<PAGE>

                                   UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION 
                               WASHINGTON D.C. 20549

                                     FORM 10-K
(MARK ONE)
  /X/          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934 

                    FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997

                                         OR
  / /         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934

              FOR THE TRANSITION PERIOD FROM __________ TO ___________
                                          
                           COMMISSION FILE NUMBER 0-22359
                                  TRACK 'n TRAIL 
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                          
                                  ---------------
                                          
          DELAWARE                                        91-1778085
  (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER 
   INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

           
        4961-A WINDPLAY DRIVE, 
        EL DORADO HILLS, CALIFORNIA                           95762 
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                    (ZIP CODE) 

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (916) 933-4525
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
            SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: 
                        COMMON STOCK, $.01 PAR VALUE
                              (TITLE OF CLASS)
                                          
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No    
                                              ---     ---

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

     The aggregate market value of Common Stock held by non-affiliates of the
registrant on March 16, 1998 was $21.2 million. 

     On March 16, 1998 the registrant had 6,842,644 shares of Common Stock
outstanding. 

                        DOCUMENTS INCORPORATED BY REFERENCE
                                          
     Part III incorporates information by reference from the definitive Proxy
Statement for the 1998 Annual Meeting of Stockholders, to be filed with the
Commission no later than 120 days after the end of the registrant's fiscal year
covered by this Form 10-K. 

<PAGE>
                                      PART I 
                                          
ITEM 1. BUSINESS 
                                          
     Track 'n Trail, a Delaware corporation (together with its subsidiaries,
unless the context otherwise requires, the "Company"),  is one of the largest
full-service specialty retailers in the United States focusing on a broad range
of high-quality branded casual, outdoor and adventure footwear. The Company has
increased its number of stores and net sales each year since inception. Pursuant
to  the reorganization (the "Reorganization")  effected in October  1997, the
Company  acquired the businesses conducted by its subsidiaries, Track 'n Trail,
a California corporation ("Track 'n Trail-California"), and Overland Management
Corporation ("Overland"). The Company operates in a single business segment.

     As of December 27, 1997, the Company operated 150 stores in 29 states under
the Track 'n Trail and Overland Trading names. All but three of the Company's
stores are located in regional or super-regional shopping malls, concentrated in
California, the Midwest and the Northeast. Each store offers a wide range of
rugged walking and fashion casual shoes, sandals and boots, featuring brands
such as Timberland, Dr. Martens, Birkenstock, Vans, Teva, Airwalk, Clarks, Ecco
and Rockport. 

     The Company targets middle to upper income consumers, with the Track 'n
Trail stores focusing on consumers in the 15- to 40-year-old age group and the
Overland Trading stores focusing on the 25- to 55-year-old age group. The
Company markets to these two different customer segments through distinct
merchandise assortments and store designs. The Track 'n Trail stores offer a
merchandise selection that emphasizes fashionable, performance-oriented footwear
and typically feature an all-glass front, often accented with rock fixtures, and
earth-tone interiors reminiscent of an outdoor setting. The Company's Overland
Trading stores are merchandised and designed to appeal to a slightly older and
more conservative consumer, with a focus on traditional and comfort-oriented
styles displayed in a contemporary, natural wood setting. Track 'n Trail stores
average approximately 1,896 square feet in size, while the Overland Trading
stores currently average approximately 1,423 square feet. As of December 27,
1997, the Company operated 113 Track 'n Trail stores in 28 states, and 37
Overland Trading stores in nine states, including the first Overland Trading
store opened in California in September 1997. 

     The Company obtained 33 Overland Trading stores by acquiring control of
Overland on October 25, 1996. Overland generated net sales of approximately
$23.8 million and total store contribution of approximately $2.4 million for the
12 months preceding the acquisition, under prior management. In addition to
obtaining a distinct retail venue, by acquiring Overland the Company
strengthened its presence in the northeastern United States. The Company also
believes that the acquisition increases its purchasing power and negotiating
position with suppliers and real estate developers, permits it to realize
operational economies of scale, and increases the potential number of stores it
can open in both existing and future markets. 

OPERATING STRATEGIES

     The Company's goal is to become the premier destination specialty retailer
of better casual, outdoor and adventure footwear. To accomplish its goal, the
Company is pursuing the following operational strategies: 

-    BRAND NAME MERCHANDISE. Management believes that brand name identity is of
     paramount importance to its target customer in making footwear purchasing
     decisions. The Company focuses on carrying authentic, well-established
     brand names for each product category. For example, the Company offers the
     Timberland brand for quality hiking, work, performance and casual boots and
     shoes. For younger buyers of "alternative" footwear, the Company offers
     Dr. Martens, Vans, Simple and Airwalk shoes. The Company features the Ecco
     and Rockport brands in the walking shoe and rugged walking category and the
     Birkenstock brand in walking sandals. In the category of performance, water
     and active sandals, the Company offers the Teva brand. Management believes
     that each of the foregoing brands is recognized as one of the originals in
     the primary category of footwear it represents. 

-    CUSTOMER SERVICE AND CONVENIENCE. The Company is committed to achieving
     customer satisfaction and to building a loyal customer base by providing a
     high level of knowledgeable, attentive and personalized customer service.
     The Company believes that educating consumers about the features and
     benefits of its product offerings is a critical component of its success,
     and management considers its sales associates' knowledge of the Company's
     customers and products to be essential to its marketing approach and
     customer satisfaction. The Company's 

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     extensive employee training and development programs are designed to 
     provide its field personnel with the knowledge and skills needed to 
     understand and communicate the performance characteristics of the 
     Company's merchandise, and to better serve its customers' needs. 

-    CAPITALIZE ON TWO DISTINCT DEMOGRAPHIC GROUPS. Management believes that the
     Company's distinct Track 'n Trail and Overland Trading retail concepts
     enable it to serve two diverse and rapidly growing demographic groups.
     Track 'n Trail stores are designed and merchandised to target 15- to
     40-year-olds, while Overland Trading stores target 25- to 55-year-olds.
     Although the customer base of the two concepts overlaps to some extent, the
     Track 'n Trail concept is intended to focus more on active and
     performance-oriented lifestyles, which it believes are particularly popular
     with the fast-growing 15- to 24-year-old age group.  Overland Trading
     stores are designed to appeal more to the large and growing 40- to
     55-year-old age group. Management plans to differentiate the two retail
     concepts to a greater degree in malls in which the Company operates both
     concepts, and slightly less so in malls in which the Company operates only
     one store. 

-    FOCUSED MERCHANDISING STRATEGY. To tailor merchandise mix to individual
     stores' customer profiles, increase inventory efficiency and minimize lost
     sales due to out-of-stock occurrences, the Company analyzes detailed sales
     and inventory data generated by the Company's advanced information and
     distribution systems on a daily basis. The Company's systems, which feature
     automatic replenishment, point-of-sale ("POS") data collection and
     electronic data interchange ("EDI"), capture net sales and inventory data
     daily on a store-by-store basis for each stock keeping unit ("SKU").

-    RECOGNIZE AND RESPOND TO CHANGING LIFESTYLE TRENDS. The Company strives to
     recognize and quickly respond to lifestyle trends that affect footwear
     customer preferences. Most recently, prevailing lifestyle trends that have
     affected footwear sales have included (i) the growth in alternative sports
     such as skate, wake and snow boarding, in-line skating and mountain biking
     as well as the footwear trends these sports have inspired, (ii) the
     movement to outdoor activities and to nature as evidenced by the resurgence
     of walking, hiking, biking, fly fishing and camping and (iii) the increased
     acceptance of casual dress for both work and social settings. Management
     believes that it has developed strong relationships with the primary
     suppliers of the more than 100 brand names that the Company carries. These
     relationships provide access to market information regarding emerging
     merchandise trends. Management believes that the breadth and strength of
     these relationships, together with the Company's focused merchandising
     strategy, provide the Company with the flexibility necessary to permit it
     to respond accurately and quickly to changing customer preferences.

-    ESTABLISH COMPLEMENTARY PRIVATE LABEL BRANDS. The Company's brand strategy
     is complemented by its private label merchandise, which is marketed in
     several product categories under brand names including Forza-TM-, Mole-TM-,
     New Terrain-TM-, Nordic Trail-TM- and Coloma Trail-TM-. Private label
     merchandise, which represented approximately 10% of total net sales in
     fiscal 1997, has provided the Company with higher maintained gross margins
     than branded products. The Company's private label strategy is to offer
     merchandise with quality and features equal or superior to branded products
     at lower prices.

MERCHANDISING

     The Company's merchandising philosophy is to maintain a core group of basic
styles while identifying and stocking emerging brands and styles. The Company
avoids taking significant inventory risk on new items by carefully testing and
monitoring their sales. The Company generally tests and monitors numerous new
styles each year. Typically, a new style is tested initially in approximately
ten stores. Successful new styles are then tested in 20 to 30 additional stores.
After further evaluation, a new style may be rolled out to a broader segment of
stores or system-wide. New styles are rolled out selectively, with attention to
test results in particular regions or in stores known to serve a higher
percentage of a certain demographic group. Each store typically carries 250 to
300 styles. 

     Merchandising decisions, including merchandise mix, pricing, promotions and
markdowns, are made at the Company's corporate offices. The Company's product
purchasing is coordinated through a centralized merchandising department under
the direction of its Executive Vice President--Merchandising. The merchandising
department currently consists of 20 persons, including two merchandising
managers, five buyers for the Track 'n Trail stores and two buyers for the
Overland Trading stores. The Company's Track 'n Trail and Overland Trading
buyers operate independently, allowing


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them to focus on their distinct customers' merchandise preferences and 
lifestyles. These buyers are supported by three stock analysts and six 
assistants, who manage the Company's computerized merchandise planning system 
and other systems personnel. Management also receives input from the 
Company's 20 district managers and three regional managers regarding local 
or regional factors relevant to merchandising decisions. 

     The principal categories of footwear offered by Track 'n Trail and Overland
Trading stores, and selected vendors for each, are summarized below: 

MEN'S AND WOMEN'S FUNCTIONAL AND SPORT SPECIFIC FOOTWEAR

     Functional footwear designed to perform under adverse conditions  or for a
specific activity; includes Hiking and Approach Shoes and Boots, White Water
Sandals, Field and Duty Footwear, Skate Boarding Shoes and Foul Weather Boots. 

          SELECTED TRACK'N TRAIL VENDORS   SELECTED OVERLAND TRADING VENDORS

          Timberland                       Rockport
          Solomon                          Sperry
          Vasque                           Sorel
          Caterpillar                      Timberland 
          Teva
          Etnies
          Vans
          Airwalk
          Columbia 

MEN'S AND WOMEN'S CASUAL FOOTWEAR 

     Casual footwear whose primary end use is as casual everyday footwear;
includes Walking Shoes, Casual and Walking Sandals, Lightweight Casuals, Dress
Casuals and Fashion Casuals. 

           SELECTED TRACK'N TRAIL VENDORS   SELECTED OVERLAND TRADING VENDORS

           Birkenstocks                     Timberland
           Rockport                         Clarks
           Timberland                       Joseph Seibel
           Doc Marten                       H.H. Brown
           Born                             Rockport
           Simple                           Easentials
           Stegmann                         Bostonian  

The following table  sets forth the Company's merchandise assortment by category
as a percentage of net sales for the periods shown:                        

<TABLE>
<CAPTION>
                                                                Fiscal
                                                       ------------------------
                                                        1997     1996     1995
                                                        ----     ----     ----
 <S>                                                   <C>       <C>       <C>
 Men's and Women's Functional and Sport Specific
   Footwear.......................................        31%      32%      35%
 Men's and Women's Casual Footwear................        60       58       54
 Men's, Women's and Children's Slippers...........         1        2        2
 Children's Footwear..............................         1        1        2
 Shoe Care Products, Hosiery and Accessories......         7        7        7
                                                        ----     ----     ----
                                                        ----     ----     ----
                                                         100%     100%     100%
                                                        ----     ----     ----
                                                        ----     ----     ----
</TABLE>


                                       3
<PAGE>

     Private label merchandise accounted for approximately 10% of the Company's
net sales in fiscal 1997. The Company sells its private label merchandise under
names such as Forza-TM-, New Terrain-TM-, Mole-TM-, Nordic Trail-TM- and Coloma
Trail-TM-. The Company introduced private label merchandise at Overland Trading
stores in fiscal 1997. 

ACCESSORIES

     The Company also offers accessories, including socks and shoe care products
such as sprays and polishes. Some of these accessories carry the same brand
names as the shoes, boots and sandals sold by the Company, although most are
supplied by different manufacturers than the Company's footwear suppliers.
Accessories accounted for approximately 7.2% of net sales at the Track 'n Trail
stores in fiscal 1997 and the Company has increased accessories sales to
approximately 5.5% of Overland's net sales in fiscal 1997 (from less than 2% for
the fiscal year ended August 3, 1996).

PURCHASING AND SOURCING

     The Company believes that its ability to buy in large quantities directly
from suppliers helps it to plan merchandise flow effectively and to obtain
competitive pricing and trade terms. Although the Company deals with
approximately 100 vendors, a substantial portion of the Company's merchandise is
provided by a limited number of brand name suppliers. The Company's ten largest
suppliers accounted for approximately  70.3% of the Company's net sales in 
fiscal 1997. In fiscal 1997, Dr. Martens, Timberland and Birkenstock accounted
for 19.3%, 15.7% and 7.9% of the Company's total net sales, respectively. 

     The Company strives to build and maintain strong and interactive
relationships with its major suppliers. Buyers meet regularly with major vendors
to stay abreast of new product lines, new features and changes in styling
direction. The Company frequently shares information with its vendors about
market research, merchandising trends and the Company's goals. In addition, the
Company has established EDI programs with most of its major suppliers in order
to improve its inventory efficiency. The Company develops and transmits purchase
orders through its EDI links, and receives information about order status,
delivery times and pricing. These programs thus permit more rapid merchandise
replenishment and faster inventory turns. The Company believes that its
relationships with major suppliers improve its ability to obtain desired styles
and give the Company flexibility to adjust to shifting market demand for
different vendors' products from season to season. In an effort to secure
appropriate quantities of items in high demand, the Company advises its major
vendors of its forecasted needs approximately six to 12 months in advance.
However, the Company has no long-term purchase contracts or other contractual
assurances of continued supply or pricing with any of its suppliers. See "Risk
Factors".

     Most private label products are sourced from the Far East (primarily China,
Taiwan and South Korea) and Europe (primarily Spain, Italy and Portugal). The
Company's Product Development Manager is responsible for identifying developing
styles for private label manufacture, arranging for product design and locating
manufacturers with the assistance of local agents. The Company actively seeks
advantageous sourcing opportunities and works with a variety of manufacturers.
During fiscal 1997, the Company relied on approximately 50 private label
manufacturers. Generally, private label products are delivered to the Company
approximately four to six months after initial order placement, with longer lead
times for products manufactured in the Far East. Upon order, the Company
typically posts an irrevocable letter of credit in the amount of the purchase
price. The Company has no long-term contracts with its manufacturing sources and
competes with other companies for production facilities. See "Risk Factors". 

STORE OPERATIONS

     The Company operated 150 stores as of  December 27, 1997, all but three of
which were located in regional or super-regional shopping malls. Each store
typically carries 250 to 300 styles of footwear. Although all stores are
integrated into the Company's inventory control, distribution and management
information systems, Track 'n Trail and Overland Trading stores differ in format
and decor because of their different targeted customer bases. 

TRACK 'N TRAIL STORE FORMAT

     The Track 'n Trail storefront design typically features an all glass 20- to
30-foot front, enabling customers to view featured products on display as well
as the extensive product assortment available inside the store. The edges of the
storefront are often accented with rock fixtures that are a signature element in
the Track 'n Trail design theme. Product display fixtures at several stores are
designed to represent rock formations, which may also be incorporated into
customer seating fixtures 


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and waterfall display pieces. The store interiors feature natural-tone walls, 
accent trim, furniture and fixtures. Floor coverings are natural wood or soft 
earth-tone carpeting, and often include colorful murals depicting outdoor 
scenes, providing an environment that is both aesthetically pleasing and 
complementary to the product displays. Each style of footwear is displayed by 
category, such as hiking boots or sandals. Merchandise is typically featured 
on rock displays or fixtures along the walls of the stores, with product 
categories indicated by an overhead sign. Track 'n Trail stores average 
approximately 1,896 square feet in size, of which 40% to 60% is devoted to 
the sales floor. 

OVERLAND TRADING STORE FORMAT

          Overland Trading stores generally feature interiors that are well
lighted, open and inviting. Most stores have two display windows in which a
representative collection of merchandise is presented. Store furnishings are
constructed of high-quality light woods that contrast against the rich, emerald
green floor coverings. Management believes that the Overland Trading stores'
more traditional environment conveys the high quality of merchandise and service
sought by the Overland Trading concept's more mature target consumer. The
Overland Trading merchandising approach focuses on the high-quality brands
carried. Each major brand is housed as a "collection" in a distinct wall
section, which is delineated by architectural elements and by a distinctive,
back-lit overhead sign carrying the vendor's logo. For example, men's Timberland
footwear is presented as a collection within a defined wall section, with a
back-lit Timberland sign overhead. Overland Trading stores have sales floors
similar in size to those at Track 'n Trail stores, but have smaller stockrooms.
The Company plans to incorporate larger stockrooms in future Overland Trading
stores in order to minimize missed sales opportunities due to shortages of
high-demand products. Overland Trading stores average approximately 1,423 square
feet in size, of which 40% to 60% is devoted to the sales floor. 

 OUTLET STORES

          The Company consolidates older or slow-moving merchandise to three
outlet stores for additional or final markdown. Inventory transfers are
initiated by the merchandising department and are effected directly between the
retail store and the outlet store. The Company's Track 'n Trail outlet stores 
currently feature a contemporary "industrial" decor, and utilize industrial
equipment throughout as props and fixtures.  The Company also operates an
Overland Trading outlet store. The Company is currently evaluating the
merchandising, format and interiors of its outlet stores. 

 STORE MANAGEMENT AND COMPENSATION

     The Company's Vice President-Stores, three regional managers and 20
district managers visit each of the Company's stores on a regular basis to
review the implementation of Company policy, monitor operations and review
inventories and the merchandise presentation. Each store has a store manager who
is responsible for supervision and overall operations, two to three assistant
managers and approximately four to eight sales associates, most of whom work
part-time. 

     The regional, district and store managers receive fixed salaries and are
eligible for incentive bonuses, primarily based on their achievement of the
goals stated in the Company's Management by Objective ("MBO") program. The MBO
program focuses on reviewing, managing and improving three key objectives: net
sales, selling cost and inventory shrinkage. All field incentive compensation
programs are based upon goals within these three key objectives. To support the
MBO program, the Company has developed an appraisal system to monitor each
store's performance on a monthly and quarterly basis. Each appraisal focuses on
a store's performance in a key compliance area such as customer service, visual
presentation, store operations or loss prevention, to support performance in the
three key MBO objectives. The Company also monitors many other store-level
variables from its corporate offices, including refund levels, register
variances, telephone bills and similar items. 

     The Company intends for store employees to focus a substantial portion of
their efforts on customer service. As a consequence, the Company has centralized
as many administrative functions as possible, including buying, development of
in-store merchandising displays, inventory allocation, human resources and
accounting functions, at its El Dorado Hills, California corporate offices. 

 CUSTOMER SERVICE

     The Company is committed to achieving customer satisfaction and to building
a loyal customer base by providing a high level of knowledgeable, attentive and
personalized customer service. The Company believes that educating consumers


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about the features and benefits of its product offerings is a critical 
component of its success, and management considers its sales associates' 
knowledge of the Company's customers and products to be essential to its 
marketing approach and customer satisfaction. 

     To develop knowledgeable, responsive sales associates, the Company has
devoted significant resources to developing and implementing employee
development and incentive programs. All store employees receive extensive
training on merchandise features, benefits and technology, as well as customer
relations and selling skills. The training program focuses on "six steps" to
achieve sales and customer satisfaction: greeting the customer; assessing his or
her needs; exceeding customer expectations; overcoming objections; suggestive
selling; and closing the sale. In addition to training from the store manager,
each employee attends regional product information seminars, receives in-store
training through vendor presentations and vendor-supplied videotapes, and is
required to complete a formal, written training program. Store managers are also
required to complete a 12-week training program, during which they are
instructed in the technical aspects of footwear, management skills and employee
relations. To provide managers with hands-on training, new store and district
managers are typically required to work alongside individuals in comparable
positions for two to three weeks before they are asked to perform their duties
without direct supervision. Managers also attend a minimum of three management
training meetings per year. Supplemental product information bulletins are
distributed frequently from the Company's corporate offices to educate store
managers and sales associates about new products as they are introduced. The
Company also employs an independent agency to send unidentified "mystery
shoppers" to Company stores, and to report on the service provided to these
shoppers by store personnel. The Company also monitors the level of customer
service on an ongoing basis through various initiatives, such as telephone
surveys. 

STORE LOCATIONS

     The Company considers its ability to obtain attractive, high-traffic store
locations to be a critical element of its business and a key factor in the
Company's future growth and profitability. In determining new store locations,
the Company considers regional and local economic conditions and household
income data, mall locations, site locations within the mall, vacancy rates,
sales per square foot, "anchor" tenant stores, tenant mix, consumer traffic,
competition and occupancy, construction and other costs associated with opening
a store. Site selection and lease negotiation are supervised by the Company's
Vice President-Real Estate and senior management. 

     The Company operated 150 stores in 29 states as of December  27, 1997, as
set forth in the following table: 

TRACK 'N TRAIL STORES

<TABLE>
<CAPTION>
                                                   Current                                                      Current
 State                                              Stores      State                                            Stores
 -----                                              ------      -----                                            ------
 <S>                                               <C>          <C>                                             <C>
 Alaska......................................            2      Minnesota.................................            2
 California..................................           27      Missouri..................................            1
 Colorado....................................            6      Nebraska..................................            1
 Connecticut.................................            3      Nevada....................................            1
 Georgia.....................................            1      New Hampshire.............................            2
 Idaho.......................................            1      New York..................................            7
 Illinois....................................            9      Ohio......................................            5
 Indiana.....................................            5      Oregon....................................            3
 Iowa........................................            1      Pennsylvania..............................            3
 Kentucky....................................            1      South Carolina............................            1
 Maine.......................................            1      Tennessee.................................            2
 Maryland....................................            1      Virginia..................................            3
 Massachusetts...............................            3      Washington................................            7
 Michigan....................................           10      Wisconsin.................................            4

OVERLAND TRADING STORES

                                                   Current                                                      Current
 State                                              Stores     State                                             Stores
 -----                                              ------     -----                                             ------
 California.................................            1      New York...................................           10
 Connecticut................................            2      Ohio.......................................            5
 Kentucky...................................            1      Pennsylvania...............................            2
 Massachusetts..............................            9      Virginia...................................            3
 New Jersey.................................            4
</TABLE>


                                       6
<PAGE>

     The Company leases all of its stores. Initial lease terms of the Company's
stores generally range from eight to ten years in duration without renewal
options, ten-year leases being the most common. The leases generally provide for
a fixed minimum rental plus a percentage of store sales in excess of a specified
amount. 

MARKETING

     The Company's policy is to price its merchandise competitively with
department stores and specialty footwear retailers in the particular mall in
which each Company store is located. The Company is primarily a full-price
retailer, selling most merchandise at full retail prices. However, the Company
conducts promotions that generally revolve around themes such as back-to-school,
and holiday seasons. In addition, the Company promotes individual items as
needed and consolidates seasonal and slow-moving merchandise into selected
mall-based stores prior to consolidation into its three outlet format stores for
liquidation. 

     The Company relies primarily on mall traffic and the visual appeal of its
stores to attract customers, and on the breadth of its product offering and the
quality of its customer service to retain them. In-store promotions with
point-of-purchase materials are also an important part of the Company's
marketing strategy. The Company also takes advantage of advertising and
promotional assistance from many of its suppliers, which takes the form of
cooperative advertising programs, point-of-purchase materials, product training
for employees and other programs. The Company spends very little on advertising,
primarily contributing to mall merchant association funds which will advertise
both the mall and individual stores within the mall. 

DISTRIBUTION

     The Company believes that strong distribution support for its stores is a
critical element in its strategy to maintain a low cost operating structure and
to expand in the future. The Company receives approximately 85% of its
merchandise at its central distribution center in El Dorado Hills, California, 
of which approximately two-thirds is distributed to Track 'n Trail stores and
one-third is distributed to the Overland Trading stores. Other merchandise is
drop-shipped from vendors directly to individual stores. The Overland Trading
stores currently receive a higher proportion of drop-shipped merchandise than
the Track 'n Trail stores. The Company intends to process an increasing
percentage of Overland Trading merchandise through its central distribution
center, as it expands the stockroom capacity of future Overland Trading stores. 

     The central distribution center is operated primarily as a "cross-docking"
facility rather than as a warehouse. The Company attempts to retain minimal
inventory at this facility, although it will occasionally back-stock high-demand
items that are expected to be in short supply and inventory for peak seasonal
needs. The central distribution center has multi-access docks, enabling the
Company to receive and ship simultaneously and to pack separate trailers for
shipments to different regions of the country at the same time. 

     Upon receipt at the central distribution center, merchandise is inspected,
recorded in the Company's MIS system, allocated to stores by the system's
automatic replenishment function, price tagged and repackaged for distribution
(to the extent it was not prepared and pre-ticketed by the vendor according to
individual store). Merchandise is typically shipped via common carrier from the
central distribution center to the various stores once a week, or as needed
during peak seasonal periods. 

MANAGEMENT INFORMATION SYSTEMS

     The Company has a computerized management information system that includes
a network of terminals at the corporate offices to support management decision
making, along with PC-based POS computers at the stores that are connected via
modem to the computers at the corporate offices. Each store's POS system
accumulates detailed sales transaction data that is polled by the Company's main
system nightly and reviewed by management each day. The system's perpetual
inventory feature enables the Company's buyers to review and analyze daily the
inventory levels at each individual store by department, class and SKU in order
to replenish fast-selling items on a timely basis. The system also includes an
automated replenishment system for core products that orders replacement stock
of such products based on factors such as current sales trends or store
inventory levels. The minimal inventory that is maintained at the Company's
central distribution center is also managed through daily inventory management
reports. During fiscal 1996, the Company upgraded the computer hardware at its
corporate offices to accommodate its presently anticipated growth. The Company
completed the integration of the Overland Trading stores into its management
information system in January 1997. 


                                       7
<PAGE>

COMPETITION

     The business in which the Company is engaged is highly competitive. Most of
the items sold by the Company are sold by department stores, outdoor and
sporting goods stores, athletic footwear stores and traditional shoe stores.
Some of these stores are owned or franchised by major suppliers of the Company.
Many of the stores with which the Company competes are units of large national
and regional chains that have substantially greater financial and other
resources than the Company. To a lesser extent, the Company competes with mail
order retailers. In many cases, the Company's stores are located in shopping
malls in which one or more of its competitors also has a store. 

     The Company believes that it has been able to compete favorably with its
competitors by operating attractive, well-stocked stores in high retail traffic
areas, offering competitive prices and providing knowledgeable and courteous
customer service. The Company seeks to provide competitive pricing by
effectively mixing high profile, brand name merchandise with private label
merchandise and opportunistic purchases of other brand name merchandise, and by
controlling both store and administrative expenses. 

EMPLOYEES

     As of December 27, 1997, the Company had approximately 500 full-time
employees and 670 part-time employees, none of whom is represented by a labor
union. The number of part-time employees fluctuates depending on seasonal needs.
The Company considers its relationship with its employees to be good and has not
experienced any interruptions of operations due to labor disagreements. 

RISK FACTORS

     THIS REPORT CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THIS REPORT.  

RISKS ASSOCIATED WITH EXPANSION 

     The Company's continued growth will depend largely upon the Company's
ability to open or acquire new stores in a timely manner and to operate them
profitably. The Company opened 22 stores in fiscal 1997, and presently
anticipates opening a substantial number of stores in fiscal 1998. The success
of the Company's planned expansion will depend on many factors, including the
Company's ability to secure suitable store sites on satisfactory leasing terms
and to complete any necessary construction or refurbishment of these sites, the
hiring, training and retention of qualified managers and other personnel and the
successful integration of new stores into existing operations. No assurance can
be given that the Company will be able to expand as planned in fiscal 1998 or
any future period, that new stores will achieve results similar to those
achieved at prior locations, or that the Company will be able to manage any
future growth successfully. Because the Company's business is highly seasonal,
any delays in store openings past peak selling periods could significantly
reduce the new stores' near-term contribution to total net sales. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". 

DEPENDENCE ON MAJOR SUPPLIERS

     The Company's business depends to a significant degree upon its ability to
obtain timely and plentiful shipments of brand name merchandise at competitive
prices. In fiscal 1997, the Company's ten largest suppliers accounted for
approximately 70.3% of its net sales. The extent  to which the Company is
dependent upon any particular supplier varies from season to season. The Company
does not have any long-term supply agreements or other contractual assurances of
continued supply, pricing or access to new products. The deterioration of the
Company's relationship with any key vendor could result in delivery delays,
merchandise shortages or less favorable trade terms than the Company currently
enjoys. The Company has occasionally received allocations of merchandise from
vendors, particularly  merchandise in high demand by many footwear retailers,
that are insufficient to meet the Company's desired inventory levels of such
merchandise. There can be no assurance that the Company will receive its desired
levels of such merchandise in the future. The Company's business is also
affected by its suppliers' ability to manufacture and deliver merchandise in a
timely and cost-effective manner, which


                                       8
<PAGE>

depends upon a number of factors beyond the Company's control, including 
fluctuations in currency exchange rates, trade barriers, and economic, labor 
and political conditions in the countries in which the Company's vendors have 
manufacturing operations. In particular, a significant deterioration in 
China's trade relationship with the United States could adversely affect the 
supply and pricing of a substantial portion of the Company's merchandise. 

UNCERTAINTIES IN MERCHANDISE TRENDS

     The Company's success depends in part on its ability to anticipate and
respond to changing merchandise trends and consumer demands in a timely manner.
Any failure by the Company to identify and respond to emerging trends could
adversely affect consumer acceptance of the merchandise in the Company's stores,
which in turn could adversely affect the Company's business, financial condition
and results of operations. Failure to anticipate and respond to changing
consumer preferences could lead to, among other things, shortages of styles in
high demand, lower net sales, additional markdowns and lower margins, which
would have a material adverse effect on the Company's results of operations and
financial condition. 

DEPENDENCE ON MALL TRAFFIC

     All but three of the Company's stores are located in regional or
super-regional shopping malls. The Company's net sales are derived, in large
part, from the volume of traffic in these malls, particularly because the
Company does little independent advertising to attract customers. The Company
therefore depends upon the ability of mall "anchor" tenants and other mall
attractions to generate consumer traffic in the vicinity of the Company's
stores, as well as the continuing popularity of malls as shopping destinations.
Mall traffic and the Company's net sales and profitability may be adversely
affected by "anchor" tenants or declines in the desirability of the shopping
environment in a particular mall. As with other specialty footwear retailers,
the Company's business is also subject to general economic conditions, including
the possibility of a nationwide recession, consumer confidence and the level of
consumer spending. 

SEASONALITY

     The Company's business is highly seasonal. The Company typically incurs
losses in the first three months of each fiscal year and recorded a larger loss
in the first three months of fiscal 1997 than in the first three months of
fiscal 1996, due to the operating loss and interest expense associated with the
Overland acquisition. The Company derives a substantial percentage of its annual
net sales and operating profitability during the "back-to-school" and year-end
holiday periods. In anticipation of increased net sales activity during these
periods, the Company incurs significant additional expenses, including the
hiring of a substantial number of temporary employees. A slowdown in sales
during these peak periods will tend to have a particularly pronounced effect on
the Company's results of operations. For example, the Company's fiscal 1997
results were negatively  affected by slower than expected Christmas sales. In
addition, as a result of this seasonality, the Company's working capital needs
are greatest in October and early November, and late in the first quarter of
each fiscal year. The Company's net sales are also affected by weather patterns,
particularly during the Spring and Fall selling seasons. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." 

COMPETITION

     The retail footwear business is intensely competitive. Most of the items
sold by the Company are sold by department stores, outdoor and sporting goods
stores, athletic footwear stores and traditional shoe stores. Some of these
stores are owned or franchised by the Company's footwear suppliers. Many of the
stores with which the Company competes are units of large national or regional
chains that have substantially greater financial and other resources than the
Company. In many cases, the Company's stores are located in shopping malls in
which one or more of its competitors also has a presence. To a lesser extent,
the Company also competes with mail order retailers. A significant change in
price, level of promotion or other strategies by the Company's competitors could
have a material adverse effect on the Company's results of operations. See
"Business--Competition." 


                                       9
<PAGE>

UNCERTAINTIES ASSOCIATED WITH PRIVATE LABEL SOURCING 

     Private label products accounted for approximately 10% of net sales in
fiscal 1997. The Company has no long-term contracts with its private label
manufacturing sources and competes with other companies for production
facilities. In addition, the Company's private label products may experience
higher mark-downs than branded products, because they require longer lead times
and must be ordered in larger volumes, and because the Company is typically
unable to return private label product to its manufacturers. There can be no
assurance that the foregoing factors will not disrupt the Company's supply of
private label goods or otherwise adversely impact the Company's operations in
the future. See "Business--Purchasing and Sourcing."

INTERNATIONAL PURCHASING RISKS

     Substantially all of the Company's private label manufacturers are located
outside of the United States. Accordingly, the Company is subject to the risks
typically associated with an import business, including unexpected changes in
foreign regulatory requirements, disruptions or delays in shipments and the
risks associated with United States import laws and regulations, including
quotas, duties, taxes, tariffs and other restrictions. The Company has not, to
date, been materially affected by any such risk, but there can be no assurance
that such risks will not adversely impact the Company's operations in the
future. See "Business--Purchasing and Sourcing." 

POTENTIAL FOREIGN CURRENCY FLUCTUATIONS

     Because a portion of the Company's purchases of private label goods are
denominated in foreign currencies, the Company's operating results are subject
to fluctuations in the exchange rates between such currencies and the U.S.
dollar. The Company has not typically engaged in hedging transactions designed
to manage currency fluctuation risks. There can be no assurance that exchange
rate fluctuations will not have a material adverse effect on the Company's
future operating results or financial condition. See "Business--Purchasing and
Sourcing."

RISKS ASSOCIATED WITH ACQUISITIONS

     The Company's business strategy includes expanding through acquisitions, as
well as through new store openings.  No assurance can be given that any
acquisition by the Company will occur, or that any such acquisition will enhance
the Company's results of operations. Any acquisition will involve numerous
risks, including difficulties in the assimilation of the acquired company's
operations, the diversion of management's attention, uncertainties associated
with operating stores in new markets and the potential loss of the acquired
company's key employees. Acquisitions may also result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities, potential reductions in income due to losses incurred by the
acquired business and increased amortization expense related to intangible
assets acquired, any of which could materially adversely affect the Company's
financial condition and results of operations. 

CONTROL BY CERTAIN STOCKHOLDERS

     David L. Suechting, Jr., the Company's Chairman of the Board, Barbara
Suechting, a director of the Company, and Deborah Suechting (the "Pre-Offering
Stockholders") in the aggregate own beneficially approximately 60% of the
Company's outstanding shares of Common Stock. As a result, the Pre-Offering
Stockholders, acting  together,  are able to control all matters requiring
approval by the stockholders of the Company, including the election of the Board
of Directors. 

FUTURE CAPITAL NEEDS

     The Company expects that anticipated cash flow from operations and
anticipated borrowings under a new credit facility will satisfy its cash
requirements through fiscal 1998. To the extent that the foregoing cash
resources are insufficient to fund the Company's activities, including new store
openings planned for 1998, additional funds will be required. There can be no
assurance that additional financing will be available on reasonable terms or at
all. Failure to obtain such financing could delay or prevent the Company's
planned expansion, which could adversely affect the Company's business,
financial condition and operating results. In addition,  if additional capital
is raised through the sale of additional equity or convertible 


                                       10
<PAGE>

securities, dilution to the Company's stockholders could occur. See 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations."

DEPENDENCE ON KEY PERSONNEL 

     The Company's future success depends to a significant extent on the efforts
and abilities of its executive officers. The loss of the services of certain of
these individuals could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company does not
maintain any key man life insurance. The Company's  recent growth, particularly
as a result of the acquisition of Overland, has resulted in an increase in
responsibilities for management personnel. The Company's ability to manage
growth effectively will require it to continue to train, motivate and manage its
employees, and to attract, motivate and retain additional skilled managerial and
merchandising personnel. Competition for such personnel is intense, and there
can be no assurance that the Company will be successful in attracting,
assimilating and retaining the personnel it requires to grow and operate
profitably. 

INTELLECTUAL PROPERTY

     Prior to being acquired by Track 'n Trail, Overland entered into an
agreement with a third party for the exclusive use of the Overland Trading
Company trademark in nine Midwestern states. The agreement prohibits the Company
from opening Overland Trading stores in those states until the agreement is
terminated. There can be no assurance that the activities of the third party
will not detract from the Company's efforts to maintain its Overland Trading
stores as a distinct retail concept, particularly in the Midwest, or from the
Company's reputation. 

ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

     The Board of Directors have the authority to issue up to 2,000,000 shares
of Preferred Stock, and to determine the rights, preferences and restrictions of
such shares, without further stockholder approval. The rights of holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock may have the effect of delaying or preventing a
change in control of the Company. In addition, certain provisions of the
Company's Certificate of Incorporation and Bylaws and of Delaware law could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers at a
price above the then-current market value of the Common Stock. 

ITEM 2. PROPERTIES

     The Company leases a single 24,192 square foot distribution center in El
Dorado Hills, California, a 6,000 square foot staging facility in Rancho
Cordova, California, and a 14,000 square foot corporate office facility in El
Dorado Hills, California. The Company believes that its current central
distribution facility will support as many as 200 stores, which the Company
believes is sufficient to continue to service existing stores and to accommodate
anticipated growth through mid-1999. The current corporate and distribution
facility's lease expires in March 1999. The Company presently anticipates moving
its distribution  facility and corporate offices to a larger, leased
"build-to-suit" facility in 1999, which is expected to have 45,000 square feet
of distribution facility space initially, and could accommodate at least 500
stores if expanded to its anticipated full capacity of 80,000 square feet. 

ITEM 3. LEGAL PROCEEDINGS 

     Although the Company is subject to various claims and legal actions that
arise in the ordinary course of its business, the Company is not presently a
party to any material legal proceedings. 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

     On October 6, 1997 the Company's stockholders approved, by unanimous
written consent, (i) the Company's Employee Stock Purchase Plan and the Track 'n
Trail 1996 Stock Option Plan, (ii) the amendment and restatement of the
Company's Certificate of Incorporation and (iii) the amended and restated bylaws
of the Company. 


                                       11
<PAGE>

                                      PART II

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

     The Company's initial public offering of its Common Stock (the "Offering")
occurred in October 1997.  The Company's Common Stock is listed on the Nasdaq
National Market under the symbol "TKTL".  For the period from commencement of
trading through December 27, 1997  the high and low sale prices reported by
Nasdaq were $11.88 and $8.50, respectively. 

     As of March 16, 1998, there were 59 holders of record of the Company's
Common Stock.  

     The Company has never paid or declared any cash dividends on its Common
Stock or other securities and does not anticipate paying cash dividends in the
foreseeable future. In addition, the Company's current line of credit prohibits
the payment of cash dividends on its capital stock. 

     In October 1997, the Company completed the Offering pursuant to a
Registration Statement on Form S-1 (File No. 333-23195) and issued 2,727,272
shares of its Common Stock to the public at a price of $10.50  per share.  The
Company received approximately $25 million of cash from the Offering, net of
underwriting discounts, commissions, and other offering costs and expenses. 

     The Company has applied all of the proceeds of the Offering as follows: 
approximately $17.7  million  to repay indebtedness, $6.4  million to fund the
payment of a distribution to the Pre-Offering Stockholders,  $443,000 for the
build-out of new stores and $485,000 for working capital. 


                                       12
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA 

     The balance sheet and statement of operations data as of December 27, 1997
and December 28, 1996, and for each of the three fiscal years in the period
ended December 27, 1997, are derived from audited consolidated financial
statements of the Company included herein and should be read in conjunction with
such financial statements.  The balance sheet and statement of operations data
as of  December 30, 1995, December 31, 1994 and December 25, 1993, and for each
of the two fiscal years in the period ended December 31, 1994 are derived from
audited consolidated financial statements of the Company which are not included
herein. The information for all periods set forth below under the captions "Pro
Forma Statement of Operations Data" and "Selected Store Operating Data" is
derived from unaudited data. The data set forth below are qualified by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and related notes included elsewhere in this report.         

<TABLE>
<CAPTION>

                                                                                         FISCAL YEAR ENDED
                                                                 ------------------------------------------------------------------
                                                                  1997           1996           1995        1994(1)         1993 
                                                                  ----           ----           ----        -------         ----
 STATEMENT OF OPERATIONS DATA:                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE, PER SQUARE FOOT AND NUMBER OF STORES DATA)
<S>                                                              <C>            <C>           <C>            <C>            <C>
 Net Sales . . . . . . . . . . . . . . . . . . . . . .           $ 91,834       $66,233       $50,691        $48,165        $41,858
 Cost of sales . . . . . . . . . . . . . . . . . . . .             47,677        34,062        26,192         25,080         21,903
                                                                 --------       -------       -------        -------        -------
 Gross profit  . . . . . . . . . . . . . . . . . . . .             44,157        32,171        24,499         23,085         19,955
 Selling and marketing expense . . . . . . . . . . . .             30,780        21,060        16,852         14,975         13,076
 Administrative and distribution . . . . . . . . . . .              6,840         5,508         4,826          4,935          4,655
                                                                 --------       -------       -------        -------        -------
 Operating income  . . . . . . . . . . . . . . . . . .              6,537         5,603         2,821          3,175          2,224
 Interest expense  . . . . . . . . . . . . . . . . . .              1,260           670           435            324            330
 Other expense (income)  . . . . . . . . . . . . . . .               (21)          (24)          (41)             37             56
                                                                 --------       -------       -------        -------        -------
 Income before income taxes and
      minority interest  . . . . . . . . . . . . . . .              5,298         4,957         2,427          2,814          1,838
 Income tax expense  . . . . . . . . . . . . . . . . .                118           488            41             67             55
 Minority interest   . . . . . . . . . . . . . . . . .                 --           105            --             --             --
                                                                 --------       -------       -------        -------        -------
 Net income  . . . . . . . . . . . . . . . . . . . . .            $ 5,180       $ 4,364       $ 2,386       $  2,747       $  1,783
                                                                 --------       -------       -------        -------        -------
                                                                 --------       -------       -------        -------        -------
 Historical earnings per share: 
    Basic  . . . . . . . . . . . . . . . . . . . . . .           $   1.10      $   1.06      $   0.58      $    0.67      $    0.43
                                                                 --------       -------       -------        -------        -------
                                                                 --------       -------       -------        -------        -------
    Diluted  . . . . . . . . . . . . . . . . . . . . .           $   1.03      $   1.04      $   0.58      $    0.67      $    0.43
                                                                 --------       -------       -------        -------        -------
                                                                 --------       -------       -------        -------        -------
 PRO FORMA STATEMENT OF OPERATIONS DATA (2):
 Historical income before income taxes
      and minority interest  . . . . . . . . . . . . .           $  5,298       $ 4,957       $ 2,427        $ 2,814        $ 1,838
 Pro forma income tax expense (2)  . . . . . . . . . .              2,119         1,983           971          1,126            735
 Minority interest . . . . . . . . . . . . . . . . . .                 --           105            --             --             --
                                                                 --------       -------       -------        -------        -------
 Pro forma net income  . . . . . . . . . . . . . . . .           $  3,179       $ 2,869       $ 1,456        $ 1,688        $ 1,103
                                                                 --------       -------       -------        -------        -------
                                                                 --------       -------       -------        -------        -------
 Pro forma earnings per share (3): 
   Basic . . . . . . . . . . . . . . . . . . . . . . .           $   0.68      $   0.70
                                                                 --------       -------       -------        -------        -------
                                                                 --------       -------       -------        -------        -------
   Diluted . . . . . . . . . . . . . . . . . . . . . .           $   0.58      $   0.57
                                                                 --------       -------       -------        -------        -------
                                                                 --------       -------       -------        -------        -------
 SELECTED STORE OPERATING DATA: 
 Store contribution(4) . . . . . . . . . . . . . . . .           $ 13,377      $ 11,111       $ 7,647        $ 8,110       $  6,880
 Number of stores:
      Opened or acquired during period   . . . . . . .                 22            51(5)         12              9              9
      Closed during period   . . . . . . . . . . . . .                  0             5             4              4              2
      Open at end of period  . . . . . . . . . . . . .                150(6)        128            82             74             69
  Total weighted average square feet(7)  . . . . . . .            236,095       168,966       144,612        130,542        114,813
 Weighted average net sales per square foot(8) . . . .         $      389     $     392     $     351      $     369       $    365
 Average square feet per store . . . . . . . . . . . .              1,780         1,744         1,873          1,894          1,851
 Increase(decrease) in comparable stores net sales(9)                 0.6%          3.1%         (1.4)%          0.6%           4.1%

</TABLE>


                                       13
<PAGE>
<TABLE>
<CAPTION>
                                                                                        AS OF
                                                      -----------------------------------------------------------------------------
                                                      DECEMBER 27,     DECEMBER 28,    DECEMBER 30,     DECEMBER 31,   DECEMBER 25,
                                                          1997             1996           1995             1994           1993
                                                      ------------     ------------    ------------     ------------   ------------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                   <C>              <C>              <C>            <C>             <C>
 BALANCE SHEET DATA: 
 Working capital. . . . . . . . . . . . . . . . . . .   $ 21,896       $   9,430       $   6,710        $   5,742          $ 5,695
 Total assets . . . . . . . . . . . . . . . . . . . .     44,133          31,858          17,050           15,630           15,409
 Total debt . . . . . . . . . . . . . . . . . . . . .        236          10,765           2,734            2,396            3,633
 Stockholders' equity . . . . . . . . . . . . . . . .     32,082          10,646           7,648            6,349            5,650

</TABLE>
-------------------

(1)  Fiscal 1994 consisted of 53 weeks. All other fiscal years presented
     consisted of 52 weeks. During the 53rd week of fiscal 1994, the Company
     generated $1.2 million in net sales. As a result, the Company's operating
     results in fiscal 1994 are not comparable to its results in any other
     fiscal year presented. 

(2)  Includes pro forma provision for income taxes using an assumed combined
     federal and state tax rate of 40%, which the Company believes approximates
     the statutory federal and state income tax rates that would have been
     applied had Track 'n Trail-California been taxed as a C corporation.
     Commencing June 28, 1992 and until the Reorganization, Track 'n
     Trail-California operated as an S corporation and was not subject to
     federal and certain state income taxes. The Company's earnings during such
     periods have been taxed directly to the Company's stockholders, rather than
     to the Company. In connection with the Reorganization on October 7, 1997,
     the S corporation election of Track 'n Trail-California and the Company,
     respectively, was terminated under circumstances under which income
     reported by the Company and Track 'n Trail-California for their respective
     terminated S corporation taxable years was determined utilizing a "closing
     of the books" method. 

(3)  Shares outstanding include approximately 327,000 and 94,000 shares issuable
     upon exercise of stock options outstanding at December 27, 1997 and
     December 28, 1996, respectively, after applying the treasury stock method.
     In applying the treasury stock method for determining the dilution
     applicable to stock options outstanding, the incremental shares assumed
     issued (excess of shares assumed issued over the number of shares assumed
     purchased) was determined using the sum of exercise proceeds, future
     compensation and the tax benefit to the Company upon exercise of the
     options as the assumed proceeds that would have been used to purchase
     shares at the average value during the period. Average market value was
     based on estimated fair values for periods prior to the Offering and market
     prices thereafter. Distribution shares of approximately 421,000 included in
     pro forma diluted earnings per share for fiscal 1997 represents the number
     of shares of Common Stock sold in the Offering, the proceeds of which were
     necessary to pay the excess of S corporation distributions paid or declared
     during the twelve month period preceding the Offering over earnings during
     the twelve month period preceding the Offering. Distribution  shares of
     approximately 828,000 included in pro forma diluted earnings per share for
     fiscal 1996 represent the number of shares of  Common Stock sold in the
     Offering, the proceeds of which were necessary to pay the excess of S
     corporation distributions paid or declared during fiscal 1996 through the
     Offering  over  fiscal 1996 earnings. All warrants outstanding and certain
     options with exercise prices in excess of market value were not dilutive
     and, accordingly, were not included. 

(4)  Store contribution refers to gross profit after deducting selling and
     marketing expenses. Store contribution is presented to provide additional
     information about the Company and is commonly used as a performance
     measurement by retail companies. Store contribution should not be
     considered in isolation or as a substitute for operating income, cash flow
     from operating activities and other income or cash flow data prepared in
     accordance with generally accepted accounting principles, or as a measure
     of the Company's profitability or liquidity. 

(5)  On October 25, 1996, the Company acquired 33 Overland Trading stores. The
     Company opened one additional Overland Trading store in November 1996
     pursuant to a commitment previously entered into by Overland. 

(6)  Stores open at end of fiscal 1997 consist of 113 Track 'n Trail stores and
     37 Overland Trading stores.

(7)  Weighted to reflect store openings and closings during each period,
     assuming that all periods presented consisted of 52 weeks. 

(8)  Weighted average net sales for fiscal 1994 have been adjusted as if such
     year consisted of 52 weeks. 

(9)  Comparable store net sales include only those stores that were open both
     for the full fiscal period and for the full prior fiscal period. The fiscal
     1995 and 1994 increases have been calculated by comparing net sales in such
     years to net sales for the prior 52 and 53 weeks, respectively. The
     increases for fiscal 1997 and 1996  exclude the Overland Trading stores
     acquired in October 1996. If such stores had been included in the Company's
     comparable store net sales comparison since the acquisition, the change in
     comparable store net sales for fiscal 1997 and for fiscal 1996 would have
     been (2%) and 2.3%, respectively. 


                                       14
<PAGE>

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

          PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. In
addition to historical information, this Management's Discussion and Analysis
includes certain forward-looking statements regarding events and financial
trends which may affect the Company's future operating results and financial
position. Such statements are subject to risks and uncertainties that could
cause the Company's actual results and financial position to differ materially.
Factors that could cause or contribute to such differences include those
discussed below. These and other risks and uncertainties related to the business
are described in detail in this report.  See "Business--Risk Factors."   Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. 

           The Company  is one of the largest full-service specialty retailers
in the United States focusing on a broad range of high-quality branded casual,
outdoor and adventure footwear. As of December 27, 1997, the Company operated
113 Track 'n Trail stores and 37 Overland Trading stores in 29 states. The
following discussion should be read in conjunction with the financial statements
and notes thereto of the Company included elsewhere in this report.   

          Comparable store sales are commonly used as a performance measurement
by retail companies. The Company defines comparable stores as those stores that
were open for the full fiscal period and for the full prior fiscal period. The
Company's comparable store net sales grew 0.6% in fiscal 1997, excluding the
acquired Overland Trading stores. Had the Overland Trading stores acquired by
the Company on October 25, 1996 been included in the Company's comparable store
net sales comparison since the acquisition, comparable store net sales would
have decreased by 2% in fiscal 1997. 

     Track 'n Trail-California was treated as an S corporation for federal 
and certain state income tax purposes from June 28, 1992, until its S 
corporation status terminated as a result of the Reorganization on October 7, 
1997 (the "Termination Date"). As a result, the earnings of  Track 'n 
Trail-California during such period were taxed, with certain exceptions, 
directly to the stockholders of Track 'n Trail-California rather than to 
Track 'n Trail-California. Thereafter, Track 'n Trail-California has been 
subject to state and federal income taxes as a C corporation, and all 
references to net income in this "Management's Discussion and Analysis of 
Financial Condition and Results of  Operations" are presented as if Track 'n 
Trail-California had been subject  to income taxes at a combined state and 
federal income tax rate of 40%. 

RESULTS OF OPERATIONS 

     The following table sets forth certain operating data as a percentage of
net sales for the periods indicated: 

<TABLE>
<CAPTION>
                                                          Fiscal     
                                            -----------------------------------
                                             1997          1996            1995
                                             ----          ----            ----
<S>                                         <C>           <C>             <C>
Net sales  . . . . . . . . . . . . . . .    100.0%        100.0%          100.0%
Cost of sales. . . . . . . . . . . . . .     51.9          51.4            51.7
                                            -----         -----           -----
Gross profit . . . . . . . . . . . . . .     48.1          48.6            48.3
Selling and marketing expenses . . . . .     33.5          31.8            33.2
                                            -----         -----           -----
Store contribution (1) . . . . . . . . .     14.6          16.8            15.1
Administrative and distribution
     expenses  . . . . . . . . . . . . .      7.5           8.3             9.5
                                            -----         -----           -----
Operating income   . . . . . . . . . . .      7.1           8.5             5.6
Interest expense . . . . . . . . . . . .      1.3           1.0             0.9
Other income . . . . . . . . . . . . . .     (0.0)         (0.0)           (0.1)
                                            -----         -----           -----
Income before income taxes
     and minority interest . . . . . . .      5.8           7.5             4.8
Pro forma income tax provision (2) . . .      2.3           3.0             1.9
     Minority interest . . . . . . . . .        -           0.2              - 
                                            -----         -----           -----
Pro forma net income (2) . . . . . . . .      3.5%          4.3%            2.9%
                                            -----         -----           -----
                                            -----         -----           -----

</TABLE>

(1)  Store contribution  refers to gross profit after deducting selling and
     marketing expenses. Store contribution is presented to provide additional
     information about the Company and is commonly used as a performance
     measurement by retail companies. Store contribution should not be
     considered in isolation or as a substitute for operating income, cash flow
     from operating activities and other income or cash flow data prepared in
     accordance with generally accepted accounting principles, or as a measure
     of the Company's profitability or liquidity. 

(2)  Reflects an assumed combined federal and state tax rate of 40%, which the
     Company believes approximates the statutory federal and state income tax
     rates that would have been applied had Track 'n Trail-California been taxed
     as a C corporation. From June 28, 1992, through the Termination Date, Track
     'n Trail-California operated as an S corporation and was not subject to
     federal and certain state income taxes. 


                                       15
<PAGE>

FISCAL 1997 COMPARED TO FISCAL 1996 

     NET SALES

     Net sales for fiscal 1997 were $91.8 million, an increase of $25.6 million,
or 38.7%,  over fiscal 1996 net sales of $66.2 million. The 37 Overland Stores
accounted for $17.9 million or 69.9% of the increase in net sales, while the 19
Track 'n Trail stores opened during the year accounted for an additional $3.2
million. A comparable store net sales increase of 0.6% for the Track 'n Trail
stores contributed $290,000 to the net sales gain. The remaining increase in net
sales of $4.2 million is primarily attributable to stores opened in fiscal 1996.
The modest comparable store net sales increase for the Track 'n Trail stores is
a result of lower than expected year-end holiday sales. 

     GROSS PROFIT

     Gross profit was $44.2 million in fiscal 1997, an  increase of  $12
million, or 37.3%, over the $32.2 million gross profit in fiscal 1996. Gross
profit as a percentage of net sales decreased to 48.1% in fiscal 1997 from 48.6%
in fiscal 1996. Gross profit at the Track 'n Trail stores in fiscal 1997 was
48.8% of net sales, a 0.2% margin improvement over the 48.6% gross profit as a
percentage of net sales in fiscal 1996. This increase was primarily attributable
to enhanced cumulative markups and lower markdowns. Overland's gross profit in
fiscal 1997 was $11.3 million, or 46.2% of net sales, which had a negative
impact on the consolidated gross profit as a percentage of net sales. The level
of gross profit as a percentage of net sales realized at the Overland Trading
stores represented an improvement over the 43.2% gross profit margin recorded by
Overland under previous management in the comparable period in 1996. This
improvement was due, in part, to increased purchasing economies of scale after
the acquisition of Overland. Management also believes that liquidity problems at
Overland contributed to Overland's low gross profit margin in the comparable
period in 1996. 

     SELLING AND MARKETING EXPENSES

     Selling and marketing expenses were $30.8 million in fiscal 1997, an
increase of $9.7 million, or 46.2%, over fiscal 1996. Overland accounted for
$6.7 million of the increase. The remaining $3 million increase is primarily
attributable to the 17 Track 'n Trail  stores opened in 1996 and the 19 Track 'n
Trail stores opened in 1997 which were not open for the full comparable period
in the prior year. As a percentage of net sales, selling and marketing expenses
increased to 33.5% in  fiscal 1997 from 31.8% in fiscal 1996, primarily as a
result of higher operating expenses as a percentage of net sales at Overland,
which were 34.1% of Overland's net sales in fiscal 1997. As a percentage of net
sales, selling and marketing expenses at the Track 'n Trail stores increased
slightly to 33.3% in fiscal 1997 from 32.6% in the comparable period in 1996,
primarily due to the timing of  new store openings. 

     ADMINISTRATIVE AND DISTRIBUTION EXPENSES

     Administrative and distribution expenses were $6.8 million in fiscal 1997,
an increase of $1.3 million, or 24.2%, over the $5.5 million recorded in fiscal
1996. Overland accounted for $1.2  million of the increase. The remaining 
$123,000  increase is attributable to increases in the Track 'n Trail staff  and
associated expenses as a result of the Company's expansion. As a percentage of
net sales, administrative and distribution expenses decreased to 7.5% in fiscal
1997 from 8.3% in fiscal 1996. In the absence of the Overland acquisition,
administrative and distribution expenses would have been 7.5% of Track 'n Trail
net sales, down from the 8.3% experienced in fiscal 1996, as a result of
spreading such expenses over a larger revenue base. 

     INTEREST EXPENSE
     
     Interest expense increased to $1.3 million, or 1.4% of net sales in fiscal
1997, from $670,000, or 1% of net sales, in fiscal 1996. This $590,000 increase
was primarily attributable to $421,000 of interest on the debt incurred in
connection with the Overland acquisition (all of which was repaid in October
1997), and $157,000 of interest on Overland's borrowings under its line of
credit. 


                                       16
<PAGE>

     NET INCOME

     The Company's net income in fiscal 1997 was $3.2 million, an increase from
the $2.9 million net income in fiscal 1996. The increase in net income is
attributable to the increase in net sales and the effect of the other factors
discussed above. 

FISCAL 1996 COMPARED TO FISCAL 1995

     NET SALES

     Net sales for fiscal 1996 were $66.2 million, an increase of $15.5 million,
or 30.7%, over fiscal 1995 net sales of $50.7 million. The 34 Overland Trading
stores accounted for $6.6 million of the increase in net sales since the
acquisition in October 1996, while the 17 Track 'n Trail stores opened during
the year accounted for an additional $6.2 million. These increases were
partially offset by a reduction in net sales of $1.8 million due to the closure
of five stores in 1996. These stores had net sales of only $117,000 in fiscal
1996 due to their closure, compared to net sales of $1.9 million in 1995. The
remaining increase in net sales of $4.4 million is primarily attributable to the
3.1% growth in comparable store net sales at Track 'n Trail stores and the
full-year benefit in fiscal 1996 of the stores opened during fiscal 1995. 

     GROSS PROFIT

     Gross profit was $32.2 million in fiscal 1996, an increase of $7.7 million,
or 31.3%, over the $24.5 million gross profit in fiscal 1995. Gross profit as a
percentage of net sales increased to 48.6% in fiscal 1996 from 48.3% in fiscal
1995. The increase as a percentage of net sales was primarily related to a
reduction in freight costs in fiscal 1996 due to shipping efficiencies. Gross
profit at Overland for the two months since the acquisition was $3.2 million, or
48.3% of net sales, which had a slightly negative impact on the consolidated
gross profit as a percentage of net sales in fiscal 1996. Nevertheless, Overland
generated a higher gross profit as a percentage of net sales for that two-month
period, which was during the Company's peak selling season, than it is expected
to produce for a full fiscal year. 

      SELLING AND MARKETING EXPENSES 

     Selling and marketing expenses were $21.1 million in fiscal 1996, an 
increase of $4.2 million, or 25%, over fiscal 1995. Overland accounted for 
$1.6 million of the increase, and $2.6 million of the remaining increase is 
primarily attributable to the net increase of 12 Track 'n Trail stores during 
the year. As a percentage of net sales, selling and marketing expenses 
decreased to 31.8% from 33.2% in fiscal 1995. In the absence of the Overland 
acquisition, selling and marketing expenses would have been $19.4 million, or 
32.5% of net sales, in fiscal 1996. This decrease in selling and marketing 
expense as a percentage of net sales was primarily attributable to the higher 
net sales at the Track 'n Trail stores. For the two months since the 
acquisition, Overland recorded selling and marketing expenses of $1.6 
million, or 24.8% of net sales. This level of selling and marketing expenses 
as a percentage of net sales is not indicative of Overland's anticipated 
performance for a full fiscal year because the acquisition occurred 
immediately prior to the Company's peak selling season. 

      ADMINISTRATIVE AND DISTRIBUTION EXPENSES

     Administrative and distribution expenses were $5.5 million in fiscal 
1996, an increase of $682,000, or 14.1%, over fiscal 1995. Such expenses 
decreased as a percentage of net sales to 8.3% in fiscal 1996 from 9.5% in 
fiscal 1995. The increase in administrative and distribution expenses from 
fiscal 1995 to 1996 was primarily attributable to increases in the Company's 
corporate staff as a result of the Company's expansion. The reduction in 
administrative and distribution expenses as a percentage of net sales was the 
result of spreading such expenses over a larger revenue base. In the absence 
of the Overland acquisition, administrative and distribution expenses would 
have been $4.9 million, or 8.3% of Track 'n Trail's net sales, in fiscal 
1996. The Company incurred $653,000 in legal and accounting expenses in 
fiscal 1995, primarily in defending itself and certain of its directors and 
executive officers in lawsuits filed by the Company's former Chairman of the 
Board. These lawsuits were subsequently resolved favorably. 

                                       17
<PAGE>

      INTEREST EXPENSE

     Interest expense increased to $670,000, or 1% of net sales, in fiscal 
1996, from $435,000, or 0.9% of net sales, in fiscal 1995. The increase is 
attributable to additional borrowings for store expansion as well as two 
months of interest on the Seller Notes and the Subordinated Note incurred in 
connection with the Overland acquisition. 

     MINORITY INTEREST

     The minority interest elimination of $105,000 represents the 21% 
interest in Overland net income owned by the Company's Pre-Offering 
Stockholders in fiscal 1996. No minority interest existed in fiscal 1995. 

     NET INCOME

     The Company's consolidated net income in fiscal 1996 would have been 
$2.5 million excluding the operations of Overland. This amount would have 
represented a 71.5% increase over fiscal 1995. Fiscal 1996 net income also 
reflects $477,000 in net income attributable to Overland from the acquisition 
of Overland in October 1996 through the end of fiscal 1996, partially offset 
by the $105,000 minority interest. On a consolidated basis, the Company's net 
income was $2.9 million in fiscal 1996, which represents a 97% increase over 
the net income of $1.5 million in fiscal 1995. 

                                       18
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

     The Company typically incurs losses in the first quarter, and derives a 
substantial percentage of its annual net sales and operating profitability 
during the "back-to-school" and year-end holiday periods. The table below 
sets forth quarterly operating data of the Company, including such data as a 
percentage of net sales for fiscal 1997 and fiscal 1996. This quarterly 
information is unaudited, but in management's opinion reflects all 
adjustments, consisting only of normal recurring adjustments, necessary for a 
fair presentation of the information for the periods presented when read in 
conjunction with the audited consolidated financial statements of the Company 
and notes thereto. The operating results for any quarter are not necessarily 
indicative of results for any future period. 

<TABLE>
<CAPTION>

                                                           FISCAL 1997                                 FISCAL 1996
                                         ------------------------------------------      -----------------------------------------
                                           First     Second       Third      Fourth        First    Second       Third     Fourth
                                          Quarter   Quarter      Quarter    Quarter       Quarter   Quarter     Quarter    Quarter
                                          ------    -------      -------    -------       -------   -------     -------    -------
<S>                                      <C>        <C>          <C>        <C>           <C>       <C>         <C>        <C>
                                                                   (In thousands, except per share data)
 Net sales   . . . . . . . . . . . . .   $16,867     $20,660     $24,761     $29,546     $10,249    $13,037     $16,581    $26,366
 Cost of sales . . . . . . . . . . . .     8,857      10,556      12,975      15,289       5,430      6,590       8,576     13,466
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Gross profit  . . . . . . . . . . . .     8,010      10,104      11,786      14,257     $ 4,819    $ 6,447     $ 8,005    $12,900
 Selling and marketing expenses  . . .     7,194       7,333       7,787       8,466       4,259      4,532       5,013      7,256
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Store contribution(1) . . . . . . . .       816       2,771       3,999       5,791        $560    $ 1,915     $ 2,992    $ 5,644
 Administrative and distribution                                                                                           
      expenses . . . . . . . . . . . .     1,780       1,664       1,777       1,619       1,180      1,137       1,151      2,040
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Operating income (loss) . . . . . . .   $  (964)    $ 1,107     $ 2,222     $ 4,172     $  (620)   $   778     $ 1,841    $ 3,604
 Interest expense  . . . . . . . . . .       289         442         440          89          91        149         146        284
 Other expense (income)  . . . . . . .       (10)         30         (26)        (15)        (15)         4          (3)       (10)
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Income (loss) before income
      taxes and minority interest  . .   $(1,243)    $   635     $ 1,808     $ 4,098     $  (696)   $   625     $ 1,698    $ 3,330
 Income tax provision (benefit)  . . .      (416)         44         125         365         (19)        17          51        439
 Minority interest . . . . . . . . . .        --          --          --          --          --         --          --        105
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Net income (loss) . . . . . . . . . .      (827)        591       1,683       3,733        (677)       608       1,647      2,786
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Historical earnings per share: 
      Basic  . . . . . . . . . . . . .   $ (0.20)    $  0.14       $0.41       $0.58     $ (0.16)   $  0.15     $  0.40      $0.68
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
      Diluted  . . . . . . . . . . . .   $ (0.19)    $  0.14       $0.39       $0.54     $ (0.16)   $  0.15     $  0.38      $0.65
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Historical income (loss) before income
      taxes and minority interest  . .    (1,243)        635       1,808       4,098        (696)       625       1,698      3,330
 Pro forma income tax provision  
      (benefit)  . . . . . . . . . . .      (497)        254         723       1,639        (278)       250         679      1,332
 Minority interest . . . . . . . . . .         -           -           -           -           -          -           -        105
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Pro forma net income (loss) (2) . . .   $  (746)       $381     $ 1,085     $ 2,459     $  (418)   $   375     $ 1,019    $ 1,893
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
 Pro forma earnings per share (3):
      Basic  . . . . . . . . . . . . .   $ (0.18)    $  0.09     $  0.26     $  0.38     $ (0.10)   $  0.09     $  0.25    $  0.46
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
      Diluted  . . . . . . . . . . . .   $ (0.15)    $  0.08     $  0.22     $  0.35     $ (0.08)   $  0.07     $  0.20    $  0.37
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------

                                                                    As a percentage of net sales
                                          ----------------------------------------------------------------------------------------
Net sales . . . . . . . . . . . . . . .    100.0%      100.0%      100.0%      100.0%      100.0%     100.0%     100.0%      100.0%
Cost of sales . . . . . . . . . . . . .     52.5        51.1        52.4        51.7        53.0       50.5       51.7        51.1
                                          ------     -------     -------     -------     -------    -------     -------    -------
Gross profit  . . . . . . . . . . . . .     47.5        48.9        47.6        48.3        47.0       49.5       48.3        48.9
Selling and marketing expenses  . . . .     42.7        35.5        31.5        28.7        41.5       34.8       30.3        27.5
                                          ------     -------     -------     -------     -------    -------     -------    -------
Store contribution(1) . . . . . . . . .      4.8        13.4        16.1        19.6         5.5       14.7       18.0        21.4
Administrative and distribution 
     expenses . . . . . . . . . . . . .     10.6         8.1         7.1         5.5        11.5        8.7        6.9         7.7
                                          ------     -------     -------     -------     -------    -------     -------    -------
Operating income (loss) . . . . . . . .     (5.8)        5.3         9.0        14.1        (6.0)       6.0        11.1       13.7
Interest expense  . . . . . . . . . . .      1.7         2.1         1.8         0.3         0.9        1.1         0.9        1.1
Other expense (income)  . . . . . . . .     (0.1)        0.1        (0.1)       (0.1)       (0.1)       0.1        (0.0)      (0.0)
                                          ------     -------     -------     -------     -------    -------     -------    -------
Income (loss) before income
     taxes and minority interest  . . .     (7.4)        3.1         7.3        13.9        (6.8)       4.8        10.2       12.6
Income tax provision (benefit)  . . . .     (2.5)        0.2         0.5         1.2        (0.2)       0.1         0.3        1.7
Minority interest . . . . . . . . . . .       --          --          --          --          --         --          --        0.4
Net income (loss) . . . . . . . . . . .     (4.9)%       2.9%        6.8%       12.7%       (6.6)%      4.7%        9.9%      10.5%
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
Historical income (loss)
     before income taxes and minority        
     interest . . . . . . . . . . . . .     (7.4)        3.1         7.3        13.9        (6.8)       4.8        10.2       12.6
Pro forma income tax provision 
   (benefit) . . . . . . . . . . . . . . .  (3.0)        1.3         2.9         5.6        (2.7)       1.9         4.1        5.1
Minority interest . . . . . . . . . . .       --          --          --          --          --         --          --        0.3
                                          ------     -------     -------     -------     -------    -------     -------    -------
Pro forma net income (loss)(2) . . . . .    (4.4)%       1.8%        4.4%        8.3%       (4.1%)      2.9%        6.1%       7.2%
                                          ------     -------     -------     -------     -------    -------     -------    -------
                                          ------     -------     -------     -------     -------    -------     -------    -------
</TABLE>

                                       19
<PAGE>
(1)  Store contribution refers to gross profit after deducting selling and
     marketing expenses. Store contribution is presented to provide additional
     information about the Company and is commonly  used as a performance
     measurement by retail companies. Store contribution should  not be
     considered in isolation or as a substitute for operating income, cash flow
     from operating activities and other income or cash flow data prepared in
     accordance with generally accepted accounting principles, or as a measure
     of the Company's profitability or liquidity. 

2)   Reflects an assumed combined federal and state tax rate of 40%, which the
     Company believes approximates the statutory federal and state income tax
     rates that would have been applied had Track 'n Trail-California been taxed
     as a C corporation. From June 28, 1992, through the Termination Date, Track
     'n Trail-California operated as an S corporation and was not subject to
     federal and certain state income taxes. 

(3)  Shares outstanding include approximately 327,000 and 94,000 shares issuable
     upon exercise of stock options outstanding at December 27, 1997 and
     December 28, 1996, respectively, after applying the treasury stock method.
     In applying the treasury stock method for determining the dilution
     applicable to stock options outstanding, the  incremental shares assumed
     issued (excess of shares assumed issued over the number of shares assumed  
     purchased) was determined using the sum of exercise proceeds, future
     compensation and the tax benefit to the Company upon exercise of the
     options as the assumed proceeds that would have been used to purchase
     shares at  the average value during the period. Average market value was
     based on estimated fair values for periods prior to the Offering and market
     prices thereafter. Distribution shares of approximately 421,000 included in
     pro forma diluted earnings per share for fiscal 1997 represents the number
     of shares of Common Stock sold in the Offering, the proceeds of which were
     necessary to pay the excess of S corporation distributions paid or declared
     during the twelve month period preceding the Offering over earnings during
     the twelve month period preceding the Offering. Distribution shares of
     approximately 828,000 included in pro forma diluted  earnings per share for
     fiscal 1996 represent the number of shares of  Common Stock sold in the
     Offering, the proceeds of which were necessary to pay the excess of S
     corporation distributions paid or declared during fiscal 1996 through the
     Offering  over  fiscal 1996 earnings. All warrants outstanding and certain
     options with exercise prices in excess of market value were not dilutive
     and, accordingly, were not included. 

     The Company anticipates that operating results will fluctuate as a result
of a number of factors, including seasonality, changes in pricing or promotion
policies by the Company, its competitors or its suppliers, the availability and
cost of merchandise, consumer acceptance of the products sold by the Company,
and the number and timing of store openings and closures. The availability and
cost of merchandise may, in turn, fluctuate due to a number of factors including
changes in the Company's relationships with major suppliers, the Company's
access to private label manufacturing capacity, foreign currency fluctuations
and other risks associated with importing private label products from foreign
countries. 

LIQUIDITY AND CAPITAL RESOURCES

     The Company had $21.9  million in working capital as of December 27, 1997, 
compared to $9.4 million at the end of fiscal 1996.  This increase is primarily
attributable to the reduction in debt and increase in cash due to the Offering
and the increase in inventories as a result of the 22 stores opened in 1997. The
Company's capital requirements relate primarily to working capital and the
build-out of new stores. The Company's working capital needs are somewhat
seasonal and typically peak in the second and fourth quarters. The peak in the
second quarter is due to the incurrence of operating losses in the first quarter
and increased inventory purchased for the Spring selling season. Working capital
needs peak in the fourth quarter due to increases in inventory in advance of the
holiday selling season, payments coming due for back-to-school merchandise and
construction payments on third-quarter store build-outs. In addition, the
Company requires incremental working capital to stock each new store upon
opening. The Company has historically opened the highest percentage of stores in
its third quarter;  however, in fiscal 1997, 14 of the 22 stores were opened in
the fourth quarter.  Seasonally strong holiday sales at the end of the fourth
quarter, and relatively low first-quarter inventory levels, typically reduce
working capital needs in the first quarter. 

     Historically, the Company has funded its cash requirements primarily
through cash flow from operations and borrowings under its bank credit
facilities.  Net cash used for operating activities for  fiscal 1997 was $1.3
million. Net cash provided by operating activities was $5.1 million and $3.4
million for 1996 and 1995, respectively. Net cash provided by/used for operating
activities has historically been driven by net income levels combined with
fluctuations in inventory and accounts payable. Inventory levels have increased
throughout these periods due to an increase in the number of stores. 


                                       20
<PAGE>

Inventories at the end of fiscal 1997 were $27.9 million compared to $19.9 
million at the end of fiscal 1996, an increase of  $8 million. The Company's 
average store inventories vary throughout the year and increase in advance of 
the peak selling periods of back-to-school and Christmas. The increase in 
inventories at fiscal 1997 year end was primarily related to opening 22 new 
stores, advantageous purchases from key vendors and early deliveries of 
spring merchandise, as well as lower than expected Christmas sales.  

     Capital expenditures excluding the cost of acquisitions were $2.3 million,
$1.7 million and $1.6 million in fiscal 1997, 1996 and 1995, respectively.
Expenditures in  fiscal 1997 were primarily for the build-out of 22  new stores
of which 6 are temporary locations to be completed in 1998,  as well as the
completion of three stores opened in 1996. Expenditures in fiscal 1996 were
primarily for the build-out of 14 of the 17 Track 'n Trail stores that were
opened in fiscal 1996, plus the remodeling of two existing stores. The full
build-outs of the other three Track 'n Trail stores opened in fiscal 1996 were
delayed until fiscal 1997. These build-outs were completed in the first quarter
of fiscal 1997. Expenditures in fiscal 1995 were primarily for the build-out of
12 of the new stores opened, plus the remodeling of four existing stores. 

     Financing activities provided cash of $5 million in fiscal 1997.   The
Company used cash of  $2.7 million and $1.7 million in financing activities in
fiscal  1996 and 1995,  respectively. Cash was used in financing activities
primarily for advances and distributions to stockholders and repayment of
long-term debt, primarily financed by borrowings under the Company's then
existing revolving loan agreement (Revolving Loan Agreement). The Company has
historically paid distributions to its stockholders as a result of the Company's
status as an S corporation prior to the Reorganization. During fiscal 1997, 1996
and 1995,  the Company made S corporation distributions to stockholders of  $8.8
million  (including the $6.4 million distribution to the Pre-Offering
Stockholders paid from a portion of the Company's proceeds from the Offering),  
$3.1 million and $376,000, respectively.  Under an agreement entered in
connection with the Offering, the Company may make payments to the Pre-Offering
Stockholders to satisfy certain tax liabilities with respect to
pre-Reorganization tax periods resulting from adjustments to the Company's tax
returns. In addition, under certain circumstances, the Pre-Offering Stockholders
may make payments to the Company to satisfy any tax liabilities (i) resulting
from an unexpected pre-Reorganization loss of S corporation status and/or
(ii) with respect to post-Reorganization taxable periods for which the
Pre-Offering Stockholders receive a tax benefit, provided that the indemnity
provided by the Pre-Offering  Stockholders will be limited to any federal and
state refunds they receive as a result of a loss of S corporation status or
other tax adjustments for such taxable periods.  On October 16, 1997 the Company
consummated its initial public offering which generated $25 million in net
proceeds. The proceeds were utilized to repay all outstanding indebtedness under
the Revolving Loan Agreement ($10.2 million) and other debt totaling $7.5
million and to make the $6.4 million distribution to the Pre-Offering
Stockholders. 

     In connection with the Offering, Track 'n Trail-California and Overland put
into place a new two-year, $10 million revolving line of credit with Union Bank
of California. This credit facility is guaranteed by the Company. The line of
credit bears interest at the option of the Company at either the bank's
reference rate or the London Inter-Bank Offered Rate plus 2%, and is
collateralized by all of the Company's assets. Of the $10 million available
under this facility, up to $1.5 million may be allocated to letters of credit
with durations of up to 180 days. Advances under the revolving line of credit
are limited to 50% of eligible inventory, subject to reduction by any amounts
outstanding under letters of credit. The new credit facility prohibits the
Company from paying dividends without the bank's consent and limits the
Company's capital expenditures to $5 million in 1997, $8 million in 1998 and $10
million in 1999. In addition, the new credit facility requires the Company to
meet certain financial covenants, including minimum financial ratios and
profitability tests. As of December 27, 1997, no amount was outstanding under
the credit facility.

     As part of its growth strategy, the Company plans to pursue opportunities
to acquire complementary businesses, although no such transactions are being
negotiated as of the date of this filing. To the extent that the foregoing cash
resources are insufficient to fund the purchase price of future acquisitions, if
any, or the operations of any acquired business, additional external capital may
be required. There can be no assurance that additional financing will be
available on reasonable terms or at all. 

     Management believes that operating cash flow and borrowings under its
credit facilities will be sufficient to complete the Company's  fiscal 1998
store expansion program and to satisfy the Company's other capital requirements
through  fiscal 1998. The Company's capital requirements may vary significantly
from those anticipated depending upon such factors as operating results, the
number and timing of new store openings, and the number and size of any future
acquisitions. 

IMPACT OF INFLATION

     Management does not believe that inflation has had a material adverse
effect on the Company's results of operations. However, the Company cannot
predict accurately the effect of inflation on future operating results. 


                                       21
<PAGE>

YEAR 2000

     The Company is aware of the issues that many computer systems will face as
the millennium (year 2000) approaches. The Company has identified its internal
software and hardware that is subject to year 2000 compliancy and has created a
plan to help ensure such software and hardware is compliant by the year 2000.
The Company estimates that the cost of pursuing this plan will total less than
$150,000 in fiscal 1998; however, there can be no assurance that actual costs of
implementing the plan will not exceed this amount. The Company believes that any
year 2000 problems encountered by third parties with whom the Company deals will
be resolved and  are not likely to have a material adverse effect on the 
Company's operations. The Company anticipates no other year 2000 problems which
are reasonably likely to have a material adverse effect on the Company's
operations or financial position. There can be no assurance, however, that such
problems will not arise. 

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 130, REPORTING COMPREHENSIVE INCOME, which establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. This pronouncement is effective for fiscal 1998 and reclassification
of financial statements for earlier periods for comparative purposes is
required. Management is in the process of determining the impact of the new
pronouncement. 

     In June 1997, the FASB issued Statement No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION, which requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that public business
enterprises report certain information about their products and services, the
geographic areas in which they operate, and their major customers. This
statement is effective for fiscal 1998.  Management is in the process of
determining the impact of the new pronouncement. 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 
                                                                                   Page
<S>                                                                                <C>
Report of independent accountants.                                                   23

Consolidated balance sheets as of December 27, 1997 and December 28, 1996.           24

Consolidated statements of operations for each of the three fiscal years in the
period ended December 27, 1997.                                                      25

Consolidated statements of changes in stockholders' equity for each of the three
fiscal years in the period ended December 27, 1997.                                  26

Consolidated statements of cash flows for each of the three fiscal years in the
period ended December 27, 1997.                                                      27

Notes to financial statements.                                                       28

</TABLE>

                                  -22-

<PAGE>

                                [LETTERHEAD]


                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
  and Stockholders
Track 'n Trail and Subsidiaries
El Dorado Hills, California

We have audited the accompanying consolidated balance sheets of Track 'n Trail
and Subsidiaries as of December 27, 1997 and December 28, 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the fiscal years ended December 27, 1997, December 28, 1996
and December 30, 1995.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Track 'n Trail
and Subsidiaries as of December 27, 1997 and December 28, 1996, and the
consolidated results of their operations and their cash flows for each of the
fiscal years ended December 27, 1997, December 28, 1996 and December 30, 1995,
in conformity with generally accepted accounting principles.


                                        /s/ Coopers & Lybrand L.L.P.


Sacramento, California
February 24, 1998


                                   -23-
<PAGE>

                        TRACK 'N TRAIL AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

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

<TABLE>
<CAPTION>
                                                        DECEMBER 27,   DECEMBER 28,
                                                            1997           1996
                                                        ------------   ------------
<S>                                                        <C>            <C>
                        ASSETS

Current assets:                                         
  Cash and cash equivalents                                $ 2,383        $   977
  Accounts receivable                                        1,540          1,010
  Inventories                                               27,852         19,868
  Prepaid expenses                                             311            212
  Deferred income taxes                                        317             49
                                                           -------        -------
      Total current assets                                  32,403         22,116

Fixed assets, net                                            7,284          6,582
Goodwill, net                                                3,084          2,691
Deferred income taxes                                        1,362            469
                                                           -------        -------
                                                           $44,133        $31,858
                                                           -------        -------
                                                           -------        -------
         LIABILITIES AND STOCKHOLDERS' EQUITY                    

Current liabilities:                                    
  Revolving line of credit                                 $    --        $   680
  Current maturities of long-term debt                         116          3,060
  Accounts payable                                           6,958          5,836
  Accrued payroll and bonuses                                  668          1,032
  Sales tax payable                                            874            752
  Income taxes payable                                       1,089            476
  Accrued expenses and other liabilities                       802            851
                                                           -------        -------
      Total current liabilities                             10,507         12,687

Deferred rent                                                1,424          1,395
Long-term debt, net of current maturities                      120          7,025
                                                           -------        -------
      Total liabilities                                     12,051         21,107
                                                           -------        -------
Minority interest in consolidated subsidiary                    --            105
                                                           -------        -------
Commitments and contingencies (Notes 8 and 14).         

Stockholders' equity:                                   
  Preferred stock, $0.01 par value; 2,000,000 shares    
    authorized; no shares issued or outstanding                 --           --  
  Common stock, $0.01 par value; 20,000,000 shares      
    authorized; 6,839,811 and 4,107,608 shares issued     
    and outstanding at December 27, 1997 and              
    December 28, 1996, respectively                             68             41
  Additional paid-in capital                                25,772            724
  Retained earnings                                          6,242          9,881
                                                           -------        -------
      Total stockholders' equity                            32,082         10,646
                                                           -------        -------
                                                           $44,133        $31,858
                                                           -------        -------
                                                           -------        -------
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                     -24-

<PAGE>

                        TRACK 'N TRAIL AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

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

<TABLE>
<CAPTION>
                                                                FISCAL YEAR ENDED
                                                   -----------------------------------------
                                                   DECEMBER 27,  DECEMBER 28,  DECEMBER 30,
                                                       1997          1996          1995
                                                   ------------  ------------  ------------
<S>                                                  <C>            <C>            <C>
Net sales                                            $91,834        $66,233        $50,691

Cost of sales                                         47,677         34,062         26,192
                                                     -------        -------        -------
  Gross profit                                        44,157         32,171         24,499
                                                     -------        -------        -------
Operating expenses:
  Selling and marketing                               30,780         21,060         16,852
  Administrative and distribution                      6,840          5,508          4,826
                                                     -------        -------        -------
    Total operating expenses                          37,620         26,568         21,678
                                                     -------        -------        -------
    Operating income                                   6,537          5,603          2,821

Other (income) expense:
  Interest                                             1,260            670            435
  Other, net                                             (21)           (24)           (41)
                                                     -------        -------        -------
    Income before provision for income taxes
      and minority interest                            5,298          4,957          2,427

Provision for income taxes                               118            488             41
                                                     -------        -------        -------
    Income before minority interest                    5,180          4,469          2,386

Minority interest in net income of consolidated
  subsidiaries                                            --            105             --
                                                     -------        -------        -------
    Net income                                       $ 5,180        $ 4,364        $ 2,386
                                                     -------        -------        -------
                                                     -------        -------        -------
Historical earnings per share:
  Basic                                              $  1.10        $  1.06        $  0.58
                                                     -------        -------        -------
                                                     -------        -------        -------
  Diluted                                            $  1.03        $  1.04        $  0.58
                                                     -------        -------        -------
                                                     -------        -------        -------
Pro forma income data (unaudited):
  Historical income before income
    taxes and minority interest                      $ 5,298        $ 4,957        $ 2,427
  Pro forma income tax provision                       2,119          1,983            971
                                                     -------        -------        -------
  Pro forma income before minority interest            3,179          2,974          1,456
  Minority Interest                                       --            105             --
                                                     -------        -------        -------
      Pro forma net income                           $ 3,179        $ 2,869        $ 1,456
                                                     -------        -------        -------
                                                     -------        -------        -------
  Pro forma earnings per share:
    Basic                                            $  0.68        $  0.70
                                                     -------        -------
                                                     -------        -------
    Diluted                                          $  0.58        $  0.57
                                                     -------        -------
                                                     -------        -------
</TABLE>

    The accompanying notes are an integral part of these financial statements.

                                     -25-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY  
                                 (IN THOUSANDS)

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

<TABLE>
<CAPTION>
                                                                                  NOTES
                                                                                RECEIVABLE
                                               COMMON STOCK         ADDITIONAL     FROM
                                            --------------------      PAID-IN     RELATED     RETAINED
                                             NUMBER       AMOUNT      CAPITAL     PARTIES     EARNINGS     TOTAL
                                            ---------     ------      -------     -------     --------     -----
<S>                                         <C>            <C>          <C>       <C>          <C>        <C>
Balance, December 31, 1994                  4,107,608        $41         $24      $  (358)     $ 6,642    $ 6,349
                                                                                 
  Cash advances to stockholders and                                              
    related party                                  --         --          --         (711)          --       (711)
                                                                                 
  Distibutions to stockholders                     --         --          --           --         (376)      (376)
                                                                                 
  Net income                                       --         --          --           --        2,386      2,386
                                            ---------        ---     -------       ------      -------    -------
Balance, December 30, 1995                  4,107,608         41          24       (1,069)       8,652      7,648
                                                                                 
  Cash advances to stockholders                    --         --          --         (591)          --       (591)
                                                                                 
  Distribution of notes to stockholders            --         --          --        1,660       (1,660)        --
                                                                                 
  Distributions to stockholders                    --         --          --           --       (1,475)    (1,475)
                                                                                 
  Exchange of stock appreciation rights                                          
    for stock option grants                        --         --         597           --           --        597
                                                                                 
  Compensation recorded under stock                                              
    option plans                                   --         --         103           --           --        103
                                                                                 
  Net income                                       --         --          --           --        4,364      4,364
                                            ---------        ---     -------       ------      -------    -------
Balance, December 28, 1996                  4,107,608         41         724           --        9,881     10,646
                                                                                 
  Issuance of common stock upon                                                  
    initial public offering, net of                                                
    offering costs of $3,649                2,727,272         27      24,961           --           --     24,988
                                                                                 
  Issuance of common stock upon                                                  
    excercise of options                        4,931         --          20           --           --         20
                                                                                 
  Distributions to stockholders                    --         --          --           --       (8,819)    (8,819)
                                                                                 
  Compensation recorded under stock                                              
    option plans                                   --         --          67           --           --         67
                                                                                 
  Net income                                       --         --          --           --        5,180      5,180
                                            ---------        ---     -------       ------      -------    -------
Balance, December 27, 1997                  6,839,811        $68     $25,772       $   --      $ 6,242    $32,082
                                            ---------        ---     -------       ------      -------    -------
                                            ---------        ---     -------       ------      -------    -------
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      -26-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

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

<TABLE>
<CAPTION>
                                                                   FISCAL YEAR ENDED
                                                       ------------------------------------------
                                                       DECEMBER 27,   DECEMBER 28,   DECEMBER 30,
                                                           1997          1996           1995
                                                       ------------   ------------   ------------
<S>                                                       <C>            <C>         <C>
Cash flows from operating activities:
  Net income                                              $  5,180     $  4,364    $  2,386
  Adjustments to reconcile to cash provided by
   operating activities:
    Depreciation and amortization                            1,743        1,121         919
    Minority interest                                           --          105          --
    Compensation recorded under stock
     option plans                                               67          103          --
    Deferred income taxes                                   (1,161)          81          22
    Cash provided by (used for) changes in
     operating assets and liabilities, net of
      effects of business combination in 1996:
      Accounts receivable                                     (530)        (375)        (73)
      Inventories                                           (7,984)      (1,008)       (612)
      Prepaid expenses                                         (99)          88         (10)
      Accounts payable and other accrued liabilities           831          281         453
      Income taxes payable                                     613          291          --
      Stock appreciation rights                                 --           12         196
      Deferred rent                                             29           42          86
                                                          --------     --------    --------

      Cash (used for) provided by operating activities      (1,311)       5,105       3,367
                                                          --------     --------    --------

Cash flows from investing activities:
  Purchases of fixed assets                                 (2,306)      (1,721)     (1,604)
  Proceeds from sale of fixed assets                            27           --          --
  Cash paid for business combination                            --         (240)         --
                                                          --------     --------    --------

      Cash used for investing activities                    (2,279)      (1,961)     (1,604)
                                                          --------     --------    --------

Cash flows from financing activities:
  Bank line of credit:
    Borrowings                                              44,819       31,154      20,906
    Repayments                                             (45,499)     (33,484)    (20,626)
  Long-term debt:
    Borrowings                                                  --        2,487         767
    Repayments                                             (10,513)        (748)       (709)
  Advances to related parties under notes
   receivable                                                   --         (591)       (711)
  Net proceeds from issuance of common stock                24,988           --          --
  Proceeds from exercise of stock options                       20           --          --
  Payment of distributions to stockholders                  (8,819)      (1,474)     (1,328)
                                                          --------     --------    --------

      Cash provided by (used for) financing activities       4,996       (2,656)     (1,701)
                                                          --------     --------    --------

      Increase in cash                                       1,406          488          62

Cash, beginning of year                                        977          489         427
                                                          --------     --------    --------

Cash, end of year                                         $  2,383       $  977      $  489
                                                          --------     --------    --------
                                                          --------     --------    --------

</TABLE>

    The accompanying notes are an integral part of these financial statements.

                                     -27-

<PAGE>
  
                         TRACK 'N TRAIL AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 -----------


1. SIGNIFICANT ACCOUNTING POLICIES:

                                  BACKGROUND
                                       
   Track 'n Trail, a Delaware corporation (Company), is the successor to
   businesses formerly conducted by Track 'n Trail, a California corporation
   (Track 'n Trail-California), and its subsidiary, Overland Management
   Corporation (Overland).  In connection with the formation of the Company,
   the Company issued an aggregate of 40,816 shares of its common stock to
   existing stockholders of Track 'n Trail-California.  A reorganization of
   Track 'n Trail-California (the Reorganization) was effected on October 7,
   1997, in which the Track 'n Trail-California stockholders exchanged 100% of
   their Track 'n Trail-California common stock for 4,107,608 shares of the
   Company's common stock, inclusive of the 40,816 shares of the Company's
   common stock issued upon formation.  The Reorganization, which was accounted
   for in a manner similar to a pooling-of-interests, was accomplished in an
   exchange of approximately 100 shares of the Company's common stock for each
   share of Track 'n Trail-California common stock.  In connection with the
   Reorganization, all of the common stock of Overland was transferred to the
   Company in the form of a dividend resulting in the predecessor businesses
   being wholly owned subsidiaries of the Company.  The accompanying financial
   statements reflect, for all periods presented, the capital structure and
   number of shares that are outstanding as a result of the Reorganization.
   Accordingly, all references to the number of common and common equivalent
   shares and to per share information in the consolidated financial statements
   have been adjusted to reflect the capital structure resulting from the
   Reorganization on a retroactive basis for all periods presented.
   
   The Company is a retailer of footwear and related accessories.  As of
   December 27, 1997 and December 28, 1996, the Company operated 150 and 128
   stores in 29 and 23 states, respectively, under the Track 'n Trail and
   Overland Trading names concentrated in California, the Midwest and the
   Northeast.  Each store offers a wide range of rugged walking and fashion
   casual shoes, sandals and boots.  The Company ends its fiscal year on the
   last Saturday in December.
   
   The Company operates in a single business segment of retailing footwear and
   related accessories.  The Company acquires its shoes from a number of
   manufacturers; however, during the fiscal years ended December 27, 1997 and
   December 28, 1996, 42.9% and 39.7%, respectively, of the Company's net sales
   was of products purchased from three manufacturers.
   
                            INITIAL PUBLIC OFFERING
                                       
   On October 16, 1997, the Company completed its initial public offering
   (Offering) of its common stock.  In connection with the Offering, the
   Company issued 2,727,272 shares of common stock and received net proceeds of
   $24,988,000, net of underwriting discounts and offering expenses.
   

                                     -28-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------


1. SIGNIFICANT ACCOUNTING POLICIES, continued:

   Upon closing of the Offering, the Company's nonqualified and incentive 
   stock options vested, resulting in a non-cash compensation charge reducing 
   net income by $33,000, after netting the related income tax effect of 
   $22,000.

   Certain notes payable, which had an aggregate balance of approximately 
   $17.7 million at the Offering became due and payable upon closing of the 
   Offering. The Company used a portion of its proceeds of the Offering to 
   retire these obligations.

   During 1997, Track 'n Trail-California declared distributions to its 
   stockholders of substantially all previously undistributed accumulated S 
   corporation earnings remaining at the date of the Reorganization.  Of such 
   distributions, $6,400,000 were paid from a portion of the Company's 
   proceeds from the Offering.

                          PRINCIPLES OF CONSOLIDATION
                                       
   The financial statements include the consolidated accounts of the Company 
   and its two subsidiaries, Track 'n Trail-California and Overland.  
   Overland became a 79.0% owned subsidiary on October 25, 1996, and a wholly 
   owned subsidiary effective January 1, 1997 (Note 13).  All intercompany 
   transactions and balances have been eliminated in consolidation.

                           CASH AND CASH EQUIVALENTS
                                       
   Cash and cash equivalents include demand deposits, money market accounts 
   and all highly liquid investments with an original maturity of three 
   months or less.

                                  INVENTORIES
                                       
   Inventories are stated at lower of cost, retail method, or market.

                                 FIXED ASSETS
                                       
   Fixed assets are stated at cost and depreciated on the straight-line 
   method over the assets' estimated useful lives ranging from three to ten 
   years; the cost of leasehold improvements are amortized over the shorter 
   of the lease term or useful life of the related assets.  When assets are 
   retired or otherwise disposed of, the cost and related accumulated 
   depreciation are removed from the accounts and any resulting gain or loss 
   is reflected in income for the period. The cost of maintenance and repairs 
   is charged to income as incurred; significant renewals and betterments are 
   capitalized.

                                      -29-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------


1.   SIGNIFICANT ACCOUNTING POLICIES, continued:

                            STORE PRE-OPENING COSTS
                                       
   Costs of a noncapital nature incurred prior to store openings are expensed 
   as incurred.

                                   GOODWILL
                                       
   Goodwill represents the excess of the purchase price over the fair value 
   of the net assets of acquired companies and is being amortized using the 
   straight-line method over 20 years.

                               MINORITY INTEREST
                                       
   Minority interest represents the minority stockholders' proportionate 
   share of the equity of Overland, including their share of Overland's net 
   income during the period from October 25, 1996 to December 28, 1996.  At 
   December 28, 1996, Track 'n Trail-California owned 79.0% of the common 
   stock of Overland and Track 'n Trail-California's stockholders owned the 
   21.0% minority interest. Effective January 1, 1997, Track 'n 
   Trail-California acquired the remaining 21.0% interest in Overland (Note 
   13).

                                 INCOME TAXES
                                       
   Commencing June 28, 1992, and until the Reorganization, Track 'n 
   Trail-California had elected S corporation status for federal income taxes 
   and most state income taxes.  Overland is a C corporation for federal and 
   state income tax purposes.  Under S corporation status, Track 'n 
   Trail-California's income, other than that of Overland, was taxable to its 
   stockholders personally, with only minimal state income taxes charged to 
   Track 'n Trail-California.

   Upon completion of the Reorganization in October 1997, Track 'n 
   Trail-California converted from an S corporation to a C corporation under 
   provisions of the Internal Revenue Code and state statutes and, 
   accordingly, became subject to federal and state income tax on all of its 
   income.  Upon termination of the S corporation election, deferred income 
   taxes of $1,324,000, representing the net tax effect of differences 
   between Track 'n Trail-California's financial statement and tax bases in 
   certain assets and liabilities, became a net asset and was included in the 
   consolidated balance sheet with a corresponding non-recurring decrease in 
   tax expense in the consolidated statement of operations as of the date of 
   the Reorganization. Such deferred tax assets relate primarily to 
   differences in the financial statement and tax bases of fixed assets and 
   inventory and the effect of rent and stock compensation plan deductions 
   for accounting, but not tax, purposes.

                                     -30-


<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

1. SIGNIFICANT ACCOUNTING POLICIES, continued:

   Pro forma net income (unaudited) has been computed to include a provision 
   for income taxes at an effective tax rate of 40.0% representing 
   management's estimate of the effective tax rate as if the Reorganization 
   had been in effect and Track 'n Trail-California had been a C corporation 
   for all periods presented.

   The Company accounts for income taxes under the provisions of Statement of 
   Financial Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME 
   TAXES, using the liability method.  The estimated future tax effect of 
   differences between the basis in assets and liabilities for tax and 
   accounting purposes is accounted for as deferred taxes.  In accordance 
   with the provisions of SFAS No. 109, a valuation allowance would be 
   established to reduce deferred tax assets if it were more likely than not 
   that all, or some portion, of such deferred tax assets would not be 
   realized.  No allowance against deferred tax assets was provided as of 
   December 27, 1997 or December 28, 1996.

                                 STOCK OPTIONS
                                       
   As permitted by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the 
   Company has elected to measure and record compensation costs relative to 
   stock option and purchase plans in accordance with the provisions of 
   Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK 
   ISSUED TO EMPLOYEES, and make pro forma disclosure of net income and 
   earnings per share as if the fair value based method of valuing stock 
   options had been applied.

                                 RENT EXPENSE
                                       
   Rent expense is recognized on a straight-line basis over the respective 
   lease term.  Rents accrued but not contractually due are reported as 
   deferred rent. Contingent rental expense, based on store sales, is 
   recognized when incurred.

                                   ESTIMATES
                                       
   The preparation of financial statements in conformity with generally 
   accepted accounting principles requires management to make estimates and 
   assumptions that affect the reported amounts of assets and liabilities and 
   disclosure of contingent assets and liabilities at the date of the 
   financial statements and the reported amount of revenues and expenses 
   during the reporting period. Actual results could differ from those 
   estimates.

                                      -31-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------


2. EARNINGS PER SHARE:

   Effective December 27, 1997, the Company adopted the provisions of 
   Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER 
   SHARE, which was effective for accounting periods ending after December 
   15, 1997.  SFAS No. 128 and related recently released positions of the 
   staff of the Securities and Exchange Commission changed the method of 
   calculating earnings per share and require a dual presentation of basic 
   and diluted earnings per share.  In accordance with the provisions of SFAS 
   No. 128, historical and pro forma earnings per share information for all 
   periods presented have been restated to the methodology and disclosures 
   specified in SFAS No. 128.

   A reconciliation of the numerators and denominators of the basic and 
   diluted earnings per share computations under SFAS No. 128 is as follows 
   (in thousands, except per share information):

<TABLE>
<CAPTION>
                                                             HISTORICAL EARNINGS PER SHARE
                                                           ----------------------------------
                                                             1997         1996        1995
                                                           ---------   ----------   ---------
  <S>                                                       <C>         <C>          <C>
  Income available to common stockholders (net income)
   for basic and diluted earnings per share                 $5,180      $4,364       $2,386
                                                            ------      ------       ------
                                                            ------      ------       ------

  Shares for basic earnings per share                        4,700       4,108        4,108

  Dilutive effect of stock options (treasury stock method)     327          94           --
                                                            ------      ------       ------
  Shares for diluted earnings per share                      5,027       4,202        4,108
                                                            ------      ------       ------
                                                            ------      ------       ------
  Basic earnings per share                                  $ 1.10      $ 1.06       $ 0.58
                                                            ------      ------       ------
                                                            ------      ------       ------
  Diluted earnings per share                                $ 1.03      $ 1.04       $ 0.58
                                                            ------      ------       ------
                                                            ------      ------       ------

<CAPTION>

                                                             PRO FORMA EARNINGS
                                                            PER SHARE (UNAUDITED)
                                                           ----------------------
                                                              1997        1996
                                                           ---------   ----------
  <S>                                                       <C>          <C>
  Income available to common stockholders (pro forma net
   income) basic and diluted earnings per share             $3,179       $2,869
                                                            ------       ------
                                                            ------       ------
  Shares for basic earnings per share                        4,700        4,108
  Dilutive effect of stock options (treasury stock method)     327           94
  Distribution shares                                          421          828
                                                            ------       ------
  
  Shares for diluted earnings per share                      5,448        5,030
                                                            ------       ------
                                                            ------       ------
  Basic earnings per share                                  $ 0.68       $ 0.70
                                                            ------       ------
                                                            ------       ------
  Diluted earnings per share                                $ 0.58       $ 0.57
                                                            ------       ------
                                                            ------       ------

</TABLE>

                                     -32-


<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

2. EARNINGS PER SHARE, continued:

   All warrants outstanding and certain options with exercise prices in 
   excess of market value were not dilutive and, accordingly, were not 
   included in the weighted average number of common and common equivalent 
   shares outstanding.

   In applying the treasury stock method for determining the dilution 
   applicable to stock options outstanding, the incremental shares assumed 
   issued (excess of shares assumed issued over the number of shares assumed 
   purchased) was determined using the sum of exercise proceeds, future 
   compensation and tax benefit to the Company upon exercise of the options 
   as the assumed proceeds that would have been used to purchase shares at 
   the average value during the period.  Average market value was based on 
   estimated fair values for periods prior to the Offering and market prices 
   thereafter.

   Distribution shares included in weighted average common shares outstanding 
   used to compute pro forma diluted earnings per share (unaudited) for 
   fiscal 1997 represents the weighted number of shares of common stock sold 
   in the Offering, the net proceeds of which were necessary to pay the 
   excess of S corporation distributions paid or declared during the twelve 
   month period preceding the Offering over earnings during the twelve month 
   period preceding the Offering. Distribution shares included in the 
   computation of pro forma diluted earnings per share (unaudited) for the 
   fiscal 1996 represents the number of shares of common stock sold in the 
   Offering, the proceeds of which would be necessary to pay the excess of S 
   corporation distributions paid or declared during fiscal 1996 and 
   thereafter until the consummation of the Offering over earnings during 
   fiscal 1996.

3. CONCENTRATION OF CREDIT RISK:

   Cash and cash equivalents include cash balances and all highly liquid 
   investments with an original maturity of three months or less at the date 
   of purchase.  Cash deposits periodically exceed the Federal Deposit 
   Insurance Corporation insured limit of $100,000 for each account.

                                     -33-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

4. FIXED ASSETS:

   Fixed assets consist of (in thousands):

<TABLE>
<CAPTION>
                                                     DECEMBER 27,    DECEMBER 28,
                                                        1997            1996
                                                     ------------    ------------
<S>                                                  <C>             <C> 
     Leasehold improvements                            $ 8,645         $ 7,237
     Furniture, fixtures and equipment                   4,493           3,671
     Vehicles                                               --              16
                                                       -------         -------
                                                        13,138          10,924

     Less accumulated depreciation                      (5,854)         (4,342)
                                                       -------         -------
       Fixed assets, net                               $ 7,284         $ 6,582
                                                       -------         -------
                                                       -------         -------
</TABLE>

   Depreciation expense for fiscal years 1997, 1996 and 1995, was $1,579,000, 
   $1,098,000 and $916,000, respectively.

5. REVOLVING LINE OF CREDIT AND LONG-TERM DEBT:

   In 1997 and 1996, the Company had a revolving loan agreement (Revolving 
   Loan Agreement) which was paid in full from a portion of the proceeds of 
   the Offering.

   Upon the consummation of the Offering, the Company obtained a $10.0 
   million revolving line of credit (Revolving Line) from a bank, which is 
   due October 1999.  Of the total amount available under the line, up to 
   $1.5 million may be allocated to letters of credit.  Advances under the 
   Revolving Line, including outstanding letters of credit (of which $857,000 
   were issued at December 27, 1997), are limited to a percentage of eligible 
   inventory.  Available additional borrowings under the Revolving Line were 
   approximately $9.1 million at December 27, 1997.  Borrowings under the 
   Revolving Line are collateralized by substantially all of the Company's 
   assets.

   The Revolving Line bears interest, at the option of the Company, at either 
   the bank's reference rate (8.50% at December 27, 1997) or LIBOR (5.91% at 
   December 27, 1997), plus 2.0%, payable monthly.  The weighted average 
   interest rates for fiscal years 1997, 1996 and 1995, were 8.94%, 8.77% and 
   9.40%, respectively.

                                     -34-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

5. REVOLVING LINE OF CREDIT AND LONG-TERM DEBT, continued:

   The Revolving Line requires the Company to meet certain financial 
   covenants including minimum financial ratios, limits on dividends and 
   acquisitions of capital assets.

   Long-term debt consists of (in thousands):

<TABLE>
<CAPTION>
                                                       DECEMBER 27,   DECEMBER 28,
                                                           1997           1996
                                                       ------------   ------------
<S>                                                       <C>            <C> 
     Bank term loan under Revolving Loan
       Agreement, repaid in 1997                          $  --          $ 2,700
     Subordinated promissory note, repaid in 1997            --            3,500
     Subordinated promissory notes, repaid in 1997           --            2,494
     Term note, repaid in 1997                               --              967
     Auto loans, repaid in 1997                              --               20
     Construction notes to store lessors, interest
       ranging from 9% to 12%, without collateral,
       due at various dates through 2000                     74              185
     Promissory note, interest at 9.36%, collateralized
       by leasehold improvements, due 2000                  162              219
                                                          -----          -------
         Total                                              236           10,085

         Less current portion                              (116)          (3,060)
                                                          -----          -------
         Long-term portion                                $ 120          $ 7,025
                                                          -----          -------
                                                          -----          -------
</TABLE>

   Scheduled maturities of long-term debt at December 27, 1997, are as 
   follows (in thousands):


              1998                                 $116
              1999                                   84
              2000                                   36
                                                   ----
                Total                              $236
                                                   ----
                                                   ----

                                      -35-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

6. STOCK OPTION AND PURCHASE PLANS:

                           STOCK APPRECIATION RIGHTS
                                       
   Until canceled on July 1, 1996, the Company had granted stock appreciation 
   rights to certain key employees, which were measured and were vesting over 
   the period from 1992 to 1997.  Under the agreements, the employees were to 
   receive certain percentages of appreciation of the Company's capital stock 
   during the measurement period based on agreed-upon appreciation 
   measurement methodologies. Compensation expense was accrued over the term 
   of the agreements for the cost of the stock appreciation rights.

   The stock appreciation rights were canceled on July 1, 1996, in exchange 
   for grants of nonqualified options under the Company's 1996 Stock Option 
   Plan, as described below.  The accrued liability at the date of 
   cancellation in connection with compensation previously recognized under 
   the stock appreciation rights was offset against total compensation 
   inherent in the nonqualified stock options granted.

                               STOCK OPTION PLAN
                                       
   In June 1996, Track 'n Trail-California stockholders approved the adoption 
   of the 1996 Stock Option Plan (Plan).  Effective upon the Reorganization, 
   the Company assumed the Plan and, effective as of the date of the 
   Offering, amended and restated the Plan.  Upon the Reorganization, options 
   to purchase shares of the Company's common stock were exchanged for all 
   stock options then outstanding pursuant to the Plan to purchase shares of 
   the common stock of Track 'n Trail-California.  The terms and conditions 
   of the options exchanged were equivalent.  A total of 1,055,735 shares of 
   common stock are reserved for issuance under the Plan.

   The Plan provides for the granting of nonstatutory stock options (NSOs) to 
   employees, directors, consultants and advisors of the Company.  The Plan 
   also provides for the granting of incentive stock options (ISOs) to 
   employees.  The Plan provides for formula grants to non-employee directors 
   of the Company (Outside Directors).  Each such Outside Director 
   automatically received NSOs to purchase 5,000 shares of common stock upon 
   their initial appointment as an Outside Director and, upon each annual 
   meeting of stockholders after their initial appointment, will receive NSOs 
   to purchase 1,250 shares (unless the Outside Director was appointed prior 
   to such a meeting, in which case the annual grant will occur at the second 
   annual meeting following the initial appointment).  The Plan provides that 
   the option exercise price for ISOs and Outside Director options must be at 
   least equal to 100% of the fair market value of the common stock on the 
   date of grant.  Options will have exercise and vesting terms as determined 
   at the date of the grant by a compensation committee of the Company's 
   board of directors; however, the options must have exercise and vesting 
   terms of no more than ten years from the date of grant.

                                     -36-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

6. STOCK OPTION AND PURCHASE PLANS, continued:

   The following is a summary of the activity in stock options granted during 
   the fiscal years ended December 27, 1997 and December 28, 1996:

<TABLE>
<CAPTION>
                                              INCENTIVE STOCK      NONQUALIFIED STOCK 
                                                  OPTIONS               OPTIONS
                                              ------------------   ------------------
                                                        WEIGHTED            WEIGHTED
                                                        AVERAGE              AVERAGE 
                                                        EXERCISE             EXERCISE
                                               SHARES    PRICE      SHARES    PRICE  
                                              --------  --------   -------  ---------
     <S>                                       <C>        <C>      <C>         <C>
     Outstanding as of December 31, 1995            --    $  --         --     $  --

     Granted                                   501,168        4    350,618      0.01
                                               -------             -------
     Outstanding as of December 28, 1996       501,168        4    350,618      0.01

     Granted                                        --       --     10,000      9.75
     Canceled                                  (20,127)       4         --        --
     Exercised                                  (4,931)       4         --        --
                                               -------             -------
     Outstanding as of December 27, 1997       476,110     $  4    360,618     $0.28
                                               -------     ----    -------      ----
                                               -------     ----    -------      ----
     Options exercisable as of 
       December 27, 1997                       476,110     $  4    350,618     $0.01
                                               -------     ----    -------      ----
                                               -------     ----    -------      ----
     Options exercisable as of 
       December 28, 1996                       100,228     $  4    212,383     $0.01
                                               -------     ----    -------      ----
                                               -------     ----    -------      ----
</TABLE>


   The weighted average remaining contractual life at December 27, 1997, of 
   all outstanding options, all outstanding NSOs with an exercise price of 
   $0.01 and all outstanding ISOs was 8.5 years, and for all outstanding NSOs 
   with an exercise price of $9.75 was 9.8 years.

   All outstanding ISOs vested upon the Offering.  No compensation resulted 
   from the grant of ISOs in fiscal 1996.

   NSOs for 177,825 shares vested upon grant, 34,558 shares vested on 
   December 15, 1996, and an additional 138,235 shares vested upon the 
   Offering.  The remaining NSOs for 10,000 shares (granted to the Outside 
   Directors upon appointment) vest prorata on October 16 of each of four 
   years commencing on October 16, 1998.

   The excess of the fair value of common stock at the date of the grant over 
   the exercise price of the NSOs represents the per share compensation of 
   the NSOs that is recorded as compensation and as an increase in additional 
   paid-in capital when the stock options vest.  A one-time increase in 
   additional paid-in capital of $597,000 was recorded in 1996 for the 
   liability that was eliminated upon exchange of the stock appreciation 
   rights for NSOs.

                                     -37-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

6. STOCK OPTION AND PURCHASE PLANS, continued:

   Compensation expense recognized for stock compensation awards, including 
   stock appreciation rights, amounted to $67,000, $116,000 and $196,000 
   during the 1997, 1996 and 1995 fiscal years, respectively.

                         EMPLOYEE STOCK PURCHASE PLAN
                                       
   In April 1997, the Company adopted the Employee Stock Purchase Plan 
   (Purchase Plan) effective as of the closing of the Offering.  The Purchase 
   Plan covers an aggregate of 150,000 shares of common stock and is intended 
   to qualify as an employee stock purchase plan within the meaning of 
   Section 423 of the Internal Revenue Code.  The plan administrator, 
   appointed by the Company's board of directors, may authorize participation 
   by eligible employees, including officers, in periodic Purchase Plan 
   offerings.  Under its terms, the board of directors may amend, modify or 
   terminate the Purchase Plan at any time without notice.

   Substantially all full-time (as defined) employees with at least one year 
   service prior to the commencement of the participation period are eligible 
   to participate in the Purchase Plan; however, any highly compensated 
   employee (as defined) who owns 3.0% or more of the outstanding stock in 
   the Company may not participate in the Purchase Plan.  Employees who 
   participate in a Purchase Plan offering may have a percentage of their 
   earnings (as established by the plan administrator) withheld pursuant to 
   the Purchase Plan.  The amount withheld will be used to purchase shares of 
   common stock on dates specified by the board at a price that will be equal 
   to 85.0% of the lesser of the fair market value of the common stock at the 
   commencement of each Purchase Plan offering period or at the relevant 
   purchase date.  Employees may end their participation in a Purchase Plan 
   offering at any time during the Purchase Plan offering period except as 
   provided under the terms of the Purchase Plan offering. Participation ends 
   automatically on termination of employment with the Company.

   The initial Purchase Plan offering commenced in October 1997 and 
   terminated on December 31, 1997.  A second Purchase Plan offering 
   commenced January 1, 1998, and will terminate no later than December 31, 
   1999.  As of December 27, 1997, no shares had been issued under the 
   Purchase Plan.  In January 1998, 2,833 shares of common stock were issued 
   pursuant to the Purchase Plan for $21,000.

                                     -38-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

6. STOCK OPTION AND PURCHASE PLANS, continued:

                        PRO FORMA RESULTS OF OPERATIONS
                                       
   The weighted-average, grant-date fair value, computed in accordance with 
   the measurement provisions of SFAS No. 123, ACCOUNTING FOR STOCK-BASED 
   COMPENSATION, of all options granted during fiscal 1997 and 1996, net of 
   the liability recorded in 1996 in connection with stock appreciation 
   rights canceled in exchange for the NSOs, was $61,000 and $170,000, 
   respectively.  The weighed-average, grant-date fair value was estimated in 
   fiscal 1997 and 1996, respectively, assuming risk-free interest rates of 
   5.97% and 6.49%, an expected life of five years, expected volatility of 
   55.0% for 1997, no expected volatility for l996 as the Company had no 
   trading record and no expected dividends.

   Results of operations, computed on a pro forma basis to assume that the 
   measurement provisions of SFAS No. 123 had been adopted, would have been 
   the same as the results of operations, as reported, for fiscal year 1996 
   and as follows for fiscal 1997 (in thousands, except per share 
   information):

<TABLE>
<CAPTION>
                                                      AS REPORTED     PRO FORMA
                                                      -----------     ---------
     <S>                                                 <C>           <C>
     Net income                                          $5,180        $5,173
                                                         ------        ------
                                                         ------        ------
     Pro forma net income, as though a
     C corporation                                       $3,179        $3,173
                                                         ------        ------
                                                         ------        ------
     Historical earnings per share:
     Basic earnings per share                            $ 1.10        $ 1.10
                                                         ------        ------
                                                         ------        ------
     Diluted earnings per share                          $ 1.03        $ 1.03
                                                         ------        ------
                                                         ------        ------
     Pro forma earnings per share, as
     though a C corporation:
     Basic earnings per share                            $ 0.68        $ 0.68
                                                         ------        ------
                                                         ------        ------
     Diluted earnings per share                          $ 0.58        $ 0.58
                                                         ------        ------
                                                         ------        ------
</TABLE>


7. NOTES RECEIVABLE FROM RELATED PARTIES:

   Notes receivable from related parties at December 30, 1995, consisted of 
   $1,036,000 in stockholder demand notes and $33,000 in related party demand 
   notes.  The balance was distributed to the stockholders in 1996 along with 
   additional notes of $591,000 related to advances made to such parties in 
   1996.

                                      -39-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

8. LEASE COMMITMENTS:

   The Company operates its stores, main office and warehouse from facilities 
   under operating lease agreements which expire at various dates through 
   2009. The store leases require minimum annual rentals plus, in some cases, 
   periodic increases stipulated in the lease agreements (fixed amounts or 
   percentages, in some cases, and increases indexed to consumer price 
   increases, in other cases). Some leases also provide for contingent 
   rentals based on sales.  The Company is generally responsible for 
   maintenance, insurance and property taxes.  At December 27, 1997, future 
   minimum lease payments under all noncancelable leases are as follows (in 
   thousands):

<TABLE>
                   <S>                                   <C>
                   1998                                  $ 9,417
                   1999                                    8,172
                   2000                                    7,279
                   2001                                    6,940
                   2002                                    6,620
                   Thereafter                             18,909
                                                         -------
                     Total                               $57,337
                                                         -------
                                                         -------
</TABLE>

   Rent expense was $8,912,000, $6,160,000 and $4,964,000 during fiscal years 
   1997, 1996 and 1995, including contingent rentals of $119,000, $123,000 
   and $130,000, respectively.

9. EMPLOYEE BENEFIT PLAN:

   The Company has a 401(k) profit-sharing plan for the benefit of employees 
   who meet certain eligibility requirements.  Participants may make tax 
   deferred contributions of up to 15% of earned income, limited to the 
   maximum allowed under the Internal Revenue Code.  Employer contributions 
   match at least 50% of participant contributions to a maximum of 4% of 
   earned income.  Employee contributions vest immediately.  Employer 
   contributions vest based on years of employment with the Company, with 
   full vesting in five years.  The employer contribution was $81,000, 
   $50,000 and $58,000 in fiscal years 1997, 1996 and 1995, respectively.


                                     -40-

<PAGE>

                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

10. INCOME TAXES:

   The provision for income taxes consists of (in thousands):

<TABLE>
<CAPTION>
                                           FISCAL YEAR ENDED
                             ----------------------------------------------
                             DECEMBER 27,    DECEMBER 28,      DECEMBER 30,
                                 1997            1996              1995
                             ------------    ------------      ------------
<S>                         <C>                 <C>                <C>
Income taxes:
Current                      $  1,279            $  407              $  19
Deferred                          163                81                 22
Net deferred tax assets
recorded upon change
in tax status from
S corporation to
C corporation                 (1,324)                --                 --
                            ---------          ---------          ---------
                             $   118            $  488               $  41
                            ---------          ---------          ---------
                            ---------          ---------          ---------
</TABLE>

   The components of deferred income taxes are (in thousands):

<TABLE>
<CAPTION>
                                                         DECEMBER 27,   DECEMBER 28,
                                                            1997           1996
                                                         ------------   ------------
<S>                                                          <C>            <C>
Depreciation                                                   $  860         $  269
Inventory - Uniform Capitalization                                253            116
Stock compensation programs                                       248             --
Deferred rent                                                     305            200
Accrued liabilities                                                57             34
Federal effect of deferred state taxes                             50           (43)
Other                                                            (94)           (58)
                                                         ------------   ------------
                                                             $  1,679         $  518
                                                         ------------   ------------
                                                         ------------   ------------
</TABLE>

   In assessing the realizability of deferred tax assets, management 
   considers whether it is more likely than not that some portion or all of 
   the deferred taxes will not be realized.  Based upon the availability of 
   management's projections for future taxable income over the period in 
   which the deferred tax assets are deductible, management believes the 
   existing net deductible temporary differences will reverse during periods 
   in which carrybacks are available and/or in which the Company generates 
   net taxable income.

                                      -41-

<PAGE>


                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

10. INCOME TAXES, continued:

   Differences between the Company's provision for income taxes and the 
   federal statutory tax rate are:

<TABLE>
<CAPTION>
                                                         FISCAL YEAR ENDED
                                         -------------------------------------------------
                                         DECEMBER 27,      DECEMBER 28,       DECEMBER 30,
                                            1997              1996               1995
                                         ------------      ------------       ------------
<S>                                       <C>              <C>                <C>
Federal statutory rate                     34.0%               34.0%             34.0%
Benefit due to Subchapter S
  tax status                              (12.0)              (28.3)            (34.0)
State income taxes                          3.6                 3.9               1.7
Permanent differences                       1.4                 0.2                --
Effect of change from S to C
Corporation tax status                    (24.9)                 --                --
Other                                       0.1                  --                --
                                        -------             -------            ------
                                            2.2%                9.8%              1.7%
                                        -------             -------            ------
                                        -------             -------            ------
</TABLE>

11.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following methods and assumptions were used by the Company in estimating
the fair value of its significant financial instruments:

  CASH AND CASH EQUIVALENTS:  The carrying amounts reported in the consolidated
  balance sheets approximate fair value because of the immediate or short-term
  maturity of these financial instruments.
  
  BANK LINE OF CREDIT:  The carrying amounts approximate fair value due to the
  floating interest rate and short maturity nature of these financial
  instruments.
  
  LONG-TERM DEBT:  The carrying amounts, totaling $236,000 at December 27,
  1997, are not believed to differ materially from fair value.  The carrying
  amounts at December 28, 1996, approximate fair value due to floating rates on
  the recent issuance of the fixed rate notes.


                                       -42-

<PAGE>


                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

12. SUPPLEMENTAL CASH FLOW INFORMATION:

   Supplemental cash flow information is as follows (in thousands):

<TABLE>
<CAPTION>
                                                    FISCAL YEAR ENDED
                                         -------------------------------------------
                                         DECEMBER 27,    DECEMBER 28,   DECEMBER 30,
                                            1997            1996           1995
                                         ------------    ------------   ------------
<S>                                     <C>              <C>            <C>
Interest paid                            $      1,360    $        615   $        401
                                         ------------    ------------   ------------
                                         ------------    ------------   ------------
Income taxes paid                        $        644    $         73   $         78
                                         ------------    ------------   ------------
                                         ------------    ------------   ------------
Noncash investing and financing
 transactions:
   Acquisition of Overland:
    Purchase price, including
     acquisition costs                   $       558     $      2,733   $        --
    Minority interest eliminated                 105               --            --
    Less debt issued in connection
     with the acquisition                       (663)          (2,493)           --
                                         ------------    ------------   ------------
Cash paid for acquisition                $        --     $        240   $        --
                                         ------------    ------------   ------------
                                         ------------    ------------   ------------
Distribution of notes receivable to
  stockholders                           $        --     $      1,660   $        --
                                         ------------    ------------   ------------
                                         ------------    ------------   ------------
Cancellation of stock appreciation
  rights                                 $        --     $        596   $        --
                                         ------------    ------------   ------------
                                         ------------    ------------   ------------
</TABLE>

13.  BUSINESS COMBINATION:

On October 25, 1996, Track 'n Trail-California, together with its stockholders,
obtained 33 Overland Trading stores by acquiring the outstanding common stock
of Overland (Note 1, PRINCIPLES OF CONSOLIDATION; MINORITY INTEREST).  Track 'n
Trail-California purchased the 79.0% interest for approximately $2,733,000
consisting of promissory notes to the sellers of approximately $2,493,000 and
warrants issued to the sellers valued at nominal amounts, plus acquisition
costs of $240,000.  The warrants give the sellers the right to purchase up to
49,392 shares of the Company's common stock at $10.50 per share until October
25, 2001.

                                       -43-

<PAGE>


                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

13. BUSINESS COMBINATION, continued:

   Effective on January 1, 1997, Track 'n Trail-California acquired from its 
   stockholders the remaining 21.0% interest in Overland at their purchase 
   price by assuming the $663,000 Seller Notes previously issued by Track 'n 
   Trail-California's stockholders.

   Total promissory notes issued by Track 'n Trail-California and its 
   stockholders in exchange for the common stock of Overland was $3,157,000 
   (the Seller Notes). The Seller Notes were repaid with a portion of the 
   proceeds of the Offering in October 1997.

   Also, in connection with the acquisition, Overland repurchased all of its 
   outstanding preferred stock in exchange for a $3,500,000 subordinated 
   promissory note (the Subordinated Note) and borrowed $2,559,000 under a 
   line of credit arranged by Track 'n Trail-California, which was used to 
   repay Overland's outstanding line of credit, retire a note payable, pay 
   accumulated dividends to its preferred stockholders and provide additional 
   working capital, all of which were recorded by Overland in connection with 
   the acquisition. Track 'n Trail-California guaranteed the Subordinated 
   Note.  The Subordinated Note was repaid with a portion of the proceeds of 
   the Offering in October 1997.

   Additionally, Track 'n Trail-California issued warrants to an investment 
   bank in consideration of financial advisory services rendered in 
   connection with the acquisition of Overland.  The warrants allow the 
   investment bank to purchase up to 74,089 shares of the Company's common 
   stock at $12.60 per share for four years commencing October 1998.  Under 
   their terms, the warrants may be exercised prior to October 1998 upon a 
   change in control of the Company.  The warrants held by both the Overland 
   sellers and the investment bank were assigned only a nominal value because 
   of the restrictive terms of the warrants when issued.

                                      -44-

<PAGE>


                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

13. BUSINESS COMBINATION, continued:

   The assets and liabilities of Overland were recorded at the fair value at 
   the time of the acquisition, based on management's estimates of value, and 
   the excess of the purchase price over amounts allocated to identifiable 
   net assets was recorded as goodwill, as follows (in thousands):

<TABLE>
<CAPTION>
                                                  79.0%             21.0%
                                                 INTEREST         INTEREST
                                                 --------         --------
<S>                                             <C>              <C>
Inventory                                        $  6,911         $    --
Store fixtures, leasehold improvements
  and office equipment                              1,908              --
Accounts receivable and prepaid expenses              406              --
Deferred income taxes                                 555              --
Accounts payable and accrued liabilities           (3,040)             --
Line of credit and long-term debt                  (6,124)             --
Other liabilities                                    (608)             --
Minority interest (21.0%) in net assets                --             105
Goodwill                                            2,725             558
                                                 --------         --------
  Purchase price                                 $  2,733         $   663
                                                 --------         --------
                                                 --------         --------
</TABLE>

   Goodwill recorded in connection with the acquisition is being amortized 
   using the straight line method over a 20-year period.  Accumulated 
   amortization at December 27, 1997 and December 28, 1996, was $199,000 and 
   $34,000, respectively.

   Results of operations of Overland are included in the consolidated 
   financial statements from October 25, 1996, with the portion attributable 
   to the 21.0% minority interest held by Track 'n Trail-California's 
   stockholders shown as minority interest in 1996.

                                       -45-

<PAGE>


                         TRACK 'N TRAIL AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                                 -----------

13. BUSINESS COMBINATION, continued:

   If the Company had purchased 100% of Overland's common stock as of the 
   beginning of fiscal year 1995, pro forma condensed consolidated results of 
   operations (unaudited) would have been  (in thousands):

<TABLE>
<CAPTION>

                                             PRO FORMA, ASSUMING
                                           ACQUISITION OCCURRED AT
                                           BEGINNING OF FISCAL 1995
                                                  (UNAUDITED)
                                           -------------------------
                                             FISCAL          FISCAL
                                              1996            1995
                                           ---------        --------
<S>                                         <C>             <C>
      Net sales                              $  84,186      $  70,660
      Gross profit                           $  39,726      $  33,275
      Operating income                       $   5,176      $   2,763
      Net income                             $   3,576      $   1,467
      
      Pro forma net income, as though a C
         corporation                         $   2,246      $     728
      
      Historical earnings per share:
        Basic earnings per share             $    0.87      $    0.36
        Diluted earnings per share           $    0.85      $    0.36
      
      Pro forma earnings per share,
       as though a C corporation:
       Basic earnings per share              $    0.55      
       Diluted earnings per share            $    0.45

</TABLE>

   Pro forma net income (unaudited) in the above table is computed after 
   deducting a pro forma provision for income taxes at the effective rate of 
   40% representing management's estimate of the effective rate that would 
   have been in effect had Track 'n Trail-California been a C corporation.

14. CONTINGENCIES:

   The Company is also involved in various claims arising out of the normal 
   course of the conduct of business.  Management believes, after reviewing 
   such matters with legal counsel, that the outcome of pending claims will 
   not have a material adverse effect on the Company's consolidated results 
   of operations or consolidated financial position.


                                       -46-
<PAGE>

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

     Effective January 15, 1996, Coopers & Lybrand L.L.P. was engaged as the 
Company's principal independent auditors, replacing Deloitte & Touche LLP 
("Deloitte"). The decision to change independent accountants was approved by 
the Company's Board of Directors. In the period from December 26, 1993 
through January 15, 1996, Deloitte issued no audit report which was qualified 
or modified as to uncertainty, audit scope or accounting principles, or which 
contained adverse opinions or disclaimers of opinion on any of the Company's 
financial statements, and there were no disagreements with Deloitte on any 
matter of accounting principles or practices, financial statement disclosure, 
or auditing scope or procedures. Prior to January 15, 1996, the Company had 
not consulted with Coopers & Lybrand L.L.P. on items which involved the 
Company's accounting principles, the application of accounting principles to 
a specified transaction, or the form of audit opinion to be rendered on the 
Company's financial statements.


                                     PART III 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
     
     Information with respect to this item is incorporated by reference from the
registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the registrant's fiscal year. 

ITEM 11. EXECUTIVE COMPENSATION.

     Information with respect to this item is incorporated by reference from the
registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the registrant's fiscal year. 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information with respect to this item is incorporated by reference from the
registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the registrant's fiscal year. 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          
     Information with respect to this item is incorporated by reference from the
registrant's definitive Proxy Statement to be filed with the Commission not
later than 120 days after the end of the registrant's fiscal year. 

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

(a)  The following documents are filed as a part of this Form 10-K: 

     1.   Financial Statements: 
               Reference is made to the Index to Consolidated Financial
               Statements under Item 8 in Part II of this Form 10-K. 

     2.   Financial Statement Schedules: 
               Financial statement schedules are omitted because they are not
               applicable or the required information is shown in the financial
               statements or notes thereto. 


                                       -47-
<PAGE>

     3.   Exhibits: 
               The exhibits listed below are required by Item 601 of Regulation 
               S-K. Each management contract or compensatory plan or arrangement
               required to be filed as an exhibit to this Form 10-K has been
               identified. 
<TABLE>
<CAPTION>
          Exhibit
           Number     Notes            Description of Document
          --------    -----            -----------------------
          <S>         <C>      <C>
            3.1       (1)      Amended and Restated Certificate of Incorporation of
                               the Registrant.
            3.2       (1)      Amended and Restated Bylaws of the Registrant.
            4.1       (1)      Form of Common Stock Certificate.
            4.2       (1)      Registration Rights Agreement among the Registrant 
                               and certain stockholders.
           10.1       (1)      Employment Agreement dated January 3, 1994 between
                               Registrant and Gregory M. Kilgore. 
           10.2       (1)      Employment Agreement dated January 3, 1994 between
                               Registrant and John E. Wilkinson
           10.3       (1)      Employment Agreement dated January 3, 1994 between
                               Registrant and Daniel J. Nahmens. 
           10.4       (1)      Employment Agreement dated January 3, 1994 between
                               Registrant and David T. Morgan. 

           10.5       (1)      Amended and Restated 1996 Stock Option Plan. 
           10.6       (1)      Form of Incentive Stock Option and Stock Option
                               Agreement, as amended. 
           10.7       (1)      Form of Nonqualified Stock Option and Stock Option
                               Agreement, as amended.
           10.8       (1)      Agreement for Distribution of Accumulated 
                               Adjustments Account and Tax Indemnification. 
           10.9       (1)      Form of Indemnification Agreement between the 
                               Company and directors and certain officers.
          10.10       (1)      Stock Exchange Agreement between the Company, Track 
                               'n Trail-California and certain stockholders.
          10.11       (1)      Warrant to Purchase Common Stock issued to Ladenburg
                               Thalmann & Co. Inc.
          10.12       (1)      Form of Warrant to Purchase Common Stock issued to
                               stockholders of Overland Management Corporation. 
          10.13                Loan Agreement dated as of  October 16, 1997 between
                               Union Bank and the subsidiaries of the Registrant.  
          10.14                Continuing Guaranty dated as of September 25, 1997
                               between Union Bank and the Registrant.
           16.1                Letter regarding change in certifying accountant. 
           21.1       (1)      List of Subsidiaries of the Registrant. 
           23.1                Consent of Coopers & Lybrand L.L.P. 
           24.1                Power of Attorney (see page 49 of this Form 10-K).
           27.1                Financial Data Schedule. 
           27.2                Restated Financial Data Schedule (Form 10-Q for the
                               quarter ended September 27, 1997).
           27.3                Restated Financial Data Schedule (Form S-1--File
                               No. 333-23195).
</TABLE>
          Notes
          -------
          (1)  Filed with Registrant's Registration Statement on Form S-1 (File
               No. 333-23195). 
     
(b)  Reports on Form 8-K.
     
     There were no reports on Form 8-K filed during the last quarter of the 
fiscal year covered by this report. 
     

                                       -48-
<PAGE>


                                     SIGNATURES
                                          
               Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on March 19, 1998 on its behalf by the undersigned, thereunto duly
authorized. 



                                       TRACK 'N TRAIL  

                                       By     /s/ GREGORY M. KILGORE
                                          -------------------------------------
                                                  Gregory M. Kilgore
                                          President and Chief Operating Officer


                          POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gregory M. Kilgore and Daniel J. Nahmens,
and each of them, his or her true and lawful attorneys-in-fact, each with full
power of substitution, for him or her in any and all capacities, to sign any
amendments to this report on Form 10-K and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or their substitute or substitutes may do or cause to be done
by virtue hereof. 

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

<TABLE>
<CAPTION>

    Signature                             Title                                         Date
    ---------                            -------                                       ------
<S>                           <C>                                                      <C>
/s/ GREGORY M. KILGORE        President, Chief Operating Officer                       3/19/98
---------------------------   (Principal Executive Officer), and
                              Director

/s/ DANIEL J. NAHMENS         Vice President - Finance, Chief Financial                3/19/98
---------------------------   Officer (Principal Financial and 
                              Accounting Officer), Treasurer and Secretary 

/s/ DAVID L. SUECHTING, JR.   Chairman of the Board                                    3/19/98
---------------------------

/s/ BARBARA J. SUECHTING      Director                                                 3/19/98
---------------------------

/s/ HELEN C. BULWIK           Director                                                 3/19/98
---------------------------

</TABLE>

                                       -49-