BRASS EAGLE INC, 424B1, 1997-11-26

BRASS EAGLE INC
424B1, 1997-11-26
RETAIL STORES, NEC

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<PAGE>

Filed pursuant to Rule 424(b)(1)
SEC File No. 333-36179

2,275,000 SHARES

[LOGO OF BRASS EAGLE PAINTBALL PRODUCTS APPEARS HERE]

COMMON STOCK

All of the 2,275,000 shares of Common Stock offered hereby are being sold by
Brass Eagle Inc. ("Brass Eagle" or the "Company"). The Company expects that
approximately $12.0 million to $14.0 million of the proceeds from this
Offering (the "Offering"), representing certain intercompany indebtedness owed
to, and divisional equity in the Company held by, Daisy (as defined herein)
will be paid to Daisy. See "Use of Proceeds" on page 17. Prior to the
Offering, there has been no public market for the Common Stock. See
"Underwriting" for information relating to the factors to be considered in
determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol "XTRM."

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SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
THE PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................... $11.00 $0.77 $10.23
- --------------------------------------------------------------------------------
Total(3)............................ $25,025,000 $1,751,750 $23,273,250
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses estimated to be $850,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 341,250 additional shares of Common Stock solely to cover over-
allotments, if any. If that option is exercised in full, the Price to the
Public, Underwriting Discounts and Commissions and Proceeds to the Company
will be $28,778,750, $2,014,513, and $26,764,237, respectively. See
"Underwriting."

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At the request of the Company, up to 113,750 shares offered in the Offering
have been reserved for sale to employees of the Company and certain members of
their families at the initial public offering price. The shares of Common
Stock are offered by the Underwriters, subject to receipt and acceptance of
the shares by them. The Underwriters reserve the right to reject any order in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made against payment therefor at the offices of McDonald & Company
Securities, Inc. or through the facilities of the Depository Trust Company on
or about December 2, 1997.

MCDONALD & COMPANY DAIN BOSWORTH
SECURITIES, INC. INCORPORATED

The date of this Prospectus is November 26, 1997.
<PAGE>

[INSERT PHOTOS HERE]

Pictured on the Inside Front Cover:

The innovative Rainmaker (TM) gun, Xtreme Vision (TM) paintball mark, Talon
Player's Kit, assorted paintball guns, Brass Eagle Paintballs, various
accessories, and a complete product assortment displayed in a retail format.

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<PAGE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, financial statements and
related notes appearing elsewhere in this Prospectus, including the information
contained under the heading "Risk Factors" beginning on page 9. Unless
otherwise indicated, all share, per share, and financial information set forth
herein: (i) reflect the initial public offering price of $11.00 per share; (ii)
has been adjusted to reflect a 1777.96-for-1 stock split in the form of a stock
dividend that was effected on November 24, 1997; (iii) gives effect to a
corporate reorganization which will take effect concurrently with the Offering;
and (iv) assumes no exercise of the Underwriters' over-allotment option.

THE COMPANY

Brass Eagle believes that it is a worldwide leader in the design,
manufacture, marketing, and distribution of paintball products, including
paintball guns, paintballs, and accessories. Based on market data compiled in
part by the Company and management's industry knowledge, the Company believes
that it is the only manufacturer with a full line of products that address
step-by-step price points for beginner, recreational, and competition level
paintball participants, and that it is the only manufacturer to offer paintball
products to consumers through easily accessible channels such as mass
merchandisers and major sporting goods retailers. As a result of these
initiatives, Brass Eagle provides a large consumer base with high quality
paintball products and accessories that generally sell for substantially less
than those of its competitors. Based on this market analysis and industry
knowledge, the Company believes that these advances have significantly
broadened the paintball industry's consumer base, increased the overall number
of paintball participants, and heightened the general awareness of and
excitement for the sport.

Approximately 80% of the Company's sales are to national and regional mass
merchandisers, such as Kmart, Wal*Mart, and Meijer, and major sporting goods
retailers, such as The Sports Authority, Dick's Sporting Goods, and Jumbo
Sports. Brass Eagle products are currently the only paintball products sold
through Kmart and Wal*Mart, and through most major sporting goods chains. The
Company's products are also sold through sporting goods distributors, specialty
distributors of paintball products, and paintball specialty shops.

The Company's sales have grown rapidly, from $2.6 million in 1994 to $4.3
million in 1995 and to $13.8 million in 1996, a compound annual growth rate of
130.4%. This growth has continued in 1997 with sales of $18.4 million through
August 31, 1997, compared to $7.0 million through August 31, 1996, an increase
for the eight month period of 162.9%. The Company believes its growth has been
the result of increasing market acceptance of paintball and, more specifically,
growing consumer demand through mass merchandisers and major sporting goods
retailers for Brass Eagle products. The Company believes significant
opportunities for additional growth exist worldwide and intends to increase
paintball participation and the Company's sales both nationally and
internationally through an active growth campaign.

CORPORATE HISTORY

Because the Company has operated as a division of Daisy Manufacturing
Company, Inc. ("Daisy") prior to the corporate reorganization being effected
concurrently with the offering (the "Reorganization"), it has a limited
operating history as a stand alone entity. However, the Company's predecessor
organizations have manufactured air powered guns for over 100 years. Operating
under the Daisy name, the Company began

3
<PAGE>

manufacturing paintball guns as a device to mark trees and cattle for
commercial purposes in the early 1970's, a market in which it was active
through 1993. In 1993, Daisy began manufacturing, marketing and distributing
paintball products under the Brass Eagle name for sports and recreational use
under a royalty arrangement with Brass Eagle, Inc., a Mississauga, Ontario,
Canada company ("BEI"). In October 1995, Daisy purchased certain assets,
patents, and trademarks, including the Brass Eagle name, from BEI (the "BEI
Acquisition"), and from 1993 to September 1997 sold paintball products through
its Brass Eagle division. In September 1997, Daisy changed its name to Brass
Eagle Inc. Pursuant to the Reorganization, the Company will transfer all of its
non-paintball related assets, operations, and liabilities to a newly created
subsidiary, Daisy Manufacturing Company, a Delaware corporation ("New Daisy").
Prior to completion of the Reorganization, the Company will cancel all of the
issued and outstanding preferred stock of the Company for no consideration and
the Company will distribute all of the outstanding common stock of New Daisy to
the Company's existing stockholders in a spin-off transaction.

GROWTH STRATEGIES

The Company has developed the following growth strategies to capitalize on
its strong brand name, successful products, and operating capabilities:

. EXPAND PENETRATION OF NEW AND EXISTING MARKETS. Brass Eagle's sales and
marketing programs are aimed at increasing its presence in its existing
markets and expanding into new markets. In addition to selling to mass
merchandisers and major sporting goods retailers, the Company has a direct
sales program to reach consumers with unique, branded accessories and
apparel. It also intends to focus on increasing sales to wholesale
distributors which supply Brass Eagle products to specialty retailers and
international markets.

. INCREASE PARTICIPATION IN THE SPORT OF PAINTBALL. The Company believes that
its marketing efforts will heighten media exposure of paintball generally
and increase paintball participation. The Company promotes its brand name
and the paintball industry through focused marketing efforts such as
designing packaging and point-of-sale materials, sponsoring paintball
events, two professional paintball teams, and the National Professional
Paintball League ("NPPL"), developing fast-paced, modular field concept
games, such as Hyperball(TM), participating in trade shows, and advertising.

. EVALUATE STRATEGIC ACQUISITIONS. The Company may, when and if the
opportunity arises, acquire other businesses involved in activities or
having product lines that are compatible with those of the Company. The
Company will evaluate acquisition opportunities as they arise and focus on
prospects that it believes complement its business and product lines.
However, the Company has no current or pending agreements, understandings or
arrangements with respect to any material acquisition.

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<PAGE>

SUMMARY RISK FACTORS

Prospective investors should carefully consider the matters discussed under
"Risk Factors" prior to investing in the Company which, individually or in the
aggregate, could have a material adverse effect on the financial condition of
the Company and its ability to make distributions to stockholders. These risks
include: (i) Risks Associated with Market Development; Industry and Product
Concentration; (ii) Risks Associated with Managing a Growing Business; (iii)
Limited Operating History; Certain Administrative Services; (iv) Certain Tax
and Contingent Liability Risks Related to the Reorganization; (v) Dependence on
Certain Customers; (vi) Dependence on Limited Number of Suppliers; Exclusive
Arrangements and Noncompetition Covenants; (vii) Difficulty in Forecasting
Product Demand; (viii) Risks Associated with Possible Acquisitions; (ix)
Product Safety and Liability; (x) Government Regulation; (xi) Dependence on Key
Personnel; (xii) Discretionary Use of Proceeds; (xiii) Allocation of Historical
Financial Information; (xiv) Competition; (xv) Limited Protection for
Technology; (xvi) Risks Associated with International Business and Market
Demand; (xvii) No Prior Public Market; Maintenance of Listing Requirements and
Possible Volatility of Stock Price; (xviii) Shares Eligible for Future Sale;
(xix) Control by Principal Stockholder; (xx) Dilution; (xxi) Absence of
Dividends; and (xxii) Future Capital Needs.

EXECUTIVE OFFICES

The Company is a Delaware corporation with its executive offices located at
1203A North Sixth Street, Rogers, Arkansas 72756, and its telephone number is
(501) 621-4390.

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<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock outstanding
prior to the Offering(1)... 4,608,899 shares
Common Stock offered by the
Company(2)................. 2,275,000 shares
Common Stock outstanding
after the Offering(1)(2)... 6,883,899 shares
Use of proceeds............. The Company intends to use the proceeds from the Offering to
(i) repay certain indebtedness outstanding under Daisy's
credit facility which has been specifically allocated to the
Company, (ii) repay certain intercompany indebtedness owed
to Daisy, (iii) pay to Daisy the value of its divisional
equity in the Company, and (iv) provide working capital and
funding for other general corporate purposes, which may
include the investment in or acquisition of complementary
businesses. As of August 31, 1997, these amounts were as
follows: (i) $1.5 million, (ii) approximately $2.2 million,
(iii) approximately $3.1 million, and (iv) approximately
$15.6 million for a total of $22.4 million. The Company
anticipates that intercompany borrowings from Daisy will
increase significantly (to approximately $7.0 to $8.0
million) prior to the consummation of this Offering due to
the Company's increased working capital needs to support
sales growth, and that divisional equity will also increase
significantly (to approximately $3.5 to $4.5 million) as a
result of increased income. Consequently, the Company
expects that total payments to Daisy from the proceeds of
this Offering will be approximately $12.0 to $14.0 million.
Nasdaq National Market
Symbol..................... XTRM
</TABLE>
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(1) After giving effect to a 1,777.96-for-1 stock split in the form of a stock
dividend to stockholders of record as of November 20, 1997, that was
effected on November 24, 1997. Does not include 944,561 shares of Common
Stock reserved for issuance under various stock option plans, stock
purchase agreements, and a director compensation arrangement. See
"Management--Director Compensation," "--Employment Agreements," "--1997
Stock Option Plan," "--Employee Stock Purchase Plan," and "--Certain
Additional Options."
(2) Does not include 341,250 shares of Common Stock that may be sold by the
Company if the over-allotment option granted by the Company to the
Underwriters is exercised in full.

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<PAGE>

SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, EIGHT MONTHS EIGHT MONTHS
------------------------------------------------ ENDED ENDED
1992 1993 1994 1995 1996 AUGUST 31, 1996 AUGUST 31, 1997
-------- -------- -------- -------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $ 159 $ 851 $ 2,615 $ 4,319 $ 13,838 $ 6,977 $ 18,391
Cost of sales......... 155 615 1,258 2,456 9,625 4,962 12,308
-------- -------- -------- -------- --------- -------- ---------
Gross profit.......... 4 236 1,357 1,863 4,213 2,015 6,083
Operating expenses.... 27 296 957 1,774 2,424 1,456 3,158
-------- -------- -------- -------- --------- -------- ---------
Operating income
(loss)............... (23) (60) 400 89 1,789 559 2,925
Interest expense and
other, net(1)........ -- -- -- 87 360 222 162
-------- -------- -------- -------- --------- -------- ---------
Income (loss) before
income taxes......... (23) (60) 400 2 1,429 337 2,763
Provision (benefit)
for income taxes..... 9 (23) 153 1 547 129 1,058
-------- -------- -------- -------- --------- -------- ---------
Net income (loss)..... $ (14) $ (37) $ 247 $ 1 $ 882 $ 208 $ 1,705
======== ======== ======== ======== ========= ======== =========
Net income per
share(2)............. $ 0.17 $ 0.32
Weighted average
shares
outstanding(2)....... 5,296,204 5,312,977
PRO FORMA STATEMENT OF
OPERATIONS DATA:
Net income(3)......... $ 965 $ 1,750
Net income per
share(4)............. $ 0.13 $ 0.24
Weighted average
shares
outstanding(4)....... 7,288,477 7,305,250
<CAPTION>
DECEMBER 31, AUGUST 31, 1997
------------------- -------------------------------
AS
1995 1996 ACTUAL ADJUSTED(5)
-------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (defi-
cit)................. $ (993) $ (734) $ 597 $ 18,887
Total assets.......... 6,288 9,269 15,549 31,145
Long-term debt (less
current portion)..... 3,043 1,892 1,414 414
Divisional equity..... 248 1,130 3,133 --
Stockholders equi-
ty(6)................ -- -- -- 22,423
</TABLE>
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(1) Intercompany borrowings from Daisy are non-interest bearing. See Note 9 to
Financial Statements.

(2) The net income per share has been calculated on a pro forma basis by
dividing net income by the weighted average shares outstanding after the
Reorganization, dilutive stock options and the number of shares to be
issued in the Offering the proceeds from which would be sufficient to pay
the divisional equity owed to Daisy.

(3) Pro forma net income has been computed by adjusting historical net income
for the year ended December 31, 1996, and the eight months ended August 31,
1997, to give effect to repayment of the $1.5 million term debt
specifically allocated to Brass Eagle and the elimination of interest
expense with respect thereto, as if the Offering had occurred on January 1,
1996, and 1997, respectively. See "Use of Proceeds."

(4) The pro forma net income per share has been calculated by dividing pro
forma net income by the weighted average shares outstanding after the
Reorganization, the issuance of 2,275,000 shares in the Offering, and
dilutive stock options.

(5) Gives effect to the application of the proceeds from the Offering after the
deduction of the estimated expenses. See "Use of Proceeds."

(6) Stockholders' equity at August 31, 1997 (as adjusted) reflects divisional
equity after giving effect to the Offering and the application of the
proceeds therefrom.

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NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements, including
statements made with respect to the results of operations and businesses of the
Company. When used in this Prospectus, the words "may," "should," "believe,"
"anticipate," "estimate," "expect," "intend," "plan," and similar expressions
are intended to identify forward-looking statements. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated, projected,
forecast, estimated, or budgeted in such forward-looking statements include,
among others, the following possibilities: (i) intensifying competition,
including specifically the intensification of price competition, the entry of
new competitors and the introduction of new products by new and existing
competitors; (ii) failure to obtain new customers or retain existing customers;
(iii) inability to carry out marketing and sales plans; (iv) loss of key
executives; (v) general economic and business conditions which are less
favorable than expected; and (vi) unanticipated changes in industry trends.

Such forward-looking statements may be found in the "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business" sections as well as in this Prospectus
generally. Actual events or results may differ materially from those discussed
in the forward-looking statements as a result of various factors.

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<PAGE>

RISK FACTORS

Prospective investors should take into account the following considerations,
as well as the other information set forth in this Prospectus, before
purchasing any of the shares of the Common Stock offered hereby.

RISKS ASSOCIATED WITH MARKET DEVELOPMENT; INDUSTRY AND PRODUCT CONCENTRATION

The market for paintball products has historically consisted primarily of a
relatively small consumer niche of paintball enthusiasts who purchased their
equipment through catalogue distributors and specialty retail outlets. Based
on market data compiled in part by the Company and management's knowledge of
the industry, the Company believes that much of the rapid recent growth of
paintball product sales is attributable to its distribution of paintball
products through mass merchandisers and major sporting goods chains. The
Company currently designs, manufactures, markets, and distributes paintball
products only. As a result of the current dependence of the industry's growth
upon the Company's efforts and this industry and product concentration, the
Company's future success will depend primarily upon its ability to attract new
paintball participants. There can be no assurance that paintball will continue
to grow at the rate at which it is currently growing or that its popularity
will not decline. The Company's failure to expand the market and to accurately
predict future trends could have a material adverse effect on the Company and
its prospects. See "Business--Introduction," "--Industry Overview," and "--
Products."

RISKS ASSOCIATED WITH MANAGING A GROWING BUSINESS

The Company has experienced rapid and sustained growth since 1993, when it
commenced its Brass Eagle paintball operations. However, there can be no
assurance that the Company will be able to implement its growth strategies in
the future or that, if implemented, such strategies will result in growth in,
or maintenance of, the Company's profitability. The Company's growth has
placed significant demands on the Company's management, working capital, and
financial and management control systems. Several members of the Company's
senior management have only recently been employed with the Company in their
present capacities. Effective management of future growth will require the
Company (i) to plan for and implement changes in its business as the market
for paintball products matures and (ii) to expand its operations, facilities,
and internal controls consistent with increased demand for its paintball
products. Management's inability to respond effectively to or plan for the
Company's future expansion, or encountering unexpected difficulties during
expansion, could have a material adverse effect on the Company and its
prospects. See "Corporate History," "Reorganization," "Business--
Introduction," "--Industry Overview," and "--Products," "Management--Executive
Officers and Directors," and "Certain Transactions--Administrative Services
Agreement."

LIMITED OPERATING HISTORY; CERTAIN ADMINISTRATIVE SERVICES

The Company has conducted Brass Eagle paintball operations since 1993. The
Company will not exist as a separately capitalized entity until the
consummation of the Reorganization, which is to be effected concurrently with
the Offering. Consequently, although Daisy has been in existence for over one
hundred years, the Company has a limited operating history, all of which has
been as a division of Daisy. Concurrently with the Reorganization the Company
will enter into an administrative services agreement with New Daisy, pursuant
to which New Daisy will agree to provide the Company with certain legal,
administrative, warehousing, shipping, and computer information services
through December 31, 1998, although the Company expects that it will terminate
this agreement with respect to all services except legal and computer
information services prior to that date. The Company expects to assume
responsibility for the remaining services. Although the Company's paintball
operations have been profitable, there can be no assurance that the Company
will be able to continue to operate profitably as a stand alone business
following the Reorganization. See "Corporate History," "Reorganization," and
"Certain Transactions--Administrative Services Agreement."

CERTAIN TAX AND CONTINGENT LIABILITY RISKS RELATED TO THE REORGANIZATION

Pursuant to the Reorganization, New Daisy will acquire and assume from the
Company all of the Company's non-paintball related assets, operations, and
liabilities, including, without limitation, certain products liability,
employee benefits, and tax liabilities and obligations.

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<PAGE>

For the period from July 1, 1993, to November 15, 1997, the Company has
self-insured the first $1.0 million of products liability claims exposure with
respect to each policy year included therein and maintains third party
insurance for certain excess exposure. In addition, the Company maintains
certain employee benefit plans, including an unfunded post-retirement medical
benefits plan and a defined benefit pension plan. In connection with the
Reorganization, New Daisy has agreed to indemnify the Company and its
officers, directors, employees and stockholders against all liabilities and
obligations related to the Company's non-paintball related operations,
including, without limitation (i) any products liability claim relating to any
products sold by the Company prior to the Reorganization (other than products
sold under the Brass Eagle name) and any products sold by New Daisy after the
Reorganization, (ii) any claim by any employee or former employee of the
Company or of New Daisy to the extent that such claim relates to post-
retirement medical or pension benefits that are attributable to the employment
of any such individual in the Company's non-paintball related operations.

In addition, the Reorganization will include (i) the transfer of certain
assets and liabilities from the Company to New Daisy, and (ii) the
distribution by the Company of all of the outstanding capital stock of New
Daisy to the Company's existing stockholders in a spin-off transaction.
Although the Company does not believe that it will incur any material tax
liability in connection with the transfer or the spin-off, there can be no
assurance that the Internal Revenue Service (the "Service") will agree with
the Company's treatment of these transactions for Federal income tax purposes.
The Company will be required to recognize gain on the transfer to the extent
that the value of the liabilities assumed by New Daisy exceeds the Company's
adjusted tax basis in the assets transferred. However, the Company believes
that it has available to it tax loss carryforwards from prior years and
current year tax losses incurred prior to the Reorganization (attributable in
each case to the Company's historical non-paintball operations) that are
sufficient to offset all of this gain. In addition, the Company would be
required to recognize gain on the spin-off if and to the extent that the fair
market value of the outstanding capital stock of New Daisy exceeds the
Company's adjusted tax basis in such stock. New Daisy has agreed to indemnify
the Company against all tax consequences related to the transactions
contemplated by the Reorganization. The indemnification obligations of New
Daisy will be guaranteed by certain stockholders of New Daisy pursuant to a
continuing guaranty. See "Certain Transactions--Continuing Guaranty."

Although the Company believes that such indemnity obligations and insurance
coverage are adequate to protect it from any material financial exposure with
respect to these risks, there can be no assurance that New Daisy will be able
to satisfy its indemnity obligations or that such insurance coverage will be
adequate or available or that the applicable insurer will be solvent at the
time of any covered loss. The occurrence of any of these events could have a
material adverse effect on the Company and its prospects. See "Corporate
History" and "Reorganization."

DEPENDENCE ON CERTAIN CUSTOMERS

Kmart and Wal*Mart accounted for 21.9% and 13.7%, respectively, of the
Company's sales in 1996. The Company's largest customers have significantly
greater financial and organizational resources than the Company and are
generally able to exert considerable influence over their suppliers. The
Company does not have long-term contracts with these customers or any of its
other customers, and there is no assurance that these or any other customer
will continue to purchase the Company's paintball products. Although the
Company is currently the only supplier of paintball products to Kmart and
Wal*Mart, it does not have any exclusive contractual supply rights. The loss
or financial insolvency of, or a substantial decline in purchases by, any of
the Company's largest customers individually, or a number of the Company's
other customers in the aggregate, could have a material adverse effect on the
Company and its prospects. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Introduction"
and "--Sales and Distribution."

DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS; EXCLUSIVE ARRANGEMENTS AND
NONCOMPETITION COVENANTS

The Company is aware of only four manufacturers of the gelatin encapsulated
paintballs necessary for paintball play. The Company believes that the cost of
equipment and the knowledge required for the encapsulation process have
historically been significant barriers to the entry of additional paintball
suppliers.

10
<PAGE>

Accordingly, there can be no assurance that additional paintball suppliers
will exist in the future. Because the Company does not manufacture its own
paintballs, it has entered into a strategic alliance with a paintball
producer, Goldcaps, Inc. ("Goldcaps"), a subsidiary of IVAX Corp. of Miami,
Florida, pursuant to which the Company has agreed to serve as such producer's
exclusive worldwide paintball distributor. This agreement extends through
August 1999, but is terminable prior to that time upon one year's notice, and
contains certain provisions which prohibit the Company from selling any
competing products during the term of the agreement. In addition, the Company
has entered into a strategic alliance with a producer of facemasks, Leader
Industries ("Leader") of Montreal, Quebec, Canada pursuant to which the
Company has agreed to serve as such producer's exclusive worldwide distributor
of such products (except in Canada, where such producer also sells its
products). This agreement extends through August 31, 1999, but is terminable
prior to that time on six months' notice, and also contains certain provisions
which prohibit the Company from selling any competing products within its
distribution territory during the term of the agreement. Despite these
contractual arrangements, there can be no assurance that these suppliers will
continue to be able to supply sufficient quantities of their products in order
to meet the Company's current needs or to support any growth in sales by the
Company. The Company does not currently have long-term contracts with any of
its other vendors, nor does it currently have multiple vendors for parts,
components, tooling, supplies and services critical to its manufacturing
process. The Company's supplier of paintballs for its European sales has
indicated that it wishes to terminate its supply relationship with the
Company, but has also indicated that it will continue to supply the Company
with its requirements of paintballs until an alternative source of supply can
be arranged. The Company's success will depend, in part, on its ability to
maintain relationships with its current suppliers and on the ability of these
and the Company's other suppliers to satisfy its product requirements. Failure
of a key supplier to meet the Company's product needs on a timely basis or
loss of a key supplier could have a material adverse effect on the Company and
its prospects. See "Business--Manufacturing; Strategic Alliances; Backlog."

DIFFICULTY IN FORECASTING PRODUCT DEMAND

Although the Company works closely with its customers to determine their
purchasing requirements, because of the rapid recent growth of paintball and
the relative newness of the sport, it has been difficult to forecast
accurately the demand for paintball products. Consequently, although the
Company believes that its current manufacturing facilities and access to
temporary and permanent labor are sufficient to accommodate significant surges
in production demand, as well as sustained increases in growth, there can be
no assurance that the Company's manufacturing resource planning systems will
be adequate to support product demand. The Company's failure to fulfill the
orders of its largest customers on a timely basis could have a material
adverse effect on the Company and its prospects. See "Business--Sales and
Distribution" and "--Manufacturing; Strategic Alliances; Backlog."

RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS

The Company may pursue strategic acquisitions as part of its growth
strategy. Such acquisitions would require investment of operational and
financial resources and could require integration of dissimilar operations,
assimilation of new employees, diversion of management time and resources,
increases in administrative costs, potential loss of key employees of the
acquired company, and additional costs associated with debt or equity
financing. Any future acquisition by the Company could have an adverse effect
on the Company's results of operations or could result in dilution to existing
stockholders, including those purchasing shares of Common Stock in the
Offering. See "Use of Proceeds," "Business--Growth Strategies," and "--
Competition."

PRODUCT SAFETY AND LIABILITY

Because of the risks associated with the misuse of paintball products, there
is a substantial risk that the Company will be a defendant in product
liability lawsuits and claims from time to time in the ordinary course of
business. To date, the Company has been named as a defendant in one such
lawsuit and has had three other product liability claims made against it for
which no lawsuit has been filed. The lawsuit and one of these claims have been
resolved without any material cost or material adverse effect on the Company
and its prospects. The Company believes that the other two claims will also be
resolved without any material cost or a material adverse effect on the Company
and its prospects. However, the Company expects that the volume of such claims
and suits will increase as sales increases.

11
<PAGE>

Historically, paintball was played primarily by relatively experienced
enthusiasts at remote locations. The Company is currently expanding the
paintball market to a broader, less experienced group of participants, who may
participate in paintball in private yards and other less remote areas.
Although the Company stresses proper safety practices at all levels of play
and requires in its product packaging materials and promotional efforts that
proper face, eye, and ear protection be worn at all times, there can be no
assurance that all paintball participants, particularly less experienced ones,
will observe all proper safety practices. Failure to observe proper safety
practices may result in injuries to such participants, as well as to nearby
non-participants. Consequently, the Company anticipates that the frequency of
product liability lawsuits and claims against it may increase as its sales
increase.

The Company maintains product liability, general liability, and excess
liability insurance to insure against potential claims, and believes that such
insurance and its anticipated cash flows will be adequate to cover its product
liability claims exposure. However, because of the uncertainty as to the
number of claims or the nature and extent of liability for personal injuries
and to changes in the historical or future levels of insurance coverage or the
terms or costs thereof, there can be no assurance that such insurance
coverages will be adequate or available in the future to cover product
liability claims or that the applicable insurer will be solvent at the time of
any covered loss. Moreover, even if the Company maintains adequate insurance,
any successful claim could materially and adversely affect the business,
reputation, and prospects of the Company and divert management time and
resources. See "Business--Legal Proceedings."

GOVERNMENT REGULATION

Paintball products are within the jurisdiction of the United States Consumer
Products Safety Commission (the "CPSC") and other Federal, state, local, and
foreign regulatory bodies. The CPSC has the authority under certain Federal
laws and regulations to protect consumers from hazardous goods. The CPSC may
exclude from the market goods it determines are hazardous, and may require a
manufacturer to repurchase such goods under certain circumstances. Some state,
local, and foreign governments have similar laws and regulations. If the
Company is found to have violated any such law or regulation, the sale of the
relevant products could be prohibited and the Company could be required to
repurchase such products. In addition, although the Company is not aware of
any legislation specifically targeted at paintball products, the Company
understands that certain local and foreign jurisdictions have enacted
legislation that prohibits retailers from selling certain product categories
that are or may be sufficiently broad to include paintball guns. Although the
Company is not aware of any Federal or state legislative or regulatory
initiatives to enact similar legislation or to prohibit or restrict
specifically the sale of paintball products, there can be no assurance that
such legislation will not be adopted in the future. Any such legislative
initiatives, if adopted, and any negative publicity surrounding such efforts,
whether or not adopted, could have a material adverse effect on the Company
and its prospects. Adverse publicity relating to the sport of paintball, or
publicity associated with actions by the CPSC or others expressing concern
about the safety or function of the Company's products or competitors products
(whether or not such publicity is associated with a claim against the Company
or results in any action by the Company or the CPSC) could have a material
adverse effect on the Company's reputation, brand image, or markets, any of
which could have a material adverse effect on the Company and its prospects.
See "Business--Government Regulation."

DEPENDENCE ON KEY PERSONNEL

The Company is dependent upon the management and leadership skills of the
members of its senior management team and other key personnel, including
certain members of its product development team. Several members of the
Company's senior management have only recently been employed with the Company
in their present capacities. The loss of any such personnel or the inability
to attract, retain, and motivate key personnel could have a material adverse
effect on the Company and its prospects. E. Lynn Scott, the President and
Chief Executive Officer of the Company, has entered into an employment and
noncompetition agreement with the Company that extends through the year 2000
and he is the only employee of the Company with an employment agreement. The
Company does not maintain key-man life insurance on any employee. See
"Management--Executive Officers and Directors" and "--Employment Agreements."

12
<PAGE>

DISCRETIONARY USE OF PROCEEDS

The Company intends to use the proceeds of the Offering to (i) repay certain
indebtedness outstanding under Daisy's credit facility which has been
specifically allocated to the Company, (ii) repay certain intercompany
indebtedness owed to Daisy, and (iii) pay to Daisy the value of its divisional
equity in the Company, representing historical retained earnings. The Company
anticipates that the sum of these amounts will total approximately $12.0 to
$14.0 million by the time of the consummation of the Offering. The balance of
the net proceeds from the Offering will be used for working capital to support
the planned growth of the Company's business and for other general corporate
purposes, which may include the investment in or acquisition of complimentary
business. As a result, the Company's success will depend substantially on the
discretion and judgment of the Company's management with respect to the
application and allocation of a substantial portion of the net proceeds of the
Offering. See "Use of Proceeds."

ALLOCATION OF HISTORICAL FINANCIAL INFORMATION

Historically, Daisy and its Brass Eagle division shared operational and
administrative facilities, including management information systems. As a
result, in preparing the historical financial information included elsewhere
in this Prospectus, certain manufacturing, selling, and administrative
expenses that could not be specifically attributed to paintball operations had
to be allocated between Daisy and the Company. These allocations were based on
various factors and assumptions, including quantity of inventory produced,
quantity of materials received, number of shipments, number of employees, and
amount of time spent by Daisy employees performing paintball-related
operations. Although there can be no assurance that these allocations are
reflective of costs the Company will incur as an independent entity in the
future, the Company believes that all historical allocations were reasonable
and that any errors in the historical allocations would not have a material
adverse effect on the Company and its prospects. Effective September 1, 1997,
it was no longer necessary to allocate certain of these costs due to the
implementation of a new computer management information services system.
Allocated costs currently represent less than 10% of total Company costs and
expenses. The impact on the Company's financial condition and operations of
inappropriately allocating financial information on a going forward basis
should not be material. See "Summary Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

COMPETITION

Based on market data compiled in part by the Company and management's
knowledge of the industry, the Company believes that the market for paintball
products is currently fragmented and underdeveloped. The Company believes it
faces a limited number of competitors, particularly in the beginner and
recreational segments, where it concentrates its business, and that it has the
leading market share in paintball products. However, there can be no assurance
that any number of new competitors, some of which may have significantly
greater financial and organizational resources than the Company, will not
emerge in the future as the market for paintball products develops, or that
the present competitors of the Company will not be able to compete more
successfully in the future. For the Company to maintain or increase its market
share, it must continue to compete successfully in the design, manufacture,
marketing, and distribution of paintball products. See "--Limited Protection
for Technology" and "Business--Competition."

LIMITED PROTECTION FOR TECHNOLOGY

The Company has obtained patents for the design of certain of its paintball
gun products and will seek patent protection in the future for new products.
Nevertheless, the Company's competitors currently replicate and may continue
to replicate certain features and functions of the Company's paintball gun
products. There can be no assurance that current or future patent protection
will prevent competitors from offering competing products, that any issued
patents will be upheld, or that patent protection will be granted in any or
all of the countries in which applications are currently pending or granted on
the breadth of the description of the invention. In addition, due to
considerations relating to, among other things, cost, delay, or adverse
publicity, there can be no assurance that

13
<PAGE>

the Company will elect to enforce its intellectual property rights. There can
be no assurance that the failure to enforce such rights will not have a
material adverse effect on the Company and its prospects.

The Company's competitors have also obtained and may continue to obtain
patents on certain features of their products which may prevent or discourage
the Company from offering such features on its products, which, in turn, could
result in a competitive disadvantage to the Company. There can be no assurance
that the Company's competitors will not assert against the Company claims of
intellectual property rights that relate to the Company's paintball gun
products and product features and, if asserted, that the Company will not
incur material liabilities in the future. See "Business--Intellectual
Property."

RISKS ASSOCIATED WITH INTERNATIONAL BUSINESS AND MARKET DEMAND

Although the Company currently manufactures its products only in the United
States, it distributes and sells its paintball products internationally,
principally in Europe. The Company's European sales were principally in the
United Kingdom and Germany. Although international sales only accounted for
14.5% of the Company's sales in 1996, 82.0% of its foreign sales were to WDP
Ltd., the Company's European distributor, pursuant to a non-exclusive
agreement. Loss of the Company's relationship with this distributor or changes
in economic conditions, currency exchange rates, tariff regulations, or other
trade restrictions or political instability ("International Conditions") could
adversely affect the international market for the Company's paintball
products, which in turn could have a material adverse effect on the Company
and its prospects. In addition, insufficient international demand for the
Company's paintball products, whether due to changes in International
Conditions, consumer preferences, or other factors, could have a material
adverse effect on the Company and its prospects. See "Business--Sales and
Distribution."

NO PRIOR PUBLIC MARKET; MAINTENANCE OF LISTING REQUIREMENTS AND POSSIBLE
VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock.
Although the Common Stock has been approved for quotation on the Nasdaq
National Market, there can be no assurance that an active trading market will
develop or be sustained. The Nasdaq National Market has certain requirements
that must be satisfied to obtain and maintain listing status, including
certain requirements with respect to the number of market makers for, and
number of stockholders of, the Common Stock that are out of the Company's
control. Although the Company believes that it will satisfy the initial
listing requirements, there can be no assurance that it will be able to
continue to satisfy the listing maintenance requirements. Any failure by the
Company to satisfy these requirements could have a material adverse effect on
the liquidity and market price of the Common Stock.

The initial public offering price of the Common Stock offered hereby will be
determined by negotiations among the Company and the Underwriters and may not
be indicative of the market price for the Common Stock after the Offering. The
market price for shares of the Common Stock may be volatile and may fluctuate
based upon a number of factors, including, without limitation, business
performance, timing of revenues, news announcements, or changes in general
trading market conditions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Shares Eligible for Future
Sale," and "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have outstanding
6,883,899 shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option). Of these shares, all of the 2,275,000 shares sold in
the Offering will be freely transferable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act") by persons other than "affiliates" (as defined in the Securities Act) of
the Company. Future sales of substantial amounts of Common Stock (including
shares issued upon the exercise of options that may be granted pursuant to any
employee stock option or other equity plan of the Company), or the perception
that such sales could occur, could have an adverse effect on the market price
of the Common Stock. If such sales or any other factor should reduce the
market price of Common Stock, the Company's ability to raise additional
capital in the public equity markets could be adversely affected. The Company
and its directors and executive officers and certain shareholders have agreed,
subject to certain exceptions, not to sell, offer to sell, grant any option
(other than pursuant to the Company's 1997 Stock Option

14
<PAGE>

Plan) for the sale of, or otherwise dispose of, any shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock
(except for shares offered in the Offering) for a period of 180 days after the
date of this Prospectus without the prior written consent of McDonald &
Company Securities, Inc. See "Description of Capital Stock," "Shares Eligible
for Future Sale," and "Underwriting."

CONTROL BY PRINCIPAL STOCKHOLDER

Upon consummation of the Offering, without taking into account any dilutive
stock options, Charter Oak Partners, a Connecticut limited partnership, will
beneficially own 53.4% of the Common Stock of the Company. As a result,
Charter Oak Partners will be in a position to control the outcome of all
matters requiring stockholder approval, including the election or removal of
directors and approval of significant corporate transactions, and will have
the ability generally to direct the Company's affairs. Such concentration of
ownership may have the effect of delaying or preventing a change in control of
the Company, including transactions in which the holders of the Company's
Common Stock might otherwise receive a premium over current market prices for
their shares. See "Principal Stockholders."

DILUTION

The initial public offering price is expected to be substantially higher
than the book value per share of the Common Stock. Investors purchasing shares
of Common Stock in the Offering will therefore incur immediate and substantial
dilution of $7.75 per share. See "Dilution."

ABSENCE OF DIVIDENDS

The Company does not expect to pay any cash dividends on shares of the
Common Stock in the foreseeable future. See "Dividend Policy."

FUTURE CAPITAL NEEDS

The Company believes that funds generated from operations, together with the
net proceeds of this Offering and borrowings under contemplated future credit
facilities, will be sufficient to meet working capital needs of the Company
for at least the next 18 months. The Company's long-term capital requirements
beyond that time will depend on many factors, including, but not limited to,
the rate at which the Company expands its business. To the extent that the
funds generated from the sources described above are insufficient to fund the
Company's activities in the short- or long-term, the Company will need to
raise additional funds through public or private financings. No assurance can
be given that additional financing will be available on terms favorable to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

15
<PAGE>

CORPORATE HISTORY

The Company, including its predecessor organizations, has manufactured air
powered guns for over 100 years. The Company, operating as Daisy, began
manufacturing paintball guns as a device to mark trees and cattle for
commercial purposes in the early 1970's. Daisy manufactured paintball guns
under contract for the Nelson Paint Company and remained active in this market
until 1993. In 1993, Daisy began manufacturing, marketing and distributing
paintball products for sports and recreational use under a royalty arrangement
with BEI. In October 1995, Daisy purchased certain assets, patents, and
trademarks, including the Brass Eagle name, from BEI in the BEI Acquisition,
and from 1993 to September 1997 sold paintball products through its Brass
Eagle division. In September 1997, Daisy changed its name to Brass Eagle Inc.
Pursuant to a corporate reorganization to be effected concurrently with the
Offering, the Company will transfer all of its non-paintball related assets,
operations, and liabilities to a newly created subsidiary, New Daisy . See
"Risk Factors--Limited Operating History; Certain Administrative Services,"
"--Certain Tax and Contingent Liability Risks Related to the Reorganization,"
"Reorganization," "Business--Manufacturing; Strategic Alliances; Backlog," and
"Certain Transactions--Administrative Services Agreement."

REORGANIZATION

Concurrently with the Offering, the Company will effect a reorganization
(the "Reorganization"), pursuant to which (i) all of the issued and
outstanding preferred stock of the Company will be cancelled for no
consideration, (ii) the Company will transfer all of its non-paintball related
assets, operations, and liabilities to New Daisy, retaining only its paintball
related assets, operations, and liabilities, (iii) the Company will then
distribute all of the outstanding common stock of New Daisy to the Company's
existing stockholders in a spin-off transaction, and (iv) New Daisy will agree
to indemnify and hold harmless the Company and its officers, directors,
employees, and stockholders from and against all liabilities and obligations
related to the Company's non-paintball related operations, including, without
limitation, (A) any products liability claim relating to any products sold by
the Company prior to the Reorganization (other than products sold under the
Brass Eagle name) and any products sold by New Daisy after the Reorganization,
and (B) any claim by any employee or former employee of the Company or of New
Daisy to the extent that such claim relates to post-retirement medical or
pension benefits that are attributable to the employment of any such
individual in the Company's non-paintball related operations. The
indemnification obligations of New Daisy will be guaranteed by certain
stockholders of New Daisy pursuant to a continuing guaranty. See "Certain
Transactions--Continuing Guaranty." Although the Company does not believe that
it will incur any material tax liability in connection with the transfer or
the spin-off, there can be no assurance that the Service will agree with the
Company's treatment of these transactions for Federal income tax purposes. The
Company will be required to recognize gain on the transfer to the extent that
the value of the liabilities assumed by New Daisy exceeds the Company's
adjusted tax basis in the assets transferred. However, the Company believes
that it has available to it tax loss carryforwards from prior years and
current year tax losses incurred prior to the Reorganization (attributable in
each case to the Company's historical non-paintball operations) that are
sufficient to offset all of this gain. In addition, the Company would be
required to recognize gain on the spin-off if and to the extent that the fair
market value of the outstanding capital stock of New Daisy exceeds the
Company's adjusted tax basis in such stock. New Daisy has agreed to indemnify
the Company against all tax consequences related to the transactions
contemplated by the Reorganization. Following the Reorganization, the Company
will concentrate on its paintball operations and New Daisy intends to continue
to market airguns, toy guns, and steel shot. See "Risk Factors--Certain Tax
and Contingent Liability Risks Related to the Reorganization" and "Certain
Transactions--Tax Allocation Agreement."

16
<PAGE>

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
offered hereby are approximately $22.4 million after deducting underwriting
discounts and commissions, and estimated offering expenses payable by the
Company.

The Company intends to use the net proceeds from the Offering to (i) repay
certain indebtedness outstanding under Daisy's credit facility which has been
specifically allocated to the Company, which matures in January 1998 and bears
interest at LIBOR plus 2.5%, (ii) repay certain intercompany indebtedness owed
to Daisy, (iii) pay to Daisy the value of its divisional equity in the
Company, and (iv) provide working capital and funding for other general
corporate purposes, which may include the investment in or acquisition of
complementary businesses. As of August 31, 1997, these amounts were as follows
(i) $1.5 million, (ii) approximately $2.2 million, (iii) approximately $3.1
million, and (iv) approximately $15.6 million for a total of $22.4 million.

The Company anticipates, however, that intercompany borrowings from Daisy
will increase significantly (to approximately $7.0 to $8.0 million) prior to
the consummation of the Offering due to the Company's increased working
capital needs to support sales growth, and that divisional equity will also
increase significantly (to approximately $3.5 to $4.5 million) as a result of
increased income. Consequently, the Company expects that total payments to
Daisy from the proceeds of the Offering will be approximately $12.0 to $14.0
million. Beyond the specific purposes described in (i)-(iii) above, the
Company's principal reason for undertaking the Offering at this time is to
provide additional working capital for the Company. The rapid growth in the
Company's revenues has resulted in an increased need for working capital.
Accordingly, the balance of the net proceeds from the Offering, approximately
$8.4 million to $10.4 million, will be used for working capital to support the
planned growth of its business and for other general corporate purposes, which
may include the investment in or acquisition of complementary businesses.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock and does
not intend to pay cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to reinvest its earnings, if any, in the
development and expansion of the Company's business. Daisy's current credit
facility contains certain restrictions on the payment of dividends. However,
upon its receipt of the payments to be made to Daisy, as described in Use of
Proceeds, the lender under such credit facility has agreed to release its
security interest in the personal and intangible properties of the Company.
Any future declaration of cash dividends will be at the discretion of the
Company's Board of Directors and will depend upon the earnings, capital
requirements, and financial position of the Company, general economic
conditions, and other pertinent factors, including without limitation, any
dividend restrictions that may be contained in any future credit facility of
the Company.

17
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
August 31, 1997, and as adjusted to reflect the sale by the Company of
2,275,000 shares of Common Stock offered hereby, after the deduction of the
estimated expenses of the Offering, at the initial public offering price of
$11.00 per share and the application of the net proceeds therefrom as
described under "Use of Proceeds." The information set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and the financial statements and the
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 31, 1997
---------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(DOLLARS
IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt................... $1,358 $858
Intercompany debt...................................... 2,194 --
------ -------
$3,552 $858
====== =======
Long-term debt, less current maturities(2)............... $1,414 $414
------ -------
Stockholders' equity:
Common Stock, $.01 par value, 10,000,000 shares
authorized;
6,883,899 issued and outstanding(3) .................. -- 69
Additional paid-in capital............................. 298 22,354
Retained earnings...................................... -- --
Divisional retained earnings........................... 2,835 --
------ -------
Total stockholders' equity............................. 3,133 22,423
------ -------
Total capitalization................................. $4,547 $23,077
====== =======
</TABLE>
- --------
(1) Gives effect to the application of the proceeds from the Offering after
the deduction of the estimated expenses. See "Use of Proceeds."
(2) See Note 5 to Financial Statements for information regarding the Company's
long-term indebtedness.
(3) Does not include 944,561 shares of the Common Stock reserved for issuance
under various stock option plans, stock purchase agreements, and director
compensation arrangements and 341,250 shares of Common Stock which the
Underwriters may purchase pursuant to the over-allotment option. See
"Management--Director Compensation," "--Employment Agreements," "--1997
Stock Option Plan," "--Employee Stock Purchase Plan," and "--Certain
Additional Options."

18
<PAGE>

DILUTION

The net tangible book value of the Company as of August 31 1997, was
approximately $3.1 million, or $.67 per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less its
total liabilities divided by the number of shares of Common Stock outstanding.
The Company estimates the net proceeds from the Offering will be approximately
$22.4 million. After giving effect to the sale by the Company of 2,275,000
shares of Common Stock in the Offering, and after deducting underwriting
discounts and commissions, estimated offering expenses payable by the Company,
and the value of the divisional equity to be paid to Daisy, the pro forma net
tangible book value of the Company as of August 31, 1997, would have been
approximately $22.4 million, or $3.25 per share. This represents an immediate
net tangible book value dilution of $7.75 per share to investors purchasing
shares in the Offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share....................... $11.00
------
Net tangible book value at August 31, 1997.................. $0.67
-----
Increase attributable to new investors in the Offering...... 2.58
-----
Pro forma net tangible book value per share after the Offer-
ing.......................................................... 3.25
------
Dilution per share to new investors........................... $ 7.75
======
</TABLE>

The following table summarizes on a pro forma basis as of August 31, 1997,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid, and the average price per share paid by
the existing stockholders of the Company ("Existing Stockholders") and the
investors purchasing shares in the Offering ("New Investors").

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ----------------------------------
Average Price
NUMBER PERCENT AMOUNT PERCENT Per Share
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders(1).. 4,608,899 66.95% $12,129,240 32.65% $ 2.63
New Investors............. 2,275,000 33.05 25,025,000 67.35 11.00
</TABLE>
- --------
(1) Does not include 944,561 shares of the Common Stock reserved for issuance
under various stock option plans, stock purchase agreements, and director
compensation arrangements and 341,250 shares of Common Stock which the
Underwriters may purchase pursuant to the over-allotment option. See
"Management--Director Compensation," "--Employment Agreements," "--1997
Stock Option Plan," "--Employee Stock Purchase Plan," and "--Certain
Additional Options."

19
<PAGE>

SELECTED FINANCIAL DATA

The following table presents selected historical financial data of the
Company. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and notes thereto included
elsewhere in this Prospectus. The statement of operations data set forth below
for each of the three years ended December 31, 1996, and the eight months
ended August 31, 1996 and 1997, and the balance sheet data at December 31,
1996, and 1995, and August 31, 1997 are derived from, and are qualified by
reference to, the financial statements included elsewhere in this Prospectus,
and should be read in conjunction with those financial statements and the
notes thereto. The statement of operations data for the years ended December
31, 1992 and 1993 is derived from unaudited financial statements not included
in this Prospectus.

The historical financial information may not be indicative of the Company's
future performance and does not necessarily reflect what the financial
position and results of operations of the Company would have been had the
Company operated as a separate, stand-alone entity during the periods covered.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, EIGHT MONTHS EIGHT MONTHS
------------------------------------------- ENDED ENDED
1992 1993 1994 1995 1996 AUGUST 31, 1996 AUGUST 31, 1997
---- ------- -------- -------- --------- --------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $159 $ 851 $ 2,615 $ 4,319 $ 13,838 $ 6,977 $ 18,391
Cost of sales........... 155 615 1,258 2,456 9,625 4,962 12,308
---- ------- -------- -------- --------- ------- ---------
Gross profit............ 4 236 1,357 1,863 4,213 2,015 6,083
Operating expenses
Selling and
marketing............ 14 78 279 640 1,472 622 2,008
General and
administrative....... 13 70 219 595 750 704 1,014
Royalty expense....... -- 148 459 487 -- -- --
Amortization expense.. -- -- -- 52 202 130 136
---- ------- -------- -------- --------- ------- ---------
27 296 957 1,774 2,424 1,456 3,158
---- ------- -------- -------- --------- ------- ---------
Operating income
(loss)................. (23) (60) 400 89 1,789 559 2,925
Other expense
Interest expense(1)... -- -- -- 87 315 222 162
Other, net............ -- -- -- -- 45 -- --
---- ------- -------- -------- --------- ------- ---------
-- -- -- 87 360 222 162
---- ------- -------- -------- --------- ------- ---------
Income (loss) before
income taxes........... (23) (60) 400 2 1,429 337 2,763
Provision (benefit) for
income taxes........... 9 (23) 153 1 547 129 1,058
---- ------- -------- -------- --------- ------- ---------
Net income (loss)....... $(14) (37) $ 247 $ 1 $ 882 $ 208 $ 1,705
==== ======= ======== ======== ========= ======= =========
Net income per
share(2)............... $ 0.17 $ 0.32
Weighted average shares
outstanding(2)......... 5,296,204 5,312,977
PRO FORMA STATEMENT OF
OPERATIONS DATA:
Net income(3)........... $ 965 $ 1,750
Net income per
share(4)............... $ 0.13 $ 0.24
Weighted average shares
outstanding(4)......... 7,288,477 7,305,250
<CAPTION>
DECEMBER 31, AUGUST 31, 1997
------------------- -------------------------------
1995 1996 ACTUAL AS ADJUSTED(5)
-------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficit).............. $ (993) $ (734) $ 597 $ 18,887
Total assets............ 6,288 9,269 15,549 31,145
Long-term debt (less
current portion)....... 3,043 1,892 1,414 414
Divisional equity....... 248 1,130 3,133 --
Stockholders'
equity(6).............. -- -- -- 22,423
</TABLE>

20
<PAGE>

- --------
(1) Intercompany borrowings from Daisy are non-interest bearing. See Note 9 to
Financial Statements.

(3) Pro forma net income has been computed by adjusting historical net income
for the year ended December 31, 1996, and the eight months ended August
31, 1997, to give effect to repayment of the $1.5 million term debt
specifically allocated to Brass Eagle and the elimination of interest
expense with respect thereto, as if the Offering had occurred on January
1, 1996, and 1997, respectively. See "Use of Proceeds."

(5) Gives effect to the application of the proceeds from the Offering after
the deduction of the estimated expenses. See "Use of Proceeds."

(6) Stockholders' equity at August 31, 1997 (as adjusted) reflects divisional
equity after giving effect to the Offering and the application of the
proceeds therefrom.

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the Financial Statements and the related notes
thereto, which are included elsewhere in this Prospectus.

GENERAL

Based on market data compiled in part by the Company and management's
knowledge of the industry, Brass Eagle believes that it is a worldwide leader
in the design, manufacture, marketing, and distribution of paintball products.
The Company's sales have grown rapidly, from $2.6 million in 1994 to $4.3
million in 1995 and to $13.8 million in 1996, a compound annual growth rate of
130.4%. This growth has continued in 1997 with sales of $18.4 million through
August 31, 1997, compared to $7.0 million through August 31, 1996, an increase
for the eight month period of 162.9%. Based on this market data and industry
knowledge, the Company believes that its growth has been the result of
increasing market acceptance of paintball and, more specifically, growing
demand from consumers through mass merchandisers and major sporting goods
retailers for Brass Eagle products. The Company believes significant
opportunities for growth continue to exist worldwide and intends to increase
market awareness both nationally and internationally through an active growth
campaign.

The Company sells paintball guns and a full line of paintball-related
accessories, including paintballs, facemasks, and refillable CO/2/ cartridges.
Approximately 80% of the Company's sales are to national and regional mass
merchandisers, such as Kmart, Wal*Mart, and Meijer, and major sporting goods
retailers, such as The Sports Authority, Dick's Sporting Goods, and Jumbo
Sports. Brass Eagle products are currently the only paintball products sold
through Kmart and Wal*Mart, and through most major sporting goods chains. The
Company's products are also sold through sporting goods distributors,
specialty distributors of paintball products, and paintball specialty shops.
See "Risk Factors--Dependence on Certain Customers" and "Business--Sales and
Distribution."

In connection with the BEI Aquisition, the Company purchased certain assets,
trademarks, and patents from BEI in October 1995 for cash and a long-term,
non-interest bearing note. As a result of this purchase, payments under a
royalty arrangement with BEI were discontinued. The purchase price is being
allocated over the useful lives of the tangible and intangible assets acquired
from BEI.

While the Company's gross profits have increased from $1.4 million in 1994
to $4.2 million in 1996, the Company's gross margins have been negatively
impacted by increased sales of lower margin paintballs and paintball
accessories. Operating expenses as a percentage of sales continue to decrease
as the Company realizes operating efficiencies from increased volume, as well
as from the decrease in royalty expense beginning in October 1995.

For the years ended December 31, 1994, 1995, and 1996, and the eight-month
period ended August 31, 1997, Brass Eagle shared operational and
administrative facilities with Daisy. As a result, manufacturing, selling, and
administrative expenses had to be allocated from Daisy to Brass Eagle.
Allocations were based on various activities including quantity of inventory
produced, quantity of inventory received, number of shipments, headcount, and
estimates of time spent on Brass Eagle. Sales, returns, material cost, and
direct labor cost were not allocated because they could be specifically
identified to Brass Eagle. Management must make estimates and assumptions in
preparing financial statements that affect the amounts reported therein and
the disclosures provided. The Company believes all allocations made were
reasonable and that any errors in the historical allocations would not have a
material adverse affect on the Company and its prospects. However, there can
be no assurance that these historical allocations reflect the costs the
Company will incur as an independent entity in the future.

22
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth operations data as a percentage of sales for
the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
------------------- --------------------
1994 1995 1996 1996 1997
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales ............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 48.1% 56.9% 69.6% 71.1% 66.9%
Gross margin......................... 51.9% 43.1% 30.4% 28.9% 33.1%
Operating expenses................... 36.6% 41.1% 17.5% 20.9% 17.2%
Operating income..................... 15.3% 2.0% 12.9% 8.0% 15.9%
Net income........................... 9.4% -- 6.4% 3.0% 9.3%
</TABLE>

EIGHT MONTHS ENDED AUGUST 31, 1997, COMPARED TO EIGHT MONTHS ENDED AUGUST 31,
1996

Sales. Sales increased by 162.9% to $18.4 million for the first eight months
of 1997 compared to $7.0 million in the first eight months of 1996. The
increase in sales was primarily due to higher unit volume of all products.
Domestic sales increased by 175.4% to $16.8 million (or 91.3% of sales) in the
first eight months of 1997 from $6.1 million (or 87.8% of sales) in the first
eight months of 1996. International sales increased by 87.4% to $1.6 million
(or 8.7% of sales) in the first eight months of 1997 from $854,000 (or 12.2%
of sales) in the first eight months of 1996, principally due to the addition
of a new distributor in Europe.

Gross margin. Gross margin (gross profit as a percentage of net sales)
increased to 33.1% for the first eight months of 1997 compared to 28.9% for
the first eight months of 1996 principally due to raw materials purchasing and
manufacturing spending efficiencies.

Operating expenses. Operating expenses increased by 113.3% to $3.2 million
in the first eight months of 1997 compared to $1.5 million in the first eight
months of 1996 due to selling and marketing expense increases and compensation
expense associated with options granted, but decreased as a percentage of
sales from 20.9% to 17.2%. The decrease in operating expenses as a percent of
sales was primarily the result of certain fixed expenses being allocated over
an increased sales base.

Operating income. Operating income increased by 418.8% to $2.9 million in
the first eight months of 1997 compared to $559,000 in the first eight months
of 1996. The increase was primarily due to higher unit sales volume.

Interest expense. The Company incurred interest expense of $162,000 in the
first eight months of 1997 compared to $222,000 in the first eight months of
1996. The decrease was primarily due to the scheduled debt payments reducing
outstanding borrowings incurred in connection with the BEI Acquisition.

Income tax rate. The Company's effective Federal and state income tax rate
was 38.3% based upon tax expenses allocated on a separate return basis in the
first eight months of 1997 and 1996.

YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995

Sales. Sales increased by 220.9% to $13.8 million in 1996 compared to $4.3
million in 1995. The increase was primarily due to higher unit volume in all
of the Company's products, the addition of new products in the accessories
category, and the introduction of the new Raptor paintball gun. Domestic sales
increased by 187.8% to $11.8 million (or 85.5% of sales) in 1996 from $4.1
million (or 93.9% of sales) in 1995. International sales increased by 660.5%
to $2.0 million (or 14.5% of sales) in 1996 from $263,000 (or 6.1% of sales)
in 1995.

Gross margin. Gross margin decreased to 30.4% in 1996 compared to 43.1% in
1995. The decrease was primarily due to increases in unit volume of
paintballs, which have significantly lower margins than the Company's other
products.

23
<PAGE>

Operating expenses. Operating expenses increased by 33.3% to $2.4 million in
1996, compared to $1.8 million in 1995, principally due to increased sales and
marketing expenses. The increase related in part to an increase in the number
of employees, but was primarily due to increased unit volume related expenses,
e.g., freight and commission. Operating expenses in 1995 decreased from 41.1%
to 17.5% of sales in 1996 primarily due to the termination in October 1995 of
the royalty arrangement with BEI, which accounted for $487,000 (or 11.2% of
sales in 1995) and increases in unit volume.

Operating income. Operating income increased by 1,922.5% to $1.8 million in
1996, compared to $89,000 in 1995. The increase was primarily due to higher
unit sales volume.

Interest expense. The Company incurred interest expense of $315,000 in 1996,
compared to $87,000 in 1995. The increase was due to debt incurred in
connection with the BEI Acquisition.

Income tax rate. The Company's effective Federal and state income tax rate
was 38.3% based upon tax expenses being allocated on a separate return basis
in 1996 and 1995.

YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994

Sales. Sales increased by 65.4% to $4.3 million in 1995, compared to $2.6
million in 1994. The increase was primarily due to the introduction of several
new products in 1995 and continued higher unit volume sales of all of the
Company's products. Domestic sales increased by 64.0% to $4.1 million (or
93.9% of sales) in 1995 from $2.5 million (or 94.5% of sales) in 1994.
International sales increased by 82.6% to $263,000 (or 6.1% of sales) in 1995
from $144,000 (or 5.5% of sales) in 1994.

Gross margin. Gross margin decreased to 43.1% in 1995, compared to 51.9% in
1994. The decrease was due to increased sales volume of paintballs, which have
significantly lower margins than the Company's other products, and
accessories.

Operating expenses. Operating expenses increased by 80.0% to $1.8 million in
1995 compared to $1.0 million in 1994. The increase was principally due to
increased marketing activities; increased volume related costs, e.g.,
commissions and freight; and was partially offset by a lower royalty cost as a
percent of sales due to the termination of the royalty arrangement in
connection with the BEI Acquisition in October 1995.

Operating income. Operating income decreased by 349.4% to $89,000 in 1995,
compared to $400,000 in 1994. The decrease was primarily due to lower gross
margins along with higher selling, marketing, general, and administrative
expenses.

Interest expense. Interest expense was $87,000 in 1995, compared to $0 in
1994, due to the debt incurred in connection with the BEI Acquisition.

Income tax rate. The Company's effective Federal and state income tax rate
was 38.3% based upon tax expenses being allocated on a separate return basis
in 1995 and 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires capital to finance increases in inventory and
receivables resulting from the rapid growth of its business. During the past
three years the Company has satisfied its operating cash needs, other than
cash required to finance the BEI Acquisition in October 1995, through
intercompany borrowings from Daisy.

Net cash used in operations for 1996 was $499,000, which consisted primarily
of net income of $882,000, depreciation and amortization expense of $426,000,
and a net increase of accounts payable and accrued expenses over prepaid
expenses of $994,000, less the increases in accounts receivable of $2.4
million and inventory of $649,000. Net cash provided by operating activities
for the eight months ended August 31, 1997, was $2.1 million, which consisted
primarily of net income of $1.7 million, depreciation and amortization expense
of

24
<PAGE>

$455,000, stock option compensation expense of $298,000, less increases in
accounts receivable of $2.9 million and inventory of $2.4 million and an
increase in accounts payable and accrued expenses over prepaid expenses of
$5.0 million.

Net cash used in investing activities was $112,000 for 1996 and $668,000 for
the eight months ending August 31, 1997, which consisted of purchases of
property, equipment, and other assets. The Company does not have any capital
commitments for the next 12 months but expects to spend approximately $1.0
million during that period for the following: plant and facilities, a
distribution center, product development, and increased production capacity.
The Company has upgraded its business enterprise system to a version that is
year 2000 compliant and does not anticipate any significant cost to be
incurred related to year 2000 compliance issues.

Net cash provided by financing activities was $611,000 in 1996, which
consisted of a $1.1 million reduction of the long-term debt and $1.7 million
of additional borrowings from Daisy. Net cash used in financing activities was
$1.4 million in the eight months ended August 31, 1997, which consisted of a
$271,000 reduction of long-term debt and $1.2 million reduction of the
intercompany borrowings from Daisy.

As of August 31, 1997, the Company had existing term debt specifically
allocated from the Daisy credit facility of $1.5 million, which matures in
January 1998 and bears interest at LIBOR plus 2.5%, and an additional non-
interest bearing term debt with a remaining face value of $1.4 million payable
to the prior owners of BEI. The BEI term note was discounted at 8.4% which was
the Company's incremental borrowing rate as of October 1, 1995, the date of
inception of the note. The present value of the note outstanding at August 31,
1997 was $1.2 million. The face value of the note is payable in three
installments of $650,000, $350,000, and $395,000, on October 3, 1997, January
31, 1998 and October 3, 1998, respectively. The Daisy credit facility is
secured by all personal and intangible properties of Daisy and Brass Eagle. On
November 7, 1997, Daisy notified the Bank that as of September 30, 1997, Daisy
was in default of a loan covenant. On November 17, 1997, the bank waived the
event of default. The bank will release its security interest in the personal
and intangible properties of Brass Eagle upon repayment of the intercompany
debt and the credit facility term loan specifically allocated to Brass Eagle.
The non-interest bearing promissory note payable to BEI is secured by the
assets acquired in the BEI Acquisition.

At August 31, 1997, the Company had working capital of $597,000, including a
balance due to Daisy of $2.2 million of non-interest bearing intercompany
borrowings. The Company expects significant increases in intercompany
borrowings prior to the time of the Offering. The Company intends to replace
the intercompany borrowings from Daisy with the proceeds from the Offering and
establish a separate credit facility and line of credit for the Company.
Although the Company has contacted financial institutions regarding the new
credit facility, the Company has not entered into any letter of intent or
other agreements relating to such facility. See "Use of Proceeds."

The Company believes that funds generated from operations, together with the
net proceeds of the Offering and borrowings under contemplated future credit
facilities, will be adequate to meet its anticipated cash requirements for at
least the next 18 months.

SEASONALITY

While more sales of the Company's paintball products occur in the spring and
fall, the Company does not believe that seasonality has had a material effect
on the Company's operations to date.

25
<PAGE>

BUSINESS

INTRODUCTION

Brass Eagle believes that it is a worldwide leader in the design,
manufacture, marketing, and distribution of paintball products, including
paintball guns, paintballs, and accessories. Based on market data compiled in
part by the Company and management's industry knowledge, the Company believes
that it is the only manufacturer with a full line of products that address
step-by-step price points for beginner, recreational, and competition level
paintball participants, and that it is the only manufacturer to offer
paintball products to consumers through easily accessible channels such as
mass merchandisers and major sporting goods retailers. As a result of these
initiatives, Brass Eagle provides a large consumer base with high quality
paintball products and accessories that generally sell for substantially less
than those of its competitors. Based on this market analysis and industry
knowledge, the Company believes that these advances have significantly
broadened the paintball industry's consumer base, increased the overall number
of paintball participants, and heightened the general awareness of and
excitement for the sport.

Approximately 80% of the Company's sales are to national and regional mass
merchandisers, such as Kmart, Wal*Mart, and Meijer, and major sporting goods
retailers, such as The Sports Authority, Dick's Sporting Goods, and Jumbo
Sports. For 1996 and for the first eight months of 1997, 21.9% and 32.6%,
respectively, of the Company's sales were to Kmart, and 13.7% and 17.1%,
respectively, of the Company's sales were to Wal*Mart. Kmart and Wal-Mart are
currently the only customers that individually represent in excess of ten
percent of the Company's sales. Brass Eagle products are currently the only
paintball products sold through Kmart and Wal*Mart, and through most major
sporting goods chains. The Company's products are also sold through sporting
goods distributors, specialty distributors of paintball products, and
paintball specialty shops. See "Risk Factors--Dependence on Certain
Customers."

The Company's sales have grown rapidly, from $2.6 million in 1994 to $4.3
million in 1995 and to $13.8 million in 1996, a compound annual growth rate of
130.4%. This growth has continued in 1997 with sales of $18.4 million through
August 31, 1997, compared to $7.0 million through August 31, 1996, an increase
for the eight month period of 162.9%. The Company believes its growth has been
the result of increasing market acceptance of paintball and, more
specifically, growing demand from consumers through mass merchandisers and
major sporting goods retailers for Brass Eagle products. The Company believes
significant opportunities for additional growth exist worldwide and intends to
increase paintball participation and the Company's sales both nationally and
internationally through an active growth campaign.

The Company's growth strategy is to increase market awareness of paintball
worldwide, thereby expanding the paintball industry and strengthening its
leadership position. The principal strategies developed by the Company to
reach its objective are as follows: (i) expand penetration of new and existing
markets; (ii) increase participation in the sport of paintball; (iii) increase
international sales of paintball products; (iv) increase product sales through
step-by-step price segmentation; and (v) evaluate strategic acquisitions.

INDUSTRY OVERVIEW

Based on published industry data compiled by the Company, the Company
estimates that 1996 retail sales of sports equipment were $17.6 billion, and
projects 1997 sales of $18.1 billion. This category includes extreme sporting
goods such as mountain bikes, snowboards, alpine and cross-country snow skis,
water skis, in-line skates, and skateboards, which represented over $1.4
billion in sales in 1996, or 7.7% of total sports equipment sales. Moreover,
certain of these activities have experienced substantial growth over the past
several years. For example, participation rates in mountain biking and in-line
skating have grown at compound annual growth rates of 14.6% and 34.7%,
respectively, over the past five years.

The Company believes that paintball, as an extreme sport, is positioned to
experience substantial growth as the sport becomes available to a broader
consumer group. Based on market data compiled in part by the Company and
management's knowledge of the industry, the Company believes that total
paintball expenditures,

26
<PAGE>

including paintball guns, paintballs, accessories, and playing field fees,
will be approximately $250.0 million for 1997 and projects these expenditures
to increase substantially in the near future. Historically, paintball was
played primarily by avid enthusiasts, generally with relatively expensive,
high-end paintball guns and accessories. Enthusiasts typically obtained their
equipment from a highly fragmented base of catalogue distributors and
specialty retailers. Recently, an increasingly broader group of players,
including corporate groups, youth leagues, church organizations, and others,
have begun participating in paintball. These beginner and recreational players
often purchase paintball guns and accessories at mass merchandise stores or
sporting goods stores and play paintball several times per year. Based on
market data compiled in part by the Company and management's knowledge of the
industry, the Company believes that its strategy of providing a full range of
products at various price and performance points has contributed significantly
to the broadening of the industry's consumer base, the increase in the overall
number of paintball participants, and the growing acceptance of the sport.

A key component in the continued growth of paintball is the availability of
playing facilities. Historically, these facilities have consisted of
commercial and private fields, typically located outside urban centers and in
rural areas and used primarily by paintball enthusiasts. In order to further
develop the market for paintball in more densely populated areas, the Company
intends to promote a modular paintball field concept that can be played in a
relatively small, self-contained area that can easily be adapted or designed
to fit into existing family amusement centers such as go-cart tracks, batting
cages and miniature golf courses or as a stand-alone facility. The Company
recently began marketing a version of this concept under the Hyperball(TM)
name. In addition, the Company believes that a significant number of field
operators are upgrading their facilities to cater to the growing number of
beginner and recreational players. Many operators are constructing "scenario
fields" where mock battlefields, forts, and other props are utilized to
provide a fun, exciting, fantasy-like experience.

GROWTH STRATEGIES

The Company has developed the following growth strategies to capitalize on
its strong brand name, successful products, and operating capabilities:

. EXPAND PENETRATION OF NEW AND EXISTING MARKETS. Brass Eagle's sales and
marketing programs are aimed at increasing its presence in its existing
markets and expanding into new markets. Approximately 80% of the
Company's sales are to national and regional mass merchandisers, such as
Kmart, Wal*Mart, and Meijer, and major sporting goods retailers, such as
The Sports Authority, Dick's Sporting Goods, and Jumbo Sports. The
Company estimates that its products are currently sold in approximately
3,500 retail outlets, and believes significant opportunities exist for
increased market penetration. In addition, the Company expects to
increase sales to wholesale distributors, which supply Brass Eagle
products to specialty retailers and international markets. The Company
also has a direct sales program to reach consumers with unique, branded
accessories and apparel, and intends to pursue aggressively new markets,
such as family amusement centers and parks, using concepts such as
Hyperball(TM) and shooting booths.

. INCREASE PARTICIPATION IN THE SPORT OF PAINTBALL. Based on market data
compiled in part by the Company and management's knowledge of the
industry, the Company believes that its increased marketing efforts and
heightened media exposure are helping to promote and grow the sport of
paintball. Through high visibility promotion campaigns, such as the
Company's "Ballin' on the Beach at Spring Break '97" in Panama City
Beach, Florida, professional paintball tournament coverage on ESPN,
MTV's Road Rules, and other televised programs, paintball is being
introduced to a broader group of potential participants. The Company is
involved in numerous paintball events and promotions and currently
sponsors the National Professional Paintball League ("NPPL") and two
professional paintball teams. The Company has been featured and
advertises in paintball-related publications.

The Company is currently marketing a modular field concept under the
Hyperball(TM) name in a variety of urban areas through an exclusive
North and South American licensing agreement with WDP Europe Limited,
the Company's European distributor. High speed modular games such as
Hyperball(TM) provide

27
<PAGE>

the beginner, recreational, and competition level participant with
convenient access to playing fields and the opportunity to participate in
an exciting new paintball activity. The modular field concept has been
widely accepted in the competition segment with the introduction of
Hyperball(TM) in 1996 at the World Paintball Championships in Orlando,
Florida, and the Company believes that it will continue to be an important
part of bringing the sport to people of all skill levels. The Company has
licensed modular fields operated under the Hyperball(TM) name in Newberg,
New York and Mantua, New Jersey, to be opened in November 1997, and
anticipates that it will license several additional locations over the next
12 months.

. INCREASE INTERNATIONAL SALES OF PAINTBALL PRODUCTS. The Company believes
that international markets for paintball products and accessories
present significant opportunities for growth. Through its relationship
with WDP Ltd., its European distributor, the Company has been successful
in expanding its market share in Europe, primarily in Germany and the
United Kingdom. The Company believes that significant additional growth
opportunities exist in Europe, as well as in South and Central America.
Sales outside of North America accounted for 14.5% of the Company's
total sales in 1996. As the popularity of paintball continues to grow
and the Company increases its marketing and sales efforts abroad, the
Company expects that sales outside of North America will account for a
larger portion of its sales.

. INCREASE PRODUCT SALES THROUGH STEP-BY-STEP PRICE SEGMENTATION. Based on
market data compiled in part by the Company and management's knowledge
of the industry, the Company believes that the total number of paintball
guns sold in 1996 more than doubled from 1995 to over 250,000 units
worldwide (146,000 of which were sold by the Company), primarily due to
the growth in the number of new users in the beginner price segment. In
1996, Brass Eagle offered four paintball guns to consumers at price
points from $35 for beginner products to $110 for recreational products.
The Company believes that new 1997 product introductions in the
competition segment, such as the Raptor and the Rainmaker(TM), will
satisfy the demands of competition-level paintball participants. The
Company believes that by offering products spanning a wide range of
price points it is able to meet the needs of new paintball consumers as
well as recreation and competition players as they move to more
sophisticated products. The Company intends to continue to focus on
research and development to ensure that Brass Eagle is able to offer
high quality paintball products at step-by-step price points.

OPERATING STRATEGIES

The Company believes it currently has the leading market share in paintball
guns and is a major participant in the paintball and paintball accessories
markets. Brass Eagle has established and continues to enhance its position as
a worldwide leader in the design, manufacture, marketing, and distribution of
paintball products through the following operating strategies:

. STRONG RELATIONSHIPS WITH CUSTOMER BASE. The Company introduced
paintball products to mass merchandisers and major sporting goods
retailers at price points familiar to them and, due to the strong demand
for paintball products and their attractive retail profit margins, has
become an increasingly important supplier to this customer base. Based
on market data compiled in part by the Company and management's
knowledge of the industry, the Company believes that it is currently the
primary supplier of paintball products to the leading mass merchandisers
and major sporting goods retailers selling paintball products and is the
only supplier to Kmart and Wal*Mart. The Company strives to maintain
these strong relationships by providing retailers high quality paintball
products and strong sales and marketing support through co-op
advertising, unique promotions, and point-of-sale support.

. PRODUCT LINE EXPANSION AND DISTRIBUTION CHANNEL SEGMENTATION. The
Company has expanded the market for paintball products by extending its
product line and segmenting product distribution to address a growing
range of price points and performance needs. In 1994, the Company
offered only

28
<PAGE>

two paintball guns and participated in a narrow market segment
represented by paintball guns which retailed from $200 to over $1,000.
Today, the Company's primary target market is the beginner and
recreational price segment. Brass Eagle now offers six paintball guns
and has successfully expanded the primary market for its paintball guns
to price points that range from approximately $35 to $500. The Company
believes its broad, segmented product lines enable it to capitalize on
its design and manufacturing capabilities to meet the cost and
performance needs of its customers at various price points, while
enhancing its brand name.

. WIDELY RECOGNIZED BRAND NAME AND DISTINCTIVE PRODUCTS. Based on market
data compiled in part by the Company and management's knowledge of the
industry, the Company believes that it is responsible for expansion of
paintball product distribution to mass merchandisers and major sporting
goods retailers, making Brass Eagle one of the most widely recognized
brand names in the paintball industry. Brass Eagle paintball products
are currently the only paintball products sold by Kmart and Wal*Mart and
most major sporting goods retailers. The Company promotes its brand name
and image through focused marketing programs, including sponsorship of
professional paintball teams and creative advertising in a variety of
U.S. and international paintball publications. The Company's brand name
and products also receive further promotion through frequent editorial
references in these paintball publications.

. INNOVATIVE PRODUCT DEVELOPMENT. Based on market data compiled in part by
the Company and management's knowledge of the industry, the Company
believes that it has established itself as a leader in the growing
paintball market by introducing a series of new and innovative paintball
products, such as the original semi-automatic Stingray paintball gun,
the new Rainmaker(TM) paintball gun, and the Xtreme Vision 280(TM)
facemask. The Company has introduced three new paintball gun products
and an array of new accessory products in the last 18 months, while
continuing to improve its earlier product offerings. Brass Eagle
supports its research and development efforts with a team of
professionals and sophisticated computer-based design tools. The Company
does extensive field tests on its new products through teams of avid
players who use the products in all types of playing situations.

. INCREASINGLY EFFICIENT DESIGN AND MANUFACTURING PROCESSES. The Company
continually seeks to improve efficiency in its product development and
manufacturing activities. Continuing improvements in product design, as
well as the Company's ability to bring critical new technology and
advances to its products, have generated significant new opportunities.
As a result, Brass Eagle has been able to expand its market by
introducing more moderately-priced products. The Company believes that
its emphasis on design and manufacturing efficiencies will continue to
be a critical factor in its ability to expand the market for its
products.

PRODUCTS

The Company offers a full line of paintball products, including paintball
guns, paintballs, and accessories at various price points.

Paintball Guns. The Company designs and manufactures a full product line of
paintball guns with a variety of performance characteristics. There are three
primary classifications of paintball guns: 12 gram, pump action, and semi-
automatic. The 12 gram paintball gun, such as the Company's Talon model, is a
direct descendent of the original "splotch marker" used to mark cattle and
trees before the advent of the sport of paintball. These paintball guns use 12
gram CO/2/ jets, are actuated using a pump action, and usually have a small
paintball capacity. Pump action paintball guns, such as the Company's
Tigershark, differ from a 12 gram paintball gun in that they use a refillable
cylinder as a power source and a hopper to feed multiple paintballs into the
chamber. While a pump action gun needs to be cocked before each shot, a semi-
automatic paintball gun needs to be cocked only once before firing the first
shot. Thereafter it fires automatically after each trigger pull. Depending upon
the skill and equipment of the paintball participant, some semi-automatic
paintball guns can be fired in excess of 14 times per second. Most organized
paintball tournaments are played exclusively with semi-automatic paintball
guns. The Company currently offers four semi-automatic paintball pistols and
guns: Eagle, Stingray, Raptor, and Rainmaker(TM).

29
<PAGE>

The following table summarizes the Company's line of paintball guns:

<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS
APPROXIMATE 1996 ENDED AUGUST
EXPERIENCE RETAIL UNIT 1997 UNIT
PRODUCT DESCRIPTION LEVEL PRICE VOLUME VOLUME
- ------------------------ ------------------------------------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Talon................... . Introduced in September 1996 Beginner $35 3,374 8,267
. 12 gram paintball gun
. Least expensive paintball gun
Player's Kit............ . Introduced in September 1996 Beginner $50 54,320 57,549
. Includes Talon paintball gun,
accessories such as a barrel plug
and ten round feed tube, "Fun
of Paintball" video covering
basic safety procedures, game
formats, and helpful hints for
new players, and a $5 rebate
coupon on purchase of Deluxe
Facemask
Tigershark.............. . Introduced in April 1994 Beginner $70 32,980 28,189
. Pump action, constant air capable
Eagle................... . Introduced in August 1995 Recreational $90 10,811 1,944
. Semi-automatic paintball pistol
. Spring fed internal magazine
. Shoots approximately 4 paintballs
per second
Stingray................ . Introduced in October 1993 Recreational $100-$110 41,506 34,310
. Semi-automatic paintball gun
. Co-polymer construction
. Shoots approximately 4 paintballs
per second
Raptor.................. . Introduced in September 1996 Competition $185-$200 3,465 11,593
. Semi-automatic paintball gun
. Extruded aircraft grade aluminum
. Shoots up to approximately 7 paintballs
per second
Rainmaker(TM) . Introduced in August 1997 Competition $500-$550 -- --
. Semi-automatic paintball gun
. Electronically controlled firing
system
. Electronically controlled feed
system to eliminate ball breakage
(patent pending)
. Shoots up to approximately 14 paintballs
per second
</TABLE>

Paintballs. Paintballs are made of a gelatinous material and the paint is
non-toxic, biodegradable, and easily washable. Paintballs are manufactured
using an encapsulation process requiring special equipment and certain
technical knowledge. Brass Eagle sells its paintballs in multiple colors in
packages of 200, 500, 1,800, and 2,500. In 1996, the Company sold
approximately 153.9 million paintballs and for the eight months ended August
31, 1997, the Company sold approximately 278.6 million paintballs. The Company
purchases all of its paintball requirements from Goldcaps through an exclusive
worldwide distribution arrangement entered into July 1995. Under this
agreement, the Company purchases paintballs at a fixed price per unit, which
is subject to change upon thirty days notice from Goldcaps. This agreement
extends through August 1999, but is terminable prior to that time upon one
year's notice and contains certain provisions which prohibit the Company from
selling any competing products during the term of the agreement. Payment terms
under this arrangement are net 30 days. The Company's European paintball
requirements are supplied through Gelkaps, also a subsidiary of IVAX,

30
<PAGE>

which is located in Falkenhagen, Germany, providing the Company a local source
of paintballs for the European market. See "Risk Factors--Dependence on
Limited Number of Suppliers; Exclusive Arrangements and Noncompetition
Covenants" and "--Manufacturing; Strategic Alliances; Backlog."

Accessory Products. Brass Eagle markets a broad product line of paintball
accessories complementary to its paintball guns and paintballs. These
accessory products include facemasks, paintball hoppers, cleaning squeegees,
and refillable CO/2/ tanks. Facemasks, a requirement for safe paintball play,
are a primary component of the Company's accessory product line. The Company's
facemasks are designed to provide full facial and ear protection.

The following table summarizes the Company's line of facemasks:

<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS
APPROXIMATE 1996 ENDED AUGUST
RETAIL UNIT 1997 UNIT
PRODUCTS DESCRIPTION PRICE VOLUME VOLUME
- ------------------------ -------------------------------------------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Deluxe Facemask......... . Introduced in August 1995 $35 50,858 59,248
. Complete eye, face, forehead, and ear protection
. Anti-scratch and anti-fog coated lens
Xtreme Vision 280(TM)... . Introduced in August 1997 $55 -- --
. 280 degrees of peripheral vision
. Optically correct bubble lens
. Complete eye, face, forehead, and ear protection
. Anti-scratch and anti-fog coated lens
</TABLE>

SALES AND DISTRIBUTION

Brass Eagle's sales and distribution strategy is unique in the paintball
industry. Unlike its competitors, Brass Eagle makes its products readily
available to mainstream consumers through mass merchandisers, major sporting
goods retailers, and specialty retailers.

Mass Merchandisers. These retailers include major retail chains such as
Kmart, Wal*Mart, and Meijer. The Company believes that accessing these
retailers is instrumental in introducing its product line to a large and
diverse demographic group. For 1996 and for the first eight months of 1997,
21.9% and 32.6%, respectively, of the Company's sales were to Kmart, and 13.7%
and 17.1%, respectively, of the Company's sales were to Wal*Mart. See "Risk
Factors--Dependence on Certain Customers."

Major Sporting Goods Retailers. These retailers include national and
regional chains such as The Sports Authority, Dick's Sporting Goods, Jumbo
Sports, Academy, Gart Brothers, and Galyan's. In addition to providing Brass
Eagle products to a large consumer base, the sale of the Company's products
through major sporting goods retailers helps to position paintball as a new
and growing sport. No customer in this channel accounted for more than 10% of
the Company's sales for 1996 or for the first eight months of 1997.

Specialty Retailers. These retailers include a variety of small sporting
goods stores, outdoor equipment retailers, and paintball specialty stores. The
Company sells paintball products to specialty retailers through distributors,
sales representatives, and telemarketing activities. Specialty retailers
complement the Company's sales and distribution strategies by penetrating
niche markets and providing paintball products to avid participants. No
customer in this channel accounted for more than 10% of the Company's sales
for 1996 or for the first eight months of 1997.

The Company's distribution strategy is centered on a product segmentation
approach. Brass Eagle sells the product mix which it believes most accurately
addresses the price points and demand characteristics of its

31
<PAGE>

customers' end consumers. In this manner, the Company believes it can best
manage the long-term growth and brand loyalty of its products while maximizing
the efficiency of its customers' space.

To facilitate its sales and distribution strategy, the Company maintains a
sales and marketing staff, including senior management and in-house sales and
marketing personnel, and retains nine independent manufacturers' sales
representative organizations to service the United States market. The sales
representatives generally offer various lines of sporting goods and have
established relationships with retailers in the Company's targeted
distribution channels. Sales representatives operate under standard contracts
in defined geographic territories and are contractually prohibited from
selling competitors' paintball products.

The Company's products are distributed internationally by WDP Ltd., a UK-
based supplier of paintball guns and accessories primarily to European
specialty retailers. Additionally, the Company sells its products directly to
other organizations, such as the Army Air Force Exchange Sevice that sells
products at post exchanges on military bases. For 1996 and the first eight
months of 1997, the Company's international sales were $2.0 million and $1.6
million, respectively. In addition, 10.0% of the Company's sales were to WDP
Ltd. for 1996.

MARKETING

The Company's marketing strategy is to maintain and further develop Brass
Eagle as the leading paintball guns and accessories brand and to expand the
paintball industry. The Company promotes its brand name and the paintball
industry through focused marketing efforts such as designing packaging and
point-of-sale materials, sponsoring paintball events, two professional
paintball teams, and the NPPL, developing modular field concepts such as
Hyperball(TM), participating in trade shows, and advertising.

Brass Eagle assists customers in designing appropriate product layouts to
display paintball guns, paintballs, and accessories. In addition, the Company
has created unique packaging to attract players at varying skill levels. For
example, the Player's Kit, which is targeted to beginning players and retails
for only $50, offers the Talon paintball gun, an introductory safety video,
and a rebate toward the purchase of a Deluxe Facemask.

The Company believes that a key component to the continued growth of the
paintball industry is the availability of playing facilities, especially in
urban areas. The Company markets a modular paintball arena under the
Hyperball(TM) name that provides an exciting, fast-paced game that allows for
public viewing. Brass Eagle licenses the Hyperball(TM) name, and will provide
operators with equipment and accessories. The Company anticipates that modular
field operators will offer walk-on games as well as planned events such as
league play. The Company also directs consumers by offering free admission to
local playing areas through its Eagles Nest program, which provides incentives
to field operators and retail outlets to carry Brass Eagle products.

The sponsorship of paintball events, two professional paintball teams, and
the NPPL is an important part of the Company's marketing strategy, as well as
its product development activities. By associating its name with
professionally staged events, the Company increases consumer awareness of, and
demand for, paintball and Brass Eagle products. The Brass Eagle sponsored
professional paintball teams compete in professional and amateur events, stage
demonstration events for retailers and other groups, and attend trade shows on
the Company's behalf. Team members also test new products and provide valuable
feedback to the Company's product development staff. The Company has also
sponsored other promotional events, such as "Ballin on the Beach at Spring
Break '97," an activity staged on a Hyperball(TM) field erected on a beach in
Panama City, Florida, during collegiate spring break, and various other
amateur tournaments.

The Company attends several key trade shows throughout each calendar year to
promote its product line to retailers and entertainment providers, including
the Super Show and the International Amusement Parks and Attractions Show. In
addition, the Company places print advertisements in outdoor recreation and
paintball magazines, including Paintball Sports International, Paintball Games
International, and Paintball Player's Bible, as well as on its website at
http://www.brasseagle.com.

32
<PAGE>

MANUFACTURING; STRATEGIC ALLIANCES; BACKLOG

The Company designs all of its paintball guns and, in cooperation with
Leader and certain of its other key suppliers, facemasks and other accessory
items. The Company designs all tooling and dies necessary for the production
of paintball guns, and has non-exclusive contracts with a number of suppliers
to provide all necessary components using the Company's tooling and dies. All
assembly manufacturing is then done at the Company's Granby, Missouri,
facility on continuous flow assembly lines. The Company generally operates a
single shift comprised of four 10-hour days. If overtime is required, it is
generally scheduled for the fifth weekday. The assembly lines are comprised of
a combination of automated and manual assembly stations supported by satellite
subassembly operations. They are designed for maximum efficiency and can
handle significant additional capacity. The Company provides extensive
training to all personnel to enable supervisors and lead assemblers to manage
their own work areas and continually monitor product quality. Each paintball
gun is individually pressure tested and fired prior to shipment. Finished
products are stored at warehouse space located at Daisy's Rogers, Arkansas,
manufacturing facilities, a portion of which the Company leases from Daisy
Manufacturing pursuant to an administrative services agreement that expires in
December 1998.

Production planning starts with a general forecast several months before the
beginning of each year. This general forecast is then refined and expanded
into a more complete, time-phased forecast which guides initial planning for
parts and labor requirements. As the year progresses, the forecast is
constantly reviewed and compared with actual customer orders. The planning
process is controlled by a fully-integrated manufacturing resource planning
system. Finished goods purchases, such as paintballs and protective facemasks,
are planned through the same materials planning system. The Company does not
consider its backlog to be significant. See "Risk Factors--Difficulty in
Forecasting Product Demand."

In July 1995, the Company entered into an agreement with Goldcaps, a
subsidiary of IVAX Corp. of Miami, Florida, pursuant to which the Company has
agreed to act as Goldcaps' exclusive worldwide paintball distributor to all
retail and wholesale outlets. Under this agreement, the Company purchases
paintballs at a fixed price per unit, which is subject to change upon thirty
days notice from Goldcaps. This agreement extends through August 1999, but is
terminable prior to that time upon one year's notice and contains certain
provisions which prohibit the Company from selling any competing products
during the term of the agreement. Payment terms under this arrangement are net
30 days. The Company's European paintball requirements are supplied through
Gelkaps, also a subsidiary of IVAX, which is located in Falkenhagen, Germany,
providing the Company a local source of paintballs for the European market.

The Company has also entered into an agreement with Leader of Montreal,
Quebec, Canada, a well known manufacturer of eye protective equipment,
pursuant to which the Company has agreed to serve as Leader's exclusive
worldwide distributor of facemasks (except in Canada, where Leader also sells
its products). Under this agreement, the Company purchases facemasks at a
fixed price per unit, which is subject to change annually based on any
increases in raw materials or labor costs. This agreement extends through
August 1999, but is terminable prior to that time on six months' notice, and
also contains certain provisions which prohibit the Company from selling any
competing products within its distribution territory during the term of the
agreement. Payment terms under this agreement are net 30 days, with a 2.0%
discount if payment is received within ten days. The facemask is a crucial
accessory item, since its use is required for safe paintball play and is
mandated by all commercially operated paintball fields.

The Company works closely with a variety of vendors to meet its production
needs, including machine shops, die casters, and injection molders. Although
the Company has established relationships with its principal suppliers and
manufacturing sources, it does not have long-term contracts with any vendors
other than Goldcaps and Leader, nor does it maintain multiple simultaneous
relationships with vendors for parts, tooling, supplies, or services critical
to its manufacturing processes. The Company believes that alternative vendors
are available if necessary and consequently does not believe that the loss of
any of these vendors would have a material adverse effect on the Company and
its prospects. The Company's contractual relationships with its principal
suppliers and manufacturing sources, other than Goldcaps and Leader, are
pursuant to the Company's standard form

33
<PAGE>

purchase agreements. The Company continually reviews its vendor relationships
with regard to cost, delivery, and quality. See "Risk Factors--Dependence on
Limited Number of Suppliers; Exclusive Arrangements and Noncompetition
Covenants."

COMPETITION

The Company believes that paintball competes in the extreme sports segment
of the sports and recreation industry, which is highly competitive. This
industry includes mountain biking, snowboarding, alpine and cross-country snow
skiing, water skiing, in-line skating, and skateboarding. Based on market data
compiled in part by the Company and management's knowledge of the industry,
the Company believes that the market for paintball products specifically,
however, is currently fragmented and underdeveloped. Based on this market
analysis and industry knowledge, the Company believes that it is the largest
manufacturer and marketer of paintball guns and accessories, particularly to
new paintball players, and is a leader in the design, manufacture, marketing,
and distribution of paintball products generally. The Company believes that it
competes primarily on the basis of price and product performance. There can be
no assurance, however, that any number of new competitors, some of which may
have significantly greater financial and organizational resources than the
Company, will not emerge in the future as the market for paintball products
develops further, or that the present competitors of the Company will not be
able to compete more successfully in the future. In order for the Company to
maintain or grow its market share and profitability, it must continue to
develop the market for paintball while competing successfully with others in
the extreme sports segment of the sports and recreation industries, as well as
with other current and potential paintball product manufacturers. See "Risk
Factors--Competition."

INTELLECTUAL PROPERTY

The Company acquired certain patents and trademarks in the BEI Acquisition.
Also, the Company has applied for patent protection on the design of the new
Rainmaker(TM) paintball gun and anticipates seeking patent protection on
paintball guns or certain features of paintball guns developed in the future.
Nevertheless, the Company's competitors currently replicate and may continue
to replicate certain features and functions of the Company's products. There
can be no assurance that current or future patent protection will prevent
competitors from offering competing products, that any issued patents will be
upheld, or that patent protection will be granted in any or all of the
countries in which applications are currently pending or granted on the
breadth of the description of the invention. In addition, due to
considerations relating to, among other things, cost, delay, or adverse
publicity, there can be no assurance that the Company will elect to enforce
its intellectual property rights. The Company has not been and is not
currently a party to any material intellectual property litigation.

The Company currently holds patents in the United States and Canada on most
of its paintball guns and has a patent pending in the United States on the new
Rainmaker(TM) paintball gun. The Company also has trademark registrations for
its name and the name of its products in the United States and both
registrations and applications in Canada. Although the Company believes that
patents are useful in maintaining the Company's competitive position, it
considers other factors, such as the Company's brand name, ability to design
innovative products, technical and marketing expertise, and customer service
to be its primary competitive advantages.

The Company's competitors have also obtained and may continue to obtain
patents on certain features of their products, which may prevent or discourage
the Company from offering such features on its products, which, in turn, could
result in a competitive disadvantage to the Company. See "Risk Factors--
Limited Protection for Technology."

FACILITIES

The Company leases 6,400 square feet of space for its sales and
administrative offices in Rogers, Arkansas, and a 32,000 square foot
manufacturing facility located in Granby, Missouri, pursuant to two separate
leases, both of which expire in December 1999. The Company, through an
agreement with the Granby Economic Development Council, holds an option to
acquire the four-acre parcel upon which the Company's manufacturing facility
is located. There will be no cost to the Company for this acquisition provided
the Company employs 25 people at the time the option is exercised. The
Company's finished goods warehouse and shipping functions are located in New
Daisy's warehouse in Rogers, Arkansas.

34
<PAGE>

ENVIRONMENTAL MATTERS

The Company is subject to Federal, state, and local laws, regulations, and
ordinances that (i) govern activities or operations that may have adverse
environmental effects (such as emissions to air, discharges to water, and the
generation, handling, storage, transportation, treatment, and disposal of
solid and hazardous wastes) or (ii) impose liability for cleaning up or
remediating contaminated property (or the costs therefor), including damages
from spills, disposals, or other releases of hazardous substances or wastes in
certain circumstances without regard to fault. The Company's manufacturing
operations routinely involve the handling of small amounts of chemicals and
wastes, some of which are or may be regulated as hazardous substances. The
Company has not incurred, and does not expect to incur, any significant
expenditures or liabilities for environmental matters. As a result, the
Company believes that its environmental obligations will not have a material
adverse effect on its operations or financial position.

LEGAL PROCEEDINGS

Because of the risks associated with the misuse of paintball products, the
Company anticipates that it will be a defendant in product liability lawsuits
from time to time. To date, the Company had been named as a defendant in one
product liability lawsuit and has had three other product liability claims
made against it for which no lawsuit has been filed. In each case, the alleged
injury was to the eye of a paintball participant. The lawsuit was settled and
dismissed and one of the claims was resolved, in each case without any
material cost or a material adverse effect on the Company and its prospects.
The Company believes that the other two claims will also be resolved without
any material cost or a material adverse effect on the Company and its
prospects. However, the Company expects that the volume of such claims and
suits will increase as sales increase.

In addition, the Company, Daisy and certain other entities and individuals,
including certain of the Company's distributors, were named as defendants in
an action filed by Powerball, Inc., d/b/a TASO ("TASO") in Los Angeles County,
California Superior Court, Central District (Case No. BC181097) on November
12, 1997, seeking approximately $1.5 million in statutorily trebled damages
(based on compensatory damages of approximately $500,000), $10.0 million in
punitive damages, and temporary and permanent injunctive relief. TASO, which
is one of the Company's distributors, has alleged that the Company and the
other defendants have engaged in unlawful secret and discriminatory pricing
practices in violation of California law. Although the Company has not yet
formally answered this claim, based upon advice of counsel, it believes that
the claim is without merit and that it will be resolved without any material
cost or material adverse effect on the Company and its prospects. The Company
may also from time to time in the future be a party to various other claims,
complaints, and other legal actions. See "Risk Factors--Product Safety and
Liability" and "--Certain Tax and Contingent Liability Risks Related to the
Reorganization."

GOVERNMENT REGULATION

Paintball products are within the jurisdiction of the United States Consumer
Products Safety Commission (the "CPSC") and other Federal, state, and foreign
regulatory bodies. Under CPSC regulations, a manufacturer of consumer goods is
obligated to notify the CPSC if, among other things, the manufacturer becomes
aware that one of its products has a defect that could create a substantial
risk of injury. If the manufacturer has not already undertaken to do so, the
CPSC may require a manufacturer to recall a product, which may involve product
repair, replacement, or refund. The Company is unaware of any activity by the
CPSC in the area of paintball products regarding the Company or any competitor
of the Company.

The Company understands that certain local and foreign jurisdictions have
legislation that prohibits retailers from selling certain product categories
that are or may be sufficiently broad to include paintball guns. Although the
Company is not aware of any state or Federal initiatives to enact comparable
legislation, there can be no assurance that such legislation will not be
enacted in the future.

The American Society of Testing Materials ("ASTM"), a non-governmental self-
regulating association, has been active in developing voluntary standards
regarding paintball fields, paintball face protection, and paintball

35
<PAGE>

guns. Company representatives are active on the relevant ASTM subcommittees
and in developing the relevant safety standards. The Company does not believe
that any current or pending ASTM standards will have a material adverse effect
on the Company's cost of doing business.

Adverse publicity relating to the sport of paintball, or publicity
associated with actions by the CPSC or others expressing concern about the
safety or function of the Company's products or competitors products (whether
or not such publicity is associated with a claim against the Company or
results in any action by the Company or the CPSC) could have a material
adverse effect on the Company's reputation, brand image, or markets, any of
which could have a material adverse effect on the Company or its prospects.
See "Risk Factors--Government Regulation."

EMPLOYEES

As of August 31, 1997, the Company employed approximately 50 full-time
employees. In addition, the Company utilizes additional temporary personnel in
its assembly operations to meet production demand when necessary. The Company
is not a party to any labor agreements and none of its employees is
represented by a labor union. The Company considers its relationship with its
employees to be excellent.

36
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Certain information regarding the Company's executive officers, directors,
and certain key employees is set forth below. The Board currently has five
members.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marvin W. Griffin....... 59 Chairman of the Board of Directors
E. Lynn Scott........... 43 President; Chief Executive Officer; Director
Charles L. Prudhomme.... 46 Vice President, Marketing and Business Development
Steven R. DeMent........ 39 Vice President, Operations
Steven R. Cherry........ 41 Vice President, Brand Development
Daniel L. Obergfell..... 37 Vice President, Sales
Stephen J. Mattia....... 49 Controller; Assistant Secretary
J.J. Brookshire......... 32 Marketing Manager
Anthony J. Dowd......... 38 Director
H. Gregory Wold......... 63 Director
Stephen J. Schaubert.... 51 Director
</TABLE>

Marvin W. Griffin has been Chairman of the Board of the Company since its
inception in September 1997. He has been the Chairman of the Board, President
and Chief Executive Officer of Daisy since 1988 and will continue to serve in
that capacity with New Daisy after the Offering. From 1983 to 1987, Mr.
Griffin was the Chief Executive Officer of the Coca-Cola Bottling Company
Consolidated, a soft-drink bottling company, and was the Senior Vice President
of Sales and Marketing at Coca-Cola U.S.A., a soft-drink maker, from 1980 to
1983.

E. Lynn Scott has been President and Chief Executive Officer of the Company
since its inception in September 1997. Mr. Scott was responsible for
developing Daisy's paintball operations through its Brass Eagle division and
he has served as President of the division since November 1996. Prior to that,
he served as Vice President, Sales and Marketing of Daisy from June 1989 to
April 1997. Before joining Daisy, Mr. Scott served as Vice President, Sales
and Marketing at Skeeter Products and Crosman, both divisions of The Coleman
Company that specialize in sporting goods. He is also a Director of New Daisy.

Charles L. Prudhomme has been Vice President of Marketing and Business
Development of the Company since its inception in September 1997. Prior to
that, he served as Vice President of Business Development and Director of
Marketing of Daisy from April 1996 and as a consultant at Daisy from August
1994 until March 1996. Mr. Prudhomme's responsibilities at Daisy included
developing paintball marketing programs. Before joining Daisy as an employee,
Mr. Prudhomme served as a principal in the Coronado Group, a management
consulting firm, from March 1993 to March 1996, and as a Vice President of the
Joey Reiman Advertising Agency, an advertising firm, from December 1991 to
February 1993.

Steven R. DeMent has been Vice President of Operations of the Company since
its inception in September 1997. Prior to that, he served as Director of
Operations of Daisy from September 1995 to August 1997. Mr. DeMent was
instrumental in the development and installation of Daisy's paintball
manufacturing processes. Before joining Daisy, Mr. DeMent served as President
of New Way Tours, a charter bus and transportation service, from May 1994 to
September 1995, Vice President of Operations for Competec International, Ltd.,
a maker of custom plastics, from April 1993 to May 1994, and as Plant Manager
for Key Tronic Corporation, a maker of computer key boards, from 1988 to March
1993.

Steven R. Cherry has been Vice President, Brand Management, of the Company
since its inception in September 1997. Prior to that, he served as Director of
Product Development of Daisy from May 1995 to August 1997. Mr. Cherry served
as a liaison between Daisy's paintball sales and manufacturing groups. He
served as Product Manager from October 1990 to May 1995, as Manufacturing
Engineering Manager from June 1988 to October 1990, and Chief Industrial
Engineer of Daisy from June 1986 to June 1988.

37
<PAGE>

Daniel L. Obergfell has been Vice President, Sales, of the Company since its
inception in September 1997. Prior to that, he served as Sales Manager of the
Brass Eagle division of Daisy from June 1997 to September 1997. Before joining
Daisy, he served as National Account Sales Manager for DeVilbiss Air Power
Company, a manufacturer of retail power equipment, from June 1996 to March
1997, and as National Account Sales Manager for the WD-40 Company, a multi-
purpose lubricant manufacturer, from November 1988 to May 1996.

Stephen J. Mattia has been Controller and Assistant Secretary of the Company
since its inception in September 1997. Prior to that, he served as Finance
Manager of the Brass Eagle division of Daisy from May 1997 to August 1997.
Before joining Daisy, Mr. Mattia served as Controller of the Global Stone
Corporation, an Oklahoma manufacturer of quick lime products, from November
1996 to May 1997, and as Controller of the Sierra Corporation, an Oklahoma
manufacturer of sporting goods, from September 1992 to September 1995.

J. J. Brookshire has been Marketing Manager of the Company since its
inception in September 1997. Prior to that, he served as Marketing Manager of
the Brass Eagle division of Daisy from October 1995 to August 1997. Before
joining Daisy, Mr. Brookshire served as Director of Marketing for National
Paintball/International Management Associates, Inc., a paintball products
distributor, from February 1992 to October 1995.

Anthony J. Dowd has been a Director of the Company since its inception in
September 1997. He also serves as Director of Private Investments for Charter
Oak Partners, a private investment firm, and has served in that capacity since
May 1992. Mr. Dowd has served as a director of Daisy since June 1993, and
serves as a director of several privately-held companies. Prior to joining the
Company, he served as a Senior Associate at James D. Wolfensohn, Inc. (now BT
Wolfensohn), an investment banking firm, from 1988 to 1991. Mr. Dowd is also a
director of New Daisy.

H. Gregory Wold has been a Director of the Company since its inception in
September 1997. Mr. Wold joined the Ford Motor Company, an auto manufacturer,
in 1964 and served as its Director of Business Development from 1996 to 1997
and its Associate Director-Corporate Strategy from 1986 to 1996. Mr. Wold
retired from the Ford Motor Company in 1997. He is also a director of New
Daisy.

Stephen J. Schaubert has been a Director of the Company since its inception
in September 1997. He is also a Director at Bain & Company Inc., an
international consulting firm headquartered in Boston. Prior to joining Bain
in 1979, Mr. Schaubert worked in the healthcare and aerospace industries in a
series of general management positions, both domestic and international.

BOARD COMMITTEES

The Company's By-laws provide that the Board may elect such directorate
committees as it may from time to time determine. Two such committees of the
Board have been established: the Audit Committee and the Compensation
Committee. The members of the Audit Committee are Messrs. Wold and Dowd,
neither of whom are officers or employees of, or otherwise affiliated with,
the Company. The Audit Committee will review the professional services
provided by the Company's independent auditors and the independence of such
auditors from management of the Company. The Audit Committee will also review
the scope of the audit by the Company's independent auditors, the annual
financial statements of the Company, the Company's system of internal
accounting controls, and such other matters with respect to the accounting,
auditing, and financial reporting practices and procedures of the Company as
it finds appropriate or as are brought to its attention. The Compensation
Committee's principal function will be to establish the compensation of
officers of the Company and to establish and administer the Company's
compensation programs. Messrs. Dowd, Scott, and Griffin will serve on the
Compensation Committee.

DIRECTOR COMPENSATION

Each director of the Company who is not also an employee of the Company (or
his or her designee) will receive, as an annual fee, Common Stock having a
fair market value of $8,000 at the time of its issuance in quarterly
installments. A director who is also an employee of the Company will receive
no additional

38
<PAGE>

compensation for serving as a director. All directors are reimbursed for out-
of-pocket expenses incurred in connection with attendance at meetings of the
Board and Board committees and other activities relating thereto.

EMPLOYMENT AGREEMENTS

Mr. Scott is the only key employee who has entered into an employment
agreement with the Company. The agreement provides for an initial three-year
term expiring September 15, 2000, which automatically extends each year,
subject to the right of either party not to extend the agreement upon ninety
days notice. In addition, Mr. Scott may elect to terminate his employment in
the event of a change-in-control of the Company or the sale of all or
substantially all of its assets. Mr. Scott will be paid an annual base salary
of $140,000 in 1997, increasing to $160,000 in 1998. In 1997, he will receive
a bonus of up to $46,667 based upon the Company's 1997 operating results. Mr.
Scott's bonus compensation for subsequent years will be determined based upon
performance targets set by the Company's Board of Directors after consultation
with Mr. Scott.

Under his employment agreement, Mr. Scott is subject to certain non-
disclosure, non-competition, and non-solicitation covenants applicable during
the term of his employment under the agreement and until one year after
termination of his employment.

Pursuant to the 1997 Stock Option Plan, Mr. Scott was granted options to
purchase up to 72,250 shares of Common Stock at the initial public offering
price. His options vest in four annual installments after completion of this
Offering. Mr. Scott is eligible to receive additional options under the 1997
Stock Option Plan. See "--1997 Stock Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

There were no compensation committee interlocks in 1996. E. Lynn Scott
currently serves on the Company's compensation committee and also serves on
the Board of Directors for New Daisy. Marvin W. Griffin is the Chairman of the
Board, President and Chief Executive Officer of New Daisy and also serves on
the Company's compensation committee.

EXECUTIVE COMPENSATION

The following tables set forth, with respect to the Company and Daisy,
certain information regarding compensation paid or accrued for services
rendered to Daisy during 1996 for its Chief Executive Officer and five most
highly compensated employees (collectively, the "Named Executive Officers"),
based on salary and bonus earned for services rendered to Daisy during 1996.
The table captioned "Brass Eagle" sets forth such information with respect to
1996 for Named Executive Officers who will be employed by the Company
following the Reorganization. The table captioned "Daisy" sets forth such
information with respect to 1996 for Named Executive Officers who will not be
employed by the Company following the Reorganization.

39
<PAGE>

SUMMARY COMPENSATION TABLE -- BRASS EAGLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- ---------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
NAME AND COMPEN- STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARD(S) OPTIONS SATION
------------------ ---- -------- ------ ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
E. Lynn Scott(1)........ 1996 $130,200 -- -- -- 22,331 $ 2,463
President and Chief Ex-
ecutive Officer
Steven R. DeMent(2)..... 1996 106,845 -- -- -- -- 11,268
Vice President, Opera-
tions
</TABLE>
- --------
(1) Consists of: (i) Company contributions to the 401(k) Retirement Savings
Plan of $1,302 and (ii) Company payments of life insurance premiums of
$1,161 for Mr. Scott.
(2) Mr. DeMent became employed by the Company as of February 12, 1996.
Consequently, Mr. DeMent's salary for 1996 as set forth above represents
only eleven months of his annual salary. Had Mr. DeMent been employed for
the entire twelve months of 1996, his salary for such year would have been
approximately $120,000. Additionally, "All Other Compensation" consists of
(i) Company payments of life insurance premiums of $1,115 and (ii) $10,153
of reimbursed relocation expenses.

SUMMARY COMPENSATION TABLE -- DAISY

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------- ---------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
NAME AND COMPEN- STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARD(S) OPTIONS SATION
------------------ ---- ------- ------ ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin Griffin(1)....... 1996 $62,020 -- -- -- 22,367 $720
President and Chief Ex-
ecutive Officer
Robert Degarmo(2)....... 1996 4,715 -- -- -- -- 778
Vice President, Opera-
tions
Jerry Watkins(3)........ 1996 15,335 -- -- -- 11,166 281
Chief Financial Officer
</TABLE>

(1) Consists of Company payments of life insurance premiums of $720 for Mr.
Griffin.
(2) Mr. Degarmo became employed by the Company on September 1, 1996.
Consequently Mr. Degarmo's salary for 1996 as set forth above represents
only four months of this annual salary. Had Mr. Degarmo been employed for
the entire twelve months of 1996, his salary for such year would have been
approximately $14,000. Additionally, "All Other Compensation" consists of
(i) Company payments of life insurance premiums of $48 and (ii) $730 of
reimbursed relocation expenses.
(3) Mr. Watkins became employed by the Company on April 2, 1996. Consequently,
Mr. Watkins' salary for 1996 as set forth above represents only nine
months of this annual salary. Had Mr. Watkins been employed for the entire
twelve months of 1996, his salary for such year would have been
approximately $20,180. Additionally, "All Other Compensation" consists of
(i) Company payments of life insurance premiums of $17 and (ii) $1,050 of
reimbursed relocation expenses.

The above salary and other compensation represent the amounts allocated from
Daisy to Brass Eagle. See "Risk Factors--Allocation of Historical Financial
Information." Mr. Griffin's total salary and other compensation, consisting of
life insurance premiums were $310,100 and $3,600, respectively. Mr. Degarmo's
total salary, life insurance premiums and reimbursed relocation expenses were
$47,146, $480 and $7,300, respectively, for the four months he was employed by
the Company. Had Mr. Degarmo been employed for the entire twelve months of
1996, his salary, life insurance premiums and reimbursed relocation expenses
would have been $140,000, $1,400 and $7,300, respectively. Mr. Watkins total
salary, life insurance premiums and reimbursed relocation expenses were
$76,676, $675 and $7,391, respectively, for the nine months he was employed by
the Company. Had Mr. Watkins been employed for the entire twelve months of
fiscal year 1996, his salary, life insurance premiums and reimbursed
relocation expenses would have been $100,676, $900 and $7,391, respectively.

40
<PAGE>

Option Grants During 1996. The following table provides information related
to options to purchase common stock of the Company granted to the Named
Executive Officers during 1996. See "Reorganization."

OPTION GRANTS IN 1996 -- BRASS EAGLE

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
% OF TOTAL OF STOCK PRICES
NUMBER OF OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OR OPTION TERMS
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME OPTIONS YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
E. Lynn Scott........... 22,331 40% $0.56 July 1, 2003 $ 5,091 $ 11,864
</TABLE>

OPTION GRANTS IN 1996 -- DAISY

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
% OF TOTAL OF STOCK PRICES
NUMBER OF OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OR OPTION TERMS
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME OPTIONS YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marvin Griffin.......... 22,331 40% $0.56 July 1, 2003 $ 5,091 $ 11,864
Robert Degarmo.......... -- -- -- -- -- --
Jerry Watkins........... 11,167 20% $0.56 July 1, 2003 $ 2,545 $ 5,932
</TABLE>

Options Exercised During 1996 and Year Ended Option Values. The following
table provides information related to options to purchase common stock of the
Company exercised by the Named Executive Officers during 1996 and the number
and value of such options held on August 31, 1997. The Company does not have
any outstanding stock appreciation rights. See "Reorganization."

OPTION EXERCISES IN 1996 -- BRASS EAGLE

<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES
ACQUIRED UNDERLYING UNEXERCISED
ON VALUE OPTIONS AT
EXERCISE REALIZED DECEMBER 31, 1996
-------- -------- -------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C> <C> <C>
E. Lynn Scott...................... -- -- 135,161 --
</TABLE>

OPTION EXERCISES IN 1996 -- DAISY

<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES
ACQUIRED UNDERLYING UNEXERCISED
ON VALUE OPTIONS AT
EXERCISE REALIZED DECEMBER 31, 1996
-------- -------- -------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C> <C> <C>
Marvin Griffin..................... -- -- 236,824 --
Robert Degarmo..................... -- -- -- --
Jerry Watkins...................... -- -- 11,166 --
</TABLE>

1997 STOCK OPTION PLAN

The 1997 Stock Option Plan ("Stock Option Plan") provides for the granting
to the Company's executive officers and other key employees of incentive stock
options and non-qualified stock options to purchase an

41
<PAGE>

aggregate of up to 430,000 shares of the Common Stock. The Stock Option Plan
is intended to provide an equity interest in the Company to eligible employees
and thereby enable such employees to share in the long-term growth and success
of the Company. The Stock Option Plan is also intended to aid in attracting
and retaining executive officers and other key employees essential to the
success of the Company. The Stock Option Plan is administered by the Company's
Compensation Committee.

All stock options granted under the Stock Option Plan will have an exercise
price per share to be determined by the Compensation Committee that will not
be less than the fair market value of the Common Stock on the date of grant.
The maximum term for all stock options granted under the Stock Option Plan is
10 years and may be subject to acceleration in the event of a change-in-
control of the Company. These change-in-control features may affect whether
amounts realized upon the receipt or exercise of stock options will be
deductible by the Company under the Internal Revenue Code.

EMPLOYEE STOCK PURCHASE PLAN

Prior to consummation of the Offering the Company intends to adopt an
Employee Stock Purchase Plan (the "Purchase Plan"), pursuant to which a total
of 70,000 shares of Common Stock will be reserved for issuance. The Purchase
Plan, which is intended to qualify under Section 423 of the Internal Revenue
Code as an "employee stock purchase plan," will be implemented by overlapping
offering periods, each with a maximum duration of 24-months, with purchases
occurring at six-month intervals. The initial offering period will commence on
the closing of the Offering and will end on December 31, 1998, with the first
purchase date to be May 1, 1998. The Purchase Plan will be administered by the
Board of Directors of the Company or the Compensation Committee of the Board.
Employees will be eligible to participate if they are customarily employed by
the Company for more than five months per year and are regularly scheduled to
work more than 20 hours per week. The Purchase Plan permits eligible employees
to purchase Common Stock through payroll deductions, which may not exceed
10.0% of an employee's cash compensation. No more than 500 shares may be
purchased by each participant on the initial purchase date and 250 shares per
participant on all subsequent purchase dates. The price of stock purchased
under the Purchase Plan will be 85.0% of the lower of the fair market value of
the Common Stock at the beginning of the offering period or on the applicable
semi-annual purchase date. Employees may end their participation in the
offering at any time during the offering period, and participation ends
automatically on termination of employment with the Company. Each outstanding
purchase right will be exercised immediately prior to a merger or
consolidation or at the next purchase date thereafter. The Board may amend or
terminate the Purchase Plan immediately after the close of any purchase date.
However, the Board may not, without stockholder approval, materially increase
the number of shares of Common Stock available for issuance or materially
modify the eligibility for participation. The Purchase Plan will in all events
terminate December 31, 2000.

CERTAIN ADDITIONAL OPTIONS

Pursuant to a program adopted by Daisy in 1993, Daisy has granted to certain
current and former Daisy employees options to purchase 256,809 shares of
Common Stock of the Company at a price of $0.56 per share. Of these options,
111,656, 72,576 and 11,166 are held by Mr. Griffin, Mr. Scott and Mr. DeMent,
respectively, and the remaining 61,411, of which 11,166 were granted in
September 1997, are held in the aggregate by one former and two current Daisy
employees who will not be employed by the Company following the
Reorganization. All of the foregoing options were fully vested as of September
15, 1997, and may be exercised in whole or in part, at any time prior to July
1, 2003.

Pursuant to a separate program also adopted by Daisy in 1993, Daisy has
granted to Mr. Griffin and Mr. Scott options to purchase an additional 125,168
and 62,584 shares of Common Stock of the Company, respectively, at a purchase
price of $0.56 per share. All of these options were fully vested as of
September 15, 1997, and may be exercised, in whole or in part, at any time
prior to the fifth anniversary of the consummation of the Offering. See
"Reorganization."

42
<PAGE>

CERTAIN TRANSACTIONS

ASSIGNMENT, ASSUMPTION AND INDEMNIFICATION AGREEMENT

Mr. Scott is the President, Chief Executive Officer and a director of the
Company and a director and shareholder of New Daisy. Mr. Griffin is the
Chairman of the Board of Directors of the Company and the Chairman of the
Board and President of New Daisy. Mr. Scott is a stockholder of New Daisy and
each of Mr. Griffin and Charter Oak Partners ("Charter Oak") are greater than
five percent stockholders of New Daisy. As a consequence, each of these
persons may be deemed to have a material direct or indirect interest in New
Daisy. The Reorganization will be effected pursuant to an assignment,
assumption and indemnification agreement which provides that (i) the Company
will transfer all of its non-paintball related assets, operations, and
liabilities to New Daisy, retaining only its paintball related assets,
operations, and liabilities, and (ii) New Daisy will agree to indemnify and
hold harmless the Company and its officers, directors, employees, and
stockholders from and against all liabilities and obligations related to the
Company's non-paintball related operations, including, without limitation, (A)
any products liability claim relating to any products sold by the Company
prior to Reorganization (other than products sold under the Brass Eagle name)
and any products sold by New Daisy after the Reorganization , and (B) any
claim by an employee or former employee of the Company or of New Daisy to the
extent that such claim relates to post-retirement medical or pension benefits
that are attributable to the employment of any such individual in the
Company's non-paintball related operations. See "Risk Factors--Certain Tax and
Contingent Liability Risks Related to the Reorganization," "--Control by
Principal Stockholder," and "Reorganization."

CONTINUING GUARANTY

Each of Charter Oak and Messrs. Griffin and Scott are guarantors under a
Continuing Guaranty (the "Guaranty") pursuant to which they have guaranteed
the obligations of New Daisy under the Assignment, Assumption and
Indemnification Agreement. It is anticipated that each of Messrs. Wold and
Schaubert, who are directors of the Company, and Messrs. Prudhomme, DeMent,
Cherry, and Obergfell, who are executive officers of the Company, will also be
guarantors under the Guaranty. The obligations of the guarantors will be
several and separate according to their pro rata ownership of the outstanding
shares of New Daisy common stock at the time that the spin-off of the New
Daisy common stock by the Company (the "Spin-Off") becomes effective (the
"Effective Time"). The aggregate amount of New Daisy's obligations guaranteed
is Five Million Dollars for the two years following the Spin-Off and Three
Million Dollars for the following two years. The term of the Guaranty expires
on the earlier of (i) four years following the date of the Spin-Off or (ii)
the date that one of the nation's six largest accounting firms renders a
determination that Daisy alone may satisfy its obligations under the
Assignment, Assumption and Indemnification Agreement. Obligations of
guarantors for claims made prior to the fourth anniversary of the effective
date of the Guaranty shall survive its termination.

TAX ALLOCATION AGREEMENT

Concurrently with the Reorganization, the Company and New Daisy will enter
into a tax allocation agreement (the "Tax Allocation Agreement") pursuant to
which the Company will file a consolidated income tax return with respect to
the taxable period ending as of the date of the Reorganization. The Tax
Allocation Agreement provides generally that for current and future taxable
periods the Company and New Daisy shall compute their separate Federal and
state tax liabilities as if they had always filed separate returns. For each
taxable period the Company and New Daisy have agreed to reimburse each other
for any reduction or increase in tax obligation caused by the use of tax
attributes allocable to the other. See "Risk Factors--Certain Tax and
Contingent Liability Risks Related to the Reorganization," "--Control by
Principal Stockholder," and "Reorganization."

ADMINISTRATIVE SERVICES AGREEMENT

Concurrently with the Reorganization, the Company will enter into an
administrative services agreement with New Daisy (the "Administrative
Agreement"), pursuant to which New Daisy will agree to provide the

43
<PAGE>

Company with certain legal, administrative, warehousing, shipping and computer
information services through December 31, 1998 for $37,598 monthly. Unless
terminated by prior written notice, the Administrative Agreement is
automatically renewed annually for three years. The Administrative Agreement
is terminable, in whole or in part, without penalty by agreement of the
parties if such services are no longer required. The Company anticipates
terminating the Administrative Agreement with respect to all services except
legal and computer information services prior to December 31, 1998. The
Company believes that the terms of the Administrative Agreement are no less
favorable than those that could have been obtained from disinterested third
parties. See "Risk Factors--Limited Operating History; Certain Administrative
Services" and "Reorganization."

TAX INDEMNIFICATION

Messrs. Griffin and Scott, are holders of shares of the preferred stock of
the Company which will be canceled in connection with the Reorganization. The
Company has agreed to enter into agreements with Messrs. Griffin and Scott
concurrently with the Offering and the Reorganization, pursuant to which the
Company will indemnify each of them against any income tax imposed on them as
a result of such cancellation of their preferred stock. It is not possible to
predict whether any such tax will be imposed, and consequently, whether such
indemnification will be required. If such indemnification is required, it is
also not possible to estimate the precise amount thereof, although the Company
does not believe that its obligation would exceed approximately $240,000 with
respect to Mr. Griffin and approximately $90,000 with respect to Mr. Scott. If
any such indemnification payment is required, the Company believes that it
would be entitled to claim a corresponding compensation deduction for income
tax purposes, and therefore, any additional indemnification costs would be
offset by these income tax deductions. Consequently, the Company believes that
any additional indemnification payments that it may be required to make would
not have a material adverse effect on the Company or its prospects.

44
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of August 31, 1997, and as adjusted to give
effect to the Offering by (i) each beneficial owner of more than 5% of Common
Stock, (ii) each of the Company's directors, (iii) each of the Named Executive
Officers, and (iv) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information furnished by
such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
---------------------------------------
PERCENT PRIOR PERCENT AFTER
NAME AND ADDRESS(2) NUMBER TO THE OFFERING THE OFFERING
------------------- --------- --------------- -------------
<S> <C> <C> <C>
Charter Oak Partners.... 3,674,474 72.7% 50.1%
Marvin W. Griffin(3).... 604,506 12.0 8.3
E. Lynn Scott(3)........ 256,772 5.1 3.5
Anthony J. Dowd(4)...... 3,674,474 72.7 50.1
H. Gregory Wold......... 42,671 0.8 0.6
Stephen J. Schaubert.... 14,224 0.3 0.2
Steven R. DeMent(3)..... 18,277 0.4 0.3
All directors and
officers as a group.... 4,610,924 91.3% 63.0%
</TABLE>
- --------
(1) Determined in accordance with the regulations of the Securities and
Exchange Commission. Beneficial ownership may include securities owned by
or for, among others, the spouse and/or minor children of the individual
and any other relative who has the same home as such individual, as well
as other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days after the date of this table. Beneficial ownership
may be disclaimed as to certain of the securities.
(2) Unless otherwise indicated, the address of each beneficial owner is 1203A
North Sixth Street, Rogers, Arkansas 72756.
(3) Amount includes the following number of currently exercisable options to
purchase shares of Common Stock by the individuals indicated: Marvin W.
Griffin (236,824); E. Lynn Scott (135,160); and Steven R. DeMent (11,166).
(4) Includes all of the shares of Common Stock owned by Charter Oak Partners
because, as Director of Private Investments of Charter Oak Partners, Mr.
Dowd may be deemed to beneficially own such shares. Mr. Dowd disclaims
beneficial ownership of shares held by Charter Oak Partners except to the
extent of his proportionate interest therein.

45
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, par value $0.01 per share. Prior to completion of the Offering,
the Company had 4,608,899 shares of Common Stock outstanding. As of the date
of this Prospectus, options to purchase an aggregate of 995,310 shares of
Common Stock were also outstanding. Upon completion of the Offering, the
Company will have 6,883,899 outstanding shares of Common Stock (7,225,149
shares if the Underwriters' over-allotment option is exercised in full). See
"Management."

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
submitted to the stockholders for a vote, including the election of directors.
Holders of Common Stock are not entitled to cumulate their votes in elections
of directors. Holders of Common Stock are entitled to receive such dividends
as may be declared and paid in the discretion of the Board of Directors out of
funds legally available therefor and to share ratably in the net assets, if
any, of the Company upon liquidation after payment or provision for all
liabilities. Holders of Common Stock have no preemptive rights to purchase any
shares of the Company's capital stock. Shares of Common Stock are not subject
to any redemption provisions and are not convertible into any other securities
of the Company. All outstanding shares of Common Stock are, and the shares of
Common Stock to be issued pursuant to the Offering will be upon payment
therefor, fully paid and nonassessable.

CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS

The directors shall be elected for one-year terms at each annual meeting of
the stockholders. The number of directors shall be fixed by the Board of
Directors, but shall consist of no less than three nor more than nine
directors. In general, the Board of Directors, not the stockholders, has the
right to appoint persons to fill vacancies on the Board of Directors. The By-
laws of the Company may be amended only by the Board of Directors or by the
affirmative vote of a majority of the Company's voting stock.

LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS--INDEMNIFICATION

Delaware law authorizes corporations to limit or eliminate the personal
liability of officers and directors to corporations and their stockholders for
monetary damages for breach of officers' and directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the
corporation, officers and directors must exercise an informed business
judgment based on all material information reasonably available to them.
Absent the limitations authorized by Delaware law, officers and directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Restated Certificate of
Incorporation limits the liability of officers and directors of the Company to
the Company or its stockholders to the fullest extent permitted by Delaware
law. Specifically, officers and directors of the Company will not be
personally liable for monetary damages for breach of an officer's or
director's fiduciary duty in such capacity, except for liability (i) for any
breach of the officer's or director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the officer and director derived an improper personal
benefit.

The inclusion of this provision in the Restated Certificate of Incorporation
may have the effect of reducing the likelihood of derivative litigation
against officers and directors, and may discourage or deter stockholders or
management from bringing a lawsuit against officers and directors for breach
of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. Both the Company's
Restated Certificate of Incorporation and By-laws provide indemnification to
the Company's officers and directors and certain other persons with respect to
certain matters to the maximum extent allowed by

46
<PAGE>

Delaware law as it exists now or may hereafter be amended. These provisions do
not alter the liability of officers and directors under federal securities
laws and do not affect the right to sue or recover monetary damages under
federal securities laws for violations thereof.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is SunTrust
Bank, Atlanta located in Atlanta, Georgia.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, assuming no exercise of the Underwriters'
over-allotment option, the Company will have 6,883,899 shares of Common Stock
outstanding (7,225,149 shares if the Underwriters' over-allotment option is
exercised in full). Of these outstanding shares of Common Stock, the 2,275,000
shares sold in the Offering (2,616,250 shares if the Underwriters' over-
allotment option is exercised in full) will be freely tradeable without
restriction unless acquired by affiliates of the Company. None of the
remaining 4,608,899 shares of outstanding Common Stock have been registered
under the Securities Act, which means that they may be resold publicly only
upon registration under the Securities Act or in compliance with an exemption
from the registration requirements of the Securities Act, including the
exemption provided by Rule 144 thereunder.

In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of the acquisition of restricted Common Stock from
either the Company or any affiliate (as defined in the Securities Act) of the
Company, the acquiror or subsequent holder thereof may sell, within any three
month period commencing 90 days after the date of this Prospectus, a number of
shares that does not exceed the greater of 1% of the then outstanding shares
of Common Stock (72,251 shares upon completion of the Offering assuming the
Underwriter's over-allotment is exercised in full), or the average weekly
trading volume of the shares of Common Stock on the Nasdaq National Market
during the four calendar weeks preceding the date on which notice of the
proposed sale is sent to the Commission. Sales under Rule 144 are also subject
to certain manner-of-sale provisions, notice requirements, and the
availability of current public information about the Company. If two years
have elapsed since the later of the date of the acquisition of restricted
Common Stock from the Company or any affiliate of the Company, a person who is
not deemed to have been an affiliate of the Company at any time for 90 days
preceding a sale would be entitled to sell such shares under Rule 144 without
regard to the volume limitations, manner of sale provisions, or notice
requirements. See "Risk Factors--Shares Eligible for Future Sale."

All of the executive officers, directors, and certain shareholders of the
Company have agreed not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of the representatives. See "Underwriting."

Prior to the Offering, there has been no public market for the Common Stock.
No prediction can be made regarding the effect, if any, that public sales of
Common Stock or the availability of shares for sale will have on the market
price of the Common Stock after the Offering. Sales of substantial amounts of
the Common Stock in the public market following the Offering, or the
perception that such sales may occur, could adversely affect the market price
of the Common Stock and could impair the ability of the Company to raise
capital through sales of its equity securities. See "Risk Factors--No Prior
Public Market; Maintenance of Listing Requirements and Possible Volatility of
Stock Price."

47
<PAGE>

UNDERWRITING

In the Underwriting Agreement, the Underwriters, represented by McDonald &
Company Securities, Inc. and Dain Bosworth Incorporated (the
"Representatives"), have agreed, severally, subject to the terms and
conditions therein set forth, to purchase from the Company, and the Company
has agreed to sell to them, the number of shares of Common Stock offered
hereby. Each Underwriter will purchase the number of shares set forth opposite
its name below, and will purchase such shares at the price to public, less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. The Underwriters are committed to take and pay for all shares if
any shares are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
McDonald & Company Securities, Inc. ..................... 797,500
Dain Bosworth Incorporated............................... 797,500
J.C. Bradford & Co., Inc. ............................... 40,000
Cowen & Co. ............................................. 40,000
Crowell, Weedon & Co. ................................... 40,000
Furman Selz Inc. ........................................ 40,000
Gerard Klauer Mattison & Co., LLC........................ 40,000
Janney Montgomery Scott, Inc. ........................... 40,000
Jefferies & Company, Inc. ............................... 40,000
Ladenburg, Thalmann & Co., Inc. ......................... 40,000
Legg Mason Wood Walker Inc. ............................. 40,000
Morgan Keegan & Co., Inc. ............................... 40,000
Piper Jaffray Inc. ...................................... 40,000
Rauscher Pierce Refsnes, Inc. ........................... 40,000
The Seidler Companies Inc. .............................. 40,000
Sutro & Co. ............................................. 40,000
Tucker Anthony Inc. ..................................... 40,000
Wheat First Butcher Singer............................... 40,000
Wit Capital Corporation.................................. 40,000
---------
Total................................................ 2,275,000
=========
</TABLE>

The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus. The Underwriters may allow to
certain selected dealers who are members of the National Association of
Securities Dealers, Inc. (the "NASD") a discount not exceeding $0.46 per
share, and the Underwriters may allow, and such selected dealers may re-allow,
a discount not exceeding $0.10 per share to other dealers who are members of
the NASD. After the Offering, the public offering price and the discount to
dealers may be changed by the Representative.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 341,250 shares of Common Stock at the public offering price, less
the underwriting discount, as set forth on the cover page of this Prospectus.
The Underwriters may exercise that option only to cover over-allotments in the
sale of the Common Stock that the Underwriters have agreed to purchase. To the
extent that the Underwriters exercise such option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase the
same percentage of the option shares as the number of shares to be purchased
and offered by that Underwriter in the table above bears to the total.

The Company has agreed to indemnify the Underwriters against certain
liabilities which may be incurred in connection with the Offering, including
liabilities under the Securities Act.

The Company and the directors, executive officers, and certain current
stockholders of the Company have agreed that they will not offer, sell,
transfer, or otherwise dispose of any Common Stock, or any securities
convertible into or exchangeable for Common Stock, for a period of 180 days
from the date of this Prospectus, without the prior written consent of
McDonald & Company Securities, Inc.

48
<PAGE>

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered by this Prospectus to any
accounts over which they exercise discretionary authority.

At the request of the Company, up to 113,750 shares of Common Stock offered
in the Offering have been reserved for sale to employees of the Company and
certain members of their families. The price of those shares to those persons
will be equal to the public offering price set forth on the cover page of this
Prospectus. The number of shares available to the general public will be
reduced to the extent those persons purchase reserved shares. Any shares not
so purchased will be offered in the Offering at the public offering price set
forth on the cover page of this Prospectus.

In connection with the Offering and in compliance with applicable law, the
Underwriters may over-allot or effect transactions that stabilize, maintain,
or otherwise affect the market price of the Common Stock at levels above those
that might otherwise prevail in the open market, including by entering
stabilizing bids, effecting syndicate covering transactions, or imposing
penalty bids. A stabilizing bid means the placing of any bid, or the effecting
of any purchase, for the purpose of pegging, fixing, or maintaining the price
of a security. A syndicate covering transaction means the placing of any bid
on behalf of the underwriting syndicate or the effecting of any purchase to
reduce a short position created in connection with the Offering. A penalty bid
means an arrangement that permits McDonald & Company Securities, Inc., as
managing underwriter, to reclaim a selling concession from a syndicate member
in connection with the Offering when securities originally sold by the
syndicate member are purchased in stabilizing or syndicate covering
transactions. These transactions may be effected on the Nasdaq National Market
or otherwise. The Underwriters are not required to engage in any of these
activities. Any such activities, if commenced, may be discontinued at any
time.

Prior to the Offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be determined by
negotiations among the Company and the Underwriters. Among the factors
considered in such negotiations will be the history of and prospects for the
Company's business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for
growth of the Company's revenues and earnings, the current state of the
economy in the United States and overseas and the current level of economic
activity in the industry in which the Company competes and in related
comparable industries, and currently prevailing conditions in the securities
markets, including current market valuations of publicly traded companies that
are comparable to the Company. Application has been made to have the Common
Stock approved for quotation on the Nasdaq National Market under the symbol
"XTRM."

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Friday, Eldredge & Clark, Little Rock, Arkansas, and certain legal
matters will be passed upon for the Underwriters by Baker & Hostetler llp,
Cleveland, Ohio.

EXPERTS

The financial statements of the Company as of December 31, 1995, and 1996
and for each of the years in the three-year period ended December 31, 1996,
that appear in this Prospectus have been audited by Crowe, Chizek and Company
LLP, independent certified public accountants, and are included in reliance
upon the report of such firm given upon their authority as experts in auditing
and accounting.

ADDITIONAL INFORMATION

The Company is not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result
of this Offering, the Company will be required to file reports and other
information with the Securities and Exchange Commission (the "Commission")
pursuant to the informational requirements of the Exchange Act.

49
<PAGE>

The Company has filed with the Commission, in Washington D.C., a
Registration Statement on Form S-1 under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain
all the information set forth in Registration Statement and the Exhibits and
Schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement
and the Exhibits and Schedules filed therewith. Statements contained in this
Prospectus as to the content of any contract or any other document referred to
are not necessarily complete, and, in each instance reference is made to the
copy of such contract or other document filed as an Exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement, and the Exhibits and
Schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission at the
Judiciary Plaza, in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices located at 7 World Trade Center, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. In addition, the Registration Statement
may be accessed electronically at the Commission's site on the World Wide Web
located at http://www.sec.gov.

50
<PAGE>

BRASS EAGLE/A DIVISION OF
DAISY MANUFACTURING COMPANY, INC.
ROGERS, ARKANSAS

FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<S> <C>
REPORT OF INDEPENDENT AUDITORS.............................................. F-2
FINANCIAL STATEMENTS
BALANCE SHEETS............................................................ F-3
STATEMENTS OF OPERATIONS.................................................. F-4
STATEMENTS OF DIVISIONAL EQUITY........................................... F-5
STATEMENTS OF CASH FLOWS.................................................. F-6
NOTES TO FINANCIAL STATEMENTS............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Daisy Manufacturing Company, Inc.
Rogers, Arkansas

We have audited the accompanying balance sheets of Brass Eagle/a Division of
Daisy Manufacturing Company, Inc. (Brass Eagle), as of December 31, 1995 and
1996, and the related statements of operations, divisional equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brass Eagle as of December
31, 1995 and 1996 and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.

As explained in Note 1, the financial statements include significant
allocations of costs and expenses of Daisy Manufacturing Company allocated to
Brass Eagle.

Crowe, Chizek and Company LLP

Oak Brook, Illinois
May 30, 1997, except for Notes 14 and 16, as to which the date is November 24,
1997

F-2
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
--------------- AUGUST 31, AUGUST 31,
1995 1996 1997 1997
------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 15)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Accounts receivable--less allowance
for doubtful accounts of $18 in
1995, and $52 in 1996 and 1997 (Note
5).................................. $ 1,334 $ 3,656 $ 6,534 $ 6,534
Inventories (Notes 3 and 5).......... 546 1,195 3,547 3,547
Prepaid expenses..................... 55 379 967 967
Deferred income taxes (Note 7)....... 38 83 265 265
------- ------- -------- --------
Total current assets............... 1,973 5,313 11,313 11,313
Property and equipment, net (Notes 4
and 5)................................ 1,223 1,070 1,422 1,422
Other assets
Intangible assets, net (Note 1)...... 3,092 2,886 2,747 2,747
Other................................ -- -- 67 67
------- ------- -------- --------
Total other assets................. 3,092 2,886 2,814 2,814
------- ------- -------- --------
$ 6,288 $ 9,269 $ 15,549 $ 15,549
======= ======= ======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Current maturities of long-term debt
(Note 5)............................ $ 1,122 $ 1,151 $ 1,358 $ 1,358
Accounts payable..................... 52 1,122 6,228 6,228
Accrued expenses..................... 173 422 936 936
Intercompany debt (Note 9)........... 1,619 3,352 2,194 2,194
Distribution payable (Note 15)....... -- -- -- 3,133
------- ------- -------- --------
Total current liabilities.......... 2,966 6,047 10,716 13,849
Long-term debt, less current maturities
(Note 5).............................. 3,043 1,892 1,414 1,414
Deferred income taxes (Note 7)......... 31 200 286 286
Divisional equity (Note 14)
Additional paid-in capital........... -- -- 298 --
Divisional retained earnings......... 248 1,130 2,835 --
------- ------- -------- --------
248 1,130 3,133 --
------- ------- -------- --------
$ 6,288 $ 9,269 $ 15,549 $ 15,549
======= ======= ======== ========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
----------------------- ------------------
1994 1995 1996 1996 1997
------ ------ --------- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $2,615 $4,319 $ 13,838 $ 6,977 $ 18,391
Cost of sales...................... 1,258 2,456 9,625 4,962 12,308
------ ------ --------- ------- ----------
Gross profit....................... 1,357 1,863 4,213 2,015 6,083
Operating expenses
Selling and marketing............ 279 640 1,472 622 2,008
General and administrative....... 219 595 750 704 1,014
Royalty expense.................. 459 487 -- -- --
Amortization expense............. -- 52 202 130 136
------ ------ --------- ------- ----------
957 1,774 2,424 1,456 3,158
------ ------ --------- ------- ----------
Operating income................... 400 89 1,789 559 2,925
Other expense
Interest expense................. -- 87 315 222 162
Other, net....................... -- -- 45 -- --
------ ------ --------- ------- ----------
-- 87 360 222 162
------ ------ --------- ------- ----------
Income before income taxes......... 400 2 1,429 337 2,763
Provision for income taxes (Note
7)................................ 153 1 547 129 1,058
------ ------ --------- ------- ----------
Net income......................... $ 247 $ 1 $ 882 $ 208 $ 1,705
====== ====== ========= ======= ==========
Net income per share (Note 14)..... $ 0.17 $ 0.32
Number of shares used to compute
net income per share (Note 14).... 5,296,204 5,312,977
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

STATEMENTS OF DIVISIONAL EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
CAPITAL EARNINGS TOTAL
---------- -------- -------
<S> <C> <C> <C>
Balance January 1, 1994......................... $ -- $ -- $ --
Net income...................................... -- 247 247
----- ------- -------
Balance December 31, 1994....................... -- 247 247
Net income...................................... -- 1 1
----- ------- -------
Balance December 31, 1995....................... -- 248 248
Net income...................................... -- 882 882
----- ------- -------
Balance December 31, 1996....................... -- 1,130 1,130
Stock options granted........................... 298 -- 298
Net income...................................... -- 1,705 1,705
----- ------- -------
Balance August 31, 1997 (unaudited)............. 298 2,835 3,133
Assumed distribution of divisional equity (Note
15)............................................ (298) (2,835) (3,133)
----- ------- -------
Balance, August 31, 1997 pro forma (unaudited)
(Note 15)...................................... $ -- $ -- $ --
===== ======= =======
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
----------------------- --------------------
1994 1995 1996 1996 1997
----- ------- ------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income............. $ 247 $ 1 $ 882 $ 208 $ 1,705
Adjustments to
reconcile net income
to net cash from
operating activities
Deferred income
taxes............... (17) 10 124 97 (96)
Depreciation and
amortization........ 1 102 426 277 455
Provision for
doubtful accounts... -- 18 34 -- --
Loss on sale of
equipment........... -- -- 46 -- --
Stock option
compensation
expense............. -- -- -- -- 298
Changes in assets and
liabilities
Accounts
receivable........ (616) (735) (2,356) (971) (2,878)
Inventories........ (232) (314) (649) (290) (2,352)
Prepaid expenses
and other assets.. (32) (42) (323) (219) (655)
Accounts payable
and accrued
expenses.......... 91 188 1,317 1,225 5,620
----- ------- ------- -------- ----------
Net cash provided
by (used in)
operating
activities...... (558) (772) (499) 327 2,097
Cash flows from investing
activities
Purchases of property
and equipment......... (8) (48) (217) (115) (668)
Acquisition of BEI
assets................ -- (2,178) -- -- --
Proceeds from sale of
equipment............. -- -- 105 -- --
----- ------- ------- -------- ----------
Net cash used in
investing
activities...... (8) (2,226) (112) (115) (668)
Cash flows from financing
activities
Proceeds (payments) on
long-term debt........ -- 2,000 (1,122) (199) (271)
Net proceeds (payments)
on intercompany debt.. 566 998 1,733 (13) (1,158)
----- ------- ------- -------- ----------
Net cash provided
by (used in)
financing
activities...... 566 2,998 611 (212) (1,429)
----- ------- ------- -------- ----------
Net change in cash....... -- -- -- -- --
Cash at beginning of
period.................. -- -- -- -- --
----- ------- ------- -------- ----------
Cash at end of period.... $ -- $ -- $ -- $ -- $ --
===== ======= ======= ======== ==========
Supplemental disclosures
of cash flow information
Cash paid during the
year
Interest............. $ -- $ 41 $ 227 $ 100 $ 180
Supplemental schedule of noncash
investing and financing activities
The Company purchased
certain assets of BEI
for $4,343,475.
The purchase price
was allocated as
follows:
Production
equipment........... $ 73
Tooling.............. 1,146
Intangible assets.... 3,125
-------
Total purchase
price............. 4,344
Cash paid............ (2,178)
-------
Amount financed by
seller............ $ 2,166
=======
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies and practices followed by the Company
are as follows:

Description of Business: Brass Eagle (the "Company") is a leading
manufacturer of paintball guns and other paintball products and is a division
of Daisy Manufacturing Company, Inc. ("Daisy"). The Company sells its products
through both foreign and major national domestic retailers. In 1993, Daisy
began manufacturing, marketing and distributing paintball products under a
royalty arrangement with Brass Eagle, Inc., a Mississaga, Ontario, Canada
company ("BEI"). BEI also supplied manufactured component parts to Daisy. In
October 1995, Daisy purchased certain assets of BEI (see Note 2). Prior to the
purchase of assets from BEI in October 1995, the Company paid royalties to BEI
to sell paintball products under the Brass Eagle name. The financial
statements have been prepared using certain estimates and allocations (see
below) and include only the accounts of Brass Eagle, the paintball division of
Daisy Manufacturing Company, Inc.

Fiscal Year: The Company's fiscal year begins on January 1 and ends on
December 31 of each year.

Reorganization: Concurrently with the consummation of an initial public
offering of common stock Daisy Manufacturing Company, Inc. intends to effect a
corporate reorganization (the "Reorganization"). In preparation for the
Reorganization, Daisy Manufacturing Company, Inc. will change its name to
Brass Eagle. Concurrently with the Offering, the Company will cancel the
existing preferred stock and will transfer all of its non-paintball related
assets, operations and liabilities to a newly created subsidiary, Daisy
Manufacturing Company, a Delaware corporation ("New Daisy"), retaining only
its paintball related assets, operations and liabilities. The Company will
then distribute all of the issued and outstanding common stock of New Daisy to
the Company's existing stockholders in a spin-off transaction described under
Section 355 of the Internal Revenue Code of 1986, as amended. New Daisy will
agree to indemnify and hold harmless the Company and its directors, officers,
employees and shareholders from and against all liabilities and obligations
arising with respect to the Company's non-paintball related operations. In
addition, the Company will agree to indemnify and hold harmless New Daisy and
its directors, officers, employees and shareholders from and against all
liabilities and obligations arising with respect to the paintball related
operations.

Earnings Per Share: Earnings per share amounts were computed by dividing
earnings by the weighted average number of common shares outstanding after
giving effect to the number of shares to be outstanding after the
Reorganization, dilutive stock options and shares to be issued in the offering
whose proceeds will be used to pay divisional equity to New Daisy (See Notes
13, 14 and 15).

Revenue Recognition: The Company recognizes revenue, net of allowances for
estimated returns, upon shipment of product.

Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.

Property and Equipment: Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to expense as incurred
and expenditures for additions and improvements which significantly extend the
lives of assets are capitalized. Upon sale or other retirement of depreciable
property, the cost and accumulated depreciation are removed from the related
accounts and any gain or loss is reflected in operations.

Tools and dies are depreciated using the units of production method.
Manufacturing equipment and office equipment are depreciated over the
estimated useful lives of the assets, ranging from six to twelve years, using
the straight-line method. Amortization of leasehold improvements is based on
the shorter of the lease term or the useful life, using the straight-line
method.

F-7
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Intangible Assets: Intangible assets including the Brass Eagle name, and
debt financing costs are stated at amortized cost. Intangible assets are being
amortized over the useful life of the assets, primarily 15 years on a
straight-line basis, and debt financing costs are amortized over the period of
the related debt. Accumulated amortization was $52, $258, and $397 as of
December 31, 1995 and 1996 and August 31, 1997, respectively.

The valuation of intangible assets is reviewed on an ongoing basis by
comparing the unamortized cost of the asset to the related projected
undiscounted revenue streams. Any impairment is charged to operations in the
period determined.

Income Taxes: The Company has a tax allocation agreement with Daisy which
provides for income taxes to be payable by Brass Eagle on the same basis as if
the Company had filed a separate income tax return.

A deferred tax liability or asset is determined at each balance sheet date.
It is measured by applying enacted tax laws to future amounts that will result
from differences in the financial statement and tax bases of assets and
liabilities.

Financial Instruments: The carrying value of accounts receivable and
accounts payable approximates fair value because of the short maturity of
these items. Based on the current market rates available to the Company, the
fair value of long-term debt approximates carrying value.

Unaudited Financial Statements: The accompanying balance sheet as of August
31, 1997, the statements of operations, divisional equity and the related
statements of cash flows for the eight months ended August 31, 1996 and 1997
are unaudited but, in the opinion of management of the Company, include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the results of operations and cash flows for the eight month
period ended August 31, 1997. The data disclosed in these notes to financial
statements for these periods are also unaudited. The results of operations for
the eight month period ended August 31, 1997 are not necessarily indicative of
the results expected for the full calendar year.

Allocations and Use of Estimates: During the eight month period ended August
31, 1997 and the years ended December 31, 1996, 1995, and 1994, Brass Eagle
shared operational and administrative facilities with Daisy. As a result,
manufacturing, selling, and administrative expenses had to be allocated from
Daisy to Brass Eagle. Allocations were based on various activities including
quantity of inventory produced, quantity of inventory received, number of
shipments, headcount, and estimates of time spent on Brass Eagle. Management
believes these allocations are based on a reasonable method. Sales, returns,
material cost, and direct labor cost were not allocated because they could be
specifically identified to Brass Eagle.

Management must make estimates and assumptions in preparing financial
statements that affect the amounts reported therein and the disclosures
provided. These estimates, allocations, and assumptions may change in the
future and future results could differ.

F-8
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2--ACQUISITIONS

On October 1, 1995, Daisy purchased certain assets of BEI for $4,344. The
purchase price was allocated to equipment, tools, dies, jigs, molds, and
exclusive rights to the Brass Eagle name. The purchase price was allocated to
the tangible and intangible assets acquired as follows:

<TABLE>
<S> <C>
Production equipment............................................... $ 73
Tooling............................................................ 1,146
The Brass Eagle name............................................... 3,125
------
$4,344
======
</TABLE>

NOTE 3--INVENTORIES

Inventories consist of the following components:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- AUGUST 31,
1995 1996 1997
------------- ----------
<S> <C> <C> <C>
Finished goods...................................... $ 298 $ 437 $2,432
Raw materials....................................... 248 758 1,115
----- ------- ------
Total inventory................................... $ 546 $ 1,195 $3,547
===== ======= ======
</TABLE>

NOTE 4--PROPERTY AND EQUIPMENT

Property and equipment consist of the following major classifications:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- AUGUST 31,
1995 1996 1997
------ ------ ----------
<S> <C> <C> <C>
Tools and dies.................................... $1,186 $1,117 $1,424
Manufacturing equipment........................... 88 169 243
Leasehold improvements............................ -- -- 85
Office equipment.................................. -- 21 72
------ ------ ------
1,274 1,307 1,824
Accumulated depreciation.......................... (51) (237) (567)
------ ------ ------
1,223 1,070 1,257
Construction in progress.......................... -- -- 165
------ ------ ------
$1,223 $1,070 $1,422
====== ====== ======
</TABLE>

NOTE 5--LONG-TERM DEBT

The Company has a term loan agreement specifically allocated in the Daisy
credit facility at LIBOR plus 2.5%. This allocated portion along with
borrowings under the loan by Daisy Manufacturing are secured by all personal
assets including accounts receivable, inventory, property and equipment, and
intangible properties of both Daisy and Brass Eagle. As of December 31, 1995
and 1996, and August 31, 1997, the Company had $2,000, $1,800, and $1,500,
respectively, outstanding under this term loan agreement.

F-9
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The Company, through Daisy, also has a non-interest-bearing promissory note
of $2,500 with the prior owners of BEI, which is secured by the assets
purchased in the acquisition. This note has been discounted at 8.4% which was
the Company's incremental borrowing rate as of October 1, 1995, the inception
of the note. The present value of the note outstanding at December 31, 1995
and 1996 and August 31, 1997 was $2,166, $1,243, and $1,243, respectively.
Installments of principal and accrued interest are due as follows:

<TABLE>
<S> <C>
October 3, 1997................................. $ 650
January 31, 1998................................ 350
October 3, 1998................................. 395
------
$1,395
======
</TABLE>

Covenants related to the term loan agreement establish borrowing limitations
and net worth, interest coverage, and debt to equity and cash flow
requirements and impose restrictions on the disposition and purchase of assets
and the creation and retirement of debt for the parent company. As of December
31, 1996, the Company and Daisy were in compliance with the covenants or had
obtained the appropriate waivers from the lender.

Aggregate maturities of long-term debt as of December 31, 1996 and August
31, 1997 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31
-----------
<S> <C>
1997 .......................................... $1,151
1998 .......................................... 892
1999 .......................................... 500
2000 .......................................... 500
2001 .......................................... --
------
$3,043
======
</TABLE>

<TABLE>
<CAPTION>
AUGUST 31
---------
<S> <C>
1998........................................... $1,358
1999........................................... 900
2000........................................... 509
2001........................................... 5
------
$2,772
======
</TABLE>

NOTE 6--LEASES

The Company leases a manufacturing facility under an operating lease which
expires December 1999. In addition, the Company leases office facilities under
an operating lease which expires December 1999. Rent expense approximated $27
for the year ended December 31, 1996 and $43 for the eight month period ended
August 31, 1997. Previous to the Company entering into these leases, the
Company was allocated facility cost from Daisy. Total minimum rentals under
noncancelable operating leases over future years as of December 31, 1996 and
August 31, 1997 are:

<TABLE>
<CAPTION>
DECEMBER 31
-----------
<S> <C>
1997 .......................................... $ 91
1998 .......................................... 91
1999 .......................................... 91
2000 .......................................... --
----
$273
====
</TABLE>

<TABLE>
<CAPTION>
AUGUST 31
---------
<S> <C>
1998............................................ $ 136
1999............................................ 136
2000............................................ 45
-----
$ 317
=====
</TABLE>

F-10
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 7--INCOME TAXES

The income tax provision is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
---------------- -----------
1994 1995 1996 1996 1997
---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Current payable................................ $170 $ (9) $423 $ 32 $1,154
Deferred income taxes.......................... (17) 10 124 97 (96)
---- ---- ---- ---- ------
$153 $ 1 $547 $129 $1,058
==== ==== ==== ==== ======
</TABLE>

Income tax expense is reconciled to the tax expense that would result from
applying regular statutory rates to pretax income as follows:

<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
-------------- -----------
1994 1995 1996 1996 1997
---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Income taxes at the statutory rate............... $135 $ 1 $486 $115 $ 939
State taxes, net of federal benefit.............. 18 -- 61 14 119
---- --- ---- ---- ------
$153 $ 1 $547 $129 $1,058
==== === ==== ==== ======
</TABLE>

Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- AUGUST 31,
1995 1996 1997
------ ------- ----------
<S> <C> <C> <C>
Current deferred items
Accounts receivable allowance................... $ 7 $ 20 $ 20
Accrued warranty................................ 16 34 147
Accrued vacation................................ 5 10 17
Inventory valuation............................. 5 13 81
Accrued insurance............................... 5 6 --
----- ------- -----
38 83 265
Noncurrent deferred items
Accrued pension cost............................ 10 27 43
Accrued postretirement benefit cost............. 11 18 22
Stock options................................... -- -- 114
Depreciation and amortization................... (52) (245) (465)
----- ------- -----
(31) (200) (286)
----- ------- -----
$ 7 $ (117) $ (21)
===== ======= =====
</TABLE>

F-11
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 8--EMPLOYEE BENEFIT PLANS

Along with the Reorganization, the Company will assume responsibility for
pension and post-retirement benefits for retirees whose last work assignment
was with the Company (see Note 1). There will be no retirees assigned to the
Company. Until the Reorganization, the Company's financial statements will
include the costs experienced by the Daisy plans for employees who the Company
will assume responsibility.

RETIREMENT INCOME PLAN

The Company participates in the Daisy defined benefit pension plan, which
covers all employees. Daisy's funding policy is to contribute an amount equal
to the minimum required employer contribution under the Employee Retirement
Income Security Act of 1974 (ERISA). Plan assets are invested in various
mutual funds. The expense for this plan allocated to the Company for the years
ended December 31, 1994, 1995, and 1996 and for the eight-month periods ended
August 31, 1996 and 1997 was $8, $19, $44, $40 and $43, respectively. Pension
expense was allocated based on the earnings of the Company participants. The
Company's share of the accrued pension liability as of December 31, 1995, 1996
and August 31, 1997, was $27, $71 and $113, which was recorded by the Company.

As of December 31, 1996, Daisy had accrued pension liability of $2,487. As
part of the formation of the Company, approximately 50 employees of Daisy that
participated in the Daisy defined benefit pension plan will be transferred to
the Company. Most of these people have limited years of service with Daisy and
thus their pension benefit obligation is relatively minor. The Daisy plan
includes obligations for over 400 active Daisy employees and over 500 retirees
and vested terminated participants (none of which are assumed by the Company).
In total, the projected benefit obligation of the Company employee plan
participants is currently estimated to be less than 3% of the Daisy plan
projected benefit obligation.

A pro-rata portion, based on an actuarial valuation, of the Daisy plan
assets, liabilities and accrued benefits will be transferred to the Company
for the plan participants who transferred. The amount of assets which will be
transferred will equal, or exceed the Accumulated Benefit Obligation and is
expected to equal the Projected Benefit Obligation. The Company will establish
its own defined benefit pension plan.

Summarized information about the Daisy plan at December 31, 1996 is as
follows: Accumulated benefit obligation - $13,045, Projected benefit
obligation - $13,295, Plan assets - $11,299, Accrued liability - $2,487,
Service cost - $161, Interest - $1,014, Expected return on assets - $981,
Amortization of prior service costs - $20, Net expense - $214. The assumptions
used to calculate the accrued pension cost are as follows: 8% weighted average
discount rate used in determining the actuarial present value of the projected
benefit obligation, 6% expected rate of compensation increase and 9% long-term
rate of return on assets.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company also participates in a postretirement benefit plan maintained by
Daisy. Employees retiring from the Company on or after attaining age 60 with
ten years of service are entitled to postretirement health care benefits.
These benefits are subject to deductibles, copayment provisions, and other
limitations. After attaining age 65, an eligible retiree's health care benefit
coverage terminates. The expense for this plan allocated to Brass Eagle for
the years ended December 31, 1994, 1995, and 1996 and for the eight-month
periods ended August 31, 1996 and 1997 was $4, $25, $17, $16, and $13,
respectively.

F-12
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Immediately following the Reorganization, the Company will consider
establishing a separate post-retirement benefit plan for the employees of the
Company. Postretirement benefits will be funded as they are incurred.

As of December 31, 1995 and 1996, Daisy had an accrued postretirement
benefit liability of $1,100 and $1,016, respectively. There are no plan
assets. Based on the estimates described in this Note, the Company's share of
the accrued post-retirement costs as of December 31, 1995 and 1996 is $29 and
$46, respectively. As of August 31, 1997, the estimated liability was $59. The
actual amounts transferred will be measured at the Reorganization date and may
be different from these estimates. The assumptions used to calculate the
accrued postretirement cost are as follows: 8% weighted average discount rate
used in determining the actuarial present value of the accumulated
postretirement benefit obligation, 9.8% assumed health care cost trend,
declining by 1% per year to an ultimate rate of 5.5%.

NOTE 9--INTERCOMPANY DEBT

Brass Eagle's cash collection and cash disbursements are administered by
Daisy. The net cash disbursed in excess of the net cash received is classified
as intercompany debt. In addition, assets transferred from Daisy to the
Company and liabilities assumed from Daisy by the Company are also accounted
for through the intercompany debt account. There has been no interest expense
charged for the use of these funds. The following is a summary of the
intercompany activity:

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
----------------------- -------------------
1994 1995 1996 1996 1997
------ ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at the beginning of the
period......................... $ -- $ 566 $ 1,619 $ 1,619 $ 3,352
Cash received from customers.... (1,999) (3,602) (11,516) (6,006) (15,513)
Cash paid to suppliers and oth-
ers............................ 2,387 4,397 11,366 5,547 12,082
Interest paid................... -- 41 227 100 180
Income taxes payable to Daisy... 170 (9) 423 32 1,154
(Proceeds)/payments of long term
debt........................... -- (2,000) 1,122 199 271
Purchase of property and equip-
ment........................... 8 48 111 115 668
Purchase of Brass Eagle......... -- 2,178 -- -- --
------ ------ ------- -------- ---------
Balance at the end of the peri-
od............................. $ 566 $1,619 $ 3,352 $ 1,606 $ 2,194
====== ====== ======= ======== =========
Average balance outstanding..... $ 283 $1,093 $ 2,486 $ 1,613 $ 2,773
====== ====== ======= ======== =========
</TABLE>

F-13
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 10--MAJOR CUSTOMERS AND SUPPLIERS

Customers accounting for 10% or more of the Company's sales for the periods
presented are as follows:

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
---------------- ----------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customer A................................ * 10% 14% 15% 17%
Customer B................................ * * 22% 12% 33%
Customer C................................ 15% 15% * * *
Customer D................................ 11% * * * *
Customer E................................ 10% * * * *
Customer F................................ * * 10% * *
---- ---- ---- ---- ----
36% 25% 46% 27% 50%
=== === === ==== ====
</TABLE>
- --------
* Customer's sales were less than 10% of the Company's sales in these periods.

Accounts receivable balances to these customers were approximately $593,
$1,723 and $2,976 at December 31, 1995, December 31, 1996 and August 31, 1997,
respectively.

Because the Company does not manufacture its own paintballs, it has entered
into a strategic alliance with a paintball producer, pursuant to which the
Company has agreed to serve as such producer's exclusive worldwide paintball
distributor to all retail and wholesale outlets (other than paintball field
operators, to whom the Company is prohibited from selling during the terms of
the Agreement). This Agreement extends through August 1999, but is terminable
prior to that time upon one year's notice and contains certain provisions
which prohibit the Company from selling any competing products during the term
of the Agreement. Failure of this supplier to meet the Company's product needs
on a timely basis or loss of this supplier could have a material adverse
effect on the Company.

NOTE 11--RELATED PARTY TRANSACTIONS

The Company has been allocated costs in the amounts of $1,199, $2,327 and
$3,527 for the years ended December 31, 1994, 1995 and 1996, respectively, and
$1,488 and $3,128 for the eight month periods ended August 31, 1996 and 1997,
respectively. The costs represent costs associated with advertising,
promotions, utilities, insurance, customer service, warehousing, shipping,
human resources, information systems, finance and legal services. The Company
intends to begin to function on a stand alone basis during the second half of
1997. As part of operating on a stand alone basis, the Company is intending to
enter into an administrative services agreement for warehousing, shipping,
human resources, information system, credit and collections, and legal
services with New Daisy. The administrative services agreement will define
specific services to be provided and the fees related to these services.

During 1994, 1995, and 1996, and for the eight months ended August 31, 1996
and 1997, the expenses related to these services were allocated to Brass Eagle
as discussed in Note 1.

For the years 1994, 1995, and 1996, and for the eight months ended August
31, 1996 and 1997, there was no interest expense charged on the intercompany
debt.

NOTE 12--GEOGRAPHIC SEGMENTS

The Company sells paintball guns, paintballs, and accessories through both
foreign and major national domestic retailers. The following summarizes the
geographic segment activity:

<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
--------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues
United States........................ $2,471 $4,056 $11,845 $6,123 $16,760
Other geographic areas............... 144 263 1,993 854 1,631
</TABLE>

F-14
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 13--EMPLOYEE STOCK OPTIONS

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options. FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") was issued by the FASB and if fully
adopted changes the methods for recognition of cost on plans similar to those
of the Company. Adoption of SFAS 123 is optional; however, pro forma
disclosures as if the Company adopted the cost recognition requirements under
SFAS 123 are presented below.

Certain employees of the Company have stock options in Daisy. The stock
options consist of options granted when Charter Oak Partners and certain
members of management acquired Daisy on June 30, 1993. The options granted in
June 1993 reserved 5% of Daisy's common stock for issuance under the plan. The
options granted vested on September 15, 1997, because of the Offering, and are
exercisable until September 15, 2002. The exercise price of the options is
fixed at $1,000 per share, $0.56 per share adjusted to reflect a 1,777.96-for-
1 stock split (See Note 1). The exercise price of the options granted by Daisy
has generally been equal to or greater than fair market value at the date of
grant. Fair market value is determined by the Board of Directors without an
independent valuation. As of August 31, 1997, there were 105.6 shares granted
under this plan, 187,753 adjusted to reflect a 1,777.96-for-1 stock split (See
Note 1). Brass Eagle employees hold options to purchase 35.2 shares (62,584
adjusted to reflect the stock split) of common stock granted on June 30, 1993.
None of these options have been exercised as of August 31, 1997.

The Company also reserved 157 shares (279,140 adjusted to reflect the stock
split) on June 30, 1993, to be distributed at the discretion of Daisy's
compensation committee. The option price was fixed at $1,000 per share, $0.56
per share adjusted to reflect the stock split) and the options are exercisable
until June 1, 2003. As of August 31, 1997, 138.2 shares were granted under
this plan (245,714 adjusted to reflect the stock split). Brass Eagle employees
held options to purchase 47.1 shares of common stock (83,742 adjusted to
reflect the stock split) granted prior to August 31, 1997. None of these
options have been exercised as of August 31, 1997.

All 243.8 shares (433,467 adjusted to reflect the stock split) granted to
both Brass Eagle and Daisy employees by Daisy under the above stock option
plan are outstanding options to purchase the Company's stock and are currently
vested and exercisable whether they are held by Brass Eagle employees or Daisy
employees.

Information regarding Brass Eagle employees participating in the plan is
shown below adjusted to reflect a 1,777.96-for-1 stock split (see Note 1):

<TABLE>
<CAPTION>
NUMBER AMOUNT AGGREGATE
OF SHARES PER SHARE VALUE
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding at December 31, 1994..... 73,750 $0.56 $41,300
Granted...................................... 16,748 0.56 9,379
------- ----- -------
Options outstanding at December 31, 1995..... 90,498 0.56 50,679
Granted...................................... 22,331 0.56 12,505
------- ----- -------
Options outstanding at December 31, 1996..... 112,829 0.56 63,184
Granted...................................... 33,497 0.56 18,758
------- ----- -------
Options outstanding at August 31, 1997....... 146,326 $0.56 $81,942
======= ===== =======
</TABLE>

F-15
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

There was no compensation expense recorded for the years ended December 31,
1995 and 1996 because the exercise price equaled or exceeded the fair market
value of the option on the date of the grant. The Company recorded
compensation expense of approximately $298 for the eight month period ended
August 31, 1997 based on the estimated fair market value of the Company
including the anticipated consummation of an initial public offering (see
Notes 1 and 14) at that time of approximately $9.00 per share. The Company
determined the fair value of the options granted in August 1997 based on the
anticipated offering price to the public of $11 per share, less the estimated
expenses of the offering of approximately $1 per share and a discount to
reflect the lack of marketability of the Company's stock and risk prior to the
potential initial public offering. A deferred tax asset of approximately $114
has also been recognized for the book tax differences associated with the
options.

The Company's net income and net income per share would be the same under
SFAS 123 as under APB Opinion 25 for the years ended December 31, 1995 and
1996 because the options had no significant fair value on the dates
distributed. Under SFAS 123, the Company's pro forma net income would be
$1,703 or $0.32 per share. The weighted average fair value of options granted
in the eight month period ended August 31, 1997 was approximately $9.00 per
share. The following assumptions were used to calculate the option values:
exercise price $0.56, risk-free weighted average rate 5.7%, option term 4.0
years, dividend yield 0% and 30% volatility.

The effects of applying SFAS 123 are not indicative of future amounts. SFAS
123 does not apply to awards prior to 1995, and additional awards in future
years are anticipated.

Along with the reorganization and spin-off of New Daisy (see Note 1), the
Daisy employees will retain their stock options in the Company. These
individuals hold options to purchase 161.5 shares of common stock (287,141
adjusted to reflect the stock split) at $1,000 per share ($0.56 per share
adjusted to reflect the stock split).

NOTE 14--WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

As discussed in Note 1, the Company, concurrent with the consummation of the
initial public offering, will complete a reorganization. Accordingly, the
historical presentation of net income per common share is based on 2,592.24
shares plus the weighted average outstanding stock options and a 1,777.96-for-
one stock split, which occurred on November 24, 1997, and the number of shares
to be issued in the Offering whose proceeds will be used to pay the divisional
equity to Daisy as if the shares had been outstanding during all periods
presented.

NOTE 15--DISTRIBUTION PAYABLE

The Company intends to use a portion of the proceeds from the offering to
pay to Daisy the value of its divisional equity in the Company. The pro forma
balance sheet and statement of divisional equity reflect the pro forma
adjustment for the distribution of divisional equity as if it had occurred in
the period ended August 31, 1997.

NOTE 16--COMMITMENTS AND CONTINGENCIES

Because of the risks associated with the misuse of paintball products, the
Company anticipates that it will be a defendant in product liability lawsuits
from time to time. To date, the Company had been named as a defendant in one
product liability lawsuit and has had three other product liability claims
made against it for which no lawsuit has been filed. In each case, the alleged
injury was to the eye of a paintball participant. The lawsuit and one of the
claims were each resolved without any material cost or a material adverse
effect on the Company and its prospects. The Company believes that the other
two claims will also be resolved without any material cost or a material
adverse effect on the Company and its prospects. However, the Company expects
that the volume of such claims and suits will increase as sales increase.

F-16
<PAGE>

BRASS EAGLE/A DIVISION OF DAISY MANUFACTURING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AUGUST 31, 1997 AND FOR THE
EIGHT MONTHS ENDED AUGUST 31, 1996 AND 1997 ARE UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 16--COMMITMENTS AND CONTINGENCIES--(CONTINUED)

In addition, the Company, Daisy and certain other entities and individuals,
including certain of the Company's distributors, were named as defendants in
an action filed by Powerball, Inc., d/b/a TASO ("TASO") in Los Angeles County,
California Superior Court, Central District (Case No. BC181097) on November
12, 1997 seeking approximately $1.5 million in statutorily trebled damages
(based on compensatory charges of approximately $500,000), $10.0 million in
punitive damages, and temporary and permanent injunctive relief. TASO, which
is one of the Company's distributors, has alleged that the Company and the
other defendants have engaged in unlawful secret and discriminatory pricing
practices in violation of California law. Although the Company has not yet
formally answered this claim, based upon advice of counsel, it believes that
the claim is without merit and that it will be resolved without any material
cost or material adverse effect on the Company and its prospects.

F-17
<PAGE>

On the inside back cover is a collage of photographs depicting
individuals participating in paintball games on a HyperBall field, a trade show
booth displaying a variety of Brass Eagle products, and various photographs
depicting a shooting gallery product designed for the amusement industry.

<PAGE>

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

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN
THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
Corporate History........................................................ 16
Reorganization........................................................... 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 26
Management............................................................... 37
Certain Transactions .................................................... 43
Principal Stockholders................................................... 45
Description of Capital Stock............................................. 46
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 48
Legal Matters............................................................ 49
Experts.................................................................. 49
Additional Information................................................... 49
</TABLE>

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

UNTIL DECEMBER 22, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DE-
LIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.

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

2,275,000 SHARES

[LOGO OF BRASS EAGLE PAINTBALL PRODUCTS APPEARS HERE]

COMMON STOCK

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

PROSPECTUS

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

MCDONALD & COMPANY
SECURITIES, INC.

DAIN BOSWORTH
INCORPORATED

NOVEMBER 26, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------