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

FORM 10-K

(Mark One)

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________________ to _______________

Commission file number: 0-20736

Sport Chalet, Inc.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State or other jurisdiction of incorporation or organization) |  | 95-4390071
(I.R.S. Employer Identification Number)

|                                                                                       |  |                 
|-------------------------------------------------------------------------------------- |  | ----------------
|920 Foothill Boulevard, La Canada, California
(Address of principal executive offices) |  | 91011
(Zip code)

Registrants telephone number, including area code: (818) 790-2717

Securities registered pursuant to Section 12(b) of the Act: None

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

Common Stock, $0.01 par value.
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [   ] 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 registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 10, 2002 was approximately $16.5 million based upon the
closing price of the common stock on that date.

The number of shares of the registrants common stock outstanding as of June
10, 2002 was 6,606,334.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive proxy statement relating to its 2002
annual meeting of stockholders, which will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days of the close of
the registrants last fiscal year are incorporated by reference into Part III
of this Report.

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TABLE OF CONTENTS



|              |                                                                                               |  |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS                                                                             
|              | ITEM 2. PROPERTIES                                                                           
|              | ITEM 3. LEGAL PROCEEDINGS                                                                    
|              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS                                
|PART II      
|              | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|              | ITEM 6. SELECTED FINANCIAL DATA                                                              
|              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|              | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|              | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III     
|              | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|              | ITEM 11. EXECUTIVE COMPENSATION                                                              
|              | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|              | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV      
|              | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|SIGNATURES   
|              | EXHIBIT INDEX                                                                                
|EXHIBIT 10.54
|EXHIBIT 10.55
|EXHIBIT 23   



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PART I

This Annual Report on Form 10-K contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Those statements include comments regarding the intent,
belief or current expectations of the Company and its management. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the
forward-looking statements. See Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations  Factors That May Affect
Future Results.




ITEM 1. BUSINESS

General

Sport Chalet, Inc. (the Company), founded in 1959, is a leading operator
of 26 full service, specialty sporting goods superstores in Southern California
and Nevada. The Company has 25 locations in California consisting of eleven
located in Los Angeles County, six in Orange County, three in each of San Diego
and San Bernardino Counties, and one in each of Riverside and Ventura Counties;
the Nevada location is in Clark County. These stores average 38,600 square
feet in size. In addition, the Company operates a retail e-commerce store
through GSI Commerce, Inc. at www.sportchalet.com. The Companys executive
offices are located at 920 Foothill Boulevard, La Canada, California 91011, and
its telephone number is (818) 790-2717.

Operating History and Growth Plan

The Companys growth strategy has focused on Southern California, but now
contemplates opening new stores in California and Nevada as suitable locations
are found over the next several fiscal years. Over the past three years the
Company has opened seven new stores and relocated two. The Company currently
plans to open at least two stores during the next 12 months, of which one will
be in Riverside, California and the second will be the Companys second store
in the Las Vegas, Nevada market. Future store openings are subject to
availability of satisfactory store locations based on local competitive
conditions, site availability and cost and the Companys ability to provide and
maintain high service levels and quality brand merchandising at competitive
prices.

Store openings are expected to have a favorable impact on sales volume,
but will negatively affect profit in the short term. New stores tend to have
higher costs in the early years of operation; due primarily to extra labor used
to open new stores, reduced sales on a per employee basis until the store
matures and increased promotional costs. As the store matures, sales tend to
level off and expenses decline as a percentage of sales. The Companys stores
generally require three years to attract a stable, mature customer base. The
Company estimates the cost of opening an average new store to be approximately
$2.0 million consisting primarily of the investment in inventory (net of
average vendor payables), the cost of furniture, fixtures and equipment and
pre-opening expenses, such as the costs associated with training employees and
stocking the store. Opening costs for each new store can vary significantly
depending on the amount of negotiated landlord contribution to the Companys
required improvements.

The Companys sales are dependent to some degree on the economic
environment and level of consumer spending in Southern California and Nevada.
The retail industry historically has been subject to substantial cyclical
variation, and a recession in the general economy or uncertainties regarding
future economic prospects that affect consumer spending habits have had, and
may in the future have, a materially adverse effect on the Companys results of
operations. For fiscal 2002, average sales per store for stores opened the
entire year were $9.3 million.

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In February 2002, the Company moved to a new 326,000 square foot
distribution center located in Ontario, California. This facility replaces the
Companys 150,000 square foot warehouse and a 30,000 square foot satellite
facility, and has been designed to support growth plans for the
foreseeable future. Labor savings from operating efficiency provided by the new facility are
expected to offset increases in occupancy costs in the short term and
installation of warehouse management software will further improve warehousing
and logistical cost management.

The Companys corporate offices are spread over seven nearby buildings in
La Canada, California neighboring the store where the Company was founded. To
facilitate growth related to the expansion plans, in the fall of 2002, the
Company intends to consolidate these locations into a new corporate office.
The Principal Stockholder is building the 27,500 square foot facility in La
Canada for this purpose and the Company expects this new corporate headquarters
to support its growth plans for the foreseeable future.

The Company has developed an information technology strategic plan calling
for: (i) the replacement of all point of sale software and equipment, (ii)
store systems to handle rental equipment, customer repairs, special orders and
team sales, (iii) installation of inventory replenishment software, and (iv)
the general upgrading of back office systems. During fiscal 2002, 2001 and
2000, the Company incurred $993,000, $3.7 million and $800,000 respectively, of capital expenditures
in implementing this plan. To date, all point of sale equipment
has been replaced including a customized rental system, replenishment software
has been installed, and back office systems are being upgraded. The Company
expects to spend $3.4 million in fiscal 2003 for, among other things, a
warehouse management system to complement its new distribution center and
upgrades to credit/debit authorization processing to speed customer check-out
and reduce costs.

Operating Strategies

The Companys stores feature a number of distinct, specialty sporting
goods divisions, offering a large assortment of quality brand name merchandise
at competitive prices. The stores include traditional sporting goods
merchandise (e.g., footwear, apparel and other general athletic products) and
nontraditional merchandise such as downhill skiing, mountaineering and SCUBA.
The merchandise appeals to both experts and beginners. In addition, the
Companys stores offer over 35 services for the serious sports enthusiast,
including custom golf club fitting and repair, ski/snowboard rental and repair,
full dive training and certification programs, SCUBA charters, team sales,
racquet stringing, and bicycle tune up and repair. Each shop is staffed by
sales associates with expertise in the use of the merchandise they sell,
permitting the Company to offer its customers a high level of knowledgeable
service.

The Company purchases merchandise from over 1,300 vendors. The Companys
largest vendor, Nike, Inc., accounted for approximately 7.3% and 9.0% of the
Companys total inventory purchases for fiscal 2002 and 2001, respectively.
The following table sets forth the percentage of total net sales for each major
category for each of the last three fiscal years:

|          |       |  |                      |     |      |  |      |     |   |  |    |     |  
|--------- | ----- |  | -------------------- | --- | ---- |  | ---- | --- | - |  | -- | --- | -
|          |       |  | Year Ended March 31,
|          |       |  |                     
|          |       |  | 2002                 |     | 2001 |  | 2000
|          |       |  |                      |     |      |  |     
|Hardlines |       |  | 53                   | %   |      |  | 55   | %   |   |  | 55 | %  
|Apparel   |       |  | 29                   | %   |      |  | 28   | %   |   |  | 27 | %  
|Footwear  |       |  | 18                   | %   |      |  | 17   | %   |   |  | 18 | %  
|          |       |  |                      |     |      |  |      |     |   |  |    |    
|          | Total |  |                      | 100 | %    |  |      | 100 | % |  |    | 100 | %
|          |       |  |                      |     |      |  |      |     |   |  |    |    

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The market for retail sporting goods is seasonal in nature. The Companys
highest sales levels and operating profit occur predominantly during the winter
months of November, December and January, which overlap the third and fourth
fiscal quarters ended December 31 and March 31. As with other retailers, the
Companys business is heavily affected by sales of merchandise during the
Holiday season. In addition, the Companys product mix has historically
emphasized cold weather sporting goods merchandise, particularly ski-related
products, thus boosting sales levels during the winter months and often
increasing the seasonality of the Companys business. Sales of winter-related
products ranged from 17% to 19% of the Companys net sales in recent years. In
each of fiscal 2002, 2001 and 2000, 33%, 32% and 31%, respectively, of the
Companys sales were attributable to the months of November, December and
January. Management anticipates that this seasonal trend in sales will
continue. No assurance can be provided that any substantial decrease in sales
for the winter months, which could be influenced by the amount and timing of
snowfall at the resorts frequented by those living in Southern California, will
not have a material adverse effect on the Companys profitability. However, in
order to be less dependent upon winter business, management continues to
emphasize a broadened product mix that offers merchandise generally purchased
by consumers in the spring, summer and fall seasons.

Marketing campaigns are conveyed through newspaper, radio, magazine,
direct mail and billboards. Magazine and billboards are funded primarily by
marketing funds collected from the Companys vendors. Through the Team Sales
Division the Company reaches out to communities in which its stores do business
contributing to local teams and leagues.

The Company operates a 326,000 square foot distribution center in Ontario,
California that serves as the primary receiving, distribution and warehousing
facility. Common carriers are used to deliver merchandise to the Nevada store
and the Companys trucks deliver merchandise from the distribution center to
the Southern California stores. A minimal amount of merchandise is shipped
directly by vendors to the stores. Most of the product received at the
distribution center is processed by unpacking and verifying the contents
received and then sorting the contents by store for delivery. Some of the
product received at the distribution center is pre-packaged and pre-ticketed by
the vendor so it can be immediately cross-docked to trucks bound for the
stores. Due to the efficiencies cross-docking creates, the Company encourages
its vendors to pre-package and ticket their products to increase the percentage
of merchandise that is cross-docked. Some of the merchandise is held at the
distribution center for future allocation to the stores based on current sales
trends as directed by our replenishment system to optimize inventory levels.

The Company uses a best of breed approach to information systems. All
new systems communicate with a legacy system that has become the centralized
data repository and the primary financial system. Consistent with the stated
direction to upgrade the legacy systems, those applications were migrated to a
new Sun computer in May 2002 and an Oracle Database was successfully
implemented. With those enhancements in place, the foundation has been
established for future developments on the Oracle platform. In October 2000
store systems were upgraded to the Encore Retail Suite of applications from CRS
Retail Systems, an open technology allowing flexibility for the future. A
custom rental program was added to the store system in October 2001.
Merchandise replenishment is controlled by E3 software from the JDA Software
Group, Inc. running on an IBM AS 400. Future projects include: upgrading
credit/debit authorization processing in the fall of 2002, a warehouse
management system expected to be installed in the spring of 2003, continual
on-going enhancements to the legacy system, and EDI software from SPS Commerce,
among other projects.

The Company uses the Sport Chalet name as a service mark in connection
with its business operations. The Company has registered Sport Chalet as a
service mark with the State of California, and has obtained federal
registration for certain purposes, which has been successfully defended in the
past against attack by third parties. The Company also retains common law
rights to the name, which it has used since 1959. The lack of federal
registration for certain purposes might pose a problem if the Company were to
expand into a geographic area where the name or any confusingly similar name is
used by someone with prior rights.

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Industry and Competition

The market for retail sporting goods is highly competitive, fragmented and
segmented. The Company competes with many different types of retail stores,
including full-line sporting goods chains (e.g., Gart Sports, The Sports
Authority, Chicks, Big 5), specialty stores (e.g., REI, Footaction, Turners,
Foot Locker, West Marine), supplier owned stores (e.g., Nike, The North Face,
adidas), discount and department stores (e.g., Wal-Mart, Nordstrom, Macys,
Target, Sears), as well as catalog and internet based retailers. The Companys
industry is dominated by sporting goods superstore retailers, i.e. full-line
sporting goods chains with stores typically larger than 30,000 square feet
often located in freestanding locations. Superstore chains generally provide a
greater selection of higher quality merchandise than other retailers, while
remaining price competitive. Historically, the Company has provided a broader
selection of higher-end specialty items that require higher levels of customer
service and sales associate expertise than other superstore retailers in the
Southern California area.

The Company believes that its broad selection of high quality name brands
and numerous specialty items at competitive prices, showcased by its
well-trained sales associates, distinguish it from discount and department
stores, traditional and specialty sporting goods stores and other superstore
operations. Management believes the Companys format takes advantage of
several significant trends and conditions in the sporting goods industry. These
trends include the size of the industry, fragmented competition, superstore
dominance, limited assortments offered by many sporting goods retailers,
consumer preference for one-stop shopping, and the importance of delivering
value through selection, quality, service and price.

The Company operates its online store through GSI Commerce, Inc. (GSI)
at www.sportchalet.com. GSI creates and operates all aspects of the
www.sportchalet.com shopping experience, including fulfillment and purchasing,
while remaining transparent to the customer. The Company receives a license
fee based on a percentage of sales generated by the website.

Employees

As of March 31, 2002, the Company had 1,854 full and part-time employees,
1,692 of whom were employed in the Companys stores and 225 of whom were
employed in warehouse and delivery operations or in executive office positions.
None of the employees are unionized. The Company believes that its employee
relations are good. A typical store has approximately 75 employees, of whom 15
to 30 are in the store at any given time on a normal operating basis.
Generally, each store employs a general manager, two to three assistant
managers, who along with area managers and department heads supervise the sales
associates in customer service, merchandising, and operations. Additional
part-time employees are typically hired during the holiday and other peak
seasons.

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ITEM 2. PROPERTIES

At June 10, 2002, the Company had 26 store locations. The following table
summarizes the key information on the Companys retail properties:

|                               |  |               |  |                    |        |  |           | 
|------------------------------ |  | ------------- |  | ------------------ | ------ |  | --------- | 
|Location                       |  | Opening Date  |  | GrossSquareFootage
|                               |  |               |  |                   
|La Canada (1)                  |  | June 1960     |  |                    | 40,300 | 
|Huntington Beach (2)           |  | June 1981     |  |                    | 50,000 | 
|La Jolla                       |  | June 1983     |  |                    | 20,000 | 
|Mission Viejo                  |  | August 1986   |  |                    | 30,000 | 
|Point Loma (2)                 |  | November 1987 |  |                    | 34,600 | 
|Valencia (2)                   |  | November 1987 |  |                    | 40,000 | 
|Marina Del Rey                 |  | November 1989 |  |                    | 42,300 | 
|Beverly Hills                  |  | November 1989 |  |                    | 39,300 | 
|Brea (2)                       |  | April 1990    |  |                    | 34,200 | 
|Oxnard (2)                     |  | June 1990     |  |                    | 40,100 | 
|West Hills (2)                 |  | June 1991     |  |                    | 44,000 | 
|Burbank                        |  | August 1992   |  |                    | 45,000 | 
|Montclair (3)                  |  | November 1992 |  |                    | 18,000 | 
|Torrance                       |  | November 1993 |  |                    | 38,700 | 
|Glendora                       |  | November 1993 |  |                    | 40,000 | 
|Rancho Cucamonga (2)           |  | June 1994     |  |                    | 36,000 | 
|Irvine (2)                     |  | November 1995 |  |                    | 35,000 | 
|Laguna Niguel                  |  | November 1997 |  |                    | 40,000 | 
|Mission Valley                 |  | June 1998     |  |                    | 47,000 | 
|Long Beach                     |  | May 1999      |  |                    | 43,000 | 
|Porter Ranch                   |  | July 1999     |  |                    | 43,000 | 
|Temecula                       |  | October 1999  |  |                    | 40,000 | 
|Chino Hills                    |  | July 2000     |  |                    | 40,000 | 
|Palmdale (2)                   |  | June 2001     |  |                    | 40,300 | 
|Henderson (2)(4)               |  | November 2001 |  |                    | 42,000 | 
|Costa Mesa  South Coast
Plaza |  | November 2001 |  |                    | 40,300 | 
|                               |  |               |  |                    |        |  |           | 
|                               |  |               |  |                    | Total  |  | 1,003,100 | 
|                               |  |               |  |                    |        |  |           | 



---

|(1) |  | The original store opened in 1959. The existing store includes four nearby facilities.
|--- |  | --------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes swimming pool facility for SCUBA and kayaking instruction.                   
|   
|   
|   
|   
|(3) |  | Outlet store relocated to a nearby regional shopping center in October 2000.          
|   
|   
|   
|   
|(4) |  | State of Nevada location.                                                             

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All facilities are located on leased property. The initial terms of the
retail leases expire in 2004 through 2020 and typically provide for multiple
five-year renewal options. All retail store leases provide for base rent which
may or may not be credited against percentage rent based upon gross sales from
the premises. In some of the leases, base rental amounts increase as the lease
term progresses, although in some cases, the Company expects that percentage
rent will more than offset the base rental amounts.

The Company leases from corporations controlled by Norbert Olberz, the
Chairman Emeritus and the Companys principal stockholder (the Principal
Stockholder), its corporate office space in La Canada and its stores in La
Canada, Huntington Beach and Porter Ranch, California. The Company also leased
its warehouse and distribution facility in Montclair, California and although
the term of this lease ran to 2007, the Principal Stockholder agreed to cancel
the lease when the Company moved to the new distribution center in February
2002. The new distribution center located in Ontario, California is leased
from an unrelated third party. The Company has incurred rental expense to the
Principal Stockholder of $2.4 million, $2.5 million and $2.1 million in fiscal
2002, 2001 and 2000, respectively.

The Companys current corporate offices are spread over seven nearby
buildings in La Canada, California neighboring the store where the Company was
founded. To facilitate growth related to the expansion plans, the Company is
negotiating for a new corporate office with La Canada Properties, Inc., a
corporation controlled by the Principal Stockholder. La Canada Properties,
Inc. is building a 27,500 square foot facility in La Canada for this purpose
that the Company could occupy in the fall of 2002. The Company expects to
consolidate into one corporate headquarters and this building will support its
growth plans for the foreseeable future.

Management believes that the occupancy costs under the leases with
corporations controlled by the Principal Stockholder described above are no
higher than those which would be charged by unrelated third parties under
similar circumstances.




ITEM 3. LEGAL PROCEEDINGS

The Company is involved in various routine legal proceedings incidental to
the conduct of its business. Management does not believe that any of these
legal proceedings will have a material adverse impact on the business,
financial condition or results of operations of the Company, either due to the
nature of the claims, or because management believes that such claims should
not exceed the limits of the Companys insurance coverage.




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

No matters were submitted to the Companys stockholders during the fourth
quarter of fiscal 2002.

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PART II




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

Market Price for Common Shares

The Companys Common Stock is traded on The Nasdaq Stock Markets National
Market under the symbol SPCH. The following table reflects the range of high
and low sale prices of the Companys Common Stock by quarter over the last two
fiscal years as reported by Nasdaq:

|               |  |      |        |     |  |   |       | 
|-------------- |  | ---- | ------ | --- |  | - | ----- | 
|Fiscal 2001    |  | High |        | Low
|               |  |      |        |    
|First Quarter  |  | $    | 5.500  |     |  | $ | 4.000 | 
|Second Quarter |  | $    | 6.500  |     |  | $ | 4.375 | 
|Third Quarter  |  | $    | 7.656  |     |  | $ | 4.875 | 
|Fourth Quarter |  | $    | 11.375 |     |  | $ | 5.359 | 

|               |  |      |        |     |  |   |       | 
|-------------- |  | ---- | ------ | --- |  | - | ----- | 
|Fiscal 2002    |  | High |        | Low
|               |  |      |        |    
|First Quarter  |  | $    | 10.000 |     |  | $ | 7.750 | 
|Second Quarter |  | $    | 9.390  |     |  | $ | 7.460 | 
|Third Quarter  |  | $    | 9.900  |     |  | $ | 7.650 | 
|Fourth Quarter |  | $    | 10.750 |     |  | $ | 9.000 | 

|                                      |  |      |       |     |  |   |       | 
|------------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|Fiscal 2003                           |  | High |       | Low
|                                      |  |      |       |    
|First Quarter (through June 10, 2002) |  | $    | 9.400 |     |  | $ | 8.500 | 

On June 10, 2002, the closing price of the Companys Common Stock as
reported by Nasdaq was $9.00. Stockholders are urged to obtain current market
quotations for the Common Stock.

Approximate Number of Holders of Common Shares

The approximate number of stockholders of record of the Companys Common
Stock as of June 10, 2002 was 300 (excluding individual participants in nominee
security position listings) and as of that date, the Company estimates that
there were approximately 1,000 beneficial owners holding stock in nominee or
street name.

Dividend Policy

The Company has not paid any dividends to stockholders since its initial
public offering in November 1992. It is currently contemplated that the
Company will retain earnings for use in the operation and potential expansion
of its business and, therefore, does not anticipate declaring or paying any
cash dividends in the foreseeable future. The declaration and payment of any
such dividends in the future will depend upon the Companys earnings, financial
condition, capital needs and other factors deemed relevant by the Board of
Directors.

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ITEM 6. SELECTED FINANCIAL DATA

The following sets forth selected financial data as of and for the periods
presented. This data should be read in conjunction with the financial
statements and related notes thereto and other financial information included
herein.

|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |       | 
|---------------------------------------------- | ------- | ---------------------------------------- | -------------------- | ----- | ---- | - | ------- | ----- | ---- | - | ------- | ----- |  | - | ------- | ----- |  | - | ------- | ----- | 
|                                               |         |                                          | Year Ended March 31,
|                                               |         |                                          |                     
|                                               |         |                                          | 2002                 |       | 2001 |   | 2000    |       | 1999 |   | 1998   
|                                               |         |                                          |                      |       |      |   |         |       |      |   |        
|Statements of Income Data:                     |         | (In thousands, except per share amounts)
|Net sales                                      |         | $                                        | 227,349              |       |      | $ | 214,842 |       |      | $ | 175,846 |       |  | $ | 154,573 |       |  | $ | 143,014 |      
|Cost of goods sold, buying and occupancy
costs |         |                                          | 162,091              |       |      |   | 148,619 |       |      |   | 123,496 |       |  |   | 106,921 |       |  |   | 100,239 |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Gross profit                                   |         |                                          | 65,258               |       |      |   | 66,223  |       |      |   | 52,350  |       |  |   | 47,652  |       |  |   | 42,775  |      
|Selling, general and administrative expenses   |         |                                          | 57,126               |       |      |   | 54,406  |       |      |   | 43,524  |       |  |   | 38,873  |       |  |   | 35,669  |      
|Stock award (1)                                |         |                                          |                     |       |      |   |        |       |      |   |        |       |  |   |        |       |  |   | 1,468   |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Income from operations                         |         |                                          | 8,132                |       |      |   | 11,817  |       |      |   | 8,826   |       |  |   | 8,780   |       |  |   | 5,638   |      
|Interest expense (income)                      |         |                                          | 71                   |       |      |   | (361    | )     |      |   | (284    | )     |  |   | (243    | )     |  |   | 175     |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Income before taxes                            |         |                                          | 8,061                |       |      |   | 12,178  |       |      |   | 9,110   |       |  |   | 9,023   |       |  |   | 5,463   |      
|Income tax provision                           |         |                                          | 3,267                |       |      |   | 4,913   |       |      |   | 3,626   |       |  |   | 3,609   |       |  |   | 2,236   |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Net income                                     |         | $                                        | 4,794                |       |      | $ | 7,265   |       |      | $ | 5,484   |       |  | $ | 5,414   |       |  | $ | 3,227   |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Earnings per share  basic                     |         | $                                        | 0.73                 |       |      | $ | 1.10    |       |      | $ | 0.83    |       |  | $ | 0.83    |       |  | $ | 0.50    |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Earnings per share  diluted                   |         | $                                        | 0.69                 |       |      | $ | 1.07    |       |      | $ | 0.81    |       |  | $ | 0.80    |       |  | $ | 0.49    |      
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Weighted average shares outstanding:           |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|                                               | Basic   |                                          |                      | 6,587 |      |   |         | 6,580 |      |   |         | 6,577 |  |   |         | 6,530 |  |   |         | 6,504 | 
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|                                               | Diluted |                                          |                      | 6,994 |      |   |         | 6,805 |      |   |         | 6,756 |  |   |         | 6,731 |  |   |         | 6,587 | 
|                                               |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Selected
Operating Data:                       |         |                                          |                      |       |      |   |         |       |      |   |         |       |  |   |         |       |  |   |         |      
|Stores open at end of period                   |         |                                          | 26                   |       |      |   | 23      |       |      |   | 22      |       |  |   | 19      |       |  |   | 18      |      
|Comparable store sales increase (decrease)(2)  |         |                                          | (1.1                 | )%    |      |   | 14.5    | %     |      |   | 2.0     | %     |  |   | 3.2     | %     |  |   | 3.8     | %    
|EBITDA (3)                                     |         | $                                        | 13,274               |       |      | $ | 16,036  |       |      | $ | 12,540  |       |  | $ | 11,995  |       |  | $ | 8,564   |      

|                           |  |                 |        |      |  |                |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|-------------------------- |  | --------------- | ------ | ---- |  | -------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                           |  | As of March 31,
|                           |  |                
|                           |  | 2002            |        | 2001 |  | 2000           |        | 1999 |  | 1998
|                           |  |                 |        |      |  |                |        |      |  |     
|Balance Sheet Data:        |  |                 |        |      |  | (In thousands) |        |      |  |     
|Working capital            |  | $               | 32,133 |      |  | $              | 33,238 |      |  | $    | 29,239 |  |  | $ | 22,999 |  |  | $ | 18,201 | 
|Total assets               |  |                 | 83,310 |      |  |                | 75,822 |      |  |      | 64,454 |  |  |   | 58,380 |  |  |   | 48,718 | 
|Debt                       |  |                 |       |      |  |                |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Total stockholders equity |  |                 | 54,924 |      |  |                | 50,040 |      |  |      | 42,622 |  |  |   | 36,980 |  |  |   | 31,521 | 



|(1) |  | Represents the fair market value of 293,625 unregistered common shares
awarded to certain employees by the Principal Stockholder and his spouse,
through their family trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | A stores sales are included in the comparable store sales calculation
after its twelfth full month of operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|   
|   
|   
|(3) |  | EBITDA is earnings before income taxes, interest expense and depreciation
and amortization. The Company believes that, in addition to cash flows
from operations and net income, EBITDA is a useful financial performance
measure for assessing operating performance as it provides an additional
basis to evaluate the ability of the Company to incur and service debt and
to fund capital expenditures. In evaluating EBITDA, consideration should
be given, among other things, to the amount by which EBITDA exceeds
interest costs for the period and how EBITDA compares to capital
expenditures for the period. To evaluate EBITDA, the components of EBITDA
such as revenue and operating expenses and the variability of such
components over time should also be considered. EBITDA should not be
construed, however, as an alternative to operating income (as determined
in accordance with accounting principles generally accepted in the United
States of America (GAAP)) as an indicator of the Companys operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. The Companys method of
calculating EBITDA may differ from methods used by other companies, and as
a result, EBITDA measures disclosed herein may not be comparable to other
similarly titled measures used by other companies.

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

The following should be read in conjunction with Item 6. Selected
Financial Data and the Companys financial statements and related notes
thereto.

Results of Operations

The following tables set forth statements of income data and relative
percentages of net sales for the periods indicated (dollar amounts in
thousands, except per share amounts).

|                                             |         |   |                     |      |         |  |        |   |         |   |         |      |         |  |       |   |  |   |         |      |  |  |       |   | 
|-------------------------------------------- | ------- | - | ------------------- | ---- | ------- |  | ------ | - | ------- | - | ------- | ---- | ------- |  | ----- | - |  | - | ------- | ---- |  |  | ----- | - | 
|                                             |         |   | Year ended March 31
|                                             |         |   |                    
|                                             |         |   | 2002                |      | 2001    |  | 2000  
|                                             |         |   |                     |      |         |  |       
|                                             |         |   | Amount              |      | Percent |  | Amount |   | Percent |   | Amount  |      | Percent
|                                             |         |   |                     |      |         |  |        |   |         |   |         |      |        
|Net sales                                    |         | $ | 227,349             |      |         |  | 100.0  | % |         | $ | 214,842 |      |         |  | 100.0 | % |  | $ | 175,846 |      |  |  | 100.0 | %
|Gross profit                                 |         |   | 65,258              |      |         |  | 28.7   |   |         |   | 66,223  |      |         |  | 30.8  |   |  |   | 52,350  |      |  |  | 29.8  |  
|Selling, general and
administrative expenses |         |   | 57,126              |      |         |  | 25.1   |   |         |   | 54,406  |      |         |  | 25.3  |   |  |   | 43,524  |      |  |  | 24.8  |  
|Income from operations                       |         |   | 8,132               |      |         |  | 3.6    |   |         |   | 11,817  |      |         |  | 5.5   |   |  |   | 8,826   |      |  |  | 5.0   |  
|Interest expense (income)                    |         |   | 71                  |      |         |  | 0.0    |   |         |   | (361    | )    |         |  | (0.2  | ) |  |   | (284    | )    |  |  | (0.1  | )
|Income before taxes                          |         |   | 8,061               |      |         |  | 3.5    |   |         |   | 12,178  |      |         |  | 5.7   |   |  |   | 9,110   |      |  |  | 5.2   |  
|Net income                                   |         |   | 4,794               |      |         |  | 2.1    |   |         |   | 7,265   |      |         |  | 3.4   |   |  |   | 5,484   |      |  |  | 3.1   |  
|Earnings per share:                          |         |   |                     |      |         |  |        |   |         |   |         |      |         |  |       |   |  |   |         |      |  |  |       |  
|                                             | Basic   |   | $                   | 0.73 |         |  |        |   |         |   | $       | 1.10 |         |  |       |   |  |   | $       | 0.83 |  |  |       |   | 
|                                             | Diluted |   | $                   | 0.69 |         |  |        |   |         |   | $       | 1.07 |         |  |       |   |  |   | $       | 0.81 |  |  |       |   | 

|                                             |         |   |                        |      |         |  |        |   |         |   |        |      |  |  |       |   | 
|-------------------------------------------- | ------- | - | ---------------------- | ---- | ------- |  | ------ | - | ------- | - | ------ | ---- |  |  | ----- | - | 
|                                             |         |   | Quarter ended March 31
|                                             |         |   |                       
|                                             |         |   | 2002                   |      | 2001   
|                                             |         |   |                        |      |        
|                                             |         |   | Amount                 |      | Percent |  | Amount |   | Percent
|                                             |         |   |                        |      |         |  |        |   |        
|Net sales                                    |         | $ | 57,312                 |      |         |  | 100.0  | % |         | $ | 56,022 |      |  |  | 100.0 | %
|Gross profit                                 |         |   | 15,073                 |      |         |  | 26.3   |   |         |   | 16,498 |      |  |  | 29.4  |  
|Selling, general and
administrative expenses |         |   | 14,984                 |      |         |  | 26.1   |   |         |   | 14,821 |      |  |  | 26.5  |  
|Income from operations                       |         |   | 89                     |      |         |  | 0.2    |   |         |   | 1,677  |      |  |  | 3.0   |  
|Interest expense (income)                    |         |   | 41                     |      |         |  | 0.1    |   |         |   | (156   | )    |  |  | (0.3  | )
|Income before taxes                          |         |   | 48                     |      |         |  | 0.1    |   |         |   | 1,833  |      |  |  | 3.3   |  
|Net income                                   |         |   | 2                      |      |         |  | 0.0    |   |         |   | 1,042  |      |  |  | 1.9   |  
|Earnings per share:                          |         |   |                        |      |         |  |        |   |         |   |        |      |  |  |       |  
|                                             | Basic   |   | $                      | 0.00 |         |  |        |   |         |   | $      | 0.15 |  |  |       |   | 
|                                             | Diluted |   | $                      | 0.00 |         |  |        |   |         |   | $      | 0.15 |  |  |       |   | 

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Fiscal 2002 Compared to Fiscal 2001.Sales increased from $214.8 million
for the fiscal year ending March 31, 2001 to $227.3 million for the same period
this year, a 5.8% increase. The increase is the result of opening three stores
in fiscal 2002 and one in fiscal 2001, offset by a comparable store sales
decrease of 1.1%. In addition to generally weak economic climate, the
comparable store sales decrease reflects unseasonably warm and dry winter
weather conditions experienced in the third and fourth quarters as compared to
the same quarters of the prior year, along with a decline in consumer demand
for in-line scooters, sales of which were significant in the prior year. Sales
exclusive of winter-related merchandise and scooters would have increased
12.3%, and comparable store sales would have increased by 5.2%.

Gross profit for the year decreased as a percent of sales from 30.8% to
28.7%. The decrease for fiscal 2002 as compared to fiscal 2001 was a result of
higher markdowns taken to stimulate sales and turn inventory. Additionally,
the decrease in comparable store sales caused occupancy costs to increase as a
percent of sales in fiscal 2002 as compared to fiscal 2001.

Selling, general and administrative expenses decreased as a percent of
sales from 25.3% to 25.1%, as decreases in litigation and incentive-based labor
were partially offset by costs related to the Companys expansion plans.
Expenses related to expansion include; the opening of three new stores, one of
which is the Companys first store outside Southern California, and costs
related to opening a new larger distribution center, most of which related to
the disposal of leasehold improvements from the old facility.

Interest income decreased from $361,000 to an expense of $71,000 due to
the use of the Companys credit facility in fiscal 2002, as compared to fiscal
2001 when the credit facility was not utilized. Invested cash was used to fund
expansion including new stores, a larger distribution center and computer
upgrades. The Company borrowed up to $10 million during the third quarter for
the seasonal build up of inventory.

The effective tax rate as a percent of pretax income is 40.5% for fiscal
2002 and 40.3% for fiscal 2001. These rates differ from the statutory rate of
39.8% primarily as a result of permanent differences between financial
reporting and tax-basis income.

Net income decreased to $4.8 million or $0.69 per diluted share, from $7.3
million, or $1.07 per diluted share, in the prior year primarily due to
decreased gross profit as markdowns were taken to drive consumer demand in the
face of a difficult retail sales environment.

Fourth Quarter 2002 Compared to Fourth Quarter 2001.Sales increased from
$56.0 million for the quarter ended March 31, 2001 to $57.3 million for the
same period in fiscal 2002, a 2.3% increase. The increase is the result of
opening three stores in fiscal 2002, offset by a comparable store sales
decrease of 6.0%. Comparable store sales decreased as unfavorable warm and dry
winter weather conditions in Southern California resulted in significant
decreases in sales of winter-related merchandise. Sales exclusive of
winter-related merchandise would have increased 16.1% and comparable store
sales would have increased by 6.2%.

Gross profit for the period decreased as a percent of sales from 29.4% for
the quarter ended March 31, 2001 to 26.3% for the same period this year. The
decrease is as a result of increased markdowns taken on winter-related
merchandise to stimulate sales and turn inventory. Additionally, the decrease
in comparable store sales caused occupancy costs to increase as a percent of
sales in the fourth quarter of fiscal 2002 as compared to the same period last year.

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Selling, general and administrative expenses decreased from 26.5% to 26.1%
as a percent of sales as decreases in litigation and incentive-based labor were
partially offset by costs related to opening a new larger distribution center,
most of which related to the disposal of leasehold improvements from the old
facility.

Interest income decreased from $156,000 to an expense of $41,000 due to
the use of the Companys credit facility in fiscal 2002, as compared to fiscal
2001 when the credit facility was not utilized. Invested cash was used to fund
expansion including new stores, a larger distribution center and computer
upgrades.

The effective income tax rate as a percent of pretax income for the fourth
quarter 2002 is 94.9% compared to 43.2% for the same period of fiscal 2001.
Both differ from the statutory rate of 39.8% as a result of fourth quarter
provision adjustments reconciling the estimated effective rate utilized in
prior quarters, to the annual effective tax rate.

Net income decreased to $2,000, or $0.0 per diluted share, from $1.0
million, or $0.15 per diluted share, in the prior year primarily due to
decreased gross profit as markdowns were taken to drive consumer demand for
winter-related merchandise in the face of a difficult retail sales environment
and unfavorable winter weather conditions.

Fiscal 2001 Compared to Fiscal 2000.Sales increased from $175.8 million
to $214.8 million, a 22.2% increase, as a result of a comparable store sales
increase of 14.5% and the opening of four new stores since May 1999. The
comparable store sales increase reflects favorable winter weather conditions
experienced in the third and fourth quarter as compared to the same quarters of
the prior year, increased consumer demand for in-line scooters and continuing
improvements in merchandising and customer service. Excluding sales of
scooters and winter-related merchandise, comparable store sales were up 7.4%
during fiscal 2001. Management believes that the scooter phenomenon has run
its course and will be insignificant in the future.

Gross profit for the year increased as a percent of sales from 29.8% to
30.8%, due to (i) reduced markdowns as a percent of sales due to early strong
sales of winter-related merchandise in fiscal 2001 as compared with fiscal 2000
and (ii) increased comparable store sales which caused occupancy costs to
decrease as a percent of sales.

Selling, general and administrative expenses increased as a percent of
sales from 24.8% to 25.3%, primarily the result of increased litigation costs
over the prior year.

Interest income increased from $284,000 to $361,000 due to cash reserves
generated by increased sales.

The effective tax rate as a percent of pretax income is 40.3% for fiscal
2001 and 39.8% for fiscal 2000. These rates differ from the statutory rate of
39.8% primarily as a result of permanent differences between financial
reporting and tax-basis income.

Net income increased to $7.3 million compared to $5.5 million in the prior
year primarily due to increased sales slightly offset by increased selling,
general and administrative expense. Diluted earnings per share increased 32.1%
to $1.07 from $.81 due primarily to increased net income.

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Liquidity and Capital Resources

The Companys primary capital requirements are for inventory and store
expansion, relocation and remodeling. Historically, cash from operations,
credit terms from vendors and bank borrowing have met the Companys liquidity
needs. The Company believes that these sources will be sufficient to fund
currently anticipated cash requirements for the foreseeable future.

Net cash provided by operating activities of $7.3 million, $11.5 million
and $1.0 million for fiscal 2002, 2001 and 2000, respectively, was primarily
the result of net income, adjusted for depreciation and amortization, and
increases in bank overdraft combined with accounts payable offset by inventory
purchases.

Inventory levels from year-to-year typically increase due to the addition
of new stores. In fiscal 2002 and 2000, the addition of three stores in each
year increased inventories $5.4 million and $7.0 million, respectively, while
in fiscal 2001 the inventory increase of $5.6 million was a result of a
significant increase in comparable store sales along with the purchase of John
Wells Golf Shops and the addition of one new store. The Company evaluates its
inventory on a per store basis. The average inventory per store was $1.8
million in fiscal 2002 and 2001 and $1.7 million in fiscal 2000.

Bank overdraft represents the total of checks in transit in excess of cash
on hand. For fiscal 2002, invested cash built-up in prior years was used to
fund the Companys expansion plan. The overdraft is expected to continue and
fluctuate due to the timing of vendor payments. Accounts payable historically
increases as inventory increases. For fiscal 2002, accounts payable combined
with the bank overdraft increased by $6.0 million primarily due to increased
inventory. During fiscal 2001, accounts payable increased only $371,000 as
part of the inventory increase occurred early in the year due to a new store
and the purchase of John Wells Golf Shops and vendors were paid before year
end. For fiscal 2000, accounts payable decreased $69,000 due to changes in the
timing of vendor payments.

Net cash used in investing activities was $12.0 million, $8.0 million, and
$6.6 million for fiscal 2002, 2001 and 2000, respectively. In fiscal 2002,
three stores were opened and the distribution center was relocated, while in
fiscal 2001 one store was opened, one was remodeled and one was relocated and
during fiscal 2000 three stores were added and one was relocated. In fiscal
2002, 2001 and 2000, capital expenditures for information technology totaled
$993,000, $3.7 million, and $800,000, respectively, while ongoing capital
expenditures for the Companys existing stores totaled $2.8 million, $3.0
million, and $2.8 million, respectively.

As a result of the Companys ongoing growth and strategic initiatives,
forecasted capital expenditures for fiscal 2003 are expected to be
approximately $10.7 million. Approximately $2.7 million of this amount will be
used to open two new stores, and $800,000 is planned for a new corporate
office. In addition, approximate expenditures on existing store improvements
and information technology are $2.2 million and $3.4 million, respectively.

In June 2002, the Company amended its credit facility with Bank of America
National Trust and Savings Association, Inc. (the Lender) which, as modified,
provides for advances up to $20 million, increasing to $30 million for the
period October 1, 2002 through December 31, 2002, less the amount of any
outstanding draws up to a $1.5 million maximum in authorized letters of credit.
Interest accrues at the banks prime rate plus 1/4% or can be fixed for a
period of time at the then current rate established under one of several
indices, all at the Companys option. This credit facility expires on
September 30, 2003 and the Company expects to renegotiate and extend the term
of this agreement or obtain another form of financing before that date.

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The Companys obligation to the Lender is presently secured by a first
priority lien on substantially all of the Companys non-real estate assets, and
the Company is subject to several restrictive covenants. The principal
operating covenants require the Company to maintain certain minimum cash flow
coverage and debt to equity ratios and restrict the level of capital
expenditures, calculated on a quarterly basis. The Company currently is in
compliance with the amended covenants and expects to remain in compliance with
the amended covenants during the term of the credit facility. The Company
believes its credit line with the Lender is sufficient to fund capital
expenditures for the foreseeable future and to meet seasonal fluctuations in
cash flow requirements. However, unexpected conditions could cause the Company
to request additional borrowing capacity from the Lender or alter its expansion
plans or operations.

The Companys primary contractual obligations and commitments are its
store leases with initial terms expiring from 2004 through 2020 and typically
provide for multiple five-year renewal options:

|                        |  |                  |             | 
|----------------------- |  | ---------------- | ----------- | 
|Payments due by period: |  | Operating Leases
|                        |  |                 
|Within 1 year           |  | $                | 12,992,154  | 
|2 - 3 years             |  |                  | 26,087,236  | 
|4 - 5 years             |  |                  | 25,124,427  | 
|After 5 years           |  |                  | 58,266,144  | 
|                        |  |                  |             | 
|Total                   |  | $                | 122,469,961 | 

All retail store leases provide for base rent which may or may not be
credited against percentage rent based upon gross sales from the premises. In
some of the leases, base rental amounts increase as the lease term progresses,
although in some cases, the Company expects that percentage rent will more than
offset the base rental amounts.

No cash dividends have been declared on common stock in fiscal 2002. The
Company intends to retain earnings for use in the operation and expansion of
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.

Critical Accounting Policies and Use of Estimates

The Companys significant accounting policies are described in Note 2 to
the Financial Statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. In preparing the
financial statements, the Company is required to make estimates and judgments
which affect the results of its operations and the reported value of assets and
liabilities. Actual results may differ from these estimates. The Company
believes that the following summarizes critical accounting policies which
require significant judgments and estimates in the preparation of its
consolidated financial statements.

Inventory Valuation.Merchandise inventories are stated at the lower of
cost (first-in, first-out determined by the retail method of accounting) or
market. The Company considers cost to include direct cost of merchandise, plus
internal costs associated with merchandise procurement, storage and handling.
The Company regularly reviews aged and excess inventories to determine if the
carrying value of such inventories exceeds market value, a reserve is recorded
to reduce the carrying value to market value as necessary. A determination of
market value requires estimates and judgment based on the Companys historical
markdown experience and anticipated markdowns based on future merchandising and
advertising plans, seasonal considerations, expected business trends and other factors.

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Seasonality

As noted previously, the months of November, December and January
historically have accounted for the largest percentage of the Companys net
sales and a significant portion of its net income. As is typical with other
sporting goods retailers, the Companys sales volume increases significantly
during the Holiday season and the peak ski and snowboard season generally
corresponds to this three-month period.

The Companys operating results historically have been influenced by the
amount and timing of snowfall at the resorts frequented by those living in
Southern California. An early snowfall often has influenced sales because it
generally extends the demand for winter apparel and equipment while a late
snowfall may have the opposite effect.

The third and fourth quarters of fiscal 2002 experienced weaker than
expected sales of winter-related products as a result of warm winter weather
conditions that provided snowfall well below average. Sales of winter-related
products ranged from 17% to 19% of the total Companys net sales in recent
years. In each of fiscal 2002, 2001 and 2000, 33%, 32% and 31%, respectively,
of the Companys sales were attributable to the months of November, December
and January.

Suppliers in the ski and snowboard industry require that commitments be
made for purchases of apparel and equipment by April for fall delivery, and
only limited quantities of merchandise can be reordered during the fall.
Consequently, the Company places its orders in the spring anticipating snowfall
in the winter. If the snowfall does not at least provide an adequate base or
occurs late in the season, or if sales do not meet projections, the Company may
be required to mark down its winter apparel and equipment.

Factors That May Affect Future Results

The statements which are not historical facts contained in this Annual
Report on Form 10-K are forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties. These risks and uncertainties include, but are not limited to,
those set forth below.

Economic Conditions.The retail industry historically has been subject to
substantial cyclical variation, and a recession in the general economy or
uncertainties regarding future economic prospects that affect consumer spending
habits have had, and may in the future have, a materially adverse effect on the
Companys results of operations.

Competition.The sporting goods business and the retail environment are
highly competitive, and the Company competes with national, regional and local
full-line sporting goods chains, specialty stores, supplier owned stores,
discount and department stores, and e-tailers. A number of the Companys
competitors are larger and have greater resources than the Company.

Regional Market Concentration.Currently, all of the Companys stores are
located in Southern California and the Las Vegas area of Nevada. Accordingly,
the Company is subject to regional risks, such as the economy, weather
conditions, natural disasters and government regulations. If the region were
to suffer an economic downturn or if other adverse events were to occur, there
could be an adverse effect on the Companys net sales and profitability and its
ability to implement its planned growth. Several of the Companys competitors
operate stores across the United States and, thus, are not as vulnerable as the
Company to such regional risks.

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Single Distribution Center.The Company has a single distribution center
and if there is a natural disaster or other serious disruption at the facility,
merchandise may be lost or undeliverable to our stores, thereby, reducing sales
and profitability.

Expansion Plan.The Companys continued growth is dependent to a
significant degree upon its ability to open new stores on a profitable basis.
The Companys ability to expand will depend, in part, on business conditions
and the availability of satisfactory store locations based on local competitive
conditions, site availability and cost, and the Companys ability to provide
and maintain high service levels and quality brand merchandising at competitive
prices. In addition, a decline in the Companys overall financial performance,
increased rents or any other adverse effects arising from the commercial real
estate market in the Companys markets may adversely effect the Companys
current growth plan. There can be no assurance that the Company will possess
sufficient funds to finance the expenditures related to its planned growth,
that new stores can be opened on a timely basis, that such new stores can be
operated on a profitable basis, or that such growth will be manageable.

Future Capital Requirements.The Company may not be able to fund its
future growth or react to competitive pressures if it lacks sufficient funds.
Unexpected conditions could cause the Company to be in violation of its
Lenders operating covenants. Currently, the Company feels it has sufficient
cash available through its bank credit facilities and cash from operations to
fund existing operations for the foreseeable future. The Company cannot be
certain that additional financing will be available in the future if necessary.

Management of Growth.Since its inception, the Company has experienced
periods of rapid growth. No assurance can be given that the Company will be
successful in maintaining or increasing its sales in the future. Any future
growth in sales will require additional working capital and may place a
significant strain on the Companys management, management information systems,
inventory management, distribution facilities and receivables management. Any
failure to timely enhance the Companys operating systems, or unexpected
difficulties in implementing such enhancements, could have a material adverse
effect on the Companys results of operations.

Dependence on Key Personnel.The Company depends on the continued service
of its senior management. The loss of the services of any key employee could
hurt the business. Also, the future success of the Company depends on its
ability to identify, attract, hire, train and motivate other highly skilled
personnel. Failure to do so may adversely affect future results.

Seasonality.The Companys business is seasonal in nature. As a result,
the Companys results of operations are likely to vary during its fiscal year.
See Seasonality

Variability of Quarterly Results.The Company has experienced, and
expects to continue to experience, a substantial variation in its net sales and
operating results from quarter to quarter. The Company believes that the
factors which influence this variability of quarterly results include general
economic and industry conditions that affect consumer spending, changing
consumer demands, the timing of the Companys introduction of new products, the
level of consumer acceptance of each new product, the seasonality of the
markets in which the Company participates, the weather and actions of
competitors. Accordingly, a comparison of the Companys results of operations
from period to period is not necessarily meaningful, and the Companys results
of operations for any period are not necessarily indicative of future
performance.

Closely Controlled Stock.At June 10, 2002, Norbert Olberz, the Companys
founder and Chairman of the Board of Directors, owned approximately 66% of the
Companys outstanding common stock. Mr. Olberz effectively has the ability to
control the outcome on all matters requiring stockholder approval, including,
but not limited to, the election and removal of directors, and any merger,
consolidation or sale of all or substantially all of the Companys assets, and
to control the Companys management and affairs.

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Stock Price.The market price of the Companys common stock is likely to
be volatile and could be subject to significant fluctuations in response to
factors such as quarterly variations in operating results, operating results
which vary from the expectations of securities analyst and investors, changes
in financial estimates, changes in market valuations of competitors,
announcements by the Company or its competitors of a material nature, additions
or departures of key personnel, future sales of common stock and stock volume
fluctuations. Also, general political and economic conditions such as a
recession or interest rate fluctuations may adversely affect the market price
of the Companys stock.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys exposure to interest rate risk consists primarily of
borrowings under its credit facility that bears interest at floating rates
(primarily LIBOR rates). The impact on earnings or cash flows during the next
fiscal year from a change of 100 basis points in the interest rate would not be
significant.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this section are submitted as part of
Item 14 of this report.




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

None.

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PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the directors and executive officers of the
Company is incorporated by reference from the section entitled Proposal 1 
Election of Directors contained in the definitive Proxy Statement of the
Company to be filed pursuant to Regulation 14A within 120 days after the end of
the Companys last fiscal year (the Proxy Statement).




ITEM 11. EXECUTIVE COMPENSATION

The information concerning executive compensation is incorporated herein
by reference from the section entitled Proposal 1  Election of Directors
contained in the Proxy Statement.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information concerning the security ownership of certain beneficial
owners and management is incorporated herein by reference from the sections
entitled General InformationSecurity Ownership of Principal Stockholders and
Management and Proposal 1-Election of Directors contained in the Proxy
Statement.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information concerning certain relationships and related transactions
is incorporated herein by reference from the section entitled Proposal
1-Election of Directors-Certain Relationships and Related Transactions
contained in the Proxy Statement.

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PART IV




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



|(a) |  | (1) Financial Statements  The financial statements listed on the accompanying Index
to Audited Financial Statements are filed as part of this report.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) |  | Schedules  Not applicable.
| | --- |  | ---------------------------



|(b) |  | Reports on Form 8-K                    
|--- |  | ---------------------------------------
|   
|    |  | None.                                  
|   
|(c) |  | Exhibits  See Index on Page E-1 hereof

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Sport Chalet, Inc.

Index to Audited Financial Statements

|                                                                                                  |  |  |    | 
|------------------------------------------------------------------------------------------------- |  |  | -- | 
|Report of Independent Auditors                                                                    |  |  | 21 | 
|Statements of Income for each of the three years in the
period ended March 31, 2002               |  |  | 22 | 
|Balance Sheets as of March 31, 2002 and 2001                                                      |  |  | 23 | 
|Statements of Stockholders Equity for each of the three
years in the period ended March 31, 2002 |  |  | 24 | 
|Statements of Cash Flows for each of the three years in the
period ended March 31, 2002           |  |  | 25 | 
|Notes to Financial Statements                                                                     |  |  | 26 | 

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Report of Independent Auditors

The Stockholders and Board of Directors
Sport Chalet, Inc.

We have audited the accompanying balance sheets of Sport Chalet, Inc. as of
March 31, 2002 and 2001, and the related statements of income, stockholders
equity, and cash flows for each of the three years in the period ended March
31, 2002. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sport Chalet, Inc. at March
31, 2002 and 2001, and the results of its operations and its cash flows for
each of the three years in the period ended March 31, 2002, in conformity with
accounting principles generally accepted in the United States.



| | /s/Ernst & Young LLP
| | --------------------

Los Angeles, California
May 17, 2002
except for Note 3 as to which the date is
June 10, 2002

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Sport Chalet, Inc.Statements of Income

|                                                      |         |         |             |                     |           |      |             |      |           |   |             |      |           | 
|----------------------------------------------------- | ------- | ------- | ----------- | ------------------- | --------- | ---- | ----------- | ---- | --------- | - | ----------- | ---- | --------- | 
|                                                      |         |         |             | Year ended March 31
|                                                      |         |         |             |                    
|                                                      |         |         |             | 2002                |           | 2001 |             | 2000
|                                                      |         |         |             |                     |           |      |             |     
|Net sales                                             |         | $       | 227,348,772 |                     |           | $    | 214,841,536 |      |           | $ | 175,846,383 |     
|Cost of goods sold, buying and occupancy              |         |         | 162,090,636 |                     |           |      | 148,619,057 |      |           |   | 123,496,150 |     
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|Gross profit                                          |         |         | 65,258,136  |                     |           |      | 66,222,479  |      |           |   | 52,350,233  |     
|Selling, general and administrative expenses          |         |         | 57,126,198  |                     |           |      | 54,405,689  |      |           |   | 43,524,142  |     
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|Income from operations                                |         |         | 8,131,938   |                     |           |      | 11,816,790  |      |           |   | 8,826,091   |     
|Interest expense (income)                             |         |         | 70,791      |                     |           |      | (361,682    | )    |           |   | (283,432    | )   
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|Income before taxes                                   |         |         | 8,061,147   |                     |           |      | 12,178,472  |      |           |   | 9,109,523   |     
|Income tax provision                                  |         |         | 3,267,000   |                     |           |      | 4,913,000   |      |           |   | 3,626,000   |     
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|Net income                                            |         | $       | 4,794,147   |                     |           | $    | 7,265,472   |      |           | $ | 5,483,523   |     
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|Earnings per share:                                   |         |         |             |                     |           |      |             |      |           |   |             |     
|                                                      | Basic   |         | $           | 0.73                |           |      | $           | 1.10 |           |   | $           | 0.83 |          
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|                                                      | Diluted |         | $           | 0.69                |           |      | $           | 1.07 |           |   | $           | 0.81 |          
|                                                      |         |         |             |                     |           |      |             |      |           |   |             |     
|Weighted average number of common shares
outstanding: |         |         |             |                     |           |      |             |      |           |   |             |     
|                                                      |         | Basic   |             |                     | 6,586,904 |      |             |      | 6,580,001 |   |             |      | 6,577,000 | 
|                                                      |         | Diluted |             |                     | 6,994,514 |      |             |      | 6,804,735 |   |             |      | 6,756,042 | 

See accompanying notes.

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Sport Chalet, Inc.Balance Sheets

|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |            |        | 
|------------------------------------------------ | --------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---------- | ---------- | ------ | ---- | ---------- | ---------- | ------ | 
|                                                 |                                                                 |                                                                                                        |            | March 31  
|                                                 |                                                                 |                                                                                                        |            |           
|                                                 |                                                                 |                                                                                                        |            | 2002       |        | 2001
|                                                 |                                                                 |                                                                                                        |            |            |        |     
|Assets                                           |                                                                 |                                                                                                        |            |            |        |      |            |           
|Current assets:                                  |                                                                 |                                                                                                        |            |            |        |      |            |           
|                                                 | Cash and cash equivalents                                       |                                                                                                        | $          | 4,273,485  |        |      | $          | 8,945,034  |       
|                                                 | Accounts receivable, less allowance of $25,000 in 2002
and 2001 |                                                                                                        |            | 678,709    |        |      |            | 519,677    |       
|                                                 | Merchandise inventories                                         |                                                                                                        |            | 47,916,553 |        |      |            | 42,491,532 |       
|                                                 | Prepaid expenses and other current assets                       |                                                                                                        |            | 1,757,007  |        |      |            | 1,324,047  |       
|                                                 | Refundable income taxes                                         |                                                                                                        |            | 448,760    |        |      |            |           |       
|                                                 | Deferred income taxes                                           |                                                                                                        |            | 1,258,795  |        |      |            | 1,928,710  |       
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|Total current assets                             |                                                                 |                                                                                                        | 56,333,309 |            |        |      | 55,209,000 |           
|Furniture, equipment and leasehold improvements: |                                                                 |                                                                                                        |            |            |        |      |            |           
|                                                 | Furniture, fixtures and office equipment                        |                                                                                                        |            | 23,076,486 |        |      |            | 19,651,049 |       
|                                                 | Rental equipment                                                |                                                                                                        |            | 3,709,955  |        |      |            | 3,472,072  |       
|                                                 | Vehicles                                                        |                                                                                                        |            | 667,456    |        |      |            | 639,693    |       
|                                                 | Leasehold improvements                                          |                                                                                                        |            | 18,864,837 |        |      |            | 13,438,382 |       
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|                                                 |                                                                 |                                                                                                        | 46,318,734 |            |        |      | 37,201,196 |           
|                                                 | Less allowance for depreciation and amortization                |                                                                                                        |            | 19,741,693 |        |      |            | 16,949,192 |       
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|                                                 |                                                                 |                                                                                                        | 26,577,041 |            |        |      | 20,252,004 |           
|Deferred income tax                              |                                                                 |                                                                                                        | 184,492    |            |        |      | 95,433     |           
|Other assets                                     |                                                                 |                                                                                                        | 215,468    |            |        |      | 265,421    |           
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|Total assets                                     |                                                                 | $                                                                                                      | 83,310,310 |            |        | $    | 75,821,858 |           
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|Liabilities and stockholders equity             |                                                                 |                                                                                                        |            |            |        |      |            |           
|Current liabilities:                             |                                                                 |                                                                                                        |            |            |        |      |            |           
|                                                 | Bank overdraft                                                  |                                                                                                        | $          | 7,192,258  |        |      | $          |           |       
|                                                 | Accounts payable                                                |                                                                                                        |            | 10,815,241 |        |      |            | 11,950,684 |       
|                                                 | Salaries and wages payable                                      |                                                                                                        |            | 2,184,509  |        |      |            | 2,960,167  |       
|                                                 | Other accrued expenses                                          |                                                                                                        |            | 4,008,208  |        |      |            | 5,773,010  |       
|                                                 | Income tax payable                                              |                                                                                                        |            |           |        |      |            | 1,286,861  |       
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|Total current liabilities                        |                                                                 |                                                                                                        | 24,200,216 |            |        |      | 21,970,722 |           
|Deferred rent                                    |                                                                 |                                                                                                        | 4,185,625  |            |        |      | 3,811,246  |           
|Commitments and contingencies                    |                                                                 |                                                                                                        |            |            |        |      |            |           
|Stockholders equity:                            |                                                                 |                                                                                                        |            |            |        |      |            |           
|                                                 | Preferred stock, $.01 par value:                                |                                                                                                        |            |            |        |      |            |            |       
|                                                 |                                                                 | Authorized shares  2,000,000
Issued and outstanding shares  none                                     |            |            |       |      |            |            |       | 
|                                                 | Common stock, $.01 par value:                                   |                                                                                                        |            |            |        |      |            |            |       
|                                                 |                                                                 | Authorized shares  15,000,000
Issued and outstanding shares  6,595,500 in 2002
and 6,580,001 in 2001 |            |            | 65,955 |      |            |            | 65,800 | 
|                                                 | Additional paid-in capital                                      |                                                                                                        |            | 21,932,617 |        |      |            | 21,842,340 |       
|                                                 | Retained earnings                                               |                                                                                                        |            | 32,925,897 |        |      |            | 28,131,750 |       
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|Total stockholders equity                       |                                                                 |                                                                                                        | 54,924,469 |            |        |      | 50,039,890 |           
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           
|Total liabilities and stockholders equity       |                                                                 | $                                                                                                      | 83,310,310 |            |        | $    | 75,821,858 |           
|                                                 |                                                                 |                                                                                                        |            |            |        |      |            |           

See accompanying notes.

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Sport Chalet, Inc.Statements of Stockholders Equity

|                          |                                      |  |              |        |            |   |                 |     |          |   |            |         |  |   |            |           |  |   |            |           | 
|------------------------- | ------------------------------------ |  | ------------ | ------ | ---------- | - | --------------- | --- | -------- | - | ---------- | ------- |  | - | ---------- | --------- |  | - | ---------- | --------- | 
|                          |                                      |  | Common Stock |        |            |   |                 |     |          |   |            |         |  |   |           
|                          |                                      |  |              |        | Additional |   | Retained        |     |          |   |           
|                          |                                      |  | Shares       |        | Amount     |   | Paid-in Capital |     | Earnings |   | Total     
|                          |                                      |  |              |        |            |   |                 |     |          |   |           
|Balance at March 31, 1999 |                                      |  | 6,532,000    |        |            | $ | 65,320          |     |          | $ | 21,532,107 |         |  | $ | 15,382,755 |           |  | $ | 36,980,182 |          
|                          | Exercise of stock options            |  |              | 45,000 |            |   |                 | 450 |          |   |            | 127,800 |  |   |            |          |  |   |            | 128,250   | 
|                          | Tax benefit from exercise
of options |  |              |       |            |   |                 |    |          |   |            | 29,700  |  |   |            |          |  |   |            | 29,700    | 
|                          | Net income for 2000                  |  |              |       |            |   |                 |    |          |   |            |        |  |   |            | 5,483,523 |  |   |            | 5,483,523 | 
|                          |                                      |  |              |        |            |   |                 |     |          |   |            |         |  |   |            |           |  |   |            |          
|Balance at March 31, 2000 |                                      |  | 6,577,000    |        |            |   | 65,770          |     |          |   | 21,689,607 |         |  |   | 20,866,278 |           |  |   | 42,621,655 |          
|                          | Exercise of stock options            |  |              | 3,001  |            |   |                 | 30  |          |   |            | 13,287  |  |   |            |          |  |   |            | 13,317    | 
|                          | Shares granted to officers           |  |              |       |            |   |                 |    |          |   |            | 134,769 |  |   |            |          |  |   |            | 134,769   | 
|                          | Tax benefit from exercise
of options |  |              |       |            |   |                 |    |          |   |            | 4,677   |  |   |            |          |  |   |            | 4,677     | 
|                          | Net income for 2001                  |  |              |       |            |   |                 |    |          |   |            |        |  |   |            | 7,265,472 |  |   |            | 7,265,472 | 
|                          |                                      |  |              |        |            |   |                 |     |          |   |            |         |  |   |            |           |  |   |            |          
|Balance at March 31, 2001 |                                      |  | 6,580,001    |        |            |   | 65,800          |     |          |   | 21,842,340 |         |  |   | 28,131,750 |           |  |   | 50,039,890 |          
|                          | Exercise of stock options            |  |              | 15,499 |            |   |                 | 155 |          |   |            | 56,028  |  |   |            |          |  |   |            | 56,183    | 
|                          | Tax benefit from exercise
of options |  |              |       |            |   |                 |    |          |   |            | 34,249  |  |   |            |          |  |   |            | 34,249    | 
|                          | Net income for 2002                  |  |              |       |            |   |                 |    |          |   |            |        |  |   |            | 4,794,147 |  |   |            | 4,794,147 | 
|                          |                                      |  |              |        |            |   |                 |     |          |   |            |         |  |   |            |           |  |   |            |          
|Balance at March 31, 2002 |                                      |  | 6,595,500    |        |            | $ | 65,955          |     |          | $ | 21,932,617 |         |  | $ | 32,925,897 |           |  | $ | 54,924,469 |          
|                          |                                      |  |              |        |            |   |                 |     |          |   |            |         |  |   |            |           |  |   |            |          

See accompanying notes.

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Sport Chalet, Inc.Statements of Cash Flows

|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |           |           |            |  
|--------------------------------------------------------------------------------- | ------------ | -------------------------------------------- | ----------------------------------------- | --------- | ------------------- | ---------- | ---------- | --------- | --------- | ---------- | ---------- | --------- | --------- | ---------- | -
|                                                                                  |              |                                              |                                           |           | Year ended March 31
|                                                                                  |              |                                              |                                           |           |                    
|                                                                                  |              |                                              |                                           |           | 2002                |            | 2001       |           | 2000     
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |          
|Operating activities                                                              |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Net income                                                                        |              | $                                            | 4,794,147                                 |           |                     | $          | 7,265,472  |           |           | $          | 5,483,523  |          
|Adjustments to reconcile net income to net cash
provided by operating activities: |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|                                                                                  |              | Depreciation and amortization                |                                           |           | 5,142,507           |            |            |           | 4,220,312 |            |            |           | 3,714,365 |           
|                                                                                  |              | Loss on disposal of equipment                |                                           |           | 659,931             |            |            |           | 85,598    |            |            |           | 149,437   |           
|                                                                                  |              | Stock compensation                           |                                           |           |                    |            |            |           | 134,769   |            |            |           |          |           
|                                                                                  |              | Deferred income taxes                        |                                           |           | 580,856             |            |            |           | (898,193  | )          |            |           | 36,689    |           
|                                                                                  |              | Tax benefit on employee stock options        |                                           |           | 34,249              |            |            |           | 4,677     |            |            |           | 29,700    |           
|                                                                                  |              | Changes in operating assets and liabilities: |                                           |           |                     |            |            |           |           |            |            |           |           |           
|                                                                                  |              |                                              | Accounts receivable                       |           |                     | (159,032   | )          |           |           | 2,289,092  |            |           |           | (1,518,503 | )
|                                                                                  |              |                                              | Merchandise inventories                   |           |                     | (5,425,021 | )          |           |           | (5,570,366 | )          |           |           | (6,982,167 | )
|                                                                                  |              |                                              | Prepaid expenses and other current assets |           |                     | (432,960   | )          |           |           | (28,965    | )          |           |           | (320,230   | )
|                                                                                  |              |                                              | Refundable income taxes                   |           |                     | (448,760   | )          |           |           |           |            |           |           |           |  
|                                                                                  |              |                                              | Bank overdraft                            |           |                     | 7,192,258  |            |           |           |           |            |           |           |           |  
|                                                                                  |              |                                              | Accounts payable                          |           |                     | (1,135,443 | )          |           |           | 371,135    |            |           |           | (69,415    | )
|                                                                                  |              |                                              | Salaries and wages payable                |           |                     | (775,658   | )          |           |           | 1,144,691  |            |           |           | (1,146,924 | )
|                                                                                  |              |                                              | Other accrued expenses                    |           |                     | (1,764,802 | )          |           |           | 2,394,703  |            |           |           | 635,945    |  
|                                                                                  |              |                                              | Income taxes payable                      |           |                     | (1,286,861 | )          |           |           | (380,693   | )          |           |           | 864,611    |  
|                                                                                  |              |                                              | Deferred rent                             |           |                     | 374,379    |            |           |           | 480,061    |            |           |           | 189,500    |  
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Net cash provided by operating activities                                         |              |                                              | 7,349,790                                 |           |                     |            | 11,512,293 |           |           |            | 1,066,531  |          
|Investing activities                                                              |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Purchases of furniture, equipment and leasehold
improvements                      |              |                                              | (12,127,475                               | )         |                     |            | (8,196,063 | )         |           |            | (6,881,596 | )        
|Other assets                                                                      |              |                                              | 49,953                                    |           |                     |            | 100,318    |           |           |            | 215,523    |          
|Proceeds from sale of assets                                                      |              |                                              |                                          |           |                     |            | 46,779     |           |           |            | 110,580    |          
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Net cash used in investing activities                                             |              |                                              | (12,077,522                               | )         |                     |            | (8,048,966 | )         |           |            | (6,555,493 | )        
|Financing activities                                                              |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Proceeds from bank borrowings                                                     |              |                                              | 15,100,000                                |           |                     |            |           |           |           |            |           |          
|Repayment of bank borrowings                                                      |              |                                              | (15,100,000                               | )         |                     |            |           |           |           |            |           |          
|Proceeds from exercise of stock options                                           |              |                                              | 56,183                                    |           |                     |            | 13,317     |           |           |            | 128,250    |          
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Net cash provided by financing activities                                         |              |                                              | 56,183                                    |           |                     |            | 13,317     |           |           |            | 128,250    |          
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|(Decrease) increase in cash and cash equivalents                                  |              |                                              | (4,671,549                                | )         |                     |            | 3,476,644  |           |           |            | (5,360,712 | )        
|Cash and cash equivalents at beginning of year                                    |              |                                              | 8,945,034                                 |           |                     |            | 5,468,390  |           |           |            | 10,829,102 |          
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Cash and cash equivalents at end of year                                          |              | $                                            | 4,273,485                                 |           |                     | $          | 8,945,034  |           |           | $          | 5,468,390  |          
|                                                                                  |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|Cash paid during the year for:                                                    |              |                                              |                                           |           |                     |            |            |           |           |            |            |          
|                                                                                  | Income taxes |                                              | $                                         | 4,587,516 |                     |            | $          | 6,202,000 |           |            | $          | 2,695,000 |          
|                                                                                  | Interest     |                                              |                                           | 91,727    |                     |            |            |          |           |            |            |          |          

See accompanying notes.

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##### Table of Contents



Sport Chalet, Inc.Notes to Financial Statements

1. Description of Business

Sport Chalet, Inc. (the Company), founded in 1959, is a leading operator of 26
full service, specialty sporting goods superstores in Southern California and
Nevada. The Company has 25 locations in California consisting of, eleven in Los
Angeles County, six in Orange County, three in each of San Diego and San
Bernardino Counties, one in each of Riverside and Ventura Counties and one in
Nevada.

The Chairman of the Board (Principal Stockholder) owned approximately 66% of
the Companys outstanding common stock at March 31, 2002.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of less
than three months when purchased to be cash equivalents.

The Company has a concentration of credit risk when cash deposits in banks are
in excess of federally insured limits in the event of nonperformance by the
related financial institution. However, management does not anticipate
nonperformance by these financial institutions.

Merchandise Inventories

Merchandise inventories are stated at the lower of cost (first-in, first-out
determined by the retail method of accounting) or market and consist
principally of merchandise held for resale. The Company considers cost to
include the direct cost of merchandise, plus internal costs associated with
merchandise procurement, storage and handling.

Furniture, Equipment and Leasehold Improvements

Furniture, equipment, and leasehold improvements are stated on the basis of
cost. Depreciation of furniture and equipment is computed primarily on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized on the straight-line method over the shorter of the
life of the asset or the remaining lease term. The estimated useful lives of
the assets are as follows:

|                                         |  |           |  | 
|---------------------------------------- |  | --------- |  | 
|Furniture, fixtures and office equipment |  | 5-7 years
|Rental equipment                         |  | 3 years  
|Vehicles                                 |  | 5 years  
|Leasehold improvements                   |  | 15 years 

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##### Table of Contents



Sport Chalet, Inc.Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Long Lived Assets

The Company periodically evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of long lived assets
may warrant revision or that the remaining balance may not be recoverable. When
factors indicate that the asset should be evaluated for possible impairment,
the Company uses an estimate of the undiscounted net cash flows over the
remaining life of the asset in measuring whether the asset is recoverable.
Based upon the anticipated future income and cash flow from operations, in the
opinion of Company management, there has been no impairment.

Pre-opening Costs

Non-capital expenditures incurred prior to the opening of a new store are
charged to operations as incurred.

Revenue Recognition

Retail merchandise sales are recognized at the point of sale less estimated
sales returns. The Company adopted Staff Accounting Bulletin No.101 (SAB 101),
Revenue Recognition in Financial Statements, in the fourth quarter of 2000.
Such adoption did not have a material impact on the Companys financial
position or results of operations.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense amounted to
$5,145,848, $5,111,472 and $4,469,803 for the years ended March 31, 2002, 2001
and 2000, respectively.

Income Taxes

The Company utilizes the liability method of accounting to compute the
difference between the tax basis of assets and liabilities and the related
financial reporting amounts using currently enacted tax laws and rates.

Earnings Per Share

Earnings per share has been computed in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share (EPS). Basic EPS equals net
income divided by the number of weighted average common shares. Diluted EPS
includes potentially dilutive securities such as stock options and convertible
securities.

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##### Table of Contents



Sport Chalet, Inc.Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Earnings Per Share (continued)

A reconciliation of the numerators and denominators of the basic and diluted
EPS computations is illustrated below:

|                                                         |                          |                                                       |       |                                       |       |      |       |          |       |   |       |       |       | 
|-------------------------------------------------------- | ------------------------ | ----------------------------------------------------- | ----- | ------------------------------------- | ----- | ---- | ----- | -------- | ----- | - | ----- | ----- | ----- | 
|                                                         |                          |                                                       |       |                                       |       |      |       | March 31 |       |   |       |      
|                                                         |                          |                                                       |       |                                      
|                                                         |                          |                                                       |       | 2002                                  |       | 2001 |       | 2000    
|                                                         |                          |                                                       |       |                                       |       |      |       |         
|                                                         |                          |                                                       |       | (in thousands, except per share data)
|Basic EPS computation:                                   |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      
|                                                         | Numerator                |                                                       | $     | 4,794                                 |       |      | $     | 7,265    |       |   | $     | 5,484 |      
|                                                         | Denominator:             |                                                       |       |                                       |       |      |       |          |       |   |       |       |      
|                                                         |                          | Weighted average
common shares
outstanding            |       |                                       | 6,587 |      |       |          | 6,580 |   |       |       | 6,577 | 
|                                                         |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      
|                                                         | Basic earnings per share |                                                       | $     | 0.73                                  |       |      | $     | 1.10     |       |   | $     | 0.83  |      
|                                                         |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      
|Diluted EPS computation:                                 |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      
|                                                         | Numerator                |                                                       | $     | 4,794                                 |       |      | $     | 7,265    |       |   | $     | 5,484 |      
|                                                         | Denominator:             |                                                       |       |                                       |       |      |       |          |       |   |       |       |      
|                                                         |                          | Weighted average
common shares
outstanding            |       |                                       | 6,587 |      |       |          | 6,580 |   |       |       | 6,577 | 
|                                                         |                          | Incremental shares
from assumed
conversion of
options |       |                                       | 408   |      |       |          | 225   |   |       |       | 179   | 
|                                                         |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      
|Total weighted average
common shares  assuming
dilution |                          |                                                       | 6,995 |                                       |       |      | 6,805 |          |       |   | 6,756 |      
|                                                         |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      
|Diluted earnings per share                               |                          | $                                                     | 0.69  |                                       |       | $    | 1.07  |          |       | $ | 0.81  |      
|                                                         |                          |                                                       |       |                                       |       |      |       |          |       |   |       |      

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Stock-Based Compensation

The Company accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.

Major Supplier

During 2002 and 2001, the Company purchased approximately 7.3% and 9.0%,
respectively, of its inventory from one supplier. At March 31, 2002 and 2001,
the amount due to this supplier constituted approximately 5.0% and 7.5% of
accounts payable, respectively.

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Sport Chalet, Inc.Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Reclassification

Certain reclassifications were made to the prior year financial statements to
conform to current year presentation.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations and No. 142,
Goodwill and Other Intangible Assets. Statement 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Statement 141 also includes guidance on the initial
recognition and measurement of goodwill and other intangible assets arising
from business combinations completed after June 30, 2001. Statement 142
prohibits the amortization of goodwill and intangible assets with indefinite
useful lives. Statement 142 requires that these assets be reviewed for
impairment at least annually. Intangible assets with finite lives will continue
to be amortized over their estimated useful lives. Additionally, Statement 142
requires that goodwill included in the carrying value of equity method
investments no longer be amortized. The Company will adopt Statement 142
beginning in the first quarter of 2003 and does not believe the adoption will
have a material impact on its results of operations.

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations for a
disposal of a segment of a business. SFAS 144 is effective for fiscal years
beginning after December 15, 2001, with earlier application encouraged. The
Company expects to adopt SFAS 144 in the first quarter of 2003 and does not
believe the adoption of SFAS 144 will have a material impact on the financial
position and results of operations of the Company.

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Sport Chalet, Inc.Notes to Financial Statements (continued)

3. Loans Payable to Bank

The Company has a credit facility with Bank of America National Trust and
Savings Association, Inc. (lender) amended on June 10, 2002 which provides for
advances up to $20 million, increasing to $30 million for the period October 1,
2002 through December 31, 2002, less the amount of any outstanding draws up to
a maximum of $1.5 million in authorized letters of credit. Maximum borrowings
generally may not exceed 45% of the value of eligible inventory, as defined,
and may also be reduced under certain circumstances to reflect reserves or
other adjustments. Interest shall accrue at the banks prime rate of interest
plus 1/4% (5.0% at March 31, 2002) or may be fixed for a period of time at the
then current rate established under one of several indices, all at the
Companys option. This credit facility expires September 30, 2003. The
agreement, as amended, provides for an annual non-utilization fee of 0.20%,
plus a one time facility fee of $20,000. The primary covenants in the credit
facility with the lender require the Company to maintain certain minimum cash
flow coverage and debt to equity ratios, and restricts the level of capital
expenditures, calculated on a quarterly basis. At March 31, 2002, the Company
was in compliance with the covenants as amended. This loan is secured by
substantially all of the Companys non-real estate assets.

At March 31, 2002, the Company had no outstanding borrowings or letters of
credit outstanding under the facility.

The weighted average interest rate on borrowings during the year ended March
31, 2002 was 4.1%

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Sport Chalet, Inc.Notes to Financial Statements (continued)

4. Commitments and Contingencies

The Company leases all buildings (including its corporate office space and
three stores from the Companys Principal Stockholder) under certain
noncancelable operating lease agreements. Rentals of the retail locations in
most instances require the payment of contingent rentals based on a percentage
of sales in excess of minimum rental payment requirements. Most of the leases
obligate the Company to pay costs of maintenance, utilities, and property
taxes. Most leases contain renewal options of five years and certain leases
provide for various rate increases over the lease term.

Future minimum payments, by year and in the aggregate, under those leases with
terms of one year or more, consist of the following at March 31, 2002:

|           |  |   |             | 
|---------- |  | - | ----------- | 
|2003       |  | $ | 12,992,154  | 
|2004       |  |   | 13,033,545  | 
|2005       |  |   | 13,053,691  | 
|2006       |  |   | 13,160,524  | 
|2007       |  |   | 11,963,903  | 
|Thereafter |  |   | 58,266,144  | 
|           |  |   |             | 
|           |  | $ | 122,469,961 | 
|           |  |   |             | 

Total rent expense amounted to $16,912,075, $15,504,720 and $13,553,746 for the
years ended March 31, 2002, 2001 and 2000, respectively, of which $2,351,571,
$2,469,373 and $2,102,252, respectively, was paid on the leases with the
Principal Stockholder. Also, total rent expense includes contingent rentals
calculated as a percentage of gross sales over certain base amounts of
$1,105,928, $977,592 and $755,933 for the years ended March 31, 2002, 2001 and
2000, respectively. Included in the accompanying balance sheets are amounts
representing prepaid rent to the Principal Stockholder of $141,818 at March 31,
2002 and $125,791 at March 31, 2001.

The Company is involved from time to time in routine legal matters incidental
to its business. In the opinion of the Companys management, based on the
advice of counsel, resolution of such matters will not have a material effect
on its financial position or results of operations.

5. Income Taxes

The provision for income taxes for the years ended March 31, 2002, 2001 and
2000 consists of the following:

|         |          |   |           |           |      |   |           |           |   |   |           |           | 
|-------- | -------- | - | --------- | --------- | ---- | - | --------- | --------- | - | - | --------- | --------- | 
|         |          |   | 2002      |           | 2001 |   | 2000     
|         |          |   |           |           |      |   |          
|Federal: |          |   |           |           |      |   |           |           |   |   |           |          
|         | Current  |   | $         | 2,018,000 |      |   | $         | 4,631,000 |   |   | $         | 2,791,000 | 
|         | Deferred |   |           | 491,000   |      |   |           | (811,000  | ) |   |           | 27,000    | 
|         |          |   |           |           |      |   |           |           |   |   |           |          
|         |          |   | 2,509,000 |           |      |   | 3,820,000 |           |   |   | 2,818,000 |          
|State:   |          |   |           |           |      |   |           |           |   |   |           |          
|         | Current  |   |           | 668,000   |      |   |           | 1,202,000 |   |   |           | 798,000   | 
|         | Deferred |   |           | 90,000    |      |   |           | (109,000  | ) |   |           | 10,000    | 
|         |          |   |           |           |      |   |           |           |   |   |           |          
|         |          |   | 758,000   |           |      |   | 1,093,000 |           |   |   | 808,000   |          
|         |          |   |           |           |      |   |           |           |   |   |           |          
|         |          | $ | 3,267,000 |           |      | $ | 4,913,000 |           |   | $ | 3,626,000 |          
|         |          |   |           |           |      |   |           |           |   |   |           |          

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Sport Chalet, Inc.Notes to Financial Statements (continued)

5. Income Taxes (continued)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax liabilities and assets as of March 31, 2002 and
2001 are as follows:

|                               |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |         |  
|------------------------------ | --------------------------- | - | --------- | ------- | ------- | - | ------- | ------- | ------- | - | --------- | ------- | ---- | - | ------- | ------- | -
|                               |                             |   | 2002      |         | 2001   
|                               |                             |   |           |         |        
|                               |                             |   |           |         |         |   | Non-    |         |         |   |           |         | Non-
|                               |                             |   | Current   |         | current |   | Current |         | current
|                               |                             |   |           |         |         |   |         |         |        
|Deferred tax liabilities:      |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |        
|                               | Tax over book depreciation  |   | $         |        |         |   | $       | (36,193 | )       |   | $         |        |      |   | $       | (74,450 | )
|                               |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |        
|Total deferred tax liabilities |                             |   |          |         |         |   | (36,193 | )       |         |   |          |         |      |   | (74,450 | )      
|Deferred tax assets:           |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |        
|                               | Uniform cost capitalization |   |           | 162,061 |         |   |         |        |         |   |           | 161,437 |      |   |         |        |  
|                               | Markdown reserve            |   |           | 547,723 |         |   |         |        |         |   |           | 471,240 |      |   |         |        |  
|                               | Accrued vacation            |   |           | 250,379 |         |   |         |        |         |   |           | 232,756 |      |   |         |        |  
|                               | Litigation reserve          |   |           |        |         |   |         |        |         |   |           | 792,540 |      |   |         |        |  
|                               | Other                       |   |           | 298,632 |         |   |         | 220,685 |         |   |           | 270,737 |      |   |         | 169,883 |  
|                               |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |        
|Total deferred tax assets      |                             |   | 1,258,795 |         |         |   | 220,685 |         |         |   | 1,928,710 |         |      |   | 169,883 |        
|                               |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |        
|Total deferred tax asset       |                             | $ | 1,258,795 |         |         | $ | 184,492 |         |         | $ | 1,928,710 |         |      | $ | 95,433  |        
|                               |                             |   |           |         |         |   |         |         |         |   |           |         |      |   |         |        

A reconciliation of the provision for income taxes for the years ended March
31, 2002, 2001 and 2000 with the amount computed using the federal statutory
rate follows:

|                                                   |  |      |           |      |  |      |           |  |  |   |           | 
|-------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                   |  | 2002 |           | 2001 |  | 2000
|                                                   |  |      |           |      |  |     
|Statutory rate, 34% applied to income
before taxes |  | $    | 2,741,000 |      |  | $    | 4,141,000 |  |  | $ | 3,097,000 | 
|State taxes, net of federal tax effect             |  |      | 500,000   |      |  |      | 711,000   |  |  |   | 499,000   | 
|Other, net                                         |  |      | 26,000    |      |  |      | 61,000    |  |  |   | 30,000    | 
|                                                   |  |      |           |      |  |      |           |  |  |   |           | 
|                                                   |  | $    | 3,267,000 |      |  | $    | 4,913,000 |  |  | $ | 3,626,000 | 
|                                                   |  |      |           |      |  |      |           |  |  |   |           | 

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Sport Chalet, Inc.Notes to Financial Statements (continued)

6. Award Plan and Stock Award

Award Plan

The Company has an Incentive Award Plan (1992 Plan) under which stock options
or other awards to purchase or receive up to 1,200,000 shares of the Companys
common stock may be granted to employees and non-employee directors. The option
price per share shall not be less than fair market value at the date of grant.
Options vest over three to five-year periods and if not exercised, expire five
to ten years from the date of grant. The 1992 Plan also provides for issuance
by the Company of stock appreciation rights, restricted stock and performance
awards. At March 31, 2002 and 2001, there were 191,999 and 268,666 remaining
shares, respectively, available for grant under the Plan.

Pro forma information regarding net income and earnings per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for fiscal 2002, 2001 and 2000: weighted-average risk-free interest
rates of 4.5%, 6% and 6%, respectively; dividend yields of 0%; weighted-average
volatility factors of the expected market price of the Companys common stock of 0.45 for 2002, 0.48 for 2001 and 0.45 for 2000; and a
weighted average expected life of the option of five years. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting period. The pro forma information follows:

|                                     |         |   |           |      |      |   |           |      |  |   |           |      | 
|------------------------------------ | ------- | - | --------- | ---- | ---- | - | --------- | ---- |  | - | --------- | ---- | 
|                                     |         |   |           |      |      |   | March 31  |      |  |   |          
|                                     |         |   | 2002      |      | 2001 |   | 2000     
|                                     |         |   |           |      |      |   |          
|Pro forma net income                 |         | $ | 4,507,591 |      |      | $ | 7,027,735 |      |  | $ | 5,308,847 |     
|Pro forma earnings per common share: |         |   |           |      |      |   |           |      |  |   |           |     
|                                     | Basic   |   | $         | 0.68 |      |   | $         | 1.07 |  |   | $         | 0.81 | 
|                                     | Diluted |   | $         | 0.66 |      |   | $         | 1.03 |  |   | $         | 0.79 | 

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Companys employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not provide a reliable single
measure of the fair value of employee stock options.

33



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Sport Chalet, Inc.Notes to Financial Statements (continued)

6. Award Plans and Stock Award (continued)

Award Plan (continued)

A summary of the Companys stock option activity and related information
follows:

|                                                               |           |  |                |         |                |   |                |      |       |  |         |         |          |   |      |      |  |  |          |          |   |   |      |      | 
|-------------------------------------------------------------- | --------- |  | -------------- | ------- | -------------- | - | -------------- | ---- | ----- |  | ------- | ------- | -------- | - | ---- | ---- |  |  | -------- | -------- | - | - | ---- | ---- | 
|                                                               |           |  | March 31, 2002 |         | March 31, 2001 |   | March 31, 2000
|                                                               |           |  |                |         |                |   |               
|                                                               |           |  |                |         |                |   | Weighted       |      |       |  |         |         | Weighted |   |      |      |  |  | Weighted
|                                                               |           |  |                |         |                |   | Average        |      |       |  |         |         | Average  |   |      |      |  |  | Average 
|                                                               |           |  |                |         |                |   | Exercise       |      |       |  |         |         | Exercise |   |      |      |  |  | Exercise
|                                                               |           |  | Options        |         | Price          |   | Options        |      | Price |  | Options |         | Price   
|                                                               |           |  |                |         |                |   |                |      |       |  |         |         |         
|Outstanding at
beginning of year                               |           |  | 851,333        |         |                | $ | 4.57           |      |       |  | 760,000 |         |          | $ | 4.65 |      |  |  | 618,000  |          |   | $ | 3.95 |     
|                                                               | Granted   |  |                | 154,000 |                |   |                | 8.54 |       |  |         | 120,000 |          |   |      | 3.96 |  |  |          | 302,000  |   |   |      | 4.47 | 
|                                                               | Exercised |  |                | (15,499 | )              |   |                | 3.62 |       |  |         | (3,001  | )        |   |      | 4.44 |  |  |          | (45,000  | ) |   |      | 2.85 | 
|                                                               | Forfeited |  |                | (77,333 | )              |   |                | 5.67 |       |  |         | (25,666 | )        |   |      | 4.15 |  |  |          | (115,000 | ) |   |      | 2.28 | 
|                                                               |           |  |                |         |                |   |                |      |       |  |         |         |          |   |      |      |  |  |          |          |   |   |      |     
|Outstanding at end
of year                                     |           |  | 912,501        |         |                | $ | 5.18           |      |       |  | 851,333 |         |          | $ | 4.57 |      |  |  | 760,000  |          |   | $ | 4.65 |     
|                                                               |           |  |                |         |                |   |                |      |       |  |         |         |          |   |      |      |  |  |          |          |   |   |      |     
|Exercisable at end
of year                                     |           |  | 704,301        |         |                | $ | 4.71           |      |       |  | 571,222 |         |          | $ | 3.97 |      |  |  | 255,600  |          |   | $ | 3.50 |     
|                                                               |           |  |                |         |                |   |                |      |       |  |         |         |          |   |      |      |  |  |          |          |   |   |      |     
|Weighted average
fair value of
options granted
during the year |           |  |               |         |                | $ | 4.16           |      |       |  |        |         |          | $ | 2.37 |      |  |  |         |          |   | $ | 2.22 |     

Exercise prices for options outstanding as of March 31, 2002 ranged from
483,501 options at $2.37 to $4.50, 275,000 options at $4.51 to $6.50, 27,000
options at $6.51 to $8.50, and 127,000 options at $8.51 to $9.21. The weighted
average remaining contractual life of those options is nine years.

Stock Award

During the year ended March 31, 2001, the Principal Stockholder and his spouse,
through their Family Trust, awarded 27,645 registered shares to certain
employees. Award recipients were not required to pay consideration for the
shares. The fair market value of the shares was treated as a capital
contribution by the Principal Stockholder and expensed as compensation to
recipients as of March 31, 2001.

The Company granted loans to employees to pay the income taxes associated with
certain stock awards granted and expensed in fiscal 1999 and fiscal 2001. These
loans bear interest at 6% and are payable over four years with a two year
extension and secured by the awarded shares.

34



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##### Table of Contents



Sport Chalet, Inc.Notes to Financial Statements (continued)

7. Employee Retirement Plan

Effective April 1, 1997, the Company adopted the Sport Chalet, Inc. Employee
Retirement Savings Plan (the 401(k) Plan). All employees who have been employed
by the Company for at least three months of service (provided that such service
represents a minimum of 1,000 hours worked during the year) and are at least 21
years of age are eligible to participate. Employees may contribute to the
401(k) Plan up to 24% of their current compensation, subject to a statutorily
prescribed annual limit. The Company matches 25% of employee contributions up
to 1% of the employees current compensation. The Company expense related to
this plan was $123,158, $118,742 and $101,519 for the years ended March 31,
2002, 2001 and 2000, respectively.

8. Quarterly Results of Operations (Unaudited)

A summary of the unaudited quarterly results of operations follows (dollar
amounts in thousands, except per share amounts):

|                           |             |   |         |  |         |   |         |  |         |   |        |  |  |   |        |  | 
|-------------------------- | ----------- | - | ------- |  | ------- | - | ------- |  | ------- | - | ------ |  |  | - | ------ |  | 
|                           |             |   | First   |  | Second  |   | Third   |  | Fourth 
|                           |             |   | Quarter |  | Quarter |   | Quarter |  | Quarter
|                           |             |   |         |  |         |   |         |  |        
|                           | Fiscal 2002 |   |         |  |         |   |         |  |         |   |        |  |  |   |        |  | 
|Net sales                  |             | $ | 47,949  |  |         | $ | 54,658  |  |         | $ | 67,429 |  |  | $ | 57,312 | 
|Gross profit               |             |   | 14,975  |  |         |   | 15,666  |  |         |   | 19,544 |  |  |   | 15,073 | 
|Income from operations     |             |   | 2,062   |  |         |   | 2,215   |  |         |   | 3,767  |  |  |   | 89     | 
|Net income                 |             |   | 1,283   |  |         |   | 1,324   |  |         |   | 2,185  |  |  |   | 2      | 
|Basic earnings per share   |             | $ | 0.19    |  |         | $ | 0.20    |  |         | $ | 0.33   |  |  | $ | 0.00   | 
|Diluted earnings per share |             | $ | 0.18    |  |         | $ | 0.19    |  |         | $ | 0.31   |  |  | $ | 0.00   | 

|                           |             |   |         |  |         |   |         |  |         |   |        |  |  |   |        |  | 
|-------------------------- | ----------- | - | ------- |  | ------- | - | ------- |  | ------- | - | ------ |  |  | - | ------ |  | 
|                           |             |   | First   |  | Second  |   | Third   |  | Fourth 
|                           |             |   | Quarter |  | Quarter |   | Quarter |  | Quarter
|                           |             |   |         |  |         |   |         |  |        
|                           | Fiscal 2001 |   |         |  |         |   |         |  |         |   |        |  |  |   |        |  | 
|Net sales                  |             | $ | 44,091  |  |         | $ | 53,744  |  |         | $ | 60,955 |  |  | $ | 56,022 | 
|Gross profit               |             |   | 13,719  |  |         |   | 16,201  |  |         |   | 19,804 |  |  |   | 16,498 | 
|Income from operations     |             |   | 2,282   |  |         |   | 2,930   |  |         |   | 4,928  |  |  |   | 1,677  | 
|Net income                 |             |   | 1,422   |  |         |   | 1,816   |  |         |   | 2,985  |  |  |   | 1,042  | 
|Basic earnings per share   |             | $ | 0.22    |  |         | $ | 0.28    |  |         | $ | 0.45   |  |  | $ | 0.15   | 
|Diluted earnings per share |             | $ | 0.21    |  |         | $ | 0.27    |  |         | $ | 0.44   |  |  | $ | 0.15   | 

9. Other Accrued Expenses

Other accrued expenses consist of the following:

|                                                |  |          |           |      |  |   |           | 
|----------------------------------------------- |  | -------- | --------- | ---- |  | - | --------- | 
|                                                |  | March 31
|                                                |  |         
|                                                |  | 2002     |           | 2001
|                                                |  |          |           |     
|Outstanding gift certificates and store credits |  | $        | 1,613,258 |      |  | $ | 1,624,858 | 
|Litigation reserve                              |  |          |          |      |  |   | 1,650,000 | 
|Accrued sales tax                               |  |          | 1,551,435 |      |  |   | 1,392,857 | 
|Other                                           |  |          | 843,515   |      |  |   | 1,105,295 | 
|                                                |  |          |           |      |  |   |           | 
|Other accrued expenses                          |  | $        | 4,008,208 |      |  | $ | 5,773,010 | 
|                                                |  |          |           |      |  |   |           | 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, on June 21, 2002.

| |                                                                 |                   
| | --------------------------------------------------------------- | ------------------
| | SPORT CHALET, INC.(Registrant)                                 
|
| | By:                                                             | /s/ CRAIG L. LEVRA
| |                                                                
| | Craig L. Levra, Chairman,
Chief Executive Officer and President

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 date indicated above.

Signature

|                                                                                                                     |  |                                                                  
|-------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------
|PRINCIPAL EXECUTIVE OFFICER                                                                                          |  | DIRECTORS                                                        
|                                                                                                                    
|/s/  CRAIG L. LEVRACraig L. Levra, Director, Chairman and
Chief Executive Officer                                    |  | /s/  NORBERT  OLBERZNorbert Olberz
Chairman Emeritus and Director
|                                                                                                                    
|PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER                                                                           |  | /s/  JOHN R. ATTWOODJohn R. Attwood, Director                    
|/s/  HOWARD K. KAMINSKYHoward K. Kaminsky, Executive Vice President -
Finance, Chief Financial Officer and Secretary |  | /s/  AL D. MCCREADYAl D. McCready, Director                      
|                                                                                                                    
|                                                                                                                     |  | /s/  ERIC S. OLBERZEric S. Olberz, Director                      
|                                                                                                                    
|                                                                                                                     |  | /s/  KENNETH OLSENKenneth Olsen, Director                        
|                                                                                                                    
|                                                                                                                     |  | /s/  FREDERICK H. SCHNEIDERFrederick H. Schneider, Director      

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                          |  |        |     |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------ | --- | -
|EXHIBIT |  |                                                                                                                                                                                                                          |  | PAGE  
|NUMBER  |  | DESCRIPTION                                                                                                                                                                                                              |  | NUMBER
|        |  |                                                                                                                                                                                                                          |  |       
|3.1     |  | Certificate of Incorporation of Sport Chalet, Inc.                                                                                                                                                                       |  |        | (1  | )
|       
|3.2     |  | Bylaws of Sport Chalet, Inc.                                                                                                                                                                                             |  |        | (1  | )
|       
|4.1     |  | Form of Certificate for the Common Stock                                                                                                                                                                                 |  |        | (1  | )
|       
|10.1    |  | Credit Agreement, dated August 1, 1992, between the Company and Wells
Fargo Bank                                                                                                                                         |  |        | (2  | )
|       
|10.2    |  | Letter dated October 8, 1992 by Wells Fargo Bank                                                                                                                                                                         |  |        | (2  | )
|       
|10.3    |  | 1992 Incentive Award Plan of the Company                                                                                                                                                                                 |  |        | (2  | )
|       
|10.4    |  | Form of Nonemployee Director Stock Option Incentive Award Agreement                                                                                                                                                      |  |        | (2  | )
|       
|10.5    |  | Form of Key Employee Stock Option Incentive Award Agreement                                                                                                                                                              |  |        | (2  | )
|       
|10.6    |  | Tax Indemnity Agreement, dated October 8, 1992, between the Company and
Norbert J. Olberz                                                                                                                                |  |        | (2  | )
|       
|10.7    |  | Form of Director and Officer Indemnification Agreement                                                                                                                                                                   |  |        | (2  | )
|       
|10.8    |  | Form of Employee Stock Option Incentive Award Agreement                                                                                                                                                                  |  |        | (3  | )
|       
|10.9    |  | Credit Agreement Between the Company and Wells Fargo Bank dated December
1, 1992.                                                                                                                                        |  |        | (4  | )
|       
|10.10   |  | Camp 7 Manufacturing Operations Lease dated March 1, 1993, between the
Company and Eric Steven Olberz                                                                                                                    |  |        | (5  | )
|       
|10.11   |  | First through Fourth Amendment to Credit Agreement between the Company
and Wells Fargo Bank dated December 1, 1992.                                                                                                      |  |        | (6  | )
|       
|10.12   |  | Credit Agreement between the Company and Wells Fargo Bank dated June 1,
1994                                                                                                                                             |  |        | (7  | )
|       
|10.13   |  | Huntington Beach store lease, dated August 25, 1994 between the Company
and Huntington Beach Properties, Inc., a California Corporation                                                                                  |  |        | (8  | )
|       
|10.14   |  | Letter Regarding Resignation of Samuel G. Allen                                                                                                                                                                          |  |        | (9  | )
|       
|10.15   |  | Letter Regarding Resignation of Joseph H. Coulombe                                                                                                                                                                       |  |        | (10 | )
|       
|10.16   |  | Severance and General Release Agreement with Samuel G. Allen                                                                                                                                                             |  |        | (10 | )
|       
|10.17   |  | Employment Contract for Joseph H. Coulombe                                                                                                                                                                               |  |        | (10 | )
|       
|10.18   |  | Employment Contract for Kim D. Robbins                                                                                                                                                                                   |  |        | (10 | )
|       
|10.19   |  | Agreement for sale of Sport Chalet Manufacturing, dated June 23, 1995 by
and among the Company, Eric S. Olberz and Camp 7, a California
corporation                                                                      |  |        | (10 | )
|       
|10.20   |  | Security Agreement [Debtor in Possession] dated June 23,1995 and
executed by Camp 7, Inc., a California corporation, as Borrower, on
behalf of the Company, as Secured Party                                             |  |        | (10 | )
|       
|10.21   |  | Continuing Guaranty dated June 23, 1995 executed by Eric S. Olberz, as
Guarantor, on behalf of the Company, as lender                                                                                                    |  |        | (10 | )
|       
|10.22   |  | Promissory Note dated June 23, 1995 executed by Camp 7, Inc., a
California corporation, as Maker on behalf of the Company                                                                                                |  |        | (10 | )
|       
|10.23   |  | Agreement of Assignment and Assumption of Lease and Consent of Landlord,
dated June 23, 1995, by and among the Company, as Assignor, Camp 7,
Inc., a California corporation, as Assignee and Eric S. Olberz, as
Landlord |  |        | (10 | )
|       
|10.24   |  | Pledge Agreement dated June 23, 1995, by and between Eric S. Olberz, as
Pledgor, and the Company, as Pledgee                                                                                                             |  |        | (10 | )

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|        |  |                                                                                                                                                                                       |  |        |     |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | --- | -
|EXHIBIT |  |                                                                                                                                                                                       |  | PAGE  
|NUMBER  |  | DESCRIPTION                                                                                                                                                                           |  | NUMBER
|        |  |                                                                                                                                                                                       |  |       
|       
|10.25   |  | Licensing Agreement dated June 23, 1995, by and between the Company as
Licensee, and Camp 7, Inc., a California corporation, as Licensor                                              |  |        | (10 | )
|       
|10.26   |  | Indemnification Agreement dated June 23, 1995, by Eric S. Olberz, as
Indemnifier, on behalf of the Company, as Indemnity [if required]                                                |  |        | (10 | )
|       
|10.27   |  | Severance and General Release Agreement with Eric S. Olberz                                                                                                                           |  |        | (10 | )
|       
|10.28   |  | Pomona Warehouse lease, dated August 10, 1995, between the company and
Montclair Warehouse, Inc., a California Corporation                                                            |  |        | (11 | )
|       
|10.29   |  | Waiver of Loan Covenant by Bank dated February 13, 1996.                                                                                                                              |  |        | (12 | )
|       
|10.30   |  | Loan and Security Agreement dated as of May 14, 1996, between the
Company and BankAmerica Business Credit, Inc., together with schedules
thereto                                      |  |        | (13 | )
|       
|10.31   |  | Letter of Credit Financing Agreement Supplement to Loan and Security
Agreement dated as of May 14,1996 between the Company and BankAmerica
Business Credit, Inc.                      |  |        | (13 | )
|       
|10.32   |  | Side Letter, dated as of May 14, 1996, between the Company and
BankAmerica Business Credit, Inc., respecting the Aggregate Rent
Reserve                                               |  |        | (13 | )
|       
|10.33   |  | Termination Agreement and Mutual General Release dated March 25, 1997
among the Company, BankAmerica Business Credit, Inc. and Bank of America
National Trust and Savings Association |  |        | (14 | )
|       
|10.34   |  | Business Loan Agreement dated as of March 25, 1997 between the Company
and Bank of America National Trust and Savings Association, together
with related exhibits                     |  |        | (14 | )
|       
|10.35   |  | Employment Agreement for President and Chief Operating Officer                                                                                                                        |  |        | (15 | )
|       
|10.36   |  | Amendment No. 1 to Business Loan Agreement                                                                                                                                            |  |        | (16 | )
|       
|10.37   |  | Business Loan Agreement dated as of June 19, 1998 between the Company
and Bank of America National Trust and Savings Association                                                      |  |        | (17 | )
|       
|10.38   |  | La Canada store lease dated June 19, 1998 between the Company and La
Canada Properties, Inc., a California Corporation                                                                |  |        | (17 | )
|       
|10.39   |  | La Canada office lease dated June 19, 1998 between the Company and La
Canada Properties, Inc., a California Corporation                                                               |  |        | (17 | )
|       
|10.40   |  | Employment contract for Senior Vice President General Merchandise
Manager                                                                                                            |  |        | (18 | )
|       
|10.41   |  | Porter Ranch store lease dated May 7, 1999 between the Company and North
San Fernando Valley Properties, Inc., a California Corporation                                               |  |        | (19 | )
|       
|10.42   |  | Employment contract for Executive Vice President Operations                                                                                                                          |  |        | (20 | )
|       
|10.43   |  | Employment contract for Senior Vice President Finance                                                                                                                                |  |        | (20 | )
|       
|10.44   |  | Employment contract for Senior Vice President General Merchandise
Manager                                                                                                            |  |        | (20 | )
|       
|10.45   |  | Employment contract for Chairman of the Board                                                                                                                                         |  |        | (21 | )
|       
|10.46   |  | Employment contract for President and Chief Executive Officer                                                                                                                         |  |        | (21 | )
|       
|10.47   |  | Amendment to employment contract for Executive Vice President
Operations                                                                                                             |  |        | (21 | )
|       
|10.48   |  | Amendment to employment contract for Senior Vice President Finance                                                                                                                   |  |        | (21 | )
|       
|10.49   |  | Amendment to employment contract for Senior Vice President General
Merchandise Manager                                                                                               |  |        | (21 | )
|       
|10.50   |  | Amendment No. 2 Business Loan Agreement                                                                                                                                               |  |        | (22 | )
|       
|10.51   |  | Employment contract for Senior Vice President Marketing & Advertising                                                                                                                |  |        | (23 | )

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|        |  |                                                                                                                                                                     |  |        |     |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | --- | -
|EXHIBIT |  |                                                                                                                                                                     |  | PAGE  
|NUMBER  |  | DESCRIPTION                                                                                                                                                         |  | NUMBER
|        |  |                                                                                                                                                                     |  |       
|       
|10.52   |  | Amendment to Bylaws of Sport Chalet, Inc.                                                                                                                           |  |        | (24 | )
|       
|10.53   |  | Amendment No. 3 Business Loan Agreement                                                                                                                             |  |        | (25 | )
|       
|10.54   |  | Amendment to employment contract for Executive Vice President Growth
and Development                                                                               |  |        | E-5 |  
|       
|10.55   |  | Amendment No. 4 Business Loan Agreement                                                                                                                             |  |        | E-6 |  
|       
|23      |  | Consent of Independent Auditors                                                                                                                                     |  |        | E-9 |  
|       
|(1)     |  | Incorporated by reference to the respective exhibit to the Companys
Registration Statement on Form S-1 (Registration Statement No.
33-53120)                       |  |        |     |  
|       
|(2)     |  | Incorporated by reference to Exhibits 10.17 through 10.23, inclusive, to
the Companys Registration Statement on Form S-1 (Registration statement
and No. 33-53120) |  |        |     |  
|       
|(3)     |  | Incorporated by reference to Exhibit 4.5 to the Companys Registration
Statement on Form S-8 (Registration Statement No. 33-61612.)                                 |  |        |     |  
|       
|(4)     |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending September 30, 1992.                               |  |        |     |  
|       
|(5)     |  | Incorporated by reference to Registrants Report on Form 10-K filed with
the Securities and Exchange Commission on June 28, 1993.                                   |  |        |     |  
|       
|(6)     |  | Incorporated by reference to Exhibit 10.1, 10.2, 10.3 and 10.4 to the
Companys quarterly report, on Form 10-Q, for the quarter ending
December 31, 1993.           |  |        |     |  
|       
|(7)     |  | Incorporated by reference to the Companys Form 10-K filed with the
Commission on June 28, 1994.                                                                    |  |        |     |  
|       
|(8)     |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending September 30, 1994.                               |  |        |     |  
|       
|(9)     |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending December 31, 1994.                                |  |        |     |  
|       
|(10)    |  | Incorporated by reference to the Companys Form 10-K filed with the
Commission on June 28, 1995.                                                                    |  |        |     |  
|       
|(11)    |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending September 30, 1995.                               |  |        |     |  
|       
|(12)    |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending December 31, 1995.                                |  |        |     |  
|       
|(13)    |  | Incorporated by reference to Exhibit 10.30, 10.31 and 10.32 to the
Companys Form 10-K filed with the Securities and Exchange Commission on
June 27, 1996.          |  |        |     |  
|       
|(14)    |  | Incorporated by reference to Exhibit 10.33 and 10.34 to the Companys
Form 10-K filed with the Securities and Exchange Commission on June 30,
1997.                 |  |        |     |  
|       
|(15)    |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending September 30, 1997.                               |  |        |     |  
|       
|(16)    |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending December 31, 1997.                                |  |        |     |  
|       
|(17)    |  | Incorporated by reference to Exhibit 10.37, 10.38 and 10.39 to the
Companys Form 10-K filed with the Securities and Exchange Commission on
June 30, 1998.          |  |        |     |  
|       
|(18)    |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending June 30, 1998.                                    |  |        |     |  
|       
|(19)    |  | Incorporated by reference to Exhibit 10.41 to the Companys Form 10-K
filed with the Securities and Exchange Commission on June 30, 1999.                           |  |        |     |  

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|     |  |                                                                                                                                                                 |  |  |  | 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|(20) |  | Incorporated by reference to Exhibit 10.1, 10.2 and 10.3 to the
Companys quarterly report, on Form 10-Q, for the quarter ending
December 31, 1999.             |  |  |  | 
|    
|(21) |  | Incorporated by reference to Exhibit 10.45 through Exhibit 10.49 to the
Companys Form 10-K filed with the Securities and Exchange Commission on
June 30, 2000. |  |  |  | 
|    
|(22) |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending June 30, 2000.                                |  |  |  | 
|    
|(23) |  | Incorporated by reference to Exhibit 10.51 to the Companys Form 10-K
filed with the Securities and Exchange Commission on June 22, 2001.                       |  |  |  | 
|    
|(24) |  | Incorporated by reference to Exhibit 3.2.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending June September 30, 2001.                     |  |  |  | 
|    
|(25) |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly
report, on Form 10-Q, for the quarter ending December 31, 2001.                            |  |  |  | 

E-4