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, 2002

                                       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


                              VARSITY BRANDS, 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.)


          6745 LENOX CENTER COURT, SUITE 300, MEMPHIS, TENNESSEE 38115
          (Address of principal executive offices, including zip code)


       Registrant's telephone number, including area code: (901) 387-4300


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


      Title of each class            Name of each exchange on which registered
 COMMON STOCK, $.01 PAR VALUE                 AMERICAN STOCK EXCHANGE
       (Title of Class)


           Securities registered pursuant to Section 12(g) of the Act:
                                     [NONE]


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 (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]

The aggregate market value of the 5,004,893  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 21, 2003, is $23,472,948.

As of March 21, 2003, the Registrant had 9,592,250 shares of Common Stock,  $.01
par value per share, outstanding.

<PAGE>


         SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

           Certain  information  contained or  incorporated by reference in this
Annual Report on Form 10-K is forward-looking in nature. All statements included
or  incorporated  by reference in this Annual  Report or made by  management  of
Varsity Brands,  Inc. and its subsidiaries,  other than statements of historical
fact, are  forward-looking  statements.  Examples of forward-looking  statements
include  statements  regarding  Varsity's  future financial  results,  operating
results, business strategies,  projected costs, products,  competitive positions
and plans and  objectives of management  for future  operations.  In some cases,
forward-looking  statements  can be  identified  by  terminology  such as "may,"
"will,"  "should,"  "would,"  "expects,"   "plans,"  "intends,"   "anticipates,"
"believes," "estimates," "predicts," "potential," "continue," or the negative of
these terms or other  comparable  terminology.  Forward-looking  statements also
include the assumptions that underlie such statements. Any expectations based on
these  forward-looking  statements  are subject to risks and  uncertainties  and
other important  factors,  including  those  discussed in the sections  entitled
"Part I - Item 1 - Business and "Part I - " "Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations." These and many other
factors could affect Varsity's future financial and operating results, and could
cause  actual  results  to  differ   materially  from   expectations   based  on
forward-looking  statements  made in this document or elsewhere by Varsity or on
its behalf. As used herein, except as the context otherwise requires,  "Varsity"
or the "Company" shall mean Varsity Brands, Inc. and its subsidiaries.


                                     PART I

ITEM 1.    BUSINESS

GENERAL

           Varsity is the leading  marketer and manufacturer of branded products
and services to the school spirit  industry,  and is also a leading  provider of
branded services to various other extracurricular activities.

           Under our many  brands,  the best known of which are  Varsity  Spirit
Fashions and Universal Cheerleaders Association, all of which we own, we are:

          o    the largest designer, marketer and supplier of cheerleader and
               dance team uniforms and accessories;

          o    the biggest operator of cheerleading and dance team training
               camps and clinics;

          o    a leading organizer of special events for extracurricular
               activities;

          o    a major provider of studio dance conventions and competitions;

          o    a producer of studio dance apparel for studio dance competitions.

           We have  built our  various  brands and lines of  business,  in large
part, based upon our year-round  relationship marketing strategy,  which we have
established and refined during the course of our twenty-eight  (28) years in the
school spirit industry. This strategy involves integrating our core cheerleading
business with our other activities, including conducting training camps, clinics
and  conventions,   and  producing  various  nationally-televised  and  regional
championships in the U.S. and performance events in the U.S. and Europe. Each of
these activities,  which are in themselves profitable,  reinforce each other and
the  sale  of  our   products,   while  they   enhance   participation   in  the
extracurricular market and build loyalty to our brands.

           We  believe  that our  Varsity  Spirit  Fashions  brand  cheerleading
uniforms  are worn by more high school and college  cheerleaders  than any other
brand.  Approximately 250,000 participants  attended the Company's  cheerleading
and dance team camps during 2002.  Approximately  42,000 people  traveled to the
Walt Disney Resorts in Orlando,  Florida and Anaheim,  California to participate
in and view our various 2002 cheerleading and dance competitions.


                                       1
<PAGE>


SIGNIFICANT DEVELOPMENTS

           In December 2002, the Company  entered into a license  agreement with
Select Sport A/S. Under the terms of the license agreement,  the Company has the
right to manufacture and distribute  Select Sport soccer team uniforms,  apparel
and equipment within the United States.

BUSINESS SEGMENTS

           We presently employ our integrated  sales and marketing  strategy and
operate our business  through various  wholly-owned  subsidiaries in principally
two business segments; (i) uniforms and accessories,  and (ii) camps and events.
For the  past  three  years,  our  uniforms  and  accessories  segment  has been
responsible for  approximately  sixty percent (60%) of total revenues,  with our
camps and  events  segment  contributing  the  balance  of total  revenues.  For
additional information regarding revenues, profit and loss, and total assets for
the past three years, please refer to pages F-3 to F-6 of the Company's attached
financial statements, which information is incorporated herein by reference.

           UNIFORMS AND ACCESSORIES

           We design, market and manufacture cheerleader and dance team uniforms
and accessories,  including skirts, shell-tops, sweaters, sweatshirts,  jumpers,
warm-up suits, t-shirts,  shorts,  pompons,  socks, jackets, pins and gloves. We
market our  cheerleading  uniforms  and  accessories  under the  Varsity  Spirit
trademark.  Approximately  110,000  catalogs are mailed  annually to schools and
school spirit advisors and coaches containing color photographs and descriptions
of our Varsity Spirit line of uniforms and accessories. We supplement our direct
sales force and catalog sales efforts with a telemarketing sales force of eleven
(11) full and part-time employees.

           The Company also markets and  manufactures a line of recital wear for
the studio dance market under the Co. Dance  trademark.  The Company has printed
and distributed approximately 25,000 catalogs to dance studios and studio owners
during the past year.  Orders are placed and  processed  through  the  Company's
customer service department in Edmond, Oklahoma.

           In conjunction  with the acquisition of the Select Sport license,  we
will  also  begin  to  design,   market  and  manufacture  soccer  uniforms  and
accessories,  including jerseys, shorts, warm-up suits, outerwear,  t-shirts and
sports bags.

           CAMPS AND EVENTS

           We operate  cheerleader  and dance  team camps in the United  States.
Camp  enrollment  has  increased  every year since the camp  division  commenced
operation in 1975 with 20 cheerleading camps and 4,000 participants.  During the
2002 camp season, approximately 250,000 participants, consisting of students and
their coaches,  attended Varsity's Universal Cheerleader  Association and United
Spirit  Association  camps,  including  over  9,000  participants   representing
colleges and junior colleges. During 2002, cheerleading and/or dance team squads
from  approximately  75% of the universities  comprising the ATLANTIC COAST, BIG
EAST,  BIG TEN,  BIG TWELVE,  PACIFIC 10 and  SOUTHEASTERN  collegiate  athletic
conferences attended our camps.

           Most of our cheerleader and dance team camps are conducted on college
or junior college  campuses.  We contract with the colleges and universities for
the provision of housing, food and athletic facilities.  Our camps generally are
conducted  over a four-day  period and are  attended by resident  and  commuting
students.

           Our  instructors  are  mostly  college   cheerleaders  who  may  have
previously  attended our camps,  and we believe that our training of many of the
top college  cheerleading  squads  augments  our  recruiting  of high school and
junior high school camp  participants.  Prior to the  commencement of our camps,
instructors  participate in an intensive six-day training session where they are
taught new  cheerleading  and dance  material.  We also  place a high  degree of
emphasis on teaching our instructors the most up-to-date teaching,  training and
safety techniques.

           We were a founding member of and remain an active  participant in the
American  Association of  Cheerleading  Coaches and Advisors,  an industry trade
group whose  mission is to improve the quality of  cheerleading  and to maintain
established  safety  standards.  In 1990,  this industry  trade group  published
comprehensive  certification and safety guidelines for cheerleading  coaches. We
follow  the  safety  guidelines  established  by  the  American  Association  of
Cheerleading Coaches and Advisors in the training of our instructional staff and
in the conduct of our cheerleader and dance team camps and competitions.


                                       2
<PAGE>


           We promote our Varsity Spirit brand products and services, as well as
the school spirit  industry,  through  active and visible  association  with the
following annual championships and television specials:

          o    National High School Cheerleading Championship(R)

          o    National Dance Team Championship(R)

          o    College Cheerleading and Dance Team National Championship(R)

          o    National All Star Cheerleading Championship(R)

          o    Company Dance Championship(R)

           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, Degree, AT&T, Got Milk?, the Walt Disney World Resort,
and Gillette.

           In  addition to  promoting  cheerleading  and dance team  activities,
these championships, television specials and events are a source of revenues for
us. In 2002, over 46,000  persons,  including  cheerleaders  and their families,
attended the Company's special events.

           OTHER

           We are  continuing to expand our uniform  design,  manufacturing  and
special event expertise from  cheerleading  into the private dance studio market
through our venture called Company Dance.  Company Dance operates  weekend dance
conventions  and  competitions,  under the Co.  Dance and  Starlight  names,  in
approximately  thirty U.S. cities,  an annual  convention  championship from the
Walt Disney  World  Resort in Orlando  that is  televised on ESPN and one annual
competition championship.

           We  also  operate  Intropa,  a tour  company,  which  specializes  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.

           RELATIONSHIP MARKETING

           Our marketing model is based upon our longstanding relationships with
three distinct but equally  important  groups.  First, our direct sales efforts,
through   personalized   service,   creates  an  important   connection  to  the
participants,  coaches and  instructors  of school spirit  activities  and other
extracurricular  activities primarily in junior and senior high schools. Second,
instructors  and staff at our camps,  clinics and  performance  tours and events
motivate  participants to get more  instruction  and become better  competitors.
Third,  we increase our brand awareness and enhance our  relationships  with our
customers  through our  affiliations  with  strategic  partners such as the Walt
Disney  Company,  ESPN and other media and marketing  entities.  These strategic
relationships  and the televised shows that we produce  reinforce the importance
of our events and competitions. We believe that our sales and marketing strategy
provides  us with a  competitive  advantage,  and  features  the  following  key
components:

          o    Cross marketing of products and promotional activities

               o    Camps and Clinics

               o    Special events, conventions and competitions

               o    Uniforms and accessories

               o    Key marketing alliances

               o    Internet operations

          o    Direct Sales Force


                                       3
<PAGE>


           CROSS MARKETING AND PROMOTIONAL ACTIVITIES

           Since  1974,   we  have   conducted,   and  we  continue  to  refine,
profit-generating  activities,  which are an  integral  part of our  promotional
efforts. We create  relationships  through our camps and events and believe that
these  relationships   naturally  translate  to  a  sales  opportunity  for  our
cheerleading  uniforms or dance costumes when the campers return to school. When
the sales force interacts with cheerleaders or dance team participants and their
coaches  during the design and  fitting of custom  uniforms,  they also have the
opportunity  to  reinforce  participation  in our camps and special  events.  We
intend  to  extend  this  strategy  to  other  extracurricular  activities.  The
marketing of our various activities is designed to provide logical extensions to
basic  participation  and  to  encourage  participants,   as  they  improve,  to
increasingly  utilize more of our products and  services.  All of our  marketing
activities  are  designed  so that each of our  various  products  and  services
reinforce  one  another,  as well as  strengthen  overall  brand  awareness  and
loyalty.

           How we  cross-market  is evident from our marketing of special events
and competitions for cheerleaders.  For example,  in order to participate in the
various special events that we offer,  such as the  nationally-televised  Macy's
Thanksgiving Day parade in New York City, a cheerleader must attend and excel at
one of our camps.  Our camps are the only place  that a  cheerleader  can get an
invitation  to appear in one of our  special  events.  Similarly,  we hold local
cheerleading  competitions  that progress to various  regional levels during the
course  of the  fall,  which  are the  only  way for a team to  qualify  for our
championships,  which  are held at the Walt  Disney  World  Resort  in  Orlando,
Florida and nationally-televised on ESPN.

           CAMPS & EVENTS

           Our approach to relationship building has inter-related parts. In the
case of cheerleading it is our camps which, more than anything else, build brand
loyalty.  Special events,  conventions and competitions enhance our relationship
marketing.

           Just as our camps build loyalty with respect to cheerleading, special
events,  conventions and competitions for other  extracurricular  activities can
build  new   allegiances   from   participants   in  a  wide  variety  of  other
extracurricular  activities.  We produce regional and national  cheerleading and
dance team  competitions  and organize  national  dance  competitions  for young
individuals  through our studio dance division.  The national  competitions  and
finals for these  activities  are typically held at the Walt Disney World Resort
in Orlando, Florida and are televised on ESPN and/or ESPN2.  Participants in the
school spirit  activities  that we target are also given the opportunity to take
part in various performance events in the United States and Europe. These events
include parades,  such as the annual Macy's  Thanksgiving Day parade in New York
City and  year-end  parades in London and Paris.  We also  arrange  pre-game and
half-time  shows for  college  football  bowl  games.  We  intend to extend  our
promotional  activities to a greater number of  extracurricular  activities with
soccer and dance the most likely next additions.

           UNIFORMS AND ACCESSORIES

           The  cheerleaders  who  participate  in our special  events,  such as
parades,  often come from a variety of schools. They each need a uniform for the
special event so that they can portray a unified appearance.  We design and sell
such uniforms and also sell a travel package,  including hotel arrangements,  to
the participants in our special events. At the same time, because  participation
in our various promotional  activities  enhances our bond with cheerleaders,  we
believe that their team is more likely to buy our uniforms and accessories.

           KEY MARKETING ALLIANCES

           We also have  longstanding  marketing  alliances with other strategic
partners  such as the Walt Disney  Company,  ESPN and other media and  marketing
entities. We are currently in our 21st year of broadcasting  championship events
on ESPN and ESPN2, and our current  agreement with ESPN extends through the year
2003. We have been holding  championship  events at the Walt Disney World Resort
in Orlando,  Florida since 1995, and our current  agreement with the Walt Disney
Company  extends  through the year 2004. All of these alliances serve to further
emphasize the prominence and importance of the activity and the participant. All
of these marketing relationships also enhance one another and serve to reinforce
and cross-market our products and services.

           INTERNET OPERATIONS

           We believe that our Internet operations,  which are described further
below, are a logical extension and application of this approach and are designed
to enhance our contact with customers and build brand loyalty.


                                       4
<PAGE>


           DIRECT SALES FORCE

           Our comprehensive  relationship  marketing and sales strategy is made
possible by our comprehensive sales efforts which are responsible for developing
and maintaining  relationships among the approximately  40,000 junior and senior
high  schools,  and  colleges in the United  States.  Our sales  force  develops
relationships  with  participants,  coaches  and  instructors  of school  spirit
activities  throughout the U.S. by providing  value-added  services that enhance
participation in the activities.  Examples of this include:  providing  clinics,
and quickly servicing, designing and fitting custom-uniforms for participants in
cheerleading.

           PRODUCTION

           CHEERLEADING AND DANCE TEAM UNIFORMS AND ACCESSORIES

           Most  of  the   cheerleading   and  dance  team  uniforms   designed,
manufactured  and marketed by us are made to order.  The  manufacturers  provide
knitting,  cutting, sewing, finishing and shipping, and we provide the patterns,
fabrics, yarn and manufacturing  specifications and quality control supervision.
We  also  provide  some  cutting,  knitting  and  lettering  at two  specialized
production  facilities.  The  use of  independent  manufacturing  facilities  to
fulfill  our  production  needs  affords us with the  flexibility  to adjust our
production  output  to  meet  our  highly  seasonal  selling  cycle.  The use of
independent  manufacturers  also  reduces our fixed  costs,  which we believe is
beneficial in a highly seasonal business.

           Cheerleading  accessories  such as shoes,  pompons and  campwear  are
purchased from various suppliers including Nike, Adidas, Body Wrappers,  and Top
Sox,  among others.  We have expanded the variety and number of  accessories  we
market, which has contributed to the increase in our revenues in recent years.

OUR INTERNET OPERATIONS

           We believe  that we can take  advantage of  commercial  opportunities
offered  by  electronic  community-building  and  commerce  as it relates to the
extracurricular  activities  market  because  we  have  the  largest  nationwide
proprietary sales force in the U.S. in the extracurricular activities market. We
believe   that  our   Internet   strategy  of  building   community   sites  and
simultaneously   establishing   complementary   commerce  sites  affords  us  an
opportunity to extend our  relationship  sales and marketing  strategy to expand
our core business and to develop new lines of business.

           We launched our Internet  business in the fourth quarter of 1999 with
a community web site with e-commerce elements for cheerleaders, www.varsity.com.
In the third  quarter  of 2000 we  launched  www.codance.com,  our  website  for
Company Dance. In the first quarter of 2003, we launched www.selectgear.com, our
website for our new line of Select branded soccer uniforms and accessories.

SEASONALITY

           Our operations are highly  seasonal.  In recent years, our operations
have been most  profitable  in the  second  and third  quarters,  with the third
quarter  typically the  strongest,  while losses have typically been incurred in
the first and fourth quarters.

           The following table sets forth selected  unaudited  operating results
of continuing Varsity operations for each of the four quarters in 2002 and 2001,
excluding the operating results of the two business units  discontinued in 2001,
the  Riddell  Group  and Umbro  divisions,  and the  extraordinary  gain on bond
redemption.  You should read this  information  together  with the  consolidated
financial  statements,  the notes related to those financial  statements and the
other financial data included elsewhere in this report.

<TABLE>
<CAPTION>
                                                    First          Second         Third       Fourth
                                                   Quarter        Quarter        Quarter      Quarter
                                                   -------        -------        -------      -------
                                                                      (In thousands)
<S>                                                <C>            <C>            <C>          <C>
Year ended December 31, 2002:
Revenues                                            $18,693       $57,370        $61,196       $19,145
      Percent of total annual revenues                11.9%         36.7%          39.1%         12.3%
Income (loss) from continuing operations           $(5,867)        $8,608         $9,988      $(2,942)

Year ended December 31, 2001:
Revenues                                            $16,659       $54,011        $60,126       $16,753
      Percent of total annual revenues                11.3%         36.6%          40.7%         11.4%
Income (loss) from continuing operations           $(4,312)        $4,862         $5,853      $(5,772)
</TABLE>


                                       5
<PAGE>


           This seasonal pattern is influenced by the following factors:

          o    Cheerleading  and dance  uniforms and  accessories  are typically
               ordered and shipped between late March, when new cheerleaders are
               selected for the coming school year, and the end of August,  just
               before the new school year begins.

          o    We incur costs relating to our camp business during the first and
               second quarter as we prepare for the upcoming camp season,  while
               most  revenue  relating to the camps is earned  during the period
               from June to August.  Company Dance  competitions and conventions
               primarily  take place during the first and second  quarters which
               may temper this segment's seasonality.

COMPETITION

           We are one of two major companies that design and market cheerleader,
dance team and  booster  club  uniforms  and  accessories  on a national  basis.
Besides us and our major national  competitor,  National Spirit Group, there are
many other  smaller  regional  competitors  serving the uniform and  accessories
market in the United States. We believe 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.

           We are also one of two companies that annually  operate a significant
number of cheerleader and dance team camps in the United States, again the other
being  National  Spirit Group.  There are also many other smaller  companies and
schools  that operate  cheerleading  camps and clinics on a regional  basis.  We
believe that 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.

           We compete with Showbiz,  Star Power,  Showstoppers,  Tremaine,  West
Coast Dance Explosion,  New York City Dance Alliance, and other smaller national
and regional  companies in operating studio dance  conventions and competitions.
We believe the  principal  factors  governing  the  selection  of a studio dance
convention or competition are the reputation of the dance operator for providing
quality instruction and supervision,  location, schedule and tuition charged for
convention/competition.

TRADEMARKS AND SERVICE MARKS

           We own various common law and  registered  trademarks in the U.S. and
various  foreign  countries  including  the  following:  Universal  Cheerleaders
Association, Varsity Spirit, United Spirit Association, Co. Dance, National High
School  Cheerleading  Championship,  the Universal Dance Association,  Universal
Dance Camps,  Varsity Spirit Fashions and The National Dance Team  Championship,
among others.

REGULATION

           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 some  inter-collegiate  sports, it could,  under certain  circumstances,
have a material adverse affect on Varsity's  business,  financial  condition and
results of  operations.  Although  we are not  aware  of any  school  officially
adopting these  activities as a competitive  sport,  recognition of cheerleading
and/or dance teams as a sport would increase the possibility that cheerleader or
dance  activities  may become  regulated.  We  currently do 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,  we expect 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,  we have been  able to work  with  these  state
athletic  associations to designate acceptable times for the cheerleaders within
these states to attend camps. We have 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 our ability to conduct our normal business activities.


                                       6
<PAGE>


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

           See  Part II -- Item 7 --  Management's  Discussion  and  Analysis of
Financial  Condition and Results of  Operations -- "Risk Factors --  Regulation"
below.

EMPLOYEES

           At March 21, 2003, we had approximately 540 employees.  Approximately
475 of these employees were employed on a full time basis and  approximately  65
were part time or temporary employees.

           During the summer of 2002,  we employed  approximately  2,600  summer
camp instructors, trainers and administrators on a seasonal basis.

           We believe that our relations with our employees are satisfactory.

INSURANCE

           We carry general  liability  insurance with coverage  limits which we
believe is adequate for our business.










                                       7
<PAGE>


ITEM 2:    PROPERTIES

           We lease various facilities throughout the U.S.

           We believe our  properties,  machinery and equipment are adequate for
our current requirements.

           Set forth below is information regarding our principal properties:

<TABLE>
<CAPTION>
                                                                    Square
Location                 Principal Use                              Footage      Lease Expiration Date
---------------------    ----------------------------------------   -------      ---------------------
<S>                      <C>                                        <C>          <C>
Memphis, Tennessee       Headquarters for Varsity Operations -       51,045      November 2011
                         all segments
Bartlett, Tennessee      Warehouse and Manufacturing - both         205,000      October 2010
                         segments
Sunnyvale, California    Offices - Camps and events                   5,200      May 2003
Cypress, California      Offices - Camps and events                   8,500      February 2008
Houston, Texas           Offices - Camps and events                   2,500      November 2003
Edmund, Oklahoma         Offices and Warehouse - Camps and events     7,000      Month to month
</TABLE>


ITEM 3.    LEGAL PROCEEDINGS

           From time to time, the Company becomes involved in various claims and
lawsuits  incidental to its businesses.  The Company does not believe that it is
currently  involved  in any legal  proceedings,  either  individually  or in the
aggregate, that could have a material adverse effect on its business.

ITEM 4.    SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

           At the Annual  Meeting  of  Stockholders,  held on August  29,  2002,
8,103,740 shares were present in person or by proxy,  constituting  85.6% of the
outstanding  common  stock  entitled to vote.  Two matters  were  submitted  for
stockholder  vote  at the  annual  meeting:  1.  The  re-election  of  Varsity's
Directors;  and 2. The  reappointment of Varsity's  Auditors.  Each of the seven
directors was re-elected. The Company's Auditors were reappointed.

           1. The following  votes were cast in connection  with the re-election
of the Company's Directors:

<TABLE>
<CAPTION>
                               Total Votes      Votes       Percent       Votes     Percent     Votes     Percent
Name                              Cast           For        of Total     Against    of Total   Withheld   of Total
-------------------------      -----------    ---------     --------     -------    --------   --------   --------
<S>                             <C>           <C>            <C>         <C>          <C>          <C>      <C>
Robert E. Nederlander           8,103,740     7,920,743      97.74%      182,997      2.26%        0        0.00%

Jeffrey G. Webb                 8,103,740     7,638,843      94.26%      464,897      5.74%        0        0.00%

Leonard Toboroff                8,103,740     7,674,853      94.71%      428,887      5.29%        0        0.00%

Don R. Kornstein                8,103,740     7,674,853      94.71%      428,887      5.29%        0        0.00%

John McConnaughy, Jr.           8,103,740     7,638,843      94.26%      464,897      5.74%        0        0.00%

Glenn E. "Bo" Schembechler      8,103,740     7,674,841      94.71%      428,899      5.29%        0        0.00%

Arthur N. Seessel, III          8,103,740     7,956,753      98.19%      146,987      1.81%        0        0.00%
</TABLE>



                                       8
<PAGE>


           2. The following votes were cast in connection with the reappointment
of Varsity's Auditors:

<TABLE>
<CAPTION>
                            Total Votes     Votes      Percent      Votes     Percent      Votes     Percent
                               Cast          For       of Total    Against   of Total    Withheld   of Total
                            -----------   ---------    --------    -------   --------    --------   --------
<S>                          <C>          <C>           <C>         <C>        <C>          <C>        <C>
For the Reappointment of     8,103,740    8,100,423     99.96%      3,026      0.04%        291        0.00%
Auditors
</TABLE>









                                       9
<PAGE>


                                     PART II

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

           Our common stock is listed on the American  Stock  Exchange under the
symbol  "VBR".  As of March 21, 2003,  there were  approximately  690 holders of
record of our  common  stock.  The  following  table sets forth the high and low
sales prices for our common stock as reported by the American Stock Exchange for
2001 and for 2002:

                                          2002 Quarters
                                          -------------
                         1               2              3               4
                       -----           ----            ----           ----
High:                  $2.45           4.49            4.75           4.75
Low:                    1.85           2.00            3.85           3.70


                                          2001 Quarters
                                          -------------
                         1               2              3               4
                        ----           ----            ----           ----
High:                   3.25           2.69            2.24           2.20
Low:                    2.25           1.25            1.56           1.40

           The closing  sale price of the Common  Stock on December 31, 2002 was
$4.75.

DIVIDEND POLICY

           Since  our  inception,  we have  not  declared  or  paid,  and do not
currently intend to declare or pay, any dividends on shares of our common stock,
and intend to retain  future  earnings for  reinvestment  in our  business.  Any
future  determination  to pay cash  dividends  will be at the  discretion of our
Board  of  Directors  and will be  dependent  upon our  results  of  operations,
financial condition,  contractual restrictions and other factors deemed relevant
by our Board of  Directors.  Our  revolving  credit  facility  prohibits us from
paying  any cash  dividends  until such time as it has been  repaid in full.  In
addition, the terms of our senior notes include restrictions which require us to
meet certain  financial  ratios  before cash  dividends  could be paid and which
limit the payment of cash dividends to 50% of cumulative net income earned while
the senior notes are outstanding.










                                       10
<PAGE>


ITEM 6.    SELECTED FINANCIAL DATA

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

           The following selected  consolidated  financial  information includes
only  the  results  of  the  Company's  continuing   operations.   The  selected
consolidated financial information does not include the operating results of the
Riddell Group and Umbro divisions, which were sold/terminated during 2001.

<TABLE>
<CAPTION>
                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF OPERATIONS DATA                                    YEAR ENDED DECEMBER 31,
                                            -------------------------------------------------------------
                                               2002        2001          2000        1999         1998
                                            ---------    ---------    ---------    ---------    ---------
<S>                                         <C>          <C>          <C>          <C>          <C>
Net revenues                                $ 156,404    $ 147,549    $ 136,035    $ 120,285    $ 112,195
Cost of revenues                               91,916       86,968       81,347       71,657       67,924
                                            ---------    ---------    ---------    ---------    ---------
Gross profit                                   64,488       60,581       54,688       48,628       44,271
Selling, general and
   administrative expenses                     47,396       46,594       42,146       39,831       38,552
                                            ---------    ---------    ---------    ---------    ---------
Income from operations                         17,092       13,987       12,542        8,797        5,719
Interest expense, net                           8,040       10,346       13,139       12,347       11,786
                                            ---------    ---------    ---------    ---------    ---------
Income (loss) from continuing operations
   before income taxes, discontinued
   operations and extraordinary item            9,052        3,641         (597)      (3,550)      (6,067)
Income taxes (benefit)                           (735)       3,010           --          905           --
                                            ---------    ---------    ---------    ---------    ---------
Income (loss) from continuing operations
   before discontinued operations and
   extraordinary item                       $   9,787    $     631    $    (597)   $  (4,455)   $  (6,067)
                                            =========    =========    =========    =========    =========
Earnings (loss) from continuing
   operations per share before
   discontinued operations and
   extraordinary item:
   Basic                                    $    1.03    $     .07    $    (.06)   $    (.48)   $    (.66)
   Diluted                                  $     .91    $     .07    $    (.06)   $    (.48)   $    (.66)
Cash dividends per share (1)                       --           --           --           --           --

<CAPTION>
BALANCE SHEET DATE (EXCLUSIVE OF ASSETS
HELD FOR DISPOSAL)(2)                                                 DECEMBER 31,
                                            -------------------------------------------------------------
                                               2002        2001          2000        1999         1998
                                            ---------    ---------    ---------    ---------    ---------
<S>                                         <C>          <C>          <C>          <C>          <C>
Working capital                             $  24,074    $  23,640    $  12,065    $  10,084    $   6,238
Total assets                                  119,558      118,631      106,185      109,433      108,586
Long-term debt, less
   current portion                             69,785       80,410      138,919      136,097      126,900
Stockholders' equity                           27,787       17,377       25,872       24,865       25,451

<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                            -------------------------------------------------------------
                                               2002        2001          2000        1999         1998
                                            ---------    ---------    ---------    ---------    ---------
<S>                                         <C>          <C>          <C>          <C>          <C>
STATEMENTS OF CASH FLOWS DATA:
Cash flows from continuing operations (3)   $  14,315    $   4,239    $   4,221    $  (5,690)   $  (2,847)
Cash flows from investing
   activities (3)                           $    (812)   $  65,219    $  (2,638)   $  (1,384)   $    (647)
Cash flows from financing
   activities (3)                           $  (9,028)   $ (48,082)   $   3,099    $   8,644    $   4,538
OTHER DATA (UNAUDITED):
EBITDA from continuing operations (4)       $  19,012    $  18,034    $  16,248    $  12,378    $   9,271
</TABLE>

----------

(1)  The Company's line of credit  facility and Senior Note  Agreement  restrict
     the Company's ability to pay dividends.

(2)  See Note 10 to the consolidated financial statements relating to contingent
     liabilities.

(3)  For  more  detail  regarding  cash  flow  from  these  activities  see  the
     Consolidated Statements of Cash Flow on Page F-6.

(4)  EBITDA from continuing operations is the sum of our earnings or loss before
     discontinued operations,  extraordinary items (and the cumulative effect of
     changes in accounting principles (as applicable)),  interest, income taxes,
     depreciation  and  amortization  expense.   EBITDA  is  a  widely  accepted
     financial  indicator  of  a  company's  ability  to  service  indebtedness.
     However,  EBITDA should not be considered as an  alternative to income from
     operations or to cash flows from  operating  activities  (as  determined in
     accordance with generally accepted accounting principles) and should not be
     construed as an indication of our operating  performance or as a measure of
     our liquidity.  The measure of EBITDA presented above may



                                       11
<PAGE>


     not be comparable to similarly titled measures  reported by other companies
     because EBITDA is not a standardized  measure of profitability or cash flow
     as defined by generally accepted accounting principals.


The following is a reconciliation of net income (loss) to EBITDA.

<TABLE>
<CAPTION>
                                                                            (IN THOUSANDS)

RECONCILIATION OF NET INCOME (LOSS) TO
EBITDA                                                                   YEAR ENDED DECEMBER 31,
                                                ------------------------------------------------------------------------
                                                  2002            2001            2000            1999            1998
                                                --------        --------        --------        --------        --------
<S>                                             <C>             <C>             <C>             <C>             <C>
Net income (loss)                               $  9,927        $ (8,495)       $    561        $   (599)       $ (7,139)
Adjustments:
Extraordinary item                                  (140)         (4,047)             --              --              --
Loss on disposal of businesses                        --           9,326              --              --              --
(Income) loss from operations of
discontinued businesses                               --           3,847          (1,158)         (3,856)          1,072
Income taxes (benefit)                              (735)          3,010              --             905              --
Net interest expense                               8,040          10,346          13,139          12,347          11,786
Depreciation and amortization, other than
debt issue costs                                   1,920           4,047           3,706           3,581           3,552
                                                --------        --------        --------        --------        --------
EBITDA                                          $ 19,012        $ 18,034        $ 16,248        $ 12,378        $  9,271
                                                ========        ========        ========        ========        ========
</TABLE>


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

Results of operations

           Set forth below is the  percentage of our revenues  generated by each
of our two business  segments in the years ended  December  31,  2002,  2001 and
2000.

<TABLE>
<CAPTION>
                                                           (IN THOUSANDS)

                                           2002       %        2001      %        2000        %
                                         -------     ----    -------    ----     -------     ----
<S>                                      <C>         <C>     <C>        <C>      <C>         <C>
           Uniforms and Accessories      $93,848     60.0%   $88,131    59.7%    $79,179     58.2%

           Camps and Events              $62,556     40.0%   $59,418    40.3%    $56,856     41.8%
</TABLE>


           YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31,
2001

           Overview

           2002  represented the first full year of operations since the sale of
the Riddell  Group  Division and the  termination  of the Umbro  soccer  license
during  2001.  As a  result  of  these  transactions,  the  Company  was able to
significantly  reduce its overall debt load and allow  management to concentrate
on the remaining facets of the Company's business. These factors,  combined with
continued growth, resulted in significant changes in the Company's profitability
as compared to 2001.

           The Company posted net income of $9.9 million,  or $0.92 per share on
a fully diluted  basis,  for 2002 as compared to a net loss of $8.5 million,  or
$(0.90) per share, for 2001.

           Income from continuing  operations  before interest  expense,  income
taxes,  discontinued  operations and extraordinary items increased $3.1 million,
or 22%, to $17.1  million  from $14.0  million in the year ending  December  31,
2001. The Company  benefited from revenue  increases  combined with decreases in
selling,  general and  administrative  expenses as a percentage  of sales.  Such
changes will be discussed in greater detail in the following  paragraphs in this
Section.


                                       12
<PAGE>


           In April 2002, the Company used the net proceeds it received from the
Umbro  settlement  to  repurchase  $8.25 million of its 10.5% Senior Notes for a
total cost, including commissions, of $7.9 million. This transaction resulted in
an extraordinary gain of $0.1 million, net of applicable taxes.

           In December 2002, the Company  entered into a license  agreement with
Select Sport A/S. Under the terms of the license agreement,  the Company has the
right to manufacture and distribute  Select Sport soccer team uniforms,  apparel
and equipment within the United States.

           The Company's  operations are highly  seasonal.  In recent years, the
Company's operations have been profitable in the second and third quarters, with
the third quarter  typically the  strongest,  while losses have  typically  been
incurred in the first and fourth quarters.

           During  2001,  the  Company  sold  its  Riddell  Group  Division  and
terminated its Umbro soccer license.  The results of these business segments are
reported  as  income  from   operations  of   discontinued   businesses  in  the
Consolidated Statements of Operations. The following management's discussion and
analysis of financial  condition and results of operations reflects changes that
occurred  with  respect to the  Company's  income  from  continuing  operations,
exclusive of the discontinued  operations of the Riddell Group Division and with
respect to the Umbro soccer license.

           Revenues

           Revenues  for the year ended  December  31,  2002  increased  by $8.9
million,  or 6.0%,  to $156.4  million  from  $147.5  million for the year ended
December 31, 2001.

           Revenues from the sale of the uniforms and  accessories  increased by
$5.7 million,  or 6.5%,  to $93.8  million for the year ended  December 31, 2002
from $88.1  million  for the year ended  December  31,  2001.  The 2002  revenue
increase was attributable to overall increases in all product categories, except
campwear. The Company also experienced growth in sales of dance and recital wear
to the studio  dance  market.  The  Company's  uniform and  accessories  revenue
growth,  as compared to revenue  growth for 2001,  was tempered by the country's
overall  economic  condition which resulted in smaller squad sizes and deferment
of certain uniform purchases.

           Revenues from camps and events increased by $3.1 million, or 5.2%, to
$62.5  million for the year ended  December 31, 2002 from $59.4  million for the
year ended  December 31, 2001. The increase in revenues for the year is directly
attributable  to the following:  (i) a 2% increase in the number of participants
attending  our summer  camps;  (ii) a 15% increase in revenues  generated at the
Company's  regional  and  national  cheerleading  and dance team  championships,
primarily  due to an  increase  in the number of  participants  attending  these
events;  and (iii) a 32% revenue  growth,  or $0.7 million,  in our studio dance
competitions  and  conventions.  These  increases  were  offset  by  significant
decreases in the Company's group tour business, caused by groups either delaying
or canceling  their 2002 tours as a result of the events of September  11, 2001.
Exclusive  of the  effects of  September  11th on the group tour  business,  the
Company's camps and events segment  experienced a 8.0% revenue  increase for the
year ended December 31, 2002.

           Gross profit

           Gross profit for the year ended  December 31, 2002 increased by 6.4%,
to $64.5 million from $60.6 million for the year ended December 31, 2001.  Gross
margin  rates  stayed  relatively  flat as compared to the prior year with a 0.1
percentage  point  increase to 41.2% for the year ended  December  31, 2002 from
41.1% in the year ended December 31, 2001.

           Gross  margins  rates  for  the  uniforms  and  accessories   segment
increased to 47.0% for the year ended  December 31, 2002 from 46.4% for the year
ended  December  31,  2001.  The  percentage  increase  was  primarily  due to a
continuance  in the shift of the  segment's  product mix away from lower  margin
campwear and  accessories  to higher  margin  manufactured  uniforms and special
event  merchandise,  combined with manufacturing  efficiencies  realized through
improvements made in the Company's uniform manufacturing processes.

           Gross  margin  rates for the camps and events  segment  decreased  to
32.6% in the year ended December 31, 2002 from 33.2% for the year ended December
31,  2001.  The  overall  decrease  in the  gross  margin  rate is due to higher
housing,   personnel  and  program  support  expenses   associated  with  higher
anticipated revenue growth for the Company's


                                       13
<PAGE>


summer camp  operations  combined with higher venue and production  costs at the
Company's special events held during the first quarter of 2002.

           Selling, general and administrative expenses

           Selling,   general  and   administrative   expenses  decreased  as  a
percentage of revenues to 30.3% for the year ended  December 31, 2002 from 31.6%
for the year ended  December 31, 2001. The  improvement  is  principally  due to
economies   of  scale   realized  by  spreading   certain   fixed  and  variable
administrative expenses over a greater revenue base combined with a reduction in
amortization  expense of approximately  $1.9 million as a result of adopting the
standards of Statement of Financial  Accounting  Standards No. 142 ("SFAS 142").
"Goodwill and Other Intangible Assets."

           Selling,  general  and  administrative  expenses as a  percentage  of
revenues with respect to the uniforms and accessories segment decreased to 30.2%
for the year ended  December 31, 2002 from 32.8% in the year ended  December 31,
2001.  These gains were due to improved  economies  of scale and  reductions  in
amortization expense as discussed in the preceding paragraph.

           Selling,  general and administrative expense ratios for the camps and
events segment remained consistent with the previous year with a slight increase
of 0.1% to 27.0% for the year ended  December  31,  2002 from 26.9% for the year
ended December 31, 2001. The change in the selling,  general and  administrative
expense  ratio is due to overhead  costs  incurred  related to the Company's new
soccer business and the increase in the ratio of administrative  expenses at the
Company's  group tour  business.  Group tour  revenues  decreased as a result of
September 11th,  while  administrative  expenses  remained flat on a comparative
basis.  These  increases  were  partially  offset by reductions in  amortization
expense as discussed in the above paragraph.

           Interest expense

           Interest expenses for the year ended December 31, 2001 was reduced by
$3.1  million,  as a  result  of  an  allocation  of  interest  expense  to  the
discontinued operations of the Riddell Group Division.

           Net interest  expense  decreased  $2.3 million to $8.0 million in the
year ended  December 31, 2002 from $10.3 million in the year ended  December 31,
2001. Total interest expense, before the allocation to discontinued  operations,
decreased by $5.4  million due to reduced  interest on the senior notes and with
respect  to the  Company's  revolving  line  of  credit  as a  result  of  lower
outstanding  indebtedness in 2002 as compared to 2001. The net interest  expense
for the year  ended  December  31,  2001  included  approximately  $0.3  million
received  as  part  of  a  federal  tax  refund.  The  refund,   which  included
approximately  $1.5 million in taxes,  related to a carryback  of net  operating
losses of the  Company's  Varsity  Spirit  Corporation  subsidiary  for  periods
preceding  the 1997  acquisition  of  Varsity  Spirit  Corporation  and had been
recorded as a receivable at the time of the acquisition.

           Income taxes

           The income tax benefit for 2002  consists of a current  state  income
tax  provision  of $520,000  offset by a deferred  tax  benefit of $1.2  million
resulting  from the  utilization  of net operating  loss  carryforwards  and the
reversal of the Company's remaining deferred tax asset valuation allowance.  The
2002 benefit has been allocated to the income statement as follows:  1) $735,000
benefit to continuing operations;  and 2) $10,000 expense to extraordinary gain.
The deferred tax benefit was a result of the reversal of the Company's valuation
allowance on its available federal net operating loss  carryforward.  Based upon
normal operating conditions,  the Company expects to fully utilize its remaining
available federal net operating loss carryforwards during 2003.

           Income tax expense for 2001  consisted of a current  state income tax
provision of $900,000,  offset by a deferred tax benefit of $2.2 million,  for a
net benefit of $1.3 million.  The 2001 income tax expense has been  allocated as
follows:  1) $3.0 million income tax expense to continuing  operations;  2) $1.5
million benefit to income (loss) from operations of  discontinued  business;  3)
$6.3  million  benefit to loss on  disposal  of  business;  and 4) $3.5  million
expense to extraordinary gain on retirement of bonds.

           YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31,
2000

           Overview

           On June 22, 2001, the Company completed the sale of its Riddell Group
Division to an acquisition  affiliate of  Lincolnshire  Management,  Inc., a New
York based private equity fund. In conjunction with this sale, the Company


                                       14
<PAGE>


wrote down its net minority  investment in an entity that provided game uniforms
to the Riddell Group Division. As a result of the two transactions,  the Company
recorded a loss of $20.5 million ($12.2  million after tax). In September  2001,
the Company  settled the  litigation  that had been  brought  earlier  that year
against  Umbro  Worldwide,  Ltd.  ("Umbro  Worldwide")  involving  its licensing
agreement  between the  Company  and Umbro  Worldwide.  In  connection  with the
settlement  and in  exchange  for  an  upfront  payment  and  Umbro  Worldwide's
agreement to make certain  additional  payments to the Company,  until the third
quarter  of 2002,  the  Company  voluntarily  agreed to  terminate  its  license
effective  November 30, 2001. The Company  reflected the transaction  during the
fourth  quarter of 2001 with the  reserves  necessary  in  conjunction  with the
purchase of inventory  by Umbro  Worldwide.  The Riddell  Group  Division's  and
Umbro's  operating  results are shown as income from  operations of discontinued
business in the Condensed Consolidated Statements of Operations.

           The Riddell Group  Division  included:  (i) all of the Company's Team
Sports  business,  excluding  Umbro  branded  team  soccer  products;  (ii)  the
Company's  licensing  segment,  which allowed  third-parties  to market  certain
products  using the Riddell and  MacGregor  trademarks;  and (iii) the Company's
retail  segment,  which  marketed  a line of sports  collectibles  and  athletic
equipment to retailers.

           The  Umbro  operations  that  were  discontinued  as a result  of the
termination of the license with Umbro  Worldwide  included sales of Umbro soccer
apparel, and equipment and footwear to soccer specialty stores and others in the
team channel of distribution, primarily in the United States.

           As a  result  of the  sale  of the  Riddell  Group  Division  and the
discontinuance  of the Umbro license,  Varsity's  continuing  financial  results
consist of operations  within the school  spirit  industry,  including:  (i) the
design,  marketing and  manufacturing of cheerleader and dance team uniforms and
accessories;  (ii) the operation of cheerleading and dance team camps throughout
the United States; (iii) the production of nationally televised cheerleading and
dance team championships and other special events;  (iv) the operation of studio
dance  competitions  and  conventions;   and  (v)  the  design,   marketing  and
manufacturing of dance and recital apparel for the studio dance market.

           During 2001, the Company used a portion of the proceeds received from
the sale of the Riddell  Group  Division  to  repurchase  $40.7  million in face
amount of its 10.5% Senior Notes for a total cost, including commissions, of $32
million. As a result of the repurchase,  the Company recognized an extraordinary
gain of approximately $4.0 million, net of income taxes, commissions and related
debt acquisition costs.

           The Company posted a net loss of $8.5 million,  or $(0.90) per share,
for 2001,  compared  with  earnings of $.6 million,  or $0.06 per share,  a year
earlier.

           Operating income before interest,  taxes, discontinued operations and
extraordinary  items for 2001 increased  $1.5 million,  or 12%, to $14.0 million
from $12.5 million in the year ended 2000.  Varsity  benefited from increases in
revenues which were offset by increases in selling,  general and  administrative
expenses as a percentage of sales, as described in more detail in the discussion
which follows this overview.

           The Company's  operations are highly  seasonal.  In recent years, the
Company's operations have been profitable in the second and third quarters, with
the third quarter  typically the  strongest,  while losses have  typically  been
incurred in the first and fourth quarters.

           The  operating  results of the Riddell  Group  Division and the Umbro
Division are reported as income from  operations of  discontinued  businesses in
the Condensed Consolidated Statements of Operations.  The following management's
discussion and analysis of financial condition reflects changes occurring in the
Company's  income from  continuing  operations,  exclusive  of the  discontinued
operations of the Riddell Group Division and the Umbro division.

           Revenues

           Revenues  for the year ended  December  31, 2001  increased  by $11.5
million,  or 8.5%,  to $147.5  million  from  $136.0  million for the year ended
December 31, 2000.

           Revenues from the sale of the uniforms and  accessories  increased by
$8.9 million,  or 11.3%,  to $88.1 million for the year ended  December 31, 2001
from $79.2  million for the year ended  December  31,  2000.  The  increase  was
attributable to an overall strong increase in most product categories, primarily
uniforms and lettering,  offset by a slight decrease in campwear and shoe sales.
The significant  increase in revenues is a direct result of quicker  delivery of
uniforms and accessories combined with higher merchandise sales generated at our
instructional camps. The improvement in delivery times is partially attributable
to improvements made to the Company's order entry system


                                       15
<PAGE>


combined  with  better  availability  of  inventory  items  for  delivery.   The
improvement  in  camp  merchandise  sales  is  partially   attributable  to  the
consolidation of merchandising  and warehousing  activities within our camps and
events division.

           Revenues from camps and events increased by $2.6 million, or 4.5%, to
$59.4  million for the year ended  December 31, 2001 from $56.8  million for the
year ended  December 31, 2000. The increase in revenues for the year is directly
attributable  to the following:  (i) a 50% revenue growth,  or $0.6 million,  in
studio  dance   competitions  and   conventions,   such  growth  being  directly
attributable to the acquisition of the assets of the Netherland Corporation,  an
operator of dance  competitions,  in June 2000; and (ii) a 6.5% increase in camp
participants  during the year of 2001 as  compared  to the same  period in 2000.
Such  increases  were  offset  somewhat by a decrease in the number of choir and
band tours handled by the Company's group tour business during 2001.

           Gross profit

           Gross profit for the year ended  December 31, 2001 increased by 10.8%
to $60.6 million from $54.7 million for the year ended December 31, 2000.  Gross
margin  rates  increased  by 0.9% to 41.1% for the year ended  December 31, 2001
from 40.2% in the year ended December 31, 2000.

           Gross  margins  rates  for  the  uniforms  and  accessories   segment
increased to 46.4% for the year ended  December 31, 2001 from 45.4% for the year
ended December 31, 2000. The percentage increase was primarily due to a shift in
the mix of products  sold from lower  margin  stockable  items to higher  margin
custom  uniforms,  combined with on-time  delivery of production and piece goods
which resulted in lower delivery costs and sales discounts. These increases were
offset  by lower  margins  earned  on the new  performance  dance  wear  line as
compared to the  Company's  other uniform  lines  combined with slightly  higher
manufacturing  costs  associated with the Company's new warehouse and production
facility.

           Gross  margin  rates  for the  camps  and  events  segment  increased
slightly  to 33.2% in the year ended  December  31, 2001 from 32.9% for the year
ended  December 31, 2000. The increase in the gross margin rate is primarily due
to the overall decrease in the Company's 2001 group tour operations,  which have
historically generated lower gross margins than the other parts of the Company's
business;  therefore,  the  decrease  in group tour  operations  resulted  in an
overall  increase in the  segment's  gross  margin  rate.  The  increase is also
partially  due  to  increased   participation  in  the  Company's  studio  dance
competitions and  conventions,  which have  historically  generated higher gross
margins than the cheerleading and dance camps.

           Selling, general and administrative expenses

           Selling,   general  and   administrative   expenses  increased  as  a
percentage of revenues to 31.6% for the year ended  December 31, 2001 from 31.0%
for the year ended  December 31,  2000.  This  increase is primarily  due to the
following  factors:  1) In 2001, the Company  accrued a $900,000  bonus; no such
bonus was accrued in 2000; 2) The Company recognized  approximately  $250,000 in
costs  associated  with  abandoning its former  corporate  headquarters;  and 3)
certain corporate administrative expenses are now being allocated over a smaller
revenue basis.

           Selling,  general  and  administrative  expenses as a  percentage  of
revenues with respect to the uniforms and accessories segment increased to 32.8%
for the year ended  December 31, 2001 from 32.2% in the year ended  December 31,
2000.  The decrease is  primarily  due to increased  rent and  occupancy  costs,
including property taxes,  incurred as a result of moving into the Company's new
warehouse in October 1999, plus additional  costs associated with abandoning the
Company's former headquarters.

           Selling,  general and administrative expense ratios for the camps and
events  segment  increased  to 26.9% for the year ended  December  31, 2001 from
24.1% for the year ended  December 31, 2000. The increases are due to additional
overhead incurred as a result of the acquisition of the assets of the Netherland
Corporation  in June  2000.  Netherland's  management  team is  responsible  for
managing the Company's studio dance competitions and conventions, as well as the
Company's line of performance and recital dance wear, introduced during 2000.

           Interest expense

           Interest  expense for the years ended  December 31, 2000 and 2001 has
been reduced by $3.1 million and $3.2 million,  respectively,  as a result of an
allocation  of interest  expense to the  discontinued  operations of the Riddell
Group Division.


                                       16
<PAGE>


           Net  interest   expense,   after  the   allocation   of  interest  to
discontinued operations, decreased by $2.8 million to $10.3 million for the year
ended December 31, 2001 from $13.1 million for the year ended December 31, 2000.
Interest expense decreased due to lower interest on the revolving line of credit
resulting  from lower  outstanding  indebtedness  and decreases in the prime and
LIBOR  interest  rates during 2001.  The net interest  expense for the year also
decreased  due to the receipt of interest  income of  approximately  $250,000 as
part of a federal  tax  refund  and  interest  earned  on the net cash  proceeds
received from the sale of the Riddell Group Division.  The tax refund related to
a carry back of net operating losses of the Company's Varsity Spirit Corporation
subsidiaries  for  periods  preceding  the 1997  acquisition  of Varsity  Spirit
Corporation.  The tax refund was for approximately $1.5 million and was recorded
as a receivable at the time of the acquisition.

           During  the year,  the  Company  used a portion  of the net  proceeds
received from the sale of the Riddell Group Division to repurchase $40.7 million
in  face  amount  of  its  10.5%  Senior  Notes  for  a  total  cost,  including
commissions,  of $32.0  million.  As a result  of the  repurchase,  the  Company
recognized an extraordinary  gain of approximately  $4.0 million,  net of income
taxes, commissions and related debt acquisition costs.

           Income taxes

           Income tax expense for 2001  consisted of a current  state income tax
provision of $900,000,  offset by a deferred tax benefit of $2.2 million,  for a
net benefit of $1.3 million.  The 2001 income tax expense has been  allocated as
follows:  1) $3.0 million income tax expense to continuing  operations;  2) $1.5
million benefit to income (loss) from operations of  discontinued  business;  3)
$6.3  million  benefit to loss on  disposal  of  business;  and 4) $3.5  million
expense to extraordinary gain on retirement of bonds.

Liquidity and capital resources

           The  seasonality of the Company's  working capital needs is primarily
impacted by three  factors.  First,  a  significant  portion of the products the
Company sells are sold  throughout  the year on  dated-payment  terms,  with the
related  receivables  becoming  due when  the  school  year  begins  during  the
following July to October period.  Second,  the Company incurs costs relating to
the Company's  summer camp business  during the first and second  quarter as the
Company  prepares for the upcoming  camp season,  while camp revenues are mostly
collected in the June to August time period.  Lastly, the outstanding balance of
the  Company's   publicly  held  debt  impacts  the  Company's  working  capital
requirements as semi-annual  interest payments on our currently $66.0 million of
10.5% Senior  Notes  outstanding  come due each  January and July.  Prior to the
consummation of the sale of the Riddell Group Division,  there were $115 million
of 10.5% of Senior Notes  outstanding.  In accordance with certain provisions of
the Senior Notes,  the Company  subsequently  repurchased  an aggregate of $49.0
million in principal  amount of Senior Notes  following  the sale of the Riddell
Group Division.  Specifically, $11.8 million in principal amount of Senior Notes
in open  market  purchases  in the  third  and  fourth  quarters  of 2001 for an
aggregate  purchase price of $8.4 million,  $28.9 million in principal amount of
Senior Notes in the Company's "Modified Dutch Auction" tender offer completed in
December  2001 for an  aggregate  purchase  price of $23.1  million,  and  $8.25
million in principal  amount of Senior Notes in an open market purchase in April
2002 for an aggregate purchase price of $8.1 million.

           To finance  the  Company's  seasonal  working  capital  demands,  the
Company  maintains a credit facility in the form of a $15 million revolving line
of credit,  less a $100,000 reserve  established by the bank. The line of credit
agreement  is  available  from  January 15 -  September  15.  Historically,  the
outstanding balance on the Company's 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 middle of
third quarter and into the fourth quarter as collections  are used to reduce the
outstanding  balance.  The credit facility  agreement  contains covenants which,
among other things,  require the Company to meet certain financial ratio and net
worth tests, restrict the level of additional  indebtedness that the Company may
incur,  limit  payments  of  dividends,  restrict  the sale of assets  and limit
investments  that the Company may make. The Company has pledged  essentially all
of its tangible assets as collateral for the credit facility.

           There were no outstanding  balances due under the credit  facility as
of December 31, 2002 and 2001.  The Company had  approximately  $716,000 of open
letter of credit agreements outstanding as of March 21, 2003.

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


                                       17
<PAGE>


           Our  current   debt  service   obligations   are   significant   and,
accordingly,  our ability to meet our debt  service and other  obligations  will
depend on our future performance and is subject to financial, economic and other
factors,  some  of  which  are  beyond  our  control.  Furthermore,  due  to the
seasonality of working capital demands described above, year-over-year growth in
our business  and working  capital  demands  could lead to higher debt levels in
future  periods.  We presently  believe that  operating  cash flow together with
funds  available from our credit facility will be sufficient to fund our current
debt service, seasonal and other current working capital requirements.

           Net cash provided from operations increased from $4.2 million for the
year ended  December 31, 2001 to $14.3  million for the year ended  December 31,
2002. This increase is primarily due to an improvement in the Company's  overall
profitability  combined with the collection of the Umbro  settlement  receivable
and a change in the timing of the receipt of customer deposits for the Company's
regional and national championships. Such increases were offset by reductions in
debt  amortization  and accrued  interest,  due to debt  retirements in 2001 and
2002.

           Net cash from investing activities decreased from $65.2 provided from
investing activities in the year ended December 31, 2001 to $0.8 million used by
investing  activities in the year ended December 31, 2002.  This decrease is due
by the  receipt of $67.3  million in 2001 in net  proceeds  from the sale of the
Riddell Group Division and from the early termination of the Umbro license. This
decrease  was offset by a  reduction  in  capital  expenditures  during  2002 as
compared to 2001. The decrease in capital  expenditures was caused by additional
capital  expenditures  incurred as a result of the  Company's  relocation of its
corporate  office  in the  fourth  quarter  of 2001;  there  were no  comparable
expenditures  in 2002. The Company  expects 2003 capital  expenditures to exceed
2002's  capital  expenditures  as the Company  will be  upgrading  its  computer
system.

           The amount of net cash used by financing  activities decreased from a
usage of $48.1  million in the year ended  December  31, 2001 to a usage of $9.0
million  in the year  ended  December  31,  2002.  This  decrease  is due to the
reduction in the  Company's  overall debt level during 2001 as a result of using
the net cash  proceeds  received  as a result of the sale of the  Riddell  Group
Division in 2001.

Critical Accounting Policies

           ACCOUNTS   RECEIVABLE:   The  majority  of  the  Company's   accounts
receivables  arise from the sale of  cheerleading  and dance team  uniforms  and
accessories  to high  schools,  junior high  schools and  all-star/youth  groups
throughout  the United  States.  Except as described in Note 3 to the  financial
statements,  as incorporated  herein by reference,  accounts  receivable are due
within 30 days and are stated at amounts due from  customers net of an allowance
for doubtful accounts.  Accounts outstanding longer than the contractual payment
terms  are  considered  past  due.  The  Company  determines  its  allowance  by
considering  a number of factors,  including  the length of time trade  accounts
receivable  are past due and the Company's  previous  loss history.  The Company
writes-off  accounts  receivable  when they become  uncollectible,  and payments
subsequently  received on such  receivables  are credited to the  allowance  for
doubtful  accounts.  The company fully reserves all service charges  assessed on
past due accounts.  Service charge payments subsequently received are recognized
as income at the time of payment.

           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,  net of an allowance for discontinued  inventory.  The Company
determines its allowance based a variety of factors, the most important of which
being the  inclusion/exclusion  of the inventory item from the Company's current
catalog. Items no longer included in the catalog are reserved at 100% of cost.

           INTANGIBLE  ASSETS,  GOODWILL 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.

           Goodwill and indefinite lived intangible assets are reviewed annually
for impairment.  The impairment assessment is derived using discounted cash flow
analysis to calculate fair value.  The Company will compare the calculated  fair
value to the carrying value of goodwill.  Any impairment charges will be charged
against operations at the time the impairment is determined.

           Effective  January 1, 2002,  the Company  adopted the  provisions  of
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible  Assets" ("SFAS 142").  SFAS 142 provides that  goodwill,  as well as
identifiable intangible assets, should not be amortized.  Accordingly,  with the
adoption of SFAS 142, the Company  discontinued  the amortization of goodwill as
of January 1, 2002. Goodwill  amortization  expense for the years ended December
31, 2001 and 2000 was $1,882,000 and $1,876,000, respectively.


                                       18
<PAGE>


           REVENUES:  Sales of products are recorded upon shipment to customers.
Camp and event revenues are recognized over the term of the respective activity.

           Contractual obligations and commercial commitments

           The  following is a summary of the  Company's  long-term  contractual
obligations as of December 31, 2002:

<TABLE>
<CAPTION>
                                                  Payments Due by Period (in thousands)
                             --------------------------------------------------------------------------------------
Contractual Obligations       Total         Less than 1 year     1 - 3 years       4 - 5 years        After 5 years
-----------------------      -------        ----------------     -----------       -----------        -------------
<S>                          <C>                <C>                <C>                <C>                <C>
Long-term debt               $72,160            $ 2,375            $ 3,550            $66,235            $    --

Operating leases              19,711              2,461              4,670              4,805              7,775

Other long-term
obligations                    3,030                365                790                750              1,125
                             -------            -------            -------            -------            -------
Total contractual
obligations                  $94,901            $ 5,201            $ 9,010            $71,790            $ 8,900
                             =======            =======            =======            =======            =======
</TABLE>


           The  following is a summary of the Company's  contractual  commercial
commitments outstanding as of December 31, 2002:

<TABLE>
<CAPTION>
                                                                  Amount of Commitment Expiration per Period
                                                                             (amounts in thousands)
                                                            ------------------------------------------------------
                                           Commitment
      Other                 Total          Outstanding
   Commercial              Amounts           as of          Less than
   Commitments           Committed     December 31, 2002     1 year        1 - 3 years  4 - 5 years   Over 5 years
                         ---------     -----------------    ---------      -----------  -----------   ------------
<S>                        <C>              <C>              <C>              <C>           <C>           <C>
Lines of credit            $15,000          $    --          $15,000          $ --          $ --          $ --

Standby letters of
credit                     $   716          $   716          $   716          $ --          $ --          $ --
                           -------          -------          -------          ----          ----          ----
Total commercial
commitments                $15,716          $   716          $15,716          $ --          $ --          $ --
                           =======          =======          =======          ====          ====          ====
</TABLE>


Accounting Pronouncements

           The  Financial  Accounting  Standards  Board has issued SFAS No. 143,
"Accounting for Asset  Retirement  Obligations."  SFAS No. 143 will be effective
January 1, 2003. The new rules apply to all entities that have legal obligations
associated with the retirement of a tangible long-lived asset. The entity should
recognize a liability for an asset retirement obligation if (a) the entity has a
duty or responsibility to settle an asset retirement obligation,  (b) the entity
has little or no discretion  to avoid the future  transfer or use of the assets,
and (c) the transaction or other event  obligating the entity has occurred.  The
Company does not believe this  pronouncement  will have a material impact on its
financial statements.


                                       19
<PAGE>


           Effective January 1, 2002, the Financial  Accounting  Standards Board
issued SFAS No. 144,  "Impairment  or Disposal of Long-Lived  Assets." Under the
provisions of SFAS No. 144, an entity should recognize an impairment loss if the
carrying  amount of a long-lived  asset or asset group if it is not  recoverable
and  exceeds  its fair  value.  An entity  must test an asset or asset group for
impairment  whenever  events  or  changes  in  circumstances  indicate  that its
carrying amount may not be recoverable.  SFAS No. 144 also includes criteria for
classifying a long-lived asset or asset group as held for sale.  Assets held for
sale must be shown at the lower of its  carrying  amount or fair value less cost
to sell. The Company adopted SFAS No. 144 effective January 1, 2002.

      In April 2002, the Financial  Accounting  Standards  Board issued SFAS No.
145, "Recission of FASB Statements 4, 44 and 64, Amendment of FASB Statement 13,
and Technical  Corrections"  ("SFAS No. 145"). Among other provisions,  SFAS No.
145 rescinds FASB Statement 4 "Reporting Gains and Losses from Extinguishment of
Debt."  Accordingly,  gains or losses from  extinguishment of debt should not be
reported  as  extraordinary  items  unless the  extinguishment  qualifies  as an
extraordinary item under the criteria of Accounting Principles Board Opinion 30,
"Reporting  the Results of Operations - Reportinig  the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and  Transactions  ("APB 30").  Gains and losses from  extinguishment  of
debt, which do not meet the criteria of APB 30, should be reclassified to income
from  continuing  operations in all prior periods  presented.  The provisions of
SFAS No. 145 will be effective  for fiscal years  beginning  after May 15, 2002.
Upon adoption,  the Company  anticipates  that it will reclassify gains on early
extinguishment  of debt and related taxes  previously  recorded as extraordinary
items to other income and provision for taxes, respectively.

           On June 1, 2002, the Financial Accounting Standards Board issued SFAS
No. 146,  "Accounting for Costs  Associated  with Exit or Disposal  Activities."
SFAS No. 146 addresses the  accounting and reporting for costs  associated  with
exit or disposal activities. This Statement requires that a liability for a cost
associated  with  an  exit or  disposal  activity  be  recognized  and  measured
initially at fair value only when the liability is incurred.  This pronouncement
will become effective as of January 1, 2003 and will impact any exit or disposal
activities the Company initiates after that date.

      In December 2002, the Financial Accounting Standards Board issued SFAS No.
148,  "Accounting for Stock-Based  Compensation - Transition and Disclosure:  an
amendment  of FASB  Statement  123"  ("SFAS No.  148").  SFAS No.  148  provides
alternative  transition  methods for a voluntary  change in the fair value based
method of accounting for stock-based employee  compensation.  In addition,  SFAS
No. 148 amends the disclosure  requirements of SFAS No. 123 to require prominent
disclosures in annual  financial  statements  about the method of accounting for
stock-based  employee  compensation and the pro forma effect on reported results
of applying  the fair value based  method for  entities  that use the  intrinsic
value method of accounting.  The pro forma effect  disclosures are also required
to be prominently  disclosed in the interim period  financial  statements.  This
provisons of SFAS No. 148 become  effective for financial  statements for fiscal
years ending after  December 15, 2002 and are effective  for  financial  reports
containing  condensed  financial  statements for interim periods beginning after
December 15, 2002.

      In January 2003, the Financial  Accounting  Standards Board issued FIN 46,
"Consolidation  of Variable  Interest  Entities - An  Interpretation  of ARB 51"
("FIN 46"). FIN  46 is effective  immediately  for any variable  interest entity
created  after  January  31,  2003 and to  variable  interest  entities  that an
enterprise  acquires  an  interest in after that date.  The  statement  includes
disclosure requirements that must be met and may require the reporting entity to
consolidate those variable  interest  entities which meet certain  requirements.
This  pronouncement  will  become  effective  as of the first  interim or fiscal
period  beginning  after June 15,  2003 and will  impact any  variable  interest
entity activities the Company inititates after that date.

Risk Factors

           Restrictive Covenants and Asset Encumbrances

           The Company's debt instruments contain numerous restrictive covenants
that limit the  discretion  of the  management  of the Company  with  respect to
certain business  matters.  These covenants place  significant  restrictions on,
among other things, the ability of the Company to incur additional indebtedness,
to create liens or other encumbrances, to pay dividends or make other restricted
payments,  to make  investments,  loans and  guarantees and to sell or otherwise
dispose of a  substantial  portion of assets to, or merge or  consolidate  with,
another  entity.  The  Company's  debt  instruments  also  contain  a number  of
financial  covenants that require the Company to meet certain  financial  ratios
and tests and provide that a Change of Control (as defined therein)  constitutes
an event of default. A failure to comply with


                                       20
<PAGE>


the  obligations  contained  therein,  if not  cured  or  waived,  could  permit
acceleration of the related  indebtedness and acceleration of indebtedness under
other instruments that contain  cross-acceleration or cross-default  provisions.
In addition,  the Company has pledged  substantially all of its assets to secure
its senior  bank debt,  which is a revolving  line of credit.  In the case of an
event of default under the Company's  senior bank debt,  the lenders  thereunder
would be entitled to exercise the remedies  available to a secured  lender under
applicable  law. If the Company  were  obligated  to repay all or a  significant
portion of its  indebtedness,  there can be no assurance  that the Company would
have sufficient cash to do so or that the Company could  successfully  refinance
such indebtedness. Other indebtedness of the Company that may be incurred in the
future may contain  financial or other  covenants  more  restrictive  than those
applicable to the Company's debt instruments.

           Seasonality and Quarterly Fluctuations

           Varsity's  business and results of operations are highly seasonal and
follow a similar annual pattern. With respect to Varsity's cheerleader and dance
team  camps,  such camps are held  exclusively  in the summer  months.  Sales of
Varsity's  cheerleader,  dance team and booster club  uniforms  and  accessories
primarily  occur  prior to the  beginning  of the school  year.  Accordingly,  a
substantial  portion of Varsity's  annual  revenues and all of its net income is
generated  in the second and third  quarters of each  calendar  year,  while the
first and fourth quarters have  historically  resulted in net losses.  Varsity's
working capital needs have generally  followed a similar pattern  reaching their
peak at the end of the first calendar quarter and continuing  through the second
quarter.  This  period  follows  Varsity's  off-season  period  during  which it
generates only nominal revenues while incurring  expenditures in preparation for
its approaching peak season.  Varsity has typically incurred seasonal borrowings
during this period which it has historically eliminated during the third quarter
as  it  receives  prepayments  on  camp  tuition  and  fees.  See  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Seasonality."

           Uncertainty of Insurance Coverage; Personal Injury Claims

           Cheerleading  is  a  vigorous  athletic  activity   involving  jumps,
tumbling,  partner stunts and pyramids, with which there are associated risks of
personal injury. Varsity actively promotes safety among cheerleaders, dance team
participants  and  coaches  and  was a  founding  member  of  and  is an  active
participant in the American Association of Cheerleading Coaches and Advisors, an
industry trade group whose mission is to improve the quality of cheerleading and
to maintain established safety standards.  From time to time, Varsity is subject
to personal  injury claims  arising from its  cheerleader  and dance team camps,
none of which was or is material to Varsity's operations. Varsity believes it is
adequately insured against such risks. There can be no assurances, however, that
one or more meritorious claims against Varsity for serious personal injury would
not have an adverse effect upon the Company's business,  financial condition and
results of operations.

           Risk of Loss of Material Contractual Relationships; Competition

           Varsity  organizes and produces  various  national  cheerleading  and
dance team  championships  for exclusive  broadcast on the ESPN,  Inc.  ("ESPN")
cable channel. Varsity's current agreement with ESPN expires in October of 2003.
Varsity has entered into several agreements with Walt Disney  Attractions,  Inc.
("Walt  Disney  Attractions")  pursuant to which its national  cheerleading  and
dance team  championships  through  2004 will be held at the Walt  Disney  World
Resort in Florida.  While the Company  believes  that it will be  successful  in
renewing or replacing the agreements with ESPN and Walt Disney  Attractions in a
manner which will continue to promote the Company's products and services, there
can be no  assurances  that it will be successful in doing so or that it will be
able to do so on economically  favorable  terms.  Although the Company  believes
that the  failure to renew any one of the  agreements  with ESPN and Walt Disney
Attractions  would not have a material  effect on the  Company,  there can be no
assurances that the loss of all or any combination of such agreements  would not
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

           Varsity  is one of two major  national  companies  that  designs  and
markets cheerleader, dance team and booster club uniforms and accessories and is
one of two major  national  operators of camps.  While  Varsity's  only national
competitor is National Spirit Group Limited, it also competes with other smaller
national and regional  competitors that serve the uniform and accessories market
or that operate cheerleader and dance team camps and clinics.

           Regulation

           At present,  no national  governing body regulates  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


                                       21
<PAGE>


athletic  conferences,  to date  cheerleading and dance teams generally are 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 other  sports)  and the  Company is unable to work with the NCAA and its
member  institutions,  or any other  applicable  regulatory  body,  to designate
acceptable  times and sites  regarding  when and where  camps  with  respect  to
cheerleading  and/or dance teams can be conducted,  Varsity might not be able to
offer a significant  number of its camps either  because  participants  might be
prohibited from participating  during the summer or because suitable sites might
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 these
activities may become  regulated.  If Varsity 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  affect on Varsity's  business,  financial
condition and results of  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  have in some  cases  imposed  certain
restrictions on off-season  practices and  out-of-state  travel to competitions.
However,  in all cases to date,  Varsity  has been able to work with these state
athletic  associations to designate acceptable times for the cheerleaders within
these  states  to  attend  camps.  Accordingly,   at  the  present  time,  state
regulations  have not had a  material  adverse  effect on  Varsity's  ability to
conduct its normal  business  activities  within those states.  Varsity has also
signed agreements with several state  associations to assist with sponsoring and
execution of official competitions with these states.

           Dependence on Key Personnel

           The Company's  executive  officers and certain other key employees of
Varsity have been primarily  responsible  for the  development  and expansion of
their respective business,  and the loss of the services of one or more of these
individuals could have a material adverse effect on the Company. The Company has
employment and non-competition  agreements with certain key personnel,  although
it  currently  does  not  have  an  employment  agreement  or a  non-competition
agreement  with Jeffrey G. Webb,  the  Company's  founder,  President  and Chief
Executive Officer.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           Varsity  is  exposed  to some  market  risk from  changes  in foreign
currency  rates,  in connection  with the Company's sale of travel  packages for
trips outside of the United States,  however,  such risk has never been, and the
Company  does  not  believe  that it  currently  is,  material  to its  business
operations.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           See Item 16(a) in Part IV and page F-1 of this Report.


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

           None.


                                    PART III

ITEM 10.             DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

           Information with respect to the directors and the executive  officers
of Varsity Brands, Inc.  ("Varsity") is set forth below as of March 21, 2003 and
is based upon the  records of Varsity  and  information  furnished  to it by the
directors and executive officers.  See "Security Ownership of Certain Beneficial
Owners and Management"  for information  pertaining to the Common Stock owned by
the directors.


                                       22
<PAGE>


<TABLE>
<CAPTION>
                                                                                  HAS SERVED AS
NAME                               AGE          POSITION WITH VARSITY             DIRECTOR SINCE
-------------------------------    ---   ---------------------------------------  ---------------
<S>                                <C>   <C>                                      <C>
Robert E. Nederlander..........    70    Chairman of the Board                    April 1988
Jeffrey G. Webb................    53    Chief Executive Officer and Vice         June 1997
                                         Chairman of the Board
Leonard Toboroff...............    70    Director and Vice President              April 1988
Don R. Kornstein...............    51    Director                                 April 1995
John McConnaughy, Jr...........    74    Director                                 September 1989
Glenn E. "Bo" Schembechler.....    74    Director                                 September 1991
Arthur N. Seessel, III.........    64    Director                                 February 1999
OTHER EXECUTIVE OFFICERS:
John M. Nichols................    51    Chief Financial Officer
David Groelinger...............    52    Executive Vice President
W. Kline Boyd..................    49    Senior  Vice  President, Apparel and
                                         Accessories
Gregory C. Webb................    51    Senior Vice President, Camps and Events
J. Kristyn Shepherd............    47    Senior Vice President, Special Events
</TABLE>


           Set forth below is biographical  information  regarding each director
and executive officer of Varsity based on information supplied by them.

           ROBERT E. NEDERLANDER. Mr. Nederlander has been Chairman of the Board
of Varsity since April 1988 and was Varsity's Chief Executive Officer from April
1988 through April 1, 1993. Mr. Nederlander has been President and/or a Director
since November 1981 of the Nederlander Organization, Inc., owner and operator of
one of the world's  largest  chains of live  theaters.  Since  December 1998 Mr.
Nederlander has been managing member of the Nederlander Company LLC, an operator
of live  theaters  outside of New York City.  He served as the Managing  General
Partner of the New York Yankees from August 1990 until  December  1991,  and has
been a limited  partner and a Director  since  1973.  Mr.  Nederlander  has been
President since October 1985 of the Nederlander Television and Film Productions,
Inc. and Chairman of the Board and Chief Executive  Officer from January 1985 to
January 2002 of MEGO Financial  Corporation.  Mr.  Nederlander was a director of
MEGO Mortgage  Corporation  from December 1996 until June 1998. Mr.  Nederlander
became  Chairman of the Board of  Allis-Chalmers  Corp.  in May 1989;  from 1993
through  October 1996 he was Vice Chairman,  and thereafter he remained solely a
director. In 1995, Mr. Nederlander became a director of HFS Incorporated,  which
later merged into Cendant Corporation. Mr. Nederlander also served as a director
of News Communications, Inc., a publisher of community-oriented free circulation
newspapers, from October 1996 until June 2002.

           JEFFREY G. WEBB.  Mr.  Webb has been the Vice  Chairman  of the Board
since  Varsity  was  acquired by Riddell in June 1997.  Mr.  Webb was  appointed
Varsity's  Chief  Executive  Officer and President in June 2001,  and previously
served as Varsity's Chief Operating Officer from October 1999 through June 2001.
Prior to the Varsity acquisition,  Mr. Webb was Chairman of the Board, President
and Chief Executive Officer of Varsity Spirit Corporation since its formation in
1974.

           JOHN M.  NICHOLS.  Mr.  Nichols  has been  Chief  Financial  Officer,
Secretary and Treasurer of Varsity since June 2001.  Mr.  Nichols joined Varsity
Spirit Corporation,  Varsity's wholly owned subsidiary, on April 1, 1992 as Vice


                                       23
<PAGE>


President,  Accounting  and Income  Taxes and served as Senior  Vice  President,
Finance  of  Varsity  Spirit  Corporation  since  July 1992 and Chief  Financial
Officer  since April 1994.  From October 1988 through  March 1992,  Mr.  Nichols
owned and operated an independent  certified public accounting practice,  during
the course of which he provided accounting and financial  consulting services to
Varsity  Spirit  Corporation.  Prior to  October  1988,  Mr.  Nichols  was Chief
Financial Officer of French Quarter Inn, Inc. and a partner with the independent
certified public accounting firm of BDO Seidman, LLP.

           LEONARD  TOBOROFF.  Mr.  Toboroff has been Vice  President of Varsity
since April 1988.  Since May 1989,  Mr.  Toboroff has been a Vice  President and
Vice  Chairman of the Board of  Allis-Chalmers  Corp.  Mr.  Toboroff  has been a
practicing  attorney  since 1961 and from  January 1, 1988 to December 31, 1990,
was counsel to Summit Solomon & Feldesman in New York City, which was counsel to
Varsity  from April 1988 through  February  1993.  He has been a Director  since
August 1987 and was Chairman and Chief  Executive  Officer from December 1987 to
May 1988 of  Ameriscribe  Corp.  Mr.  Toboroff was Chairman and Chief  Executive
Officer from May through July 1982,  and then was Vice  Chairman  from July 1982
through  September 1988 of American  Bakeries  Company.  Mr. Toboroff has been a
director of Engex, Inc. since March 1999.

           DAVID  GROELINGER.  Mr.  David  Groelinger  has been  Executive  Vice
President of Varsity since June 1996, and previously  served as Varsity's  Chief
Financial  Officer from March 1996 through June 2001. From 1994 to 1995 he was a
member of the Board of Directors,  Executive Vice President and Chief  Financial
Officer of Regency  Holdings  (Cayman)  Inc.,  which owned and  operated a major
international cruise line. Prior to 1994 Mr. Groelinger served in various senior
financial  capacities during his twelve years at Chiquita Brands  International,
Inc.  In  1990,  he was  promoted  to Vice  President  reporting  to  Chiquita's
President and Chief Operating Officer. From 2000 until 2001 Mr. Groelinger was a
Director and chaired the audit  committee  of Applied  Theory,  a  NASDAQ-listed
internet solutions company.

           DON R.  KORNSTEIN.  Mr.  Kornstein is  currently  President of Alpine
Advisors  LLC,  a  company  engaged  in  strategic,   management  and  financial
consulting.  Prior to this Mr. Kornstein was a member of the Board of Directors,
Chief  Executive  Officer  and  President  of  Jackpot  Enterprises,  Inc.  from
September 1994 through  February 2000.  Prior to this Mr. Kornstein was a Senior
Managing  Director at Bear,  Stearns & Co. Inc. for 17 years  through  September
1994. Mr. Kornstein has been a director of Varsity since April 1995.

           JOHN  MCCONNAUGHY, JR.   Mr. McConnaughy  has been Chairman and Chief
Executive Officer of JEMC Corp. since 1988. Mr.  McConnaughy was the Chairman of
the Board of the  Excellence  Group,  LLC, which filed a petition for bankruptcy
under  Chapter 11 of the  Bankruptcy  Code on January 13, 1999.  The  Excellence
Group's  subsidiaries  produced labels for a variety of customers.  From 1969 to
1986, Mr.  McConnaughy served as Chairman and Chief Executive Officer of Peabody
International  Corp.  ("Peabody").  From 1981 to 1992, he served as Chairman and
Chief  Executive  Officer of GEO  International  Corp. when it was spun off from
Peabody in 1981.  Mr.  McConnaughy is a Director of Fortune  Natural  Resources,
Levcor International, Inc., Wave Systems, Inc., Consumer Portfolio Services Inc.
and Overhill Farms Inc. He has been a director of Varsity since September 1989.

           GLENN E. "BO"  SCHEMBECHLER.  Mr.  Schembechler  was President of the
Detroit  Tigers from January 1990 through August 1992 and a member of the Tigers
Board of  Directors  from 1989  through  1990.  He is also a Director of Midland
Company. From 1968 through 1989, Mr. Schembechler was head football coach of the
University of Michigan and served as its Athletic  Director in 1988 and 1989. He
has been a director of Varsity since September 1991.

           ARTHUR N. SEESSEL,  III. Mr. Seessel was the Chief Executive  Officer
of Seessel  Holdings  Inc., a supermarket  chain located in Memphis,  Tennessee,
until the company was sold in 1996. Mr. Seessel currently serves as a consultant
to Schnuck Markets,  Inc. and is a member of the Board of Directors of 1st Trust
Bank, Wunderlich Securities,  Land O'Frost, Inc. and Auto Radio Inc. He has been
a director of Varsity since February 1999.

           W. KLINE BOYD.  Mr. Boyd has been Senior Vice  President  and General
Manager - Varsity  Spirit  Fashions  since March 1989, a date which precedes the
June 1997  acquisition  of  Varsity.  Mr. Boyd has been a member of the Board of
Directors  of Boyd & McWilliams  Energy  Group,  Inc.  since 1978 and has been a
member of the Board of Directors of Smith Oil Company, Inc. since 1988.

           GREGORY C. WEBB.  Mr. Webb has been Senior Vice President and General
Manager - Universal  Cheerleaders  Association since 1989, a date which precedes
the June 1997  acquisition of Varsity.  Mr. Webb has been general manager of the
Universal  Cheerleaders  Association  operations  since 1986 and had  previously
served in similar  capacities  since  joining  Varsity in 1976.  Mr. Webb is the
brother of Jeffrey G. Web, the Varsity's Chief  Executive  Officer and President
and Vice Chairman of the Board.


                                       24
<PAGE>


           J. KRISTYN  SHEPHERD.  Ms. Shepherd has been Senior  Vice-President -
Universal  Cheerleaders  Association  since 1989, a date which precedes the June
1997  acquisition of Varsity,  and has served in various other  capacities since
joining the Company in 1979. Ms. Shepherd  oversees the Company's special events
and studio dance operations as well as television productions.

                            SECTION 16(A) DISCLOSURE

           Varsity  believes,  based  solely on its  review of the copies of the
Forms 3, 4 and 5 required to be filed with Varsity  pursuant to Section 16(a) of
the Exchange Act by its officers,  directors and beneficial  owners of more than
10% of Varsity's  Common Stock  ("insiders"),  that during the fiscal year ended
December 31,  2002,  all filing  requirements  applicable  to its insiders  were
complied with.











                                       25
<PAGE>


ITEM 11.   SUMMARY COMPENSATION TABLE

           The table below sets forth the cash  compensation  paid to or accrued
for  Varsity's  Chief  Executive  Officer  and its four other most  highly  paid
executive  officers in 2002 for services  rendered in all  capacities to Varsity
and its  subsidiaries  during the fiscal years ended December 31, 2002, 2001 and
2000.

<TABLE>
<CAPTION>
                                                                                               LONG TERM
                                                                                             COMPENSATION
                                                                ANNUAL COMPENSATION             AWARDS
                                                    --------------------------------------    ----------
                                                                                              SECURITIES
                                                                              OTHER ANNUAL    UNDERLYING       ALL OTHER
NAME AND PRINCIPAL POSITION                YEAR      SALARY        BONUS      COMPENSATION    OPTIONS (1)   COMPENSATION (2)
--------------------------------------     ----     --------     --------     ------------    -----------   ----------------
<S>                                        <C>      <C>          <C>             <C>            <C>            <C>
Jeffrey G. Webb.......................     2002     $485,000     $120,000        $ --               --         $    442
   Chief Executive Officer and President   2001      409,500      100,000          --               --              200
                                           2000      397,688           --          --               --              200

David Groelinger......................     2002     $124,279     $     --        $ --               --         $180,000(3)
   Executive Vice President (3)            2001      255,631           --          --               --          251,386(3)
                                           2000      233,133           --          --               --            2,040

W. Kline Boyd........................      2002     $210,000     $ 56,000        $ --               --         $    442
    Senior Vice President                  2001      215,000       50,000          --               --              200
                                           2000      202,717           --          --            8,000              200

John  M. Nichols......................     2002     $210,000     $ 70,000        $ --               --         $    442
   Chief Financial Officer, Senior         2001      186,240       45,000          --               --              200
   Vice-President                          2000      156,000           --          --           10,000              200


Gregory C. Webb.......................     2002     $210,000     $ 45,000        $ --               --         $    442
   Executive Vice President                2001      192,780       45,000          --               --              200
                                           2000      189,000           --          --            5,225              200
</TABLE>

----------
(1)  These  options were issued under  Varsity's  1991 Stock Option Plan or 1997
     Stock Option Plan.

(2)  Represents  Varsity's  contribution  to a  401(k)  plan  on  behalf  of the
     employee, except for the payments described below in Note (3).

(3)  David Groelinger  resigned as Chief Financial  Officer on June 22, 2001, in
     connection  with the sale of the Riddell Group  Division,  but continues to
     serve as Executive Vice President pursuant to an employment  agreement that
     terminates on March 31, 2003. Mr.  Groelinger  received  payments  totaling
     $180,000  and  $250,000  for the years  ended  December  31, 2002 and 2001,
     respectively, related to the sale of the Riddell Group Division in 2001.

                             OPTIONS GRANTED IN 2002

           The  following  table sets forth  information  concerning  individual
grants of stock options made during 2002 to each named executive  officer listed
below pursuant to the Company's 1997 Stock Option Plan.

<TABLE>
<CAPTION>
                                                                                              POTENTIAL REALIZABLE VALUE
                      NUMBER OF          % OF TOTAL                                         ASSUMED ANNUAL RATES OF STOCK
                      SECURITIES      OPTIONS GRANTED                                     APPRECIATION FOR OPTIONS TERM (1)
                  UNDERLYING OPTIONS  TO EMPLOYEES IN   EXERCISE PRICE                    ---------------------------------
     NAME              GRANTED          FISCAL YEAR        PER SHARE     EXPIRATION DATE          5%             10%
----------------  ------------------  ---------------   --------------   ---------------        ------        --------
<S>                      <C>               <C>               <C>               <C>                <C>            <C>
Jeffrey G. Webb          --                --                --                --                 --             --
David Groelinger         --                --                --                --                 --             --
W. Kline Boyd            --                --                --                --                 --             --
John M. Nichols          --                --                --                --                 --             --
Gregory C. Webb          --                --                --                --                 --             --
</TABLE>


                                       26
<PAGE>


1)   Based  upon the per share  market  price on the date of grant and an annual
     appreciation  of such market price at the rate stated in the table  through
     the  expiration of such  options.  Gains,  if any, are  dependent  upon the
     actual performance of the common stock, as well as the continued employment
     of the  executive  officers  through  the  vesting  period.  The  potential
     realizable values indicated have not taken into account amounts required to
     be paid as income tax under the Internal  Revenue  Code and any  applicable
     state laws.

          STOCK OPTION EXERCISES AND STOCK OPTIONS HELD AT END OF 2002

           The following  table  indicates the total number of  exercisable  and
unexercisable stock options held by each named executive officer listed below on
December 31, 2002. No options to purchase  Varsity's Common Stock were exercised
by any of these  individuals  during 2002.  On December 31, 2002,  the last sale
price of the Common Stock on the American Stock Exchange was $4.75 per share.

<TABLE>
<CAPTION>
                                                                   NUMBER OF SECURITIES
                                                                        UNDERLYING
                                                                  UNEXERCISED OPTIONS AT      VALUE OF UNEXERCISED IN-THE-MONEY
                                                                     DECEMBER 31, 2002           OPTIONS AT DECEMBER 31, 2002
                                                                ----------------------------  ---------------------------------
                            SHARES ACQUIRED    VALUE REALIZED
        NAME                ON EXERCISE (#)       ($) (1)       EXERCISABLE    UNEXERCISABLE      EXERCISABLE   UNEXERCISABLE
--------------------------  ---------------    --------------   -----------    -------------      -----------   -------------
<S>                              <C>                <C>           <C>              <C>             <C>             <C>
Jeffrey G. Webb...........       --                 --            459,010           8,750          $373,028        $14,219
David Groelinger..........       --                 --            141,250           3,750            26,406          6,094
W. Kline Boyd.............       --                 --            105,990           9,000            59,516          8,125
John Nichols..............       --                 --             61,000           7,500            12,188          4,063
Robert E. Nederlander.....       --                 --             37,500          15,000            25,313         25,875
Leonard Toboroff..........       --                 --             37,500          15,000            25,313         25,875
Gregory C. Webb...........       --                 --             93,863           6,362            61,031          6,094
</TABLE>

----------
(1)  Value  realized is based upon the fair market  value of common stock on the
     date of exercise less the exercise price, and does not necessarily indicate
     that the optionee sold such stock.

                       COMPENSATION OF BOARD OF DIRECTORS

           Directors  who are not officers of Varsity  received a fee in 2002 of
$21,250  per  annum.  In 2002,  directors  who were  members  of the  Audit  and
Compensation   Committees  of  the  Board   (Messrs.   McConnaughy,   Kornstein,
Schembechler and Seessel) were also each paid an aggregate  additional amount of
$6,250 per annum for their Committee memberships. In 2003, directors who are not
officers  of the  Company  will  receive a fee of $25,000  per annum;  committee
members  will receive  $5,000 per annum for each  committee on which they serve;
and committee  chairpersons  will each receive an  additional  fee of $5,000 per
annum.

           See "Summary  Compensation  Table" for a discussion  of  compensation
paid to Mr. Webb, Varsity's Vice Chairman and Chief Executive Officer.

           Varsity has agreed to indemnify  each  director  and officer  against
certain  claims and  expenses  for which the  director  might be held  liable in
connection  with  service  on the  Board.  In  addition,  Varsity  maintains  an
insurance policy insuring our directors and officers against such liabilities.


                                       27
<PAGE>


            EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS

           In June 1992, Varsity entered into an employment  agreement with each
of Messrs.  Nederlander and Toboroff.  Each agreement continues until terminated
by Varsity, with termination effective three years after Varsity delivers notice
of  termination  or, if earlier,  until the death or disability of the employee.
The  agreements  are  immediately  terminable  by Varsity  for cause (as defined
therein).  Bonuses are at the discretion of the board. Each agreement provides a
base salary of $162,500  which may be increased in the  discretion of the board,
provided  that in any event each year the salaries are increased at least by the
percentage increase in the Consumer Price Index. Each agreement provides that in
the event Varsity terminates the employee's  employment,  generally,  other than
for cause, the employee will receive his full salary through the end of the term
of his agreement  and annual  bonuses for the remainder of the term equal to the
average of the annual bonuses awarded to the employee prior to termination. Each
agreement  acknowledges  that the employee will devote time and provide services
to entities other than Varsity.  In April 2002,  Varsity  amended its agreements
with  each  of  Messrs.   Nederlander  and  Toboroff  whereby  each  of  Messrs.
Nederlander  and Toboroff  agreed to waive the  percentage  Consumer Price Index
increase  with  respect to their base salary of $162,500 as of June 22, 1999 for
each annual  period from June 22, 1999 to June 21,  2000,  June 22, 2000 to June
21, 2001 and June 22, 2001 to June 21, 2002,  and Varsity  agreed to pay to each
of Messrs.  Nederlander  and Toboroff (i) a bonus of $12,241,  and (ii) increase
their base salary to  $223,841  effective  January 1, 2002,  and for each twelve
(12) month period thereafter.

           In connection  with the  acquisition of Varsity  Spirit  Corporation,
Varsity entered into an employment  agreement with Mr. Jeffrey G. Webb effective
June 1997.  Under the  provisions  of such  agreement  Mr.  Webb  serves as Vice
Chairman  of the  Board of  Directors  as well as  Chief  Operating  Officer  of
Varsity. Mr. Webb is entitled to a base salary of no less than $375,000 per year
and is  eligible  to  participate  in those  bonus  arrangements  which are made
available  to other  senior  officers of Varsity at a target level of 40% of his
base salary. Pursuant to his employment agreement,  Mr. Webb received options to
purchase  50,000  shares of common  stock of Varsity  with a per share  exercise
price of $5.44 and "special options" to purchase an additional 347,760 shares at
a per share exercise price of $3.80.  Upon termination of Mr. Webb's  employment
(1) by Varsity  without cause, as defined in Webb's  agreement,  (2) by Mr. Webb
with good reason, as defined in Webb's agreement, or (3) as a result of a change
in control,  as defined in Webb's  agreement,  Mr. Webb will  receive  continued
payments  of base  salary  for the  longer of the  remainder  of the term of the
agreement and one year,  or two years if as a result of a change of control,  as
well as other  benefits.  Mr.  Webb is  subject  to a  non-competition  covenant
generally for a period of two years  following the termination of his employment
for any  reason.  Mr.  Webb's  Employment  Agreement  has by its terms  expired.
Varsity and Mr. Webb continue to operate  substantially  in accordance  with the
expired Employment  Agreement.  Subsequent to the sale by Varsity of its Riddell
Group  Division,  Mr. Webb was elevated to the  positions of President and Chief
Executive Officer of Varsity.

           The Company  entered into an employment  agreement  with Mr.  Nichols
effective  November 1, 2002 in connection with his duties as the Company's Chief
Financial  Officer and Executive Vice President.  The agreement  provides for an
initial  annual base salary of $210,000 and allows Mr. Nichols to participate in
the  Company's  bonus  pool at a target  level of 35% of his  base  salary.  The
agreement  is  immediately  terminable  for cause,  as  defined in Mr.  Nichols'
agreement.  Mr. Nichols' agreement presently expires, unless renewed, in October
2004. The agreement  provides,  generally,  that if Mr.  Nichols'  employment is
terminated other than for cause,  including a change of control (in which event,
it may be terminated at Mr.  Nichols'  option or the option of the Company),  he
will  be paid no  less  than  one and  one-half  year's  salary  and  bonus,  if
applicable.  In addition,  his stock options become fully vested and immediately
exercisable for a six-month period.

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

           In  2002  there  were no  Compensation  Committee  interlocks  and no
insider participation in Compensation  Committee decisions that were required to
be reported under the rules and regulations of the Exchange Act.

ITEM 12:   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
           AND RELATED STOCKHOLDER MATTERS

           The following  table sets forth certain  information  as of March 21,
2003  pertaining  to  ownership of  Varsity's  common stock by persons  known to
Varsity  to own 5% or more of  Varsity's  common  stock and common  stock  owned
beneficially  by each  director  and named  executive  officer of Varsity and by
directors and named executive officers of Varsity as a group.


                                       28
<PAGE>


           The  information  contained  herein has been obtained from  Varsity's
records,  or from information  furnished directly by the individual or entity to
Varsity made by such persons with the U.S. Securities and Exchange Commission.

                                               Shares Owned         Percent of
                                               Beneficially        Common Stock
                                               -------------       ------------
    Robert E. Nederlander                       1,274,710(1)           13.2%
    c/o Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    Jeffrey G. Webb                             1,333,887(2)           13.3%
    Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    John M. Nichols                                63,500(3)              *
    Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    David Groelinger                              123,500(4)            1.3%
    Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    Leonard Toboroff                            1,326,085(5)           13.8%
    c/o Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    Don R. Kornstein                               67,437(6)              *
    c/o Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    John McConnaughy, Jr.                       1,061,437(7)           11.0%
    c/o Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    Glenn E. "Bo" Schembechler                     60,000(8)              *
    c/o Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    Arthur N. Seessel, III                         30,000(9)              *
    c/o Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115


                                       29
<PAGE>


    W. Kline Boyd                                 143,985(10)           1.5%
    Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    Gregory C. Webb                               162,230(11)           1.7%
    Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    J. Kristyn Shepherd                           117,312(12)           1.2%
    Varsity Brands, Inc.
    6745 Lenox Center Court, Suite 300
    Memphis, TN 38115

    All officers and directors as a group       5,764,083(13)          53.5%
    12 individuals)

    Angelo, Gordon & Co., L.P.                  1,385,747(14)          12.6%
    245 Park Avenue, 26th Fl.
    New York, NY 10167

    Bedford Oak Partners                          592,500(15)           6.2%
    100 South Bedford Road
    Mt. Kisco, NY 10549

    Dimensional Fund Advisors Inc.                501,508(16)           5.6%
    1299 Ocean Ave., 11th fl.
    Santa Monica, CA
    90401


----------
*    Less than 1%

(1)  1,274,710 shares are owned by Mr. Nederlander  directly or through entities
     controlled by him having dispositive power over these shares, and 37,500 of
     these  1,274,710  shares are issueable upon the exercise of options granted
     under  Varsity's 1991 Stock Option Plan and 7,500 of these shares  underlie
     options granted under Varsity's 1997 Stock Option Plan that are exercisable
     currently.

(2)  Includes  467,760  shares  issueable  upon the exercise of options  granted
     under  Varsity's 1997 Stock Option Plan that are  exercisable  currently or
     within 60 days of March 21, 2003.

(3)  Includes 5,000 shares underlying options granted under Varsity's 1991 Stock
     Option Plan and 58,500 shares  underlying  options  granted under Varsity's
     1997 Stock Option Plan that are exercisable  currently or within 60 days of
     March 21, 2003.

(4)  Includes  115,000 shares  underlying  options  granted under Varsity's 1991
     Stock Option Plan that are exercisable currently or within 60 days of March
     21, 2003.

(5)  Includes  37,500 shares  underlying  options  granted under  Varsity's 1991
     Stock  Option  Plan and  7,500  shares  underlying  options  granted  under
     Varsity's 1997 Stock Option Plan that are exercisable currently.

(6)  Includes  37,500 shares  underlying  options  granted under  Varsity's 1991
     Stock  Option  Plan and  7,500  shares  underlying  options  granted  under
     Varsity's 1997 Stock Option Plan that are exercisable currently.


                                       30
<PAGE>


(7)  Includes  37,500 shares  underlying  options  granted under  Varsity's 1991
     Stock  Option  Plan and  7,500  shares  underlying  options  granted  under
     Varsity's  1997  Stock  Option  Plan that are  exercisable  currently.  Mr.
     McConnaughy  has pledged  his  interest in  1,016,437  shares of  Varsity's
     common stock to financial institutions to secure loans.

(8)  Includes  37,500 shares  underlying  options  granted under  Varsity's 1991
     Stock  Option  Plan and  7,500  shares  underlying  options  granted  under
     Varsity's 1997 Stock Option Plan that are exercisable currently.

(9)  Includes  22,500 shares  underlying  options  granted under  Varsity's 1991
     Stock  Option  Plan and  7,500  shares  underlying  options  granted  under
     Varsity's 1997 Stock Option Plan that are exercisable currently.

(10) Includes  110,990 shares  underlying  options  granted under Varsity's 1997
     Stock Option Plan that are exercisable currently or within 60 days of March
     21, 2003.

(11) Includes  97,613 shares  underlying  options  granted under  Varsity's 1997
     Stock Option Plan that are exercisable currently or within 60 days of March
     21, 2003.

(12) Includes  66,863 shares  underlying  options  granted under  Varsity's 1997
     Stock Option Plan that are exercisable currently or within 60 days of March
     21, 2003.

(13) The  aggregate  number of shares  beneficially  owned and percent of common
     stock  beneficially  owned by all officers and directors as a group does it
     include an aggregate of 505,299  shares of underlying  option granted under
     Varsity's 1991 Stock Option Plan and 1997 Stock Option Plan.

(14) Based on a Schedule 13G filed February 13, 1997, Angelo, Gordon & Co., L.P.
     may be deemed to be the beneficial owner of 1,385,747 shares as a result of
     voting and dispositive powers it holds with respect to $6,125,000 principal
     amount of Varsity's  4.10%  Convertible  Subordinated  Note due November 1,
     2007 (the "Notes")  convertible at $4.42 per share into 1,385,747 shares of
     common stock which it holds for the account of private investment funds for
     which it acts a general  partner  and/or  investment  advisor or investment
     manager.

(15) Based on amounts reported by the American Stock Exchange as of February 14,
     2003.

(16) Based on a Schedule 13G filed February 3, 2003,  Dimensional  Fund Advisors
     Inc. may be deemed to be the beneficial owner of 501,508 shares.

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
            Plan category                   Number of securities to be      Weighted average exercise       Number of securities
                                             Issued upon exercise of      price of outstanding options,   remaining available for
                                          outstanding options, warrants        warrants and rights            future issuance
                                                    and rights
--------------------------------------    -----------------------------   -----------------------------   -----------------------
<S>                                                 <C>                               <C>                          <C>
Equity compensation plans approved by
security holders                                    1,682,025                         $4.35                        17,975

Equity compensation plans not approved
by security holders                                         0                             0                             0

Total                                               1,682,025                         $4.35                        17,975
</TABLE>



ITEM 13:   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           On February  25, 2000,  the Company  entered into a nine (9) year six
(6) month  sublease with a company owned and  controlled by Varsity's  chairman,
Mr. Robert Nederlander, for premises to serve as the Company's corporate offices
located in New York City. Pursuant to the sublease,  the Company will pay a base
rent of  approximately  $117,000  per annum  which  will  rise to  approximately
$138,000  per annum during the term of the  sublease.  The Company will also pay
our pro rata share  (approximately 33%) of operating expenses during the term of
the  sublease.  Management  believes that the terms of the sublease are at least
equivalent  to what the  Company  could  reasonably  expect to  receive  from an
unrelated  third party.  In connection  with the  Company's  sale of its Riddell
Group Division, the Company has


                                       31
<PAGE>


moved its corporate offices to Memphis,  Tennessee,  and is currently subleasing
the premises to a third  party.  During the year ended  December  31, 2002,  the
Company  paid  approximately   $14,000  to  Mr.  Nederlander  under  this  lease
agreement.  Subsequent to December 31, 2002,  the tenant who was  sub-subleasing
the office space stopped  paying rent on a current  basis,  although the Company
still has four (4) months worth of rent payments  from such tenant  representing
the balance of the security  deposit that the Company received from such tenant.
At the current time, the Company is in  discussions  with the current tenant and
others with respect to the letting of the space.


ITEM 14:   CONTROLS AND PROCEDURES

           Within the 90-day period prior to the filing of this Annual Report on
Form 10-K, the Company carried out an evaluation, under the supervision and with
the  participation of management,  including the Chief Executive Officer and the
Chief  Financial  Officer,  of the  effectiveness  of the  Company's  disclosure
controls  and  procedures.  Based  upon  the  evaluation,  the  Company's  Chief
Executive  Officer and Chief Financial Officer have concluded that the Company's
disclosure  controls  and  procedures  are  effective  to timely  alert  them to
material  information  required  to be included in the  Company's  Exchange  Act
filings.  In addition,  there have been no changes in internal  controls,  or in
other factors that could  significantly  affect internal controls  subsequent to
the date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.


ITEM 15:   PRINCIPAL ACCOUNTANT FEES AND SERVICES

           The following is a summary of fees paid to the Company's  independent
accountants during the year ended December 31, 2002:

        Audit Fees (1)                                                  $154,574
        Financial Information Systems Design and Implementation Fees    $    -0-
        All Other Fees (2)                                              $ 83,378
                                                                        --------
                                                                        $237,952
                                                                        ========

----------
(1)  Audit fees billed by Grant Thornton LLP consisted of the examination of the
     Company's  Annual Report on Form 10-K for the years ended December 31, 2001
     and 2002 and  review  of other  Company  filings  with the  Securities  and
     Exchange Commission.

(2)  "All Other Fees" by Grant  Thornton  LLP for  non-audit  services  included
     $32,460 for consulting  services  related to the disposition of the Riddell
     Group and Umbro Divisions and $50,918 for tax planning services.









                                       32
<PAGE>


                                     PART IV

ITEM 16.   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.


                     Exhibit Index

                     Note:  All references to "Riddell Sports Inc." refer to the
                     Company, currently known as "Varsity Brands, Inc."

   EXHIBIT

   NUMBER              DESCRIPTION

   2.1               Agreement  and Plan of Merger,  dated as of May 5, 1997, by
                     and among Riddell Sports Inc., Cheer  Acquisition Corp. and
                     Varsity Spirit Corporation (15).

   3.1               Articles of Incorporation of Riddell Sports Inc. (11).

   3.2               First Amended and Restated Bylaws of Riddell Sports Inc.
                     (9).

   3.3               Certificate  of   Incorporation   of  All  American  Sports
                     Corporation (formerly known as Ameracq Corp.) (17).

   3.4               Bylaws of All American Sports  Corporation  (formerly known
                     as Ameracq Corp) (17).

   3.5               Certificate of  Incorporation  of Cheer  Acquisition  Corp.
                     (17).

   3.6               Bylaws of Cheer Acquisition Corp. (17).

   3.7               Certificate   of   Incorporation   of  Equilink   Licensing
                     Corporation (17).

   3.8               Bylaws of Equilink Licensing Corporation (17).

   3.9               Certificate of Incorporation of Proacq Corp. (17).

   3.10              Bylaws of Proacq Corp. (17).

   3.11              Certificate of Incorporation  of RHC Licensing  Corporation
                     (17).

   3.12              Bylaws of RHC Licensing Corporation (17).

   3.13              Amended and Restated  Articles of Incorporation of Riddell,
                     Inc. (formerly known as EN&T Associates Inc.) (17).

   3.14              Bylaws of Riddell,  Inc. (formerly known as EN&T Associates
                     Inc.) (17).

   3.15              Amended and Restated  Articles of  Incorporation of Ridmark
                     Corporation (17).

   3.16              Bylaws of Ridmark Corporation (17).

   3.17              Charter of International Logos, Inc. (17).


                                       33
<PAGE>


   3.18              Bylaws of International Logos, Inc. (17).

   3.19              Charter of Varsity/Intropa Tours, Inc. (17).

   3.20              Bylaws of Varsity/Intropa Tours, Inc. (17).

   3.21              Amended and Restated  Charter of Varsity Spirit  Fashions &
                     Supplies, Inc. (17).

   3.22              Bylaws of Varsity Spirit Fashions & Supplies, Inc. (17).

   3.23              Amended and Restated Charter of Varsity USA, Inc. (17).

   3.24              Bylaws of Varsity USA, Inc. (17).

   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 (14).

   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 (13).

   10.3              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.


   10.4              Employment Agreement,  dated June 22, 1992, between Riddell
                     Sports Inc. and Robert F. Nederlander (4); amended July 27,
                     1994 (6).

   10.5              Employment Agreement,  dated June 22, 1992, between Riddell
                     Sports Inc. and Leonard Toboroff (4); amended July 27, 1994
                     (6).

   10.6              Employment  Agreement,  dated  March 19,  1993,  commencing
                     March 25, 1993 between David Mauer and Riddell  Sports Inc.
                     (5),  as amended  January 17,  1994;  November 1, 1994 (7);
                     November 28, 1994 (8).

   10.7              Employment  Agreement,  dated as of March 7, 1996,  between
                     Riddell Sports Inc. and David  Groelinger  (10), as amended
                     March 7, 1998 (18) and as amended March 1, 2000 (20).

   10.8              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 (11).

   10.9              Registration  Rights  Agreement,  dated  November  8, 1996,
                     between  Riddell  Sports Inc. and Silver Oak Capital L.L.C.
                     (11).

   10.10             Shareholders  Agreement,  dated as of May 5, 1997,  between
                     Riddell Sports Inc.,  Cheer  Acquisition  Corp. and certain
                     shareholders of Varsity Spirit Corporation (16).

   10.11             Employment  Agreement,  dated  as of May 5,  1997,  between
                     Riddell Sports Inc. and Jeffrey G. Webb (16).

   10.12             Employment  Agreement,  dated  as of May 5,  1997,  between
                     Riddell  Sports  Inc.  and W. Kline  Boyd (16),  as amended
                     August 2, 1999 (20).

   10.13             Umbro  License  Agreement,  dated as of November  23, 1998,
                     between  Umbro  International,   Inc.  and  Varsity  Spirit
                     Fashions & Supplies, Inc. (19).

   10.14             Asset  and  USISL  Stock  Purchase  Agreement,  dated as of
                     November  1998,  between  Umbro  International,   Inc.  and
                     Varsity Spirit Fashions & Supplies, Inc. (19).

   10.15             Amended and Restated Loan,  Guaranty And Security Agreement
                     dated as of April 20, 1999 among the financial institutions
                     named  therein,  as the Lenders,  Bank of America  National
                     Trust


                                       34
<PAGE>


                     and Savings Association, as the Agent, Riddell Sports Inc.,
                     as the Parent Guarantor, Riddell, Inc., All American Sports
                     Corporation, Varsity Spirit Corporation, and Varsity Spirit
                     Fashions & Supplies, Inc. collectively, as the Borrower and
                     all   other   subsidiaries   of   the   Parent   Guarantor,
                     collectively, as the Subsidiary Guarantors (19), as amended
                     July 16,  1999 (20),  as amended  January 1, 2000 (20),  as
                     amended  December 31, 2000 (21) and as amended December 31,
                     2000 (21).

   10.16             Sublease   between   Nederlander    Television   and   Film
                     Production, Inc. and Riddell Sports Inc., as amended (20).

   10.17             Employment  Agreement,  dated as of March 1, 2000,  between
                     Riddell Sports Inc. and Greg Webb (21).

   10.18             Industrial  Lease  Agreement  dated August 22, 2000 between
                     Riddell Sports,  Inc. and Belz Investco GP (21), as amended
                     January 24, 2001 (21) and as amended February 13, 2001.

   10.19             Lease  Agreement  dated  February 1, 2001  between  Riddell
                     Sports Inc. and Lenox Park Building F Partners (21).

   10.20             Second  Amended and  Restated  Loan,  Guaranty And Security
                     Agreement  dated as of July 23,  2001  among the  financial
                     institutions  named  therein,  as  the  Lenders,   Bank  of
                     America,  N.A., as the Agent,  Riddell  Sports Inc., as the
                     Parent  Guarantor,  Varsity  Spirit  Corporation,   Varsity
                     Spirit  Fashions  &  Supplies,  Inc.,  Varsity  USA,  Inc.,
                     Varsity/Intropa  Tours, Inc. and International  Logos, Inc.
                     collectively, as the Borrower (22).

   10.21             4.10% Convertible Subordinated Note, dated August 16, 2001,
                     between Riddell Sports Inc. and Silver Oak Capital,  L.L.C.
                     (23).

   10.22             Supply  and  Purchase   Agreement  between  Varsity  Spirit
                     Fashions & Supplies,  Inc.  and Select  Sport  America Inc.
                     (1).

   10.23             Trademark  License  Agreement  between Select Sport A/S and
                     Varsity Spirit Fashions & Supplies, Inc. (1).

   21                List of subsidiaries (17).

   23                Consent of Grant  Thornton LLP  regarding  Varsity  Brands,
                     Inc. (1).

   99.1              Certification  by  Chief  Executive   Officer  Pursuant  to
                     section 906 of the Sarbanes-Oxley act of 2002(1).

   99.2              Certification  by  Chief  Financial   Officer  Pursuant  to
                     section 906 of the Sarbanes-Oxley act of 2002(1).


----------
(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).

(3)  Intentionally omitted.

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

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

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

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

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

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

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

(11) Incorporated by reference to Riddell Sports Inc.'s Form 10-Q dated November
     11, 1996.


                                       35
<PAGE>


(12) Intentionally omitted.

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

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

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

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

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

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

(19) Incorporated by reference to Riddell Sports Inc.'s Form 10-K Report for the
     year ended 1998 (File No. 0-19298).

(20) Incorporated by reference to Riddell Sports Inc.'s Form 10-K Report for the
     year ended 1999 (File No. 0-19298).

(21) Incorporated by reference to Riddell Sports Inc.'s Form 10-K Report for the
     year ended 2000 (File No. 0-19298).

(22) Incorporated  by reference to Varsity  Brands,  Inc.'s Form 10-Q Report for
     the quarter ended June 30, 2001 (File No. 0-19298).

(23) Incorporated  by reference to Varsity  Brands,  Inc.'s Form 10-Q Report for
     the quarter ended September 30, 2001 (File No. 0-19298).

           (b)  Reports on Form 8-K

                One Report on Form 8-K was filed on May 5, 2002.





                                       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.

                                           VARSITY BRANDS, INC.

Dated:  March 31, 2003                     By:  /s/ Jeffrey G. Webb
                                               --------------------------------
                                               Jeffrey G. Webb
                                               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.


/s/ Jeffrey G. Webb              Vice Chairman of the Board       March 31, 2003
---------------------------      and Chief Executive Officer
Jeffrey G. Webb


/s/ Robert E. Nederlander        Chairman of the Board            March 31, 2003
---------------------------
Robert E. Nederlander


/s/ Leonard Toboroff             Vice President and Director      March 31, 2003
---------------------------
Leonard Toboroff


/s/ John M. Nichols              Chief Financial Officer          March 31, 2003
---------------------------
John M. Nichols


/s/ John McConnaughy, Jr.        Director                         March 31, 2003
---------------------------
John McConnaughy, Jr.


/s/ Glen E. Schembechler         Director                         March 31, 2003
---------------------------
Glen E. Schembechler


/s/ Don R. Kornstein             Director                         March 31, 2003
---------------------------
Don R. Kornstein


/s/ Arthur N. Seessel, III       Director                         March 31, 2003
---------------------------
Arthur N. Seessel, III






                                       37
<PAGE>


                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Jeffrey G. Webb, certify that:

1.   I have reviewed this annual report on Form 10-K of Varsity Brands, Inc.;

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

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

4.   The  registrants's  other  certifying  officers and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.




Dated: March 31, 2003                              /s/ Jeffrey G. Webb
                                                   President
                                                   Chief Executive Officer




                                       38
<PAGE>


CERTIFICATION

I, John M. Nichols, certify that:

1.   I have reviewed this annaul report on Form 10-K of Varsity Brands, Inc.;

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

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

4.   The  registrants's  other  certifying  officers and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Dated:  March 31, 2003                               /s/ John M. Nichols
                                                     Senior Vice President
                                                     Chief Financial Officer




                                       39
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


                                                                           Page
                                                                           ----

Report of Independent Certified Public Accountants......................... F-2

Consolidated Balance Sheets at December 31, 2002 and 2001 ................. F-3

Consolidated Statements of Operations for the years ended
     December 31, 2002, 2001 and 2000 ..................................... F-4

Consolidated Statements of Stockholders' Equity for the years
     ended December 31, 2002, 2001 and 2000 ............................... F-5

Consolidated Statements of Cash Flows for the years ended
     December 31, 2002, 2001 and 2000...................................... 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 statements or
     the notes thereto or is not necessary.








                                      F-1
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Varsity Brands, Inc.


           We have  audited  the  accompanying  consolidated  balance  sheets of
Varsity Brands,  Inc. (a Delaware  corporation)  and Subsidiaries as of December
31,  2002 and 2001,  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 2002. These financial  statements are the  responsibility  of
the  management  of Varsity  Brands,  Inc. Our  responsibility  is to express an
opinion on these financial statements based on our audits.

           We  conducted  our  audits  in  accordance  with  auditing  standards
generally accepted in the United States of America. Those standards require that
we plan and perform our 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.

           As discussed in Note 1 to the consolidated financial statements,  the
Company adopted Statement of Financial  Accounting  Standards No. 142, "Goodwill
and other Intangible Assets" ("SFAS 142") on January 1, 2002.

           In our opinion,  the financial  statements  referred to above present
fairly, in all material respects, the consolidated financial position of Varsity
Brands,  Inc.  and  Subsidiaries  as of  December  31,  2002 and  2001,  and the
consolidated  results of their operations and their  consolidated cash flows for
each of the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.




                                                  GRANT THORNTON LLP


Chicago, Illinois
February 14, 2003





                                      F-2
<PAGE>


                      VARSITY BRANDS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          December 31,  December 31,
                                                             2002          2001
                                                           ---------     ---------
<S>                                                        <C>           <C>
ASSETS
Current assets:
   Cash and cash equivalents                               $  18,821     $  14,397
   Accounts receivable, trade less allowance for
      doubtful accounts ($441 and $429, respectively)         12,321        12,161
   Inventories                                                 7,811         7,863
   Prepaid expenses                                            4,337         3,937
   Other receivables                                              --         3,555
   Deferred taxes                                              2,770         2,383
                                                           ---------     ---------

Total current assets                                          46,060        44,296

Property, plant and equipment, less accumulated
   depreciation ( $5,081 and $4,929, respectively)             3,459         4,387
Deferred taxes                                                   660            --
Goodwill, less accumulated amortization
   ($9,595 and $9,595, respectively)                          66,596        66,596
Intangibles and deferred charges, less accumulated
   amortization ($3,545 and $3,048, respectively)              2,186         2,793
Other assets                                                     597           559
                                                           ---------     ---------

                                                           $ 119,558     $ 118,631
                                                           =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                        $   5,225     $   5,891
   Accrued liabililties                                        7,068         8,258
   Customer deposits                                           7,318         5,132
   Current portion of long-term debt                           2,375         1,375
                                                           ---------     ---------

Total current liabilities                                     21,986        20,656

Long-term debt                                                69,785        80,410
Deferred taxes                                                    --           188
Contingent liabilities                                            --            --

Stockholders' equity:
   Preferred stock, $.01 par; authorized 5,000,000
     shares; none issued                                          --            --
   Common stock, $.01 par; authorized 40,000,000;
     outstanding 9,592,250, and 9,452,250, respectively           96            95
   Additional paid-in capital                                 37,788        37,306
   Accumulated deficit                                       (10,097)      (20,024)
                                                           ---------     ---------

                                                              27,787        17,377
                                                           ---------     ---------

                                                           $ 119,558     $ 118,631
                                                           =========     =========
</TABLE>


            See notes to condensed consolidated financial statements.



                                      F-3
<PAGE>


                      VARSITY BRANDS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS,EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   Years ended December 31,
                                                              -----------------------------------
                                                                 2002         2001        2000
                                                              ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>
Net revenues:
   Uniforms and accessories                                   $  93,848    $  88,131    $  79,179
   Camps and events                                              62,556       59,418       56,856
                                                              ---------    ---------    ---------

                                                                156,404      147,549      136,035

Cost of revenues:
   Uniforms and accessories                                      49,767       47,279       43,209
   Camps and events                                              42,149       39,689       38,138
                                                              ---------    ---------    ---------

                                                                 91,916       86,968       81,347
                                                              ---------    ---------    ---------

Gross profit                                                     64,488       60,581       54,688

Selling, general and
   administrative expenses                                       47,396       46,594       42,146
                                                              ---------    ---------    ---------

Income from operations                                           17,092       13,987       12,542

Other expense:
   Interest expense                                               8,183       11,096       13,139
   Interest income                                                 (143)        (750)          --
                                                              ---------    ---------    ---------

Total other expense                                               8,040       10,346       13,139
                                                              ---------    ---------    ---------

Income (loss) from continuing operations before
   income taxes, discontinued operations and
   extraordinary items                                            9,052        3,641         (597)

Income taxes (benefit)                                             (735)       3,010           --
                                                              ---------    ---------    ---------

Income (loss) from continuing operations                          9,787          631         (597)

Discontinued operations:
   Income (loss) from operations of discontinued businesses          --       (3,847)       1,158
   Loss on disposal of businesses                                    --       (9,326)
                                                              ---------    ---------    ---------

Income (loss) before extraordinary items                          9,787      (12,542)         561

Extraordinary items - Gain on retirement of bonds                   140        4,047
                                                              ---------    ---------    ---------

Net income (loss)                                             $   9,927    $  (8,495)   $     561
                                                              =========    =========    =========

Income (loss) from continuing operations per share:
      Basic                                                   $    1.03    $    0.07    $   (0.06)
      Diluted                                                 $    0.91    $    0.07    $   (0.06)

Net earnings (loss) per share:
      Basic                                                   $    1.05    $   (0.90)   $    0.06
      Diluted                                                 $    0.92    $   (0.90)   $    0.06

Weighted average number common and common
   equivalent shares outstanding
      Basic                                                       9,483        9,452        9,389
      Diluted                                                    11,187        9,452        9,471
</TABLE>


                 See notes to consolidated financial statements



                                      F-4
<PAGE>


                      VARSITY BRANDS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              RETAINED
                                           COMMON STOCK         ADDITIONAL    EARNINGS       TOTAL
                                     ----------------------      PAID IN    (ACCUMULATED  STOCKHOLDERS'
                                      SHARES        AMOUNT       CAPITAL      DEFICIT)       EQUITY
                                     --------      --------     ----------  ------------  -------------
<S>             <C>                     <C>        <C>           <C>          <C>           <C>
Balance January 1, 2000                 9,263      $     93      $ 36,862     $(12,090)     $ 24,865
   Stock issued to employees               54                         169                        169
   Issuance of common stock upon
      exercise of stock options           135             2           275                        277
   Net income for the year                                                         561           561
                                     --------      --------      --------     --------      --------

Balance December 31, 2000               9,452            95        37,306      (11,529)       25,872
   Net (loss) for the year                                                      (8,495)       (8,495)
                                     --------      --------      --------     --------      --------

Balance December 31, 2001               9,452            95        37,306      (20,024)       17,377
   Issuance of common stock upon
      exercise of stock options           140             1           482           --           483
   Net income for the year                 --            --            --        9,927         9,927
                                     --------      --------      --------     --------      --------

Balance December 31, 2002               9,592      $     96      $ 37,788     $(10,097)     $ 27,787
                                     ========      ========      ========     ========      ========
</TABLE>



                 See notes to consolidated financial statements



                                      F-5
<PAGE>


                      VARSITY BRANDS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31,
                                                                  --------------------------------
                                                                    2002        2001        2000
                                                                  --------    --------    --------
<S>                                                               <C>         <C>         <C>
Cash flows from operating activities:
   Net income (loss)                                              $  9,927    $ (8,495)   $    561
   Adjustments to reconcile net income (loss) to net
     cash provided by continuing operations:
     (Income) loss from operations of discontinued businesses           --       3,847      (1,158)
      Loss on disposal of businesses                                    --       9,326          --
      Extraordinary gain on retirement of bonds                       (140)     (4,047)         --
      Depreciation and amortization:
         Amortization of debt issue costs                              504         761         863
         Other depreciation and amortization                         1,920       4,047       3,706
      Provision for losses on accounts receivable                      307         325         417
      Deferred taxes                                                (1,235)     (2,195)         --
      Changes in assets and liabilities, net of assets sold
          and extraordinary items:
         (Increase) decrease in:
            Accounts receivable, trade                                (467)      1,987      (2,902)
            Inventories                                                 52        (661)      2,126
            Prepaid expenses                                          (400)       (687)        997
            Other receivables                                        3,555      (2,101)        (28)
            Other assets                                               (38)       (456)      1,384
         Increase (decrease) in:
            Accounts payable                                          (666)      1,819        (611)
            Accrued liabilities                                     (1,190)      1,127        (534)
            Customer deposits                                        2,186        (358)       (600)

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

Net cash provided by continuing operations                          14,315       4,239       4,221

Cash flows from discontinued operations and extraordinary item
   Net change in assets held for disposal                               --      (6,021)     (4,199)
   Deferred bond costs associated with extraordinary gain              (51)     (1,067)         --

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

Net cash used by discontinued operations and extraordinary item        (51)     (7,088)     (4,199)

Cash flows from investing activities:
   Capital expenditures                                               (812)     (2,089)     (2,306)
   Net proceeds received from sale of businesses                        --      67,308          --
   Other assets                                                         --          --        (332)

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

Net cash provided by (used in)  investing activities                  (812)     65,219      (2,638)

Cash flows from financing activities:
   Net borrowings under line-of-credit agreement                     7,400      16,309       2,822
   Repayment of line of credit agreement                            (7,400)    (32,728)         --
   Redemption of senior bonds                                       (7,858)    (31,425)         --
   Debt repayments                                                  (1,375)         --          --
   Debt issue costs                                                   (278)       (238)         --
   Proceeds from issuance of common stock                              483          --         277

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

Net cash provided in (used by) financing activities                 (9,028)    (48,082)      3,099
                                                                  --------    --------    --------

Net increase in cash                                                 4,424      14,288         483
Cash, beginning                                                     14,397         109        (374)
                                                                  --------    --------    --------

Cash, ending                                                      $ 18,821    $ 14,397    $    109
                                                                  ========    ========    ========
</TABLE>


                 See notes to consolidated financial statements.



                                      F-6
<PAGE>


                      VARSITY BRANDS, 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 Varsity Brands,  Inc. and its wholly owned  subsidiaries
("the Company").  All significant  intercompany  accounts and transactions  have
been eliminated.

           BUSINESS: The Company designs and markets cheerleading and dance team
uniforms and accessories;  operates  cheerleading and dance team camps,  clinics
and special events; and provides studio dance conventions and competitions.  The
Company   markets  its  products  and  services  to  schools  and   recreational
organizations  and the coaches and  participants in the  extracurricular  market
through  its own  nationwide  sales  force,  a web  site  targeted  to  specific
activities and a year-round marketing cycle of special events,  competitions and
instruction.

           CASH AND CASH  EQUIVALENTS:  The Company  considers all highly liquid
investments  with a maturity  date of three months or less when  purchased to be
cash equivalents.

           ACCOUNTS   RECEIVABLE:   The  majority  of  the  Company's   accounts
receivables  arise from the sale of  cheerleading  and dance team  uniforms  and
accessories  to high  schools,  junior high  schools and  all-star/youth  groups
throughout the United States. Except as described in Note 3, accounts receivable
are due within 30 days and are stated at amounts  due from  customers  net of an
allowance  for  doubtful   accounts.   Accounts   outstanding  longer  than  the
contractual  payment terms are considered  past due. The Company  determines its
allowance by considering a number of factors, including the length of time trade
accounts  receivable are past due and the Company's  previous loss history.  The
Company  writes-off  accounts  receivable  when they become  uncollectible,  and
payments subsequently received on such receivables are credited to the allowance
for doubtful  accounts.  The company fully reserves all service charges assessed
on  past  due  accounts.  Service  charge  payments  subsequently  received  are
recognized as income at the time of payment.

           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,  net of an allowance for discontinued  inventory.  The Company
determines its allowance based a variety of factors, the most important of which
being the  inclusion/exclusion  of the inventory item from the Company's current
catalog. Items no longer included in the catalog are reserved at 100% of cost.

           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 leasehold improvements are depreciated over the lesser
of the lease  term or their  useful  life,  and 3 to 7 years for  machinery  and
equipment and furniture and fixtures) of the related assets.

           INTANGIBLE  ASSETS,  GOODWILL 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.

           Goodwill and indefinite lived intangible assets are reviewed annually
for impairment.  The impairment assessment is derived using discounted cash flow
analysis to calculate fair value.  The Company will compare the calculated  fair
value to the carrying value of goodwill.  Any impairment charges will be charged
against operations at the time the impairment is determined.


                                      F-7
<PAGE>


           Effective  January 1, 2002,  the Company  adopted the  provisions  of
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible  Assets" ("SFAS 142").  SFAS 142 provides that  goodwill,  as well as
identifiable intangible assets, should not be amortized.  Accordingly,  with the
adoption of SFAS 142, the Company  discontinued  the amortization of goodwill as
of January 1, 2002. Goodwill  amortization  expense for the years ended December
31, 2001 and 2000 was $1,882,000 and $1,876,000, respectively.

           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 are recorded upon shipment to customers.
Camp and event revenues are recognized over the term of the respective activity.

           ESTIMATES:  In preparing  financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States of  America,
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 10.

           CONCENTRATION   OF  CREDIT  RISK:   The  majority  of  the  Company's
receivables  arise 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 generally not
exceeded management's expectations.

           EARNINGS  (LOSS) PER SHARE:  Basic earnings  (loss) per share amounts
have been computed by dividing earnings (loss) by the weighted average number of
outstanding  common  shares.  Diluted  earnings  (loss)  per share are  computed
dividing  earnings  (loss) by the weighted  average  number of common shares and
common  equivalent shares relating to dilutive  securities.  The following table
shows a reconciliation of this denominator:

                                                      YEARS ENDED DECEMBER 31,
                                                      ------------------------
                                                       2002     2001     2000
                                                      ------   ------   ------
                                                           (IN THOUSANDS)
Weighted average number of outstanding
    common shares .................................    9,483    9,452    9,389
Weighted average of shares issued under
    convertible debt agreement ....................    1,645       --       --
Options, assumed exercise of dilutive options,
    net of treasury shares, which could have
    been purchased from the proceeds of
    the assumed exercise based on
    average market prices .........................       59       --       82
                                                      ------   ------   ------
           Denominator for diluted computation ....   11,187    9,452    9,471
                                                      ======   ======   ======

          For the year ended  December 31, 2002,  options to purchase  1,331,025
shares of common stock with a weighted average price of $4.72 were excluded from
the computation of diluted  earnings per share.  For the year ended December 31,
2001,  options  to  purchase  2,130,875  shares of common  stock with a weighted
average  price  of  $4.34  and the  convertible  debt  described  in Note 7 were
excluded from the computation of diluted  earnings per share, as their inclusion
would have been anti-dilutive.  For the year ended December


                                      F-8
<PAGE>


31, 2000,  options to purchase  1,960,450 shares of common stock with a weighted
average  price  of  $4.66  and the  convertible  debt  described  in Note 7 were
excluded from the computation of diluted  earnings per share, as their inclusion
would not have been dilutive.

          SHIPPING AND HANDLING  FEES: In September  2000,  the Emerging  Issues
Task force  ("EITF")  reached a  consensus  with  respect  to EITF Issue  00-10,
"Accounting for Shipping and Handling Fees and Costs." The purpose of this issue
discussion was to clarify the  classification  of shipping and handling  revenue
and costs.  The  consensus  reached was that all shipping  and handling  amounts
billed to customers should be classified as revenue.  Additionally,  a consensus
was  reached  that the  classification  of  shipping  and  handling  costs is an
accounting  policy  decision  that should be  disclosed  pursuant to  Accounting
Principles Board Opinion No. 22, "Disclosures of Amounting Policies."

          The Company has adopted EITF issue 00-10 and billings to customers for
freight and handling  charges and freight  costs are  generally  included in net
sales and cost of goods sold,  respectively,  in the Consolidated  Statements of
Operations for all periods presented.

           NEW ACCOUNTING  PRONOUNCEMENTS:  The Financial  Accounting  Standards
Board has issued SFAS No. 143,  "Accounting for Asset  Retirement  Obligations."
SFAS No.  143 will be  effective  January 1,  2003.  The new rules  apply to all
entities  that  have  legal  obligations  associated  with the  retirement  of a
tangible  long-lived asset. The entity should recognize a liability for an asset
retirement  obligation if (a) the entity has a duty or  responsibility to settle
an asset  retirement  obligation,  (b) the entity has little or no discretion to
avoid the future transfer or use of the assets, and (c) the transaction or other
event obligating the entity has occurred.

           In June 2002, the Financial  Accounting  Standards  Board issued SFAS
No. 144,  "Impairment or Disposal of Long-Lived Assets." Under the provisions of
SFAS No. 144, an entity  should  recognize  an  impairment  loss if the carrying
amount of a long-lived asset or asset group if it is not recoverable and exceeds
its fair  value.  An  entity  must test an asset or asset  group for  impairment
whenever  events or changes in  circumstances  indicate that its carrying amount
may not be  recoverable.  SFAS No. 144 also includes  criteria for classifying a
long-lived  asset or asset group as held for sale.  Assets held for sale must be
shown at the lower of its carrying  amount or fair value less cost to sell.  The
Company  does not  believe  SFAS No.  144 will  have a  material  impact  on its
financial statements. SFAS No. 144 will become effective January 1, 2003.

           In April 2002, the Financial  Accounting  Standards Board issued SFAS
No. 145, "Recission of FASB Statements 4, 44 and 64, Amendment of FASB Statement
13, and Technical  Corrections"  ("SFAS No. 145"). Among other provisions,  SFAS
No.  145  rescinds   FASB   Statement  4   "Reporting   Gains  and  Losses  from
Extinguishment  of Debt."  Accordingly,  gains or losses from  extinguishment of
debt should not be reported as  extraordinary  items  unless the  extinguishment
qualifies as an extraordinary  item under the criteria of Accounting  Principles
Board Opinion 30,  "Reporting the Results of Operations - Reportinig the Effects
of  Disposal  of a  Segment  of  a  Business,  and  Extraordinary,  Unusual  and
Infrequently Occurring Events and Transactions ("APB 30"). Gains and losses from
extinguishment  of debt,  which do not meet the  criteria  of APB 30,  should be
reclassified  to  income  from  continuing   operations  in  all  prior  periods
presented.  The  provisions  of SFAS No. 145 will be effective  for fiscal years
beginning after May 15, 2002.  Upon adoption,  the Company  anticipates  that it
will  reclassify  gains  on  early  extinguishment  of debt  and  related  taxes
previously  recorded as  extraordinary  items to other income and  provision for
taxes, respectively.


                                      F-9
<PAGE>


           Effective  June 1, 2002,  the Financial  Accounting  Standards  Board
issued  SFAS No. 146,  "Accounting  for Costs  Associated  with Exit or Disposal
Activities."  SFAS No. 146  addresses  the  accounting  and  reporting for costs
associated  with exit or disposal  activities.  This  Statement  requires that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value only when the liability is incurred.  This
pronouncement  will become  effective  as of January 1, 2003 and will impact any
exit or disposal activities the Company inititates after that date.

           In December 2002,  the Financial  Accounting  Standards  Board issued
SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure:  an amendment of FASB Statement 123" ("SFAS No. 148").  SFAS No. 148
provides alternative transition methods for a voluntary change in the fair value
based method of accounting for stock-based employee  compensation.  In addition,
SFAS No.  148  amends  the  disclosure  requirements  of SFAS No. 123 to require
prominent  disclosures  in  annual  financial  statements  about  the  method of
accounting for  stock-based  employee  compensation  and the pro forma effect on
reported  results of applying the fair value based method for entities  that use
the intrinsic value method of accounting.  The pro forma effect  disclosures are
also  required  to be  prominently  disclosed  in the interim  period  financial
statements.  This  provisons  of SFAS No. 148  become  effective  for  financial
statements for fiscal years ending after December 15, 2002 and are effective for
financial reports containing  condensed financial statements for interim periods
beginning after December 15, 2002.

           In January 2003, the Financial  Accounting Standards Board issued FIN
46,  "Consolidation of Variable Interest Entities - An Interpretation of ARB 51"
("(FIN 46"). FIN 46 is effective  immediately  for any variable  interest entity
created  after  January  31,  2003 and to  variable  interest  entities  that an
enterprise  acquires  an  interest in after that date.  The  statement  includes
disclosure requirements that must be met and may require the reporting entity to
consolidate those variable  interest  entities which meet certain  requirements.
This  pronouncement  will  become  effective  as of the first  interim or fiscal
period  beginning  after June 15,  2003 and will  impact any  variable  interest
entity activities the Company inititates after that date.

2.         DISPOSITION OF ASSETS

           In June 2001,  the  Company  sold its  Riddell  Group  Division to an
affiliate of Lincolnshire Management,  Inc. ("Lincolnshire"),  a New York based,
private-equity  fund. The purchase price, which was determined by an arms-length
negotiation, was for approximately $67.5 million in cash.

           The sale was made pursuant to a stock purchase  agreement dated April
27,  2001  between  the Company and  Lincolnshire.  The Riddell  Group  Division
included: (i) all of the Company's team sports business, excluding Umbro branded
team soccer  products,  (ii) the  Company's  licensing  segment,  which  allowed
third-parties  to market  certain  products  using  the  Riddell  and  MacGregor
trademarks,  and (iii) the  Company's  retail  segment,  including  the New York
Executive Office, which managed the retail and licensing segments,  and marketed
a line of sports collectibles and athletic  equipment,  principally to retailers
in the United States,  and to a limited extent  internationally.  In conjunction
with the sale of the Riddell Group Division, the Company recognized a decline in
value in its net  minority  investment  in a company  who made game  uniforms on
behalf of the Riddell Group Division.  The Company had previously  accounted for
its  investment  in  the  game  uniform  company  using  the  equity  method  of
accounting.  As a  result  of the sale of the  Riddell  Group  Division  and the
write-down in the value of its minority  investment in the game uniform company,
the Company  recorded a loss on the sale of the Riddell Group  Division of $20.5
million ($12.2 million after tax) in 2001.

           The net operating results of the Riddell Group Division are presented
as  income  from  operations  of  discontinued  businesses  in the  Consolidated
Statements of Operations.  Revenues  generated by the Riddell Group Division for
the years ended December 31, 2001 and 2000 were $42.4 million and $89.3 million,
respectively.


                                      F-10
<PAGE>


           In September  2001, the Company  settled the  litigation  that it had
brought  earlier that year against Umbro  Worldwide,  Ltd.  ("Umbro  Worldwide")
involving the licensing  agreement between the Company and Umbro Worldwide.  The
license  agreement  allowed  Varsity  to  sell  Umbro  branded  soccer  apparel,
equipment and footwear to soccer specialty stores and others in the team channel
of distribution, principally in the United States.

           In connection with the settlement the Company voluntarily  terminated
its license  effective  November  30, 2001 in exchange for a lump sum payment to
the Company and Umbro  Worldwide's  agreement  to make  certain  payments to the
Company in the future. Such payments included the purchase, for $2.6 million, of
certain inventory from the Company.  As a result of the early termination of the
Umbro license, the Company recognized a gain of approximately $4.9 million ($2.9
million after tax) during the fourth quarter of 2001.

           The net  operating  results of the Umbro  Division  are  presented in
income  from   discontinued   operations  of  discontinued   businesses  in  the
Consolidated Statements of Operations.  Revenues generated by the Umbro division
for the years  ended  December  31,  2001 and 2000 were  $9.3  million  and $9.4
million, respectively.


3.         RECEIVABLES

          Accounts   receivable  include  unbilled  shipments  of  approximately
$639,000 and $610,000 at December 31, 2002 and 2001. 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.


4.         INVENTORIES:

           Inventories consist of the following:
                                                                 DECEMBER 31,
                                                          ----------------------
                                                           2002            2001
                                                          ------          ------
                                                              (IN THOUSANDS)
                     Finished goods                       $5,012          $5,904
                     Raw materials                         2,799           1,959
                                                          ------          ------
                                                          $7,811          $7,863
                                                          ======          ======

5.         PROPERTY AND EQUIPMENT:

           Property and equipment consist of the following:

                                                                 DECEMBER 31,
                                                          ----------------------
                                                           2002            2001
                                                          ------          ------
                                                              (IN THOUSANDS)

           Machinery and equipment                        $5,443          $6,157
           Furniture and fixtures                          2,830           2,861
           Leasehold improvements                            267             298
                                                          ------          ------
                                                           8,540           9,316
           Less accumulated depreciation                   5,081           4,929
                                                          ------          ------
                                                          $3,459          $4,387
                                                          ======          ======



                                      F-11
<PAGE>


           Depreciation  expense  from  continuing  operations  relating  to all
property and equipment amounted to $1,740,000, $2,051,000 and $1,806,000 for the
years ended December 31, 2002, 2001, and 2000, respectively.

6.         INTANGIBLE ASSETS AND DEFERRED CHARGES:

           Intangible assets and deferred charges consist of the following:

                                           ESTIMATED         DECEMBER 31,
                                             LIVES      ---------------------
                                           IN YEARS       2002        2001
                                           ---------    -------      -------
                                                           (IN THOUSANDS)
           Goodwill                           --        $76,191      $76,191
           Debt issue costs                 5 to 8        5,113        5,481
           Other                            2 to 5          618          360
                                                        -------      -------
                                                         81,922       82,032
           Less accumulated amortization                 13,140       12,643
                                                        -------      -------
                                                        $68,782      $69,389
                                                        =======      =======

           Amortization  expense relating to all intangible  assets and deferred
charges  amounted to $684,000,  $2,757,000  and  $2,763,000  for the years ended
December 31, 2002, 2001 and 2000, respectively.

7.         LONG-TERM DEBT:

Long-term debt consists of the following:

                                                                 DECEMBER 31,
                                                            --------------------
                                                              2002         2001
                                                            -------      -------
                                                                (IN THOUSANDS)
Outstanding balance under a credit facility
  expiring in 2003, the facility was revised
  in 2001, terms further described below                    $    --      $    --

Senior notes, 10.5%, due 2007, terms further
  described below                                            66,035       74,285

Convertible subordinated note payable,
  interest at 4.1%, due 2002 through 2007,
  terms further described below                               6,125        7,500
                                                            -------      -------
                                                            $72,160      $81,785
                                                            =======      =======

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

           YEARS ENDING DECEMBER 31,                (IN THOUSANDS)
                    2003                               $ 2,375
                    2004                                 3,450
                    2005                                   100
                    2006                                   100
                    2007                                66,135
                                                       -------
                                                       $72,160
                                                       =======

           In July 2001, the Company entered into a revised credit facility with
Bank of America,  N.A. The revised  credit  facility  replaced the Company's $48
million  credit  facility  with  Bank of  America  National  Trust  and  Savings
Association.  The  revised  credit  facility  consists  of a line of credit in a
principal amount not to exceed $15 million,  less a $100,000 reserve established
by the bank, during the period from January 15 through


                                      F-12
<PAGE>


September 15. The credit facility is to be used to support the Company's working
capital  and  letter of credit  requirements.  The  credit  facility  expires on
September  15, 2003.  Draws under the line of credit are limited to a percentage
of the Company's  eligible  receivables and inventory,  as defined by the credit
facility  agreement.  The outstanding  balance of the line accrues interest at a
rate of prime plus 1%, payable  monthly.  The credit  facility also calls for an
unused line fee equal to an annual  rate of 0.5%  applied to the amount by which
the lesser of $15  million and the then  maximum  revolving  amount  exceeds the
average  daily  balance of  outstanding  borrowings  under the line.  The credit
facility agreement  contains  covenants which,  among other things,  require the
Company to meet certain financial 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 limit  investments  the Company  may make.  The
credit  facility  also  requires  repayment  of the  principal  amount  upon the
occurrence of a change in the control, as defined,  of the Company.  The Company
has pledged  essentially all of its tangible assets as collateral for the credit
facility. As of December 31, 2002,  irrevocable standby letters of credit in the
principal amount of approximately $716,000 were outstanding.

           The 10.5% senior notes contain  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.
The full face value of the senior notes is due on July 15, 2007. 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 in
the senior notes). The senior notes contain prepayment  restrictions and have no
mandatory redemption  provisions.  The senior notes are guaranteed by all of the
Company's subsidiaries. Each of these subsidiaries is wholly owned subsidiary of
the Company and has 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.

           According to the terms of the 10.5% Senior Notes  Agreement,  the use
of  proceeds  received  from  the  sale  of  the  Company's  businesses,  net of
applicable   expenses,   is  limited  to  the   reduction  of  existing   senior
indebtedness,  reinvestment in the business  and/or the  acquisitions of outside
business  interests.   In  the  event  that  the  Company  has  not  executed  a
reinvestment in the business and/or acquisition(s) of outside business interests
within two hundred and seventy days (270) after the receipt of proceeds from the
transaction,  the Company is required, under the terms of the 10.5% Senior Notes
Agreement, to offer to repurchase the Senior Notes at par.

           A portion of the proceeds received from the sale of the Riddell Group
Division  was  used  to  repay  all  of  the  then   outstanding   indebtedness,
approximately $32.7 million, on the revolving line of credit. The remaining cash
proceeds,  approximately  $31.5  million,  were used to redeem a face  amount of
approximately   $40.7  million  of  the  10.5%  Senior  Notes  in  a  series  of
transactions  during  2001.  As a result  of  these  transactions,  the  Company
recognized an extraordinary  gain of approximately  $4.0 million,  net of income
taxes, commissions, expenses and debt issue costs.

           Net cash proceeds received from the Umbro  settlement,  approximately
$7.9  million,  were used to redeem a face amount of $8.25  million of the 10.5%
Senior  Notes during April 2002.  As a result of this  transaction,  the Company
recognized an extraordinary  gain of approximately  $0.1 million,  net of taxes,
commissions, expenses and debt issue costs.

           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


                                      F-13
<PAGE>


other debt.  The note limits the  Company's  ability to grant stock  options and
requires  repayment of 101% of the principal in the event of a change in control
(as defined).  In conjunction  with the sale of the Riddell Group Division,  the
Company and the debtholder entered into a Note Exchange  Agreement.  The note is
convertible into shares of common stock based on a conversion price of $4.42 per
share.


8.         STOCKHOLDERS' EQUITY AND STOCK OPTION PLANS:

                   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
exercise  price or terms of grants.  During  fiscal 2001,  the 1991 Stock Option
Plan expired and as such no further options may be granted from the 1991 Plan.

           During 2000 the Company  issued  54,000 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 $169,000
based on quoted  market  values at the date of grant.  The shares issued in 2000
were granted in  satisfaction of accruals for  compensation  included in accrued
liabilities at December 31, 1999.

           Options  granted  through  December  31,  2002  generally  have  been
designated  as  non-qualified  stock options and have had option prices equal to
market values on the date of grant, except for options for 450,000 shares issued
in connection with the  acquisition of Varsity Spirit  Corporation in 1997 which
were  in-the-money on the measurement date of the 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, 2000        2,446,025       $4.30       1,519,513      $4.22
        Granted                        285,500       $3.85
        Exercised                     (134,270)      $2.02
        Forfeited                     (106,325)      $5.19
        Expired                         (8,480)      $3.38
                                     ---------
     Balance, December 31, 2000      2,482,450       $4.34       1,729,988      $4.44
        Forfeited                     (351,575)      $4.33
                                     ---------
     Balance, December 31, 2001      2,130,875       $4.34       1,882,063      $4.38
        Granted                         90,000       $3.03
        Exercised                     (140,000)      $3.45
        Forfeited                     (398,850)      $4.32
                                     ---------
     Balance, December 31, 2002      1,682,025       $4.35       1,466,775      $4.48
                                     =========
</TABLE>

      In conjunction  with the sale of the Riddell Group  Division  during 2001,
all employees of the Riddell Group Division who held options to purchase  shares
of the  Company  received a  termination  payment of $1 per  option  held.  Such
termination  payment  is  included  in the  income  (loss)  from  operations  of
discontinued businesses in the Consolidated Statements of Operations.


                                      F-14
<PAGE>


      Further  information about stock options  outstanding at December 31, 2002
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>
            $1.85 - $4.49       861,000        5.8 years        $3.48        697,625      $3.58
            $4.50 - $6.50       821,025        4.9 years        $5.26        769,150      $5.29
</TABLE>


           At December 31, 2002 there were 17,975  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,
                                                                   ------------------------------
                                                                    2002        2001        2000
                                                                   ------     --------     ------
                                                               (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S>                                                                <C>        <C>           <C>
           Pro forma net income (loss)                             $9,434     ($9,242)      ($294)
           Pro forma net income (loss) per share, basic            $ 0.99      ($0.98)     ($0.03)
           Pro forma net income (loss) per share, diluted          $ 0.88      ($0.98)     ($0.03)
</TABLE>

           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, 2002 and 2000,  respectively:  risk-free interest rates of 6.1% and
5.7%;  expected  volatility  of 50%,  expected  option  life  of 7 years  and no
dividend payments.  The weighted average estimated fair value of options granted
during 2002 and 2000 was $3.37 and $2.29 per share, respectively.  There were no
options granted during 2001.



                                      F-15
<PAGE>


9.         COMMITMENTS:

           LEASES:  The Company  leases various  facilities and equipment  under
operating   leases.   Rent  expense  in   continuing   operations   amounted  to
approximately $2,476,000, $2,110,000 and $1,835,000 for the years ended December
31, 2002, 2001 and 2000, respectively.

           Future  minimum  rental   payments  for  all   non-cancelable   lease
agreements for periods after December 31, 2002 are as follows:

             YEARS ENDING DECEMBER 31,                   (IN THOUSANDS)
                            2003                            $  2,461
                            2004                               2,354
                            2005                               2,316
                            2006                               2,389
                            2007                               2,416
                            Later years                        7,775
                                                            --------
             Total minimum payments required                $ 19,711
                                                            ========

           During 2001, in conjunction with the termination of the Umbro license
and resulting sale of all Umbro related inventory,  as further discussed in Note
2, the Company abandoned a portion of its leased warehouse space for a period of
at least  five (5)  years.  The  Company  included  a  $570,000  charge  for the
abandoned  property  in  the  income  (loss)  from  operations  of  discontinued
businesses in the Consolidated Statements of Operations.

           STRATEGIC  ALLIANCE:  In September  2002, the Company  entered into a
strategic   alliance   with  the  National   Federation  of  State  High  School
Associations (the  "Federation").  In exchange for the Federation  endorsing the
Company's cheerleading and dance team championships, the Company is obligated to
pay the  Federation  annual  license and  educational  fees over the term of the
agreement.  In  addition  to these fees,  the  Company  will pay the  Federation
contingent  fees  based  on  membership  and   participant   increases  over  an
established base level. The agreement will expire on December 31, 2010.

           Future  minimum  license and  educational  fees under the  Federation
agreement for periods after 2002 are as follows:

                YEARS ENDING DECEMBER 31,                 (IN THOUSANDS)
                               2003                            $   350
                               2004                                350
                               2005                                350
                               2006                                375
                               2007                                375
                               Later years                       1,125
                                                               -------
           Total minimum payments required                     $ 2,925
                                                               =======

           LICENSE FEE: In December 2002,  the Company  entered into a trademark
license  agreement  with Select Sport A/S,  ("Select") a Danish  company,  under
which the Company has the right to utilize the Select  trademark  in  connection
with the Company's  plans to sell Select branded  soccer  uniforms and equipment
within the United Sates. The license  agreement will expire on December 31, 2005
unless the agreement is extended for an additional five (5) year term. Under the
terms of the license agreement,  the Company is required to make minimum royalty
payments  under this  agreement  of  $15,000,  $30,000 and $60,000 for the years
ending December 31, 2003, 2004 and 2005, respectively.


                                      F-16
<PAGE>


           EMPLOYEE  BENEFITS:  The  Company  maintains  a defined  contribution
401(k) plan covering  substantially all of its employees.  Discretionary 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 $30,000,  $70,000 and $30,000 for the years ended December 31, 2002,
2001 and 2000, respectively.

           DISCONTINUED  OPERATIONS:  As of December 31,  2002,  the Company has
approximately  $251,000  of accruals  related to the sale of the  Riddell  Group
Division and the discontinuance of the Umbro license.  These accruals consist of
remaining  severance  payments to a former  executive  and  accruals  related to
potential  state  tax  issues  associated  with  the sale of the  Riddell  Group
Division.   Accrued   liabilities   related  to  discontinued   operations  were
approximately $710,000 as of December 31, 2001.

10.        ACCRUED LIABILITIES AND CONTINGENCIES:

           Accrued liabilities consist of the following:

                                                         DECEMBER 31,
                                                   ----------------------
                                                     2002          2001
                                                   -------        -------
                                                        (IN THOUSANDS)
       Accrued interest                            $ 3,365        $ 3,786
       Accrued compensation                          1,308          1,665
       Accrued rent                                    955          1,030
       Accrued income taxes                            923            900
       Other accrued liabilities                       517            877
                                                   -------        -------
               Total                               $ 7,068        $ 8,258
                                                   =======        =======

           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.

11.        INCOME TAXES:

           Income taxes on income (loss),  before  extraordinary  items, for the
years ended December 31, 2002, 2001 and 2000 is summarized
below:

                                                 YEARS ENDED DECEMBER 31,
                                             -------------------------------
                                               2002        2001        2000
                                             -------     -------     -------
                                                     (IN THOUSANDS)
     Current tax expense:
               Federal                       $    --     $    --     $   100
               State                             520         900          --
                                             -------     -------     -------
                                                 520         900         100
                                             -------     -------     -------
          Deferred tax expense (benefit):
               Federal                        (1,245)     (2,195)       (100)
               State                              --          --          --
                                             -------     -------     -------
                                              (1,245)     (2,195)       (100)
                                             -------     -------     -------
                                             $  (725)    $(1,295)    $    --
                                             =======     =======     =======

           The income tax benefit for 2002  consists of a current  state  income
tax  provision  of  $520,000,  offset by a deferred  tax benefit of $1.2 million
resulting from net operating loss  carryforward  utilization and the reversal of
the Company's  remaining deferred tax asset valuation reserve.  The 2002 benefit
has been allocated to the income


                                      F-17
<PAGE>


statement  as  follows:  1) $735,000  benefit to  continuing  operations  and 2)
$10,000 expense to extraordinary gain. Income tax expense for 2001 consists of a
current state income tax provision of $900,000, offset by a deferred tax benefit
of $2.2  million.  The 2001 income tax expense has been  allocated to the income
statement  as  follows:  1)  $3.0  million  income  tax  expense  to  continuing
operations;  2) $1.5  million  benefit  to  income  (loss)  from  operations  of
discontinued  businesses;  3)  $6.3  million  benefit  to loss  on  disposal  of
businesses;  and 4) $3.5  million  expense  to  extraordinary  gain.  Income tax
expense for 2000 consisted of a provision for federal  alternative  minimum tax,
with an offsetting  deferred tax benefit.  There was no other current income tax
expense  for the  year  ended  December  31,  2000 due to net  operating  losses
generated, or carried forward to, these periods. There was no other deferred tax
expense during the year ended December 31, 2000 since there was generally a full
valuation allowance applied to net deferred tax assets. Changes in the valuation
allowance were a decrease of $4,279,000 and $156,000 for each 2002 and 2001, and
an increase of $1,185,000 for 2000.

           Deferred  tax  assets and  liabilities  are  determined  based on the
differences  between  the  financial  reporting  and tax  bases  of  assets  and
liabilities.  The  significant  components  of  deferred  income  tax assets and
liabilities at December 31, 2002 and 2001 are as follows:

                                                               DECEMBER 31,
                                                           ------------------
                                                             2002       2001
                                                           -------    -------
                                                              (IN THOUSANDS)
     Deferred income tax assets:
          Accrued expenses and reserves                    $   500    $   756
          Inventory                                            585        695
          Intangible assets and deductible goodwill            717        808
          Net operating loss, and credit, carryforwards      1,971      4,279
          Other                                                 --        124
                                                           -------    -------
                                                             3,773      6,662
          Valuation allowances                                  --     (4,279)
                                                           -------    -------
          Total deferred income tax assets                   3,773      2,383
                                                           -------    -------
     Deferred income tax liabilities:
          Property and equipment                               343        188
                                                           -------    -------
          Total deferred income tax liabilities                343        188
                                                           -------    -------
     Total net deferred income tax asset                   $ 3,430    $ 2,195
                                                           =======    =======


           The net current and  non-current  components  of the deferred  income
taxes were  recognized  in the balance  sheet at  December  31, 2002 and 2001 as
follows:

                                                               DECEMBER 31,
                                                           ------------------
                                                             2002       2001
                                                           -------    -------
                                                              (IN THOUSANDS)

     Net current deferred tax assets                       $ 2,770    $ 2,383
     Net non-current deferred tax assets                       660         --
     Net non-current deferred tax liabilities                   --       (188)
                                                           -------    -------
                                                           $ 3,430    $ 2,195
                                                           =======    =======



                                      F-18
<PAGE>


           Reconciliation between the actual provision for income taxes and that
computed by applying the U.S.  statutory  rate to income (loss) before taxes are
as follows:

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                          -------------------------------
                                                            2002        2001        2000
                                                          -------     -------     -------
                                                                  (IN THOUSANDS)

<S>                                                       <C>         <C>         <C>
     Tax expense (benefit) at U.S. statutory rate         $ 3,643     $(3,364)    $   225
     Differences resulting from:
          State income tax, net
               of federal tax benefit                         314         544          --
          Amortization  of goodwill not deductible
            for tax purposes                                   --         829         720
          Travel & entertainment expenses
            not deductible for tax purposes                    86         392         330
          Benefit of prior periods net operating
            losses not previously recognized resulting
            in decrease in valuation allowance             (3,157)         --      (1,242)
          Valuation allowance adjustment                   (1,694)         --          --
          Other differences                                    83         304         (33)
                                                          -------     -------     -------
     Income tax expense                                   $  (725)    $(1,295)      $ -0-
                                                          =======     =======     =======
</TABLE>

           At December 31, 2002 the Company had  estimated  net  operating  loss
carryforwards  for federal  income tax  purposes of  approximately  $4.6 million
expiring  between 2012 and 2016.  While this loss  carryforward  is available to
reduce the payment of taxes that might otherwise be payable in future years, the
benefit 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.

12.        RELATED PARTY TRANSACTIONS:

                In 2000,  the Company  entered  into a sublease for office space
from an entity  controlled by a stockholder who is the Chairman of the Company's
Board of  Directors,  on  substantially  the same terms as the over  lease.  The
sublease  runs  through  September  2009 and  provides  for annual fixed rent of
$116,970  increasing to an  annualized  rate of $137,826 at the end of the lease
term and  additional  rent based on a percentage  of tax and  operating  expense
escalation  payments made by the  sub-lessor to its landlord.  During 2001, as a
result of the sale of the Riddell Group Division,  this space was  sub-subleased
to a third party for the remaining lease term. Total payments to the shareholder
controlled  entity  for  the  years  ended  December  31,  2002  and  2001  were
approximately  $14,000 and $90,000 which included  rents as described  above and
the Company's  share of utilities.  Subsequent to December 31, 2002,  the tenant
who was sub-subleasing the office space terminated their sub-sublease agreement.
At the current time, the Company is looking for another tenant for this space.

13.        SUPPLEMENTAL CASH FLOW INFORMATION:

           Cash  payments  for  interest  were   $8,100,000,   $15,333,000   and
$15,460,000 for the years ended December 31, 2002, 2001 and 2000,  respectively.
The Company received an income tax refund of  approximately  $1.5 million during
2001. This refund related to a carryback of net operating  losses of its Varsity
Spirit  Corporation  subsidiary  for periods  preceding the 1997  acquisition of
Varsity  Spirit  Corporation.   Income  tax  payments,   or  refunds,  were  not
significant for 2002 or 2000.


                                      F-19
<PAGE>


           During 2000,  the Company issued shares of its common stock valued at
$169,000 based on quoted market values a the time of grant, to certain employees
in satisfaction of accruals for compensation  included in accrued liabilities at
December 31, 1999.


14.        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, 2002 had
a carrying value of $66,035,000 and a fair value, based on quoted market values,
of $62,568,000.  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.


15.        SEGMENT AND PRODUCT LINE INFORMATION:

           The Company has two reportable segments: uniforms and accessories and
camps and events.

           Uniforms and accessories: This segment primarily designs, markets and
manufactures  cheerleader  and dance team uniforms and  accessories to colleges,
high schools, junior high schools and youth groups throughout the United States.
Products  are  marketed  through the annual  mailing of a full color  catalog to
schools and school spirit advisors and through the Company's direct sales force.
This segment also includes a line of  performance  and recital dance apparel for
the studio dance market and merchandise  sales by the Company's camps and events
segment.

           Camps and events:  This segment  operates  cheerleader and dance team
camps and  studio  dance  competitions  and  conventions  throughout  the United
States.  This segment also includes  cheerleading and dance team related special
events and specialized group tours for cheerleaders,  bands, choirs,  orchestras
and dance and theater groups.

           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 Company has determined these reportable  segments
in accordance with the management  approach  specified in Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosure About Segments of an Enterprise
and Related  Information."  The  management  approach  designates  the  internal
organization  that is used by  management  for making  operating  decisions  and
assessing performance as the basis for determination of the Company's reportable
segments.

           The  following  segment   information   represents  results  for  the
Company's  continuing  operations  and does not include  activity of  businesses
discontinued during 2001 (the Riddell Group and Umbro divisions.).



                                      F-20
<PAGE>


<TABLE>
<CAPTION>
                                                                    (IN THOUSANDS)
                                                               YEARS ENDED DECEMBER 31,
                                                         -------------------------------------
                                                            2002          2001          2000
                                                         ---------     ---------     ---------
<S>                                                      <C>           <C>           <C>
     NET REVENUES:
           Uniforms and accessories                      $  93,848     $  88,131     $  79,179
           Camps and events                                 62,556        59,418        56,856
                                                         ---------     ---------     ---------
           Consolidated total                            $ 156,404     $ 147,549     $ 136,035
                                                         =========     =========     =========

     INCOME FROM OPERATIONS:
           Uniforms and accessories                      $  15,734     $  11,952     $  10,443
           Camps and events                                  3,544         3,729         5,034
           Corporate and unallocated expenses               (2,186)       (1,694)       (2,935)
                                                         ---------     ---------     ---------
           Consolidated total                            $  17,092     $  13,987     $  12,542
                                                         =========     =========     =========

     DEPRECIATION AND AMORTIZATION, EXCLUSIVE OF DEBT ISSUE COSTS:
           Uniforms and accessories                      $   1,242     $   2,818     $   2,620
           Camps and events                                    426         1,065         1,050
           Corporate and unallocated                           252           164            36
                                                         ---------     ---------     ---------
           Consolidated total                            $   1,920     $   4,047     $   3,706
                                                         =========     =========     =========

     CAPITAL EXPENDITURES:
           Uniforms and accessories                      $     506     $   1,478     $   1,470
           Camps and events                                    306           611           472
           Corporate and unallocated                            --            --           364
                                                         ---------     ---------     ---------
           Consolidated total                            $     812     $   2,089     $   2,306
                                                         =========     =========     =========

     TOTAL ASSETS:
           Uniforms and accessories                      $  80,301     $  81,238     $  72,724
           Camps and events                                 33,580        31,975        28,090
           Corporate and unallocated                         5,677         5,418         5,371
           Discontinued operations                              --            --        87,632
                                                         ---------     ---------     ---------
           Consolidated total                            $ 119,558     $ 118,631     $ 193,817
                                                         =========     =========     =========
</TABLE>


16.   SUMMARIZED QUARTERLY DATA (UNAUDITED):

<TABLE>
<CAPTION>
                                                                      FISCAL QUARTER
                                                 ----------------------------------------------------------
                                                  FIRST       SECOND      THIRD        FOURTH        TOTAL
                                                 -------     -------     -------      -------      --------
                                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                              <C>         <C>         <C>          <C>          <C>
Year ended December 31, 2002:
      Net revenues                               $18,693     $57,370     $61,196      $19,145      $156,404
      Gross profit                                 6,564      25,301      25,265        7,358        64,488
      Income (loss) from
         continuing operations                    (5,867)      8,608       9,988       (2,942)        9,787
      Basic earnings (loss) per share             ($0.62)      $0.91       $1.05       ($0.31)        $1.03
      Diluted earnings (loss) per share           ($0.62)      $0.78       $0.89       ($0.31)        $0.91

Year ended December 31, 2001:
      Net revenues                               $16,659     $54,011     $60,126      $16,753      $147,549
      Gross profit                                 6,061      23,166      24,488        6,866        60,581
      Income (loss) from
         continuing operations                    (4,312)      4,862       5,853       (5,772)          631
      Basic earnings (loss) per share             ($0.46)      $0.51       $0.62       ($0.61)        $0.07
      Diluted earnings (loss) per share           ($0.46)      $0.45       $0.53       ($0.61)        $0.07
</TABLE>



                                      F-21
<PAGE>


           Earnings (loss) per share were computed independently for each of the
quarters presented. The sum of the quarters may not equal the total year amount,
due to the impact of computing  average  quarterly  shares  outstanding for each
period.














                                      F-22
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                                   ON SCHEDULE




Board of Directors
Varsity Brands, Inc.


           In connection with our audit of the consolidated financial statements
of Varsity Brands, Inc. (formerly Riddell Sports Inc.) and Subsidiaries referred
to in our report dated February 14, 2003,  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, 2002. In our opinion,  this schedule,  when considered
in relation to the basic financial  statements taken as a whole, present fairly,
in all material respects, the information therein.




                                                       GRANT THORNTON LLP


Chicago, Illinois
February 14, 2003











                                      S-1
<PAGE>


SCHEDULE II

                      VARSITY BRANDS, 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
----------------------------------     ----------   ----------  ----------  ----------   ----------
                                                                               (a)
<S>                                      <C>          <C>           <C>       <C>          <C>
Year ended December 31, 2000
   Allowance for doubtful accounts       $1,000       $  417        --        $1,017       $  400

Year ended December 31, 2001
   Allowance for doubtful accounts       $  400       $  325        --        $  296       $  429

Year ended December 31, 2002
   Allowance for doubtful accounts       $  429       $  307        --        $  295       $  441
</TABLE>

---------
Notes: (a) Deductions for the allowance for doubtful accounts consist of
           accounts written off net of recoveries.







                                      S-2