<PAGE>

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                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K405

(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 26, 1998

                                        OR
               TRANSITION REPORT PURSUANT OT 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 tht 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 1, 1999 was $2.9 million.

     On March 1, 1999 the rgistrant had 6,865,899 shares of Common Stock 
outstanding.

                             DOCUMENTS INCORPORATED BY REFERENCE

     Part III incorporates information by reference from the definitive Proxy 
Statement for the 1999 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.

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<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 and
apparel. 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"). On August 26,
1998, the Company acquired Nevin's Eagles Nest, Inc. ("Eagles Nest"), a retailer
of premium branded outdoor apparel. The Company operates in a single business
segment.

                  As of December 26, 1998, the Company operated 192 stores in 36
states under the Track 'n Trail, Overland Trading and Eagles Nest names. All but
two of the Company's stores are located in regional or super-regional shopping
malls, located throughout the United States. Each Track 'n Trail and Overland
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. In addition to offering many of the
same footwear brands as Track 'n Trail and Overland, each Eagles Nest store
specializes in sport and outdoor apparel lines featuring such brands as The
North Face, Columbia, Patagonia, Woolrich and Ex Officio.

                  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 and Eagles Nest 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. The newly acquired Eagles Nest stores are merchandised and
designed to appeal to an active outdoor customer with an emphasis on functional
and fashion related sportswear, outerwear and accessories. Track 'n Trail stores
average approximately 1,969 square feet in size, the Overland Trading stores
average approximately 1,488 square feet and the Eagles Nest stores currently
average approximately 5,160 square feet in size. As of December 26, 1998, the
Company operated 141 Track 'n Trail stores in 34 states, 46 Overland Trading
stores in 13 states and five Eagles Nest stores in two states.

                  The Company obtained 33 Overland Trading stores by acquiring
control of Overland on October 25, 1996. In addition to obtaining a distinct
retail venue, by acquiring Overland the Company strengthened its presence in the
northeastern United States. The Company entered the apparel market by
acquiring control of Nevin's Eagles Nest and its five Eagles Nest stores on
August 26, 1998. The Company expects Eagles Nest to provide not only access to
the apparel market but also new customer streams for its footwear lines. The
Company believes these acquisitions increase its purchasing power and 
negotiating position with suppliers and real estate developers, permit it to 
realize operational economies of scale, and increase 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 and apparel.
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, and Airwalk
                  shoes. The Company features the Ecco and Rockport brands

                                        1
<PAGE>



                  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. The Eagles Nest stores offer sportswear and
                  outdoor wear by Ex Officio, Patagonia and Royal Robbins, which
                  management believes meet the demand for high performance
                  apparel required for adventure travel. Management believes
                  that each of the foregoing brands is recognized as one of the
                  originals in the primary category 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 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 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 and Eagles Nest
                  stores target 25- to 55-year-olds. The Track 'n Trail strategy
                  is to focus on products that reflect an active and
                  performance-oriented lifestyle, which the Company believes are
                  particularly popular with the fast-growing 15- to 24-year-old
                  age group. Overland Trading and Eagles Nest stores are
                  designed to appeal more to the large 25- to 55-year-old age
                  group. Management plans to differentiate the two footwear
                  retail concepts to a greater degree in malls in which the
                  Company operates both a Track 'n Trail store and an Overland
                  Trading store and/or an Eagles Nest 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 customer preferences. Most recently,
                  prevailing lifestyle trends that have affected retail apparel
                  and footwear sales have included (i) the growth in alternative
                  sports such as skateboarding, snowsports, in-line skating and
                  mountain biking as well as the apparel and 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- , Coloma Trail-TM-, and Quo
                  Vadis-TM-. Private label merchandise, which represented
                  approximately 10% of total net sales in fiscal 1998, 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 footwear 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

                                        2

<PAGE>



testing and monitoring their sales. The Company generally tests and monitors
numerous new styles each year. After evaluation of market performance and other
criteria, a new style may be distributed to a broader segment of stores or
system-wide.

                  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 approximately 20 persons,
including three merchandising managers, five buyers for the Track 'n Trail
stores, two buyers for the Overland Trading stores and two buyers for the Eagles
Nest stores. The Company's Track 'n Trail, Overland Trading and Eagles Nest
buyers operate independently, allowing them to focus on their distinct
customers' merchandise preferences and lifestyles. These buyers are supported by
stock allocation analysts and assistants, who manage the Company's computerized
merchandise planning system. Management also receives input from the Company's
23 district managers and three regional managers regarding local or regional
factors relevant to merchandising decisions.

                  The principal categories of product offered by the Company's
concepts and selected vendors for each, are summarized below:

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

                  Functional products are designed to perform under adverse
conditions or for a specific activity such as hiking and water sports, field and
duty, skateboarding, snowsports and inclement weather.


<TABLE>
<CAPTION>

SELECTED TRACK 'N TRAIL VENDORS        SELECTED OVERLAND TRADING VENDORS    SELECTED EAGLES NEST VENDORS
<S>                                    <C>                                  <C>
Timberland                             Rockport                             The North Face
Solomon                                Sperry                               Patagonia
Vasque                                 Sorel                                Columbia
Caterpillar                            Timberland                           Marmot
Teva                                                                        Ex Officio
Etnies                                                                      Royal Robbins
Vans
Airwalk
Columbia
</TABLE>


MEN'S AND WOMEN'S CASUAL WEAR

                  Casual footwear and sportswear is designed primarily for
everyday wear such as walking shoes and casual tops and bottoms including
shorts, trousers, pants, T-shirts, knit and woven shirts, blouses, dresses and
skirts.

<TABLE>
<CAPTION>


SELECTED TRACK 'N TRAIL VENDORS         SELECTED OVERLAND TRADING VENDORS      SELECTED EAGLES NEST VENDORS
<S>                                     <C>                                    <C>
Birkenstocks                            Timberland                             Tommy Bahama
Rockport                                Clarks                                 Ceramicci
Timberland                              Joseph Seibel                          Tsunami
Dr. Martens                             Rockport                               Royal Robbins
Born                                    Easentials                             True Grit
Simple                                  Bostonian                              Woolrich
Stegmann

</TABLE>



                                        3

<PAGE>



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
                                                              -------------------------
                                                               1998     1997      1996
                                                              ------   ------    ------



<S>                                                              <C>     <C>     <C> 
Men's and Women's Functional and Sport Specific Footwear ..      28 %    31 %    32 %
Men's and Women's Casual Footwear .........................      60      60      58
Apparel ...................................................       2      --      --
Men's, Women's and Children's Slippers ....................       1       1       2
Children's Footwear .......................................       1       1       1
Shoe Care Products, Hosiery and Accessories ...............       8       7       7
                                                                ---     ---      ---
                                                                100%    100%     100%
                                                                ---     ---      ---
                                                                ---     ---      ---
</TABLE>



                  Private label merchandise accounted for approximately 10% of
the Company's net sales in fiscal 1998. The Company sells its private label
merchandise under names such as Forza-TM-, New Terrain-TM-, Mole-TM-, Nordic
Trail-TM- , Coloma Trail-TM- and Quo VadIs-TM-.

ACCESSORIES

                  The Company also offers accessories, including socks,
neckware, belts, backpacks and shoe care products such as sprays and polishes.
Some of these accessories carry the same brand names as the ready-to-wear and
footwear sold by the Company, although most are supplied by different
manufacturers than the Company's footwear suppliers. Accessories accounted for
approximately 7.8% of net sales at the Track 'n Trail and Overland Trading
stores in fiscal 1998.

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 68.4% of the
Company's net sales in fiscal 1998. In fiscal 1998, Dr. Martens, Timberland and
Birkenstock accounted for 21.0%, 15.7% and 8.1% 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 of the Company's private label products are sourced from
Europe (primarily Italy, Spain and Portugal) and the Far East (primarily China,
Taiwan and South Korea). The Company's Director of Product Development is
responsible for developing styles for private label manufacture and locating
suitable manufacturers. The Company actively seeks advantageous sourcing
opportunities and works with a variety of manufacturers. During fiscal 1998, 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

                                        4

<PAGE>



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 192 stores as of December 26, 1998, all
but two of which were located in regional or super-regional shopping malls.
Although all stores are integrated into the Company's inventory control,
distribution and management information systems, Track 'n Trail, Overland
Trading and Eagles Nest stores differ in format, merchandise content 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 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. The six Track 'n
Trail stores located in the Mills malls feature a contemporary "industrial"
decor, and utilize industrial equipment throughout as props and fixtures. Track
'n Trail stores average approximately 1,969 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 the stores acquired by
the Company in October 1996 have smaller stockrooms. The Company has
incorporated larger stockrooms in the Overland Trading stores opened after the
acquisition of Overland in order to minimize missed sales opportunities due to
shortages of high-demand products. Overland Trading stores average approximately
1,488 square feet in size, of which 40% to 60% is devoted to the sales floor.

EAGLES NEST STORE FORMAT

                 Eagles Nest stores are designed with expansive, all glass
storefronts framed in rich slate and warm natural wood design elements. Windows
feature mannequins showing the most current sportswear and active wear
collections and accessories. Store interiors feature a contemporary outdoor
environment created through wall elements that are used to create mountain
silhouettes depicting the heritage of this company's Rocky Mountain roots.
Vignettes featuring natural wood and slate elements emphasize sportswear, travel
and active wear collections throughout the store's interior. Impact brand
signing is used to call attention to the collections of premium quality and
unique brands carried in the Eagles Nest stores. Eagles Nest stores average
approximately 5,160 square feet in size, of which 75% to 85% is devoted to the
sales floor.

 STORE MANAGEMENT AND COMPENSATION

                 The Company's Vice President-Stores, three regional managers
and 23 district managers visit each of the Track 'n Trail, Overland and Eagles
Nest 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

                                        5

<PAGE>



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 payroll
costs, 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 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
the merchandise, 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.




                                        6

<PAGE>



                  The Company operated 192 stores in 36 states as of December
26, 1998, as set forth in the following table:

 TRACK 'N TRAIL STORES
<TABLE>
<CAPTION>


                                           CURRENT                                                           CURRENT
STATE                                       STORES             STATE                                          STORES
-----                                       ------             -----                                          ------


<S>                                       <C>                  <C>                                            <C>
Alabama..................................        1             Michigan....................................       11
Alaska ..................................        2             Minnesota ..................................        4
Arkansas ................................        1             Missouri ...................................        1
California ..............................       27             North Carolina .............................        1
Colorado.................................        6             Nebraska ...................................        1
Connecticut..............................        5             Nevada......................................        1
Florida  ................................        4             New Hampshire...............................        3
Georgia .................................        4             New York....................................        8
Idaho....................................        1             Ohio........................................        4
Illinois.................................        9             Oregon......................................        4
Indiana..................................        5             Pennsylvania................................        3
Iowa ....................................        1             South Carolina .............................        1
Kentucky ................................        3             Tennessee...................................        2
Louisiana ...............................        1             Texas ......................................        4
Maine....................................        2             Virginia....................................        4
Maryland.................................        2             Washington..................................        7
Massachusetts............................        4             Wisconsin...................................        4
</TABLE>


OVERLAND TRADING STORES

<TABLE>
<CAPTION>

                                          CURRENT                                                           CURRENT
STATE                                      STORES             STATE                                          STORES
-----                                      ------             -----                                          ------

<S>                                       <C>                 <C>                                           <C>
California  .............................       2             New York.....................................      10
Connecticut .............................       2             Ohio.........................................       5
Florida .................................       2             Pennsylvania.................................       2
Georgia .................................       1             Tennessee  ..................................       4
Kentucky ................................       1             Utah ........................................       1
Massachusetts ...........................       8             Virginia ....................................       3
New Jersey ..............................       5
</TABLE>


EAGLES NEST STORES


<TABLE>
<CAPTION>

                                          CURRENT                                                           CURRENT
STATE                                      STORES             STATE                                          STORES
-----                                      ------             -----                                          ------


<S>                                       <C>                 <C>                                           <C>
Colorado ................................       4             Nevada  .....................................       1
</TABLE>


                  The Company leases all of its store space. 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 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 to
increase sales activity.

                  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

                                        7

<PAGE>


spends very little on advertising, primarily contributing to mall merchant
association funds which 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. In order to support the needs of a
growing store base, the Company relocated its central distribution center to a
larger facility located in West Sacramento, California, approximately 30 miles
from the previous location in El Dorado Hills, California. The new facility
contains approximately 50,000 square feet of storage space, more than double the
capacity of the previous facility. The Company believes the new facility will
provide distribution support for up to 500 stores.

                  The Company receives approximately 85% of its merchandise at
its central distribution center in West Sacramento, California. 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. Virtually all of the merchandise for
the Eagles Nest stores is drop shipped. The Company intends to process an
increasing percentage of the Eagles Nest merchandise through the central
distribution center.

                  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, processed and repackaged for
distribution . Merchandise is typically shipped via common carrier from the
central distribution center to the various stores once a week, or more often 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. In January, 1999, the Company upgraded the computer hardware
at its corporate offices to accommodate its current and presently anticipated
growth. The Company also completed the integration of the Eagles Nest stores
into its management information system in February 1999.

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 and apparel stores
and traditional shoe and apparel 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.


                                        8

<PAGE>



                  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 26, 1998, the Company had approximately 870
full-time employees and 690 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 47 stores (including the five Eagles
Nest stores acquired in August 1998) in fiscal 1998 and 22 stores in fiscal
1997. The Company plans on scaling back store openings in 1999 until sustained
comparable store gains are achieved. Thus, the Company presently anticipates
opening eight stores (one net of closures) in fiscal 1999. The success of the
Company's future expansion efforts 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, 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 1998, the Company's ten largest suppliers
accounted for approximately 68.4% 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 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.


                                        9

<PAGE>



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 two 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; WEATHER

                  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 quarter of fiscal 1998 than in the first
quarter of fiscal 1997, due to the fixed operating costs associated with a
larger store base during a period of historically low sales. 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 1998 results were negatively affected by
slower than expected "back-to-school" and year-end holiday 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 and apparel stores and traditional shoe
and apparel 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. For example, in fiscal 1998 the closeout of
the Kinney footwear stores adversely affected both Company sales and margins.
See "Business--Competition" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

UNCERTAINTIES ASSOCIATED WITH PRIVATE LABEL SOURCING

                  Private label products accounted for approximately 10% of net
sales in fiscal 1998. 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

                                       10

<PAGE>



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 YEAR 2000

                  Many computer programs were designed and developed utilizing
only two digits in the date field, thereby creating the inability to recognize
the year 2000 or years thereafter. The year 2000 issue creates risks for the
Company for unforeseen or unanticipated problems in its internal computer
systems as well as from computer systems of suppliers, lessors and other
vendors. Failures of these systems or untimely corrections could have a material
adverse impact on the Company's ability to conduct its business and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000."

RISKS ASSOCIATED WITH ACQUISITIONS

                  The Company's business strategy includes expanding when
appropriate 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.





                                       11

<PAGE>



FUTURE CAPITAL NEEDS

                  The Company expects that anticipated cash flow from operations
and anticipated borrowings under its credit facility will satisfy its cash
requirements through fiscal 1999. To the extent that the foregoing cash
resources are insufficient to fund the Company's activities, including new store
openings planned for 1999, 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 securities, dilution
to the Company's stockholders could occur. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

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 and Eagles Nest, 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.

ITEM 2. PROPERTIES

                  The Company entered into a new 10-year lease on a single
50,240 square foot distribution center in West Sacramento, California commencing
on November 1, 1998. The Company believes that its new central distribution
facility will support as many as 500 stores, which the Company believes is
sufficient to continue to service existing stores and to accommodate anticipated
growth. The Company also has a lease on a 6,000 square foot merchandise staging
facility in Rancho Cordova, California, which expires on March 31, 1999. The
Company does not plan on renewing this lease. The corporate office is a 16,000
square foot facility located in El Dorado Hills, California. This facility's
lease expires on March 31, 1999. The Company presently anticipates negotiating a
new 10-year lease on the corporate office facility. The Company also maintains a
5-year lease on a 2,681 square foot office facility in Littleton, Colorado to
support the sales operations and merchandising management team for the Eagles
Nest stores. This lease expires on October 31, 2001.

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

                  No matters were submitted to a vote of the Company's
stockholders during the fourth quarter of the fiscal year covered by this
report.



                                       12

<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. The following table sets
forth for the quarterly periods indicated the high and low prices per share of
common stock as reported by Nasdaq:


<TABLE>
<CAPTION>

             FISCAL 1998            HIGH               LOW
             -----------            ----               ----



<S>                                <C>               <C>   
             1st Quarter           $ 9.00            $ 4.75
             2nd Quarter             9.13              4.38
             3rd Quarter             5.44              3.50
             4th Quarter             3.63              1.88
</TABLE>


                  As of March 1, 1999, there were 60 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 without the
bank's consent.














                                       13

<PAGE>



ITEM 6. SELECTED FINANCIAL DATA

                  The balance sheet and statement of operations data as of
December 26, 1998 and December 27, 1997, and for each of the three fiscal years
in the period ended December 26, 1998, 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 28, 1996, December 30, 1995 and December 31,
1994, and for each of the two fiscal years in the period ended December 30, 1995
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
                                                        ---------------------------------------------------------------------


                                                          1998              1997         1996            1995         1994(1)
                                                        ---------       ---------     ---------       ---------     ---------



                                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE, PER SQUARE FOOT AND NUMBER OF 
                                                                                     STORES DATA)

<S>                                                     <C>             <C>           <C>             <C>           <C>      
STATEMENT OF OPERATIONS DATA:

Net Sales ...........................................   $  99,851       $  91,834     $  66,233       $  50,691     $  48,165
Cost of sales .......................................      53,615          47,677        34,062          26,192        25,080
                                                        ---------       ---------     ---------       ---------     ---------
Gross profit ........................................      46,236          44,157        32,171          24,499        23,085
Selling and marketing expense .......................      37,186          30,780        21,060          16,852        14,975
Administrative and distribution .....................       7,741           6,840         5,508           4,826         4,935
                                                        ---------       ---------     ---------       ---------     ---------
Operating income ....................................       1,309           6,537         5,603           2,821         3,175
Interest expense ....................................         369           1,260           670             435           324
Other expense (income) ..............................         173             (21)          (24)            (41)           37
                                                        ---------       ---------     ---------       ---------     ---------
Income before income taxes and
   minority interest ................................         767           5,298         4,957           2,427         2,814
Income tax expense ..................................         371             118           488              41            67
Minority interest ...................................        --              --             105            --            --
                                                        ---------       ---------     ---------       ---------     ---------
Net income ..........................................   $     396       $   5,180     $   4,364       $   2,386     $   2,747
                                                        ---------       ---------     ---------       ---------     ---------
                                                        ---------       ---------     ---------       ---------     ---------

Historical earnings per share (3):
   Basic ............................................   $     .06       $    1.10     $    1.06       $    0.58     $    0.67
                                                        ---------       ---------     ---------       ---------     ---------
                                                        ---------       ---------     ---------       ---------     ---------
   Diluted ..........................................   $     .06       $    1.03     $    1.04       $    0.58     $    0.67
                                                        ---------       ---------     ---------       ---------     ---------
                                                        ---------       ---------     ---------       ---------     ---------
Weighted average shares outstanding:
   Basic ............................................       6,847           4,700         4,108           4,108         4,108
                                                        ---------       ---------     ---------       ---------     ---------
                                                        ---------       ---------     ---------       ---------     ---------

   Diluted ..........................................       7,154           5,027         4,202           4,108         4,108
                                                        ---------       ---------     ---------       ---------     ---------
                                                        ---------       ---------     ---------       ---------     ---------

PRO FORMA STATEMENT OF OPERATIONS DATA (2):
Historical income before income taxes
   and minority interest ............................                   $   5,298       $   4,957     $   2,427     $   2,814
Pro forma income tax expense (2) ....................                       2,119           1,983           971         1,126
Minority interest ...................................                        --               105          --            --
                                                                        ---------     ---------       ---------     ---------

Pro forma net income ................................                   $   3,179       $   2,869     $   1,456     $   1,688
                                                                        ---------     ---------       ---------     ---------
                                                                        ---------     ---------       ---------     ---------
Pro forma earnings per share (3):
  Basic .............................................                   $    0.68     $    0.70
                                                                        ---------     ---------
                                                                        ---------     ---------
  Diluted ...........................................                   $    0.58     $    0.57
                                                                        ---------     ---------
                                                                        ---------     ---------
Weighted average shares outstanding:
   Basic ............................................                       4,700         4,108
                                                                        ---------     ---------
                                                                        ---------     ---------
   Diluted ..........................................                       5,448         5,030
                                                                        ---------     ---------
                                                                        ---------     ---------



SELECTED STORE OPERATING DATA:
Store contribution(4) ...............................   $   9,050       $  13,377     $  11,111       $   7,647     $   8,110
Number of stores:
     Opened or acquired during period ...............          47(5)           22            51(6)           12             9
     Closed during period ...........................           5               0             5               4             4
     Open at end of period ..........................         192(7)          150           128              82            74
 Total weighted average square feet(8) ..............     306,737         236,095       168,966         144,612       130,542
Weighted average net sales per square foot(9) .......   $     326       $     389     $     392       $     351     $     369
Average square feet per store .......................       1,937           1,780         1,744           1,873         1,894
Increase(decrease) in comparable stores net sales(10)        (9.1)%           0.6%          3.1%           (1.4)%         0.6%
</TABLE>





                                       14

<PAGE>


<TABLE>
<CAPTION>
                                                                                    AS OF
                                                         -------------------------------------------------------------------
                                                         DECEMBER 26,  DECEMBER 27,  DECEMBER 28, DECEMBER 30,  DECEMBER 31,
                                                             1998         1997          1996         1995          1994
                                                         ------------  -----------   ------------ -----------   ------------


                                                                               (DOLLARS IN THOUSANDS)

<S>                                                        <C>          <C>          <C>          <C>          <C>    
BALANCE SHEET DATA:
Working capital .....................................      $25,116      $21,896      $ 9,430      $ 6,710      $ 5,742
Total assets ........................................       61,279       44,133       31,858       17,050       15,630
Total debt ..........................................       11,510          236       10,765        2,734        2,396
Stockholders' equity ................................       32,538       32,082       10,646        7,648        6,349

</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 Company's
                  initial public offering in October 1997 (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 August 26, 1998, the Company acquired five Eagles Nest
                  stores.

(6)               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.

(7)               Stores open at the end of fiscal 1998 consist of 141 Track 'n
                  Trail stores, 46 Overland Trading stores and five Eagles Nest
                  stores.

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

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

(10)              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 decrease for
                  fiscal 1998 excludes the Eagles Nest stores acquired in August
                  1998.




                                       15

<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 following
discussion should be read in conjunction with the financial statements and notes
thereto of the Company included elsewhere in this report.

                   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 and apparel. On August 26, 1998, the
Company acquired the outstanding common stock of Nevin's Eagles Nest, Inc.
("Eagles Nest") for $1.5 million in cash, of which the remaining $100,000 is
expected to be paid in August 1999 provided that certain conditions are met (see
attached "Notes to Consolidated Financial Statements"). Eagles Nest is a 
mall-based retailer primarily of premium branded outdoor apparel and operates 
five stores, four in Colorado and one in Nevada. The Eagles Nest acquisition 
represents the Company's entrance into the apparel market, an expansion that 
also is expected to provide new customer streams for the footwear lines. As is 
common in the apparel industry, Eagles Nest margins are lower than those that 
the Company currently experiences in its footwear business. As of December 26, 
1998, the Company operated 141 Track 'n Trail stores, 46 Overland Trading 
stores, and five Eagles Nest stores in 36 states.

                  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
year. The Company's comparable store net sales decreased 9.1% in fiscal 1998,
excluding the acquired Eagles Nest stores. Had the Eagles Nest stores acquired
by the Company on August 26, 1998 been included in the Company's comparable
store net sales comparison since the acquisition, comparable store net sales
would have decreased by 9.0% in fiscal 1998.

                  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 and it became a wholly owned subsidiary of the
Company 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,
the Company has been subject to state and federal income taxes as a C
corporation, and all references to net income for periods prior to fiscal 1998
in this "Management's Discussion and Analysis of Financial Condition and Results
of Operations" are presented as if Track 'n Trail-California, prior to the
Reorganization, 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
                                                                   ------------------------------
                                                                   1998        1997         1996
                                                                   ----        ----         ----

<S>                                                              <C>          <C>          <C> 
Net sales ................................................        100.0%      100.0%       100.0%

Cost of sales ............................................         53.7        51.9         51.4
                                                                  -----       -----        -----

Gross profit .............................................         46.3        48.1         48.6
Selling and marketing expenses ...........................         37.2        33.5         31.8
                                                                  -----       -----        -----

Store contribution (1) ...................................          9.1        14.6         16.8
Administrative and distribution
     expenses ............................................          7.8         7.5          8.3
                                                                  -----       -----        -----

Operating income .........................................          1.3         7.1          8.5
Interest expense .........................................          0.4         1.4          1.0
Other (income) expense ...................................          0.1        (0.1)        (0.0)
                                                                  -----       -----        -----

Income before income taxes
     and minority interest ...............................          0.8         5.8          7.5
Income tax provision (2) .................................          0.4         2.3          3.0
Minority interest ........................................          --          --           0.2
                                                                  -----       -----        -----


Net income (2) ...........................................          0.4%        3.5%         4.3%
                                                                  -----       -----        -----
                                                                  -----       -----        -----
</TABLE>



                                       16

<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)               For 1997 and 1996, 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.

FISCAL 1998 COMPARED TO FISCAL 1997

                  NET SALES

                  Net sales increased to $99.9 million in fiscal 1998, an
increase of $8.0 million, or 8.7%, over fiscal 1997 net sales. The 42 stores
opened by the Company in fiscal 1998 generated $8.0 million in net sales. In
addition, the 20 stores (net of closures) opened in fiscal 1997 were responsible
for $5.9 million more in net sales in fiscal 1998 than in fiscal 1997 and, the
five Eagles Nest stores acquired in fiscal 1998 contributed $2.9 million in
fiscal 1998. These additions to net sales were partially offset by a decrease in
comparable store net sales of $7.7 million, or 9.1%, for fiscal 1998, a $378,000
decrease, relative to fiscal 1997, in net sales attributable to the closing of
five stores during fiscal 1998, and a $773,000 decrease, relative to fiscal
1997, in net sales attributable to the relocation of three stores and the
remodeling of one store in fiscal 1998. The decrease in comparable store sales
is primarily due to the disruptions caused by unseasonable weather conditions
consisting of a wet and cold spring associated with El Nino and a warm fall
season. In addition, heavy discounting by competitors (related, in part, to
competitor store closures) put pressure on both the customer stream and prices.

                  GROSS PROFIT

                  Gross profit was $46.2 million for fiscal 1998, an increase of
$2.1 million, or 4.7%, over the gross profit for fiscal 1997. Approximately $1.2
million of the increase in gross profit is attributable to the Eagles Nest
stores acquired in 1998. Gross profit as a percentage of net sales decreased to
46.3% for fiscal 1998 from 48.1% in fiscal 1997. This decrease was primarily the
result of markdowns taken to liquidate winter goods in the first quarter and in
response to competitor discounting in the third and fourth quarters.

                  SELLING AND MARKETING EXPENSES

                  Selling and marketing expenses were $37.2 million for fiscal
1998, an increase of $6.4 million, or 20.8%, over the $30.8 million in selling
and marketing expenses for fiscal 1997. Approximately $664,000, or 10.4%, of
this increase is attributable to the Eagles Nest stores acquired in 1998. The
remaining increase is primarily attributable to operating costs related to
operating 42 additional stores at December 26, 1998 versus December 27, 1997. As
a percentage of net sales, selling and marketing expenses increased to 37.2% in
fiscal 1998 from 33.5% in fiscal 1997, primarily as a result of operating a
larger store base during a period in which the Company experienced declining
comparable store sales and opened new stores which have a lower initial sales
base.

                  ADMINISTRATIVE AND DISTRIBUTION EXPENSES

                  Administrative and distribution expenses were $7.7 million for
fiscal 1998, an increase of $901,000, or 13.2%, over $6.8 million in
administrative and distribution expenses for fiscal 1997. This increase is
primarily attributable to the increases in personnel and related expenses
associated with the Company's expansion and becoming a public company.
Approximately $201,000 of the increase in administrative and distribution
expenses is attributable to the Eagles Nest acquisition in August 1998. As a
percentage of net sales, administrative and distribution expenses increased to
7.8% in fiscal 1998 from 7.5% in fiscal 1997, predominately as a result of the
decrease in comparable store sales.





                                       17

<PAGE>

                  INTEREST EXPENSE

                  Interest expense decreased to $369,000, or 0.4% of net sales,
for fiscal 1998, from $1.3 million, or 1.4% of net sales, in fiscal 1997. This
decrease is primarily attributable to repayment of debt incurred in connection
with the acquisition of Overland and reduction of the outstanding principal
balance of the Company's credit facility from the proceeds from the Offering.
Interest expense attributable to debt incurred in connection with the Eagles
Nest acquisition was $88,000, or 23.9% of total interest expense for fiscal
1998.

                  NET INCOME

                  The Company's net income for fiscal 1998 was $396,000, a
decrease of $2.8 million, or 87.5 %, from $3.2 million in fiscal 1997.
Approximately $107,000 of net income for fiscal 1998 is attributable to the
Eagles Nest acquisition in August 1998. The decrease in net income of $2.9
million (excluding Eagles Nest) is primarily attributable to fixed operating
costs associated with a larger store base during a period in which the Company
experienced declining comparable store sales and the start up costs associated
with a larger base of new stores in fiscal 1998.

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
$12.0 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 $3.0 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.





                                       18

<PAGE>



                  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.

                  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.













































                                       19

<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 1998 and fiscal 1997. 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 1998                             Fiscal 1997
                                                      -------------                           -------------
            

                                       FIRST       SECOND     THIRD     FOURTH      FIRST      SECOND      THIRD    FOURTH
                                      QUARTER     QUARTER    QUARTER    QUARTER    QUARTER     QUARTER    QUARTER   QUARTER
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                                           (In thousands, except per share data)

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

Net sales .........................   $ 18,908    $ 22,311   $ 25,662   $ 32,970   $ 16,867    $ 20,660   $ 24,761  $ 29,546
Cost of sales .....................     10,065      11,385     13,927     18,238      8,857      10,556     12,975    15,289
                                      --------    --------   --------   --------   --------    --------   --------  --------
Gross profit ......................      8,843      10,926     11,735     14,732      8,010      10,104     11,786    14,257
Selling and marketing expenses ....      8,239       8,523      9,511     10,913      7,194       7,333      7,787     8,466
                                      --------    --------   --------   --------   --------    --------   --------  --------
Store contribution(1) .............        604       2,403      2,224      3,819        816       2,771      3,999     5,791
Administrative and distribution

     expenses .....................      2,007       1,908      1,945      1,881      1,780       1,664      1,777     1,619
                                      --------    --------   --------   --------   --------    --------   --------  --------
Operating income (loss) ...........   $ (1,403)   $    495   $    279   $  1,938   $   (964)   $  1,107   $  2,222  $  4,172
Interest expense ..................          5          46         89        229        289         442        440        89
Other expense (income) ............          5           4         29        135        (10)         30        (26)      (15)
                                      --------    --------   --------   --------   --------    --------   --------  --------
Income (loss) before income taxes .   $ (1,413)   $    445   $    161   $  1,574   $ (1,243)   $    635   $  1,808  $  4,098
Income tax provision (benefit) ....       (565)        178         64        694       (416)         44        125       365
                                      --------    --------   --------   --------   --------    --------   --------  --------
Net income (loss) .................       (848)        267         97        880       (827)        591      1,683     3,733
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                      --------    --------   --------   --------   --------    --------   --------  --------

Historical earnings per share:
     Basic ........................   $  (0.12)   $   0.04   $   0.01   $   0.13   $  (0.20)   $   0.14   $   0.41  $   0.58
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                      --------    --------   --------   --------   --------    --------   --------  --------
     Diluted ......................   $  (0.12)   $   0.04   $   0.01   $   0.12   $  (0.20)   $   0.14   $   0.39  $   0.54
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                      --------    --------   --------   --------   --------    --------   --------  --------

Weighted average shares outstanding:

     Basic ........................      6,842       6,843      6,851      6,852      4,108       4,108      4,108     6,478
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                      --------    --------   --------   --------   --------    --------   --------  --------
     Diluted ......................      6,842       7,256      7,070      7,074      4,108       4,302      4,330     6,973
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                      --------    --------   --------   --------   --------    --------   --------  --------

Historical income (loss) before
     income taxes .................                                                  (1,243)        635      1,808     4,098
Pro forma income tax provision
     (benefit) ....................                                                    (497)        254        723     1,639
                                                                                   --------    --------   --------  --------
Pro forma net income (loss) (2) ...                                                $   (746)   $    381   $  1,085  $  2,459
                                                                                   --------    --------   --------  --------
                                                                                   --------    --------   --------  --------
Pro forma earnings per share:
     Basic ........................                                                $  (0.18)   $   0.09   $   0.26  $   0.38
                                                                                   --------    --------   --------  --------
                                                                                   --------    --------   --------  --------
     Diluted ......................                                                $  (0.16)   $   0.08   $   0.22  $   0.35
                                                                                   --------    --------   --------  --------
                                                                                   --------    --------   --------  --------
Weighted average shares outstanding:
     Basic.........................                                                   4,108       4,108      4,108     6,478
                                                                                   --------    --------   --------  --------
                                                                                   --------    --------   --------  --------
     Diluted ......................                                                   4,786       4,888      4,880     7,044
                                                                                   --------    --------   --------  --------
                                                                                   --------    --------   --------  --------

                                              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 .....................       53.2        51.0       54.3       55.3       52.5       51.1        52.4      51.7
                                      --------    --------   --------   --------   --------    --------   --------  --------

Gross profit ......................       46.8        49.0       45.7       44.7       47.5       48.9        47.6       48.3
Selling and marketing expenses ....       43.6        38.2       37.0       33.1       42.7       35.5        31.5       28.7
                                      --------    --------   --------   --------   --------    --------   --------  --------
Store contribution(1) .............        3.2        10.8        8.7       11.6        4.8       13.4        16.1       19.6
Administrative and distribution      
     expenses .....................       10.6         8.6        7.6        5.7       10.6        8.1         7.1        5.5
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                     
                                     
Operating income (loss) ...........       (7.4)        2.2        1.1        5.9       (5.8)       5.3         9.0       14.1

Interest expense ..................        0.1         0.2        0.4        0.7        1.7        2.1         1.8        0.3
Other expense (income) ............        0.0         0.0        0.1        0.4       (0.1)       0.1        (0.1)      (0.1)
                                      --------    --------   --------   --------   --------    --------   --------  --------
Income (loss) before income taxes         (7.5)        2.0        0.6        4.8       (7.4)       3.1         7.3       13.9
Income tax provision (benefit) ....       (3.0)        0.8        0.2        2.1       (2.5)       0.2         0.5        1.2
                                     
                                     
Net income (loss) .................       (4.5)%       1.2%       0.4%       2.7%      (4.9)%      2.9%        6.8%      12.7%
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                      --------    --------   --------   --------   --------    --------   --------  --------
                                     
Historical income (loss) before      
income taxes ......................                                                    (7.4)       3.1         7.3      13.9
                                     
Pro forma income tax provision       
(benefit) .........................                                                    (3.0)       1.3         2.9       5.6
                                                                                   --------    --------   --------  --------
                                     
Pro forma net income (loss) (2) ...                                                    (4.4)%      1.8%        4.4%      8.3%
                                                                                   --------    --------   --------  --------
                                                                                   --------    --------   --------  --------
                                  
</TABLE>




                                       20




<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.

                  The Company anticipates that operating results will fluctuate
as a result of a number of factors, including seasonality, weather, 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 has financed its operations from internally
generated cash flow, borrowings under its revolving line of credit, and equity
financing. The Company's liquidity requirements relate primarily to the
financing of inventories, build-out of new stores and remodeling of existing
stores. In fiscal 1998, the Company also used funds for the acquisition of
Eagles Nest and the relocation of its distribution facility from El Dorado
Hills, California to West Sacramento, California. In connection with the
acquisition of Eagles Nest, the Company paid off the Eagles Nest line of credit
and other debt of approximately $1.4 million.

                 Net cash used for operating activities for fiscal 1998 and
fiscal 1997 was $2.8 million and $1.3 million, respectively. Cash provided by
operating activities for fiscal 1996 was $5.1 million. Net cash used
for/provided by 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. Inventories at the end of fiscal 1998 were $37.0 million compared to
$27.9 million at the end of fiscal 1997, an increase of $9.1 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 five
Eagles Nest stores acquired accounted for $1.6 million of the increase. The
remaining increase in inventory between December 27, 1997 and December 26, 1998
relates primarily to the opening of 37 new Track 'n Trail and Overland Trading
stores (net of closures) and increased inventory levels in six larger format
stores.

                 The Company had $25.1 million in working capital at the end of
fiscal 1998 compared to $21.9 million at the end of fiscal 1997, an increase of
$3.2 million. The increase in working capital is primarily attributable to an
increase in inventory due to a larger store base, which increase was partially
offset by the use of cash for the construction of 42 new stores and the
acquisition of Eagles Nest. 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, and payments coming due for back-to-school merchandise.
In addition, the Company requires incremental working capital to stock each new
store upon opening. 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.

                 Capital expenditures excluding the cost of acquisitions were
$6.9 million, $2.3 million and $1.7 million in fiscal 1998, 1997, and 1996,
respectively. Capital expenditures for fiscal 1998 were primarily for the
build-out of 42 new stores, four of which are temporary locations to be
completed in 1999, the completion of four stores opened in 1997, the remodeling
of three stores, the relocation of three stores and the distribution facility,
and the full build-out of a store to be opened in the first quarter of 1999. An
additional $1.4 million of cash was used in 1998 for the acquisition of Eagles
Nest.


                                       21

<PAGE>



                 During fiscal 1999, the Company plans to open approximately
eight new stores, complete the build-out of the four temporary stores opened in
fiscal 1998 and remodel 14 existing stores. In addition, the Company plans to
complete the capital improvements to the new distribution facility and upgrade
certain computer hardware and software. The Company estimates that total capital
expenditures in fiscal 1999 will be approximately $3.5 million.

                 The Company reviews the operating performance of its stores on
an ongoing basis to determine which stores, if any, to close. The Company closed
two stores in the first quarter of 1998 and closed three additional stores in
the third quarter.  The Company anticipates closing seven stores in fiscal 1999.

                  Financing activities provided cash of $10.5 million and $5.0
million in fiscal 1998 and fiscal 1997, respectively. The Company used cash of
$2.7 million in financing activities in fiscal 1996. Net cash provided in fiscal
1998 is primarily attributable to additional borrowings under the Company's
revolving line of credit to fund working capital requirements and the
acquisition of Eagles Nest. Cash was also used from financing activities for the
early retirement of long-term debt. In fiscal 1997 the Company consummated its
initial public offering which generated $25 million in net proceeds. The
proceeds were utilized to repay all indebtedness then outstanding under the
Company's revolving credit facility ($10.2 million) and other debt totaling $7.5
million, and to make a $6.4 million distribution to the Pre-Offering
Stockholders.

                 In October 1998 the Company increased its revolving line of
credit availability to $20.0 million. Pursuant to the revised terms of the
credit facility, the Company has the right to convert as of October 11, 1999,
the date upon which the revolving line is scheduled to mature, up to $10.0
million of the revolving line to term debt with principal amortizing over a five
year term expiring on October 30, 2004. The Company's revolving line 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 $20.0 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 are limited to 50% of eligible inventory,
subject to reduction by any amounts outstanding under letters of credit. The
credit facility prohibits the Company from paying dividends without the bank's
consent and limits the Company's capital expenditures to $4.0 million in 1999.
In addition, the credit facility requires the Company to meet certain financial
covenants, including minimum financial ratios and profitability tests. As of
December 26, 1998, $11.3 million was outstanding under the credit facility.

                 Management believes that operating cash flow and borrowing
under its credit facility will be sufficient to complete the Company's fiscal
1999 planned store expansions and to satisfy the Company's other capital
requirements through fiscal 1999. 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. When the term of the Company's current bank credit
facility expires, management believes that it will be able to either obtain an
extension to the Company's current revolving line of credit or obtain a new 
credit facility.

                 As part of its growth strategy, the Company may, when
appropriate, pursue opportunities to acquire complementary businesses. 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.

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.

YEAR 2000

                 The Year 2000 problem concerns the inability of some computer
programs to recognize a year that begins with "20" instead of the familiar "19".
For computer programs that were written using two digits instead of four to
define the applicable year, they may recognize a date using "00" as the year
1900 instead of the year 2000. Computer programs which are not Year 2000
compliant may fail or create erroneous results after December 31, 1999 (and in
some cases before), causing disruptions of operations, including, among other
things, a temporary inability to process transactions or send and receive
electronic data to or from third parties or engage in similar normal business
activities.

                                       22

<PAGE>



                 STATE OF READINESS

                 The Company has developed a Year 2000 plan (the "Y2K Plan")
with the objective of having all of its information technology ("IT") systems
and non-IT systems functioning properly with respect to the Year 2000 by
December 31, 1999. The Y2K Plan consists of the following phases: 1) assess the
Year 2000 compliance of IT and non-IT systems and identify potential problems;
2) assign priorities to identified Year 2000 problems; 3) remediation; 4) test
IT and non-IT systems; and 5) develop contingency plans, including the
possibility of securing alternate sources of supplies and services, increasing
inventory and supply levels, and adjusting store and office staffing levels. The
Company defines IT systems as all applications, operating systems and hardware
on mainframe, PC or LAN platforms. Non-IT systems refer to systems with embedded
software or hardware that may have a time element. The Company has identified
three areas of focus for its Y2K Plan: corporate headquarters, store sites, and
"key" third parties (the "Third Parties"). Third Parties include suppliers,
vendors and service providers that are deemed to be critical to the Company's
business operations. All phases of the Y2K Plan are being applied to these three
areas.

                 An outside vendor provides the mainframe system software used
at the Company's corporate office. The software contains an operating system and
seven modules. The outside vendor has tested the operating system, merchandise,
accounts payable, sales audit, fixed assets and general ledger modules and
verified to the Company that such software is Year 2000 compliant. The Company
has received Year 2000 compliant upgrade software for the electronic data
exchange and report writing modules, and expects installation and testing to be
complete in second quarter 1999. The manufacturer of the mainframe hardware has
tested the hardware and advised the Company that it is Year 2000 compliant.

                 As of December 26, 1998, the Company had assessed approximately
75% of the personal computers at the corporate headquarters, of which
approximately 50% were found to be non-Year 2000 compliant. The Company expects
the remaining personal computers and non-IT systems will be assessed by the end
of second quarter 1999. Retrofitting and/or replacement and subsequent testing
of non-compliant systems is scheduled for the third quarter of 1999. The local
area network (LAN) software and hardware manufacturers have advised the Company
that the LAN software and hardware is Year 2000 compliant.

                 The Company utilizes software produced by an outside vendor for
its human resource and payroll functions. In the third quarter of 1998, the
outside vendor upgraded and tested both systems and verified to the Company that
they are Year 2000 compliant.

                 The Company has identified the systems most critical to ongoing
operations within the corporate headquarters category. Contingency planning for
this category began in third quarter 1998 and is scheduled for completion in
third quarter 1999.

                 The Company uses point of sale (POS) hardware and software
provided by an outside vendor at each of its Track 'n Trail and Overland stores
to record sales transactions. Eagles Nest was converted to the same POS system 
in the first quarter of 1999. Of the Company's 192 stores, eleven require 
hardware upgrades to become Year 2000 compliant as of the end of fiscal 1998.
Additionally, the Company expects to receive a Year 2000 compliant software
upgrade for its POS systems and expects to retrofit all of its stores with the
upgraded software version by the end of the second quarter of 1999. POS systems
for new stores, if any, will be installed with the upgraded version of the
software. Contingency planning for this category is scheduled to begin in the
first quarter of 1999 and is expected to be completed by the end of the second
quarter of 1999.

                 The Company has initiated formal communications with all Third
Parties to determine the extent to which the Company is vulnerable to a Third
Parties failure to remediate its own Year 2000 issues. To the extent that the
Company does not receive adequate assurances, it will develop contingency plans,
with completion of these plans scheduled for the end of the second quarter of
1999.

                 COSTS

                 The Company expects its costs associated with becoming Year
2000 compliant to be approximately $53,000, exclusive of system additions,
upgrades or replacements incurred in the normal course of business and assuming
that implementation of contingency plans will not be necessary. The Company
estimates that $21,000 of this amount will have been incurred repairing software
problems and $32,000 will have been incurred in connection with replacement of
problem


                                       23

<PAGE>



systems and equipment. Costs incurred through December 26, 1998 have been
approximately $12,000. The remaining costs are expected to be incurred in the
first nine months of fiscal 1999. The Company does not separately track the
internal costs incurred for the Y2K Plan. Such internal costs are principally
related to the payroll of the Company's Management Information Systems
department. The Company's policy is to expense maintenance and modification
costs and capitalize hardware and software purchases and upgrades. The Company
intends to fund the foregoing from operating cash flow.

                 RISKS

                 The failure to correct a material Year 2000 problem could
result in an interruption in, or failure of, certain normal business activities
or operations of the Company. Such failures could materially and adversely
affect the Company's results of operations, liquidity and financial condition.
Because of the range of possible issues and large number of variables involved,
it is impossible to quantify the total potential cost of Year 2000 problems or
to determine the Company's worst- case scenario in the event the Company's Year
2000 remediation efforts or the efforts of those with whom it does business are
not successful. In order to deal with the uncertainty associated with the Year
2000 problem, the Company is developing contingency plans to address the
possibility that efforts to mitigate the Year 2000 risk are not successful
either in whole or part. These plans will include manual processing of
information for critical information technology systems, increasing store
staffing levels and inventory levels, identifying alternative suppliers and
increasing cash on hand. The contingency plans are expected to be completed by
the end of the second quarter of fiscal 1999, after which the appropriate
implementation training is scheduled to take place. The Company believes that,
upon completion of the Y2K Plan as scheduled, the possibility of material
interruptions of normal operations also should be substantially lowered. No
assurances can be given, however, that the Company may not suffer material
interruptions of normal operations, or that such interruptions, even after the 
implementation of any contingency plans, will not have a material adverse 
effect.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

                  In June 1998, the Financial Accounting Standards Board (FASB)
issued Statements of Financial Accounting Standard (SFAS) No. 133, ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which requires that all
derivative instruments be recorded on the balance sheet at fair value, and that
changes in the fair value of the derivative instruments be recorded in net
earnings or comprehensive earnings. SFAS 133 must be adopted for fiscal years
beginning after June 15, 1999, with earlier adoption permitted. Management has
determined that adoption of SFAS 133 will not have a material impact on the
Company's consolidated financial statements.

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                  The market risk inherent in the Company's market risk
sensitivity instruments is the potential loss arising from adverse changes in
interest rates and foreign currency exchange rates. All financial instruments
held by the Company and described below are held for purposes other than
trading.

                  INTEREST RATE RISK 

                  The Company's revolving line of credit exposes earnings to
changes in short-term interest rates since the interest rates on the revolving 
line of credit are variable. If the variable rates on the Company's revolving 
line of credit were to increase by 1% from the rate at December 26, 1998 and the
Company borrowed the maximum amount available under its revolving line of credit
($20.0 million) for all of fiscal 1999, solely as a result of the increase in 
interest rates, the Company's interest expense would increase, resulting in a 
$113,000 decrease in net income. The marginal income tax rate of 48.4% was used.
This analysis does not consider the effects of the reduced level of overall 
economic activity that could exist in such an environment. Further, in the event
of a change of such magnitude, management would likely take actions to further 
mitigate its exposure to the change. The fair value of the Company's revolving 
line of credit is not affected by changes in market interest rates.

                  FOREIGN EXCHANGE RISK

                  The Company typically does not hedge its foreign currency
exposure.  Management does not believe its exposure to foreign currency rate
fluctuations to be material.



                                       24

<PAGE>



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
Report of independent accountants.                                            26

Consolidated balance sheets as of December 26, 1998 
and December 27, 1997.                                                        27

Consolidated statements of income for each of the three fiscal
years in the period ended December 26, 1998.                                  28

Consolidated statements of changes in stockholders' equity for
each of the three fiscal years in the period ended December 26, 1998.         29

Consolidated statements of cash flows for each of the three fiscal 
years in the period ended December 26, 1998.                                  30

Notes to financial statements.                                                31
</TABLE>



                                       25

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS



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


In our opinion, the accompanying consolidated balance sheets and the related 
consolidated statements of income, stockholders' equity and cash flows 
present fairly, in all material respects, the financial position of Track 'n 
Trail and its subsidiaries at December 26, 1998 and December 27, 1997, and 
the results of their operations and their cash flows for each of the fiscal 
years ended December 26, 1998, December 27, 1997 and December 28, 1996, in 
conformity with generally accepted accounting principles. 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 which 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, assessing 
the accounting principles used and significant estimates made by management, 
and evaluating the overall financial statement presentation. We believe that 
our audits provide a reasonable basis for the opinion expressed above.


/s/PricewaterhouseCoopers LLP


Sacramento, California
February 11, 1999


                                       26
<PAGE>

     TRACK 'N TRAIL AND
     SUBSIDIARIES
     REPORT ON AUDITS OF FINANCIAL STATEMENTS
     FOR THE YEARS ENDED DECEMBER 26, 1998
     AND DECEMBER 27, 1997




<PAGE>


TRACK 'N TRAIL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                             DECEMBER 26,    DECEMBER 27,
ASSETS                                                           1998          1997
                                                            ------------     ------------
<S>                                                         <C>              <C>
Current assets:
    Cash and cash equivalents                               $      1,808     $      2,383
    Accounts receivable                                            2,510            1,540
    Income taxes receivable                                          130              -
    Inventories                                                   36,998           27,852
    Prepaid expenses                                                 432              311
    Deferred income taxes                                            675              317
                                                            ------------     ------------

             Total current assets                                 42,553           32,403

Fixed assets, net                                                 11,849            7,284
Goodwill, net                                                      4,852            3,084
Deferred income taxes                                              2,025            1,362
                                                            ------------     ------------

             Total assets                                   $     61,279     $     44,133
                                                            ------------     ------------
                                                            ------------     ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term debt                       $      1,746     $        116
    Accounts payable                                              12,481            6,958
    Accrued payroll and bonuses                                      561              668
    Sales tax payable                                                952              874
    Income taxes payable                                             687            1,089
    Accrued expenses and other liabilities                         1,010              802
                                                            ------------     ------------

             Total current liabilities                            17,437           10,507

Deferred rent                                                      1,540            1,424
Long-term debt, net of current portion                             9,764              120
                                                            ------------     ------------

             Total liabilities                                    28,741           12,051
                                                            ------------     ------------

Commitments and contingencies (Notes 4, 7 and 13)

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; 6,851,961 and 6,839,811 shares issued
      and outstanding at December 26, 1998 and
      December 27, 1997, respectively                                 69               68
    Additional paid-in capital                                    25,831           25,772
    Retained earnings                                              6,638            6,242
                                                            ------------     ------------

             Total stockholders' equity                           32,538           32,082
                                                            ------------     ------------

             Total liabilities and stockholders' equity     $     61,279     $     44,133
                                                            ------------     ------------
                                                            ------------     ------------
</TABLE>


   The accompanying notes are an intergral part of the financial statements.


                                       27
<PAGE>

TRACK 'N TRAIL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               FISCAL YEAR ENDED
                                                           -----------------------------------------------------------
                                                              DECEMBER 26,       DECEMBER 27,         DECEMBER 28,
                                                                 1998                1997                 1996
                                                           ------------------  ------------------  -------------------
<S>                                                        <C>                 <C>                 <C>
Net sales                                                  $          99,851   $          91,834   $           66,233

Cost of sales                                                         53,615              47,677               34,062
                                                           ------------------  ------------------  -------------------
           Gross profit                                               46,236              44,157               32,171
                                                           ------------------  ------------------  -------------------
Operating expenses:
    Selling and marketing                                             37,186              30,780               21,060
    Administrative and distribution                                    7,741               6,840                5,508
                                                           ------------------  ------------------  -------------------
           Total operating expenses                                   44,927              37,620               26,568
                                                           ------------------  ------------------  -------------------
           Operating income                                            1,309               6,537                5,603

Other (income) expenses:
    Interest expense                                                     369               1,260                  670
    Other, net                                                           173                 (21)                 (24)
                                                           ------------------  ------------------  -------------------
           Income before provision for income taxes
             and minority interest                                       767               5,298                4,957

Income tax provision                                                     371                 118                  488
                                                           ------------------  ------------------  -------------------
           Income before minority interest                               396               5,180                4,469

Minority interest in net income of consolidated
    subsidiaries                                                           -                   -                  105
                                                           ------------------  ------------------  -------------------
           Net income                                      $             396   $           5,180   $            4,364
                                                           ------------------  ------------------  -------------------
                                                           ------------------  ------------------  -------------------
Historical earnings per share:
    Basic                                                  $            0.06   $            1.10   $             1.06
                                                           ------------------  ------------------  -------------------
                                                           ------------------  ------------------  -------------------
    Diluted                                                $            0.06   $            1.03   $             1.04
                                                           ------------------  ------------------  -------------------
                                                           ------------------  ------------------  -------------------
Pro forma income data (unaudited):
    Historical income before income
      taxes and minority interest                                              $           5,298   $            4,957
    Pro forma income tax provision                                                         2,119                1,983
                                                                               ------------------  -------------------
    Pro forma income before minority interest                                              3,179                2,974
    Minority interest                                                                          -                  105
                                                                               ------------------  -------------------
           Pro forma net income                                                $           3,179   $            2,869
                                                                               ------------------  -------------------
                                                                               ------------------  -------------------
    Pro forma earnings per share:
      Basic                                                                    $            0.68   $             0.70
                                                                               ------------------  -------------------
                                                                               ------------------  -------------------
      Diluted                                                                  $            0.58   $             0.57
                                                                               ------------------  -------------------
                                                                               ------------------  -------------------
</TABLE>

   The accompanying notes are an intergral part of the financial statements.


                                       28
<PAGE>


TRACK 'N TRAIL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS,
EXCEPT SHARE DATA)
--------------------------------------------------------------------------------
<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 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
      exercise 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

    Issuance of common stock under the
     employee stock purchase plan                12,150             1            59           -              -               60

    Net income                                      -             -             -             -              396            396
                                              ---------   -----------   -----------   -----------    -----------    -----------

BALANCE, DECEMBER 26, 1998                    6,851,961   $        69   $    25,831   $       -      $     6,638    $    32,538
                                              ---------   -----------   -----------   -----------    -----------    -----------
                                              ---------   -----------   -----------   -----------    -----------    -----------
</TABLE>

   The accompanying notes are an intergral part of the financial statements.


                                       29
<PAGE>

TRACK 'N TRAIL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                    1998         1997         1996
                                                                                  --------     --------     --------
<S>                                                                               <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                                    $    396     $  5,180     $  4,364
    Adjustments to reconcile to cash (used for)
      provided by operating activities:
       Depreciation and amortization                                                 2,119        1,743        1,121
       Loss on disposal of fixed assets                                                122          -            -
       Minority interest                                                               -            -            105
       Compensation recorded in connection
        with stock option plans                                                        -             67          103
       Deferred income taxes                                                          (408)      (1,161)          81
       Cash provided by (used for) changes in
        operating assets and liabilities, net of
        effects of business combinations:
          Accounts receivable                                                         (384)        (530)        (375)
          Income taxes receivable                                                     (130)         -            -
          Inventories                                                               (7,946)      (7,984)      (1,008)
          Prepaid expenses                                                            (104)         (99)          88
          Accounts payable and accrued liabilities                                   3,916          831          293
          Income taxes payable                                                        (402)         613          291
          Deferred rent                                                                 64           29           42
                                                                                  --------     --------     --------

          Cash (used for) provided by operating activities                          (2,757)      (1,311)       5,105
                                                                                  --------     --------     --------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchases of fixed assets                                                       (6,942)      (2,306)      (1,721)
    Proceeds from sale of fixed assets                                                 -             27          -
    Cash paid for business combinations                                             (1,401)         -           (240)
                                                                                  --------     --------     --------

           Cash used for investing activities                                       (8,343)      (2,279)      (1,961)
                                                                                  --------     --------     --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Bank line of credit:
      Borrowings                                                                    48,431       44,819       31,154
      Repayments                                                                   (37,732)     (45,499)     (33,484)
    Other long-term debt:
      Borrowings                                                                       -            -          2,487
      Repayments                                                                      (960)     (10,513)        (747)
    Book overdraft                                                                     726          -            -
    Advances to related parties under notes receivable                                 -            -           (591)
    Net proceeds from issuance of common stock                                          60       24,988          -
    Proceeds from exercise of stock options                                            -             20          -
    Payment of distributions to stockholders                                           -         (8,819)      (1,475)
                                                                                  --------     --------     --------

           Cash provided by (used for) financing activities                         10,525        4,996       (2,656)
                                                                                  --------     --------     --------

           (Decrease) increase in cash and cash equivalents                           (575)       1,406          488

Cash and cash equivalents, beginning of year                                         2,383          977          489
                                                                                  --------     --------     --------

Cash and cash equivalents, end of year                                            $  1,808     $  2,383     $    977
                                                                                  --------     --------     --------
                                                                                  --------     --------     --------
</TABLE>


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


                                       30
<PAGE>


TRACK 'N TRAIL AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES

     BACKGROUND
     Track n' Trail, a Delaware corporation (Company), is a retailer of
     footwear, apparel and related accessories. As of December 26, 1998 and
     December 27, 1997, the Company operated 192 and 150 stores in 36 and 29
     states, respectively, under the Track `n Trail, Overland Trading and Eagles
     Nest names. Each Track `n Trail and Overland Trading store offers a wide
     range of rugged walking and fashion casual shoes, sandals and boots. Each
     Eagles Nest store offers premium outdoor apparel and footwear.

     The Company ends its fiscal year on the last Saturday in December.

     The 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 prior to the Reorganization,
     the capital structure and number of shares outstanding resulting from 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 operates in a single business segment of retailing. The Company
     acquires its merchandise from a number of manufacturers; however, during
     the fiscal years ended December 26, 1998 and December 27, 1997, 44.8% and
     42.9%, respectively, of the Company's net sales were related to merchandise
     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.

     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 the related income tax effect of $22,000.

     Certain notes payable, which had an aggregate balance of approximately
     $17.7 million at the date of 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.


                                       31

<PAGE>

     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 three subsidiaries, Track 'n Trail-California, Overland and Nevin's
     Eagles Nest, Inc. (Eagles Nest). Overland became a 79.0% owned subsidiary
     on October 25, 1996, and a wholly owned subsidiary effective January 1,
     1997 and Eagles Nest became a wholly owned subsidiary on August 26, 1998.
     All intercompany transactions and balances have been eliminated in
     consolidation.

     CASH AND CASH EQUIVALENTS
     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.

     In the ordinary course of business the Company periodically has outstanding
     checks in excess of its bank balance (book overdraft). At December 26,
     1998, the Company had book overdrafts of $726,000, which are included in
     accounts payable.

     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.

     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.


                                       32
<PAGE>

     INCOME TAXES
     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 26, 1998 or December 27,
     1997.

     Commencing June 28, 1992, and until the Reorganization on October 7, 1997,
     Track 'n Trail-California had elected S corporation status for federal
     income taxes and most state income taxes while Overland operated as 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.

     Pro forma net income (unaudited) for 1997 and 1996 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.

     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
     employee 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.


                                       33
<PAGE>

2.   EARNINGS PER SHARE

     A reconciliation of the numerators and denominators used in the computation
     of basic and diluted earnings per share is as follows (in thousands, except
     per share information):

<TABLE>
<CAPTION>
                                                  HISTORICAL EARNINGS PER SHARE
                                           --------------------------------------
                                                 1998          1997          1996
                                           ----------    ----------    ----------
<S>                                        <C>           <C>           <C>
Income available to common stockholders
 (net income) for basic and diluted
 earnings per share                        $      396    $    5,180    $    4,364
                                           ----------    ----------    ----------
                                           ----------    ----------    ----------

Weighted average shares for basic               6,847         4,700         4,108
 earnings per share
Dilutive effect of stock options
 (treasury stock method)                          307           327            94
                                           ----------    ----------    ----------

Weighted average shares for
diluted earnings per share                      7,154         5,027         4,202
                                           ----------    ----------    ----------
                                           ----------    ----------    ----------

Historical earnings per share:
  Basic                                    $     0.06    $     1.10    $     1.06
                                           ----------    ----------    ----------
                                           ----------    ----------    ----------
  Diluted                                  $     0.06    $     1.03    $     1.04
                                           ----------    ----------    ----------
                                           ----------    ----------    ----------

<CAPTION>
                                                PRO FORMA EARNINGS
                                               PER SHARE (UNAUDITED)
                                           ----------------------------
                                               1997             1996
                                           ------------    ------------
<S>                                        <C>             <C>
Income available to common stockholders
 (pro forma net income) for basic and
 diluted earnings per share                $      3,179    $      2,869
                                           ------------    ------------
                                           ------------    ------------

Weighted average shares for
 basic earnings per share                         4,700           4,108
Dilutive effect of stock options
 (treasury stock method)                            327              94
Distribution shares                                 421             828
                                           ------------    ------------

Weighted average shares for diluted
 earnings per share                               5,448           5,030
                                           ------------    ------------
                                           ------------    ------------

Pro forma earnings per share:
    Basic                                  $       0.68    $       0.70
                                           ------------    ------------
                                           ------------    ------------
    Diluted                                $       0.58    $       0.57
                                           ------------    ------------
                                           ------------    ------------
</TABLE>

     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.


                                       34
<PAGE>

     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) were 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 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.   FIXED ASSETS

     Fixed assets consist of (in thousands):
<TABLE>
<CAPTION>
                                      DECEMBER 26,      DECEMBER 27,
                                         1998              1997
                                     -------------     -------------
<S>                                  <C>               <C>
Leasehold improvements               $      11,814     $       8,645
Furniture, fixtures and equipment            5,736             4,493
                                     -------------     -------------

                                            17,550            13,138

Less accumulated depreciation               (5,701)           (5,854)
                                     -------------     -------------

Fixed assets, net                    $      11,849     $       7,284
                                     -------------     -------------
                                     -------------     -------------
</TABLE>


     Depreciation expense for fiscal years 1998, 1997 and 1996, was $1,922,000,
     $1,579,000, and $1,098,000, respectively.

     During 1998, the Company recorded an impairment write-down for assets of
     closed stores and stores planned to be closed. Such adjustments resulted in
     a loss of approximately $122,000 consisting of a reduction of cost of
     $2,205,000 and a reduction of accumulated depreciation of $2,083,000.


                                       35

<PAGE>

4.   LONG-TERM DEBT

     Long-term debt consists of (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 26,            DECEMBER 27,
                                                                   1998                      1997
                                                            -------------------       -------------------
<S>                                                             <C>                     <C>
Revolving Line of credit                                              $ 11,299                      $  -
Promissory note, interest at 9.36%, collateralized
  by leasehold improvements, due 2000                                       99                       162
Payable to sellers of Eagles
 Nest, due 1999                                                            100                         -
Construction notes to store lessors, repaid
 in 1998                                                                     -                        74
Capital lease, final payment due 2002                                       12                         -
                                                            -------------------       -------------------

Total                                                                   11,510                       236

Less current portion                                                    (1,746)                     (116)
                                                            -------------------       -------------------

Long-term portion                                                      $ 9,764                     $ 120
                                                            -------------------       -------------------
                                                            -------------------       -------------------
</TABLE>

     In 1997, the Company had a 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.

     In October 1998, the Company obtained an amendment (October 1998 Amendment)
     to the Revolving Line. The October 1998 Amendment increased the Revolving
     Line to $20.0 million, including $1.5 million in letters of credit (of
     which $550,000 were issued at December 26, 1998), and limited borrowings
     and letters of credit to a percentage of eligible inventory. The October
     1998 Amendment also granted the Company the right to convert as of October
     11, 1999, the date upon which the Revolving Line is scheduled to mature, up
     to $10.0 million of the Revolving Line to term debt with principal
     amortizing over a five year term expiring on October 30, 2004. As the
     Company intends to either obtain an extension of the Revolving Line or
     convert $10.0 million to a term note, $9.7 million ($10.0 million less
     principal due on the term note in 1999) of the amount outstanding on the
     Revolving Line at December 26, 1998, has been classified as a noncurrent
     liability.

     Available additional borrowings or letters of credit under the Revolving
     Line were approximately $6.9 million at December 26, 1998. 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 (7.75% at December 26, 1998) or LIBOR (5.63% at
     December 26, 1998), plus 2.0%, payable monthly, plus an annual commitment
     fee of $75,000. The weighted average interest rates for fiscal years 1998,
     1997 and 1996, were 7.99%, 8.94% and 8.77%, respectively.

     The Revolving Line requires the Company to meet certain financial covenants
     including minimum earnings before income taxes, depreciation and
     amortization (EBITDA), and limits on dividends and acquisitions of capital
     assets. Such covenants were amended as part of the October 1998 Amendment,
     and were further amended in December 1998.


                                       36
<PAGE>

     Scheduled maturities of long-term debt (assuming $10.0 million of the
     Revolving Line is converted to term debt at October 1999) at December 26,
     1998, are as follows (in thousands):
<TABLE>
        <S>                                                 <C>
        1999                                                $     1,746
        2000                                                      1,760
        2001                                                      1,868
        2002                                                      2,015
        2003                                                      2,175
        Thereafter                                                1,946
                                                            ------------

             Total                                          $    11,510
                                                            ------------
                                                            ------------
</TABLE>

5.   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, is entitled to
     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


                                       37
<PAGE>

     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.

     The following is a summary of the activity in stock options granted during
     the fiscal years ended December 26, 1998, 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 30, 1995                     -   $       -               -   $       -
    Granted                                       501,168        4.00         350,618        0.01
                                             -------------              --------------
                                             -------------              --------------

Outstanding as of December 28, 1996               501,168        4.00         350,618        0.01
    Granted                                             -           -          10,000        9.75
    Cancelled                                    (20,127)        4.00               -           -
    Exercised                                     (4,931)        4.00               -           -
                                             -------------              --------------

Outstanding as of December 27, 1997               476,110        4.00         360,618        0.28
    Granted                                        40,000        9.75               -           -
                                             -------------              --------------

Outstanding as of December 26, 1998               516,110   $    4.45         360,618   $    0.28
                                             -------------  ----------  --------------  ----------
                                             -------------  ----------  --------------  ----------

Options exercisable as of December 26, 1998       476,110   $    4.00         353,118   $    0.08
                                             -------------  ----------  --------------  ----------
                                             -------------  ----------  --------------  ----------

Options exercisable as of December 27, 1997       476,110   $    4.00         350,618   $    0.01
                                             -------------  ----------  --------------  ----------
                                             -------------  ----------  --------------  ----------
</TABLE>

The weighted average remaining contractual life of all options outstanding at
December 26, 1998, was:

<TABLE>
<CAPTION>
      INCENTIVE STOCK                NONQUALIFIED STOCK
          OPTIONS                         OPTIONS
   -----------------------          ----------------------
               WEIGHTED                        WEIGHTED
               AVERAGE                         AVERAGE
              REMAINING                       REMAINING
             CONTRACTUAL                     CONTRACTUAL
   EXERCISE      LIFE               EXERCISE     LIFE
    PRICE     (IN YEARS)            PRICE     (IN YEARS)
   --------  -------------          -------  -------------
<S>          <C>                 <C>         <C>
$     4.00         7.5           $    0.01         7.5

$     9.75         4.9           $    9.75         8.8
</TABLE>

     ISOs for 100,228 shares vested on December 15, 1996, and an additional
     380,813 shares vested upon the Offering. ISOs granted in 1998 for 40,000
     shares vest at a rate of 20% per year. No compensation resulted from the
     grant of ISOs in fiscal 1996 or fiscal 1998.


                                       38
<PAGE>

     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 over four years.

     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.

     Compensation expense recognized for stock compensation awards, including
     stock appreciation rights, amounted to $0, $67,000 and $116,000 during the
     1998, 1997 and 1996 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. Two additional Purchase Plan offerings plans
     commenced, the first on January 1, 1998, and the second on July 1, 1998,
     and terminated on June 30, 1998 and December 30, 1998, respectively.
     Another Purchase Plan offering commenced January 1, 1999, and will
     terminate no later than December 31, 2000. As of December 26, 1998, and
     December 27, 1997, 12,150 and -0-shares had been issued under the Purchase
     Plan, respectively. In January 1999, 13,938 shares of common stock were
     issued pursuant to the Purchase Plan for $24,000.

     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 1998, 1997 and 1996, net
     of the liability recorded in 1996 in connection with stock appreciation
     rights canceled in exchange for the NSOs, was $95,000, $61,000 and
     $170,000,


                                       39
<PAGE>

     respectively. The weighted average, grant-date fair value was estimated in
     fiscal 1998, 1997 and 1996, respectively, assuming risk-free interest rates
     of 5.22%, 5.97% and 6.49%, an expected life of five years, expected
     volatility of 61.4% for 1998, 55.0% for 1997, and 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 1998 and 1997 (in thousands, except per share
     information):

<TABLE>
<CAPTION>
                                                                         1998                         1997
                                                            --------------------------    -----------------------
                                                             AS REPORTED   PRO FORMA       AS REPORTED  PRO FORMA
                                                            ------------  ------------    ----------    ---------
<S>                                                         <C>           <C>             <C>           <C>
Net income                                                  $       396   $       377     $   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                                $      0.06   $      0.06     $    1.10     $   1.10
                                                            ------------  ------------    ----------    ---------
                                                            ------------  ------------    ----------    ---------
    Diluted earnings per share                              $      0.06   $      0.05     $    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>


6.   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.



                                       40
<PAGE>

7.   LEASE COMMITMENTS

     The Company operates its stores, main office and warehouse from facilities
     under operating lease agreements which expire at various dates through
     2010. 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 26, 1998, future minimum lease
     payments under all noncancelable leases are as follows (in thousands):
<TABLE>
<CAPTION>
               <S>                                     <C>
               1999                                    $   12,261
               2000                                        11,340
               2001                                        11,030
               2002                                        10,836
               2003                                        10,190
               Thereafter                                  30,892
                                                     -------------

                    Total                              $   86,549
                                                     -------------
                                                     -------------
</TABLE>


     Rent expense was $11,293,000, $8,912,000, and $6,160,000 during fiscal
     years 1998, 1997 and 1996, including contingent rentals of $62,000,
     $119,000, and $123,000, respectively.


8.   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 profit-sharing expense was $61,000, $81,000, and
     $50,000 in fiscal years 1998, 1997 and 1996, respectively.


                                       41
<PAGE>

9.   INCOME TAXES

     The provision for income taxes consists of (in thousands)

<TABLE>
<CAPTION>
                                                              FISCAL YEAR ENDED
                                          -----------------------------------------------------------
                                            DECEMBER 26,        DECEMBER 27,         DECEMBER 28,
                                                1998                1997                 1996
                                          ------------------  ------------------   ------------------
<S>                                       <C>                 <C>                  <C>
Currently payable:
    Federal                               $             525   $           1,264    $             282
    State                                               254                  15                  125

Deferred:
    Federal                                            (351)                (13)                  56
    State                                               (57)                176                   25

Net deferred tax assets recorded
  upon change in tax status from
  S corporation to C corporation                          -              (1,324)                    -
                                          ------------------  ------------------   ------------------

                                          $             371   $             118    $             488
                                          ------------------  ------------------   ------------------
                                          ------------------  ------------------   ------------------
</TABLE>


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

<TABLE>
<CAPTION>
                                                    DECEMBER 26,         DECEMBER 27,
                                                       1998                  1997
                                                   -------------        --------------
<S>                                                <C>                  <C>
Depreciation                                          $   1,149             $     860
Inventory - Uniform capitalization                          337                   253
Inventory - method change                                   131                    32
Stock compensation programs                                 240                   248
Deferred rent and other accrued liabilities                 484                   362
Net operating loss carryforward                             436                     -
Federal effect of deferred state taxes                     (105)                   50
Other                                                        28                  (126)
                                                   -------------        --------------

                                                      $   2,700             $   1,679
                                                   -------------        --------------
                                                   -------------        --------------
</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. No allowance against deferred tax assets has
     been provided as 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.


                                       42
<PAGE>

     Federal and state tax net operating loss carryforwards at December 26,
     1998, generated from Eagles Nest prior to its acquisition by the Company,
     and available to reduce future taxable income are approximately $1,081,000
     and will expire as follows:

<TABLE>
<CAPTION>
               <S>                                      <C>
               2008                                     $ 114,000
               2009                                       795,000
               2010                                        40,000
               2011                                        35,000
               2012                                        97,000
</TABLE>

     The net operating loss carryforwards can only be used to offset taxable
     income generated by Eagles Nest. Due to the change in ownership rules under
     Internal Revenue Code Section 382 the use of Eagles Nest NOL's is limited
     to approximately $75,000 annually.

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

<TABLE>
<CAPTION>
                                                             FISCAL YEAR ENDED
                                          --------------------------------------------------------
                                           DECEMBER 26,         DECEMBER 27,         DECEMBER 28,
                                              1998                 1997                 1996
                                          --------------      ---------------      ---------------
<S>                                       <C>                 <C>                  <C>
Federal statutory rate                            34.0%                34.0%                34.0%
Benefit due to Subchapter S
 tax status                                           -                (12.0)               (28.3)
State income taxes                                  5.2                  3.6                  3.9
Nondeductable goodwill and
 other permanent differences                        9.2                  1.4                  0.2
Effect of change from S to C
 corporation tax status                               -                (24.9)                   -
Other                                                 -                  0.1                    -
                                          --------------      ---------------      ---------------

                                                  48.4%                 2.2%                 9.8%
                                          --------------      ---------------      ---------------
                                          --------------      ---------------      ---------------
</TABLE>

10.  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.

         LONG-TERM DEBT: The carrying amounts, totaling $11,510,000 and $236,000
         at December 26, 1998 and December 27, 1997, respectively, are believed
         to approximate fair value due to the floating interest rate on the
         majority of these financial instruments.



                                       43
<PAGE>

11.  SUPPLEMENTAL CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
                                                                FISCAL YEAR ENDED
                                                 ----------------------------------------------------
                                                   DECEMBER 26,       DECEMBER 27,      DECEMBER 28,
                                                      1998               1997              1996
                                                 --------------     --------------     --------------
<S>                                              <C>                <C>                <C>
Interest paid                                    $          294     $        1,360     $          615
                                                 --------------     --------------     --------------
                                                 --------------     --------------     --------------

Income taxes paid                                $        1,312     $          644     $           73
                                                 --------------     --------------     --------------
                                                 --------------     --------------     --------------

Noncash investing and financing transactions:
    Acquisitions of businesses:
      Purchase price, including
       acquisition costs                         $        1,501     $          558     $        2,733
      Minority interest eliminated                            -                105                  -
      Less debt issued in connection
       with the acquisition                                   -               (663)            (2,493)
      Less retention                                       (100)                 -                  -
                                                 --------------     --------------     --------------


    Cash paid for acquisitions                   $        1,401     $            -     $          240
                                                 --------------     --------------     --------------
                                                 --------------     --------------     --------------

    Distribution of notes receivable to
     stockholders                                $            -     $            -     $        1,660
                                                 --------------     --------------     --------------
                                                 --------------     --------------     --------------

    Cancellation of stock appreciation
     rights                                      $            -     $            -     $          596
                                                 --------------     --------------     --------------

    Receivables recorded for tenant
     improvement allowances                      $          577     $            -     $            -
                                                 --------------     --------------     --------------
                                                 --------------     --------------     --------------
</TABLE>


12.  BUSINESS COMBINATIONS

                            OVERLAND TRADING COMPANY

     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.

     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.


                                       44
<PAGE>


     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.

     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>

     Accumulated amortization at December 26, 1998 and December 27, 1997, on
     goodwill recorded in connection with the Overland acquisition, was $363,000
     and $199,000, 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>

                               NEVIN'S EAGLES NEST

     On August 26, 1998, the Company acquired all the outstanding shares of
     capital stock of Eagles Nest. The purchase price of the shares was $1.5
     million in cash, $100,000 of which remained payable at December 26, 1998
     (Retention). Substantially all of the cash was provided by the Company's
     Revolving Line.

     The acquisition was accounted for using the purchase method of accounting.
     The purchase price was allocated to the fair value of the assets and
     liabilities acquired as follows: $1.3 million to current assets, $244,000
     to property, plant and equipment, $518,000 to other assets, $1.1 million to
     accounts payable and other accrued liabilities and $1.4 million to debt and
     capital lease obligations. This resulted in goodwill of $2.0 million. Upon
     closing of the Eagles Nest acquisition, the Company extinguished $1.4
     million of Eagles Nest debt.

     Accumulated amortization at December 26, 1998 and December 27, 1997, on
     goodwill recorded in connection with the Eagles Nest acquisition, was
     $33,000 and $0, respectively.

     The following unaudited pro forma summary combines the consolidated results
     of operations of the Company and Eagles Nest as if the acquisition had
     occurred at the beginning of fiscal 1997 and fiscal 1998 after giving
     effect to certain adjustments, including amortization of goodwill, revised
     depreciation based on estimated fair market values, and revised interest
     expense based on the additional borrowings and interest rate differentials
     on Eagles Nest debt retired at acquisition. The pro forma summary does not
     necessarily reflect the results of operations as they would have been if
     the Company and Eagles Nest had constituted a single entity during such
     periods (in thousands, except per share information):

<TABLE>
<CAPTION>
                                                            PRO FORMA, ASSUMING
                                                          ACQUISITION OCCURRED AT
                                                               BEGINNING OF
                                                                  FISCAL
                                                                YEARS ENDED
                                                                (UNAUDITED)
                                                     -----------------------------------
                                                       DECEMBER 26,        DECEMBER 27,
                                                         1998                  1997
                                                     --------------      ---------------
<S>                                                  <C>                 <C>
Net sales                                            $     103,224       $       98,731
                                                     --------------      ---------------
                                                     --------------      ---------------
Net income before income taxes                       $         218       $        5,077
Income tax                                                     178                   59
                                                     --------------      ---------------
                                                     --------------      ---------------
Net income                                           $          40       $        5,018
                                                     --------------      ---------------
                                                     --------------      ---------------
Earnings per share:
    Basic                                            $        0.01       $         1.07
                                                     --------------      ---------------
                                                     --------------      ---------------
    Diluted                                          $        0.01       $         1.00
                                                     --------------      ---------------
                                                     --------------      ---------------

Net income before income taxes                                           $        5,077
Pro forma income tax provision (Note 1)                                           2,031
                                                                         ---------------
                                                                         ---------------
Pro forma net income                                                     $        3,046
                                                                         ---------------
                                                                         ---------------
Pro forma earnings per share:
    Basic                                                                $         0.65
                                                                         ---------------
                                                                         ---------------
    Diluted                                                              $         0.56
                                                                         ---------------
                                                                         ---------------
</TABLE>


                                       46
<PAGE>

13.  CONTINGENCIES

     The Company is 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.


                                       47
<PAGE>

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

Not Applicable.

                                   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.



                                       48
<PAGE>

                                     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.

           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.



                                       49

<PAGE>




<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               (2)            Amended and Restated Loan Agreement dated as of  October 9, 1998 between Union
                                                Bank of California, N.A. and the subsidiaries of the Registrant.
             10.14               (3)            Continuing Guaranty dated as of September 25, 1997 between Union Bank of
                                                California, N.A.  and the Registrant.
             10.15               (4)            1998 Bonus Plan for Officers of the Registrant.
             10.16                              1999 Bonus Plan for Officers of the Registrant.
             10.17                              Lease Agreement dated as of September 18, 1998 between Spieker Properties,
                                                L.P. and the Registrant.
             21.1                (1)            List of Subsidiaries of the Registrant.
             23.1                               Consent of PricewaterhouseCoopers LLP.
             24.1                               Power of Attorney (see page 51 of this Form 10-K).
             27.1                               Financial Data Schedule.

</TABLE>

Notes

(1)               Filed with Registrant's Registration Statement on Form S-1
                  (File No. 333-23195).

(2)               Filed with Registrant's Quarterly Report on Form 10-Q for the
                  quarter ended September 26, 1998.

(3)               Filed with Registrant's Annual Report on Form 10-K for the
                  year ended December 27, 1997.

(4)               Filed with Registrant's Quarterly Report on FORM 10-Q for the
                  quarter ended March 28, 1998.

(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.


                                       50
<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 1, 1999 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
                             (Principal Executive Officer), and
                             Director                                                3/1/99

/s/ DANIEL J. NAHMENS        Executive Vice President - Finance, Chief Financial
                             Officer (Principal Financial and
                             Accounting Officer), Treasurer and Secretary            3/1/99

/s/ DAVID L. SUECHTING, JR.  Chairman of the Board                                   3/1/99

/s/ BARBARA J. SUECHTING     Director                                                3/1/99

/s/ HELEN C. BULWIK          Director                                                3/1/99

/s/ STEVEN D. TOUGH          Director                                                3/1/99

</TABLE>



                                       51