**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

** **

**FORM 10-Q**

 

**(MARK ONE)**

 

**ý****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

**FOR THE QUARTERLY PERIOD ENDED JULY 30, 2005.**

 

**OR**

 

**o****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

**FOR THE TRANSITION PERIOD FROM          TO          **

 

**COMMISSIONFILE NUMBER 0-50659.**

 

**GANDER MOUNTAIN COMPANY**

(EXACT NAME OF REGISTRANT ASSPECIFIED IN ITS CHARTER)

 
| **MINNESOTA**                                                    | ** ** | **41-1990949**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or  Other Jurisdiction of  Incorporation or Organization) |       | (I.R.S.  Employer Identification No.) |
| ** **                                                       | ** ** | ** **                            |
| **180 EAST  FIFTH STREET, SUITE 1300  ST PAUL, MINNESOTA**       | ** ** | **55101**                             |
| (Address of  Principal Executive Offices)                        |       | (Zip Code)                            |

 

**(651) 325-4300**

(Registrant’s Telephone Number,Including Area Code)

 

(Former Name, Former Addressand Former Fiscal Year, If Changed Since Last Report)

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes ýNo o

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12b-2 of the SecuritiesExchange Act of 1934). Yes oNo ý

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes oNo ý

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the latest practicabledate:  Common Stock, $.01 par value;14,264,073 shares outstanding as of September 1, 2005.

 

 

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**GANDERMOUNTAIN COMPANY**

**QUARTERLYPERIOD ENDED JULY 30, 2005**

**Form 10-QIndex**

 
| PART I. FINANCIAL INFORMATION |    |
|------------------------------------|---------|
|                               | Item 1. | Unaudited Financial Statements |   |
|                               |    |   | Condensed Statements of Operations |   |
|                               |    |   | Condensed  Balance Sheets |   |
|                               |    |   | Condensed Statements of Cash Flows |   |
|                               |    |   | Notes to Unaudited Condensed Financial Statements |   |
|                               | Item 2. | Management’s Discussion and Analysis of Financial Condition and  Results of Operations |   |
|                               | Item 3. | Quantitative and Qualitative Disclosures About Market Risk |   |
|                               | Item 4. | Controls and Procedures |   |
| PART II.  OTHER INFORMATION   |    |
|                               | Item 1. | Legal  Proceedings |   |
|                               | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |   |
|                               | Item 3. | Defaults Upon Senior Securities |   |
|                               | Item 4. | Submission of Matters to a Vote of Security Holders |   |
|                               | Item 5. | Other  Information |   |
|                               | Item 6. | Exhibits |   |
| SIGNATURES                         |    |

 

2

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**PART I. FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS**

 

**Gander Mountain Company**

**Condensed Statements of Operations -Unaudited**

**(In thousands, except per share data)**

 
| ** **                                                          | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|---------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                          | ** ** | **July 30,**  | ** ** | **July 31,**  | ** ** | **July 30,** | ** ** | **July 31,** | ** ** |
| ** **                                                          | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                          | ** ** | ** **         | ** ** | **(restated)**     | ** ** | ** ** | ** ** | **(restated)** | ** ** |
| Sales                                                               |       | $                  | 173,617    |               | $          | 128,096 |   | $ | 308,745 |   | $ | 226,815 |   |
| Cost of goods sold                                                  |       | 132,931            |       | 96,395             |       | 242,880 |   | 175,721 |   |
| Gross profit                                                        |       | 40,686             |       | 31,701             |       | 65,865 |   | 51,094 |   |
|                                                                |       |               |       |               |       |   |   |   |   |
| Operating expenses:                                                 |       |               |       |               |       |   |   |   |   |
| Store  operating expenses                                           |       | 38,133             |       | 27,231             |       | 70,703 |   | 51,056 |   |
| General and  administrative expenses                                |       | 9,568              |       | 6,115              |       | 15,321 |   | 12,613 |   |
| Pre-opening  expenses                                               |       | 1,017              |       | 1,320              |       | 3,776 |   | 2,693 |   |
| Loss from operations                                                |       | (8,032             | )          | (2,965             | )          | (23,935 | ) | (15,268 | ) |
| Interest expense, net                                               |       | 2,349              |       | 895                |       | 4,014 |   | 2,397 |   |
| Loss before income taxes                                            |       | (10,381            | )          | (3,860             | )          | (27,949 | ) | (17,665 | ) |
| Income tax provision                                                |       | —             |       | —             |       | — |   | — |   |
| Net loss                                                            |       | (10,381            | )          | (3,860             | )          | (27,949 | ) | (17,665 | ) |
| Less preferred stock dividends                                      |       | —             |       | —             |       | — |   | 4,305 |   |
| Loss applicable to common shareholders                              |       | $                  | (10,381    | )                  | $          | (3,860 | ) | $ | (27,949 | ) | $ | (21,970 | ) |
|                                                                |       |               |       |               |       |   |   |   |   |
| Basic and  diluted loss applicable to common shareholders per share |       | $                  | (0.73      | )                  | $          | (0.27 | ) | $ | (1.96 | ) | $ | (2.76 | ) |
|                                                                |       |               |       |               |       |   |   |   |   |
| Weighted average common shares outstanding                          |       | 14,258             |       | 14,222             |       | 14,247 |   | 7,962 |   |

 

See accompanying notes to unaudited condensed financial statements.

 

3

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**Gander Mountain Company**

**Condensed Balance Sheets**

**(In thousands)**

 
| ** **                                      | ** ** | **July 30,** | ** ** | **January 29,** | ** ** |
|-------------------------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                                      | ** ** | **2005**          | ** ** | **2005 (1)**         | ** ** |
| ** **                                      | ** ** | **(unaudited)**   | ** ** | ** **           | ** ** |
| **Assets**                                      |       |              |       |                 |       |
| Current assets:                                 |       |              |       |                 |       |
| Cash and  cash equivalents                      |       | $                 | 1,353      |                 | $          | 1,033 |   |
| Accounts  receivable                            |       | 16,856            |       | 9,347                |       |
| Inventories                                     |       | 322,168           |       | 264,138              |       |
| Prepaids and  other current assets              |       | 7,812             |       | 5,806                |       |
| Total current assets                            |       | 348,189           |       | 280,324              |       |
| Property and equipment, net                     |       | 126,331           |       | 101,430              |       |
| Other assets                                    |       | 4,488             |       | 4,089                |       |
| Total assets                                    |       | $                 | 479,008    |                 | $          | 385,843 |   |
|                                            |       |              |       |                 |       |
| **Liabilities and shareholders’ equity**   |       |              |       |                 |       |
| Current liabilities:                            |       |              |       |                 |       |
| Borrowings  under credit facility               |       | $                 | 186,695    |                 | $          | 114,441 |   |
| Accounts  payable                               |       | 79,707            |       | 38,808               |       |
| Accrued and  other current liabilities          |       | 42,094            |       | 39,348               |       |
| Total current liabilities                       |       | 308,496           |       | 192,597              |       |
| Long term liabilities                           |       | 35,736            |       | 30,938               |       |
| Shareholders’ equity                       |       | 134,776           |       | 162,308              |       |
| Total liabilities and shareholders’ equity |       | $                 | 479,008    |                 | $          | 385,843 |   |

 

----

(1) The balance sheetas of January 29, 2005 has been condensed from the audited financialstatements

 

See accompanying notes tounaudited condensed financial statements.

 

4

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**Gander Mountain Company**

**Condensed Statements of Cash Flows -Unaudited**

**(In thousands)**

 
| ** **                                                                   | ** ** | **26 Weeks Ended** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                   | ** ** | **July 30,**  | ** ** | **July 31,** | ** ** |
| ** **                                                                   | ** ** | **2005**           | ** ** | **2004** | ** ** |
| ** **                                                                   | ** ** | ** **         | ** ** | **(restated)** | ** ** |
| **Operating activities**                                                     |       |               |       |   |   |
| Net loss                                                                     |       | $                  | (27,949    | ) | $ | (17,665 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |               |       |   |   |
| Depreciation  and amortization                                               |       | 8,039              |       | 5,283 |   |
| Property and  equipment write-offs                                           |       | 1,160              |       | 439 |   |
| Change in  operating assets and liabilities:                                 |       |               |       |   |   |
| Accounts  receivable                                                         |       | (7,509             | )          | (7,918 | ) |
| Inventories                                                                  |       | (58,030            | )          | (73,349 | ) |
| Prepaid  expenses and other assets                                           |       | (2,613             | )          | (2,742 | ) |
| Accounts  payable and other liabilities                                      |       | 47,355             |       | 46,087 |   |
| Net cash used in operating activities                                        |       | $                  | (39,547    | ) | $ | (49,865 | ) |
|                                                                         |       |               |       |   |   |
| **Investing activities**                                                     |       |               |       |   |   |
| Purchase of property and equipment, net                                      |       | (32,767            | )          | (17,720 | ) |
| Net cash used in investing activities                                        |       | $                  | (32,767    | ) | $ | (17,720 | ) |
|                                                                         |       |               |       |   |   |
| **Financing activities**                                                     |       |               |       |   |   |
| Proceeds from sale of common stock, net of  expenses                         |       | —             |       | 96,216 |   |
| Proceeds from exercise of stock options and  stock sales                     |       | 380                |       | — |   |
| Repayments of notes with affiliates                                          |       | —             |       | (9,840 | ) |
| Borrowings (repayments) under credit  facility, net                          |       | 72,254             |       | (18,589 | ) |
| Net cash provided by financing activities                                    |       | $                  | 72,634     |   | $ | 67,787 |   |
|                                                                         |       |               |       |   |   |
| Net increase in cash                                                         |       | 320                |       | 202 |   |
| Cash, beginning of period                                                    |       | 1,033              |       | 970 |   |
| Cash, end of period                                                          |       | $                  | 1,353      |   | $ | 1,172 |   |

 

See accompanying notes to unaudited condensedfinancial statements.

 

5

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**GanderMountain Company**

**Notes to Unaudited Condensed Financial Statements**

**QuarterlyPeriod Ended July 30, 2005**

 

**1. Basis of Presentation**

 

The accompanyingunaudited condensed financial statements of Gander Mountain Company (“we” or “us”)have been prepared in accordance with the requirements for Form 10-Q anddo not include all the disclosures normally required in annual financialstatements prepared in accordance with U.S. generally accepted accounting principles.The interim financial information as of July 30, 2005 and for the 13 and26 weeks ended July 30, 2005 and July 31, 2004, is unaudited and hasbeen prepared on the same basis as the audited annual financial statements. Inthe opinion of management, this unaudited information includes all adjustmentsnecessary for a fair presentation of the interim financial information. All ofthese adjustments are of a normal recurring nature. These interim financialstatements filed on this Form 10-Q and the discussions contained hereinshould be read in conjunction with the annual financial statements and notesincluded in our Annual Report on Form 10-K for the fiscal year ended January 29,2005, as filed with the Securities and Exchange Commission, which includesaudited financial statements for our three fiscal years ended January 29,2005.

 

Our business isseasonal in nature and interim results may not be indicative of results for afull year. Historically, we have realized more of our sales in the latter halfof our fiscal year, which includes the hunting and holiday seasons. Ourbusiness is also impacted by the timing of new store openings. Both variationin seasonality and new store openings impact the analysis of the results ofoperations and financial condition for comparable periods.

 

**2. Recent Accounting Pronouncements**

 

In December 2004, the FinancialAccounting Standards Board issued Statement No. 123R, “Share-BasedPayment,” which replaces Statement of Financial Accounting Standards No. 123,“Accounting for Stock-Based Compensation” and supercedes Accounting PrinciplesBoard Opinion No. 25, “Accounting for Stock Issued to Employees.”  SFAS No. 123R eliminates the option ofusing the intrinsic value method to record compensation expense related tostock-based awards to employees and instead requires companies to recognize thecost of these awards based on their grant-date fair value over the relatedservice period of these awards.  Weexpect to adopt the provisions of this standard at the beginning of fiscal2006. Until that time, we will continue to apply APB No. 25 and relatedinterpretations in accounting for our stock-based employee compensationplans.  Accordingly, any compensationcost for stock options is measured as the excess, if any, of the fair marketvalue of our stock at the measurement date over the employee’s option exerciseprice. Any resulting compensation expense is amortized ratably over the relatedvesting period.

 

Prior to theeffective date of SFAS No. 123R, we will continue to provide the pro formadisclosures for past award grants as required under SFAS No. 123 and SFAS No. 148,“Accounting for Stock-Based Compensation — Transition and Disclosure.”  SFAS No. 148 requires expanded and moreprominent disclosure in both annual and interim financial statements about themethod of accounting for stock-based employee compensation and the effect ofthe method on reported results.

 

We are currently evaluating the requirementsunder SFAS No. 123R and expect that the adoption of the provisions of SFASNo. 123R could have a material impact on net income and net income percommon share.

 

**3. Restatement of Previously Issued FinancialStatements**

 

During the fourthquarter of fiscal 2004, we performed a comprehensive review of our leaseaccounting practices. As a result, we restated our financial statements forperiods prior to fiscal 2004 and for the first three quarters of fiscal 2004.The restatements arose from revisions to accounting for (i) theamortization lives for leasehold improvements, (ii) constructionallowances from landlords and (iii) certain pre-opening period rentholidays.  The restatement adjustmentswere non-cash and had no impact on revenues or net cash flows. The followingtable shows the impact of these adjustments as of July 31, 2004 and forthe 13 and 26 week periods ended July 31, 2004 (in thousands, except pershare data):

 

6

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| ** **                                  | ** ** | **As**                                 | ** ** | ** **      | ** ** | ** **   | ** ** |
|---------------------------------------------|------------|----------------------------------------|------------|-----------------|------------|--------------|------------|
| ** **                                  | ** ** | **Previously**                         | ** ** | ** **      | ** ** | **As**       | ** ** |
| ** **                                  | ** ** | **Reported**                           | ** ** | **Adjustments** | ** ** | **Restated** | ** ** |
| ** **                                  | ** ** | **13 Weeks Ended July 31,  2004** | ** ** |
| **Statement of Operations Data**            | ** ** | ** **                             | ** ** | ** **      | ** ** | ** **   | ** ** |
| Cost of goods sold                          |       | $                                      | 96,558     |            | $          | (163         | )          | $ | 96,395 |   |
| Store operating expenses                    |       | 26,968                                 |       | 263             |       | 27,231       |       |
| General and administrative expenses         |       | 6,115                                  |       | —          |       | 6,115        |       |
| Pre-opening expenses                        |       | 1,246                                  |       | 74              |       | 1,320        |       |
| Loss from operations                        |       | (2,791                                 | )          | (174            | )          | (2,965       | )          |
| Loss before income taxes                    |       | (3,686                                 | )          | (174            | )          | (3,860       | )          |
| Loss applicable to common shareholders      |       | $                                      | (3,686     | )               | $          | (174         | )          | $ | (3,860 | ) |
| Basic and diluted loss applicable to common |       |                                   |       |            |       |         |       |
| shareholders  per share                     |       | $                                      | (0.26      | )               | $          | (0.01        | )          | $ | (0.27 | ) |
|                                        |       |                                   |       |            |       |         |       |
| ** **                                  | ** ** | **26 Weeks Ended July 31,  2004** | ** ** |
| **Statement of Operations Data**            | ** ** | ** **                             | ** ** | ** **      | ** ** | ** **   | ** ** |
| Cost of goods sold                          |       | $                                      | 176,010    |            | $          | (289         | )          | $ | 175,721 |   |
| Store operating expenses                    |       | 50,600                                 |       | 456             |       | 51,056       |       |
| General and administrative expenses         |       | 12,613                                 |       | —          |       | 12,613       |       |
| Pre-opening expenses                        |       | 2,477                                  |       | 216             |       | 2,693        |       |
| Loss from operations                        |       | (14,885                                | )          | (383            | )          | (15,268      | )          |
| Loss before income taxes                    |       | (17,282                                | )          | (383            | )          | (17,665      | )          |
| Loss applicable to common shareholders      |       | $                                      | (21,587    | )               | $          | (383         | )          | $ | (21,970 | ) |
| Basic and diluted loss applicable to common |       |                                   |       |            |       |         |       |
| shareholders  per share                     |       | $                                      | (2.71      | )               | $          | (0.05        | )          | $ | (2.76 | ) |
|                                        |       |                                   |       |            |       |         |       |
| ** **                                  | ** ** | **As of July 31, 2004**           |       |
| **Balance Sheet Data**                      | ** ** | ** **                             |       |
| Property and equipment, net                 |       | $                                      | 65,684     |            | $          | 1,871        |       | $ | 67,555 |   |
| Accrued and other current liabilities       |       | 24,871                                 |       | 421             |       | $            | 25,292     |   |
| Long term liabilities                       |       | 4,815                                  |       | 7,127           |       | $            | 11,942     |   |
| Shareholders’ equity                   |       | $                                      | 148,732    |            | $          | (5,677       | )          | $ | 143,055 |   |
|                                        |       |                                   |       |            |       |         |       |
| ** **                                  | ** ** | **26 Weeks Ended July 31,  2004** | ** ** |
| **Statement of Cash Flows Data**            | ** ** | ** **                             | ** ** |
| Net cash used in operating activities       |       | $                                      | (52,761    | )               | 2,896      |         | $          | (49,865 | ) |
| Net cash used in investing activities       |       | (14,824                                | )          | (2,896          | )          | (17,720      | )          |
| Net cash provided by financing activities   |       | 67,787                                 |       | —          |       | 67,787       |       |
| Net increase in cash                        |       | $                                      | 202        |            | $          | —       |       | $ | 202 |   |

 

 

**4. Capital Stock**

 

Upon completion of our initial public offeringon April 26, 2004, and the filing of our Amended and Restated Articles ofIncorporation in connection therewith, the authorized capital stock of ourcompany consists of 100,000,000 shares of common stock, par value $.01 pershare, and 5,000,000 shares of preferred stock, par value $.01 per share. As ofJuly 30, 2005, there were 14,264,073 shares of common stock and no sharesof preferred stock outstanding.

 

In February 2005, our board of directorsapproved and, in June 2005, our shareholders approved the establishment ofan employee stock purchase plan that enables substantially all full-timeemployees to purchase up to a total of 500,000 shares of our common stock bycontributions through payroll deductions. Purchases of common stock are madefrom accumulated employee contributions at the end of designated six-monthpurchase periods and currently are executed at 95% of the market price on thelast payday of the purchase period.

 

7

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**5. CreditFacility**

 

In February 2005,we amended our credit facility to increase our availability under the facilityfrom $175,000,000 to $225,000,000 and extended the maturity date to June 2009.  Availability under the facility can befurther increased to $300,000,000, subject to certain conditions including theabsence of default. Other substantial terms and provisions of the agreementwere not materially changed in the amendment. Outstanding borrowings under thecredit facility, including letters of credit, were $192.9 million and $89.7million as of July 30, 2005 and July 31, 2004, respectively. Ourtotal remaining borrowing capacity under the credit facility, after subtractingletters of credit, was $26.7 million as of July 30, 2005 and $65.4 millionas of July 31, 2004.

 

**6. Stock-Based Compensation**

 

We continue to apply APB No. 25 andrelated interpretations in accounting for stock-based compensation plans.Accordingly, compensation expense has not been recognized for employee stockoptions as the exercise price for options granted has been greater than orequal to our stock price on the date of grant. We have, however, recognizedexpense for certain options where terms were modified subsequent to the date ofgrant.

 

In February 2004,we adopted the Gander Mountain Company 2004 Omnibus Stock Plan, which as of July 30,2005, authorizes the granting of stock-based awards covering up to 4,000,000shares of common stock. This plan was approved by shareholders in March 2004and an increase in the number of shares available under this plan was approvedby shareholders in June 2005.  Underthis plan, awards may be made to employees, directors, and consultants.  The types of awards that may be granted underthe plan include restricted and unrestricted stock, incentive and nonstatutorystock options, stock appreciation rights and other stock awards. Under thisplan, as of July 30, 2005, there were 1,979,736 options to purchase commonstock outstanding, with a weighted average exercise price of $13.39 and aweighted average remaining life of 8.7 years. The options granted under thisplan typically vest in equal increments over periods up to three years from thedate of grant.

 

On March 2, 2005,the compensation committee of our board of directors accelerated the vestingfor certain outstanding options to purchase common stock that had exerciseprices greater than $10.53, the closing price of our common stock on thatdate.  We accelerated options to purchase1,186,728 shares of common stock, which included all options issued andoutstanding under our 2004 Omnibus Stock Plan as of January 29, 2005, aswell as options held by two executive officers under February 2004 optiongrants that were outstanding on March 2, 2005.  As a result of the acceleration, all of theseoptions were fully exercisable as of March 2, 2005 and will remainexercisable through their respective termination dates, which vary, but do notextend past 2014.

 

We took this action because it will produce amore favorable impact on our results from operations once we adopt SFAS No. 123R.  Also, because these options had exerciseprices in excess of our stock price on the date the acceleration was approved,we believed that these options may not be offering sufficient incentive to theemployees when compared to the potential future compensation expense that wouldhave been attributable to the options under SFAS No. 123R.  Assuming we adopt SFAS No. 123Rbeginning in fiscal 2006, we estimate that we will eliminate a maximum of$3,900,000 of future expense.

 

As of July 30,2005, there were a total of 3,115,461 options to purchase common stockoutstanding, under our stock option plans and including non-plan stock options,with a weighted average exercise price of $11.71 and a weighted averageremaining life of 7.9 years.

 

The table below illustrates the effect on ournet loss and net loss per share applicable to common shareholders as if we hadapplied the fair value recognition provisions of SFAS No. 123 tostock-based employee compensation for the periods presented.

 

 

8

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| ** **                                                                                       | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                                                       | ** ** | **July 30,**  | ** ** | **July 31,**  | ** ** | **July 30,** | ** ** | **July 31,** | ** ** |
| **(in thousands, except per share data)**                                                        | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                                       | ** ** | ** **         | ** ** | **(restated)**     | ** ** | ** ** | ** ** | **(restated)** | ** ** |
| Net loss applicable to common shareholders,  as reported                                         |       | $                  | (10,381    | )                  | $          | (3,860 | ) | $ | (27,949 | ) | $ | (21,970 | ) |
| Add:  Stock-based employee compensation expense included in reported net loss                    |       | 242                |       | —             |       | 242 |   | — |   |
| Deduct:  Stock-based employee compensation expense   determined under the fair value method |       | (699               | )          | (829               | )          | (7,864 | ) | (1,147 | ) |
| Pro forma net loss applicable to common  shareholders                                            |       | $                  | (10,838    | )                  | $          | (4,689 | ) | $ | (35,571 | ) | $ | (23,117 | ) |
| Basic and  diluted loss applicable to common   shareholders per share - as reported         |       | $                  | (0.73      | )                  | $          | (0.27 | ) | $ | (1.96 | ) | $ | (2.76 | ) |
| Basic and  diluted loss applicable to common   shareholders per share - pro-forma           |       | $                  | (0.76      | )                  | $          | (0.33 | ) | $ | (2.50 | ) | $ | (2.90 | ) |

 

The stock-based compensation expense of $7,864,000for the 26 week period ended July 30, 2005, determined under the fairvalue method, includes $6,589,000 of expense related to the acceleration ofvesting that otherwise would have been expensed over the remaining vestingperiod.

 

The weighted average fair value of optionsgranted during the 13 weeks ended July 30, 2005 and the 13 weeks ended July 31,2004, was $4.99 and $10.37, respectively, per option share. The fair value ofeach grant is estimated on the date of grant using the Black-Scholes optionpricing model with the following assumptions:

 
| ** **                      | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|---------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                      | ** ** | **July 30,**  | ** ** | **July 31,**  | ** ** | **July 30,** | ** ** | **July 31,** | ** ** |
| ** **                      | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Average risk-free interest rate |       | 4.10               | %          | 3.66               | %          | 4.22 | % | 3.62 | % |
| Expected dividend yield         |       | 0                  | %          | 0                  | %          | 0 | % | 0 | % |
| Expected stock price volatility |       | 0.50               |       | 0.50               |       | 0.50 |   | 0.50 |   |
| Expected life of stock options  |       | 5 years            |       | 5 years            |       | 5 years |   | 5 years |   |

 

**7. Earnings Per Share**

 

Basic and diluted loss applicable to commonshareholders per share is based upon the weighted average number of sharesoutstanding. All potentially dilutive stock options have been excluded from thecalculation of weighted average shares outstanding for the periods presentedbecause their inclusion would have an anti-dilutive effect on loss per share.As of July 30, 2005 and July 31, 2004, there were a total of3,115,461 and 2,068,774 options to purchase common stock outstanding,respectively.

 

9

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The accompanying condensed unauditedfinancial statements report loss applicable to common shareholders and lossapplicable to common shareholders per share, in accordance with U.S. generallyaccepted accounting principles. We also disclose this information on a proforma basis below.  We closed our initialpublic offering of shares of common stock on April 26, 2004. The pro formaamounts assume that the conversion of the convertible preferred shares tocommon shares, our 32-for-1 stock split and our initial public offering tookplace at the beginning of the 13 and 26 week periods ended July 30, 2005,and July 31, 2004. The pro forma amounts exclude the preferred stockdividends that are assumed extinguished and the interest expense on theportions of our indebtedness that would have been paid down with the proceedsfrom the initial public offering, net of $0 taxes. We believe the use of proforma amounts provides meaningful information due to the significant increasein outstanding shares as a result of our initial public offering and theelimination of our preferred stock dividends.

 
| ** **                                                  | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|-------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                  | ** ** | **July 30,**  | ** ** | **July 31,**  | ** ** | **July 30,** | ** ** | **July 31,** | ** ** |
| **(in thousands, except per share data)**                   | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                  | ** ** | ** **         | ** ** | **(restated)**     | ** ** | ** ** | ** ** | **(restated)** | ** ** |
| **Pro Forma Data**                                          | ** ** | ** **         | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** |
| ***Basic and Diluted***                                     |       |               |       |               |       |   |   |   |   |
| Pro forma loss applicable to common  shareholders           |       | $                  | (10,381    | )                  | $          | (3,860 | ) | $ | (27,949 | ) | $ | (16,723 | ) |
| Pro forma loss applicable to common  shareholders per share |       | $                  | (0.73      | )                  | $          | (0.27 | ) | $ | (1.96 | ) | $ | (1.18 | ) |
| Pro forma weighted average common shares  outstanding       |       | 14,258             |       | 14,222             |       | 14,247 |   | 14,222 |   |
|                                                        |       |               |       |               |       |   |   |   |   |
| **Reconciliation of Pro Forma Data to GAAP**                |       |               |       |               |       |   |   |   |   |
| Loss applicable to common shareholders  (GAAP)              |       | $                  | (10,381    | )                  | $          | (3,860 | ) | $ | (27,949 | ) | $ | (21,970 | ) |
| Preferred stock dividends                                   |       | —             |       | —             |       | — |   | 4,305 |   |
| Interest expense reduction                                  |       | —             |       | —             |       | — |   | 942 |   |
| Net loss applicable to common shareholders  (Pro forma)     |       | $                  | (10,381    | )                  | $          | (3,860 | ) | $ | (27,949 | ) | $ | (16,723 | ) |
|                                                        |       |               |       |               |       |   |   |   |   |
| Weighted average common shares outstanding  (GAAP)          |       | 14,258             |       | 14,222             |       | 14,247 |   | 7,962 |   |
| Conversion of preferred stock                               |       | —             |       | —             |       | — |   | 3,149 |   |
| Additional shares issued in IPO                             |       | —             |       | —             |       | — |   | 3,111 |   |
| Weighted average common shares outstanding  (Pro forma)     |       | 14,258             |       | 14,222             |       | 14,247 |   | 14,222 |   |

 

We continued to reflect the accretion ofcumulative unpaid dividends on our previously outstanding Class A, B and Cconvertible preferred stock, in accordance with U.S. generally acceptedaccounting principles, until the closing of our initial public offering. Noneof these dividends were paid and any unpaid cumulative dividends wereextinguished with the changes in capital structure completed in connection withour initial public offering. Accordingly, no related obligation or reduction tonet income (loss) is reflected in our quarterly results of operations after May 1,2004.

 

**8. Related Party Transactions**

 

On March 17, 2005, we amended the SharedServices Agreement dated as of February 2, 2004 by and between HolidayCompanies and us. The amendment substantially reduced the number of servicesprovided to us by Holiday Companies as we either provide these servicesinternally or independently secure these services from third party providers.For the 13 and 26 week periods ended July 30, 2005, the services providedby Holiday Companies were $16,000 and $381,000, respectively, as compared to$575,000 and $1,589,000 for the 13 and 26 week periods ended July 31,2004, respectively.

 

**9. Contract Settlement**

 

In March 2005, we received $2,500,000relating to the termination of our contract with the former provider of ourco-branded credit card services in consideration of the lost opportunity. Thispayment to us is reflected as a reduction of general and administrativeexpenses in the 26 week period ended July 30, 2005.

 

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**10. Contingencies - Litigation**

 

We are exposed to a number of asserted andunasserted legal claims encountered in the normal course of business.  Set forth below is summary informationregarding the status of certain ongoing proceedings.  Please refer to the information under theheading “Legal Proceedings” in Part II of our Quarterly Report on Form 10-Qfor the quarter ended July 30, 2005 for further information on theseproceedings.

 

We are not able to predict the ultimateoutcome of the litigation described below, including whether or not appealswill be pursued, but such litigation may be costly and disruptive.  The total costs may not be reasonablyestimated at this time.

 

*Cabela’s Incorporated* - On August 18, 2005, the U.S.District Court for the District of Minnesota issued a memorandum opinion andorder in our action against Cabela’s Incorporated on the limited question ofwhether the contingent trademark licensing provision in our NoncompetitionAgreement with Cabela’s is legally invalid as a noncompetition agreement.  The Court ruled that the provision is notlegally invalid as a noncompetition agreement, and also acknowledged that ithad not been asked to determine, and was not determining, “the scope of theContingent Trademark License or the parties respective rights thereunder.”  Those issues remain to be decided in furtherproceedings. The outcome of this dispute may impact the manner in which wemarket our products in the future. It is not expected to affect the marketingof our products through retail stores.

 

*SecuritiesLitigation -*****TheConsolidated Class Action Complaint in the action entitled *In re Gander Mountain Company Securities Litigation*, whichwas filed on August 9, 2005 in the U.S. District Court for the District ofMinnesota, alleges that the defendants, including our company and eight of ourpresent and former directors and executive officers, made false and misleadingpublic statements about our company, and our business and prospects, in theregistration statement and prospectus for our initial public offering, and infilings with the SEC and press releases issued thereafter, and that the marketprice of our stock was artificially inflated as a result. The Consolidated Class ActionComplaint alleges claims under Sections 11 and 15 of the Securities Act of1933, and under Sections 10(b) and 20(a) of the Securities andExchange Act of 1934.

 

*DerivativeLitigation -*****On May 6,2005, we moved to dismiss the purported derivative action, *Kurt Haberlev. Mark Baker, et al*, in which our company, as a nominal defendant,and 12 of our present and former directors were named as defendants.  On August 30, 2005, the U.S. DistrictCourt for the District of Minnesota issued a memorandum opinion and orderdismissing the complaint on the grounds that plaintiff was required to makepre-suit demand on our board of directors and failed to do so.  The time for appeal on the order has not yetrun.

 

**11. Subsequent Event – Placement ofConvertible Debt**

 

On August 16, 2005, we completed aprivate offering of $20 million of subordinated unsecured convertible notes(the “Notes”) in a transaction exempt from registration pursuant to Rule 506promulgated under the Securities Act of 1933, as amended.  The Notes are convertible into our commonstock at any time by the holder at an initial conversion price of $16.00 pershare.  The conversion price adjusts onlyfor dividends, stock divisions or combinations, recapitalizations and similaroccurrences.  The Notes mature on August 16,2010 and bear interest at 7.0% per annum for the first two years, payablesemi-annually, after which the rate will float at a fixed spread of 3.50% onthe federal funds rate from a minimum of 6.0% to a maximum of 8.5%. We mayprepay the Notes, without penalty, any time after August 16, 2007, and wehave the option to require conversion of the Notes if the volume-weightedaverage closing price of our common stock reaches or exceeds $24.00 for any 20out of 30 consecutive trading days. Under the note purchase agreement enteredinto in connection with this transaction, we granted the holder certainregistration rights, as described therein. The proceeds were used to reduce theoutstanding borrowings under our credit facility. Transaction costs associatedwith the placement were less than $100,000.

 

Concurrentwith the placement of the Notes, we caused a change in ownership within themeaning of Section 382 of the Internal Revenue Code because of theconversion features of the Notes. As a result, our net operating losses priorto the ownership change, for tax purposes, may be subject to an annuallimitation based upon (i) our aggregate fair market value before theownership change multiplied by (ii) the long-term tax exempt rate (withinthe meaning of IRC Sec. 382) in effect at the time. We do not expect thislimitation, if any, to impact our tax provision for financial reportingpurposes.

 

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**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS**

 

**Forward Looking Statements**

 

The following discussion may containforward-looking statements regarding us, our business prospects and our resultsof operations that are subject to certain risks and uncertainties posed by manyfactors and events that could cause our actual business, prospects and resultsof operations to differ materially from those that may be anticipated by such forward-lookingstatements.  Factors that could cause orcontribute to such differences include, but are not limited to, those describedin the “Risk Factors Affecting Current and Future Results” section of our Form 10-Kand other reports, as filed with the Securities and Exchange Commission.  Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of the dateof this report.  We undertake noobligation to revise any forward-looking statements in order to reflect eventsor circumstances that may subsequently arise. Readers are urged to carefullyreview and consider the various disclosures made by us in this report and inour other reports filed with the Securities and Exchange Commission that adviseinterested parties of the risks and factors that may affect our business.

 

The interimfinancials statements filed on this Form 10-Q and the discussionscontained herein should be read in conjunction with the annual financialstatements and notes included in our Form 10-K, as filed with theSecurities and Exchange Commission, which includes audited financial statementsfor our three fiscal years ended January 29, 2005.

 

**Overview**

 

The Gander Mountain brand name has a 45-yearheritage and strong appeal to outdoor lifestyle customers. From 1960 to 1996,our predecessor operated a nationwide catalog business that, by 1996, included17 retail stores. In 1996 and 1997, Holiday Companies, which at the time ownedand operated a group of retail sporting goods stores, acquired these GanderMountain retail stores, formed our company and began to build a new outdoorlifestyle business. We have expanded our store base from 26 stores in 1997 to91 Gander Mountain stores in 15 states as of July 30, 2005.

 

We are transforming our market position from a traditional specialtystore to a larger format, category-focused store by opening larger formatstores and increasing the selling space within our existing stores. The largerformat strategy has allowed us to offer our customers a broader and deeperassortment of merchandise. We offer competitively priced hunting, fishing,camping and boating equipment, accessories and related technical apparel andfootwear, as well as gunsmith, archery, ATV and marine services. Our storesfeature national, regional and local brands as well as our owned brands, andour associates provide knowledgeable customer service. Our success will dependon our ability to grow our business by building new stores and by increasingsales in our existing stores.

 

We are utilizing several strategic and operating initiatives aimed atimproving our merchandise offerings, enhancing profitability and expanding thenumber and geographic diversity of our stores. We measure performance using such key operating statistics as comparablestore sales, sales per square foot, gross margin percentage and store operatingexpenses, with a focus on labor, as a percentage of sales. These resultstranslate into store operating contribution, which we use to evaluate overallperformance on an individual store basis. Store operating contribution iscalculated by deducting a store’s operating expenses from its gross margin. Inaddition, general and administrative expenses are monitored in absoluteamounts, as well as on a percentage of sales basis.Pre-opening expenses are analyzed based on the number of store openings, marketattributes and store size.

 

We also measure and evaluate investments in our retail locations,including inventory and property and equipment. Inventory performance is primarilymeasured by inventory turns, or the number of times store inventory turns overin a given period, and amounts of owned inventory at various times based onpayment terms from our vendors. The most significant investments in propertyand equipment are made at the time a store is opened by us.

 

We believe that the overall growth of ourbusiness will allow us to generally maintain or increase our gross margins.Increased merchandise volumes should enable us to improve our purchasingleverage and achieve greater support throughout the supply chain. The mix ofmerchandise in our total sales also influences our gross margins. As wecontinue sales and store growth, a number of other factors may impact,positively or negatively, our gross margin percentage, including:

 

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•                  the introduction ofnew product categories with varying gross margin percentage characteristics,

 

•                  changes in themerchandise mix at our current locations,

 

•                  differences inmerchandise mix by geographic location,

 

•                  price competition,

 

•                  clearance activitiesin connection with seasonal inventory management,

 

•                  closeout sales inconnection with store relocations and consolidations,

 

•                  sourcing of productsfrom locations outside the United States,

 

•                  vendor programs, and

 

•                  supply chainenhancements.

 

The most significant store operating expenses are labor and relatedemployee benefits and advertising. We believe the combination of increasedsales volume and improved labor management within our stores will allow us tobetter leverage payroll expenses over time. Our employee benefits includehealth insurance, the cost of which continues to increase faster than thegeneral rate of inflation. We continually monitor this cost and reviewstrategies to effectively control increases, but we are subject to the overalltrend of increases in health care costs. Advertising costs are monitored as apercentage of sales.  These costs arelargely variable, which allows us to actively manage them to facilitate achievingour sales, gross margin percentage and store operating contribution objectives.

 

Store operating contribution is measured as a percentage of sales. Itgives us an overall measure as to whether or not individual locations andmarkets are meeting our financial objectives.

 

General and administrative expenses are monitored and controlled as apercentage of sales.  In anticipation ofour accelerated growth plans, we have made significant investments ininfrastructure, including our information systems, distribution capabilitiesand management. Our current infrastructure facilitates the opening of stores atan accelerated rate, which we believe enables us to leverage our expenses.  Accordingly, we expect these expenses todecrease as a percentage of sales over time.

 

Pre-opening expenses will continue to be related to store openings,including relocations. These expenses will fluctuate based on the number andtiming of new store openings.

 

Inventory turns are based on cost of sales and average inventory for theapplicable period. We recognize that our inventory turns may be lower thanthose of other retailers, which we believe is due to the categories ofmerchandise we carry, including firearms, and the large quantities ofmerchandise we use in our in-store displays. We believe we have the opportunityto enhance our supply chain to improve our inventory turns. Additionally, inmerchandise categories that experience slower inventory turns, we continue towork with vendors to increase our trade credit terms to reduce our investmentin owned inventory. We cannot assure you that we will be able to improve ourinventory turns or inventory investment.

 

Identification of appropriate new store sites is essential to ourgrowth strategy. We believe our focus on our larger store size and our flexiblereal estate strategy provides us with increased opportunities to find optimalreal estate locations on attractive terms. We evaluate and invest in new storesbased on site-specific projected returns on investment.

 

**Critical Accounting Policies and Use ofEstimates**

 

Our financialstatements are prepared in accordance with U.S. generally accepted accountingprinciples.  In connection with thepreparation of the financial statements, we are required to make assumptions,make estimates and apply judgments that affect the reported amounts of assets,liabilities, revenue, expenses and the related disclosures.  We base our assumptions, estimates andjudgments on historical experience, current trends and other factors that webelieve to be relevant at the time the financial statements are prepared.  On a regular basis, we review the accountingpolicies, assumptions, estimates and judgments to ensure that our financialstatements are presented fairly and in accordance with U.S. generally acceptedaccounting principles. However, because future events and their effects cannotbe determined with certainty, actual results could differ from our assumptionsand estimates, and such differences could be material.

 

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Our critical accounting policies and use ofestimates are discussed and should be read in conjunction with the annualfinancial statements and notes included in our Form 10-K, as filed withthe Securities and Exchange Commission, which includes audited financialstatements for our three fiscal years ended January 29, 2005.

 

**Results of Operations**

 

The following table includes selected items in the Unaudited CondensedStatements of Operations, reflected as a percentage of sales:

 
| ** **                           | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|--------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                           | ** ** | **July 30,**  | ** ** | **July 31,**  | ** ** | **July 30,** | ** ** | **July 31,** | ** ** |
| ** **                           | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                           | ** ** | ** **         | ** ** | **(restated)**     | ** ** | ** ** | ** ** | **(restated)** | ** ** |
| Sales                                |       | 100.0              | %          | 100.0              | %          | 100.0 | % | 100.0 | % |
| Cost of goods sold                   |       | 76.6               | %          | 75.3               | %          | 78.7 | % | 77.5 | % |
| Gross profit                         |       | 23.4               | %          | 24.7               | %          | 21.3 | % | 22.5 | % |
| Operating expenses:                  |       |               |       |               |       |   |   |   |   |
|                                 |       |               |       |               |       |   |   |   |   |
| Store  operating expenses            |       | 22.0               | %          | 21.3               | %          | 22.9 | % | 22.5 | % |
| General and  administrative expenses |       | 5.5                | %          | 4.8                | %          | 5.0 | % | 5.6 | % |
| Pre-opening  expenses                |       | 0.6                | %          | 1.0                | %          | 1.2 | % | 1.2 | % |
| Loss from operations                 |       | -4.6               | %          | -2.3               | %          | -7.8 | % | -6.7 | % |
| Interest expense, net                |       | 1.4                | %          | 0.7                | %          | 1.3 | % | 1.1 | % |
| Loss before income taxes             |       | -6.0               | %          | -3.0               | %          | -9.1 | % | -7.8 | % |
| Income tax provision                 |       | 0.0                | %          | 0.0                | %          | 0.0 | % | 0.0 | % |
| Net loss                             |       | -6.0               | %          | -3.0               | %          | -9.1 | % | -7.8 | % |

 

A store is included inthe comparable store base in its fifteenth full month of operations.  A relocated store returns to the comparablestore base in its fifteenth full month after relocation. Non-comparable storesales include sales from our stores before they have begun their fifteenthmonth of operation. During the quarter ended July 31, 2004, we changedthis internal measurement from the fourteenth month to the fifteenth month tobetter reflect comparable sales activity in the stores and minimize the effectof grand opening activities. This change did not have a material impact on thecomparable store sales measurement.

 

Cost of goods soldincludes the cost of merchandise, freight, distribution, inventory shrinkageand store occupancy costs. Store occupancy costs include rent, real estatetaxes and common area maintenance charges.

 

Store operating expensesinclude store associate payroll, taxes and fringe benefits, advertising,maintenance, utilities, depreciation, insurance, bank and credit card chargesand other store level expenses.

 

General andadministrative expenses include all expenses associated with operating ourcorporate headquarters.

 

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Pre-opening expenses consist primarily ofpayroll, rent, recruiting, advertising and other costs incurred prior to a newstore opening.

 

***Thirteen Weeks Ended July 30, 2005compared to Thirteen Weeks Ended July 31, 2004 (Restated)***

 

*Sales.*  Sales increased by $45.5 million, or 35.5%,to $173.6 million in the second quarter of fiscal 2005, from $128.1 million inthe second quarter of fiscal 2004. This increase primarily resulted from salesof $57.3 million from new stores not yet included in the comparable store salesbase. This increase was partially offset by a comparable store sales decreaseof $4.6 million, or 4.2%, and a $7.2 million sales decrease primarily fromrelocated or consolidated stores.  Weopened four new stores during the second quarter of fiscal 2005 compared tothree new stores during the second quarter of fiscal 2004. Total square footageas of July 30, 2005 increased 53% to 4.4 million square feet, as comparedto July 31, 2004.

 

Comparable store salesdecreased 4.2% after an increase of 1.8% in the second quarter of fiscal 2004.For certain of our comparable stores, sales were negatively impacted bycannibalization from some of our own new store openings, as well as competitionentering our markets.

 

Marine accessories saleswere strong for the quarter as a result of expansion of the product mix in thatcategory and our increased focus on the marine market. The ATV categorycontinued to reflect an increased share of the sales mix for the second quarterof fiscal 2005, driven largely by larger format store sales and ATVaccessories. The fishing and camping categories declined as a percentage of thesales mix.

 

Gross Profit. Grossprofit increased by $9.0 million, or 28.3%, to $40.7 million in the secondquarter of fiscal 2005 from $31.7 million in the second quarter of fiscal 2004.As a percentage of sales, gross profit decreased 130 basis points to 23.4% in thesecond quarter of fiscal 2005 from 24.7% in the second quarter of fiscal2004.  Factors affecting gross margin inthe current quarter were:

 

•                  anegative impact of approximately 80 basis points resulting from the absence ofa co-branded credit card program,

•                  higherdistribution costs of approximately 30 basis points as a result of higher fuelcosts and costs associated with the upgrade of our distribution center,

•                  increasedstore occupancy costs of 60 basis points as a result of reduced leverage fromlower comparable store sales and lower sales per square foot at our newer, lessmature stores, and

•                  anet benefit from an improved mark-up rate despite aggressive seasonal clearancesales of merchandise in July.

 

*Store Operating Expenses.*  Store operating expenses increased by $10.9million, or 40.0%, to $38.1 million in the second quarter of fiscal 2005 from$27.2 million in the second quarter of fiscal 2004. As a percentage of sales,store operating expenses increased 70 basis points to 22.0% in the second quarterof fiscal 2005 from 21.3% in the second quarter of fiscal 2004. A 30 basispoint efficiency gain in our advertising spending was offset by reducedleverage in labor costs and depreciation due to the comparable store salesdecline.

 

*General and Administrative Expenses.*  General and administrative expenses increasedby $3.5 million, or 56.5%, to $9.6 million in the second quarter of fiscal 2005from $6.1 million in the second quarter of fiscal 2004. As a percentage ofsales, general and administrative expenses increased 70 basis points to 5.5% inthe second quarter of fiscal 2005 from 4.8% in the second quarter of fiscal2004. The increase was primarily due to an obligation recorded in connectionwith the separation of an employee, additional investment in infrastructure andincreased legal fees.

 

*Pre-opening Expenses.*  Pre-opening expenses decreased $0.3 million,or 23.0%, to $1.0 million in the second quarter of fiscal 2005 from $1.3million in the second quarter of fiscal 2004. We opened four new stores in thesecond quarter of fiscal 2005 compared to the three new stores we opened in thesecond quarter of fiscal 2004. The decrease was due to the timing ofexpenditures and reduced average pre-opening costs per store.

 

*Interest Expense, net.*  Interest expense increased by $1.4 million,or 162.6%, to $2.3 million in the second quarter of fiscal 2005 from $0.9million in the second quarter of fiscal 2004. The increase resulted from higheraverage borrowings incurred to fund our growth. We also experienced higheraverage interest rates by

 

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approximately 115 basis points during the second quarter of fiscal2005, as compared to the second quarter of fiscal 2004.

 

*Income Tax Provision.*We did not record an income tax benefit for the second quarters of fiscal 2005or fiscal 2004 due to the uncertainty of the realization of the net operatingloss carry forwards. We have determined the realization of the tax benefitrelated to our net deferred tax asset is uncertain at this time and a valuationallowance was recorded for the entire balance of our net deferred tax asset.

 

*Net Loss.*As aresult of the factors discussed above, the net loss of $10.4 million for thesecond quarter of fiscal 2005 represented an increase of $6.5 million from thenet loss of $3.9 million for the second quarter of fiscal 2004.

 

***Twenty-Six Weeks Ended July 30, 2005compared to Twenty-Six Weeks Ended July 31, 2004 (Restated)***

 

*Sales.*  Sales increased by $81.9 million, or 36.1%,to $308.7 million in the first half of fiscal 2005, from $226.8 million in thefirst half of fiscal 2004. This increase primarily resulted from sales of $97.8million from new stores not yet included in the comparable store sales base.This increase was partially offset by a comparable store sales decrease of $5.5million, or 2.7%, and a $10.4 million sales decrease primarily from relocatedor consolidated stores.  We opened tennew stores during the first half of fiscal 2005 compared to five new storesduring the first half of fiscal 2004.

 

Comparable store sales decreased 2.7% afteran increase of 4.8% in the first half of fiscal 2004. For certain of ourcomparable stores, sales were negatively impacted by cannibalization from someof our own new store openings, as well as competition entering our markets.

 

Marine accessories sales were strong for thefirst half of fiscal 2005 as a result of expansion of the product mix in thatcategory and our increased focus on the marine market. Also, the firearmsproduct category had positive comparable store sales and performed well in ournew stores.

 

The ATV category continues to reflect anincreased share of the sales mix for the first half of fiscal 2005, drivenlargely by larger format store sales and ATV accessories, while the fishing andcamping categories declined as a percentage of the sales mix.

 

*Gross Profit.* Gross profit increased by $14.8million, or 28.9%, to $65.9 million in the first half of fiscal 2005 from $51.1million in the first half of fiscal 2004. As a percentage of sales, grossprofit decreased 120 basis points to 21.3% in the first half of fiscal 2005from 22.5% in the first half of fiscal 2004. Factors affecting gross margin during the first half of fiscal 2005were:

 

•                  anegative impact of approximately 70 basis points resulting from the absence ofa co-branded credit card program,

•                  higherdistribution costs of approximately 30 basis points as a result of higher fuelcosts and costs associated with the upgrade of our distribution center,

•                  increasedstore occupancy costs of 50 basis points, as a percentage of sales, as a resultof reduced leverage from lower comparable store sales and lower sales persquare foot at our newer, less mature stores, and

•                  anet benefit from an improved mark-up rate despite aggressive seasonal clearancesales of merchandise in July.

 

*Store Operating Expenses.*  Store operating expenses increased by $19.6million, or 38.5%, to $70.7 million in the first half of fiscal 2005 from $51.1million in the first half of fiscal 2004. As a percentage of sales, storeoperating expenses increased 40 basis points to 22.9% in the first half offiscal 2005 from 22.5% in the first half of fiscal 2004. A 60 basis pointefficiency gain in our advertising spending was offset by reduced leverage inlabor costs and depreciation due to the comparable store sales decline, andcosts related to the relocation of two stores.

 

*General and Administrative Expenses.*  General and administrative expenses increasedby $2.7 million, or 21.5%, to $15.3 million in the first half of fiscal 2005from $12.6 million in the first half of fiscal 2004. As a percentage of sales,general and administrative expenses decreased 60 basis points to 5.0% in thefirst half of fiscal 2005 from 5.6% in the first half of fiscal 2004. The decreasewas due to the termination and settlement of our

 

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contract with the provider of our co-branded credit card during fiscal2005 that resulted in a payment to us of $2.5 million. Excluding the effect ofthis payment, general and administrative expenses as a percentage of salesincreased to 5.8% due to an obligation recorded in connection with theseparation of an employee and increased legal fees.

 

*Pre-opening Expenses.*  Pre-opening expenses increased $1.1 million,or 40.3%, to $3.8 million in the first half of fiscal 2005 from $2.7 million inthe first half of fiscal 2004. We opened ten new stores in the first half offiscal 2005, including one store relocation, compared to the five new stores weopened in the first half of fiscal 2004. Our pre-opening expenses per store infiscal 2005 were approximately 20% lower than in fiscal 2004.

 

*Interest Expense, net.*  Interest expense increased by $1.6 million,or 67.4%, to $4.0 million in the first half of fiscal 2005 from $2.4 million inthe first half of fiscal 2004. The increase resulted from higher averageborrowings incurred to fund our growth. We also experienced higher averageinterest rates of approximately 70 basis points during the first half of fiscal2005, as compared to the first half of fiscal 2004.

 

*Income Tax Provision.*We did not record an income tax benefit for the first half of fiscal 2005 orfiscal 2004 due to the uncertainty of the realization of the net operating losscarry forwards. We have determined the realization of the tax benefit relatedto our net deferred tax asset is uncertain at this time and a valuationallowance was recorded for the entire balance of our net deferred tax asset.

 

*Net Loss.*As aresult of the factors discussed above, the net loss of $27.9 million for thefirst half of fiscal 2005 represented an increase of $10.3 million from the netloss of $17.6 million for the first half of fiscal 2004.

 

*Preferred Stock Dividend. *Until the closing ofour initial public offering in April 2004, we continued to reflect theaccretion of cumulative unpaid dividends on our previously outstanding Class A,B and C convertible preferred stock in accordance with accountingstandards.  No such dividends were paidand any unpaid cumulative dividends were extinguished with the changes incapital structure associated with the closing of our initial publicoffering.  No such obligation orreduction to net income (loss) is reflected in our quarterly results ofoperations after May 1, 2004.

 

**Liquidity and Capital Resources**

 

Our primary capital requirements are forinventory, capital improvements, pre-opening expenses to support our new storegrowth plans, and, to the extent of the highly seasonal nature of our business,operating losses.  Until the completionof our initial public offering, our main sources of liquidity were equityinvestments by, and advances from, Holiday Companies and its affiliatedentities, and borrowings under our credit facility.

 

*Operating Activities. *Net cash used inoperating activities for the first half of fiscal 2005 decreased by $10.4million to $39.5 million, as compared to the first half of fiscal 2004. Thedecrease was primarily the result of lower inventory levels in our recentlyopened stores as well as the success of our efforts to reduce inventory in allour stores. The growth in inventories during both fiscal periods wasrepresentative of seasonal inventory levels, and the building of inventorylevels for new store openings. The reduced need for cash resulting from theinventory reductions on a per store basis was offset primarily by the highernet loss.

 

*Investing Activities*.  Net cash used in investing activities was$32.8 million in the first half of fiscal 2005 and $17.7 million in the firsthalf of fiscal 2004, consisting of purchases of property and equipment.Additionally, there was $1.4 million in non-cash capitalized lease obligationsrecorded in the first half of fiscal 2004, along with the correspondingleasehold improvement and equipment assets. We used cash primarily for tenantimprovements and equipment to open new stores and to remodel and upgradeexisting stores. There were ten new stores opened in the first half of fiscal2005 and five new stores opened in the first half of fiscal 2004. Purchases ofproperty and equipment in the first half of fiscal 2005 also included anupgrade to our distribution center, information technology equipment and officefurniture and equipment at our corporate headquarters.

 

*Financing Activities*.* *Netcash provided by financing activities was $72.5 million in the first half offiscal 2005, as compared to $67.8 million in the first half of fiscal 2004. Theincreased cash need was provided by our credit facility to finance increasedinventory levels, property and equipment purchases, and our operating loss.

 

On April 26, 2004, we closed the initialpublic offering of our common stock, selling 6,583,750 shares of common stockat a price of $16.00 per share, resulting in net proceeds to us of $96.2million.  Transaction costs were $9.1million and have been reflected as a reduction of paid-in-capital. We appliedthe entire net proceeds from our initial public offering to reduce debt.

 

17

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*Credit Facility. *In February 2005,we amended our credit facility to increase our availability under the facilityfrom $175,000,000 to $225,000,000 and extended the maturity date to June 2009.  Availability under the facility can befurther increased to $300,000,000, subject to certain conditions including theabsence of default. Other substantial terms and provisions of the agreementwere not materially changed in the amendment. The actual availability under ourcredit facility is limited to 85% of eligible credit card receivables, plus thelesser of 68.25% to 75.50% of our eligible inventory, or 85% of our inventory’sliquidation value, in each case net of specified reserves and less any lettersof credit outstanding. Interest on the outstanding indebtedness under thecredit facility currently accrues at the lender’s prime commercial lending rateplus 0% to 0.5% depending on our EBITDA, as defined in the credit agreement,or, if we elect, at the one, two, three or six month LIBOR plus 1.25% to 2.25%depending on such EBITDA. Interests in substantially all of our assets secureour obligations under the credit facility. As of July 30, 2005, we were incompliance with all covenants under this facility. As of July 30, 2005,outstanding borrowings under the credit facility were $192.9 million, includingletters of credit of $6.2 million. Our total remaining borrowing capacity underthe credit facility, after subtracting letters of credit, was $26.7 million asof July 30, 2005 and $65.4 million as of July 31, 2004.

 

*Placement of Convertible Debt.*  On August 16, 2005, we completed aprivate offering of $20 million of subordinated unsecured convertible notes(the “Notes”) in a transaction exempt from registration pursuant to Rule 506promulgated under the Securities Act of 1933, as amended.  The Notes are convertible into our commonstock at any time by the holder at an initial conversion price of $16.00 pershare.  The conversion price adjusts onlyfor dividends, stock divisions or combinations, recapitalizations and similaroccurrences.  The Notes mature on August 16,2010 and bear interest at 7.0% per annum for the first two years, payablesemi-annually, after which the rate will float at a fixed spread of 3.50% onthe federal funds rate from a minimum of 6.0% to a maximum of 8.5%. We mayprepay the Notes, without penalty, any time after August 16, 2007, and wehave the option to require conversion of the Notes if the volume-weightedaverage closing price of our common stock reaches or exceeds $24.00 for any 20out of 30 consecutive trading days. Under the note purchase agreement enteredinto in connection with the transaction, we granted the holder certainregistration rights, as described therein. The proceeds were used to reduce the outstanding borrowings under our creditfacility. Transaction costs associated with the placement were less than$100,000.

 

Concurrent with the placement of the Notes,we caused a change in ownership within the meaning of Section 382 of theInternal Revenue Code because of the conversion features of the Notes. As aresult, any tax deductions for our net operating losses prior to the ownershipchange, for tax purposes, may be subject to an annual limitation based upon (i) ouraggregate fair market value before the ownership change multiplied by (ii) thelong-term tax exempt rate (within the meaning of IRC Sec. 382) in effect at thetime.   We do not expect this limitation,if any, to impact our tax provision for financial reporting purposes.

 

*Future Capital Requirements*.  Our future capital requirements willprimarily depend on the number of new stores we open and the timing of thoseopenings within a given fiscal year. These requirements will include costsdirectly related to opening new stores and may also include costs necessary toensure that our infrastructure, including technology and distributioncapabilities, is able to support a larger store base. We opened ten new storesduring the first half of fiscal 2005, including one relocated store, and ourcash used in investing activities was $32.8 million. We currently plan to open19 stores in fiscal 2005, including three or four relocations andconsolidations. However, business conditions, business strategy or otherfactors may cause us to adjust such plans.

 

Additional needs for capital include funding seasonal inventory levels andlosses from operations due to our seasonality. We may also increase our direct product sourcing activities, requiringadditional funding possibly through increased letters of credit or tradecredit. We intend to satisfy our capital requirements over the next twelvemonths with cash flows from operations, funds available under our creditfacility and equipment financing leases. However, if capital requirements forour business strategy change, or other factors change our capital requirements,we may need to seek additional financing in the public or private capitalmarkets. There is no assurance that financing will be available to us onacceptable terms.

 

**ContractualObligations and Other Commitments**

 

Ourmaterial off-balance sheet arrangements are operating lease obligations andletters of credit.  We excluded theseitems from the balance sheet in accordance with U.S. generally acceptedaccounting principles. As of July 30, 2005, the minimum operating leasepayments due within one year were $46.2 million. As of July 30, 2005,

 

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totalminimum operating lease payments remaining over the life of the operatingleases were $568.5 million. These obligation amounts include future minimumlease payments and exclude direct operating costs such as common area costs andreal estate taxes.

 

Issuedand outstanding letters of credit were $6.2 million at July 30, 2005, andwere related primarily to importing of merchandise and funding insuranceprogram liabilities.

 

In the ordinary course of business, we enterinto arrangements with vendors to purchase merchandise in advance of expecteddelivery.  Because most of these purchase orders do not contain anytermination payments or other penalties if cancelled, they are not included asoutstanding contractual obligations.

 

**QuarterlyResults of Operations and Seasonality**

 

Our quarterlyoperating results may fluctuate significantly because of several factors,including the timing of new store openings and related expenses, profitabilityof new stores, weather conditions and general economic conditions. Our businessis also subject to seasonal fluctuation, with approximately 65% of our salesactivity normally occurring during the third and fourth quarters of our fiscalyear, which are primarily associated with the fall hunting seasons and theholiday season.  The first half of ourfiscal years have averaged approximately 35% of our annual sales, including newstore sales, over the past two years. However, this factor cannot necessarilybe used as an indicator of future results. Our customers’ demand for ourproducts and therefore our sales, can be significantly impacted by unseasonableweather conditions that affect outdoor activities and the demand for relatedapparel and equipment. This seasonality also impacts our inventory levels,which tend to rise beginning approximately in April, reach a peak in November,and decline to lower levels after the December holiday season.

 

Our pre-opening expenses have and will continue to vary significantlyfrom quarter to quarter, primarily due to the timing of store openings.  We typically incur most pre-opening expensesfor a new store during the three months preceding, and the month of, itsopening.  In addition, our labor andoperating costs for a newly opened store can be greater during the first one totwo months of operation than what can be expected after that time, both inaggregate dollars and as a percentage of sales. Accordingly, the volume and timing of new store openings in any quarterhas had and is expected to continue to have a significant impact on quarterlypre-opening costs and store labor and operating expenses.  Due to these factors, results for anyparticular quarter may not be indicative of results to be expected for any otherquarter or for a full fiscal year.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed tomarket risk from changes in interest rates on borrowings under our creditfacility. This floating rate indebtedness was $186.7 million at July 30,2005 and averaged $172.5 million during the second quarter of fiscal 2005. Ifshort-term floating interest rates on our average variable rate debt for thesecond fiscal quarter of 2005 had changed by 100 basis points, our interestexpense would have increased by approximately $0.4 million, assuming comparableborrowing levels. These amounts are determined by considering the impact of thehypothetical interest rates on our average amount of floating rate indebtednessoutstanding and cash equivalents balances for each of the respective fiscalyears.

 

We have no derivative financial instrumentsor derivative commodity instruments in our cash and cash equivalents.  We have no international sales, however, weimport certain items for sale in our stores. Substantially all of our purchases are denominated in U.S. dollars.

 

**ITEM 4.  CONTROLS AND PROCEDURES**

 

As of the end of the period covered by thisreport, we conducted an evaluation, under the supervision and with theparticipation of the principal executive officer and principal financialofficer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)).  Based on this evaluation, the principalexecutive officer and principal financial officer concluded that our disclosurecontrols and procedures are effective to ensure that information required to bedisclosed by us in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms.  There was no change in our internal controlover financial reporting identified in connection with the evaluation requiredby Rule 13a-15(d) and 15d-15(d) of the Exchange Act thatoccurred during the period covered by this report that has materially affected,or is reasonably likely to materially affect, our internal control overfinancial reporting.

 

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#### **PART II.OTHER INFORMATION**

#### ** **

**ITEM 1.  LEGAL PROCEEDINGS**

 

***Cabela’sIncorporated***

* *

As reported in ourAnnual Report on Form 10-K for the fiscal year ended January 29,2005, on July 2, 2004, we filed an Arbitration Demand with the AmericanArbitration Association seeking arbitration of certain issues arising under ourNoncompetition Agreement dated May 16, 1996, with Cabela’sIncorporated.  On July 2, 2004, wealso filed a Complaint in the U.S. District Court for the District of Minnesotaseeking a declaratory judgment that a contingent trademark licensing provisionof the Noncompetition Agreement is unenforceable.  Although the noncompetition provisions of theNoncompetition Agreement expired in June 2003, Cabela’s contends that theNoncompetition Agreement may require us to grant Cabela’s a license that wouldrestrict our ability to use of certain of our trademarks that were in existencein 1996 in a “direct marketing business” (as defined in the NoncompetitionAgreement).  We filed the ArbitrationDemand and the Complaint to seek clarification as to the interpretation andenforceability of the Noncompetition Agreement. Cabela’s denied the claims in the Complaint and the Arbitration Demand.

 

In May 2005, weterminated the arbitration proceeding as moot and moved forward in the federalcourt action to seek a declaration that the contingent trademark licensingprovision of the Noncompetition Agreement is invalid and unenforceable.  On August 18, 2005, the district courtissued a memorandum opinion and order on the limited question of whether thecontingent trademark licensing provision is legally invalid as a noncompetitionagreement.  The Court ruled that theprovision is not legally invalid as a noncompetition agreement, and alsoacknowledged that it had not been asked to determine, and was not determining, “thescope of the Contingent Trademark License or the parties respective rightsthereunder.”  Those issues remain to bedecided in further proceedings.  We arenot able to predict the ultimate outcome of such proceedings, but they may becostly and disruptive. The total costs may not be reasonably estimated at thistime.  The outcome of this dispute mayimpact the manner in which we market our products in the future.  It is not expected to affect the marketing ofour products through retail stores.

 

**Securities Litigation**

 

Our company and eight of our present andformer directors and executive officers were named as defendants in a purportedclass action alleging violations of the federal securities laws.  The action is pending in the U.S. DistrictCourt for the District of Minnesota, where it is titled *In re GanderMountain Company Securities Litigation*.  The action arose from the consolidation ofsix virtually identical actions, which were filed between January 28, 2005and March 4, 2005.  The leadplaintiffs in the consolidated action seek to represent a class of all persons(except defendants) who purchased stock in our initial public offering on April 20,2004, or in the open market between April 21, 2004 and January 14,2005. The Consolidated Class Action Complaint, which was filed on August 9,2005, alleges that the defendants made false and misleading public statementsabout our company, and our business and prospects, in the registrationstatement and prospectus for our initial public offering, and in filings withthe SEC and press releases issued thereafter, and that the market price of ourstock was artificially inflated as a result. The Consolidated Class ActionComplaint alleges claims under Sections 11 and 15 of the Securities Act of1933, and under Sections 10(b) and 20(a) of the Securities andExchange Act of 1934. The lead plaintiffs seek compensatory damages on behalfof the alleged class and an award of attorneys’ fees and costs of litigation.

 

We believe that we, and the other defendants,have meritorious defenses to the lead plaintiffs’ claims and we intend to moveto dismiss the Consolidated Class Action Complaint. We are not able topredict the ultimate outcome of this litigation, but it may be costly anddisruptive. The total costs may not be reasonably estimated at this time.Securities class action litigation can result in substantial costs and divertour management’s attention and resources, which may have a material adverseeffect on our business and results of operations, including our cash flows.

 

**Derivative Litigation**

 

Our company, as a nominal defendant, and 12of our present and former directors were named as defendants in a purportedderivative action, *Kurt Haberle v. Mark R.Baker, et al*, thatwas filed on February 11, 2005 in the U.S. District Court for the Districtof Minnesota. In the complaint, the shareholder-plaintiff alleged claims ofbreach of fiduciary duty, abuse of control, gross mismanagement, waste ofcorporate assets and unjust enrichment against the individual defendantsarising out of the same events that are alleged in the federal securities

 

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actions that are described above. Essentially, the complaint assertedthat wrongful conduct by the individual defendants resulted in our companymaking false and misleading public statements, which in turn led to our companygetting sued for federal securities fraud, which in turn has caused our companyto lose market capitalization, reputation and goodwill. The complaint soughtcompensatory damages from the individual defendants for the loss allegedlysustained by our company, restitution and disgorgement of all profits, benefitsand other compensation obtained by the individual defendants and an award ofattorneys’ fees and costs of litigation.  On May 6, 2005, we moved to dismiss the case. On August 30,2005, the court issued a memorandum opinion and order dismissing the complainton the grounds that plaintiff was required to make pre-suit demand on our boardof directors and failed to do so.  Thetime for appeal on the order has not yet run.

 

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

Not applicable.

 

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

 

Not applicable.

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

On June 8, 2005, we held our annual meeting of shareholders forthe purpose of (a) electing seven directors to serve until theirsuccessors are duly elected, (b) approving the amendment and restatementof the Gander Mountain Company 2004 Omnibus Stock Plan, (c) approving theGander Mountain Company Employee Stock Purchase Plan and (d) ratifying theappointment of Ernst & Young LLP as our independent registered publicaccounting firm for the fiscal year ending January 28, 2006.

 

The shareholders present in person or by proxy cast the followingnumbers of votes (in whole shares) in connection with the election ofdirectors: 

 
| ** **         | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|--------------------|------------|------------|------------|--------------|------------|
| Mark R. Baker      |       | 12,892,158 |       | 70,518       |       |
| Karen M. Bohn      |       | 12,896,669 |       | 66,007       |       |
| Marshall L. Day    |       | 12,896,539 |       | 66,137       |       |
| Richard C. Dell    |       | 12,895,962 |       | 66,714       |       |
| Gerald A. Erickson |       | 12,887,471 |       | 75,205       |       |
| Ronald A. Erickson |       | 12,889,915 |       | 72,761       |       |
| Dale Nitschke      |       | 12,900,143 |       | 62,533       |       |

 

The shareholders present in person or by proxy cast the followingnumbers of votes (in whole shares) in connection with the approval of theamendment and restatement of the Gander Mountain Company 2004 Omnibus StockPlan:

 
| **For**   | ** ** | **Against** | ** ** | **Abstentions** | ** ** | **Broker Non-Votes** | ** ** |
|-----------|------------|-------------|------------|-----------------|------------|----------------------|------------|
| 8,870,589 |       | 1,554,489   |       | 210,937         |       | 2,326,661            |       |

 

The shareholders present in person or by proxy cast the followingnumbers of votes (in whole shares) in connection with the approval of theGander Mountain Company Employee Stock Purchase Plan:

 
| **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** | **Broker Non-Votes** |   |
|------------|------------|-------------|------------|-----------------|------------|----------------------|--------|
| 10,353,712 |       | 75,601      |       | 206,702         |       | 2,326,661            |   |

 

The shareholders present in person or by proxy cast the followingnumbers of votes (in whole shares) in connection with the ratification of theselection of Ernst & Young LLP as our independent registered publicaccounting firm for the fiscal year ending January 28, 2006:

 
| **For**    | ** ** | **Against** | ** ** | **Abstentions** | ** ** | **Broker Non-Votes** |   |
|------------|------------|-------------|------------|-----------------|------------|----------------------|--------|
| 12,934,547 |       | 24,384      |       | 3,745           |       | 0                    |   |

 

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**ITEM 5.  OTHER INFORMATION**

 

None

 

**ITEM6.  EXHIBITS**

 
| **Exhibit No.** | ** ** | **Description**                                                                                            | ** ** | **Method of Filing**          | ** ** |
|----------------------|------------|------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| 3.1                  |       | Amended and Restated Articles of  Incorporation of the Registrant                                          |       | Incorporated By Reference (1) |       |
|                 |       |                                                                                                       |       |                          |       |
| 3.2                  |       | Amended and Restated Bylaws of the  Registrant                                                             |       | Incorporated By Reference (2) |       |
|                 |       |                                                                                                       |       |                          |       |
| 4                    |       | Form of Floating Rate Convertible  Subordinated Note                                                  |       | Incorporated by Reference (3) |       |
|                 |       |                                                                                                       |       |                          |       |
| 10.1                 |       | Note Purchase Agreement, dated August 16,  2005, among the Registrant and the purchaser named therein |       | Incorporated by Reference (3) |       |
|                 |       |                                                                                                       |       |                          |       |
| 10.2                 |       | Gander Mountain Company Employee Stock  Purchase Plan                                                      |       | Incorporated by Reference (4) |       |
|                 |       |                                                                                                       |       |                          |       |
| 10.3                 |       | Amended and Restated Gander Mountain  Company 2004 Omnibus Stock Plan                                      |       | Incorporated by Reference (5) |       |
|                 |       |                                                                                                       |       |                          |       |
| 31.1                 |       | Rule 13a-14(a)/15d-14(a) Certification  by Principal Executive Officer                           |       | Filed Electronically          |       |
|                 |       |                                                                                                       |       |                          |       |
| 31.2                 |       | Rule 13a-14(a)/15d-14(a) Certification  by Principal Financial and Accounting Officer            |       | Filed Electronically          |       |
|                 |       |                                                                                                       |       |                          |       |
| 32                   |       | Section 1350 Certifications                                                                           |       | Filed Electronically          |       |

 

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(1)         Incorporated by referenceto Exhibit 3.3 to Amendment No. 1 to the Registrant’s RegistrationStatement on Form S-1 (Registration No. 333-112494), filed with theCommission on March 15, 2004.

(2)         Incorporated by referenceto Exhibit 3.4 to Amendment No. 1 to the Registrant’s RegistrationStatement on Form S-1 (Registration No. 333-112494), filed with theCommission on March 15, 2004.

(3)         Incorporated by referenceto Exhibit 10 to the Registrant’s Current Report on Form 8-K (File No. 0-50659),filed with the Commission on August 17, 2005.

(4)         Incorporated by referenceto Exhibit C to the Registrant’s definitive proxy statement for its 2005annual meeting of shareholders (File No. 0-50659).

(5)         Incorporated by referenceto Exhibit B to the Registrant’s definitive proxy statement for its 2005annual meeting of shareholders (File No. 0-50659).

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|                          | GANDER MOUNTAIN COMPANY                                                                                                         |
|-------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                          |                                                                                                                            |
| Date: September 12, 2005 | By:                                                                                                                             |  /s/  Mark R. Baker |   |
|                          | Mark R. Baker*President and Chief Executive Officer*(Principal Executive Officer)                                               |
|                          |                                                                                                                            |
|                          |                                                                                                                            |
| Date: September 12, 2005 | By:                                                                                                                             | /s/ Dennis M. Lindahl |   |
|                          | Dennis M. Lindahl*Executive Vice President, Chief Financial Officer  and Treasurer*(Principal Financial and Accounting Officer) |
|                               |                                                                                                                                 |  |  |  |

 
| **Exhibit No.** | ** ** | **Description**                                                                                            | ** ** | **Method of Filing**          |   |
|----------------------|------------|------------------------------------------------------------------------------------------------------------|------------|-------------------------------|--------|
| 3.1                  |       | Amended and Restated Articles of  Incorporation of the Registrant                                          |       | Incorporated By Reference (1) |   |
|                 |       |                                                                                                       |       |                          |   |
| 3.2                  |       | Amended and Restated Bylaws of the  Registrant                                                             |       | Incorporated By Reference (2) |   |
|                 |       |                                                                                                       |       |                          |   |
| 4                    |       | Form of Floating Rate Convertible  Subordinated Note                                                  |       | Incorporated by Reference (3) |   |
|                 |       |                                                                                                       |       |                          |   |
| 10.1                 |       | Note Purchase Agreement, dated August 16,  2005, among the Registrant and the purchaser named therein |       | Incorporated by Reference (3) |   |
|                 |       |                                                                                                       |       |                          |   |
| 10.2                 |       | Gander Mountain Company Employee Stock  Purchase Plan                                                      |       | Incorporated by Reference (4) |   |
|                 |       |                                                                                                       |       |                          |   |
| 10.3                 |       | Amended and Restated Gander Mountain  Company 2004 Omnibus Stock Plan                                      |       | Incorporated by Reference (5) |   |
|                 |       |                                                                                                       |       |                          |   |
| 31.1                 |       | Rule 13a-14(a)/15d-14(a) Certification  by Principal Executive Officer                           |       | Filed Electronically          |   |
|                 |       |                                                                                                       |       |                          |   |
| 31.2                 |       | Rule 13a-14(a)/15d-14(a) Certification  by Principal Financial and Accounting Officer            |       | Filed Electronically          |   |
|                 |       |                                                                                                       |       |                          |   |
| 32                   |       | Section 1350 Certifications                                                                           |       | Filed Electronically          |   |

 

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