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, 1997

                                     OR

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

                       Commission file number 0-19298

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

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


             900 Third Avenue, 27th Floor, New York, New York  10022
          (Address of principal executive offices, including  zip code)

           Registrant's telephone number, including area code: (212) 826-4300

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

             Title of each class Name of each exchange on which registered
                          none
                          none

              Securities registered pursuant to Section 12(g) of the Act:
                             Common Stock, $.01 par value
                                   (Title of Class)

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

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

The Registrant hereby incorporates by reference, in response to Part III,
its Proxy Statement for its 1998 Annual Meeting of Stockholders to be filed
on or before April 30, 1998 (except to the limited extent the rules and
regulations of the Commission authorize certain sections of such Proxy
Statement not to be incorporated herein by reference, as specifically
indicated in such Proxy Statement).

The aggregate  market value of the 4,816,447  shares of outstanding  voting
stock held by  non-affiliates  of the Registrant,  computed by reference to
the last sale price of the Registrant's  Common Stock on March 23, 1998, is
$25,286,504.

As of March 20, 1998, the Registrant had 9,109,654  shares of Common Stock,
$.01 par value per share, outstanding.


        SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

      This Form 10-K contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of
management as well as assumptions made by and information currently
available to management. Such forward- looking statements are principally
contained in the sections "Part I--Item 1--Business-," and "Part 2--Item
7--Management's Discussion and Analysis of Financial Condition and Results
of Operations" and include, without limitation, the Company's expectations
and estimates as to: the Company's actions to improve results in the youth
sports products and retail products businesses; the Company's ability to
reduce gross margin declines; the Company's ability to successfully address
Year 2000 issues and the costs and timing of the steps it expects to take;
the Company's future financial performance, including its ability to
generate sufficient cash flow and have funds available under borrowings to
satisfy its debt service and working capital requirements; the introduction
of new products; and the Company's business operations, including the
integration of business of the Company's new Varsity Spirit division with
the Company's other businesses and the achievement of certain synergies
related thereto. In addition, in those and other portions of this Form
10-K, the words "anticipates, "believes" "estimates," "expects," "plans,"
"intends" and similar expressions, as they relate to the Company and its
subsidiaries, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks and uncertainties and that could
cause the actual results to differ materially from those expressed in any
forward- looking statements made by the Company. The Company does not
intend to update these forward-looking statements.

                                   PART I

Item 1.     BUSINESS

GENERAL

      Riddell Sports Inc. (the "Company") is the world's leading
manufacturer and reconditioner of football protective equipment and is the
nation's leading supplier of products and services to the school spirit
industry. Since acquiring Varsity Spirit Corporation in June 1997, the
Company has been conducting its business through two principal operating
divisions: the Riddell Group Division ("Riddell") and the Varsity Group
Division ("Varsity"). The Company believes that the Riddell brand is one of
the best known and recognizable in all of sports. Management estimates that
Riddell football equipment is worn by more than 80% of all professional NFL
players, and by more than 50% of all high school and collegiate players. In
addition to the sale of new protective athletic equipment, Riddell is the
largest national participant in the highly fragmented athletic equipment
reconditioning industry. Additionally, Riddell markets both full-size and
miniature collectible helmets and other collectible products, and licenses
its Riddell(R) and MacGregor(R) trademarks for use in athletic footwear and
apparel. Varsity designs and markets innovative cheerleader and dance team
uniforms and accessories for sale to the school spirit industry. Varsity is
also a leading operator of high school and college cheerleader and dance
team camps. Varsity promotes its products and services, as well as the
school spirit industry, by organizing and producing various nationally
televised cheerleading and dance team championships and other special
events.

         The Company is a holding company that operates through various
wholly owned subsidiaries. The Company's principal offices are located at
900 Third Ave, 27th floor, New York, New York, 10022 (212-826- 4300).

RECENT DEVELOPMENTS

         On June 19, 1997 the Company acquired all of the outstanding
shares of Common Stock of Varsity Spirit Corporation and its subsidiaries
in a transaction valued at approximately $91 million (the "Acquisition").
In connection with the Acquisition, Mr. Jeffrey Webb, President and Chief
Operating Officer of Varsity Spirit Corporation, became Vice Chairman of
the Company and a member of the Executive Committee of its Board of
Directors and together with certain other members of Varsity management
purchased from the Company approximately $4.4 of million newly-issued
shares of Common Stock, representing approximately 11% of the Company's
then-outstanding shares.

         In connection with the Acquisition the Company issued $115 million
principal amount of its 10.5% Senior Notes due 2007 (the "Senior Notes")
and entered into a new $35 million credit facility with Nationsbank and NBD
Bank (the "New Credit Facility"). The Company used the net proceeds from
the offering of the Senior Notes and the initial borrowing under the New
Credit Facility to finance the Acquisition, to refinance the Company's
former credit agreement, to pay fees and expenses of the transactions and
to repay certain long term debt. The Senior Notes and New Credit Facility
impose certain restrictions on the Company, including without limitation
restrictions on its ability to incur indebtedness, make investments, sell
assets, and make distributions to its stockholders. The agreements also
require the Company to repay the indebtedness in the event of certain
changes in control and to maintain certain financial ratios. The terms of
the Senior Notes and New Credit Facility, including payment provisions, are
described more fully in Note 7 to the Consolidated Financial Statements.

         In June 1997, the Company settled a number of long-standing
separate legal actions requiring the Company to pay approximately $2.3
million, including a $1.4 million cash payment for which the Company had
previously established a reserve and approximately $700,000 which the
Company previously deposited into escrow and expensed. The Company also
assigned up to $3 million, on a present value basis, of royalties from the
Company's Riddell footwear licensee over a period of up to ten years, which
period is subject to extension if the Company terminates the footwear
license. In January 1998, an affiliate of Enterprise Rent-A Car Company
assumed the Company's Riddell footwear license from Pursuit Athletic
Footwear, the previous licensee. See "--Trademark, Service Marks and
License Agreements--General--Riddell Trademark and Licensing."

         Varsity recently implemented an expansion of its dance business
and began working with CS Designs, a prominent designer and manufacturer of
dancewear. Varsity expects to introduce an expanded line of dance uniforms
and costumes under the Varsity label to be sold by Varsity's in-house,
nationwide sales force to high school and college dance teams as well as a
new line of dance uniforms and costumes for dance studio participants to be
marketed in coordination with Co. Dance, its new venture. Co dance runs
regional dance conventions and competitions for students from private dance
studios. Paula Abdul is Artistic Director and a co-founder of Co. Dance and
is scheduled to host the national Co. Dance championship to be broadcast
from Disney World on ESPN in July 1998. In 1997 Co. Dance conducted three
weekend dance conventions in which dancers who have performed on Broadway,
in music videos and in Hollywood provided dance instruction to
participants. Co Dance has eleven more sessions planned in 1998.

INDUSTRY SEGMENTS

         The Company operates in three principal business segments: sports
products (including sales of athletic products, reconditioning of athletic
equipment and sports collectible products), trademark licensing and the
spirit segment (including sales of cheerleading and dance team uniforms and
accessories and operation of cheerleading and dance camps, special events
and related operations). The Company's sports products and trademark
licensing segments are conducted through the Riddell Group Division and its
spirit segment is conducted through the Varsity Group Division. See Note 15
to the Consolidated Financial Statements for net revenues, income or loss
from operations and identifiable assets attributable to each of the
Company's segments for the last three years.



THE RIDDELL GROUP DIVISION-- SPORTS PRODUCTS AND TRADEMARK LICENSING


General

         Riddell Sports Inc. was organized in April 1988 to acquire
substantially all of the assets and businesses from two subsidiaries of
MacGregor Sporting Goods, Inc. The businesses consisted of manufacturing
and selling Riddell football helmets and other protective products and the
licensing of the MacGregor trademark. In September 1991, the Company
acquired certain assets and liabilities of the protective equipment
operations (the "Protective Equipment Division") of BSN Corp., now known as
Aurora Electronics Inc. The Protective Equipment Division primarily
consisted of BSN's reconditioner of protective sports equipment.

         Riddell is the world's leading manufacturer of high school,
college and professional football helmets, with a market share estimated at
over 50%. Riddell sells its football products primarily to high schools,
colleges and other Institutions, and also sells shoulder pads, including a
line of premium pads under the Power(R) name, as well as a line of
accessory pads which include thigh, hip, rib and knee pads.

         Riddell also reconditions football helmets, shoulder pads and other
related equipment. Reconditioning typically involves cleaning, sanitizing,
buffing or painting, and recertifying helmets as conforming to NOCSAE
standards. NOCSAE, an entity organized by various participants from the
sporting goods industry, establishes industry-wide standards for protective
athletic equipment. Riddell may also replace face guards, interior pads and
chin straps. In addition, Riddell reconditions shoulder pads, as well as
equipment for other sports, including baseball and lacrosse helmets,
baseball gloves and catchers' masks.

         Riddell maintains a promotional rights agreement with the NFL's
licensing division (the "NFL Agreement") which requires that the Riddell
name appears on the front and on the chin strap of each Riddell helmet used
in NFL play. The NFL Agreement further requires all teams in the NFL to
cover any indicia of brand identification of any other manufacturers which
might otherwise appear on helmets, face masks or chin straps not
manufactured by Riddell, but used during league play. Presently,
approximately 80% of NFL players wear Riddell football helmets. The
recognition resulting from the frequent appearance of the Riddell name on
helmets in televised football games as well as in photographs, newspapers
and magazines, such as Sports Illustrated, is viewed by management as
important to its overall sales, marketing and licensing efforts. The NFL
Agreement expires in April 1999 and automatically extends for unlimited
successive five-year periods thereafter, provided that the quality of
Riddell's helmets and shoulder pads remains comparable to the best
available technology as reasonably determined by the NFL.

         In October 1994, management implemented a significant change in
its institutional distribution system by eliminating the network of
independent team dealers which historically sold products to the
institutional market and began selling athletic equipment directly to its
customers by utilizing the Company's reconditioning sales force that had
previously been selling only reconditioning services to its institutional
customers. Management subsequently increased this full-time sales force
from 80 in 1994 to approximately 115 in 1997. The change to direct sales
has (i) enabled Riddell to increase its sales and profitability, (ii)
facilitated the introduction and cross-selling of Riddell's non-football-
related products such as practicewear and baseball equipment, (iii)
improved control over the sales efforts to educational institutions and
(iv) provided better access to detailed sales information for analysis.

         In addition to repositioning its institutional marketing effort,
management also refocused its retail collectible business. Riddell's retail
collectible business began with miniature and full-size collectible
football helmets displaying NFL and college team logos. Management
redirected the strategy of its Consumer Products Group to (i) reduce
production costs, (ii) segregate products by distribution channels and
(iii) accelerate new product development. Riddell also introduced several
new collectible products, including miniature hockey goalie masks
displaying NHL team logos in 1995 and miniature baseball batter helmets
displaying MLB team logos in 1997. Also in 1997 Riddell began selling
half-scale Star Wars(R) miniature collectibles in the United States under a
license granted by Lucasfilm, Ltd. through December 1998 and in 1998 hired
a new manager to run the Consumer Products Group.

Athletic Products and Reconditioning

         Original Line of Athletic Products: Riddell is the world's leading
manufacturer of football helmets, which it sells under the Riddell brand.
For the years ended December 31, 1995, 1996, and 1997 sales of football
helmets for competitive use constituted approximately 20%, 21% and 10%,
respectively, of Riddell's consolidated revenues and 8% of the Company's
1997 consolidated revenues pro forma for the Acquisition.

         Riddell football helmets are worn by football players throughout
the world, including players on all NFL teams, certain other professional
leagues and on most teams in the NCAA. High school teams, however, have
historically been the largest market segment for Riddell football helmets.
Riddell offers several types of varsity and youth helmets which are
different in their configurations and types of padding and other fitting
features. Riddell helmets are known for their quality and performance and
meet the industry standards set by NOCSAE.

         The Company sells a professional and collegiate line of shoulder
pads under the Power(R) name and several other lines of shoulder pads used
by NFL, high school and college players. Football shoulder pad sales for
the years ended December 31, 1995, 1996 and 1997 constituted approximately
9%, 9% and 5% respectively, of the Company's consolidated revenues and 4%
of the Company's 1997 consolidated revenues pro forma for the Acquisition.
Riddell also sells accessory pads, including thigh, hip, rib and knee pads.

         Expanded Line of Athletic Products: Riddell recently began
increasing the categories of athletic products its sells to the
institutional market. In 1996 Riddell introduced a line of baseball and
softball products designed for high school and college players, marketed
under the ProEDGE(R) brand. This new line includes baseballs and softballs,
protective baseball equipment such as chest protectors, leg guards and
catchers' masks and certain other products including bases, bags and field
equipment. In late 1995, Riddell introduced a redesigned line of
competitive and youth batting helmets, including the first batting helmet
designed specifically for women's softball. The new baseball product line
includes professional quality models that are similar to the best quality
products available from Riddell's competitors. Riddell's helmets meet the
standards set by NOCSAE.

         Late in 1996 Riddell further expanded its line of institutional
products to include practicewear such as t-shirts, shorts, fleece warmups
and other basic athletic clothing. Practicewear is the first broad line of
products sold by Riddell to the institutional market because it goes to
both male and female athletes in all sports. Riddell offers customized
silkscreen printing as an option for its practicewear line. The Company
plans to introduce practice wear for female athletes and game uniforms for
men and women in 1998.

         Reconditioning: Riddell's subsidiary, All American, is the leading
national reconditioner of football helmets, shoulder pads and related
equipment with over 50% of the reconditioning market. Reconditioning
typically involves the cleaning, sanitizing, buffing or painting, and
recertifying of helmets as conforming to NOCSAE standards. Riddell may also
replace face guards, interior pads and chin straps. The Company also
reconditions shoulder pads, as well as equipment for other sports,
including baseball and lacrosse helmets, catchers' masks and baseball
gloves. Riddell's reconditioning services are sold by its institutional
sales force to the same athletic coaches responsible for equipment
purchases. The Company's reconditioning customers are primarily high
schools, colleges and youth recreational groups. Reconditioning constituted
31%, 30% and 17% of the Company's consolidated revenues in the years ended
December 31, 1995, 1996 and 1997, respectively and 13% of Riddell's 1997
consolidated revenues pro forma for the Acquisition.

         Sports Collectible Products: Riddell's sports collectible products
are sold to consumers through the retail market channel. For the years
ended December 31, 1995, 1996 and 1997 sales of sports collectible products
have constituted approximately 26%, 29% and 13% of the Company's
consolidated revenues and 10% of the Company's 1997 consolidated revenues
pro forma for the Acquisition.

         The collectible product line consists primarily of authentic and
replica helmets of professional and college sports teams. These helmets are
offered in various miniature and full-size models bearing the colors and
logos of NFL and other professional or collegiate teams. The Company's
full-size authentic football helmets are the same helmets used by players
on these teams. Nonauthentic helmets are not constructed with the same
material as authentic helmets and are therefore less expensive. Riddell
expanded its line of collectible items in 1995 to include a new line of
smaller, less expensive football helmets tailored for the mass market and
miniature hockey goalie masks bearing NHL team logos and in 1997 to include
miniature baseball batters helmets bearing MLB logos.

         In connection with the sale of the Company's collectible helmets,
NFL Properties Inc. has granted Riddell a license to use the names,
symbols, emblems, designs and colors of the member clubs of the NFL and the
"League Marks" (i.e., "National Football League," "NFL," "NFC," "AFC,"
"Super Bowl," "Pro Bowl," the "NFL Shield" design and other insignia
adopted by the NFL) on authentic and replica football helmets sold for
display purposes. See "-Marketing and Promotion." The NFL Agreement has a
term expiring in April 1999 and automatically extending for unlimited
successive five-year periods thereafter unless, in general, Riddell helmets
fails to meet certain quality standards.

         In addition, Riddell has license agreements for other collectible
products from organizations such as the NHL, MLB and Lucasfilm, Ltd. which,
late in 1996 granted Riddell a license through December 1998 to sell
half-scale Star Wars(R) miniature collectibles in the United States.

         Under a stock purchase agreement entered into in 1994 in
connection with the acquisition of the miniature helmet business of SharCo
Corporation, the Company is required to pay a percentage of net sales,
currently 6.0%,of certain miniature helmets and other products through
September 30, 2001.

Trademark Licensing

         Riddell licenses its Riddell and MacGregor trademarks in various
categories, including athletic clothing and footwear. For the years ended
1995, 1995 and 1997, the Company's revenues from licenses of its trademarks
constituted approximately 5%, 3% and 2% of consolidated revenues,
respectively and 1% of the Company's 1997 consolidated revenues pro forma
for the Acquisition. See "-Trademarks, Service Marks and License
Agreements" for a discussion of Riddell's principal license agreements and
its licensing program.

Marketing and Promotion

         General

         Since April 1989, Riddell has been a party to the NFL Agreement.
The NFL Agreement requires that the Riddell name appears immediately above
the front forehead and on the chin straps of each Riddell helmet used in
NFL play and, further, requires all teams in the NFL to cover any indicia
of brand identification of other manufacturers which might otherwise appear
on helmets, face masks or chin straps not manufactured by Riddell.

         The NFL Agreement has a term expiring in April 1999 and
automatically extends for unlimited successive five-year periods
thereafter, provided that the quality of Riddell's helmets and shoulder
pads remains comparable to the best available technology as reasonably
determined by the NFL. In return, Riddell agrees to supply specified
quantities of Riddell helmets, shoulder pads and related equipment, either
at no cost or at reduced cost to each NFL team which has a requisite
percentage of its roster using the Riddell helmet. For the 1996/97
professional football season, Riddell believes that more than 80% of NFL
players used Riddell helmets. Riddell also has supply agreements with other
professional leagues.

         Riddell utilizes a variety of promotional techniques to build
brand awareness, but the NFL Agreement provides the Company with a unique
marketing and promotional tool. The recognition resulting from the frequent
appearance of the Riddell name on helmets in televised football games as
well as in photographs in newspapers and magazines, such as Sports
Illustrated, is viewed by management as important to its overall sales,
marketing and licensing effort. Riddell believes that this arrangement
increases sales of products by Riddell and its Riddell brand licensees and
improves licensing opportunities.

         Sports Products and Services

         Athletic Products and Reconditioning: Riddell's athletic products
and equipment reconditioning services are sold directly to schools and
other institutions through a direct sales force of approximately 115
salespeople. Prior to October 1994, sales of protective athletic equipment
to institutional customers had been made through independent team sports
dealers who in turn sold to schools and other institutions. Riddell now
markets products to these institutional customers on a factory-direct basis
utilizing its sales force, which previously sold only Riddell's
reconditioning services.

         Riddell's youth football products are principally marketed to
youth recreational groups, such as parks and recreation and Pop Warner
leagues. The Company's youth football products are sold through retail
stores, independent team sports dealers and other distributors and,
beginning in 1998, directly to youth leagues by Riddell's direct sales
force.

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

         Sports Collectible Products: Riddell's collectible products are
sold primarily to retail and specialty sporting goods stores through
approximately 40 independent commissioned sales representatives. The
Company strategically targets different channels of trade based on the type
and price of each retail product.

         In support of its sports collectible products, the Company has
initiated various advertising and public relations efforts. Riddell is a
sponsor of the "NFL Experience," an event conducted each year during the
week of the Super Bowl in which the public can experience various
aspects of playing football and the businesses which supply football
products. Riddell advertises in publications targeted toward the sports
collectible industry as well as other licensed products retailers. Riddell
also provides incentives to retail outlets to advertise and display Riddell
products during promotional periods and participates in a major national
sporting goods show where it promotes these products.

     Licensing

         Through its licensing subsidiaries, Riddell has granted certain
third parties the right to use the Riddell and MacGregor trademarks in
connection with the sale of athletic shoes, clothing and other products,
and the Company is seeking to further capitalize upon television and media
exposure of its name on helmets worn during NFL games. In 1996, Riddell
hired an independent licensing agent to help expand its licensing program
for both the Riddell and MacGregor marks and to administer Riddell's
trademark programs.

Production

     Sports Products and Services

         Athletic Products: Riddell engineers, manufactures and packages
all of its full sized football helmets at its plant in Chicago, Illinois.
Football helmet shells are manufactured by Riddell using a custom grade of
plastic resin and precision injection molding techniques. Baseball batter
helmet shells are manufactured primarily by Riddell and to a lesser extent
by a domestic supplier. Riddell's Elk Grove, Illinois facility has a screen
printing operation which can customize the practicewear with almost any
logo, team name or other design that a customer requests.

         Power shoulder pads are manufactured by a single source in Canada,
and Riddell has a facility in Pennsylvania which can customize these
shoulder pads. All of Riddell's other shoulder pads are imported as
finished products from sources in the Far East. All of the Company's
sourcing from foreign countries are subject to the risks generally
associated with doing business abroad, such as governmental and economic
instability, changes in import duties, tariffs, foreign governmental
regulations, foreign currency fluctuations and shipment disruptions.

         Riddell purchases its baseball products, other than baseball
helmets, from suppliers in the Far East and sources its practicewear from
four domestic suppliers. The Company believes alternative sources for all
of these products are readily available.

         Reconditioning: Riddell's reconditioning services include the
sanitizing, buffing or painting, replacing certain parts and recertifying
of athletic equipment as conforming to NOCSAE standards. As a policy,
Riddell does not recondition helmets over 10 years old. These services are
performed at Riddell's reconditioning facilities which are strategically
located throughout the United States and in Canada. In late 1994, in
response to Riddell's move to direct sales, Riddell's primary competitor in
new football equipment, Schutt Sports Group ("Schutt"), manufacturer of the
AIR helmet, canceled Riddell's reconditioning subsidiary's designation as
an authorized reconditioner of AIR helmets and refused to sell parts for
their helmets to this entity. This move has had no measurable impact on
Riddell's ability to recondition AIR helmets, and no significant volume has
been lost. Riddell sources parts from outside suppliers and can recertify
all AIR helmets to NOCSAE standards as it had before this move by Schutt.
However, it is possible that Schutt's action could have some limited impact
on Riddell's reconditioning volume in future years.

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

     Quality Testing

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

     Warranty

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

         Research and engineering studies conducted by Riddell and its
suppliers indicate that certain physical properties of the plastics used in
football helmets deteriorate over time. While Riddell recommends that
football helmets not be used for more than five years, its policy is to
refuse to recondition helmets that are more than ten years old.

Raw Materials

         Principal raw materials purchased by Riddell for use in its
products include various custom and standard grades of resins, plastic and
foam as well as metal fasteners, paints and cardboard. Similar materials
are used in most purchased components and finished products along with
steel wire used in purchased face guard components. Riddell has not
experienced and does not expect in the near future to experience shortages
in raw materials.

Product Design and Engineering

         The activities of Riddell's engineering staff relate principally
to the design, development and improvement of its helmets and shoulder pads
and to the testing of raw materials which are used in, or could be used to
improve, Riddell products or in the development of new products. The
Company has seven employees devoted principally to design, development and
quality and has several patents and patents pending that are applicable to
its protective products. See "-Patents and Trade Secrets." Riddell has
retained a design company to assist it in developing new retail collectible
products on terms that Riddell believes are customary in the industry and
from time to time works with other design companies.

Competition

    Sports Products and Services

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

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

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

         Retail Collectible Products: Riddell's sports collectible products
compete with a large number and wide array of manufacturers and sellers of
sports and other collectible and memorabilia products, some of which have
greater resources than the Company. Among its competitors in this large
marketplace are sellers of products such as autographed photographs and
uniforms and other memorabilia and manufacturers of clothing, such as caps
and jackets.

    Licensing

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

Patents and Trade Secrets

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

Trademarks, Service Marks and License Agreements

   General

         Riddell considers the MacGregor, Riddell, ProEdge and Power
trademarks to be material to its business. All of Riddell's football
helmets are marketed under the Riddell name and the Company's football
shoulder pads are sold under the Riddell and Power trademarks. Riddell
markets footballs and certain baseball equipment under the ProEdge
trademark and conducts its reconditioning business under the Riddell/All
American name.

         Riddell licenses the Riddell and MacGregor trademarks for certain
types of athletic clothing and for athletic footwear.

     Riddell Trademark and Licensing

         The Company owns all of the domestic rights to the Riddell
trademark which is registered with the United States Patent and Trademark
Office and with the trademark registration offices in certain foreign
countries. Registration is being sought in other major foreign markets.

         Riddell has a short term license agreement granting Signal Apparel
Company the rights to use the Riddell trademark along with the logos of NFL
teams on certain types of athletic clothing.

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

    MacGregor Trademark and Licensing

         MacMark Corporation, which owns the MacGregor trademark, is owned
50% by the Company. The remaining 50% of the stock of MacMark is owned by
Hutch Sports USA, Inc. ("Hutch"), a subsidiary of RDM Sports Group, Inc.
RDM and Hutch are currently subject to proceeding under Chapter 11 of the
U.S. Bankruptcy Code in Georgia.

          The MacGregor trademark is registered in the United States Patent
and Trademark Office.

         MacMark granted Hutch a perpetual, exclusive and royalty-free
license to use (and, with the consent of MacMark and Riddell, to sublicense
others to use) the MacGregor trademark principally for equipment used in
sports such as baseball, soccer and basketball, for sale to retail stores
only. The Company has alleged in the Hutch bankruptcy proceeding that the
Hutch license has terminated as a result of breaches and is in discussions
with Hutch concerning a resolution of this matter. MacMark has also granted
Sports Supply Group Inc. ("SSG") a license to use the MacGregor trademark
for sales of the same classes of goods as Hutch, but generally restricts
SSG from selling these goods in retail channels.

         MacMark has granted Riddell a perpetual, exclusive, royalty-free
license to use (and to sublicense others to use) the MacGregor trademark in
connection with the manufacture and sale of all products other than
products which MacMark had previously licensed to Hutch and SSG. Riddell's
use of the MacGregor trademark is further limited by an agreement with
Global Licensing Corporation, which owns the similar McGregor trademark.
Under this agreement, the parties have agreed on certain restrictions in
the use of their respective trademarks. Additionally, under a separate
agreement, Riddell is precluded from using the MacGregor trademark in
connection with the sale of golf products.

         Accordingly, Riddell's use of the MacGregor trademark is currently
limited to sporting goods, certain apparel and athletic footwear.

         Riddell has entered into sublicense agreements for the MacGregor
trademark granting Kmart an exclusive license expiring in June 1998 to use
the MacGregor trademark on certain athletic apparel (e.g., jogging suits
and sweat separates), footwear, athletic bags and knapsacks and a
non-exclusive license on other products such as athletic socks. Kmart in
turn has granted a sublicense pursuant to which Footstar, Inc. sells
MacGregor athletic footwear in Kmart stores. Riddell and Footstar recently
entered into a license agreement effective when its sublicense under the
Kmart license expires in 1998. The new Footstar license, which has an
initial term expiring 2001 and is renewable at Footstar's option for an
additional two year period if certain conditions are satisfied, provides
that Footstar will continue to sell athletic footwear bearing the MacGregor
trademark at Kmart stores on substantially the same terms as its original
sublicense.

         Kmart has indicated it will not renew the apparel portions of the
license. Discussions on the renewal of the remaining smaller categories
continue with Kmart but no decision has been reached. The Company intends
to seek a new licensee for MacGregor sports apparel as well as any other
category not renewed after the Kmart license expires. Royalties from sales
of athletic clothing bearing the MacGregor trademark at Kmart stores
constituted under 1% of the Company's consolidated revenues and 30% of the
Company's total licensing revenues in 1997. No assurance can be given that
a new apparel license will be established after the Kmart license expires.
A material decline in the royalties from the MacGregor trademark rights
could be deemed to impair the carrying value of the MacGregor trademark
rights and could have a material adverse effect on the Company's financial
position and results of operations. See Part II, Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

         Riddell is exploring additional opportunities for licensing the
MacGregor and Riddell trademarks and in this connection has retained an
independent licensing agent. See "-Marketing and Promotion-Licensing."


VARSITY GROUP DIVISION-- SPIRIT SEGMENT

General

         Varsity is a leading provider of products and services to the
school spirit industry. It designs and markets cheerleader and dance team
uniforms and accessories and is one of the nation's leading operators of
youth, junior high, high school and college cheerleader and dance team
camps, clinics and competitions. Varsity promotes its products and
services, as well as the school spirit industry, by organizing and
producing various nationally televised cheerleading and dance team
championships and other special events. Varsity's primary market includes
the approximately 37,500 educational institutions located throughout the
United States.

         Such products, which bear the Varsity(R) label, include
custom-made cheerleader, dance team and booster club uniforms and
accessories, including sweaters, sweatshirts, jumpers, vests, skirts,
warm-up suits, t-shirts, shorts, pompons, socks, shoes, pins, jackets and
gloves. Exclusive contracts are maintained with several independent
manufacturers who provide knitting, sewing, finishing and shipping for all
orders. By relying on independent manufacturers to produce its uniforms,
Varsity is able to minimize its fixed costs and retain the flexibility
necessary to adjust its manufacturing to its highly seasonal production
needs. Varsity monitors its contractors closely for quality control and
financial performance and provides its manufacturers with patterns,
fabrics, yarn and manufacturing specifications for its products. Varsity
also provides some cutting, knitting and lettering at its specialized
production facility located at its Memphis headquarters and maintains an
in-house design staff to maintain its leadership in setting design trends.
Varsity's uniform and accessory sales accounted for 24% of the Company's
consolidated revenues for the year ended December 31, 1997 and 37% of the
Company's consolidated 1997 revenues pro forma for the Acquisition.

         Varsity's camp division commenced operations in 1975 with 20
cheerleading camps and 4,000 participants. Today, through its UCA division
and USA subsidiary, Varsity is a leading operator of cheerleader and dance
camps. Camp enrollment has increased every year since Varsity has been in
business and totaled 206,000 participants in 1997. Camp sessions, which are
primarily held on college campuses in the summer, were conducted in every
state except Alaska, as well as in Canada, Panama and Japan in 1997.
Participants in Varsity's 1997 summer camps included the cheerleading
and/or dance team squads of approximately 76% of the universities
comprising the Atlantic Coast, Big East, Big Ten, Big Twelve, Pacific 10
and Southeastern collegiate athletic conferences. Varsity instructors are
mostly college cheerleaders who may have previously attended a Varsity
camp, and management believes that its training of many of the top college
cheerleading squads augments its recruiting of high school and junior high
school camp participants. Varsity's camp and event revenues accounted for
23% of the Company's consolidated revenues for the year ended December
31,1997 and 26% of the Company's consolidated revenues pro forma for the
Acquisition.

         Varsity promotes its products and services through active and
visible association with the following championships and television
specials: the National College Cheerleading and Dance Team Championship(R)
(nationally televised for 12 consecutive years), the National High School
Cheerleading Championship(R) (17 consecutive years), the National Dance
Team Championship(R) (10 consecutive years) and the National All Star
Cheerleading Championship(R) (2 consecutive years). In addition to
promoting cheerleading and dance team activities, these championships,
television specials and events are a revenue source to Varsity. In 1997,
approximately 28,000 persons, including cheerleaders and their families,
participated in Varsity's special events, such as championships and holiday
parades in the U.S., London and Paris.

         In December, 1994, Varsity acquired Intropa, a Varsity supplier
since 1988. Intropa specializes in providing international and domestic
tours for special interest, performing, youth and educational groups
including Varsity's London and Paris trips.

         Varsity's strategy has been to increase revenue and market share
by (i) expanding its school spirit product lines, (ii) strengthening its
sales force, (iii) increasing enrollment in its cheerleader and dance team
camps as a vehicle to increase participation in special events such as
parades and bowl games and cross-sell products, such as uniforms and (iv)
actively promoting its business as well as the school spirit industry,
primarily through its nationally televised cheerleading and dance team
championships. Varsity has significantly expanded the variety and selection
of its uniforms and accessories and recently increased its direct sales
force to approximately 139 full-time professional sales representatives.

         Varsity has experienced significant growth over the last five
years. Revenues have increased at a compounded annual growth rate of 21%
from approximately $41.6 million in the year ended March 31, 1993 to
approximately $101.4 million in the year ended December 31, 1997.

     Market and School Spirit Industry

         The market for school spirit products and services has evolved and
grown with the development of high school and college athletic programs.
The 1997 edition of Patterson's American Education reported that there are
approximately 14,900 junior high schools, 19,300 high schools, 1,750 junior
colleges and 1,500 colleges located throughout the United States. According
to the National Federation of State High School Associations, there are
more than 5,800,000 students participating in organized athletic programs
at high schools located in the United States, and according to the National
Collegiate Athletic Association, there are approximately 260,000 students
participating in organized athletic programs at NCAA universities and
colleges. Since commencing operations in 1974, Varsity has focused
primarily on the school spirit market consisting of camps, cheerleader
uniforms and accessories and special events for cheerleaders and dance
teams.

Varsity Cheerleader and Dance Team Uniforms and Accessories

         Through the Company's subsidiary, Varsity Spirit Fashions &
Supplies, Inc. ("Varsity Fashions"), Varsity designs and markets
cheerleader and dance team uniforms and accessories, including sweaters,
sweatshirts, jumpers, vests, skirts, warm-up suits, t-shirts, shorts,
pompons, socks, jackets, pins and gloves. Varsity Fashions employs two
full-time fashion designers, both of whom are former college cheerleaders
and one of whom was trained at the Fashion Institute of Technology in New
York City. Varsity Fashions also utilizes specialized computer software to
create its new fashion designs and patterns.

         Cheerleading and dance team uniforms designed and marketed by
Varsity Fashions are made to order. During 1997, Varsity Fashions
contracted for its production requirements with eight independent garment
manufacturers, under which the manufacturers provide knitting, cutting,
sewing, finishing and shipping for all orders, and Varsity Fashions
provides the patterns, fabrics, yarn and manufacturing specifications and
quality control supervision. Varsity Fashions also provides some cutting,
knitting and lettering at its specialized production facility located at
Varsity's Memphis headquarters. The use of independent manufacturing
facilities to fulfill Varsity's production needs affords Varsity with
flexibility to adjust its production output to meet its highly seasonal
selling cycle. The use of independent manufacturers also reduces Varsity's
fixed costs, which Varsity believes is beneficial in a highly seasonal
business. Varsity believes that the loss or termination of its relationship
with any single independent manufacturer would not have a material adverse
effect on the Company.

         Varsity Fashions purchases from various suppliers many of the
cheerleading accessories that it markets, including shoes, pompons and
campwear. Varsity Fashions purchases products from Nike(R), Capezio(R)
and Converse(R), among others and has expanded the variety and number of
accessories it markets, which has contributed to the increase in
merchandise sales revenue in the past five fiscal years. The Company
believes that the loss or termination of a relationship between Varsity and
any single supplier would not have a material adverse effect on the
Company.

         Varsity markets its uniforms, accessories and other merchandise to
cheerleading and dance teams and coaches through in-house sales
representatives and, to a lesser extent, through its direct mail catalog
and telemarketing programs. As of December 31, 1997 Varsity had
approximately 139 full-time sales representatives operating in all
50 states. Varsity representatives are employed directly by Varsity or are
representatives of one marketing firm with which Varsity has contracted for
marketing services. These sales representatives, who typically cover one or
more major metropolitan areas on an exclusive basis, call on substantially
all of the junior high, high school and college accounts within their
respective territories. The sales representatives are typically compensated
on a percentage of sales basis. Management closely and continuously
monitors the performance of its sales representatives and periodically
meets with the representatives to discuss and review sales goals.

Varsity Cheerleader and Dance Team Camps

         Varsity operates cheerleader and dance team camps in the United
States. During the 1997 summer camp season, approximately 206,000
participants (consisting of students and their coaches) attended Varsity's
Universal Cheerleader Association ("UCA") and United Spirit Association
("USA") camps, including over 6,800 participants representing colleges and
junior colleges. During the summer of 1997, cheerleading and/or dance team
squads from approximately 76% of the universities comprising the Atlantic
Coast, Big East, Big Ten, Big Twelve, Pacific 10 and Southeastern
collegiate athletic conferences attended Varsity camps. On May 15, 1996,
Varsity acquired the camp business of United Spirit Association from United
Special Events, Inc. This business consists of instructional spirit camps
and clinics primarily in the western United States.

         Varsity camp sessions for high school and junior high school
students are held primarily in June and July, while camp sessions for
college cheerleaders and dance team participants are held primarily in
August. Mascot training clinics are also provided at certain of Varsity's
cheerleader and dance team camps.

         A significant majority of Varsity cheerleader and dance team camps
are conducted on college or junior college campuses. The camps generally
are conducted over a four-day period and are attended by resident and
commuting students. Varsity generally markets the camp, establishes
participation fees, registers students, collects the participation fees,
provides instruction and performs all related administrative services.
Varsity contracts with the colleges and universities for provision of
housing, food and conference facilities. During the summer of 1997,
resident fees for high school cheerleader and dance team camps sponsored by
Varsity ranged from $75 to $239, with commuter fees ranging from $45 to
$135. In addition to participation fees, Varsity also generates revenues at
cheerleading and dance team camps through the sale of t-shirts, shorts,
caps, patches and various other accessories.

         Varsity also operates two cheerleading practice facilities located
in Dallas, Texas and Decatur, Georgia. These gyms are year-round facilities
at which cheerleaders and other spirit group participants can enroll in
instructional and recreational programs offered by Varsity.

Special Events

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

         o      National High School Cheerleading Championship(R)

         o      National Dance Team Championship(R)

         o      National College Cheerleading and Dance Team
                Championship (R)

         o      National All Star Cheerleading 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, Unilever, Capezio, The Walt Disney World Resort,
Johnson & Johnson, Pepsi Cola and Wal-Mart.

         Varsity also conducts and promotes special cheerleading events,
such as holiday parades in the U.S., London and Paris and half-time shows
at college football bowl games. In 1997, approximately 28,000 persons,
including participants and their families, took part in Varsity's
special events.

         These championships, television specials and events are a revenue
source to Varsity during its off-season and promote consumer awareness of
Varsity(R) and Universal Cheerleader Association(R) products and services,
as well as cheerleader and dance team activities in general.

Marketing Programs

         Varsity markets its uniforms and accessories under the Varsity
trademark. The distinctive Varsity logo patch appears on the front of all
uniforms manufactured by or for Varsity. Varsity annually mails to schools
and school spirit advisors and coaches over 150,000 catalogs containing
color photographs and descriptions of Varsity's uniforms and accessories.
Varsity supplements its direct and catalog sales efforts with a
telemarketing sales force of 12 full and part-time employees operating from
its Memphis headquarters.

         Varsity annually publishes several newsletters which are directed
toward cheerleaders and school spirit advisors. It also annually
distributes, in certain targeted areas, a professionally produced video
tape containing highlights of the Company's cheerleader and dance team
camps and special events. Varsity distributes each year by direct mail over
178,000 four-color promotional brochures describing Varsity's cheerleader
and dance team camps to schools, school principals, head cheerleaders,
coaches, dance team captains and school spirit advisors.

         Varsity has developed various cross-marketing programs to promote
its cheerleader and dance team camps, its uniforms and accessories.
Specifically, Varsity's sales force of approximately 139 full-time
representatives also promote Varsity's cheerleader and dance team camps.
Similarly, the more than 1,689 instructors at Varsity's cheerleader and
dance team camps promote sales of Varsity's merchandise.

Other Operations

         Varsity, through a wholly-owned subsidiary, Varsity/Intropa Tours,
Inc. ("Varsity/Intropa"), operates a tour company that specializes in
organizing trips for cheerleaders, bands, choirs and orchestras, dance and
theater groups and other school affiliated or performing groups. Most tours
are planned around a performance event. Prices are negotiated on a
tour-by-tour basis and fluctuate based on factors such as the availability
of discounts on air fares and foreign exchange rates, in the case of
international tours. The tours are marketed to targeted groups via direct
mailings, conventions, trade magazines, advertisements, and, more
importantly, repeat business and referrals. Last year, Intropa handled the
travel and concert arrangements for over 5,000 persons who toured the
continental United States, Hawaii, Canada, Europe and Israel.

Training

         Varsity emphasizes the training of its instructors. Prior to the
commencement of its camps, instructors participate in an intensive
six-day training session where they are taught new cheerleading and dance
material, as well as up-to-date teaching methods and safety techniques.
Varsity hires its instructors by utilizing applications given to talented
camp participants, supervisor evaluations and numerous nationwide tryouts.
As a result of this process, Varsity believes it hires the most qualified
and talented instructors available.

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

Competition

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

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

Trademarks and Service Marks

         Varsity registered various trademarks with the U.S. Patent and
Trademark Office, including the following: the Universal Cheerleaders
Association logo, the Varsity logo, the United Spirit Association logo, the
National High School Cheerleading Championship logo, the Universal Dance
Association logo, Universal Dance Camps, Varsity Spirit Fashions and The
National Dance Team Championship.

THE  COMPANY

Seasonality and Backlog

         The Company's Riddell and Varsity operations are highly seasonal.
Riddell Group's historical operations in recent years have been most
profitable in the second and third quarters, with losses occurring in the
fourth quarter, and the Varsity Group's operations have also generated
operating income in the second and third quarters of each calendar year
with offsetting losses each first and fourth quarter. Accordingly, the
second and third calendar quarters have become the most important to the
Company's profitability. This seasonal pattern is expected to continue.

         Orders for competitive football products and reconditioning
services are solicited over a sales cycle that begins in the fall of each
year at the end of the football season and continues until the start of
football play at the end of the following summer. Delivery of competitive
football products and performance of reconditioning services reach a low
point during the football playing season. These activities contribute most
to profitability in the first through third quarters of each calendar year.

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

         Varsity's spirit business and the results of its operations are
highly seasonal. Varsity's cheerleader and dance team camps are held
exclusively in the summer months and sales of uniforms and accessories
occur primarily in the six months prior to the beginning of the school
year. A substantial portion of Varsity's annual revenues and all of
Varsity's net income are generated in the second and third quarters of the
calendar year, while the first and fourth quarters have historically
resulted in net losses.

         The selling season for competitive products sold by Riddell's
direct sales force to schools and other institutional customers is well
into its annual sales cycle, and order backlog for these product lines at
March 15, 1998 was $13.4 million, a 10% increase over comparable March 15,
1997 backlog of $12.2 million. The competitive product increase was more
than offset by a decrease in order backlog relating to orders for retail
sports collectible products, resulting in an overall decline in backlog.
The selling cycle for sports collectible products has only recently begun
and, accordingly, retail backlog levels at March 15 are not necessarily
indicative of sales levels which may occur for the full calendar year.
Combining the competitive and retail products businesses and the spirit
business, backlog for the Company at March 15,1998 was approximately $16.4
million, a decrease of $0.5 million from March 15, 1997 backlog of
approximately $16.9 million.

Governmental Regulation

         Riddell's products and accessories are subject to the Federal
Consumer Product Safety Act, which empowers the Consumer Product Safety
Commission (the "CPSC") to protect consumers from hazardous sporting goods
and other articles. The CPSC has the authority to exclude from the market
certain articles which are found to be hazardous and can require a
manufacturer to repurchase such goods. The CPSC's determination is subject
to court review. Similar local laws exist in some states and cities in the
United States, Canada and Europe. Riddell maintains a quality control
program for its protective equipment operations and retail products that is
designed to comply with applicable laws. To date, none of the Company's
products has been deemed to be hazardous by any governmental agency.

         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 athletic conferences, to date cheerleading and dance
teams are generally free from rules and restrictions similar to those
imposed on other competitive athletics at the college level. However, if
rules limiting off-season training are applied to cheerleading and/or dance
teams (similar to rules imposed by the NCAA on certain sports), it is
likely that Varsity would be unable to offer a significant number of its
camps either because participants would be prohibited from participating
during the summer or because enough suitable sites would not be available.
Although the Company is not aware of any school officially adopting these
activities as a competitive sport, recognition of cheerleading and/or dance
teams as "sports" would increase the possibility that cheerleader or dance
activities may become regulated. If 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 effect on Varsity's
business and operations. However, the Company currently does not believe
that any regulation of collegiate cheerleading or dance teams as a "sport"
is forthcoming in the foreseeable future, and in the event any rules are
proposed to be adopted by athletic associations, the Company expects to
participate in the formulation of such rules to the extent permissible.

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

         Each of Riddell's and Varsity's operations at all of its
facilities are subject to regulation by the Occupational Safety and Health
Agency and various other regulatory agencies.

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

Employees

         At February 28,1998, Riddell had 648 employees engaged as follows:
6 in product design, engineering and testing, 117 in manufacturing and
distributing, 333 in reconditioning, 146 in sales and marketing and 46 in
administration. Approximately 40 of Riddell's employees employed in
manufacturing at the Chicago factory are represented by the Chicago and
Central States Joint Board, Amalgamated Clothing and Textile Workers Union,
under a collective bargaining agreement which will expire in January 1999.
Approximately 30 of Riddell's employees working in reconditioning at the
Company's New York facility are represented by the Local #500A United Food
and Commercial Workers Union (AFL-CIO) under a collective bargaining
agreement that expires in January 2000. Riddell believes that relations
with its employees are satisfactory.

         At March 12, 1998, Varsity employed 426 full-time employees and 82
part-time employees. In addition, during the summer of 1997, Varsity
employed approximately 1,689 summer camp instructors, trainers and
administrators. None of Varsity's employees is covered by a collective
bargaining agreement, and Varsity considers its relationship with its
employees to be satisfactory.

Product Liability Proceedings and Insurance

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

    Insurance

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

         The basic insurance coverage under the policy provides coverage of
up to $2,250,000 per claim in excess of an uninsured retention (deductible)
of $750,000 per occurrence ("Basic Coverage"). The Basic Coverage, which
does not affect the availabilty of the excess coverage described below, has
an aggregate limit which is currently $4,300,000, but the policy allows the
Company to increase this maximum limit to $7,700,000 at any time by
prepaying the required premium, which counts at 120% of the amount paid
toward the limit.

         The insurance program also provides for additional coverage
("Excess Coverage") of up to $20,000,000 per occurrence, in excess of the
first $3,000,000 of each claim which is covered by the Basic Coverage, to
the extent available. Claims covered by the Excess Coverage are subject to
one of two separate $20,000,000 aggregate policy limits, depending on the
date of the related injury. The first $20,000,000 aggregate limit applies
to claims for injuries occurring prior to January 31, 1998 and claims
occurring after January 1998, are covered under the second separate
$20,000,000 aggregate limit.

         The Company's product liability insurance carrier is a division of
American International Group, Inc., which has been rated A++XV by A.M. Best
Property and Casualty Insurance Rating Company. There is no certainty that
coverage will remain available to the Company after 2005 or that the
insured amounts will be sufficient to cover all future claims.

         Each of Riddell and Varsity carries general liability insurance
with coverage limits which the Company believes are adequate for its
business.

    Product Liability Proceedings

         Riddell has historically been a defendant in product liability
personal injury suits allegedly related to the use of football helmets
manufactured or reconditioned by subsidiaries of the Company, including
suits relating to helmets made by BSN Corp.'s helmet division prior to its
acquisition by Riddell in 1991. As of March 15, 1998, six product liability
cases were pending against Riddell.

         The Company has established reserves for pending product liability
claims and determines its reserves based on estimates of losses and defense
and settlement costs which it anticipates would result from such claims
based on information available at the time the financial statements are
issued. Due to the uncertainty involved with estimates, actual results have
at times varied substantially from earlier estimates and could do so in the
future. Accordingly, there can be no assurance that the ultimate costs of
these claims or potential future claims will fall within the established
reserves. See Note 10 to the Consolidated Financial Statements.


Item 2: PROPERTIES

         Riddell owns its principal football helmet manufacturing facility
located in Chicago, Illinois. and has 14 other locations, 10 of which are
used in its reconditioning operations.

         Varsity leases its facilities throughout the U.S.

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

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

------------------------------------------------------------------------------
                                                                  Lease
                                                    Square      Expiration
Location                  Principal Use            Footage         Date
------------------------------------------------------------------------------
New York, New York    Corporate headquarters      3,800      September 1999

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

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

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

San Antonio,          Reconditioning             27,000     October 1998
Texas(1)

Stroudsburg,          Reconditioning and         44,000     October 1998
Pennsylvania(1)       shoulder pad
                      customizing

Belton,               Reconditioning              6,600     January 1999
Missouri

Buffalo, New York     Warehouse                   6,400     Month-to-month

Burgettestown,        Reconditioning             17,000     September 2013
Pennsylvania

Franklin Park,        Reconditioning             16,000     June 2000
Illinois

Fort Valley,          Reconditioning             15,000     October 1998
Georgia(2)
Ft. Erie,             Reconditioning              5,000     Year-to-year
Ontario, Canada

New Rochelle,         Reconditioning             23,000     January 2000
New York

San Leandro,          Reconditioning             19,600     July 2002
California

Memphis,              Headquarters for           63,700     October 2000
Tennessee             Varsity's Operations
                      and Manufacturing

Memphis,              Warehouse                  21,500     October 1998
Tennessee

Sunnyvale,            Office/Warehouse           10,030     November 2000
California

Decatur,              Sport Gym                  12,000     July 1998
Georgia

Carrollton,           Sport Gym                  11,050     January 2000
Texas

Bellaire, Texas       Office                      2,984     November 2000

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

(1) Lease is  subject to renewal  by  Riddell  for three  years.
(2) Lease renewable at Riddell's option for four years.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

      None.

                                  PART II

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

         The Company's Common Stock is quoted on the NASDAQ-NMS under the
symbol RIDL. As of March 19,1998, there were approximately 875 holders of
record of the Company's Common Stock. The following table sets forth the
high and low sales prices for the Common Stock as reported by the
NASDAQ-NMS for the periods indicated:


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

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

      The last sale  price of the Common  Stock on  December  31,  1997 was
$5.00.

Dividend Policy

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


ITEM 6.  SELECTED FINANCIAL DATA

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

                             (In thousands, except per share amounts)

<TABLE>
<CAPTION>
Operating Data (1)                                              Year Ended December 31,
                                              -----------------------------------------------------------
                                                 1997         1996        1995        1994         1993
                                                ------       ------      ------      ------       -----
<S>                                         <C>          <C>         <C>         <C>          <C>
  Net revenues ............................   $ 138,273    $  72,382   $  67,043   $  55,412    $  48,753
  Cost of revenues ........................      80,675       38,813      35,794      29,792       28,885
                                              ---------    ---------   ---------   ---------    ---------
  Gross profit ............................      57,598       33,569      31,249      25,620       19,868
  Selling, general and administrative
     expenses(2) ..........................      46,278       27,853      25,983      28,614       23,395
  Other charges ...........................        --           --          --         1,188        2,170
                                              ---------    ---------   ---------   ---------    ---------
  Income (loss) from operations ...........      11,320        5,716       5,266      (4,182)      (5,697)
  Interest expense ........................      11,879        2,763       2,795       2,001        2,029
                                              ---------    ---------   ---------   ---------    ---------
  Income (loss) before taxes, extraordinary
     item and cumulative effect of changes
     in accounting principles .............        (559)       2,953       2,471      (6,183)      (7,726)
  Income taxes (credits) ..................        --            110         100      (1,250)      (2,245)
  Income (loss) before extraordinary item
     and cumulative effect of changes
     in accounting principles(3) ..........   $    (559)   $   2,843   $   2,371   $  (4,933)   $  (5,481)
                                              =========    =========   =========   =========    =========

  Earnings (loss) per share before
    extraordinary item and cumulative
    effect of changes in accounting
    principles (5):
       Basic ..............................   $   (0.07)   $    0.35   $    0.29   $   (0.62)   $   (0.69)
       Diluted ............................       (0.07)        0.33        0.29       (0.62)       (0.69)
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data (1) (4)                                               December 31,
                                              ------------------------------------------------------------
                                                 1997         1996        1995        1994         1993
                                                ------       ------      ------      ------       ------
<S>                                         <C>           <C>         <C>         <C>          <C>
  Working capital .........................   $  37,599     $ 25,957    $ 19,286    $ 11,036     $ 13,231
  Total assets ............................     181,761       76,361      74,125      72,252       60,656
  Long-term debt, less current portion.....     122,500       29,984      23,600      20,168       17,442
  Shareholders' equity ....................      32,125       27,745      24,902      24,431       29,459
</TABLE>

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

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

(3)  In 1993 a charge was recorded for the cumulative effect on prior years
     of a change in accounting principles for income taxes of $51,000
     ($0.01 per share) and a change in accounting principles for contingent
     product liability of $214,948 ($0.03 per share). An extraordinary item
     in 1995 consisted of a $1,900,000 ($0.23 per share) provision for
     costs relating to fraudulent transfer litigation.

(4)  See Note 10 to the Company's consolidated financial statements relating
     to contingent liabilities.

(5)  On December 31, 1997, the Company adopted Statement of Financial
     Accounting Standards No. 128 "Earnings per Share" (SFAS 128"). All
     current and prior years earnings (loss) per share data have been
     restated to conform to the provisions of SFAS 128.


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

Results of Operations

      Overview

      On June 19, 1997 the Company acquired Varsity Spirit Corporation (the
"Acquisition" and "Varsity"). Varsity's operations now comprise the
Company's spirit segment and include the design and marketing of
cheerleader and dance team uniforms for sale to the school spirit industry
and the operation of high school and college cheerleader and dance team
camps, clinics and special events.

      In transactions related to the Acquisition, the Company issued $115
million of 10.5% Senior Notes, sold approximately $4.4 million of its
Common Stock to certain key managers of Varsity, entered into a new working
capital credit facility and repaid certain other long term debt.

      The Acquisition significantly increased the size of the Company's
business. On a pro forma basis, revenue for the Company combined with
Varsity was $174.1 million in 1997 and $160.8 million in 1996, more that
twice the Company's historical stand-alone revenues for the year before the
Acquisition.

      Also in 1997 the Company settled certain litigation (unrelated to
product liability) which had been ongoing for several years, resulting in a
curtailment of the high levels of legal expenses relating to these actions.

      The Company's operating results for the year ended December 31, 1997
include Varsity's operating results from the date of acquisition, not the
full year. Since 1997 operating results for the Company include only this
partial year of Varsity's operations and 1996 operating results do not
include any of Varsity's operating results, the 1997 and 1996 operating
results are not comparable and are not indicative of the combined
operations of the Company on a going forward basis. To assist in overcoming
this limitation this presentation includes a comparison of certain pro
forma operating results for 1997 and 1996 to supplement the comparison of
actual results. As used in this discussion, the pro forma results are on
the basis described and presented in Note 2 of the Consolidated Financial
Statements and include Varsity's preacquisition results together with
certain pro forma adjustments.

      Operations for the year resulted in a net loss on both an actual and
pro forma basis. On an overall basis, those portions of the Company's
operations, in both its historical sports products segment and the recently
acquired spirit segment, which sell to schools and other institutional
customers through the Riddell and Varsity direct sales forces demonstrated
improvements in revenues and operating income for the year. This revenue
improvement was offset to some degree and, as a result, the operating
income improvement was more than offset by declines from the Company's line
of retail sports collectibles sold through retail channels and its youth
sports products which are sold through dealers. In response to these
results the Company has recently hired new management for the retail
product lines and shifted the primary method of distributing youth sports
products toward direct marketing using the Company's in-house sales force.


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

      Pro Forma Revenues

      Pro forma revenues for the year ending December 31, 1997 increased
$13.3 million, or 8%, to $174.1 million from $160.8 million in 1996.

      Pro forma revenues from the Company's spirit segment, acquired in the
Acquisition, increased 15% to $101.4 million in 1997 from $88.4 million in
1996. This improvement reflected an increase in sales of uniforms and
accessories of $7.0 million, or 14%, in comparison to 1996, as well as
growth in the number of camp participants which contributed to an increase
in camp and event revenues of $6.0 million or 15% over 1996 levels.

      Revenues generated by the Company's sports product and trademark
licensing segments are discussed below in the comparison of actual 1997 and
1996 results.


      Pro Forma Gross Profit

      Pro forma gross profit for 1997 was $71.0 million, an increase over
pro forma gross profit of $68.4 million for 1996.

      Pro forma gross profit from the Company's spirit segment, acquired in
the Acquisition, increased $4.0 million, or 12%, for 1997 to $38.8 million
from $34.8 million in 1996. Pro forma gross profit for the spirit segment
was reduced by $0.8 million of charges stemming from a revaluation of
inventory in June 1997 and included in Varsity's preacquisition results.
Pro forma gross margins were also impacted by increased freight and
overtime costs incurred in the segment's uniform and accessory business in
order to overcome certain production delays which occurred during the year.

      Gross profit generated by the Company's sports products and trademark
licensing segments is discussed, below, in the comparison of actual 1997
and 1996 results.


      Pro Forma Selling, General and Administrative Expenses

      On a pro forma basis, selling, general and administrative expenses
for 1997 were approximately $63.0 million, an increase over pro forma
expenses of $55.5 for 1996.

      Pro forma selling, general and administrative expenses for the
Company's spirit segment, acquired in the Acquisition, increased $5.3
million for 1997 to $33.0 million from $27.6 million in 1996. This increase
is generally due to increases in variable expenses associated with
increased sales volume. The pro forma 1997 expenses also include the impact
of a non-cash charge of $0.6 million relating to in-the-money Riddell stock
options contractually granted to certain Varsity employees (as further
discussed in Note 8 of the Consolidated Financial Statements) and a charge
of $0.4 million stemming from a revaluation of receivable reserves in June
1997 and included in Varsity's preacquisition results. The segment's pro
forma selling, general and administrative expenses also reflect start-up
costs associated with Co. Dance, a new venture in the private dance studio
market.

      Selling, general and administrative expenses incurred by the
Company's historical operations are discussed below in the comparison of
actual 1997 and 1996 results.


Year Ended December 31, 1997 Compared to The Year Ended December 31, 1996
(Comparison of Actual Results)

      Revenues

      Total revenues for the year ended December 31, 1997 increased to
$138.3 million from $72.4 million for the year ended December 31, 1996.
This increase included revenues from the recently acquired Varsity
operations of $65.6 million for the period from the June acquisition
through December 31, 1997.

      Net sales of the Company's sports products segment increased $0.4
million, or under 1%, to $70.3 million in 1997 from $69.9 million in 1996.
The Company achieved a gain in sales to its institutional customers while
experiencing offsetting declines in its other product lines, as further
discussed in the following paragraphs.

      Sales of athletic products and services sold to schools and other
institutions by the Riddell in-house sales force, which comprised
approximately 70% of the revenues from the Company's historical sports
products segment for 1997, increased approximately $5.2 million, or 12%,
over 1996 levels. The Company benefitted from initial sales of its newly
introduced line of athletic practice clothing and continued to experience
volume gains in most of its core football protective product lines and
reconditioning services.

      The Company experienced a decrease in sales of collectible products
sold to retailers, youth athletic products sold through recreational
dealers and, to a lessor extent, products sold internationally. Sales for
these product lines decreased an aggregate of $4.8 million, or 19%, from
1996 levels.

      The Company believes that the principal reasons for the declines in
sales of retail collectible products related to the timing of new product
introductions and industry-wide cautiousness in making inventory
commitments for licensed sports products. As part of a restructuring of its
consumer products group, early in 1998 the Company replaced the head of its
retail group and filled the sales manager position which had been vacant
since July 1997.

      While sales of youth products had increased somewhat in 1996, the
1997 decrease represents the continuation of a trend that started in late
1994, when the Company changed its method of distribution for institutional
products, replacing independent dealers with its direct sales force. At
that time it left recreational youth products exclusively with the dealer
network and anticipated sales declines in youth products as dealers
de-emphasized the Company's products in reaction to the company's
withdrawal of institutional products from dealers. Because of the decline
in sales of youth products the Company decided to change its principal
means of distributing these products and in late 1997 began to sell youth
products to recreational teams and organizations on a direct basis. Youth
products will also continue to be offered to recreational team dealers and
distributors. Sales of youth products constituted 2% of the Company's
revenues in 1997. This change in distribution strategy could lead to lower
youth product sales to dealers which may or may not be offset by direct
sales.

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

      The Company has derived a significant portion of its royalties from
licensing the MacGregor trademark to Kmart under an arrangement which
expires in mid 1998. Royalty income generated from this license was
approximately $2.0 million in 1997. The Company has renewed the footwear
portion of this license, which represented approximately 40% of royalties
under the license, for an initial term ending June, 2001 on substantially
the same terms. Kmart has indicated that it will not be renewing the sports
apparel portion of the license, which also has generated approximately 40%
of royalties under the license. Discussions on the renewal of the remaining
smaller categories which include socks and athletic bags have not reached a
conclusion. The Company intends to seek a new licensee to replace Kmart for
MacGregor sports apparel, as well any other category not renewed, after the
Kmart license expires. Also see "MacGregor Trademark" and "Business -
Riddell - Trademarks, Service Marks and License Agreements."

      Gross Profit

      Gross profit for the year ended December 31, 1997 increased to $57.6
million from $33.6 million for 1996. This increase included gross profit
from the recently acquired Varsity operations of $25.4 million for the
period from the Acquisition date through December 31, 1997.

      Gross profit from the Company's sports products segment, which does
not include the operations acquired from Varsity, decreased by $1.3 million
to $29.8 million for 1997 from $31.1 million in 1996. Related gross margin
rates decreased to 42.4% of sales for 1997 from 44.5% of sales for 1996.
The decline in gross profit and gross margin rates was due to several
factors. First, the decline in sales of retail sports collectibles
discussed above heavily impacted gross profit and the margin rate as these
products carry higher than average margins. In addition, sales of practice
wear, which increased during the periods as discussed above, also diluted
gross margins as expected. Margins on practice wear, which normally carry a
lower margin than the Company's historical product lines, were also
negatively impacted during 1997 by start up costs of related screen
printing operations and introductory pricing. Also, while institutional
reconditioning business volume increased, margins for this product line
were down due to higher costs associated with the initial year of
reconditioning work on equipment from new customers gained during the year
and an increase in material and parts usage.

      The Company believes that gross margin rates could decline in future
periods due to its strategy of introducing new products, although such
decreases would not likely be as large as the decrease in pro forma margin
rates experienced in 1997 which included the other causes discussed above.
New product introductions may include products which carry lower margins
than the average of the Company's other products and the Company is likely
to incur start up costs on new product lines as they are introduced.
Margins could also be negatively impacted in future years if growth of
newer lower margin products exceeds the growth of product lines with higher
margins.

      While trademark licensing does have certain costs including selling,
general and administrative expenses, there are no costs which are deducted
in arriving at gross profit. Accordingly, any increase or decrease in
royalty income results in a corresponding increase or decrease in gross
profit.

      Selling, General and Administrative Expenses

      Selling, general and administrative expense increases reflect
expenses from the recently acquired Varsity operations of $16.2 million for
the period from the Acquisition date through December 31, 1997.

      Selling, general and administrative expenses from the Company's
historical operations increased 8%, or $2.2 million, to $30.1 million for
1997 from $27.9 million in 1996. The year to date increase in expenses is
largely attributable to increased legal expenses related to various
litigation (exclusive of product liability matters) that were resolved
during 1997 as discussed elsewhere in this report. Total litigation expense
related to these litigation matters amounted to $2.8 million for 1997 and
$1.2 million 1996. These litigation matters were settled in 1997,
curtailing the high levels of legal expenditures relating to these actions.

      Interest Expense

      Interest expense for 1997 increased significantly over 1996 levels
due to the costs of additional debt incurred to finance the Varsity
Acquisition and the inclusion of a $3.0 million onetime charge relating to
the commitment fee for bridge financing that had been obtained as part of
the transactions surrounding the Acquisition. The increase in debt incurred
to finance the Acquisition, as further discussed below, will have a
continuing impact on interest expense in future periods.

      Income Taxes

      Tax expense for both 1997 and 1996 was reduced by the benefit of net
operating loss carryforwards recognized in those years. The recognition of
these tax benefits had the effect of decreasing tax expense by
approximately $0.5 million in 1997 and $1.2 million in 1996. The Company
anticipates that any remaining unrecognized tax benefit for financial
reporting purposes would be phased out upon the generation of approximately
$1.5 million in future pre-tax income and adjustments. The goodwill
recorded in connection with the Varsity Acquisition will generate
approximately $1.7 million in annual amortization charges that are not
deductible for income tax purposes during future years. This increase in
the level of permanent differences between income computed for financial
reporting purposes and for income tax purposes will have the effect of
increasing the Company's effective tax rate in future years.


Year Ended December 31, 1996 Compared to The Year Ended December 31, 1995

      Overview

      The discussion of operations for 1996 in comparison to 1995 is based
on the reported results for the Company and do not include any pro forma
impact of the operations acquired from Varsity in 1997.

      Operations for the year ended December 31, 1996 resulted in a 20%
increase in net income to $2.8 million or $0.33 per share (on a diluted
basis), in comparison to 1995 earnings of $2.4 million or $0.29 per share
(on a diluted basis), before an extraordinary item. An extraordinary item
in 1995 consisted of a $1.9 million charge to establish a provision for
costs related to certain fraudulent transfer litigation. At the time the
provision was established, a settlement had been agreed to between the
parties but this litigation was not settled until 1997, as discussed
elsewhere in this report, and was settled under an agreement different from
the one anticipated at the time the provision was recorded.

      In 1996 the Company benefitted from increased sales volume over most
of its product lines which, combined with a favorable sales mix, improved
the Company's gross margins from sales of sports products. These gains were
offset by a decrease in royalties from trademark licensing and an increase
in selling costs.

      Revenues:

      Net sales of the Company's sports products segment increased by 10%
in 1996 to $69.9 million from $63.6 during 1995. The Company experienced
sales gains in most of its product lines, including overall increases in
sales of athletic products, sports collectible products and reconditioning
services.

      Sales of competitive athletic products increased approximately $2.0
million, or 8%, in comparison to 1995 levels. Sales of these products,
principally football helmets and shoulder pads sold to schools and other
institutions, reflect increased volume and selected price increases to
offset rising costs. Unit volume increases occurred as the Company gained
experience in direct distribution of institutional products. The Company
also benefitted from other actions taken to increase institutional sales.
These actions included increases in the number of salesmen calling on
schools, more intensive sales training, incremental field sales managers,
new sales incentive programs, and the introduction of additional athletic
products. In spite of continuing de-emphasis by the Company's historical
independent dealers, sales of youth products increased in 1996 as the
Company expanded its distribution. The Company experienced an anticipated
decline in sales of these products in 1995 as many dealers stopped
purchasing Riddell youth products when they were no longer offered the
Company's institutional product lines.

      Sales of reconditioning services increased 3%, or approximately $0.7
million over comparable 1995 levels. This improvement was principally due
to moderate price increases.

      Sales of sports collectible products increased approximately 20%, or
$3.5 million over 1995 levels. This improvement was due to increased volume
in sales of the Company's line of miniature helmets.

      Royalty income decreased by 27% to $2.5 million from $3.4 million in
1995. MacGregor licensing royalties decreased 20%, or approximately $0.5
million in comparison to 1995 due a to decline in royalties from Kmart and
the inclusion in 1995 of certain non-recurring royalties. Royalties from
other MacGregor licensees remained stable at minimum contractual levels.
Royalty income for 1996 included approximately $0.3 million in royalties
from licenses which expired at the end of 1996. The larger of these two
licenses was with Thom McAn which had licensed the MacGregor trademark for
athletic shoes but had withdrawn from the athletic shoe market.

      Royalties from the licensing of the Riddell trademark decreased from
approximately $0.8 million in 1995 to approximately $0.4 million in 1996.
The decline was principally due to two previously announced events which
took place near the end of 1995. First, the Company terminated a license
for certain athletic equipment due to the licensee's failure to pay
royalties. Secondly, the Company revised the terms of a license for Riddell
branded leisure apparel in conjunction with the related licensee's
restructuring of its product lines. The revised leisure apparel license
called for a lower level of minimum royalties than those paid in 1995. The
Company also saw a decrease in royalties received from its Riddell athletic
footwear licensee as the licensee offset certain amounts against royalties
due the Company in 1996.

      Gross Profit

      Gross profit attributable to the sports products segment increased
$3.3 million or 12%, to $31.1 million for the year ended December 31, 1996
from $27.8 million for the year ended December 31, 1995. Gross profit
margin rates for the segment increased to 44.5% of sales in 1996 from 43.7%
of sales for 1995. The increase in gross profit is principally due to sales
increases discussed above. Other factors contributing to the improvement in
gross margins were changes to the sales mix, efficiencies due to higher
volumes and selective price increases taken to offset rising costs.

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses increased $1.9 million
or 7% over 1995 levels. These increases are attributable to higher levels
of selling, marketing and promotional expenses relating to the Company's
sales of competitive athletic products sold to schools and other
institutions. These selling expense increases were incurred in taking
certain actions to increase sales of competitive athletic products as
discussed under revenues, above. These increases in selling expenses were
offset in part by a decline in administrative expenses with the end result
that overall selling, general and administrative expenses remained
relatively stable as a percentage of revenues, decreasing to 38.5% of
revenues in 1996 from 38.8 % of revenues in 1995.

      Interest Expense

      Interest expense was relatively stable between the two years with an
overall decrease of approximately 1%. An overall decrease in average
interest rates was offset, in part, by increases in average indebtedness
relating to increased levels of overall business volume. A substantial
portion of the Company's borrowings were based on its bank's prime rate,
which averaged 8.27% in 1996, a 6% decrease from an average rate of 8.83%
in 1995. Average interest rates also decreased as a result of the Company's
issuance of a $7,500,000, 4.1% convertible subordinated note in November
1996. The majority of the proceeds of this note were used to repay
indebtedness which carried higher interest rates.

      Income Taxes

      Tax expense for both 1996 and 1995 was reduced by the benefit of net
operating loss carryforwards recognized during the years. The recognition
of these tax benefits had the effect of decreasing tax expense by
approximately $1.2 million in 1996 and approximately $0.9 million in 1995.


MacGregor Trademark

      The Company acquired certain rights to the MacGregor trademark and
related license agreements as part of an acquisition in 1988 at an
allocated cost of approximately $20.1 million. The Company is amortizing
the trademark rights over a period of forty years, and the license
agreements over their terms. The unamortized cost of these assets included
in intangible assets at December 31, 1997 was approximately $13.7 million.
( See Note 6 of the Consolidated Financial Statements). The Company
considers licensing revenues derived from the MacGregor trademark rights to
be a material part of its business. A material decline in the royalties
from the MacGregor trademark rights could have a material adverse effect on
the Company's results of operations. Furthermore, if there were a material
decline in the revenues from the MacGregor trademark, then the carrying
amount of the MacGregor trademark rights could be deemed to have been
impaired. A write-down for such impairment could have a material adverse
effect on the Company's financial position and results of operations.


Year 2000 Issues

      The Company uses computer systems across its business, and like
virtually all companies and organizations, is faced with the task of
addressing the Year 2000 issue over the next two years. The Year 2000 issue
relates to the possibility that computer systems may not be able to
properly process data which utilizes dates after December 31, 1999. The
Company has been engaged in a program to assess and correct related
problems in existing systems or, in the case of a system otherwise slated
for replacement, to obtain a new system which is Year 2000 compliant. In
this regard, the Company has incurred expenses for Year 2000 remedial
programs of approximately $200,000 in 1997 and anticipates that costs will
remain at this level over the next year, exclusive of the cost of the new
system being procured. The cost of the new system is not expected to impact
capital expenditures beyond the level generally experienced over the past
two years, on a pro forma basis. The Company will utilize both internal and
external resources to reprogram or replace and test systems for Year 2000
compliance. The Company plans to complete its Year 2000 compliance program
by early 1999 and believes that completion of the program can mitigate its
Year 2000 issues. However, the issues involved are full of complexities and
uncertainties, and if all required modifications and conversions are not
identified and completed on a timely basis, the Year 2000 issue could
result in a material impact on the Company.

      While the Company believes it is taking all appropriate steps to
become Year 2000 compliant, it is dependant on customer, vendor and other
third party compliance to a large extent. While the Company has had
communications with certain customers and suppliers on this issue, the
diversity of its customer and supplier base make it impracticable to
determine the full extent to which the Company may be vulnerable to those
third parties' failures to remediate their own Year 2000 issues. There can
be no guarantee that the systems of customers, vendors and other companies
will be timely converted and that failure to convert would not have a
material adverse effect on the Company.


Liquidity and Capital Resources

      Changes in debt structure

      In order to finance the Varsity Acquisition, the Company issued $115
million of 10.5% Senior Notes due 2007 and entered into a new credit
facility for a $35 million five year revolving line of credit. See Note 7
of the Consolidated Financial Statements.

      Overall, the costs of the Acquisition and the financing used
approximately $101 million of cash, net of $4.4 million of gross proceeds
from newly issued stock sold to certain key employees of Varsity. The
remaining $14 million of proceeds from the issuance of the $115 million
Senior Notes, together with draws under the new revolving line of credit,
were used to repay debt consisting of a $5 million term note with interest
at prime plus 0.5%, $439,000 of 8% subordinated notes due to certain
shareholders and approximately $150,000 of other notes payable which had
been discounted at 6.5% and to refinance and reduce the Company's and
Varsity's existing lines of credit. All of the Company's preexisting long
term debt was repaid except for its $7.5 million of 4.10% Convertible
Subordinated Notes.

      The Company incurred debt issue costs of approximately $5.4 million
in connection with the Senior Notes and approximately $0.8 million of costs
in connection with the new credit facility. These costs will be amortized
to interest expense over the life of the related debt.

      The Senior Notes and the New Credit Facility impose certain covenants
on the Company, including covenants limiting the amount of additional
indebtedness the Company may incur, its ability to engage in future
acquisitions, its ability to sell assets and apply proceeds from them and
the amount of dividends the Company may declare and pay. The covenants in
the New Credit Facility also require the Company to maintain specified
financial ratios and meet specified financial tests, all of which may
impose limitations on the Company's future liquidity.

      Capital Expenditures

      Combined capital expenditures for the Company and Varsity totaled
approximately $2.7 million in 1997 and $3.0 million in 1996.

      Working Capital Seasonality and Liquidity

      The Company has historically sold a significant portion of its
competitive football products and reconditioning services on dated payment
terms to its customers (primarily high schools and colleges). Accordingly,
trade receivables increase throughout the year as sales are made on these
dated payment terms. The increase in trade receivables continues throughout
an annual cycle until reduced at the end of the cycle as the dated
receivables become due, generally in the following July to October period.
In order to finance the resulting receivable levels, the Company has
maintained a revolving line of credit. The outstanding balance on the
revolving line of credit generally follows the seasonal receivable cycle
described above, increasing as the level of receivables increase until the
midsummer of each year when collections of the dated receivables begin and
are used to reduce the outstanding balance.

      The recently acquired operations of Varsity follow a similar pattern.
Varsity's slow season runs from the fourth quarter and last into the second
quarter, a period in which Varsity generates lower levels of revenue while
incurring expenditures in preparation for its approaching business season.
Working capital demand reaches a peak in the middle of the second quarter.
Varsity has historically repaid these borrowings by early in the third
quarter as its collections begin to pick up in June with the start of camp
and continues at a seasonally high level through the fall of each year as
many of its receivables are collected from the sale of uniforms and related
goods.

      There were no outstanding borrowings at December 31, 1997 under the
Company's New Credit Facility which matures in 2002 and provides for
seasonal borrowings under a revolving line of up to $35 million, dependant
on certain levels of receivables and inventories. The Company anticipates
that it will need to modify certain financial covenants contained in its
credit facility during 1998. Based on the Company's relationship with its
lenders and recent discussions, the Company believes that it will be able
to obtain the necessary modifications to its credit facility, although
there can be no such assurance that this will be the case.

      In addition to the historical seasonality of the Company's
businesses, the Company expects that its new debt structure will impact the
seasonality of its working capital demands as the semi-annual interest
payments on the $115 million of 10.5% Senior Notes come due each January
and July. There are no principal payments due on the Senior Notes until
they mature in 2007.

      As a result of the financing transactions associated with the Varsity
Acquisition discussed above, the Company's debt service obligations have
increased significantly. The ability of the Company to meet its debt
service and other obligations will depend on its future performance and is
subject to financial, economic and other factors, some of which are beyond
its control. However, the Company believes that operating cash flow
together with funds available from the line of credit under the credit
facility will be sufficient to funds its debt service and seasonal and
other working capital requirements in the foreseeable future.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

      None.

                                  PART III

         The Registrant hereby incorporates by reference in response to
Part III its Proxy Statement to be filed pursuant to Regulation 14A by
April 30, 1997 (except to the limited extent the rules and regulations of
the Commission authorize certain sections of such Proxy Statement not to be
incorporated herein by reference, as specifically indicated in such Proxy
Statement).

                                  PART IV


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

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

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

      (a)(3)  Exhibits

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

      (b) Reports on Form 8-K

            Form 8-K filed December 23, 1997 and as amended February 19,
            1998 reporting the Company's results of operations for the
            third quarter of 1997 and incorporating by reference certain
            sections on the Company's registration statement on Form S-4.

            Form 8-K dated February 5, 1998 reporting ECG2, Inc. purchased
            the assets of Pursuit Athletic Footwear, Inc., and became the
            Company's new footwear licensee of the "Riddell" brand and that
            the Company's subsidiary, Varsity Spirit Corporation, is
            expanding its dance business to include an expanded line of
            dancewear and a new venture that runs regional dance
            conventions and competitions for private dance studio students.



                       INDEX TO FINANCIAL STATEMENTS


                                                                       Page

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

   Consolidated Balance Sheets at December 31, 1997 and 1996 ........   F-3

   Consolidated Statements of Operations for the years ended
        December 31, 1997, 1996 and 1995 ............................   F-4

   Consolidated Statements of Shareholders' Equity for the years
        ended December 31, 1997, 1996 and 1995 ......................   F-5

   Consolidated Statements of Cash Flows for the years ended
        December 31, 1997, 1996 and 1995 ............................   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.





             REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS









Board of Directors
Riddell Sports Inc.


           We have audited the accompanying consolidated balance sheets of
Riddell Sports Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1997and 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the management of Riddell Sports Inc. Our responsibility
is to express an opinion on these financial statements based on our audits.

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

           In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Riddell Sports Inc. and Subsidiaries as of December 31, 1997
and 1996, and the consolidated results of their operations and their
consolidated cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting
principles.




                                                         GRANT THORNTON LLP


Chicago, Illinois
February 21, 1998




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

<TABLE>
<CAPTION>

                                                                                           December 31,
                                                                                    1997                 1996
                                                                               ------------        ----------
                              ASSETS (Note 7)
Current assets:
   Cash      ..................................................................      $1,011                 $357
   Accounts receivable, trade, less allowance for doubtful
      accounts ($824 and $513 respectively) (Note 3)...........................      26,425               15,145
   Inventories (Note 4)........................................................      24,066               16,406
   Prepaid expenses............................................................       6,800                4,835
   Other receivables...........................................................       1,562                  159
   Deferred taxes (Note 11 )...................................................       1,358                1,820
                                                                               ------------        -------------
             Total current assets                                                    61,222               38,722
Property and equipment, less accumulated depreciation (Note 5).................       7,823                3,507
Intangible assets and deferred charges, less accumulated.......................
   amortization (Note 6) ......................................................     112,118               34,067
Other assets...................................................................         598                   65
                                                                               ------------        -------------
                                                                                   $181,761              $76,361
                                                                               ============        =============


                    LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
<S>                                                                             <C>                       <C>
   Current portion of long-term debt (Note 7).................................. $        -                $1,158
   Accounts payable............................................................       8,377                4,867
   Accrued liabilities (Notes 10 and 12).......................................      10,717                6,740
   Customer deposits...........................................................       4,529                   -
                                                                               ------------        ------------
             Total current liabilities                                               23,623               12,765
Long-term debt, less current portion (includes $439
   due to shareholders at December 31, 1996) (Note 7)                               122,500               29,984
Deferred taxes (Note 11).......................................................         453                1,820
Other liabilities (Notes 10 and 12)............................................       3,060                4,047
Commitments and contingent liabilities (Notes 9 and 10)

Shareholders' equity (Note 8):
   Preferred stock, $.01 par; authorized 5,000,000 shares; none issued
   Common stock, $.01 par; authorized 40,000,000 shares; issued
      and outstanding 9,079,154 and 8,067,985 shares, respectively.............          91                   81
   Capital in excess of par....................................................      36,386               31,457
   Accumulated deficit.........................................................      (4,352)              (3,793)
                                                                               ------------        -------------
                                                                                     32,125               27,745
                                                                               ------------        -------------
                                                                                  $ 181,761             $ 76,361
                                                                               ============        =============


               See notes to consolidated financial statements

</TABLE>



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

                                                                                       Years ended December 31,
                                                                           1997            1996            1995
                                                                       ------------    -----------     --------
Net revenues:
<S>                                                                        <C>             <C>             <C>
   Net sales, products and reconditioning............................      $103,583        $69,888         $63,603
   Camps and events..................................................        32,302             -               -
   Royalty income....................................................         2,388          2,494           3,440
                                                                       ------------    -----------     -----------
                                                                            138,273         72,382          67,043
                                                                       ------------    -----------     -----------
Costs of revenues:
   Products and reconditioning.......................................        58,718         38,813          35,794
   Camps and events..................................................        21,957             -               -
                                                                       ------------    -----------     ----------
                                                                             80,675         38,813          35,794
                                                                       ------------    -----------     -----------
Gross profit.........................................................        57,598         33,569          31,249
Selling, general and administrative expenses.........................        46,278         27,853          25,983
                                                                       ------------    -----------     -----------
Income from operations...............................................        11,320          5,716           5,266
Interest expense (Note 7)............................................        11,879          2,763           2,795
                                                                       ------------    -----------     -----------
Income (loss) before taxes and extraordinary item....................          (559)         2,953           2,471
Income taxes.........................................................            -             110             100
                                                                       ------------    -----------     -----------
Income (loss) before extraordinary item..............................          (559)         2,843           2,371
Extraordinary item, provision for costs relating to
      fraudulent transfer litigation.................................             -              -          (1,900)
                                                                       ------------    -----------     -----------
Net income (loss)....................................................         ($559)        $2,843            $471
                                                                       ============    ===========     ===========

Basic earnings (loss) per share:
   Income (loss) before extraordinary item...........................        ($0.07)         $0.35           $0.29
   Extraordinary item, provision for costs relating to
      fraudulent transfer litigation.................................             -              -           (0.23)
                                                                       ------------    -----------     -----------
   Net income (loss).................................................        ($0.07)         $0.35           $0.06
                                                                       ============    ===========     ===========

Diluted earnings (loss) per share:
   Income (loss) before extraordinary item...........................        ($0.07)         $0.33           $0.29
   Extraordinary item, provision for costs relating to
      fraudulent transfer litigation.................................             -              -           (0.23)
                                                                       ------------    -----------     -----------
   Net income (loss).................................................        ($0.07)         $0.33           $0.06
                                                                       ============    ===========     ===========

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




               See notes to consolidated financial statements

</TABLE>


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

<TABLE>
<CAPTION>

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

<S>                                           <C>      <C>              <C>           <C>           <C>
Balance, January 1, 1995..................... 8,040    $80              $31,458       $(7,107)      $24,431
   Issuance of common stock in
      connection with an acquisition             28      1                   (1)           -             -
   Net income for the year...................    -      -                    -            471           471
                                             ------  -----    -----------------   -----------   -----------
Balance, December 31, 1995...................8,068      81               31,457        (6,636)       24,902
   Net income for the year...................    -      -                    -          2,843         2,843
                                             ------  -----    -----------------   -----------   -----------
Balance, December 31, 1996................... 8,068     81               31,457        (3,793)       27,745
   Compensation in connection
      with option grants.....................    -      -                   559            -            559
   Issuance of common stock upon
      exercise of stock options..............    25     -                    60            -             60
   Sale of common stock,
      net of costs                              986     10                4,310            -          4,320
   Net (loss) for the year...................    -      -                    -           (559)         (559)
                                             ------  -----    -----------------   -----------   -----------
Balance, December 31, 1997................... 9,079    $91              $36,386       ($4,352)      $32,125
                                             ======  =====    =================   ===========   ===========


</TABLE>


               See notes to consolidated financial statements



                    RIDDELL SPORTS INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)

<TABLE>
<CAPTION>

                                                                                      Years ended December 31,
                                                                                 1997            1996            1995
                                                                             ------------    -----------     --------
Cash flows from operating activities:
<S>                                                                              <C>           <C>               <C>
   Net income (loss)......................................................       ($559)        $2,843            $471
   Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
      Depreciation and amortization:
        Amortization of debt issue costs..................................         502             15              -
        Other depreciation and amortization...............................       4,010          2,193           2,167
      Stock options issued................................................         559             -               -
      Provision for losses on accounts receivable.........................         365            436             393
      Change in assets and liabilities (net
       of effects from acquisitions):
        (Increase) decrease in:
           Accounts receivable, trade.....................................       6,426         (1,482)         (3,759)
           Inventories....................................................       1,400         (1,980)         (2,263)
           Prepaid expenses...............................................       2,304            (10)           (717)
           Other receivables..............................................         975            199           5,464
           Other assets...................................................          45             39               6
        Increase (decrease) in:
           Accounts payable...............................................      (4,010)        (1.437)           (410)
           Accrued liabilities............................................        (502)        (2,842)         (6.467)
           Customer deposits..............................................      (6,167)        (2,558)             -
           Other liabilities..............................................        (987)            -            2,912
                                                                          ------------    -----------     -----------
             Net cash provided by (used in) operating activities..........       4,361         (4,584)         (2,203)
                                                                          ------------    -----------     -----------
Cash flows from investment activities:
   Capital expenditures...................................................      (1,814)        (1,139)           (750)
   Acquisitions      .....................................................     (91,245)            -             (642)
   Contingent "earn-out" payments on prior acquisitions...................        (166)          (174)             -
                                                                          ------------    -----------     ----------
             Net cash used in investing activities........................     (93,225)        (1,313)         (1,392)
                                                                          ------------    -----------     -----------
Cash flows from financing activities:
   Net borrowings under line-of-credit agreement..........................     (17,890)           (87)            603
   Proceeds from issuance of long-term debt...............................     115,000          7,500           5,000
   Debt issue costs.......................................................      (6,220)          (761)             -
   Principal payments on long-term debt:
      Shareholders........................................................        (439)          (871)         (1,029)
      Banks and other.....................................................      (5,313)          (142)           (554)
   Proceeds from issuance of common stock.................................       4,380             -               -
                                                                          ------------    -----------     ----------
           Net cash provided by financing activities......................      89,518          5,639           4,020
                                                                          ------------    -----------     -----------
Net increase (decrease) in cash...........................................         654           (258)            425
Cash, beginning...........................................................         357            615             190
                                                                          ------------    -----------     -----------
Cash, ending         .....................................................      $1,011           $357            $615
                                                                          ============    ===========     ===========

               See notes to consolidated financial statements
</TABLE>





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

                    RIDDELL SPORTS INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.         Summary of significant accounting policies:

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

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

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

           Intangible assets and deferred charges: Amortization of the cost
of license agreements acquired is based on the estimated future revenues
over the terms of those agreements. 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.

           On an ongoing basis, management reviews the valuation of
goodwill and other intangible assets to determine if there has been
impairment by comparing the related assets' carrying value to the
undiscounted estimated future cash flows and/or operating income from
related operations.

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

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

           Estimates: In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Estimates relating to contingent liabilities are further discussed in Note
10.

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

           Earnings (loss) per share: On December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128 - "Earnings per
Share" (SFAS 128"). As required by SFAS 128 all current and prior year
earnings (loss) per share data have been restated to conform to the
provisions of SFAS 128.

           The Company's basic net earnings (loss) per share amounts have
been computed by dividing earnings (loss) by the weighted average number of
outstanding common shares. The Company's diluted earnings (loss) per share
is computed by adjusting earnings for effect of the assumed conversion of
dilutive securities and dividing the result by the weighted average number
of common shares and common equivalent shares relating to dilutive
securities. A reconciliation between the numerators and denominators for
these calculations follows:

<TABLE>
<CAPTION>

                                                                                    Years ended December 31,
                                                                               1997            1996          1995
                                                                           ------------    -----------     --------
                                                                                           (In thousands)
  Earnings (loss) - numerator:
<S>                                                                              <C>           <C>             <C>
      Income (loss) before extraordinary item                                    ($ 559)       $ 2,843         $ 2,371
      Effect of assumed conversion, when dilutive,
        of convertible debt - interest savings net of tax                            -              61              -
                                                                           ------------    -----------     ----------
               Numerator for diluted per share computation                       ($ 559)        $2,904         $ 2,371
                                                                           ============    ===========     ===========

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


           The convertible debt, which has been outstanding since November
1996, is described in Note 7 below. Options and warrants are described in
Note 9 below. All potentially dilutive securities were excluded from the
computation of diluted earnings per share for the year ended December 31,
1997 as their inclusion would not have been dilutive due to the net loss
for the year. Options and warrants to purchase 89,500 shares of common
stock with a weighted average exercise price of $10.29 which were
outstanding at December 31, 1996 were excluded from the computation of
diluted earnings per share for 1996 as their inclusion would not have been
dilutive because their exercise prices were greater than the average market
price of common shares for the year. No options or warrants were included
in the computation of diluted earnings per share the year ended December
31, 1996 as substantially all of their exercise prices were greater than
the average market price of common shares for the year.

           Extraordinary item: For the year ended December 31, 1995 the
Company recorded a charge to establish a provision for costs related to
certain fraudulent transfer litigation as further described in Note 10.
This charge has been classified as an extraordinary item due to the unusual
and infrequent nature of the related litigation claim.

           Reclassification: Certain amounts in the 1996 and 1995 financial
statements have been reclassified to conform with the 1997 presentation.


2.    Acquisition

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

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

           The operating results of Varsity have been included in the
consolidated statements of operations from the date of acquisition. The
following pro forma information presents the combined operations of the
Company and Varsity as if the acquisition, and relating financing
transactions discussed in Note 7, had occurred at the beginning of each of
the periods presented:


<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
                                                                      1997                1996
                                                                    -------              -------
                                                               (In thousands, except per share amounts)
<S>                                                                    <C>                  <C>
           Net revenues                                                $174,084             $160,831
           Cost of revenues                                             103,076              92,426
                                                                       --------             --------
           Gross profit                                                  71,008               68,405
           Selling, general and administrative expenses                  63,048               55,469
                                                                       --------              -------
           Income from operations                                         7,960               12,936
           Interest expense                                              14,230               13,988
                                                                       --------             --------
           Income (loss) before taxes                                    (6,270)              (1,052)
           Income taxes                                                      -                    -
                                                                      ---------             --------
           Net income (loss)                                            ($6,270)             ($1,052)
                                                                      =========             ========
           Earnings (loss) per share:
                     Basic                                               ($0.69)              ($0.12)
                     Diluted                                             ($0.69)              ($0.12)

           Depreciation and amortization                                 $5,588               $5,142

</TABLE>

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


3.         Receivables

           Accounts receivable include unbilled shipments of approximately
$1,157,000 at December 31, 1997, principally relating to Varsity's
business. Unbilled shipments at December 31, 1996, before the acquisition
of Varsity, were not material. 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:
<TABLE>
<CAPTION>

                                                                               December 31,
                                                                         1997                 1996
                                                                        -------             --------
                                                                              (In thousands)
<S>                                                                        <C>                  <C>
                     Finished goods                                        $ 12,691             $ 6,712
                     Work-in-process                                          3,571               4,345
                     Raw materials                                            7,804               5,349
                                                                   ----------------     ---------------
                                                                            $24,066             $16,406
                                                                   ================     ===============

5.         Property and equipment:

           Property and equipment consist of the following:
                                                                               December 31,
                                                                         1997                 1996
                                                                   ----------------     ----------
                                                                              (In thousands)
                     Land                                                  $    207             $   207
                     Building and improvements                                1,428               1,102
                     Machinery and equipment                                 10,955               6,017
                                                                   ----------------     ---------------
                                                                             12,590               7,326
                     Less accumulated depreciation                            4,767               3,819
                                                                   ----------------     ---------------
                                                                            $ 7,823             $ 3,507
                                                                   ================     ===============
</TABLE>

           Depreciation expense relating to all property and equipment
amounted to $1,423,000, $598,000 and $596,000 for the years ended December
31, 1997, 1996 and 1995, respectively.

6.         Intangible assets and deferred charges:

           Intangible assets and deferred charges consist of the following:

<TABLE>
<CAPTION>

                                                       Estimated
                                                          Lives            December 31,
                                                        in years         1997              1996
                                                        --------       --------         ----------
                                                                           (In thousands)
<S>                                                        <C>       <C>                 <C>
           MacGregor trademark rights                      40        $18,040             $18,040
           MacGregor license agreements                     8          2,030               2,030
           Trademarks                                      40          3,250               3,250
           Goodwill                                        40         91,292              16,371
           Debt issue costs                                 8          6,981                 761
           Other                                         7 to 10       3,773               3,773
                                                                   ---------     ---------------
                                                                     125,366              44,225
           Less accumulated amortization                              13,248              10,158
                                                                   ---------     ---------------
                                                                    $112,118             $34,067
                                                                   =========     ===============


</TABLE>


7.         Long-Term Debt:

           Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                                                  December 31,
                                                                                            1997                 1996
                                                                                        ----------------    -----------
                                                                                                  (In thousands)
<S>                                                                                       <C>                <C>
Senior notes, 10.5%, due 2007, terms further described below                              $115,000           $     -

Convertible subordinated note payable, interest at 4.1%, due 2002 through
   2004, terms further described below                                                       7,500             7,500

Revolving line of credit, bank, interest at the bank's prime rate (8.25% at
   December 31, 1996), refinanced in June 1997 in connection  with certain
   financing transactions occurring at the time of the Varsity acquisition                       -            17,890

Term loan payable, bank, interest at 1/2% over prime, repaid in June 1997
   in connection with certain financing transactions occurring at the time
   of the Varsity acquisition                                                                    -             5,000

Subordinated  note  payable,  shareholders,  interest at 8%, repaid in June
   1997 in connection with certain financing  transactions occurring at the
   time of the Varsity acquisition                                                               -               439

Notes payable, discounted at 6.5%, repaid in June 1997 in connection with
   certain financing transactions occurring  at the time of the  Varsity
   acquisition                                                                                   -               313
                                                                                          ------------       --------
                                                                                           122,500             31,142
Less current portion                                                                             -               1,158
                                                                                          ------------      ----------
                                                                                           $122,500            $29,984
                                                                                          =============     ==========


</TABLE>

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

           Years ending December 31,                      (In thousands)
                    2002                                      $   1,875
                    2003                                          1,875
                    2004                                          3,750
                    2007                                        115,000
                                                               $122.500

           In addition to the outstanding debt listed above, the Company
maintains a revolving line of credit under a credit facility with its
bankers There was no outstanding balance under this line of credit at
December 31, 1997. The credit facility consists of a line of credit in a
principal amount not to exceed $35 million, expiring in 2002. Draws under
the line of credit are limited under the terms of the related loan
agreement to a percentage of certain receivables and inventory. The
outstanding balance of the line accrues interest, payable monthly, at a
rate of LIBOR plus a margin of 2.25% on draws so designated by the Company,
and on other draws at the higher of the bank's prime rate plus a margin of
0.75% or the Federal Funds rate plus 1.25%. At December 31, 1997 LIBOR
rates averaged approximately 5.8% and the prime rate was 8.5%. The credit
facility also calls for a commitment fee equal to an annual rate of 0.5%
applied to the unused portion of the line. The margin of the interest rate
over the related rates, as well as the commitment fee rate, is subject to
quarterly adjustment after June 30, 1998 dependent on certain financial
ratios. The interest rate margin can vary between 1.5% and 2.5% over LIBOR,
0% to 1% over the prime rate, 0.5% and 1.5% over the Federal Funds rate and
0.4% to 0.5% on the commitment fee. The credit facility agreement contains
certain covenants which, among other things, require the Company to meet
certain ratio and net worth tests, restrict the level of additional
indebtedness the Company may incur, limit payments of dividends, restrict
the sale of assets and restricts investments the Company may make. The
credit facility also requires repayment of the principal amount upon the
occurrence of certain changes in the control of the Company. The Company
has pledged essentially all of its tangible assets as collateral for the
credit facility.

           The 10.5% senior notes due 2007 (the "Senior Notes") contain
certain covenants that, among other things, restrict the level of other
indebtedness the Company may incur, the amounts of investments it may make
in other businesses, the sale of assets and use of proceeds therefrom, and
the payment of dividends. The Senior Notes also restrict payment of junior
indebtedness prior to the maturity of the junior indebtedness. The Senior
Interest on the notes is payable semiannually each January 15 and July 15.
The holders of the Senior Notes have the right to require the Senior Notes
to be redeemed at 101% of the principal amount in the event of a Change of
Control (as defined). The Senior Notes contain certain prepayment
restrictions and have no mandatory redemption provisions. The Senior Notes
are guaranteed by all of the Company's subsidiaries. Each of these
subsidiaries are wholly-owned subsidiaries of the Company and have fully
and unconditionally guaranteed the Senior Notes on a joint and several
basis. The Company itself is a holding company with no assets or operations
other than those relating to its investments in its subsidiaries. The
separate financial statements of the guaranteeing subsidiaries are not
presented in this report because, considering the facts stated above, the
separate financial statements and other disclosures concerning the
guaranteeing subsidiaries are not deemed material to investors by
management.

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

           The Senior Notes were issued and the new revolving credit
facility was entered into in connection with the acquisition of Varsity
Spirit Corporation (see Note 2). In connection with these financing
transactions, all other long term debt of the Company, except the
convertible notes, was repaid. The Company incurred debt issue costs of
approximately $5.4 million in connection with the Senior Notes and
approximately $0.8 million of costs in connection with the new credit
facility. These costs are included with intangibles and deferred charges
(see Note 6) and will be amortized to interest expense over the life of the
related debt. The Company also incurred costs of $3.0 million in connection
with a bridge loan commitment needed to support the acquisition which was
charged to interest expense in June 1997.

           In February 1996, certain shareholders of the Company had
provided the Company's bank with limited guaranties, aggregating
$2,000,000, of the term loan and revolving line of credit in place at the
time. This group of shareholders, all of whom were directors of the
Company, included the Company's Chairman, CEO and a Vice President. These
guarantees were provided in conjunction with certain modifications of the
loans obtained in December 1995. The guarantees were released by the bank,
and terminated, in November 1996.


8.         Shareholders' equity and stock option plans:

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

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

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

           Options granted through December 31, 1997 generally have been
designated as non-qualified stock options and, except as described above,
have had option prices equal to market values on the date of grant, have
had terms of five or ten years, and have had vesting periods of one or four
years. Information relating to stock option transactions over the past
three years is summarized as follows:

<TABLE>
<CAPTION>

                                                                  Options Outstanding               Options Exercisable
                                                                                 Weighted                           Weighted
                                                                                  Average                           Average
                                                               Number            Price Per            Number        Price per
                                                             Outstanding           Share            Exercisable       Share
<S>                                                               <C>                <C>                 <C>             <C>
        Balance, December 31, 1994                                1,035,550          $4.36               321,638         $7.12
           Granted                                                 177,000           $2.20
           Forfeited                                              (180,500)          $4.22
                                                         -----------------
        Balance, December 31, 1995                                1,032,050          $4.02               485,775         $5.21
           Granted                                                 239,500           $4.57
           Forfeited                                                (5,500)          $2.89
           Expired                                                 (80,000)          $8.00
                                                         -----------------
        Balance, December 31, 1996                                1,186,050          $3.87               712,913         $3.79
           Granted                                                1,085,925          $4.75
           Exercised                                               (25,000)          $2.39
           Forfeited                                                (7,000)          $4.46
           Expired                                                 (82,000)          $10.75
                                                         -----------------
        Balance, December 31, 1997                                2,157,975          $4.05               1,284,425       $3.37
                                                         ==================

</TABLE>


Further information about stock options outstanding at December 31, 1997 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>             <C>
            $1.80 - $2.49       264,050        1.7  years             $2.20       256,550         $2.20
            $2.50 - $3.99       812,500        6.4  years             $3.44       757,500         $3.46
            $4.00 - $5.44       1,081,425      8.2  years             $4.95       270,375         $4.22


</TABLE>

           At December 31, 1997 there were stock options outstanding for
144,800 shares, with a weighted average price per share of $2.74, which are
exercisable and which expire prior to December 31, 1998.

           At December 31, 1997 there were 732,525 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,
                                                               1997         1996            1995
                                                           ------------    -----------     --------
                                                                       (In thousands)
<S>                                                        <C>             <C>              <C>
           Pro forma net income (loss)                     ($1,973)        $2,669           $408
           Pro forma earnings (loss) per share
                Basic                                       ($0.23)         $0.33           $0.05
                Diluted                                     ($0.23)         $0.31           $0.05
</TABLE>

           These pro forma amounts may not be representative of future
disclosures because they do not take into effect pro forma compensation
expense related to grants made before 1995. The pro forma results include
expense related to the fair value of stock options estimated at the date of
grant using the Black-Scholes option pricing model and the following
weighted average assumptions for the years ended December 31, 1997, 1996
and 1995, respectively: risk-free interest rates of 6.4%, 6.6% and 6.1%;
expected volatility of 50%, 38% and 38%; expected option life of 7.0 years,
6.9 years and 4.5 years, and no dividend payments. The weighted average
estimated fair value of options granted during 1997, 1996 and 1995 was
$3.28, $2.40 and $0.93 per share, respectively.

           Warrants: Warrants are outstanding for the purchase of an
aggregate of 322,152 shares of the Company's common stock. Warrants for
172,152 of these shares are held by one of the Company's banks and are
exercisable through October 1999 at an exercise price that is currently
$3.54 per share and that increases 5% annually. The remaining 150,000
warrants are held by certain shareholders and are exercisable through
January 1999 at a price that is currently $2.96 and which that increases 5%
annually. Both sets of warrants were issued in 1994 in consideration for
certain changes in debt of the Company outstanding to the holders at the
time.


9.         Commitments:

           Leases: The Company leases various facilities and equipment
under operating leases. Rent expense amounted to approximately $1,958,000,
$1,451,000 and $1,331,000 for the years ended December 31, 1997, 1996 and
1995, respectively.

           Future minimum rental payments for all non-cancelable lease
agreements for periods after December 31, 1997 are as follows:

                Years ending December 31,               (In thousands)
                               1998                          $ 2,255
                               1999                            1,771
                               2000                              987
                               2001                              137
                               2002                               68
                               Later years                        11
                                                        ------------
                Total minimum payments required              $ 5,229
                                                        ============


           Employee benefits: The Company has three noncontributory defined
benefit pension plans that cover, or have covered, certain employee groups.
These plans consist of two "Union Plan" covering certain unionized
employees and a "Non-Union Plan" that covered other employees of certain
subsidiaries. The Non-Union Plan was amended in 1994 to provide that no
benefits would accrue under the plan on or after December 31, 1994. Pension
expense for these plans have averaged under $50,000 annually over the three
year period ended December 31, 1997.

           The Company maintains defined contribution (401-k) plans
covering substantially all of its employees, other than those covered by
the Union Plans. Company contributions to these plans are based on a
percentage of employee contributions and are funded and charged to expense
as incurred. Expense related to the plans amounted to $342,000, $307,000
and $220,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.


10. Accrued liabilities, litigation matters and contingencies:

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

<TABLE>
<CAPTION>

                                                                            Accrued
                                                                          liabilities       Other liabilities
                                                                           (Current)          (Non-Current)
    December 31, 1997:                                                                (In thousands)
<S>                                                                             <C>                   <C>
 Product liability matters, reserves for
 .        pending and other contingencies                                        $   700               $ 3,000
       Items not related to litigation or contingencies:
         Accrued interest                                                         6,536                    -
         Other accrued liabilities                                                3,481                    60
                                                                       ----------------    ------------------
               Total of balance sheet category                                 $ 10,717               $ 3,060
                                                                       ================    ==================
    December 31, 1996:
       Product liability matters:
         Future payments on settled cases                                       $ 1,750            $        -
         Reserves for pending and other contingencies                               500                 3,500
                                                                       ----------------    ------------------
               Totals for product liability matters                               2,250                 3,500
       Provision relating to fraudulent transfer litigation                       1,400                    -
       Other litigation contingency reserves                                        400                    -
                                                                       ----------------    -----------------
               Total recorded liabilities relating to
                 litigation or contingencies                                      4,050                 3,500
       Items not related to litigation or contingencies:
         Accrued interest                                                           110                   310
         Other accrued liabilities                                                2,580                   237
                                                                       ----------------    ------------------
               Total of balance sheet category                                  $ 6,740               $ 4,047
                                                                       ================    ==================


</TABLE>

           Product liability litigation matters and contingencies:

           At December 31, 1997, the Company was a defendant in 6 product
liability suits relating to personal injuries allegedly related to the use
of helmets manufactured or reconditioned by subsidiaries of the Company.
The ultimate outcome of these claims, or potential future claims, cannot
presently be determined. The Company estimates that the uninsured portion
of future costs and expenses related to these claims, and incurred but not
reported claims, will amount to at least $3,700,000 and, accordingly, a
reserve in this amount is included in the Consolidated Balance Sheet at
December 31, 1997 as part of accrued liabilities and other liabilities.
These reserves are based on estimates of losses and defense costs
anticipated to result from such claims, from within a range of potential
outcomes, based on available information, including an analysis of
historical data such as the rate of occurrence and the settlement amounts
of past cases. However, due to the uncertainty involved with estimates
actual results have at times varied substantially from earlier estimates
and could do so in the future. Accordingly there can be no assurance that
the ultimate costs of such claims will fall within the established
reserves.

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

           The basic insurance coverage under the policy ("Basic Coverage")
provides coverage of up to $2,250,000 per claim in excess of an uninsured
retention (deductible) of $750,000 per occurrence. The Basic Coverage is
subject to an aggregate program limit and certain annual aggregate sub
limits. The Basic Coverage, which does not affect the availability of the
excess coverage described below, has an aggregate limit which is currently
$4.3 million, but the policy allows the Company to increase this maximum
limit to $7.7 million at any time by prepaying the required premium, which
counts at 120% of the amount paid toward the limit. The Basic Coverage, to
the extent available, covers the insured portion of the first $3,000,000 of
a claim. The insurance program also provides for additional coverage
("Excess Coverage") of up to $20,000,000 per occurrence, in excess of the
first $3,000,000 of each claim. Claims covered by the Excess Coverage are
subject to one of two separate $20,000,000 aggregate policy limits,
depending on the date of the related injury. The first $20,000,000
aggregate limit applies to claims for injuries occurring prior to January
31, 1998, and claims occurring after January 1998 are covered by the second
separate $20,000,000 aggregate limit.


           Other contingencies and litigation matters:

           In 1997 the Company settled certain fraudulent transfer
litigation commenced against it in March, 1995 by the trustee for MacGregor
Sporting Goods, Inc. ("Mac I"), which filed for bankruptcy protection in
March 1989, and the trustee for MGS Acquisition, Inc. (collectively, the
"Trustees"). The settlement agreement (the "Settlement Agreement") was
approved by order of the New Jersey Bankruptcy Court (the "Mac Order"),
which also dismissed the action with prejudice. The action had sought
damages in connection with the Company's acquisitions in 1988 and 1989 of
substantially all the assets and businesses of two former second-tier
subsidiaries of Mac I on the ground that the Company failed to pay adequate
consideration at a time when Mac I was insolvent. The businesses acquired
included the Company's core football helmet business, the MacGregor
licensing business and the non-football uses of the Riddell trademark.

           Additionally, the Settlement Agreement settles, and the Mac
Order dismisses with prejudice, a state law debtor and creditor action
initiated against the Company by Innovative Promotions, Inc. and certain
other purported unsecured creditors of Mac I making similar allegations.

           The Settlement Agreement also settles claims against the Company
brought by the Company's former President. Among other things, the former
officer alleged the Company breached its indemnification obligation to him
as a former officer and director of the Company.

           Generally, the Settlement Agreement required the Company to pay
an aggregate of approximately $2,300,000, with respect to which the Company
had, in prior periods, previously expensed approximately $2,100,000
including a $1,400,000 provision included in accrued liabilities at
December 31, 1996 and approximately $700,000 paid into an escrow fund in
prior years. The $1,400,000 provision was provided for by a charge of
$1,900,000 recorded in 1995 as an extraordinary item relating to the
fraudulent transfer litigation. The provision was reduced to $1,400,000
during 1996 when certain related legal expenses were charged against the
provision. The funds in escrow were placed there during a period from 1992
to 1996 in conjunction with matters related to the litigation with a former
officer of the Company. The settlement amounts were paid in August 1997.
Additionally the Company agreed to assign royalties, to the extent paid, of
up to $3,000,000 on a present value basis, for up to ten years from its
current or any future "Riddell" footwear licensee.

           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, 1997, 1996 and 1995 is summarized below:

<TABLE>
<CAPTION>

                                                                                         Years ended December 31,
                                                                            1997              1996              1995
                                                                       -------------     -------------     ---------
           Current tax expense:                                                          (In thousands)
<S>                                                                           <C>                <C>               <C>
                     Federal                                                  $   -              $  50             $  40
                     State                                                        -                 60                60
                                                                       -------------     -------------     -------------
                                                                                  -                110               100
                                                                       -------------     -------------     -------------
                Deferred tax expense:
                     Federal                                                      -                  -                -
                     State                                                        -                  -                -
                                                                       -------------     -------------     ------------
                                                                                  -                  -                -
                                                                       -------------     -------------     ------------
                                                                              $   -             $  110            $  100
                                                                       ===============   =============     =============

</TABLE>

           For the years ended December 31, 1997, 1996 and 1995, tax
expense was reduced by offsetting tax benefits of approximately $500,000,
$1,200,000 and $900,000, respectively, of net operating loss carryforwards
which were not recognized in prior years.

           Significant components of deferred income tax assets and
liabilities at December 31, 1997, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>

                                                                                Years ended December 31,
                                                                            1997              1996              1995
                                                                       -------------     -------------     ---------
           Deferred income tax assets:                                                   (In thousands)
<S>                                                                          <C>               <C>               <C>
                Accrued expenses and reserves                                $ 2,267           $ 3,509           $ 5,029
                Inventory                                                        733               492               711
                Intangible assets                                                 -                 26                28
                Net operating loss, and
                  credit, carryforwards                                        4,832             3,689             2,904
                Other                                                            276                36                35
                                                                       -------------     -------------     -------------
                                                                               8,108             7,752             8,707
                Valuation allowances                                          (1,031)           (1,386)           (2,539)
                                                                       --------------    -------------     -------------
                Total deferred income tax assets                               7,077             6,366             6,168
                                                                       -------------     -------------     -------------
           Deferred income tax liabilities:
                Intangible assets and deductible goodwill                      5,498             6,014             5,770
                Property and equipment                                           481                86                48
                Prepaid expenses                                                 193               266               350
                                                                       -------------     -------------     -------------
                Total deferred income tax liabilities                          6,172             6,366             6,168
                                                                       -------------     -------------     -------------
           Total net deferred income tax asset                                 $ 905           $ - 0 -           $ - 0 -
                                                                       =============     =============     =============

</TABLE>

           The net current and non-current components of the deferred
income taxes were recognized in the balance sheet at December 31, 1997,
1996 and 1995 as follows:

<TABLE>
<CAPTION>

                                                                                 Years ended December 31,
                                                                            1997              1996              1995
                                                                       -------------     -------------     ---------
                                                                                        (In thousands)


<S>                                                                          <C>               <C>               <C>
           Net current assets, included with
                prepaid expenses                                             $ 1,358           $ 1,820           $ 1,990
           Net non-current deferred tax liabilities                              453             1,820             1,990
                                                                       -------------     -------------     -------------
                                                                             $   905         $   - 0 -         $   - 0 -
                                                                       =============     =============     =============

</TABLE>


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

<TABLE>
<CAPTION>


                                                                                         Years ended December 31,
                                                                            1997              1996              1995
                                                                       -------------     -------------     ---------

<S>                                                                        <C>                 <C>               <C>
           Statutory Federal tax rate                                      (34.0%)             34.0%             34.0%
           Differences resulting from:
                Effective state tax rate,
                  net of federal tax benefit                                  -                 3.1               1.6
                Amortization not deductible
                  for tax purposes                                           87.1               5.8               6.7
                Travel & entertainment expenses
                  not deductible for tax purposes                            33.9               1.2               1.1
                Benefit of prior periods net operating
                  losses not previously recognized                          (86.4)            (40.2)            (38.1)
                Other differences                                            (0.6)             (0.2)            ( 1.3)
                                                                       -----------       -----------          --------
                                                                              0.0%              3.7%              4.0%
                                                                       ===========         =========          ========
</TABLE>


           At December 31, 1997 the Company had estimated net operating
loss carryforwards for federal income tax purposes of approximately
$13,800,000 expiring in the years 2008 to 2012. While this loss
carryforward is available to reduce the payment of taxes that might
otherwise be payable in future years, the benefit of most of the net
operating losses have been recognized in the computation of income tax
expense reflected in the Company's consolidated financial statements in the
current and prior years. Approximately $1.5 million of net operating loss
carryforwards have not yet been recognized in the computation of income tax
expense for financial reporting purposes and are reflected in the deferred
income tax asset valuation allowance along with other items. These
unrecognized carryforwards would be recognized through a reduction of
income tax expense in future periods upon the generation of taxable
earnings of an equal amount.



12.        Related party transactions:

           Interest expense includes  interest on debt due shareholders and
related  parties of  $17,000,  $111,000  and  $198,000  for the years ended
December 31, 1997,  1996 and 1995,  respectively.  In 1996 the Company paid
consulting  fees of  $75,000  to one  director  and paid  another  director
$20,000 for services in connection  with a series of  promotional  football
clinics sponsored by the Company. Other liabilities (non-current),  include
accrued  interest due to  shareholders of $310,129 at December 31, 1996. In
1995,  $1,029,166  of  principal  payments  were made in  advance  of their
maturity on long-term  debt due to a  shareholder.  In 1997,  in connection
with  certain  financing  transactions  occurring  in  connection  with the
Varsity acquisition, notes payable to shareholders of $439,000 plus accrued
interest were repaid in advance of maturity.


13.        Supplemental cash flow information:

           Cash payments for interest were $5,260,000, $2,662,000 and
$2,742,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. Interest payments for 1997 included $3,000,000 relating to
certain bridge financing commitment fees - see Note 7. Income tax payments,
or refunds, were not significant for 1997, 1996 or 1995.

           In June 1997, in connection with the Varsity acquisition, the
Company assumed liabilities of $23,068,000. In January 1995, in connection
with an acquisition, the Company assumed liabilities of $765,000.


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, 1997 had a carrying value of $115,000,000 and a fair value,
based on quoted market values, of $119,600,000. 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 information:

           The Company operates in three industry segments: sports
products, spirit, and trademark licensing.

           Sports products : This segment consists principally of the
manufacture, sale and reconditioning of football helmets, other athletic
products and sports collectible products. The Company's football helmets
and athletic products are marketed primarily to institutions such as
schools, colleges and recreational groups through the Company's direct
sales force. Sports collectible products are marketed to consumer product
retailers.

           Spirit: This segment consists principally of the sale of
cheerleader and dance team uniforms and accessories and the operation of
cheerleader and dance team camps, clinics and special events. These
products, camps and events are marketed primarily to the same, or similar,
institutional groups as the Company's athletic sports products through the
Company's sales force and other direct sales efforts. The Company entered
the spirit segment with the Varsity acquisition in 1997 (see Note 2).

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

<TABLE>
<CAPTION>

                                                                        Years ended December 31,
                                                                 1997                  1996                     1995
                                                           -----------------     -----------------           -------
      Net Revenues:                                                              (In thousands)

<S>                                                                <C>                <C>                    <C>
           Sports products                                         $70,277            $ 69,888               $ 63,603
           Spirit                                                   65,608                  -                      -
           Trademark licensing                                       2,388               2,494                  3,440
                                                             -------------         -----------            -----------
                                                                 $ 138,273            $ 72,382               $ 67,043
                                                             =============         ===========            ===========

      Income from Operations:
           Sports products                                         $ 6,621             $ 7,930                $ 7,184
           Spirit                                                    9,250                  -                      -
           Trademark licensing                                       1,476               1,536                  2,264
           Corporate and unallocated                                (6,027)             (3,750)                (4,182)
                                                             -------------         -----------            ------------
                                                                  $ 11,320             $ 5,716                $ 5,266
                                                             =============         ===========            ===========

      Depreciation and Amortization:
           Sports products                                         $ 1,654             $ 1,483                $ 1,459
           Spirit                                                    1,715                  -                      -
           Trademark licensing                                         732                 702                    701
           Corporate and unallocated                                   411                  23                      7
                                                             -------------         -----------            -----------
                                                                   $ 4,512             $ 2,208                $ 2,167
                                                             =============         ===========            ===========

      Capital Expenditures:
           Sports products                                           $ 845             $ 1,139                  $ 750
           Spirit                                                      969                  -                      -
                                                             -------------         -----------            ----------
                                                                   $ 1,814             $ 1,139                  $ 750
                                                             =============         ===========            ===========

      Identifiable assets:
           Sports products                                        $ 56,619            $ 54,374               $ 51,478
           Spirit                                                   99,011                  -                      -
           Trademark licensing                                      18,975              18,983                 19,760
           Corporate and unallocated                                 7,156               3,004                  2,887
                                                             -------------         -----------            -----------
                                                                  $181,761            $ 76,361               $ 74,125
                                                             =============         ===========            ===========

</TABLE>



             REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                                ON SCHEDULE









Board of Directors
Riddell Sports Inc.


           In connection with our audit of the consolidated financial
statements of Riddell Sports Inc. and Subsidiaries referred to in our
report dated February 21, 1998, which is included on page F-2 of this Form
10-K, we have also audited Schedule II for each of the three years in the
period ended December 31, 1997. In our opinion, this schedule presents
fairly, in all material respects, the information required to be set forth
therein.




/s/ GRANT THORNTON LLP


Chicago, Illinois
February 21, 1998




SCHEDULE II


                    RIDDELL SPORTS INC. AND SUBSIDIARIES
                     VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                 Col.  A                      Col.  B                      Col.  C                  Col.  D           Col.  E
---------------------------------------   ---------------   ---------------------------------   ---------------   -----------
                                                                           Additions

                                                                  (1)               (2)
                                                              Charged to      Charged to
                                            Balance at           Costs             Other                          Balance at
                                             Beginning            and            Accounts-                          End of
               Description                   of Period         Expenses          Describe         Deductions        Period

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

 Year ended December 31, 1995
   Allowance for
      doubtful accounts                            $1,970              $393                -             $1,743              $620
                                                                                                             (a)

Year ended December 31, 1996
   Allowance for
      doubtful accounts                              $620              $436                -               $543              $513
                                                                                                             (a)

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

</TABLE>

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





                                 SIGNATURES

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

                                          RIDDELL SPORTS INC.


Dated:  March 30, 1998                    By: /s/ DAVID MAUER
                                              -------------------
                                              David Mauer
                                              Chief Executive Officer


      Pursuant to the requirements of the Securities  Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/ DAVID MAUER            Chief Executive Officer            March 30, 1998
------------               and Director
David M. Mauer             (Principal Executive Officer)

/s/ ROBERT  NEDERLANDER    Chairman of the Board              March 30, 1998
-------------------
Robert Nederlander

/s/ JEFFREY G. WEBB        Vice Chairman of the Board         March 30, 1998
---------------            and President and Chief
Jeffrey G. Webb            Operating Officer of
                           Varsity Spirit Corporation

/s/ LEONARD TOBOROFF       Vice President and Director        March 30, 1998
----------------
Leonard Toboroff

/s/ DAVID GROELINGER       Executive Vice President and       March 30, 1998
----------------           Chief Financial Officer
David Groelinger           (Principal Financial Officer)

/s/ LAWRENCE SIMON         Senior Vice President              March 30, 1998
--------------             (Principal Accounting Officer)
Lawrence Simon

/s/ DON KORNSTEIN          Director                           March 30, 1998
--------------
Don Kornstein

/s/ JOHN MCCONNAUGHY, JR.  Director                           March 30, 1998
---------------------
John McConnaughy, Jr.

/s/ GLENN E. SCHEMBECHLER  Director                           March 30, 1998
----------------------
Glenn E. Schembechler



Item                                      PART IV
14(c)                                  Exhibit Index


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

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

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

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

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

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

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

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

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

3.6         Bylaws of Cheer Acquisition Corp. (33)

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

3.8         Bylaws of Equilink Licensing Corporation. (33)

3.9         Certificate of Incorporation of Proacq Corp. (33)

3.10        Bylaws of Proacq Corp. (33)

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

3.12        Bylaws of RHC Licensing Corporation. (33)

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

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

3.15        Amended and Restated Articles of Incorporation of
            Ridmark Corporation. (33)

3.16        Bylaws of Ridmark Corporation. (33)

3.17        Charter of International Logos, Inc. (33)

3.18        Bylaws of International Logos, Inc. (33)

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

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

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

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

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

3.24        Bylaws of Varsity USA, Inc. (33)

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

9.1         Voting Trust Agreement dated May 1991. (2)

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

10.2        1997 Stock Option Plan. (22)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.30       Employment Agreement, dated as of March 7, 1996, between
            Riddell sports Inc. and David Groelinger (19), as amended March
            7, 1998 (1).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.51       License Agreement dated March 4, 1998 between Footstar
            Corp. and Equilink Licensing Corporation (1)

21          List of subsidiaries. (33)

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

27.1        Financial data schedule for December 31, 1997 and the
            year then ended (1).

27.2        Restated financial data schedules for December 31,
            1996 and 1995 (1).

27.3        Restated financial data schedules for the interim
            periods of 1997 (1).

27.4        Restated financial data schedules for the interim
            periods of 1996 (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)      Incorporated by reference to Riddell Sports Inc.'s Form 10-K
         report (Commission File No. 0-19298) for the year ended December
         31, 1991.

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

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

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

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

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

(9)      Incorporated by reference to Riddell Sports Inc.'s Form 10-K for
         the year ended December 31, 1993.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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