
   terms further described below

                                                                                                       
Senior notes, 10.5%, due 2007, terms further described below                         115,000       115,000
                                                                                                  
                                                                                                            
Convertible subordinated note payable, interest at 4.1%, due 2002 through
   2004, terms further described below                                                 7,500         7,500
                                                                                -------------   ----------

                                                                                     126,900       122,500
Less current portion                                                                       -             -
                                                                                -------------   ----------
                                                                                     $126,900     $122,500
                                                                                =============   ==========
</TABLE>

The aggregate maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
                      Years ending December 31,                                (In thousands)
                      <S>                                                       <C>    

                             2002                                                  $   6,275
                             2003                                                      1,875
                             2004                                                      3,750
                             2007                                                    115,000
                                                                                    --------
                                                                                    $126.900
                                                                                    ========

</TABLE>

         The credit facility consists of a line of credit with the Company's
bankers in a principal amount not to exceed $35 million, expiring in 2002.
Draws under the line of credit are limited under the terms of the related loan
agreement to a percentage of certain receivables and inventory. The
outstanding balance of the line accrues interest, payable monthly, at a rate
of LIBOR plus a margin of 2.5% on draws so designated by the Company, and on
other draws at the higher of the bank's prime rate plus a margin of 1% or the
Federal Funds rate plus 1.5%. At December 31, 1998 LIBOR rates averaged
approximately 4.9% and the prime rate was 7.75%. The credit facility also
calls for a commitment fee equal to an annual rate of 0.5% applied to the
unused portion of the line. The margin of the interest rate over the related
rates, as well as the commitment fee rate, is subject to quarterly adjustment
dependent on certain financial ratios. The interest rate margin can vary
between 1.5% and 2.5% over LIBOR, 0% to 1% over the prime rate, 0.5% and 1.5%
over the Federal Funds rate and 0.4% to 0.5% on the commitment fee. The credit
facility agreement contains certain covenants which, among other things,
require the Company to meet certain ratio and net worth tests, restrict the
level of additional indebtedness the Company may incur, limit payments of
dividends, restrict the sale of assets and restricts investments the Company
may make. The credit facility also requires repayment of the principal amount
upon the occurrence of certain changes in the control of the Company. The
Company has pledged essentially all of its tangible assets as collateral for
the credit facility.

         The 10.5% senior notes due 2007 (the "Senior Notes") contain certain
covenants that, among other things, restrict the level of other indebtedness
the Company may incur, the amounts of investments it may make in other
businesses, the sale of assets and use of proceeds therefrom, and the payment
of dividends. The Senior Notes also restrict payment of junior indebtedness
prior to the maturity of the junior indebtedness.

                                       F-12
<PAGE>

                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The interest on the Senior Notes is payable semiannually on January 15 and
July 15. The holders of the Senior Notes have the right to require the Senior
Notes to be redeemed at 101% of the principal amount in the event of a Change
of Control (as defined). The Senior Notes contain certain prepayment
restrictions and have no mandatory redemption provisions. The Senior Notes are
guaranteed by all of the Company's subsidiaries. Each of these subsidiaries
are wholly-owned subsidiaries of the Company and have fully and
unconditionally guaranteed the Senior Notes on a joint and several basis. The
Company itself is a holding company with no assets or operations other than
those relating to its investments in its subsidiaries. The separate financial
statements of the guaranteeing subsidiaries are not presented in this report
because, considering the facts stated above, the separate financial statements
and other disclosures concerning the guaranteeing subsidiaries are not deemed
material to investors by management.

         The 4.1% convertible subordinated note is subordinated in right to
prior payment in full of Senior Indebtedness, which is generally defined in
the governing agreements to include debt under the senior notes and revolving
line of credit described above and any refinancing, renewal or replacement
thereof as well as certain other debt. Repayments of 25% and 33 1/3% of the
then outstanding principal balance is due on November 1, 2002 and 2003,
respectively, with the remaining balance due November 1, 2004. Interest is
payable semiannually each May 1 and November 1. The note limits the Company's
ability to grant certain stock options and requires repayment of 101% of the
principal amount in the event of a change in control (as defined). In
connection with obtaining consents needed for various aspects of the Varsity
acquisition, the Company amended the note to provide for a reduction from
$6.00 to $5.3763 per share in the conversion price.

         The Senior Notes were issued and the revolving credit facility was
entered into in connection with the 1997 acquisition of Varsity Spirit
Corporation (see Note 2). In connection with these financing transactions, all
other long-term debt of the Company, except the convertible notes, was repaid.
The Company incurred debt issue costs of approximately $5.4 million in
connection with the Senior Notes and approximately $0.8 million of costs in
connection with the new credit facility. These costs are included with
intangibles and deferred charges (see Note 7) and are being amortized to
interest expense over the life of the related debt. The Company also incurred
costs of $3.0 million in connection with a bridge loan commitment needed to
support the acquisition. The bridge loan was not drawn-down and the commitment
fee was charged to interest expense in June 1997.


9.       Shareholders' equity and stock option plans:

         In conjunction with the Varsity Acquisition in June 1997, the Company
sold 986,169 shares of its Common Stock to certain key employees of Varsity at
$4.50 per share for an aggregate, net of related costs, of approximately $4.3
million pursuant to Stock Purchase Agreements, dated May 15, 1997.

         Stock option plans: The 1991 Stock Option Plan, as amended, and the
1997 Stock Option Plan provide for the granting of options to key employees,
directors, advisors and independent consultants to the Company for the
purchase of up to an aggregate of 2,915,500 shares of the Company's common
stock. Under the 1991 Stock Option Plan, options for an aggregate of 1,415,500
shares may be granted at an option price of no less than 85% of the market
price of the Company's common stock on the date of grant and may be
exercisable between one and ten years from the date of grant. Under the 1997
Stock Option Plan, options or other stock-based awards may be granted for an
aggregate of 1,500,000 shares. The 1997 Stock Option Plan generally does not
restrict the option price or exercise terms of grants.



                                       F-13

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         During 1998, the Company issued 81,000 shares of its Common Stock to
certain employees for incentive compensation as a stock award under the terms
of the 1997 Stock Option Plan. These shares were recorded at a value of
$328,000 based on quoted market values at the date of grant. The grants
include 27,000 shares, valued at $128,000, granted in consideration for
compensation included in accrued liabilities at December 31, 1997.

         During 1997, in connection with the terms of certain agreements
entered into in connection with the Varsity acquisition, the Company issued
options for the purchase of approximately 950,000 shares of its Common Stock
to Varsity employees. Included in this amount are 450,000 options to certain
key employees of Varsity which vested immediately with an option price of
$3.80. A charge of approximately $559,000 was recorded in June, 1997, and
credited to additional paid in capital to reflect the intrinsic value of these
options based on their in-the-money position on the measurement date for this
grant. The remaining 500,000 options were issued to a broad group of Varsity
employees with exercise prices at market. Both of these sets of option grants
are included in the information summarized below.

         Options granted through December 31, 1998 generally have been
designated as non-qualified stock options and, except as described above, have
had option prices equal to market values on the date of grant, have had terms
of five or ten years, and have had vesting periods of one or four years.
Information relating to stock option transactions over the past three years is
summarized as follows:

<TABLE>
<CAPTION>
                                                         Options Outstanding    Options Exercisable
                                                        ---------------------    -----------------
                                                                     Weighted                      Weighted
                                                                      Average                      Average
                                                     Number          Price Per      Number          Price per
                                                   Outstanding         Share        Exercisable    Share
                                                  ------------         -----        -----------    -----
       <S>                                        <C>                  <C>          <C>            <C>              
       Balance, January 1, 1996                     1,032,050          $4.02        485,775        $5.21
         Granted                                      239,500          $4.57
         Forfeited                                     (5,500)         $2.89
         Expired                                      (80,000)         $8.00
                                                    ---------
       Balance, December 31, 1996                   1,186,050          $3.87        712,913        $3.79
         Granted                                    1,085,925          $4.75
         Exercised                                    (25,000)         $2.39
         Forfeited                                     (7,000)         $4.46
         Expired                                      (82,000)        $10.75
                                                    ---------
       Balance, December 31, 1997                   2,157,975          $4.05      1,284,425        $3.37
         Granted                                      461,600          $5.08
         Exercised                                    (58,825)         $2.48
         Forfeited                                   (291,925)         $3.59
         Expired                                      (16,300)         $4.05
                                                    ---------
       Balance, December 31, 1998                   2,252,525          $4.36      1,362,106        $3.81
                                                   ==========

</TABLE>

     Options granted in 1998 include grants for 56,600 shares, granted in
November 1998, to certain employees (none of which were directors of the
Company) in exchange for cancellation of options for 69,850 shares which had
previously been granted to these employees. The canceled options, which are
included in the forfeited category above, would have expired in December 1998
and had a weighted average option price of $2.65 per share. The new grants had
a term of ten years and a weighted average option price of $3.76 per share.


                                       F-14

<PAGE>

                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Further information about stock options outstanding at December 31, 1998 is
summarized as follows:
<TABLE>
<CAPTION>

                                                 Options        Outstanding                     Options Exercisable
                            -------------------------------------------------                  ---------------------
                                                Weighted          Weighted                           Weighted
                                                 Average           Average                           Average
            Range of              Number        Remaining         Price Per        Number            Price Per
         Exercise Prices       Outstanding    Contractual Life      Share        Exercisable           Share
         ---------------       -----------    --------------        -----        -----------           -----
         <S>                   <C>            <C>               <C>              <C>            <C>            
          $1.80 - $2.49          136,500      2.4  years            $1.99            135,000           $1.99
          $2.50 - $3.99          764,100      7.2  years            $3.56            721,250           $3.54
          $4.00 - $5.44        1,351,925      8.9  years            $5.05            505,856           $4.67

</TABLE>

         At December 31, 1998 there were 498,150 shares available for future
option grants.

         In accordance with the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), the Company has elected to continue to account for stock-based
compensation under the intrinsic value based method of accounting prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Under APB 25, generally, no cost is recorded for stock
options issued to employees unless the option price is below market at the
time options are granted. The following pro forma net income and earnings per
share are presented for informational purposes and have been computed using
the fair value method of accounting for stock-based compensation as set forth
in SFAS 123:

<TABLE>
<CAPTION>

                                                                                Years ended December 31,
                                                                               -------------------------           
                                                                             1998          1997        1996
                                                                          ---------    ----------    -------
                                                                                       (In thousands)

         <S>                                                               <C>           <C>         <C>   
         Pro forma net income (loss)                                        ($7,953)      ($1,973)   $2,669
         Pro forma earnings (loss) per share
              Basic                                                          ($0.87)       ($0.23)    $0.33
              Diluted                                                        ($0.87)       ($0.23)    $0.31

</TABLE>

         These pro forma amounts may not be representative of future
disclosures because they do not take into effect pro forma compensation
expense related to grants made before 1995. The pro forma results include
expense related to the fair value of stock options estimated at the date of
grant using the Black-Scholes option pricing model and the following weighted
average assumptions for the years ended December 31, 1998, 1997 and 1996,
respectively: risk-free interest rates of 5.3%, 6.4% and 6.6%; expected
volatility of 56%, 50% and 38%; expected option life of 7.0 years,7.0 years
and 6.9 years, and no dividend payments. The weighted average estimated fair
value of options granted during 1998, 1997 and 1996 was $3.16, $3.28 and $2.40
per share, respectively.

         Warrants: At December 31, 1998 warrants were outstanding for the
purchase of an aggregate of 172,152 shares of the Company's common stock.
These warrants are held by one of the Company's banks and are exercisable
through October 1999 at an exercise price of $3.72 per share.

         During 1998 certain officers and directors of the Company exercised
outstanding warrants for shares of the Company's Common Stock which would have
expired in January 1999. The Company agreed to a cashless exercise of the
warrants, in effect accepting shares issuable upon exercise as payment for the
exercise. As a result, 42,362 shares of Common Stock were issued in exchange
for warrants for 150,000 shares based on an exercise price of $2.96 per share
and an exchange price of $4.125 per share. The


                                       F-15

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

exchange price of $4.125 per share was set on a date when the quoted market
price of a share of Common Stock was $4.00.

10.      Commitments:

         Leases: The Company leases various facilities and equipment under
operating leases. Rent expense amounted to approximately $2,792,000,
$1,958,000 and $1,451,000 for the years ended December 31, 1998, 1997 and
1996, respectively.

         Future minimum rental payments for all non-cancelable lease
agreements for periods after December 31, 1998 are as follows:

              Years ending December 31,           (In thousands)

                           1999                      $ 2,828
                           2000                        2,023
                           2001                          789
                           2002                          557
                           2003                          431
                           Later years                 3,370
                                                   ---------
              Total minimum payments required        $ 9,998
                                                   =========

         Employee benefits: The Company has three noncontributory defined
benefit pension plans that cover, or have covered, certain employee groups.
These plans consist of two "Union Plans" covering certain unionized employees
and a "Non-Union Plan" that covered other employees of certain subsidiaries.
The Non-Union Plan was amended in 1994 to provide that no benefits would
accrue under the plan on or after December 31, 1994. Expense for these plans
for the year ended December 31, 1998 was approximately $200,000 including a
provision for expense of an anticipated termination of the Non-Union Plan.
Total pension expense for these plans was under $50,000 in each of the years
ended December 31, 1997 and 1996.

         The Company maintains defined contribution (401-k) plans covering
substantially all of its employees, other than those covered by the Union
Plans. Company contributions to these plans are based on a percentage of
employee contributions and are funded and charged to expense as incurred.
Expenses related to the plans amounted to $95,000, $342,000 and $307,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
 


                                       F-16

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.      Accrued liabilities and contingencies:

         Recorded liabilities: In regards to the product liability
contingencies discussed below, the Company has recorded certain liabilities.
While these amounts are discussed in the remaining sections of this note, a
summary of these amounts together with other items comprising the balance
sheet line items "accrued liabilities" and "other liabilities" follows:

<TABLE>
<CAPTION>

                                                                Accrued
                                                              liabilities     Other liabilities
                                                               (Current)        (Non-Current)
                                                                --------        -------------
                                                                       (In thousands)
<S>                                                           <C>             <C> 
    December 31, 1998:                                                
      Product liability matters, reserves for
        pending and other contingencies                            $   700        $ 3,300
      Accrued interest                                               5,690              -
      Other accrued liabilities                                      4,863            254
                                                            --------------    -----------
             Total of balance sheet category                      $ 11,253        $ 3,554
                                                            ==============    ===========

    December 31, 1997:
      Product liability matters, reserves for
        pending and other contingencies                            $   700        $ 3,000
      Accrued interest                                               6,536              -
      Other accrued liabilities                                      3,481             60
                                                            --------------    -----------
             Total of balance sheet category                      $ 10,717        $ 3,060
                                                            ===============   ===========

</TABLE>

         Product liability litigation matters and contingencies:

         At December 31, 1998, the Company was a defendant in 5 product
liability suits relating to personal injuries allegedly related to the use of
helmets manufactured or reconditioned by subsidiaries of the Company. The
ultimate outcome of these claims, or potential future claims, cannot presently
be determined. The Company estimates that the uninsured portion of future
costs and expenses related to these claims, and incurred but not reported
claims, will amount to at least $4,000,000 and, accordingly, a reserve in this
amount is included in the Consolidated Balance Sheet at December 31, 1998 as
part of accrued liabilities and other liabilities. These reserves are based on
estimates of losses and defense costs anticipated to result from such claims,
from within a range of potential outcomes, based on available information,
including an analysis of historical data such as the rate of occurrence and
the settlement amounts of past cases. However, due to the uncertainty involved
with estimates actual results have at times varied substantially from earlier
estimates and could do so in the future. Accordingly there can be no assurance
that the ultimate costs of such claims will fall within the established
reserves.

         The Company maintains product liability insurance under a policy
expiring in January 2005. The policy is an occurrence-based policy providing
coverage against claims currently pending against the Company and future
claims relating to all injuries occurring prior to January 2005 even if such
claims are filed after the end of the policy period. The insurance program
provides certain basic and excess coverage on product liability claims with a
combined aggregate coverage of over $40,000,000 subject to the limitations
described below.

         The first level of insurance coverage under the policy ("Basic 
Coverage") provides coverage of up to $2,250,000 per claim in excess of an
uninsured retention (deductible) of $750,000 per occurrence. The


                                       F-17

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basic Coverage is subject to an aggregate program limit and certain annual
aggregate sub limits. The Basic Coverage, which does not affect the
availability of the excess coverage described below, has an aggregate limit
which is currently $4.9 million, but the policy allows the Company to increase
this maximum limit to $7.7 million at any time by prepaying the required
premium, which counts at 120% of the amount paid toward the limit. The Basic
Coverage, to the extent available, covers the insured portion of the first
$3,000,000 of a claim. The insurance program also provides for additional
coverage ("Excess Coverage") of up to $20,000,000 per occurrence, in excess of
the first $3,000,000 of each claim. Claims covered by the Excess Coverage are
subject to one of two separate $20,000,000 aggregate policy limits, depending
on the date of the related injury. The first $20,000,000 aggregate limit
applies to claims for injuries occurring prior to January 31, 1998, and claims
occurring after January 1998 are covered by the second separate $20,000,000
aggregate limit.

         Other contingencies and litigation matters:

         In addition to the matters discussed in the preceding paragraphs, the
Company has certain other claims or potential claims against it that may arise
in the normal course of business, including without limitation, claims
relating to personal injury as well as employment related matters. Management
believes that the probable resolution of such matters will not materially
affect the financial position or results of operations of the Company.


12.      Income taxes:

         Income taxes on income (loss), before extraordinary items, for the
years ended December 31, 1998, 1997 and 1996 is summarized below:

<TABLE>
<CAPTION>

                                                                     Years ended December 31,
                                                                    --------------------------
                                                                1998            1997           1996
                                                             -----------    -----------     -------
                                                                           (In thousands)
          <S>                                                <C>            <C>             <C>
          Current tax expense:
                  Federal                                         $         $        -            $  50
                  State                                                -             -               60
                                                             -----------    -----------     -----------
                                                                       -             -              110
                                                             -----------    -----------     -----------
              Deferred tax expense:
                  Federal                                              -             -                -
                  State                                                -             -                -
                                                             -----------    -----------     -----------
                                                                       -             -                -
                                                             -----------    -----------     -----------
                                                                  $    -    $        -           $  110
                                                             ===========   =============    ===========
</TABLE>
              For the years ended December 31, 1997 and 1996, tax expense was
reduced by offsetting tax benefits of approximately $500,000 and $1,200,000,
respectively, of net operating loss carryforwards which were not recognized in
prior years.



                                       F-18

<PAGE>

                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         Significant components of deferred income tax assets and liabilities
at December 31, 1998, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                                   Years ended December 31,
                                                             --------------------------------------
                                                                1998            1997           1996
                                                             -----------    -----------     -------
         Deferred income tax assets:                                        (In thousands)
         <S>                                                 <C>           <C>              <C>    

              Accrued expenses and reserves                      $ 2,843        $ 2,267         $ 3,509
              Inventory                                              711            733             492
              Intangible assets                                        -             -               26
              Net operating loss, and
                credit, carryforwards                              6,551          4,832           3,689
              Other                                                  308            276              36
                                                             -----------    -----------     -----------
                                                                  10,413          8,108           7,752
              Valuation allowances                                (3,215)        (1,031)         (1,386)
                                                             -----------    ------------    ------------
              Total deferred income tax assets                     7,198          7,077           6,366
                                                             -----------    -----------     -----------
         Deferred income tax liabilities:
              Intangible assets and deductible goodwill            5,648          5,498           6,014
              Property and equipment                                 442            481              86
              Prepaid expenses                                       203            193             266
                                                             -----------    -----------     -----------
              Total deferred income tax liabilities                6,293          6,172           6,366
                                                             -----------    -----------     -----------
         Total net deferred income tax asset                    $    905          $ 905         $ - 0 -
                                                             ===========    ===========     ===========
</TABLE>

         The net current and non-current components of the deferred income
taxes were recognized in the balance sheet at December 31, 1998, 1997 and 1996
as follows:

<TABLE>
<CAPTION>
                                                                     Years ended December 31,
                                                             -------------------------------------- 
                                                                1998            1997           1996
                                                             -----------    -----------     -------
                                                                           (In thousands)
         <S>                                                 <C>            <C>              <C>
         Net current assets, included with
              prepaid expenses                                   $ 1,253        $ 1,358      $ 1,820
         Net non-current deferred tax liabilities                    348            453        1,820
                                                             -----------    -----------     --------
                                                                $    905        $   905      $ - 0 -
                                                             ===========    ===========     ========
</TABLE>

A reconciliation of effective tax rates to federal statutory tax rates is as
follows:

<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                                             --------------------------------------
                                                                1998            1997           1996
                                                             -----------    -----------     -------
         <S>                                                 <C>            <C>             <C>
         Statutory Federal tax rate                            (34.0%)        (34.0%)         34.0%
         Differences resulting from:
              Effective state tax rate,
                net of federal tax benefit                         -             -             3.1
              Amortization not deductible
                for tax purposes                                10.2           87.1            5.8
              Travel & entertainment expenses
                not deductible for tax purposes                  3.9           33.9            1.2
              Losses with no current benefit                    20.2
              Benefit of prior periods net operating
                losses not previously recognized                              (86.4)         (40.2)
              Other differences                                 (0.3)          (0.6)          (0.2)
                                                            --------       --------        -------
                                                                 0.0%           0.0%           3.7%
                                                           =========       ========        =======
</TABLE>
                                                        F-19

<PAGE>

                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         At December 31, 1998 the Company had estimated net operating loss
carryforwards for federal income tax purposes of approximately $17,700,000
expiring between 2008 to 2013. While this loss carryforward is available to
reduce the payment of taxes that might otherwise be payable in future years,
the benefit of most of the net operating losses have been recognized in the
computation of income tax expense reflected in the Company's consolidated
financial statements in prior years. Benefits relating to approximately $7.0
million of net operating loss carryforwards have not yet been recognized in
the computation of income tax expense for financial reporting purposes and
have been reserved for as part of the deferred income tax asset valuation
allowance. These unrecognized carryforwards would be recognized through a
reduction of income tax expense in future periods upon the generation of an
offsetting amount of taxable earnings.

13.      Related party transactions:

         In 1997, in connection with certain financing transactions occurring
in connection with the Varsity acquisition, notes payable to shareholders of
$439,000 plus accrued interest were repaid in advance of maturity. Interest of
$17,000 and $111,000 on the note was included in interest expense for the
years ended December 31, 1997, and 1996, respectively. In 1996 the Company
paid consulting fees of $75,000 to one director and paid another director
$20,000 for services in connection with a series of promotional football
clinics sponsored by the Company.

14.      Supplemental cash flow information:

         Cash payments for interest were $14,700,000, $5,260,000 and
$2,662,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Interest payments for 1997 included $3,000,000 relating to bridge financing
commitment fees - see Note 8. Income tax payments, or refunds, were not
significant for 1998, 1997 or 1996.

         In 1998, the Company issued shares of its Common Stock, valued at
$128,000 based on quoted market values at the time of grant, to certain
employees as consideration for compensation included in accrued liabilities at
December 31, 1997.

         In June 1997, in connection with the Varsity acquisition, the Company
assumed liabilities of $23,068,000.

15.      Fair values of financial instruments:

         The Company's financial instruments include cash, accounts
receivable, accounts payable and long-term debt. The carrying values of cash,
accounts receivable and accounts payable approximate their fair values. The
Company's long-term debt include the Senior Notes which at December 31, 1998
had a carrying value of $115,000,000 and a fair value, based on quoted market
values, of $109,250,000. The Company's remaining long-term debt is not traded
and has no quoted market value, however management believes any difference
between its carrying value and fair value would not be material in relation to
these Consolidated Financial Statements.


                                       F-20

<PAGE>


                      RIDDELL SPORTS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.      Segment and product line information:

         The Company has three reportable segments: institutional products and 
services, retail products and trademark licensing:

         Institutional products and services: This segment markets products
and services primarily through the Company's direct sales force for
institutional customers such as schools, leagues, recreational groups and
other organizations for competitive and recreational sport and spirit
activities. Operations include the manufacture and sale of athletic products
(including football helmets), spirit products (including cheerleading and
dance uniforms and accessories), and athletic equipment reconditioning. The
segment also operates cheerleader and dance team camps, clinics and special
events.

         Retail products: This segment markets products through retailers in
the U.S. and internationally. Most of the products sold by this segment are
sports collectible products, such as authentic and replica football helmets,
which bear licensed sports team logos. The segment's operations also include
sales of certain recreational football and other athletic products sold
through consumer product retailers and distributors.

         Trademark licensing: This segment consists of the licensing of the
Company's Riddell and MacGregor trademark rights to other entities for use in
marketing products such as athletic footwear and apparel.

         The Company's reportable segments are strategic business units that
differ and are managed separately because of the nature of their markets and
channels of distribution. The Institutional products and services segment
includes the company's institutional athletic products business unit and its
spirit (cheerleading and dance) business unit. Information about these two
business units has been combined and reported as the institutional products
and services segment as the units have similar economic and other business
traits.

         The accounting policies of the segments are the same as those
described in the summary of significant accounting policies except for the
inclusion of operating results for Varsity Spirit Corporation, and related pro
forma adjustments, for the period prior to its acquisition in June 1997 (see
Note 2). The company evaluates performance of the institutional products and
services segment based on these pro forma results. Total assets are as
reported and do not include pro forma amounts or adjustments.

<TABLE>
<CAPTION>

                                                                  (In thousands)
                                                               Years ended December 31,
                                                              --------------------------
                                                        1998              1997               1996
                                                  ---------------    ---------------    ---------
<S>                                                    <C>           <C>                <C>                  
Net revenues:
     Institutional products and services               $166,845          $153,641           $136,974
     Retail products                                     18,142            18,055             21,363
     Trademark licensing                                  1,613             2,388              2,494
                                                    -----------        ----------         ----------
                                                        186,600           174,084            160,831
     Less, preacquisition results of Varsity
       Spirit Corporation included above                    -              35,811             88,449
                                                    -----------        ----------         ----------
     Consolidated total                                $186,600          $138,273            $72,382
                                                    ===========        ==========         ==========

</TABLE>


                                       F-21

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




16.      Segment and product line information (continued):

<TABLE>
<CAPTION>
                                                                   (In thousands)
                                                                 Years ended December 31,
                                                        1998              1997              1996
                                                  ---------------    ---------------    -----------
<S>                                               <C>                <C>                 <C>    

Income from Operations:
     Institutional products and services                $11,416           $10,841            $11,423
     Retail products                                         56             1,742              3,727
     Trademark licensing                                    841             1,476              1,536
     Corporate and unallocated expenses                  (4,796)           (6,099)            (3,750)
                                                    -----------        ----------         ----------
                                                          7,517             7,960             12,936
     Less, preacquisition results of Varsity
       Spirit Corporation included above                    -              (3,360)             7,220
                                                    -----------        ----------         ----------
     Consolidated total                                  $7,517           $11,320             $5,716
                                                    ===========        ==========         ==========

Depreciation and amortization, exclusive of 
debt issue costs:
     Institutional products and services                 $4,497            $4,253             $3,854
     Retail products                                        557               595                541
     Trademark licensing                                    614               696                702
     Corporate and unallocated                               45                44                 45
                                                    -----------        ----------         ----------
                                                          5,713             5,588              5,142
     Less, preacquisition results of Varsity
       Spirit Corporation included above                    -               1,578              2,949
                                                    -----------        ----------         ----------
     Consolidated total                                  $5,713            $4,010             $2,193
                                                    ===========        ==========         ==========

Capital expenditures:
     Institutional products and services                 $2,265            $2,562             $2,698
     Retail products                                        229               139                269
                                                    -----------        ----------         ----------
                                                          2,494             2,701              2,967
     Less, preacquisition results of Varsity
       Spirit Corporation included above                    -                 887              1,828
                                                    -----------        ----------         ----------
     Consolidated total                                  $2,494            $1,814             $1,139
                                                    ===========        ==========         ==========

Total assets:
     Institutional products and services               $150,163          $143,414           $ 43,302
     Retail products                                     10,253            11,497             11,468
     Trademark licensing                                 16,898            17,835             17,807
     Corporate and unallocated                            8,897             9,015              3,784
                                                    -----------        ----------         ----------
     Consolidated total                                $186,211          $181,761            $76,361
                                                    ===========        ==========         ==========
</TABLE>


                                                        F-22

<PAGE>


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




16.      Segment and product line information (continued):

<TABLE>
<CAPTION>

                                                                   (In thousands)
                                                                Years ended December 31,
                                                        1998              1997              1996
                                                  ---------------    ---------------      ---------
<S>                                                 <C>                   <C>             <C>    

Revenues by product line for all reportable segments in the aggregate
  were as follows:

     Cheerleader and dance products                     $63,491           $56,453            $49,472
     Camps and events                                    48,704            44,966             38,977
     Athletic products                                   34,276            30,177             27,884
     Athletic product reconditioning                     23,415            22,892             21,700
     Sports collectibles                                 15,101            17,208             20,304
     Trademark licensing                                  1,613             2,388              2,494
                                                    -----------        ----------         ----------
                                                        186,600           174,084            160,831
     Less, preacquisition results of Varsity
       Spirit Corporation included above                    -              35,811             88,449
                                                    -----------        ----------         ----------
     Consolidated revenues                             $186,600          $138,273            $72,382
                                                    ===========        ==========         ==========

</TABLE>

17.      Subsequent event:

     On March 16, 1999, a jury rendered a verdict against the Company in a
Texas product liability lawsuit for approximately $11.4 million plus interest
from February 1996. The Company intends to appeal the verdict. If the verdict
was paid in full it would be covered by the insurance described above, except
for an amount equal to the $750,000 uninsured retention. This amount, however,
is already included in the Company's balance sheet reserves. Any such payment
by the insurance company would reduce the amount of the aggregate limits of
the Company's product liability insurance coverage described in Note 11,
above.


                                       F-23

<PAGE>






              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                                  ON SCHEDULE









Board of Directors
Riddell Sports Inc.


         In connection with our audit of the consolidated financial statements
of Riddell Sports Inc. and Subsidiaries referred to in our report dated
February 21, 1998, which is included on page F-2 of this Form 10-K, we have
also audited Schedule II for each of the three years in the period ended
December 31, 1998. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.




                                                             GRANT THORNTON LLP


Chicago, Illinois
February 19, 1999




                                       S-1

<PAGE>



SCHEDULE II


                     RIDDELL SPORTS INC. AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>




              Col.  A                  Col.  B                  Col.  C              Col.  D         Col.  E
---------------------------------   -------------  -----------------------------  -------------  -----------
                                                              Additions
                                                   -----------------------------
                                 
                                                         (1)            (2)
                                                     Charged to     Charged to
                                     Balance at         Costs         Other                       Balance at
                                      Beginning          and         Accounts-                      End of
        Description                   of Period       Expenses       Describe      Deductions       Period
-------------------------            -----------      ---------      --------      ----------      --------
<S>                                  <C>               <C>           <C>           <C>             <C>    
Year ended December 31, 1996
   Allowance for
     doubtful accounts                  $620           $436              -            $543           $513
                                                                                         (a)

Year ended December 31, 1997
   Allowance for
     doubtful accounts                  $513           $365            $325           $379           $824
                                                                          (b)            (a)

Year ended December 31, 1998
   Allowance for
     doubtful accounts                  $824           $929              -            $451           $1,302
                                                                                           (a)
</TABLE>

-----------
   Notes:     (a) Accounts written off net of recoveries
              (b) Addition charged to other accounts for 1997 is the initial
                  balance from the Varsity acquisition.


                                       S-2