SPORTSMANS GUIDE INC, 424B1, 1998-02-06

SPORTSMANS GUIDE INC
424B1, 1998-02-06
CATALOG & MAIL-ORDER HOUSES

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PROSPECTUS
1,800,000 SHARES

[LOGO]
COMMON STOCK

Of the 1,800,000 shares of Common Stock offered hereby (the "Shares"),
1,600,000 Shares are being sold by The Sportsman's Guide, Inc. (the "Company")
and 200,000 Shares are being sold by certain selling shareholders of the Company
(the "Selling Shareholders"). The Company will not receive any of the proceeds
from the sale of Shares by the Selling Shareholders. See "Principal and Selling
Shareholders."

Although the Common Stock was traded in the local over-the-counter market
under the symbol "SGDE" prior to this offering, such trading was limited and
sporadic. On February 4, 1998, the last reported sale price of the Common Stock
was $7.375 per share. See "Price Range of Common Stock." See also "Underwriting"
for the factors considered in determining the public offering price. The Common
Stock has been approved for listing on the Nasdaq National Market under the
symbol "SGDE".
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THE COMMON STOCK OFFERED BY THIS PROSPECTUS IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 5.
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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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<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
<S> <C> <C> <C> <C>
Per Share................ $6.50 $.52 $5.98 $5.98
Total(3)................. $11,700,000 $936,000 $9,568,000 $1,196,000
</TABLE>

(1) Excludes a non-accountable expense allowance equal to 2% of the total Price
to Public payable by the Company to the Representatives of the Underwriters
and issuance by the Company to the Representatives for nominal consideration
of a five-year warrant to purchase up to 100,000 shares of Common Stock
exercisable at 130% of the Price to Public. In addition, the Company and the
Selling Shareholders have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $832,000,
including the Representatives' non-accountable expense allowance, and
expenses payable by the Selling Shareholders estimated at $62,000. See
"Underwriting."
(3) The Selling Shareholders have granted the Underwriters a 30-day option to
purchase up to an additional 270,000 shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Selling Shareholders will be $13,455,000 , $1,076,400 and $2,810,600,
respectively. See "Underwriting."

The shares of Common Stock are offered severally by the Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to the right of the Underwriters to reject any order
in whole or in part and certain other conditions. It is expected that delivery
of the certificates for the Common Stock will be made against payment therefor
at the offices of Cruttenden Roth Incorporated, Irvine, California, on or about
February 10, 1998.
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<C> <S>
CRUTTENDEN ROTH JOHN G. KINNARD AND COMPANY,
I N C O R P O R A T E D I N C O R P O R A T E D
</TABLE>

THE DATE OF THIS PROSPECTUS IS FEBRUARY 5, 1998
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[INSIDE FRONT COVER]

[The Sportsman's Guide Logo]

[Photograph of camping scene with tent and man by fire, overlayed on mountain
scene]

The Sportman's Guide...
outfitting the nation's outdoorsmen with gear and clothing at discount prices

1-800-888-.30-06
www.sportsmansguide.com

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. SUCH TRANSACTIONS MAY INCLUDE STABILIZING BIDS, THE IMPOSITION OF
PENALTY BIDS, THE PURCHASE OF SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND
OVERALLOTMENTS IN CONNECTION WITH THE OFFERING. FOR A DISCUSSION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

"The Sportsman's Guide" and "The 'Fun-to-Read' Catalog" are registered
trademarks of the Company in the United States. Trade names and trademarks of
other companies appearing in this Prospectus are the property of their
respective holders.
<PAGE>
[INSIDE GATEFOLD]

Quality, Name Brand Products At Discount Prices
Sold To Over 1 Million Customers In The Last Year.

Hunting and Camping Gear. Footwear and Clothing. Military Surplus. Ammunition.
Gifts and More.

[Picture of various Company catalogs surrounded by
pictures of sample products sold by the Company.]
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS
REFLECTS A 1-FOR-10 REVERSE STOCK SPLIT EFFECTIVE MARCH 5, 1997. REFERENCES TO
FISCAL YEAR REFER TO THE COMPANY'S 52 OR 53 WEEK FISCAL YEAR ENDED THE FRIDAY
NEAREST DECEMBER 31 FOR YEARS PRIOR TO 1997 AND THE SUNDAY NEAREST DECEMBER 31
FOR 1997.

THE COMPANY

The Sportsman's Guide, Inc. (the "Company") is a leading mail order catalog
retailer of value priced outdoor, hunting and general merchandise. The Company
primarily targets men who are hunters, outdoorsmen and collectors, offering a
wide selection of high value products at low prices as well as unique products.
The Company sells its products through distinctive catalogs that are marketed as
The "Fun-to-Read" Catalog-Registered Trademark- featuring creative and expansive
use of art and copy to describe products in a humorous and entertaining fashion.
Products are offered for sale at what the Company advertises as "ridiculously
low prices," made possible by the Company's purchasing strategy, which is
increasingly focused on manufacturers' close-outs and military surplus items.
Products are routinely offered at savings of 25% to 60% from original retail
prices. The Company employs an information intensive management approach to
merchandising, marketing and customer list management, continually testing,
assessing and adjusting day-to-day activities as well as long-term strategies.
The Company's short catalog lead time (approximately 60 days) gives it a high
degree of flexibility to make changes in upcoming catalogs based on up-to-date
information. The Company believes that its niche marketing focus on the
value-oriented outdoorsman, together with its product offerings, catalog formats
and management strategy, position it uniquely within the direct marketing
industry.

According to industry reports, from 1992 to 1996 U.S. consumer catalog sales
volume grew at a rate of approximately 8% annually to an estimated $46 billion
in 1996. Between 1992 and 1996, U.S. catalog sales growth outpaced that of the
retail industry. The Company believes that its target market of value-oriented
men is a growing niche that is currently underserved, since most catalogs are
targeted to women. Industry data show that in 1996, 52% of American men bought
from catalogs, up from 38% in 1994.

The Company sells its products through monthly main catalogs and specialty
catalogs. Products offered include footwear, clothing and accessories, hunting
and shooting accessories, camping and outdoor recreation equipment, optics,
collectibles, gift items and a diverse range of additional offerings in other
product categories. The Company's catalogs consist of a changing mix of products
from catalog to catalog. The Company believes this dynamic product mix and the
humorous, entertaining format are key competitive advantages that keep customers
reading each catalog. In addition, the Company offers a high level of customer
service including a buyer's club, an interest free payment plan and an
unconditional return policy in an attempt to foster increased customer loyalty.
The monthly general catalog contains a wide variety of product offerings and is
sent to a relatively broad range of customers in the Company's targeted market.
The specialty catalogs offer a more narrow selection of product categories, but
a deep and broad selection of products in each featured category. Specialty
catalogs are sent to core groups of the Company's mailing list that have
demonstrated a propensity to buy products from the featured product category.
Product categories featured in specialty catalogs include footwear and apparel,
deer hunting equipment, camping equipment, military surplus and ammunition and
shooting supplies. The Company circulated 11 monthly and 18 specialty catalogs
which made up a total circulation of approximately 61 million catalogs in 1997.
Catalogs are mailed to persons selected from the Company's 3.6 million name
database and rented or exchanged mailing lists. Over one million customers have
purchased from the Company in the last 12 months.

The Company's predecessor was founded by Gary Olen in 1970 as a direct
marketer focused on the deer hunter. The Company's product offerings and
marketing efforts have evolved to broaden the Company's focus to include the
value-oriented male in general, and the outdoorsman in particular. In 1992, the
Company instituted a value pricing approach by which high quality products are
sold at below

2
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normal retail prices. The Company believes this value pricing approach has been
the key factor in its significant sales growth since that time, driving sales
from $38 million in 1992 to $112 million in 1996. In 1994, the Company began to
strengthen its management team in an effort to capitalize on the opportunity
represented by the recent sales growth. The Company has added experienced direct
marketing professionals in each of its key functional areas over the past few
years. The new management team has focused on improving profitability by
investing in advanced information systems to allow better and more timely
decision making, increasing the emphasis on higher margin manufacturers'
close-outs and military surplus items and implementing extensive cost control
programs.

The Company's strategy is based on five key elements: (i) expand and
capitalize on the value-oriented male niche; (ii) offer quality, name brand and
unique products at value pricing; (iii) provide a fun and convenient shopping
experience; (iv) manage by proactively using information systems; and (v)
capitalize on the Company's flexible structure and short catalog lead time.

The Company was incorporated under the laws of the State of Minnesota on
March 23, 1977 as The Olen Company, Inc. At that time the Company acquired the
business and assets of The Olen Company, a sole proprietorship owned by Gary
Olen, the President and Chief Executive Officer of the Company. In March 1986,
the Company changed its name to The Sportsman's Guide, Inc. The Company's
principal executive offices are located at 411 Farwell Avenue, South St. Paul,
Minnesota 55075, and its telephone number is (612) 451-3030. The Company's web
site address is www.sportsmansguide.com.

THE OFFERING

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<S> <C>
Common Stock offered by the
Company..................... 1,600,000 shares

Common Stock offered by the
Selling Shareholders........ 200,000 shares

Common Stock to be outstanding
after the offering.......... 3,959,649 shares(1)

Use of proceeds by the
Company..................... To repay subordinated notes payable, to repurchase Series A Preferred Stock and for working capital
and general corporate purposes. See "Use of Proceeds."

Nasdaq National Market
Symbol...................... SGDE
</TABLE>

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(1) Excludes 345,564 shares issuable upon the exercise of options and 695,603
shares issuable upon the exercise of warrants as of February 4, 1998.
Warrants covering 695,603 shares will expire 30 days following completion of
this offering if not exercised prior to such time. See "Shares Eligible for
Future Sale."

1989 BANKRUPTCY PROCEEDING

The Company operated as a debtor in possession under Chapter 11 of the
United States Bankruptcy Code from April to November 1989. Under the Company's
plan of reorganization, Vincent W. Shiel, the current Chairman of the Board of
the Company, and certain other investors purchased a controlling interest in the
Company equal to 70% of the Common Stock, purchased 20,000 shares of Series A
Preferred Stock and provided the Company with an operating loan. See "Certain
Transactions" and "Principal and Selling Shareholders." The reorganization plan
was consummated in January 1990.

3
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SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND SELECTED OPERATING DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------------------- ----------------------------
JAN. 1, DEC. 31, DEC. 30, DEC. 29, DEC. 27, SEPTEMBER 27, SEPTEMBER 26,
1993 1993 1994 1995 1996 1996 1997
--------- --------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................. $ 38,162 $ 60,191 $ 96,398 $ 101,832 $ 112,270 $ 69,273 $ 77,611
Earnings (loss) from operations....... 592 (26) 3,732 (1,229) 4,056 632 1,485
Net earnings (loss)................... 511 (478) 2,722 (1,744) 2,327 (72) 339
Net earnings (loss) per share(1):
Basic............................. $ .22 $ (.20) $ 1.17 $ (.75) $ 1.00 $ (.03) $ .15
Diluted........................... .22 (.20) 1.06 (.75) .96 (.03) .12
Weighted average shares
outstanding(1):
Basic............................. 2,333 2,333 2,333 2,334 2,334 2,334 2,335
Diluted........................... 2,335 2,333 2,576 2,334 2,431 2,334 2,884

SELECTED OPERATING DATA:
Gross profit as a percentage of
sales............................... 30.7% 29.5% 33.2% 34.1% 35.7% 34.1% 39.1%
Total catalogs mailed (000s).......... 12,698 21,886 39,312 54,436 42,908 28,344 39,557
Total active customers (000s)(2)...... 561 773 1,021 1,034 1,017 969 1,051
Income (loss) per advertising
dollar(3)........................... $ .09 $ .00 $ .24 $ (.06) $ .21 $ .05 $ .09
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 26, 1997
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ACTUAL AS ADJUSTED(4)
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BALANCE SHEET DATA:
Working capital........................................................................ $ 391 $ 8,165
Total assets........................................................................... 40,665 45,025
Long-term debt (less current maturities)............................................... 118 118
Shareholders' equity................................................................... 4,229 12,003
</TABLE>

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(1) See Note A-12 in the Notes to Financial Statements.

(2) An "active customer" is defined as a customer who has purchased merchandise
from the Company within 12 months preceding the end of the period indicated.

(3) "Income (loss) per advertising dollar" is defined as earnings (loss) from
operations divided by advertising expense.

(4) Adjusted to give effect to (i) the sale of 1,600,000 shares of Common Stock
by the Company and the application of the estimated net proceeds therefrom,
including the repayment of $3,414,000 of subordinated notes payable and the
repurchase of 20,000 shares of the Company's Series A Preferred Stock for
$1,000,000 and (ii) the issuance of 20,424 shares of Common Stock pursuant
to the exercise of warrants by a Selling Shareholder at an exercise price of
$1.88 per share.

4
<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE PURCHASING SHARES
OF COMMON STOCK OFFERED HEREBY.

RISKS ASSOCIATED WITH CATALOG RETAILING

The Company's success depends on the success of its catalog business, which
the Company believes is achieved through the efficient targeting of its
mailings, appropriate shifts in the Company's merchandising mix, the Company's
ability to achieve adequate response rates to its mailings and the Company's
ability to accurately forecast economic conditions and consumer demand. Catalog
mailings involve substantial postage, paper, printing and merchandise
acquisition costs which are incurred prior to the mailing of each catalog. If
for any reason the Company were to experience a significant shortfall in
anticipated sales from a particular catalog mailing and thereby not recover
costs associated with that catalog edition, the Company's business, financial
condition and results of operations could be adversely affected. In addition,
response rates and sales generated by each catalog mailing can be affected by
factors such as consumer preferences, economic conditions, timing of the
Company's and competitors' catalog mailings and merchandise mix. Any inability
of the Company to accurately target the appropriate customers or to achieve
adequate response rates could result in lower sales and lower margins which
could have a material adverse effect on the Company's business, financial
condition and results of operations.

DEPENDENCE ON SERVICE PROVIDERS

The Company's ability to distribute its catalogs and to fill customer orders
depends on services provided by third parties. The Company is dependent on (i)
outside printers to print and mail its catalogs, (ii) shipping companies and the
U.S. Postal Service for timely delivery of its catalogs and shipment of its
merchandise to customers and (iii) an outside call center to handle inbound
customer telephone orders when calls become backlogged or in the event of
telephone system failure. Any disruption in these services could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Operations and Fulfillment."

The United Parcel Service ("UPS") strike in August 1997 and related events
negatively impacted the Company's sales in the third quarter of 1997. Although
the Company is not dependent upon UPS to ship most of its products (other than
ammunition, which is shipped solely through UPS and accounted for approximately
5.7% of the Company's sales in 1997), management believes the UPS strike and
resulting publicity created a perception among buyers that orders could not be
delivered or that delivery would be significantly delayed. This perception
resulted in a decrease in orders for the Company's product offerings and
therefore suppressed sales. The Company was further impacted when the overloaded
U.S. Postal Service failed to deliver the Company's catalogs on a timely basis,
or at all, during and after the UPS strike. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations."

There is currently uncertainty regarding UPS's labor relations with its
in-house pilots union. The pilots have operated without a contract since 1995.
Although in January 1998 negotiators for the pilots union and UPS reportedly
reached a handshake agreement on a new contract that is expected to be ratified
by the pilots in March 1998, there can be no assurance that strikes, delays or
disruptions in service will not occur in the future. Such occurrences could have
a material adverse effect on the Company's business, financial condition and
results of operations.

INCREASES IN POSTAGE AND PAPER COSTS; PAPER AVAILABILITY

Increases in postal rates and paper costs have a significant impact on the
cost of production and mailing of the Company's catalogs and the shipment of
customer orders. Postage prices increase periodically, and the Company has no
control over increases that may occur in the future. The U.S. Postal Service

5
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has recently proposed an increase in postal rates which, if approved, could go
into effect in 1998. Paper prices historically have been cyclical and
significant increases have been experienced by the Company in the past.
Significant increases in postal rates or paper costs could have a material
adverse effect on the Company's business, financial condition and results of
operations, particularly to the extent the Company is unable to pass on such
increases directly to its customers or offset such increases by reducing other
costs.

In addition, the Company is dependent upon the availability of paper to
print its catalogs. Paper shortages have occurred in the past and may occur in
the future. Any such paper shortage may increase the Company's paper costs and
cause the Company to reduce its catalog circulation, change to a different
weight or grade of paper or reduce the number of pages per catalog. Such
increased costs or responsive actions could have a material adverse effect on
the Company's business, financial condition and results of operations.

LIST DEVELOPMENT AND MAINTENANCE

The Company mails catalogs to names in its proprietary customer database and
to potential customers whose names are obtained from rented or exchanged mailing
lists. Names derived from rented or exchanged lists generate lower response
rates while requiring the same or greater advertising expenses than names in the
Company's database. Consequently, overall response rates could decline while
expenses increase if the Company were to increase its use of rented or exchanged
lists relative to the use of names in its customer database. In addition, the
Company must constantly update its mailing list by identifying new prospective
customers and tracking purchases by existing customers. The Company uses
internally developed customer segmentation models to identify prospective and
existing customers to whom a catalog will be mailed. Inaccurate models or the
Company's failure to update its mailing list could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business-- Marketing."

There has been increasing public concern regarding right to privacy issues
involved with the rental and use of customer mailing lists among direct
marketing retailers. Any legislation enacted at the federal or state level
limiting or prohibiting this practice could have a material adverse effect on
the Company's new customer acquisition strategies.

DEPENDENCE ON SENIOR MANAGEMENT

The Company's success is dependent to a significant extent on the efforts of
members of senior management, including Gary Olen, the Company's President,
Chief Executive Officer and co-founder. The Company's ability to attract and
retain well-qualified senior management and other key personnel is crucial to
the Company's successful continued operations. The loss of any member of senior
management could have a material adverse effect upon the Company. The Company
maintains key-man life insurance on Mr. Olen and has entered into employment
agreements with certain of its senior managers. See "Management."

QUARTERLY FLUCTUATIONS AND SEASONALITY

The Company's sales and results of operations have fluctuated and can be
expected to continue to fluctuate on a quarterly basis as a result of a number
of factors, including: the timing of new merchandise and catalog offerings;
recognition of costs or sales contributed by new merchandise and catalog
offerings; fluctuations in response rates; fluctuations in postage, paper and
printing costs and in merchandise returns; adverse weather conditions that
affect response, distribution or shipping; shifts in the timing of holidays; and
changes in the Company's product mix. The Company recognizes the cost of catalog
production and mailing over the estimated useful lives of the catalogs, ranging
from four to six months from the catalog's in-home date. Consequently,
quarter-to-quarter sales and expense comparisons will be impacted by the timing
of the mailing of the Company's catalog editions.

6
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The majority of the Company's sales historically occur during the third and
fourth fiscal quarters. The seasonal nature of the Company's business is due to
the catalog's focus on hunting merchandise and related accessories for the fall,
as well as winter apparel and gifts for the holiday season. The Company expects
this seasonality will continue in the future. In anticipation of increased sales
activity during the third and fourth fiscal quarters, the Company incurs
significant additional expenses for hiring additional employees and building
inventory levels. If for any reason the Company's sales were to fall below its
expectations during the third and fourth fiscal quarters, the Company's
business, financial condition and results of operations could be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Fluctuations and Seasonality."

RISK OF CHANGING ECONOMIC CONDITIONS AND CONSUMER PREFERENCES

The Company's business is sensitive to changes in discretionary consumer
spending, which is controlled to a large extent by prevailing economic
conditions. A recession in the national or regional economies or uncertainties
regarding future economic prospects could affect consumer spending habits and
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company is also subject to risks associated with changing consumer
preferences. Failure to anticipate and respond to changes in consumer
preferences in a timely or commercially appropriate manner could lead to lower
sales or margins which could have a material adverse effect on the Company's
business, financial condition and results of operations.

RISKS OF BUSINESS INTERRUPTION OR DISASTER; DEPENDENCE ON SINGLE FACILITY

The Company's ability to receive, process and fulfill customer orders
depends on the effective operation of its telephone lines, operational and
management information systems, and warehouse and distribution facility. Any
material disruption in the Company's order receipt, processing or fulfillment
systems resulting from internal or external telephone system failure, electrical
problems, failure of the Company's information systems or other technical
problems could cause significant delays in the Company's ability to receive and
fill orders and may cause orders to be lost, shipped or delivered late or
cancelled by the customer. The Company maintains a single warehouse and
distribution facility at its headquarters in South St. Paul, Minnesota. If this
facility were to be destroyed or significantly damaged by fire or other
disaster, the Company would need to obtain alternative facilities and replenish
its inventory, either of which would result in significantly increased operating
costs and delays in fulfilling customer orders. The increased costs and delays
associated with such disruptions could have a material adverse effect on the
Company's business, financial condition and results of operations. While the
Company maintains business interruption insurance, there can be no assurance
that such levels of insurance will be adequate. Additionally, the Company's
lease on its warehouse and distribution facility expires in March 1999. If the
Company does not renew the lease, the Company would be required to move its
operations to another location and as a result could incur additional costs and
operating expenses. See "Business--Properties."

DEPENDENCE ON SOURCING MERCHANDISE

The Company offers a changing mix of products. This changing mix of products
presents certain unique challenges in finding merchandise for the Company's
catalogs. The Company's buyers must develop and maintain relationships with
vendors to locate sources for high quality, low price, name brand merchandise
they believe will interest the Company's customers. The Company competes with
non-catalog retailers for much of the merchandise offered in its catalogs. There
can be no assurance that the Company will be able to locate sources for or
maintain ongoing access to manufacturers' close-outs, military surplus and other
items featured by the Company or that such merchandise will be available to the
Company at the times or prices or in the quantities desired. See
"Business--Merchandising."

7
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COMPETITION

The direct marketing industry is highly competitive and fragmented. Although
the Company believes that no competitor offers as comprehensive a selection of
products at discount prices, the Company has significant competitors within each
merchandise category and may face competition from new entrants or existing
competitors who shift focus to markets currently served by the Company. These
competitors include other outdoor/hunting or discount mail order catalogs or
retailers. Some of these competitors are larger and have substantially greater
financial, marketing and other resources than the Company. An increase in the
amount of competition faced by the Company or its failure to compete effectively
against its competitors could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Competition."

INVENTORY COST AND MARK-DOWNS

The Company frequently purchases large quantities of manufacturers'
close-outs and other individual product items on an opportunistic or
when-available basis. The seasonal nature of the merchandise or the timing of
its acquisition may require that it be held for several months before being
offered in a catalog. This can result in increased inventory levels and lower
inventory turnover, thereby increasing the Company's working capital
requirements and related carrying costs. Increased inventory levels, lower
turnover rates and the inability to return manufacturers' close-outs, military
surplus and direct imported merchandise to vendors increase the risk of future
inventory mark-downs.

AVAILABILITY OF LABOR

The Company's executive offices, warehouse and distribution facilities are
located in South St. Paul, Minnesota. Due to the current low unemployment rate
in the Minneapolis/St. Paul metropolitan area, the Company faces a shrinking
pool of available labor and could experience labor shortages and higher labor
costs in the future, particularly when numerous additional employees are needed
for the Company's peak selling season. The Company uses dedicated agents at an
outside call center to meet its needs for additional qualified telemarketing
agents when the Company is unable to hire locally, which results in an increase
in the Company's operating costs. Such labor shortages and higher costs could
have a material adverse effect on the Company's business, financial condition
and results of operations.

MERCHANDISE RETURNS

The Company maintains a policy of making refunds or exchanges for all
merchandise returned by customers for any reason, and places no time limit on
this return policy. As the Company's merchandise mix of footwear and apparel has
increased so have merchandise returns. While the Company makes allowances in its
financial statements for anticipated merchandise returns based on historical
return rates, its history of forecasting footwear and apparel returns is
limited. Consequently, there can be no assurance that actual merchandise returns
will not exceed the Company's allowances. Any significant increase in
merchandise returns or merchandise returns that exceed the Company's reserves
could have a material adverse effect on the Company's business, financial
condition and results of operations.

CONTROL BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT

Upon completion of this offering, the current executive officers and
directors of the Company (including Vincent W. Shiel, the Chairman of the Board
of the Company, and members of his family as well as trusts for the benefit of
children and grandchildren) will beneficially own approximately 35.6% (30.1% if
the Underwriters' over-allotment option is exercised in full) of the outstanding
shares of Common Stock. Such persons will also beneficially own exercisable
warrants and options to purchase 658,386 shares of Common Stock, which if fully
exercised would result in such persons beneficially owning 44.8% (40.0% if the
Underwriters' over-allotment option is exercised in full) of the outstanding
shares of Common Stock.

8
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Of the warrants and options to purchase 658,386 shares, warrants for 410,522
shares are expected to be exercised within 30 days following completion of this
offering.

As a result of such ownership, such persons will be able to greatly
influence the outcome of shareholder votes including votes concerning the
election of directors and changes in control. Such a level of ownership can have
the effect of delaying or preventing a change in control of the Company and can
adversely affect the voting and other rights of the other holders of Common
Stock. In addition, the Company's Restated Articles of Incorporation provide
that shareholders may cumulate their votes for the election of directors, which
may allow shareholders owning less than a majority of the outstanding shares of
Common Stock to elect one or more directors. See "Principal and Selling
Shareholders" and "Description of Capital Stock."

GOVERNMENT REGULATION

The Company is subject to federal, state and local laws and regulations
which affect its business. Federal Trade Commission regulations govern the
manner in which orders may be solicited and prescribe other obligations in
fulfilling orders and consummating sales. Other laws and regulations prohibit or
limit the sale, in certain states and localities, of certain items offered in
the Company's catalogs such as black powder firearms, ammunition, bows, knives
and similar products. The failure to comply with such laws and regulations could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company sells black powder firearms, air guns, ammunition and shooting
accessories. Sales of these products accounted for approximately 15.6% of the
Company's sales in 1997. Government regulation of firearms can affect sales of
these ancillary firearm products, and any increase in such regulation could have
a material adverse effect on the Company's business, financial condition and
results of operations.

State and local government regulation of hunting can result in changes to
hunting seasons, bans or limitations on hunting or other similar restrictions.
Because a significant amount of the Company's sales are attributable to hunting,
such changes or restrictions could decrease the demand for certain of the
Company's products, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company presently does not collect sales or similar taxes on sales of
merchandise shipped to residents of states other than Minnesota. Various states
have sought to impose on direct marketers the burden of collecting state sales
and use taxes on the sale of merchandise shipped to residents of that state. The
U.S. Supreme Court has held that the various states, absent Congressional
legislation, may not impose tax collection obligations on an out-of-state mail
order company whose only contacts with the taxing state are the distribution of
catalogs and other advertisement materials through the mail, and whose
subsequent delivery of purchased goods is by mail or interstate common carriers.
If such legislation is ultimately enacted by Congress or if the Company
otherwise becomes subject to collection of additional sales or use tax, the
imposition of additional tax collection obligations could adversely affect
customer response rates and have a material adverse effect on the Company's
business, financial condition and results of operations.

SHARES ELIGIBLE FOR FUTURE SALE

As of February 4, 1998, the Company had outstanding 2,359,649 shares of
Common Stock, which does not include: (i) the 1,600,000 Shares offered by the
Company hereby, (ii) 345,564 shares of Common Stock issuable upon the exercise
of outstanding options, (iii) 220,000 shares of Common Stock issuable upon the
exercise of options granted contingent upon the completion of this offering or
(iv) 695,603 shares of Common Stock issuable upon the exercise of warrants which
must be exercised or will expire 30 days after this offering.

9
<PAGE>
Sales of substantial amounts of the Company's Common Stock could adversely
affect prevailing market prices of the Company's Common Stock and could impair
the Company's ability to raise additional capital. Of the shares of Common Stock
outstanding as of February 4, 1998 (other than the 200,000 Shares offered by the
Selling Shareholders hereby), approximately 411,086 shares are not subject to
the lock-up agreements described below and are freely tradeable pursuant to Rule
144(k) or other exemptions from registration under the Securities Act of 1933.
Approximately 1,748,563 shares of Common Stock outstanding as of February 4,
1998 are subject to lock-up agreements and will be eligible for sale 180 days
after the completion of this offering (approximately 891,464 of which will be
subject to the requirements of Rule 144). Additionally, holders of 264,364
options exercisable upon the completion of this offering and holders of 695,603
warrants have agreed not to offer, sell or otherwise dispose of the shares
issuable upon the exercise of such options and warrants for a period of 180 days
from the effective date of this offering without the prior written consent of
Cruttenden Roth Incorporated. Also, upon execution of the Underwriting
Agreement, the Company will sell the Representatives of the Underwriters a
five-year warrant to purchase up to 100,000 shares of Common Stock which
includes customary demand and participatory registration rights.

The warrants covering 695,603 shares will expire 30 days following
completion of this offering unless exercised prior to such time. The Company
expects that all or substantially all of the warrants will be exercised and
intends to register the resale of the 695,603 shares issuable thereunder
following the completion of this offering for the benefit of the warrant
holders. If so registered, such shares will be saleable by the holders thereof
in the public market subject to the restrictions of the lock-up agreements
described above. See "Shares Eligible for Future Sale" and "Underwriting."

PRODUCT LIABILITY EXPOSURE

The Company's products include black powder firearms, ammunition, machetes,
air guns, paintball guns, blank firing firearms, bows, slingshots, knives, stun
guns, blowguns, crossbows, certain non-lethal and chemical spray devices and
other potentially dangerous products. Although the Company is not a manufacturer
of any of these products, the sale of these products involves a risk of being
named as a party defendant in product liability litigation. No assurance can be
given that the Company's insurance will cover all potential claims arising from
the sale of such products or that the amount of the coverage will be adequate,
nor can assurance be given that adequate insurance coverage can be obtained in
the future at an acceptable cost or at all. Any uninsured or inadequately
insured claim or liability could have a material adverse effect on the Company's
business, financial condition and results of operations.

POSSIBLE VOLATILITY OF STOCK PRICE

Although the Company's Common Stock was traded in the local over-the-counter
market prior to this offering, such trading was limited and sporadic. The public
offering price has been determined by negotiation between the Company, the
Selling Shareholders and the Representatives of the Underwriters based on
several factors and may not necessarily reflect the market price of the Common
Stock after this offering or the price at which the Common Stock may be sold in
the public market after the offering. See "Underwriting."

The market price for the Common Stock may be significantly affected by such
factors as the Company's operating results, the actions of competitors, news
announcements or changes in general economic and market conditions. The Common
Stock has been approved for listing on the Nasdaq National Market. The Nasdaq
National Market has experienced a high level of price and volume volatility and
market prices for the stock of many companies have experienced wide price
fluctuations not necessarily related to the operating performance of the
companies.

10
<PAGE>
DILUTION

The following gives effect to the issuance of the Shares offered hereby, but
does not give effect to any exercise of outstanding options or warrants to
purchase an aggregate of 1,065,904 shares of Common Stock at an average exercise
price of $2.43 per share as of September 26, 1997. The book value of the
Company's Common Stock at September 26, 1997 was $4,229,000 or $1.81 per share.
"Book value" represents assets less liabilities of the Company, and "book value
per share" was determined by dividing the book value of the Company by the
number of shares of Common Stock outstanding on September 26, 1997. See
"Capitalization." "Dilution in book value per Share to new investors" represents
the difference between the Price to Public per Share and the pro forma book
value per share after this offering. Without taking into account any changes in
the Company's book value per share after September 26, 1997, other than to give
effect to (i) the sale of the Shares offered hereby (net of underwriting
discount and estimated offering expenses payable by the Company and prior to the
application of the estimated net proceeds) and (ii) the issuance of 20,424
shares pursuant to the exercise of warrants by a Selling Shareholder at an
exercise price of $1.88 per share, the pro forma book value of the Company at
September 26, 1997 would have been $13,003,000 or $3.28 per share. This
represents an immediate increase in book value to the existing shareholders of
$1.47 per share and an immediate book value dilution to purchasers of the Shares
of $3.22 per share, as illustrated by the following table:

<TABLE>
<S> <C> <C>
Price to Public per Share..................................... $ 6.50
Book value per share at September 26, 1997.................. $ 1.81
Increase per share attributable to new investors............ 1.47
---------
Pro forma book value per share after the offering............. 3.28
---------
Dilution in book value per share to new investors............. $ 3.22
---------
---------
</TABLE>

After the effect of applying $1,000,000 of the net proceeds to repurchase
the Company's Series A Preferred Stock, the pro forma book value of the Company
at September 26, 1997 would have been $12,003,000 or $3.03 per share. This
represents an immediate increase in book value to the existing shareholders of
$1.22 per share and an immediate book value dilution to purchasers of the Shares
of $3.47 per share.

The following table summarizes, on a pro forma basis, the difference between
the number of shares of Common Stock purchased from the Company by existing
shareholders (as of September 26, 1997, which does not include the issuance of
20,424 shares pursuant to the exercise of warrants by a Selling Shareholder at
an exercise price of $1.88 per share) and by new investors in this offering, the
total consideration paid to the Company and the average price paid per share.
The table assumes that no Shares are purchased in this offering by existing
shareholders. To the extent existing shareholders purchase Shares in this
offering, their percentage ownership, total consideration and average
consideration per Share will be greater than as shown.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- -------------------------- CONSIDERATION
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders............................... 2,339,225 59.4% $ 2,388,000 18.7% $ 1.02
New investors....................................... 1,600,000 40.6 10,400,000 81.3 6.50
---------- ----- ------------- -----
Total............................................... 3,939,225 100.0% $ 12,788,000 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,600,000 shares of
Common Stock offered by the Company are estimated to be approximately
$8,736,000, after deducting the underwriting discount and estimated offering
expenses payable by the Company. The Company intends to apply these proceeds
approximately as follows:

<TABLE>
<S> <C>
Repayment of subordinated notes
payable............................... $ 3,414,000
Repurchase of Series A Preferred
Stock................................. 1,000,000
Working capital and general corporate
purposes.............................. 4,322,000
-----------
Total................................. $ 8,736,000
-----------
-----------
</TABLE>

REPAYMENT OF SUBORDINATED NOTES PAYABLE. The Company plans to use
approximately $3,414,000 of the net proceeds to repay subordinated notes payable
due June 15, 1998. These notes are payable to certain of the Selling
Shareholders and others and bear interest at 1.75% over prime but not less than
9% per annum (10.25% at February 4, 1998). The subordinated notes payable were
issued in May 1996 to replace and renew subordinated notes issued in February
1994. See "Certain Transactions."

REPURCHASE OF SERIES A PREFERRED STOCK. The Company plans to use $1,000,000
of the net proceeds to repurchase 20,000 shares of the Company's Series A
Preferred Stock, representing all of the issued and outstanding Series A
Preferred Stock. The holders of the Series A Preferred Stock include certain
Selling Shareholders. See "Principal and Selling Shareholders." See also
"Certain Transactions" for a description of how the purchase price for the
Series A Preferred Stock was determined.

WORKING CAPITAL AND GENERAL CORPORATE PURPOSES. The Company plans to use
the balance of the net proceeds for working capital and general corporate
purposes. The Company may use a portion of the proceeds to increase purchases of
manufacturers' close-outs, military surplus and direct imported merchandise, and
to accommodate vendor payment terms required for cash discounts.

Pending such uses, the net proceeds may be invested in short-term,
investment-grade, interest-bearing securities or may be used to pay down
outstanding borrowings under the Company's revolving credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources."

The Company will not receive any of the proceeds from the sale of Shares by
the Selling Shareholders in this offering or upon the exercise of the
Underwriters' over-allotment option granted by the Selling Shareholders. See
"Principal and Selling Shareholders."

12
<PAGE>
PRICE RANGE OF COMMON STOCK

Although the Company's Common Stock was traded in the local over-the-counter
market prior to this offering, such trading was limited and sporadic. The
following table sets forth, for the periods indicated, the high and low closing
bid quotations for the Common Stock in the local over-the-counter market as
reported by Metro Data Company, a Minneapolis computer service bureau that
collects quotations for local market makers. Such quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and do not
necessarily represent actual transactions.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------

<S> <C> <C>
1995

First Quarter........................................... $10 $ 5 5/8
Second Quarter.......................................... 6 7/8 2 1/2
Third Quarter........................................... 5 2 1/2
Fourth Quarter.......................................... 3 1/8 15/16

1996

First Quarter........................................... 15/16 5/16
Second Quarter.......................................... 1 7/8 5/16
Third Quarter........................................... 1 7/8 1 7/8
Fourth Quarter.......................................... 2 1/2 1 1/2

1997

First Quarter........................................... 5 2 3/16
Second Quarter.......................................... 6 3 1/2
Third Quarter........................................... 6 7/8 5 1/2
Fourth Quarter.......................................... 7 3/8 5 1/4

1998

First Quarter (through February 4, 1998)................ 7 1/2 5 1/4
</TABLE>

On February 4, 1998, the last reported sale price of the Common Stock was
$7.375 per share. As of February 3, 1998, there were approximately 306 holders
of record of the Company's Common Stock.

The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "SGDE".

DIVIDEND POLICY

The Company has not previously declared or paid any cash dividends on its
Common Stock. The Company currently intends to retain all earnings for use in
its business in the foreseeable future. The Company is prohibited from paying
and declaring cash dividends under the terms of its revolving credit agreement.

13
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at
September 26, 1997, and as adjusted to give effect to (i) the sale of 1,600,000
shares of Common Stock by the Company and the application of the estimated net
proceeds therefrom, including repayment of the subordinated notes payable and
repurchase of the Series A Preferred Stock and (ii) the issuance of 20,424
shares pursuant to the exercise of warrants by a Selling Shareholder at an
exercise price of $1.88 per share.

<TABLE>
<CAPTION>
SEPTEMBER 26, 1997
----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------- -------------

SHORT-TERM DEBT:
Note payable--bank............................................................... $ 13,256,157 $ 13,256,157
Current maturities of long-term debt............................................. 44,023 44,023
Subordinated notes payable....................................................... 3,413,429 --
------------- -------------
$ 16,713,609 $ 13,300,180
------------- -------------
------------- -------------

LONG-TERM DEBT:
Note payable to a government agency.............................................. $ 115,000 $ 115,000
Other............................................................................ 3,184 3,184

SHAREHOLDERS' EQUITY:
Series A Preferred Stock--$.01 par value; 200,000 shares authorized; 20,000
shares issued and outstanding; no shares outstanding as adjusted............... 200 --
Common Stock--$.01 par value; 36,800,000 shares authorized; 2,339,225 shares
issued and outstanding; 3,959,649 shares as adjusted(1)........................ 23,392 39,596
Additional paid-in capital....................................................... 2,364,318 10,122,474
Accumulated earnings............................................................. 1,841,154 1,841,154
------------- -------------
Total shareholders' equity..................................................... 4,229,064 12,003,224
------------- -------------
Total capitalization......................................................... $ 4,347,248 $ 12,121,408
------------- -------------
------------- -------------
</TABLE>

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

14
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND SELECTED OPERATING DATA)

The following table sets forth certain historical financial and operating
data for the Company for the periods indicated. The Statement of Operations Data
and Balance Sheet Data as of and for each of the fiscal years ended January 1,
1993, December 31, 1993, December 30, 1994, December 29, 1995 and December 27,
1996 have been derived from the Company's Financial Statements audited by Grant
Thornton LLP, independent certified public accountants. The Selected Operating
Data as of and for the periods indicated were derived or computed from the
Company's circulation or accounting records or the Statement of Operations Data
identified above. The Statement of Operations Data and the Balance Sheet Data as
of and for the thirty-nine weeks ended September 27, 1996 and September 26, 1997
have been derived from the Company's unaudited financial statements. The
unaudited financial statements were prepared on the same basis as the audited
financial statements and, in the opinion of management, contain all normal
recurring adjustments necessary for a fair presentation of the information
presented. The Company's business is impacted by seasonal fluctuations and,
therefore, interim results are not necessarily indicative of results to be
expected for the full year. The information below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
THIRTY-NINE
FISCAL YEAR ENDED WEEKS ENDED
--------------------------------------------------------- -------------
JAN. 1, DEC. 31, DEC. 30, DEC. 29, DEC. 27, SEPTEMBER 27,
1993 1993 1994 1995 1996 1996
--------- ----------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales.......................................... $ 38,162 $ 60,191 $ 96,398 $ 101,832 $ 112,270 $ 69,273
Cost of sales.................................. 26,460 42,417 64,367 67,137 72,200 45,624
--------- ----------- ----------- --------- --------- -------------
Gross profit................................. 11,702 17,774 32,031 34,695 40,070 23,649
Selling, general and administrative expenses... 11,110 17,800 28,299 35,924 36,014 23,017
--------- ----------- ----------- --------- --------- -------------
Earnings (loss) from operations.............. 592 (26) 3,732 (1,229) 4,056 632
Interest expense............................... (111) (437) (582) (943) (981) (714)
Miscellaneous income (expense), net............ 30 (15) (43) 73 11 10
--------- ----------- ----------- --------- --------- -------------
Earnings (loss) before income taxes.......... 511 (478) 3,107 (2,099) 3,086 (72)
Income taxes................................... -- -- (385) 355 (759) --
--------- ----------- ----------- --------- --------- -------------
Net earnings (loss).......................... $ 511 $ (478) $ 2,722 $ (1,744) $ 2,327 $ (72)
--------- ----------- ----------- --------- --------- -------------
--------- ----------- ----------- --------- --------- -------------
Net earnings (loss) per share(1):
Basic...................................... $ .22 $ (.20) $ 1.17 $ (.75) $ 1.00 $ (.03)
--------- ----------- ----------- --------- --------- -------------
--------- ----------- ----------- --------- --------- -------------
Diluted.................................... $ .22 $ (.20) $ 1.06 $ (.75) $ .96 $ (.03)
--------- ----------- ----------- --------- --------- -------------
--------- ----------- ----------- --------- --------- -------------
Weighted average shares outstanding(1):
Basic...................................... 2,333 2,333 2,333 2,334 2,334 2,334
--------- ----------- ----------- --------- --------- -------------
--------- ----------- ----------- --------- --------- -------------
Diluted.................................... 2,335 2,333 2,576 2,334 2,431 2,334
--------- ----------- ----------- --------- --------- -------------
--------- ----------- ----------- --------- --------- -------------
SELECTED OPERATING DATA:
Gross profit as a percentage of sales.......... 30.7% 29.5% 33.2% 34.1% 35.7% 34.1%
Total catalogs mailed (000s)................... 12,698 21,886 39,312 54,436 42,908 28,344
Total active customers (000s)(2)............... 561 773 1,021 1,034 1,017 969
Income (loss) per advertising dollar(3)........ $ .09 $ .00 $ .24 $ (.06) $ .21 $ .05
BALANCE SHEET DATA:
Working capital (deficit)(4)................... $ 2,001 $ 1,296 $ 3,951 $ (2,463) $ 3,612 $ 652
Total assets................................... 8,623 14,546 21,179 23,709 27,890 28,491
Note payable--bank............................. -- -- -- 965 1,497 8,681
Subordinated notes payable..................... 660 1,160 3,660 3,414 3,414 3,414
Long-term liabilities excluding trade
creditors' obligation and subordinated notes
payable...................................... 102 740 379 287 678 204
Trade creditors' obligation.................... 785 785 635 -- -- --
Shareholders' equity........................... 1,048 570 3,292 1,548 3,875 1,476

SEPTEMBER 26,
1997
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Sales.......................................... $ 77,611
Cost of sales.................................. 47,234
-------------
Gross profit................................. 30,377
Selling, general and administrative expenses... 28,892
-------------
Earnings (loss) from operations.............. 1,485
Interest expense............................... (963)
Miscellaneous income (expense), net............ (4)
-------------
Earnings (loss) before income taxes.......... 518
Income taxes................................... (179)
-------------
Net earnings (loss).......................... $ 339
-------------
-------------
Net earnings (loss) per share(1):
Basic...................................... $ .15
-------------
-------------
Diluted.................................... $ .12
-------------
-------------
Weighted average shares outstanding(1):
Basic...................................... 2,335
-------------
-------------
Diluted.................................... 2,884
-------------
-------------
SELECTED OPERATING DATA:
Gross profit as a percentage of sales.......... 39.1%
Total catalogs mailed (000s)................... 39,557
Total active customers (000s)(2)............... 1,051
Income (loss) per advertising dollar(3)........ $ .09
BALANCE SHEET DATA:
Working capital (deficit)(4)................... $ 698
Total assets................................... 40,972
Note payable--bank............................. 13,256
Subordinated notes payable..................... 3,414
Long-term liabilities excluding trade
creditors' obligation and subordinated notes
payable...................................... 814
Trade creditors' obligation.................... --
Shareholders' equity........................... 4,229
</TABLE>

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

(1) See Note A-12 in the Notes to Financial Statements.

(2) An "active customer" is defined as a customer who has purchased merchandise
from the Company within 12 months preceding the end of the period indicated.

(3) "Income (loss) per advertising dollar" is defined as earnings (loss) from
operations divided by advertising expense.

(4) Working capital at December 29, 1995 and September 26, 1997 reflects the
effect of the subordinated notes payable being classified as current
liabilities.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF
FACTORS, INCLUDING GENERAL ECONOMIC CONDITIONS, A CHANGING MARKET ENVIRONMENT
FOR THE COMPANY'S PRODUCTS AND THE MARKET ACCEPTANCE OF THE COMPANY'S CATALOGS
AS WELL AS THE FACTORS SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.

OVERVIEW

The Company is a leading mail order catalog retailer of value priced
outdoor, hunting and general merchandise. The Company's predecessor was founded
by Gary Olen in 1970 as a direct marketer focused on the deer hunter. The
Company's product offerings and marketing efforts have evolved to broaden the
Company's focus to include the value-oriented male in general, and the
outdoorsman in particular. In 1992, the Company instituted a value pricing
approach by which high quality products are sold at below normal retail prices.
The Company believes this value pricing approach has been the key factor in its
significant sales growth since that time, driving sales from $38 million in 1992
to $112 million in 1996. In 1994, the Company began to strengthen its management
team in an effort to capitalize on the opportunity represented by the recent
sales growth. The Company has added experienced direct marketing professionals
in each of its key functional areas over the past few years. The new management
team has focused on improving profitability by investing in advanced information
systems to allow better and more timely decision making, increasing emphasis on
higher margin manufacturers' close-outs and military surplus items and
implementing extensive cost control programs.

RECENT OPERATING RESULTS

Sales for the thirteen weeks ended December 28, 1997 of $50.5 million were
$7.5 million or 17.5% higher than sales of $43.0 million for the same period
last year. Gross profit for the thirteen weeks ended December 28, 1997 was $21.5
million or 42.6% of sales compared to $16.4 million or 38.2% of sales for the
same period last year. Earnings from operations for the thirteen weeks ended
December 28, 1997 were $3.6 million or 7.1% of sales compared to earnings from
operations of $3.4 million or 8.0% of sales for the same period last year. Net
earnings for the thirteen weeks ended December 28, 1997 were $2.1 million or
4.2% of sales compared to net earnings of $2.4 million or 5.6% of sales for the
same period last year.

Sales for the fiscal year ended December 28, 1997 of $128.1 million were
$15.8 million or 14.1% higher than sales of $112.3 million for the fiscal year
ended December 27, 1996. Gross profit for fiscal 1997 was $51.9 million or 40.5%
of sales compared to $40.1 million or 35.7% of sales for fiscal 1996. Earnings
from operations were $5.0 million or 3.9% of sales in fiscal 1997 compared to
earnings from operations of $4.1 million or 3.6% of sales during fiscal 1996.
Net earnings for fiscal 1997 were $2.5 million or 1.9% of sales compared to net
earnings of $2.3 million or 2.1% of sales for fiscal 1996.

16
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth for the periods indicated information from
the Company's statements of operations expressed as a percentage of sales.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTY-NINE WEEKS ENDED
------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
DEC. 30, DEC. 29, DEC. 27, SEPTEMBER 27, SEPTEMBER 26,
1994 1995 1996 1996 1997
----------- ----------- ----------- --------------- ---------------
Sales................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................ 66.8 65.9 64.3 65.9 60.9
----- ----- ----- ----- -----
Gross profit....................................... 33.2 34.1 35.7 34.1 39.1
Selling, general and administrative expenses......... 29.4 35.3 32.1 33.2 37.2
----- ----- ----- ----- -----
Earnings (loss) from operations.................... 3.8 (1.2) 3.6 0.9 1.9
Interest expense..................................... 0.6 0.9 0.9 (1.0) (1.3)
----- ----- ----- ----- -----
Earnings (loss) before income taxes................ 3.2 (2.1) 2.7 (0.1) 0.6
Income taxes......................................... (0.4) 0.4 (0.7) -- (0.2)
----- ----- ----- ----- -----
Net earnings (loss)................................ 2.8% (1.7)% 2.0% (0.1)% 0.4%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 1997 COMPARED TO THE THIRTY-NINE WEEKS
ENDED SEPTEMBER 27, 1996

SALES. Sales for the thirty-nine weeks ended September 26, 1997 of $77.6
million were $8.3 million or 12.0% higher than sales of $69.3 million for the
same period last year. The increase in sales was due to a 40% increase in
catalog circulation, offset partially by the effects of a UPS strike in August
and September as well as lower customer response rates resulting from increased
catalog editions and the planned merchandising shift to higher margin products.
Although the Company is not dependent upon UPS to ship most of its products,
management believes the UPS strike and resulting publicity created a perception
among buyers that orders could not be delivered or that delivery would be
significantly delayed. This perception resulted in a decrease in orders for the
Company's product offerings and therefore suppressed sales. The Company was
further affected when the overloaded U.S. Postal Service failed to deliver
catalogs on a timely basis, or at all, during and after the UPS strike.
Management believes that the UPS strike and related events negatively impacted
sales by approximately $2.5 million in the third quarter.

The Company mailed 22 catalog editions, including 14 specialty editions,
during the thirty-nine weeks ended September 26, 1997 compared to 17 catalog
editions, including eight specialty editions, during the same period last year.
Gross returns and allowances for the thirty-nine weeks ended September 26, 1997
were $9.0 million or 10.4% of gross sales compared to $6.0 million or 7.9% of
gross sales for the same period last year. The increase was anticipated as part
of the merchandising strategy to offer more products in the apparel and footwear
categories, which tend to have higher return rates than other product
categories.

GROSS PROFIT. Gross profit for the thirty-nine weeks ended September 26,
1997 was $30.4 million or 39.1% of sales compared to $23.6 million or 34.1% of
sales for the same period last year. The increase in gross profit as a percent
of sales was due primarily to higher retail product margins which were the
result of the Company's ongoing plan to shift a larger percentage of product
offerings to higher margin manufacturers' close-outs and military surplus as
well as apparel and footwear.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the thirty-nine weeks ended September 26, 1997 were
$28.9 million or 37.2% of sales compared to $23.0 million or 33.2% of sales for
the same period last year. The dollar increase was primarily due to the 40%
increase in circulation. Total circulation during the thirty-nine weeks ended
September 26, 1997 was 39.6 million catalogs compared to 28.3 million catalogs
during the same period last year. The increase in

17
<PAGE>
catalog circulation was primarily due to a planned increase in the number of
specialty catalogs editions and increased efforts to develop new customers.
Advertising expense for the thirty-nine weeks ended September 26, 1997 was $17.0
million or 21.9% of sales compared to $12.7 million or 18.3% of sales for the
same period last year. The increase as a percent of sales was primarily due to
lower customer response associated with the number of catalog editions mailed to
existing customers, new customer prospecting, and lower customer response rates
which management believes were caused by the UPS strike during the third
quarter. The Company recorded $100,000 of recovered merger costs during the
thirty-nine weeks ended September 26, 1997 compared to $218,000 of merger
related expenses during the same period last year. These expenses were incurred
in connection with an Agreement and Plan of Merger entered into in March 1996
among the Company, VISTA 2000, Inc. and VISTA Acquisition Subsidiary, Inc. The
Company terminated the agreement in May 1996 based upon various breaches of the
agreement by VISTA 2000, Inc.

EARNINGS FROM OPERATIONS. Earnings from operations for the thirty-nine
weeks ended September 26, 1997 were $1.5 million or 1.9% of sales compared to
earnings from operations of $632,000 or 0.9% of sales for the same period last
year.

INTEREST EXPENSE. Interest expense for the thirty-nine weeks ended
September 26, 1997 was $963,000 compared to $714,000 for the same period last
year. The increase was primarily due to increased borrowings against the
revolving line of credit as a result of higher inventory levels.

INCOME TAXES. Income tax expense for the thirty-nine weeks ended September
26, 1997 was $179,000. No income tax benefit was recorded for the same period
last year due to a valuation allowance being recorded.

NET EARNINGS (LOSS). Net earnings for the thirty-nine weeks ended September
26, 1997 were $339,000 or 0.4% of sales compared to a net loss of $72,000 for
the same period last year.

FISCAL YEAR ENDED DECEMBER 27, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 29,
1995

SALES. Sales for fiscal 1996 of $112.3 million were $10.5 million or 10.3%
higher than sales of $101.8 million for fiscal 1995. The increase in sales was
due to an increase in customer demand. The Company mailed 22 catalog editions,
including ten specialty editions, each year during 1996 and 1995. Gross returns
and allowances for fiscal 1996 were $10.2 million or 8.3% of gross sales
compared to $7.3 million or 6.7% of gross sales in fiscal 1995. This increase
was due to the merchandising strategy of offering more products in the apparel
and footwear categories, which tend to have higher return rates than other
product categories.

GROSS PROFIT. Gross profit for fiscal 1996 was $40.1 million or 35.7% of
sales compared to $34.7 million or 34.1% of sales in fiscal 1995. The increase
in gross profit as a percent of sales was due to higher retail product margins
which were the result of the strategic plan to shift a larger percentage of
product offerings to higher margin manufacturers' close-outs and military
surplus as well as apparel and footwear.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $36.0 million or 32.1% of sales during fiscal 1996
compared to $35.9 million or 35.3% of sales during fiscal 1995. The decrease as
a percent of sales was primarily the result of an improved circulation plan
which lowered advertising expense as a percent of sales, offset slightly by
higher spending in other expense categories. The Company's catalog circulation
strategy for 1996 was to control advertising costs by reducing its mailings from
the previous year. The Company made more informed mailing decisions during 1996
due to the implementation of improved customer demand monitors, the creation of
new segmentation models and the timely delivery of the Company's catalogs. Total
circulation during 1996 of 42.9 million catalogs represented a 21% decrease from
the 54.4 million catalogs mailed during 1995. Advertising expense for fiscal
1996 was $19.5 million or 17.4% of sales compared to $21.6 million or 21.2% of
sales for fiscal 1995. The decrease as a percent of sales was due to increased
customer demand.

18
<PAGE>
EARNINGS (LOSS) FROM OPERATIONS. Earnings from operations were $4.1 million
or 3.6% of sales in fiscal 1996 compared to a loss from operations of $1.2
million during fiscal 1995.

INTEREST EXPENSE. Interest expense was $981,000 during fiscal 1996 compared
to $943,000 during fiscal 1995. The weighted average interest rate during 1996
was 10.6% compared to 9.2% during 1995 which reflected higher borrowing costs to
the Company in 1996 as a result of its performance in 1995.

INCOME TAXES. Income tax expense for fiscal 1996 was $759,000 compared to
an income tax benefit of $355,000 in fiscal 1995. The Company's effective tax
rate in 1996 was lower than the statutory tax rate due to the utilization of net
operating loss carryforwards and in 1995 was lower than the statutory rate due
to a valuation allowance being recorded. As of December 27, 1996, the Company
had fully utilized its net operating loss carryforwards.

NET EARNINGS (LOSS). Net earnings for fiscal 1996 were $2.3 million or 2.0%
of sales compared to a net loss of $1.7 million for fiscal 1995.

FISCAL YEAR ENDED DECEMBER 29, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
1994

SALES. Sales for fiscal 1995 of $101.8 million were $5.4 million or 5.6%
higher than sales of $96.4 million during fiscal 1994. The increase in sales was
a result of a 38% increase in total catalog mailings offset by lower than
anticipated customer demand. The Company mailed 22 catalog editions, including
ten specialty editions, during 1995 compared to 13 catalog editions, including
one specialty edition, during 1994. The lower than anticipated customer demand
was due to several late catalog mailings by the Company's printer and an overall
softness in the retail environment. Gross returns and allowances for fiscal 1995
were $7.3 million or 6.7% of gross sales compared to $6.8 million or 6.6% of
gross sales in fiscal 1994.

GROSS PROFIT. Gross profit for fiscal 1995 was $34.7 million or 34.1% of
sales compared to $32.0 million or 33.2% of sales in fiscal 1994. The increase
in gross profit as a percent of sales was primarily due to the Company
increasing shipping and handling charges on outgoing parcels to its customers.
Retail product margins as a percent of sales were virtually unchanged from 1994.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $35.9 million or 35.3% of sales in fiscal 1995
compared to $28.3 million or 29.4% of sales in fiscal 1994. The dollar increase
was primarily due to higher catalog mailings and increases in building rent and
equipment depreciation associated with an increase in the capacity of the
computer system, telephone switch and warehouse in anticipation of sales growth.
The late catalog mailings affected the overall accuracy of the information used
in making mailing decisions, causing the Company to incur costs associated with
ineffective mailings. The increase as a percent of sales was primarily due to
lower than anticipated customer response on virtually all catalogs along with
higher postage and paper costs. Total circulation during 1995 of 54.4 million
catalogs represented a 38% increase compared to 39.3 million catalogs during
1994. Advertising expense for fiscal 1995 was $21.6 million or 21.2% of sales
compared to $15.4 million or 15.9% of sales for fiscal 1994. The increase as a
percent of sales was due to lower customer response rates.

EARNINGS (LOSS) FROM OPERATIONS. The Company incurred a loss from
operations of $1.2 million in fiscal 1995 compared to earnings from operations
of $3.7 million or 3.8% of sales in fiscal 1994.

INTEREST EXPENSE. Interest expense for fiscal 1995 was $943,000 compared to
$582,000 in fiscal 1994. The increase was primarily due to significantly
increased borrowings against the revolving line of credit throughout 1995
partially due to higher inventory levels.

INCOME TAXES. The income tax benefit for fiscal 1995 was $355,000 compared
to income tax expense of $385,000 in fiscal 1994. The Company's effective tax
rate in 1995 was lower than the statutory tax rate

19
<PAGE>
due to a valuation allowance being recorded and in 1994 was lower than the
statutory tax rate due to the utilization of net operating loss carryforwards.
At December 29, 1995, the Company had net operating loss carryforwards of $3.8
million.

NET EARNINGS (LOSS). The net loss for fiscal 1995 was $1.7 million compared
to net earnings of $2.7 million or 2.8% of sales for fiscal 1994.

QUARTERLY FLUCTUATIONS AND SEASONALITY

The majority of the Company's sales historically occur during the third and
fourth fiscal quarters. The seasonal nature of the Company's business is due to
the catalog's focus on hunting merchandise and related accessories for the fall,
as well as winter apparel and gifts for the holiday season. The Company expects
this seasonality will continue in the future. In anticipation of increased sales
activity during the third and fourth fiscal quarters, the Company incurs
significant additional expenses for hiring additional employees and building
inventory levels. Management believes that sales during the third quarter of
fiscal 1997 were negatively impacted by the UPS strike and related events.

20
<PAGE>
The following table sets forth certain unaudited quarterly financial
information for the Company for the periods shown. In the opinion of management,
this unaudited information has been prepared on the same basis as the audited
information and includes all normal recurring adjustments necessary to present
fairly, in all material respects, the information set forth therein.

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FISCAL 1995
Sales............................................................... $ 23,859 $ 17,612 $ 24,579 $ 35,782
Gross profit........................................................ 8,624 5,707 8,269 12,095
Earnings (loss) from operations..................................... 276 (1,209) (844) 548
Net earnings (loss)................................................. 90 (1,046) (771) (17)

FISCAL 1996
Sales............................................................... $ 24,177 $ 18,611 $ 26,485 $ 42,997
Gross profit........................................................ 8,077 6,311 9,261 16,421
Earnings (loss) from operations..................................... 239 (248) 641 3,424
Net earnings (loss)................................................. 80 (471) 319 2,399

FISCAL 1997
Sales............................................................... $ 27,876 $ 23,245 $ 26,490
Gross profit........................................................ 10,516 9,181 10,680
Earnings (loss) from operations..................................... 1,192 462 (169)
Net earnings (loss)................................................. 625 70 (356)
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its operating cash requirements through
funds generated from operations and borrowings under its revolving line of
credit and from subordinated notes payable to shareholders and other investors.

The Company had working capital of $391,000 as of September 26, 1997,
compared to working capital of $3.6 million as of December 27, 1996 and negative
working capital of $2.5 million as of December 29, 1995. The increase of $6.1
million in working capital during 1996 was primarily the result of the Company's
improved profitability during 1996 and the renewal of the $3.4 million in
subordinated notes payable, maturing June 1998. The decrease of $3.2 million in
working capital during the thirty-nine weeks ended September 26, 1997 was the
result of the $3.4 million in subordinated notes payable being classified as a
current liability as of September 26, 1997, partially offset by year-to-date
earnings. The Company's working capital requirements have increased during the
thirty-nine weeks ended September 26, 1997 compared to the same period last year
primarily as a result of higher inventory levels and lower inventory turnover
which are consistent with the Company's strategic plan to increase product
margins through purchasing more manufacturers' close-outs. The Company purchases
large quantities of manufacturers' close-outs and other individual product items
on an opportunistic or when-available basis, particularly in the case of
footwear and apparel. The seasonal nature of the merchandise or the time of its
acquisition may require that it be held for several months before being offered
in a catalog. This can result in increased inventory levels and lower inventory
turnover, thereby increasing the Company's working capital requirements and
related carrying costs.

In November 1995, the Company began offering its customers an installment
credit plan with no finance fees, known as the "G.O. Painless 4-Pay Plan." Each
of the four consecutive monthly installments is billed directly to customers'
credit cards. The Company had installment receivables of $1.7 million at
September 26, 1997 compared to $2.3 million at December 27, 1996 and $1.2
million at December 29, 1995. The installment plan will continue to require the
allocation of working capital which the Company expects to fund from operations
and availability under its revolving credit facility.

21
<PAGE>
On April 18, 1997, the Company entered into an Amended and Restated Credit
and Security Agreement with Norwest Business Credit, Inc. increasing its
revolving line of credit from $10.0 million to $15.0 million, subject to an
adequate borrowing base, and extending the expiration date to May 2000. The
amended credit facility increased the limit for letters of credit to $5.0
million and the interest rate was reduced to the bank's prime rate. In September
1997, the Company further amended its credit facility to provide a revolving
line of credit up to $16.5 million, subject to an adequate borrowing base. The
additional $1.5 million of availability expired on December 15, 1997. All other
terms and conditions remained substantially the same as in the previous
agreement. The Company was in compliance with the credit agreement's covenants
as of September 26, 1997. As of September 26, 1997, the Company had borrowed
$13.3 million against the revolving credit line compared to $1.5 million at
December 27, 1996 and $965,000 at December 29, 1995. The increase during the
thirty-nine weeks ended September 26, 1997 was due to the $11.8 million increase
in inventory required to support the merchandising plan.

Cash flows used in operating activities for the thirty-nine weeks ended
September 26, 1997 were $10.7 million compared to $6.8 million for the same
period last year. The increase in cash flows used in operating activities was
primarily the result of increased inventory levels. Cash provided by operating
activities during fiscal 1996 was $662,000 compared to $1.3 million during
fiscal 1995. The net decrease in cash provided by operating activities resulted
primarily from an increase of $3.6 million in inventory and a decrease in
accounts payable, partially offset by the improved profitability of the Company
and an increase in accrued liabilities.

Cash used in investing activities during the thirty-nine weeks ended
September 26, 1997 was $1.0 million compared to $895,000 for the same period
last year and $1.1 million in fiscal 1996 compared to $1.8 million in fiscal
1995. During 1994, the Company began a multi-year project of replacing and
enhancing its operational and management information systems which has resulted
in significant capital expenditures being incurred each year to develop computer
software programs. Additionally, the Company has made investments to enhance
warehouse operations in terms of efficiencies and capacity. The Company has
continued the system development plan with additional hardware and software
upgrades totaling $668,000 for the thirty-nine weeks ended September 26, 1997
which have been funded from operations.

The Company believes that its available cash after this offering together
with cash flow from operations and borrowing capacity under its revolving credit
facility will be sufficient to fund operations and future growth for the next 12
months.

22
<PAGE>
BUSINESS

OVERVIEW

The Company is a leading mail order catalog retailer of value priced
outdoor, hunting and general merchandise primarily marketed to the outdoorsman.
The Company's broad selection of products are sold through distinctive main and
specialty catalogs which are advertised as The "Fun-to-Read"
Catalog.-Registered Trademark- The Company offers a large selection of high
value products at low prices including footwear, clothing and accessories,
hunting and shooting accessories, camping and outdoor recreation equipment,
optics, collectibles and gift items as well as a diverse range of additional
offerings in other product categories. In recent years, the Company has
aggressively pursued a strategy to provide manufacturers' close-outs of name
brand shoes, boots, apparel and general merchandise as well as military surplus
from around the world.

The Company's business was started in 1970 by Gary Olen, the Company's
President and Chief Executive Officer. Originally serving the deer hunter, the
Company's product offerings and marketing efforts have evolved to broaden the
Company's focus to include the value-oriented male in general, and the
outdoorsman in particular. In 1992, the Company began its value pricing strategy
of offering hunting and shooting equipment at discount prices, later adding
military surplus, manufacturers' close-outs and other lines of high value, high
margin merchandise that appeal to a broader group of customers. Due in large
part to the success of these strategies, the Company's sales have increased from
$38 million in 1992 to $112 million in 1996.

INDUSTRY AND MARKET

The catalog shopping industry has experienced substantial growth over the
past several years. According to industry reports, from 1992 to 1996 U.S.
consumer catalog sales volume grew at a rate of approximately 8% annually to an
estimated $46 billion in 1996. The U.S. consumer catalog industry is expected to
reach sales of at least $62 billion by 2001. Between 1992 and 1996, U.S. catalog
sales growth outpaced that of the retail industry. Of the total U.S. adult
population, 57% or 110 million adults shopped from catalogs in 1996. An industry
source estimates the size of the adult catalog shopper market will reach 158
million by 2001, up 44% from 1996. The Company believes that catalog sales will
continue to increase due to the convenience and time savings of catalog
shopping.

The majority of the Company's sales fall within two large product segments
of the U.S. catalog market: apparel and sporting goods. Together, the apparel
and sporting goods segments represent approximately 27% of the total dollar
volume of catalog sales in the United States.

Since most direct mail catalogs are targeted to women, the Company believes
the male catalog customer is an underserved segment of the market that
represents a significant opportunity. The proportion of men who are catalog
shoppers is increasing. Recent industry data suggest that 52% of men in the U.S.
bought from catalogs during 1996, up from 38% in 1994.

The Company believes that its niche marketing focus on the value-oriented
outdoorsman, together with its product offerings and growing sales of general
merchandise to men, has positioned it to continue to take advantage of
opportunities within this large and expanding market.

BUSINESS STRATEGY

The Company's objective is to maximize its niche of selling by direct mail
value priced outdoor and general merchandise. Key elements of the Company's
business strategy include:

EXPAND AND CAPITALIZE ON THE VALUE-ORIENTED MALE NICHE. The Company seeks
to expand its customer base and capitalize on its value-oriented male market
niche through increased circulation of its specialty catalogs, name acquisition
programs and new product offerings.

OFFER QUALITY, NAME BRAND AND UNIQUE PRODUCTS AT VALUE PRICING. The Company
offers high quality, name brand products along with unique and unusual products,
all at value pricing. The Company offers a

23
<PAGE>
changing mix of products which are hand picked and field tested to ensure
quality and maximize customer appeal.

PROVIDE A FUN AND CONVENIENT SHOPPING EXPERIENCE. The Company strives to
provide a fun and convenient shopping experience by combining its entertaining
catalog format with the convenience of direct mail shopping. The Company
emphasizes customer service and maintains sophisticated order entry and
fulfillment operations for efficient processing of customer orders.

MANAGE BY PROACTIVELY USING INFORMATION SYSTEMS. The Company proactively
uses its information systems in merchandising, marketing and list management to
test, assess and adjust day-to-day as well as long-term operating activities.
Timely, comprehensive information allows the Company to alter product mix in
future catalogs, adjust circulation plans, select target customers and change
prices on particular products in response to consumer preferences.

CAPITALIZE ON THE COMPANY'S FLEXIBLE STRUCTURE AND SHORT CATALOG LEAD
TIME. The Company's short catalog lead time (approximately 60 days) gives it a
high degree of flexibility to make changes in upcoming catalogs based on
up-to-date information. This enables the Company to manage its business on a
catalog by catalog, page by page, product by product basis to determine future
product offerings and the most profitable customer segments to target.

CATALOGS

The Company publishes main and specialty editions of The Sportsman's Guide
catalog. The Company mailed approximately 61 million catalogs to existing and
prospective customers in 1997.

FORMAT. The Company's catalogs are designed to be fun and entertaining.
Every catalog uses a highly promotional format that features various items at
sale prices. Unique to the Company is its product description, or copy. The
catalogs make creative and expansive use of art and copy to extensively describe
products with humorous text, call-outs, photos, photo captions and caricatures.
Copy is written in the first person from Gary Olen to the reader. The catalogs
are perceived by customers as having entertainment value and are advertised as
The "Fun-to-Read" Catalog.-Registered Trademark- Excerpts from the catalogs have
been featured in Jay Leno's "Headlines" segment on The Tonight Show. The copy
has also been singled out for its excellence by various publications within the
direct mail industry.

TYPES AND PURPOSES. Main catalog editions are mailed monthly and offer
selections of the Company's best selling products in a variety of product
categories. Main catalogs generate the majority of the Company's sales. The
Company also uses its main catalog as its primary prospecting catalog to test
new names and new products. Response data from main catalog mailings is used to
create specialty catalogs. New customers continue to receive monthly main
catalogs in addition to specialty catalogs featuring the product categories in
which they have shown an interest through past purchases.

Specialty catalogs contain wide selections of products from a single product
category. The Company identifies the product categories for its specialty
catalogs based on demand generated for certain categories in the Company's main
catalogs. The Company first tested the specialty catalog concept in 1994 and
found it to be successful. The Company has since developed the concept into
numerous specialty editions. During 1997, the Company published 18 specialty
catalogs targeting buyers of footwear and apparel, deer hunting equipment,
ammunition and shooting supplies, military surplus, camping equipment and
holiday gifts. The Company plans to continue to develop and test new specialty
titles.

The specialty titles allow the Company to utilize a customized marketing
plan for individual consumer groups thereby maximizing response rates and
minimizing advertising costs as a percentage of sales. The Company believes that
its specialty catalog titles have been an important component in its sales
growth and have allowed the Company to expand its sales to existing customers
and to broaden sales to new customers beyond the Company's historical customer
profile.

24
<PAGE>
CREATION. All catalogs are created and designed in-house by the Company's
creative services department which produces the advertising copy and layouts for
each catalog. Substantially all of the photographs used in the catalogs are
taken at the Company's in-house photo studio. Artwork and copy for the catalog
are transmitted in digital format from the Company's desktop publishing systems
to a pre-press vendor and then to the printer, which prints and mails the
catalogs. These capabilities allow the Company to preserve the catalog's
distinctive character and allow the Company greater control of the catalog
production schedule, which reduces the lead time necessary to produce catalogs.
The Company is able to prepare and mail a catalog in approximately 60 days,
which allows it to offer new merchandise quickly to its customers, thereby
maximizing pricing opportunities while minimizing inventory carrying costs. The
Company believes this turnaround time is one of the fastest in the direct
marketing industry. Because the Company uses a value-oriented sales approach,
the Company is able to use a lower weight and grade of paper than its
competitors to reduce its catalog production costs.

MERCHANDISING

The Company's products originally were limited to a small selection of
merchandise targeted to the deer hunter. The Company's product offerings have
gradually evolved to a broader range of merchandise intended to appeal to the
value-oriented outdoorsman. The Company offers a changing mix of products from
catalog to catalog.

PRODUCTS. The Company's products include footwear, clothing and
accessories, hunting and shooting accessories, camping and outdoor recreation
equipment, optics and ammunition as well as a diverse range of offerings in
other product categories. The Company sells high value, low price, name brand
products, as well as unique and unusual products which appeal to its targeted
customer base and provide value to customers. The following graph shows the
Company's sales by product category for 1997:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Footwear 24.5%
Clothing and Accessories 22.4%
Hunting and Shooting Accessories 9.9%
Camping and Outdoor Recreation 8.4%
Optics 7.8%
Ammunition 5.7%
Domestics 4.3%
Novelty and Collectibles 4.1%
Hardware, Tools and Automotive 3.3%
Electronics 2.9%
Knives 2.2%
Other 4.5%
</TABLE>

25
<PAGE>
MERCHANDISE MIX. The Company historically offered a changing mix of in-line
products. In-line products are those products regularly available from
manufacturers. As a complement to its value pricing approach, in 1996 the
Company began aggressively pursuing manufacturers' close-outs of name brand
shoes, boots, clothing, watches and other merchandise, which it offers to its
customers at savings of 25% to 60% from original retail prices. The Company also
offers military surplus from around the world, providing customers a low-cost
alternative for items such as wool coats and pants, shirts, gloves, underwear,
blankets, boots, sleeping bags, jackets, backpacks, skis and snowshoes.

The Company's merchandising strategy has been to shift its merchandise mix
to a larger percentage of manufacturers' close-outs, military surplus and other
higher margin product categories including apparel and footwear, and to reduce
the number of lower price point items, while maintaining a broad selection of
products. This strategy has added to the Company's customer base value-oriented
purchasers who may not otherwise be identified as pure outdoorsmen. This
strategy has also contributed to significant increases in the Company's overall
gross profit margins.

SOURCING. The Company's buyers actively seek sources for products they
believe will interest the Company's targeted customers. The Company seeks to
maintain existing and develop new relationships with vendors to provide ongoing
access to manufacturers' close-outs, military surplus and other items. Buyers
regularly attend trade shows, meet with vendors and make mass mailings and cold
calls to locate high quality, low price, name brand merchandise as well as
unusual or unique products. The Company frequently purchases large quantities of
close-outs and other individual items on an opportunistic or when-available
basis. The capability to purchase large quantities in a short time period makes
the Company a unique and desirable outlet for manufacturers looking to sell
overstocked or discontinued products.

The Company purchases its merchandise from more than 1,000 suppliers and
generally purchases all of its product needs for a particular item from one
vendor. No single supplier accounted for more than 10% of the Company's
purchases during 1997, and the Company believes there are numerous sources for
products in its merchandise categories.

SELECTION. The Company's buyers and merchandising staff along with Gary
Olen collectively select the merchandise to be offered to customers by
evaluating product availability, pricing, historical demand, emerging
merchandise trends and expected product profitability. Each product is
hand-picked, and most are field tested by Company buyers to ensure quality,
functionality and proper sizing in order to maximize appeal to customers.

INVENTORY MANAGEMENT. Once merchandise has been selected, the Company's
rebuyers are responsible for ordering all merchandise, determining the quantity
and arrival date, managing inventory levels, assessing customer demand,
adjusting estimates, cancelling orders for slow-moving merchandise and
reordering merchandise. Utilizing the Company's information systems, buyers and
rebuyers meet seven days following each catalog mailing to monitor product sales
and take responsive action. Slow-moving merchandise is actively promoted through
telemarketing, clearance sales, package stuffers or, when possible, is returned
to the vendor.

As part of its merchandise liquidation strategy, the Company maintains a
retail outlet store at its warehouse and distribution facilities in South St.
Paul, and opened a second retail store in Moundsview, Minnesota in 1997, from
which it sells discontinued, overstocked, returned and regular catalog
merchandise. The retail stores provide a liquidation outlet and serve to
minimize inventory mark-downs.

CATALOG CONTENT. The merchandise offered in the catalogs is determined
based on product availability and the catalog in-home delivery date.
Manufacturers' close-outs are offered when available. Close-outs and military
surplus merchandise purchased in large quantities are normally placed in the
Company's main catalogs. If a supply of merchandise is limited, it is usually
offered in a specialty catalog or is included in a multiple page insert in the
main catalog mailed to a targeted customer segment. Numerous products are

26
<PAGE>
shown on each page giving the catalog a dense look and adding to the Company's
value-oriented image. Product sales are analyzed item by item to identify trends
and help plan future merchandise offerings.

MARKETING

The Company's marketing programs are based on gathering, analyzing and
organizing information on its customers. The Company believes that because it
offers such a broad mix of merchandise, it is particularly important for it to
fully understand its customers.

CUSTOMER DATABASE. The Company maintains a proprietary customer database in
which it stores detailed information on each customer in the Company's customer
list, including demographic data and purchasing history. The Company's customer
database contains over 3.6 million house names, including over one million
customers who have made purchases within the last 12 months. The customer
database is updated regularly with information as new purchases are recorded.

CUSTOMER SEGMENTATION. The Company has developed its own customer
segmentation models to segment its customer list according to many variables,
allowing the Company's marketing department to analyze each segment's buying
patterns. The Company statistically validates the results of each of its catalog
mailings. The data is used to further segment the customer database to refine
the frequency and selectivity of the Company's catalog mailings in an effort to
maximize response rates and profitability.

LIST DEVELOPMENT. The Company's new customer acquisition program is
designed to cost-effectively identify and capture new customers that fit its
customer profile. New customers are acquired principally through the use of
targeted mailings to individuals identified through mailing lists rented or
exchanged from other catalog companies, retail subscription lists, and lists of
names compiled from businesses whose customers have interests similar to those
of the Company's customers. The Company is generally entitled to make one
mailing to each name obtained through a rented or exchanged mailing list. If the
prospect responds, the name is added to the Company's database and may be freely
used by the Company in the future. The Company is also pursuing new sources of
prospective customers, such as those who request catalogs through advertising,
through the Company's web site or from customer referrals. New customers
accounted for approximately 18% of the Company's sales during 1997.

Once new customers are acquired, the Company's objective is to maximize the
long-term profit potential from these customers. With ongoing refinements in the
Company's approach to merchandising and marketing, the Company has increased the
frequency and quantity of mailings to the most profitable segments of its
existing customer list. Demographic and regression analyses of historical
purchasing patterns of existing customers, including recency, frequency and
monetary modeling, are performed to assist in merchandising and customer
targeting and to increase sales to existing customers. Existing customers
accounted for approximately 82% of the Company's sales during 1997.

MARKETING PROGRAMS AND PROMOTIONAL FORMATS. The Company strives to develop
promotional formats that will stimulate customer purchases. Successful
promotional formats include catalog cover designs, different catalog covers (or
wraps), free gifts and promotional tag lines such as "last chance" offers.

The Company employs a disciplined approach to its marketing activities. The
Company tests a sample of new names before mailing to a new customer group,
tests price and shipping charge changes, tests new list sources and tests
marketing programs and promotional formats before full-scale implementation to
ensure customer acceptance and cost-effectiveness. Two significant, successful
marketing programs implemented by the Company are a buyer's club and an
installment payment plan.

- BUYER'S CLUB. The Company's buyer's club offers its members exclusive
merchandise not offered to other customers as well as a merchandise
discount of 10% on regularly priced items and 5% on sale items and special
buys. Customers can purchase a one year membership in the Company's
buyer's club for a $29.99 fee, or a two or three year membership for a fee
of $53.99 and $80.99, respectively.

27
<PAGE>
- INSTALLMENT PAYMENT PLAN. The Company's installment payment plan, known as
the "G.O. Painless 4-Pay Plan," is available to credit card customers with
orders of $50 or more. Payments under the plan consist of 25% of the
merchandise charges (plus 100% of any shipping charges and buyer's club
fees, if applicable) at the time of shipment with three equal installments
in 30 day increments, which are automatically charged to the customer's
credit card. No interest or additional fees are charged by the Company to
customers who elect the 4-Pay Plan.

CUSTOMER SERVICE. A key element of the Company's marketing strategy is its
commitment to customer service. The Company has a toll-free customer service
telephone line separate from its inbound ordering lines. The Company maintains a
separate customer service department staffed with full-time customer service
representatives who answer customer inquiries, reply to complaints and assist
customers in returning merchandise. The customer service department personally
responds to all customer correspondence. The Company's commitment to customer
service is supported by its unconditional guarantee which allows customers to
return merchandise for any reason and at any time for refund or exchange if they
are not satisfied with the merchandise.

WEB SITE. The Company maintains a web site which allows customers to
request catalogs and provides information on special product offerings. Although
customers cannot order merchandise from the web site, customers can e-mail the
Company with questions about products, pricing and availability. The Company is
collecting e-mail addresses and plans to use e-mail communications in its future
marketing efforts. The address of the Company's web site is
www.sportsmansguide.com.

OPERATIONS AND FULFILLMENT

INBOUND CALLS. The Company maintains an in-house call center. Approximately
75% of customer orders are placed through the Company's toll-free telephone
lines which are staffed 24 hours per day, seven days a week, with the remaining
25% of orders received by mail or facsimile. The Company's telephone system
consists of an expandable AT&T GR3 digital switch which currently has ten T-1
lines. Computer telephony integration software identifies the caller and, if
known, accesses the customer's records simultaneously with answering the call.
When fully staffed, the Company has the capacity of handling up to 2,500 calls
per hour on average, and the Company believes that its current capacity is
sufficient to handle demand in the foreseeable future.

The Company also contracts with an outside call center to handle calls on an
as-needed basis. If calls become backlogged or in the event of telephone system
failure, back-up systems and rerouting capabilities allow the outside call
center to handle inbound telephone orders. The outside call center has access to
inventory availability, mirrors existing call processing and allows the Company
to maintain its call standards.

OUTBOUND TELEMARKETING. The Company maintains a small outbound
telemarketing department as part of its telephone sales operations.
Telemarketers contact existing customers who have previously purchased
collectibles and supply items such as ammunition to offer them similar products.
Outbound telephone sales accounted for approximately 1% of the Company's sales
during 1997.

ORDER ENTRY. The Company's telemarketing department is staffed with
individuals who are familiar with the products offered in the catalogs and can
offer assistance to customers on availability, color, size and other
information. Telemarketers use a catalog sales system with pre-written
merchandise descriptions and sales offers and are provided monetary incentives
to sell additional merchandise to customers who order by phone. During 1997,
add-on sales averaging $10 per order were made to approximately 28% of all
inbound phone orders.

Processing of customer orders is coordinated and handled by the Company's
on-line order entry system. Telephone orders are entered directly into the
system. Mail orders are batched and, after payment is verified, are then entered
into the system. The system is also used in connection with all other order

28
<PAGE>
entry and fulfillment tasks including credit authorization, order picking and
packing and shipment. During 1997, the Company's on-line order processing system
handled in excess of 1.7 million orders.

CREDIT AND PAYMENT TERMS. Customers can pay for orders by check or major
credit card. Orders are shipped after credit card charges are approved or checks
are received. Charges are not billed to customer credit cards until the orders
are ready for shipment.

PICKING AND PACKING. Through its fulfillment and delivery methods, the
Company strives to be a low cost operator in the direct mail industry. The
Company uses an integrated computer-driven picking, packing and shipping system.
The system edits orders and generates warehouse pick tickets and packing slips.
Packers are provided monetary incentives to ensure accuracy of orders, which has
contributed to the Company's distribution accuracy rate in excess of 99% during
1997. During its peak season, the Company normally ships in excess of 20,000
packages in a single shift. The Company believes it has sufficient additional
capacity available for the foreseeable future which can be utilized by adding
more shifts and working days.

SHIPPING. The Company promises next business day shipping on orders
received by 7 p.m. for in-stock merchandise. Virtually all of the Company's
merchandise is stocked at, and shipped from, its facility in South St. Paul,
Minnesota, although a small percentage of merchandise is drop-shipped directly
to the customer by specific vendors. The Company primarily utilizes the U.S.
Postal Service and, to a lesser extent, UPS for shipment of merchandise to
customers. Ammunition, which accounted for approximately 5.7% of the Company's
sales in 1997, is shipped exclusively via UPS. The Company utilizes a
consolidating shipper for delivery of merchandise to the U.S. Postal Service. A
shipping fee is charged on each customer order based on the total dollar amount
ordered. The Company will expedite shipping for an additional fee. The Company's
fulfillment system automatically determines the lowest cost method of shipping
each order.

INVENTORY CONTROL. The Company's merchandise mix results in the Company
maintaining a broad selection of products as well as large quantities of
individual products. Consequently, inventory management is an important
component of its operations. The Company employs a cycle count (perpetual
inventory) procedure which eliminates wall-to-wall physical counts and resulted
in 99.6% inventory accuracy during 1997.

RETURNS. The Company maintains an unconditional return policy which permits
customers to return merchandise for any reason at any time for refund or
exchange. Returned merchandise is restocked, sold in the retail outlets,
returned to the supplier or scrapped. Returns processors are provided monetary
incentives to ensure accuracy of returns processing.

SEASONAL STAFFING. The Company adjusts the number of employees to meet
variable demand levels, particularly during the peak selling season, which
includes the months of November and December. To meet increased order volume
during the Company's peak selling season, the Company hires a significant number
of temporary employees.

INFORMATION SYSTEMS AND TECHNOLOGY

The Company has developed an integrated management information system which
the Company expects to be fully redundant by the second quarter of 1998. In
addition to on-line order entry and processing, the information system also
provides support for merchandising, inventory management, marketing and
financial and management reporting. The on-line access to information allows
management to monitor daily trends and the performance of merchandise and
planning functions.

The Company's main hardware platform is the IBM RISC 6000 series of
computers. The Company uses a Unidata database operating system. The Company
believes that its recent investment in the IBM RISC 6000 processors and its
operating system will provide the Company with an adequate platform to

29
<PAGE>
support its growth plan. Based on an internal review, the Company believes its
systems are year 2000 compliant.

COMPETITION

The direct marketing industry includes a wide variety of specialty and
general merchandise retailers in a highly competitive and fragmented business
environment. The Company sells its products to customers in all 50 states and
competes in the purchase and sale of merchandise with all retailers. The Company
believes that no competitor offers as comprehensive a selection of products at
discount prices. However, there are other mail order catalogs as well as
discount retailers that offer similar products to those found in the Company's
catalogs. Examples of other outdoor/hunting catalogs include Bass Pro Shops Inc.
and Cabela's Inc. Although these catalogs may compete with the Company in
certain product categories, none focuses directly on the value-oriented
outdoorsman niche. Discount retailers, such as Wal-Mart Stores, Inc. or Kmart
Corporation, offer selected products similar to those found in the Company's
catalogs. See "Risk Factors--Competition."

REGULATION

The Company is subject to federal, state and local laws and regulations
which affect its catalog mail order operations. Federal Trade Commission
regulations, in general, govern the manner in which orders may be solicited, the
information which must be provided to prospective customers, the time in which
orders must be shipped, obligations to customers if orders are not shipped
within the time promised, and the time in which refunds must be paid if the
ordered merchandise is unavailable or if it is returned. In addition, the
Federal Trade Commission has established guidelines for advertising and labeling
many of the products sold by the Company.

The Company is also subject to a variety of state laws and regulations
relating to, among other things, advertising, pricing, charging and collecting
state sales or use tax and product safety/restrictions. Some of these laws
prohibit or limit the sale, in certain states or localities, of certain items
offered in the Company's catalogs such as black powder firearms, ammunition,
bows, knives and similar products. State and local government regulation of
hunting can also affect the Company's business. See "Risk Factors--Government
Regulation."

SERVICE MARKS

The Company's service marks "The Sportsman's Guide" and "The 'Fun-to-Read'
Catalog" have been registered with the United States Patent and Trademark
Office. "The Sportsman's Guide" mark has also been registered in Canada.

EMPLOYEES

As of January 18, 1998, the Company employed 858 individuals, including
full-time and part-time associates. During 1997, the Company's seasonal
employment ranged from a high of approximately 1,060 employees (plus an
additional 70 temporary workers) in November to a low of approximately 590
employees in early June. None of the Company's employees are currently covered
by a collective bargaining agreement. The Company considers its employee
relations to be good.

PROPERTIES

The Company's executive offices, warehouse and distribution facilities are
located at 411 Farwell Avenue, South St. Paul, Minnesota. The Company leases
approximately 320,000 square feet at this facility under a triple net lease
expiring March 1999. The lease includes a three year renewal option at fair
market value rental rates. The Company conducts all of its catalog operations at
this facility, which also includes a retail outlet store from which it sells
discontinued, overstocked, returned and regular catalog merchandise.

30
<PAGE>
The Company is exploring alternative sites for its operations in the event its
lease is not renewed. The Company also leases approximately 14,000 square feet
in Moundsview, Minnesota where it opened a second retail outlet store in 1997.
The Company believes its facilities are sufficient for its current operating
plan.

LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceedings other than
litigation which is incidental to its business and which the Company believes is
not material.

31
<PAGE>
MANAGEMENT

DIRECTORS AND OFFICERS

Set forth below is certain information about the Company's directors and
officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Vincent W. Shiel, 64 Chairman of the Board(1)(2)
Ph.D.................
Gary Olen.............. 55 President, Chief Executive Officer and Director(1)
Gregory R. Binkley..... 49 Executive Vice President, Chief Operating Officer and Director
Charles B. Lingen...... 53 Senior Vice President of Finance, Chief Financial Officer, Secretary,
Treasurer and Director
William G. Luth........ 48 Senior Vice President of Marketing
John M. Casler......... 47 Vice President of Merchandising
Barry W. Benecke....... 52 Vice President of Creative Services
Bernard S. Bauhof...... 50 Vice President of Information Systems and Technology
Leonard M. Paletz...... 62 Director(2)(3)
Mark F. Kroger......... 44 Director(3)
William T. Sena........ 60 Director(1)(2)(3)
</TABLE>

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

(1) Member of Executive Committee

(2) Member of Compensation Committee

(3) Member of Audit Committee

VINCENT W. SHIEL, PH.D. has been a director of the Company since 1990 and
was elected Chairman of the Board in 1994. Dr. Shiel owns an interest in and
serves as a director of ABN Sports Supply, Inc. ("ABN Sports"), a wholesale
firearms distributor. Dr. Shiel is a principal shareholder and has served as
President and a director of Outdoor Consulting, Inc., a management consulting
firm, since 1988. From 1984 to 1988, Dr. Shiel served on the board of directors
and owned a controlling interest in Gander Mountain, Inc. ("Gander Mountain"),
then a retail mail order catalog company specializing in outdoor sporting
equipment. Dr. Shiel resigned as a director of and sold his controlling interest
in Gander Mountain in 1988. Dr. Shiel was the principal owner and President of
Outdoor Sports Headquarters, Inc., a hunting and sporting goods wholesaler, from
its formation in the early 1960s until 1978.

GARY OLEN is a co-founder of the Company and served as its Executive Vice
President and Secretary from its incorporation in 1977 until December 31, 1993.
Mr. Olen was elected President and Chief Executive Officer of the Company in
1994. Mr. Olen has been a director of the Company since its incorporation. From
1970 to 1977, Mr. Olen was employed as the Marketing Director for Fidelity File
Box, Inc. ("Fidelity File Box"), which sells corrugated storage products, office
and industrial equipment and office industrial supplies through mail order
catalogs. From 1967 to 1970, Mr. Olen was a Merchandise Manager with C&H
Distributors, a business-to-business mail order catalog specializing in the sale
of industrial and office equipment. From 1960 to 1967, Mr. Olen was employed in
the catalog division of J.C. Penney Company. Mr. Olen was also the sole
proprietor of the predecessor of the Company, The Olen Company, founded in 1970.

GREGORY R. BINKLEY has been a director of the Company since 1995. Mr.
Binkley has been employed by the Company since February 1994 and was elected
Vice President in April 1994, Senior Vice President of Operations and Chief
Operating Officer in 1995 and Executive Vice President in 1996. From 1993 to
1994, Mr. Binkley served as an independent operations consultant. From 1990 to
1993, Mr. Binkley was employed by Fingerhut Companies, Inc. ("Fingerhut"), a
mail order catalog business, as Director of Distribution. From 1988 to 1990, Mr.
Binkley was Director of Distribution with Cable Value Network, Inc., a cable
television retailer. From 1975 to 1988, Mr. Binkley was employed by Donaldsons
Department

32
<PAGE>
Stores, a division of Allied Stores Corporation, serving as Vice President of
Finance and Operations from 1987 to 1988 and Vice President of Operations from
1981 to 1987.

CHARLES B. LINGEN has been a director of the Company since 1995. Mr. Lingen
has been employed by the Company since May 1994 as its Chief Financial Officer,
Vice President of Finance and Treasurer, in 1995 was elected Secretary and in
1996 was elected Senior Vice President of Finance. From 1973 to 1994, Mr. Lingen
was employed by Fingerhut, serving as Vice President of Finance and Controller
from 1989 to 1994.

WILLIAM G. LUTH has been employed by the Company since June 1995, was
elected Vice President of Marketing in December 1995 and in 1996 was elected
Senior Vice President of Marketing. Mr. Luth was employed by Fingerhut from 1994
to 1995 as General Manager Motorsports Marketing, served as an independent
consultant to two direct marketing catalog firms from 1993 to 1994, was employed
by Lands' End, Inc., a mail order catalog business, from 1992 to 1993 as
Managing Director/Canada and was employed by Fingerhut from 1982 to 1992 where
he served in various marketing and management positions including Vice President
Marketing--Figi's Inc. from 1991 to 1992, Director--Telemarketing from 1989 to
1990 and Director--Customer List Marketing from 1985 to 1989.

JOHN M. CASLER has been employed by the Company since January 1996 and was
elected Vice President of Merchandising in January 1997. Mr. Casler was employed
by Gander Mountain from 1989 to 1995, where he served as Division Merchandise
Manager from 1990 to 1995. Prior to that time, Mr. Casler held merchandise
management positions at Munson Sporting Goods Co., Inc. from 1985 to 1989 and at
the Target Stores Division of Dayton Hudson Corp. from 1982 to 1985.

BARRY W. BENECKE has been employed by the Company since July 1996 as Senior
Director--Creative Services and was elected Vice President of Creative Services
in July 1997. Mr. Benecke was employed by CyDeCosse Inc., a direct marketing
company, from 1990 to 1996 as Vice President of Creative Services, and Fingerhut
from 1983 to 1990 as Creative Director. Prior to 1983, Mr. Benecke managed his
own advertising/design firm for 13 years.

BERNARD S. BAUHOF has been employed by the Company since July 1996 as Senior
Director-- Information Systems and Technology and was elected Vice President of
Information Systems and Technology in July 1997. Mr. Bauhof was employed by
CyDeCosse Inc. from 1994 to 1996 as Director of Information Systems, by The
MusicLand Group, Inc. from 1990 to 1994 as Director of Distributed Systems, by
Zetaco Inc., a manufacturer of optical disc servers, from 1988 to 1990 as
Director of Software Engineering and by CPT Corporation, a network printing
company, from 1980 to 1988 as Software Engineering Director.

LEONARD M. PALETZ is a co-founder of the Company and served as Chairman of
the Board, Chief Executive Officer, Treasurer and a director from the Company's
incorporation in 1977 until 1994. Mr. Paletz resigned his offices of Chairman of
the Board, Chief Executive Officer and Treasurer in May 1994, and retired as an
employee of the Company effective December 31, 1994. Mr. Paletz also served as
the Company's President from its incorporation through December 31, 1993. From
1962 to 1977, Mr. Paletz was employed by Fidelity File Box in various positions
including Vice President and General Manager and was also a director and
shareholder of Fidelity File Box.

MARK F. KROGER has been a director of the Company since 1990. He is the
former Chairman of the Board, President, Chief Executive Officer and Treasurer
of ABN Sports. Mr. Kroger served as President and a director of ABN Sports from
1987 to December 1997. Mr. Kroger also served as the Chairman of the Board,
President and Chief Executive Officer of LMV, Inc. dba Ohio Powder Company, a
wholesale distributor of gun powder, from 1995 to December 1997 and as the
President and a director of MKS Supply, Inc., a marketer and seller of firearms
to distributors, from 1993 to December 1997. Mr. Kroger was employed by Outdoor
Sports Headquarters, Inc. from 1973 to 1985 where he held various positions in
sales and merchandising.

33
<PAGE>
WILLIAM T. SENA has been a director of the Company since 1990. He is an
investment advisor with Sena Weller Rohs Williams, Inc., an investment advisory
firm. Mr. Sena has been associated with such investment advisory firm and its
predecessor since 1965. Mr. Sena is also a director of Phoenix Medical
Technology, Inc.

EXECUTIVE COMPENSATION

The following table sets forth the cash compensation paid to the Chief
Executive Officer and to each of the other executive officers of the Company
whose total annual salary and bonus for fiscal 1996 exceeded $100,000 (the
"Named Executive Officers") for services rendered in all capacities to the
Company for each of the fiscal years indicated.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
-------------------- ------------
SALARY BONUS OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
- ------------------------------------------------------------ ------- --------- --------- ------------
<S> <C> <C> <C> <C>
Gary Olen .................................................. 1996 137,127 158,000 38,950
President and Chief Executive Officer 1995 126,253 -- --
1994 125,000 95,571 21,875

Gregory R. Binkley ......................................... 1996 103,275 86,500 21,210
Executive Vice President and Chief 1995 98,269 -- --
Operating Officer 1994(1) 76,827 47,785 5,313

Charles B. Lingen .......................................... 1996 97,218 79,500 17,670
Senior Vice President of Finance, Chief Financial Officer 1995 90,816 -- --
and Secretary/Treasurer 1994(2) 49,759 19,114 1,875

William G. Luth ............................................ 1996 94,311 79,500 17,670
Senior Vice President of Marketing 1995(3) 42,489 -- --
</TABLE>

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

(1) Mr. Binkley was employed by the Company in February 1994. Salary paid in
1994 consists of amounts paid from such date to the end of the fiscal year.

(2) Mr. Lingen was employed by the Company in May 1994. Salary paid in 1994
consists of amounts paid from such date to the end of the fiscal year.

(3) Mr. Luth was employed by the Company in June 1995. Salary paid in 1995
consists of amounts paid from such date to the end of the fiscal year.

34
<PAGE>
STOCK OPTIONS

The following table sets forth information with respect to the Named
Executive Officers concerning the grant of options during fiscal 1996.

OPTION GRANTS IN FISCAL 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM(2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) YEAR(3) ($/SH) DATE 5%($) 10%($)
- ----------------------------------- ----------- ------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gary Olen.......................... 38,950 31.2% 2.50 10/21/06 61,239 155,191
Gregory R. Binkley................. 21,210 17.0% 2.50 10/21/06 33,347 84,508
Charles B. Lingen.................. 17,670 14.1% 2.50 10/21/06 27,781 70,404
William G. Luth.................... 17,670 14.1% 2.50 10/21/06 27,781 70,404
</TABLE>

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

(1) All options were granted under the Company's 1996 Stock Option Plan and
became exercisable July 16, 1997.

(2) The compounding assumes a ten-year exercise period for all option grants.
The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock
market conditions. The amounts reflected in this table may not necessarily
be achieved.

(3) During fiscal 1996, the Company granted employees options to purchase an
aggregate of 125,000 shares of Common Stock.

The following table sets forth information with respect to the Named
Executive Officers concerning options held at fiscal year end 1996. None of the
Named Executive Officers exercised any options during fiscal 1996.

AGGREGATED FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 27, 1996(#) DECEMBER 27, 1996($)(1)
---------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary Olen.................... 21,875 93,950 -- --
Gregory R. Binkley........... 5,313 21,210 -- --
Charles B. Lingen............ 1,875 17,670 -- --
William G. Luth.............. -- 17,670 -- --
</TABLE>

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

(1) None of the options were "in-the-money" at the end of fiscal 1996.

(2) The Named Executive Officers were granted certain options under the
Company's 1996 Stock Option Plan as described in "Option Grants in Fiscal
1996," which options became exercisable upon shareholder approval on July
16, 1997, and accordingly, as of February 4, 1998, of the options listed
above, Mr. Olen has 60,825 exercisable options and 55,000 unexercisable
options (which become exercisable upon completion of this offering) and all
of such options held by Messrs. Binkley, Lingen and Luth are exercisable.

35
<PAGE>
1997 STOCK OPTION GRANTS

On April 18, 1997, the Board of Directors granted options to purchase an
aggregate of 130,000 shares of Common Stock under the Company's 1996 Stock
Option Plan to certain employees of the Company, including grants to the
following senior management personnel: Gary Olen--33,790 shares; Gregory R.
Binkley--20,740 shares; Charles B. Lingen--15,420 shares; William G.
Luth--17,250 shares; and John M. Casler--10,000 shares. The options vest in four
cumulative installments of 25% commencing on the date of grant and on each
anniversary of the date of grant and expire on the tenth anniversary of the date
of grant. The options have an exercise price of $4.00 per share, which was
slightly in excess of the average of the bid and asked price of the Common Stock
on the date of grant.

On July 1, 1997, the Board of Directors approved the grant of options to
purchase 220,000 shares of Common Stock to officers of the Company contingent
upon the completion of this offering as follows: Mr. Olen--50,000 shares; Mr.
Binkley--59,500 shares; Mr. Lingen--34,000 shares; Mr. Luth--42,500 shares; and
Mr. Casler--34,000 shares. The exercise price of each option will be the Price
to Public set forth on the cover page of this Prospectus. The options will vest
in four cumulative installments of 25% commencing on the date of grant and on
each anniversary of the date of grant and will expire on the tenth anniversary
of the date of grant.

EMPLOYMENT AGREEMENTS

The Company entered into employment agreements in 1997 with Gary Olen,
Gregory R. Binkley, Charles B. Lingen, William G. Luth and John M. Casler to
continue their employment in their present positions at their current annual
base salary levels. Mr. Olen's agreement continues until December 31, 2001, and
Messrs. Binkley's, Lingen's, Luth's and Casler's agreements continue until
December 31, 1998. Such agreements contain certain nondisclosure,
nonsolicitation and option forfeiture provisions. Each agreement is
automatically renewed for additional one year terms unless either party gives
two months' notice of nonrenewal, and terminates upon the employee's death,
disability or retirement at age 65. Upon termination of the agreement by reason
of death or disability, each of the employees or his estate is entitled to a
payment equal to 12 months of his monthly base salary, plus a pro rata portion
of the bonus that would otherwise have been payable to the employee under the
Company's bonus plan then in effect. Upon termination of the agreement (i) by
the employee for good reason (as defined in the agreement) or (ii) by the
Company without good cause or upon the Company's failure to renew the agreement,
the employee is entitled to a payment equal to 24 months of his monthly base
salary, plus a pro rata portion of the bonus that would otherwise have been
payable to the employee under the Company's bonus plan then in effect. Each
agreement also provides that if the employee is terminated, or resigns for good
reason or if the Company fails to renew the agreement within two years following
a substantial event (defined as a sale of substantially all of the Company's
assets, a merger or other reorganization resulting in the incumbent directors
constituting less than a majority of the board, or a tender offer for 50% or
more of the Company's outstanding voting stock), such employee is entitled to a
payment equal to three times his annual base salary, plus a pro rata portion of
the bonus otherwise payable to the employee.

DIRECTOR COMPENSATION

The Company currently does not pay directors fees. Directors are reimbursed
for out-of-pocket expenses incurred in attending board meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors is comprised of Vincent
W. Shiel, Leonard M. Paletz and William T. Sena. Mr. Paletz is a former Chief
Executive Officer of the Company. During fiscal 1996 and the thirty-nine weeks
ended September 26, 1997, the Company purchased merchandise inventory in the
amounts of $3.0 million and $1.3 million, respectively, from ABN Sports.

36
<PAGE>
Dr. Shiel is a shareholder and director of ABN Sports. Mark F. Kroger was a
shareholder, Chairman of the Board, President, Chief Executive Officer and
Treasurer of ABN Sports during 1997. The Company believes that the terms of such
purchases were as favorable as could have been obtained from an unrelated party.

Outdoor Consulting, Inc., a corporation owned by Dr. Shiel, provides certain
consulting services to the Company. In addition, Dr. Shiel, Mr. Paletz and Mr.
Kroger hold subordinated notes payable which will be paid in full, and Dr. Shiel
and Mr. Kroger own shares of Series A Preferred Stock which will be repurchased
by the Company, upon completion of this offering. See "Certain Transactions."

CERTAIN TRANSACTIONS

In January 1990, the Company entered into a Consulting Agreement with
Outdoor Consulting, Inc., pursuant to which Outdoor Consulting, Inc. provides
consulting services to the Company. The initial term of the agreement expired on
December 31, 1990; however, the agreement continues on a year-to-year basis
until terminated by either party upon 60 days prior written notice. The initial
compensation payable under the agreement was $4,000 per month. Effective January
1, 1997, the compensation payable under this agreement was increased to $5,000
per month. Vincent W. Shiel is the sole shareholder and employee of Outdoor
Consulting, Inc.

In February 1994, the Company issued $3.2 million of subordinated notes
payable in a private placement transaction with certain shareholders of the
Company, including Vincent W. Shiel, Leonard M. Paletz and Mark F. Kroger.
Pursuant to the terms of the notes, interest was payable quarterly at the rate
of 8% and the entire principal amount was payable in February 1996 and was
subsequently extended until May 1996. Of the entire financing, $2.5 million
represented additional funds provided to the Company to meet certain working
capital needs, $500,000 represented a rollover of the payment of short-term
promissory notes issued in June 1993, $167,000 represented a rollover of the
principal payments due in January 1994 for a subordinated note payable and
$80,000 represented a rollover of a principal payment due to Mr. Paletz.
Warrants to purchase 324,680 shares of Common Stock of the Company, at an
exercise price of $1.88, were attached to the promissory notes issued in 1994.

In May 1996, the Company issued $3.4 million of subordinated notes payable
in a private placement to replace and renew the 1994 financing and certain other
subordinated notes payable. These notes bear interest at 1.75% over prime, but
not less than 9% (10.25% at February 4, 1998), payable quarterly. Pursuant to
the terms of these subordinated notes payable, the entire principal amount is
due June 15, 1998. The holders of the subordinated notes payable (and principal
amount) include: Vincent W. Shiel and his wife ($986,074); Frederick J. Kroger
($723,334); Ralph E. Heyman, as trustee under various trusts for the benefit of
Dr. and Mrs. Shiel and their children and grandchildren ($397,260); William T.
Sena, as trustee under a trust for the benefit of Dr. and Mrs. Shiel and their
children ($200,000); Leonard M. Paletz ($180,095); Stuart A. Shiel ($100,000);
Mark F. Kroger ($31,667); and all others ($795,000). Warrants to purchase
341,347 shares of Common Stock of the Company, at an exercise price of $1.81,
were attached to these subordinated notes payable. The subordinated notes
payable are collateralized by the assets of the Company subordinate to liens
securing borrowings under the Company's revolving credit facility. The Company's
aggregate interest expense during 1996 for all of these financings was $317,000.
The subordinated notes payable will be paid in full upon completion of this
offering using a portion of the net proceeds from this offering.

The 20,000 shares of the Company's Series A Preferred Stock currently
outstanding were issued for an aggregate purchase price of $200,000 ($10.00 per
share) in 1990 in connection with the Company's plan of reorganization under
Chapter 11 of the Bankruptcy Code. The holders of the Series A Preferred Stock
(and number of shares) include: Dr. and Mrs. Shiel (10,000 shares); Frederick J.
Kroger (3,000 shares); Mark J. Kroger (1,000 shares); and all others (6,000
shares). See "Principal and Selling Shareholders." The Board of Directors of the
Company has determined that it is in the best interests of the Company to

37
<PAGE>
repurchase the Series A Preferred Stock in connection with this offering.
Because the terms of the Series A Preferred Stock do not contain any provision
for its repurchase, the Board of Directors has determined that the fair value of
the Series A Preferred Stock is equal to the maximum amount payable under the
terms of the Series A Preferred Stock upon a liquidation, dissolution or winding
up of the Company. See "Description of Capital Stock--Series A Preferred Stock."
Based upon the formula contained in the terms of the Series A Preferred Stock,
such amount is equal to $50.00 per share, or an aggregate of $1,000,000. One of
the factors considered by the Board of Directors in making this determination
was the fact that the holders of the Series A Preferred Stock would have
received such maximum amount in connection with the proposed merger of the
Company with VISTA 2000, Inc. in 1996 which was never consummated.

Gary Olen holds an option to purchase 55,000 shares of Common Stock at an
exercise price of $2.50 per share which will become exercisable upon completion
of this offering and will expire six months thereafter. The Board of Directors
has approved a loan to Mr. Olen in an amount necessary to pay the aggregate
exercise price for the option and the income taxes payable by Mr. Olen upon
exercise of the option. The loan will be for a term of five years, will bear
interest at the mid-term applicable federal rate (5.69% for February 1998) and
will be collateralized by a pledge of the shares acquired upon exercise.

38
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock and Series A Preferred Stock
as of February 4, 1998 by each director and Named Executive Officer of the
Company, all directors and executive officers as a group, each person known by
the Company to beneficially own more than 5% of the Common Stock or Series A
Preferred Stock and each Selling Shareholder, and as adjusted to give effect to
the sale of shares offered hereby.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
OF COMMON
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP STOCK
OF COMMON STOCK OF PREFERRED STOCK COMMON AFTER THE
PRIOR TO OFFERING PRIOR TO OFFERING SHARES OFFERING(1)
------------------------- ------------------------- BEING ----------
NAME NUMBER PERCENT(2) NUMBER PERCENT OFFERED(1) NUMBER
- --------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS(3):
Vincent W. Shiel(4).............. 692,353 27.1% 10,000 50.0% 54,706 637,647
Gary Olen(5)..................... 152,456 6.3 -- -- -- 219,956
Gregory R. Binkley(6)............ 41,708 1.7 -- -- -- 56,583
Charles B. Lingen(7)............. 23,400 1.0 -- -- -- 31,900
William G. Luth(8)............... 21,983 * -- -- -- 32,608
Leonard M. Paletz(9)............. 260,420 10.8 -- -- 22,911 237,509
Mark F. Kroger(10)............... 107,836 4.5 1,000 5.0 10,212 97,624
William T. Sena, as trustee of
various trusts for the benefit
of Dr. and Mrs. Shiel and their
children(11)................... 128,000 5.3 -- -- 9,629 118,371
All directors and executive
officers as a group
(8 persons)(12)................ 1,428,156 51.0 11,000 55.0 97,458 1,432,198
OTHER SHAREHOLDERS OWNING MORE
THAN 5% AND SELLING
SHAREHOLDERS:
Ralph E. Heyman, individually and
as trustee of various trusts
for the benefit of Dr. and Mrs.
Shiel and their children and
grandchildren(13).............. 497,488 20.2 -- -- 43,528 453,960
Stuart A. Shiel(14).............. 183,334 7.7 -- -- 17,871 165,463
Deryl L. Patterson(15)........... 17,499 * -- -- 1,914 15,585
Frederick J. Kroger(16).......... 188,636 7.7 3,000 15.0 10,212 178,424
Susan M. Mills(17)............... 117,819 5.0 -- -- -- 117,819
Susan M. Mills Charitable
Remainder Unitrust, Marshall &
Ilsley Trust Company of
Florida, Trustee(18)........... 65,819 2.8 3,920 19.6 18,805 47,014
Frederic H. Mayerson(19)......... 63,833 2.7 1,000 5.0 5,106 58,727
Philip H. Steiner(20)............ 35,253 1.5 500 2.5 2,553 32,700
Richard H. Steiner(21)........... 35,253 1.5 500 2.5 2,553 32,700

NAME PERCENT(2)
- --------------------------------- ----------
<S> <C>
DIRECTORS AND EXECUTIVE
OFFICERS(3):
Vincent W. Shiel(4).............. 15.4%
Gary Olen(5)..................... 5.4
Gregory R. Binkley(6)............ 1.4
Charles B. Lingen(7)............. *
William G. Luth(8)............... *
Leonard M. Paletz(9)............. 5.9
Mark F. Kroger(10)............... 2.5
William T. Sena, as trustee of
various trusts for the benefit
of Dr. and Mrs. Shiel and their
children(11)................... 3.0
All directors and executive
officers as a group
(8 persons)(12)................ 31.8
OTHER SHAREHOLDERS OWNING MORE
THAN 5% AND SELLING
SHAREHOLDERS:
Ralph E. Heyman, individually and
as trustee of various trusts
for the benefit of Dr. and Mrs.
Shiel and their children and
grandchildren(13).............. 11.2
Stuart A. Shiel(14).............. 4.2
Deryl L. Patterson(15)........... *
Frederick J. Kroger(16).......... 4.4
Susan M. Mills(17)............... 3.0
Susan M. Mills Charitable
Remainder Unitrust, Marshall &
Ilsley Trust Company of
Florida, Trustee(18)........... 1.2
Frederic H. Mayerson(19)......... 1.5
Philip H. Steiner(20)............ *
Richard H. Steiner(21)........... *
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

39
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)

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

* Less than 1% of outstanding shares

(1) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full, the number of
shares owned after the offering and the percentage of ownership (which
would reflect the exercise of warrants to purchase 3,574 shares for sale to
the Underwriters in this offering by a Selling Shareholder) for Vincent W.
Shiel would be 563,794 shares and 13.6%; for Leonard M. Paletz would be
206,579 shares and 5.2%; for Mark F. Kroger would be 83,838 shares and
2.1%; for William T. Sena, as trustee, would be 105,375 shares and 2.6%;
for all directors and executive officers as a group would be 1,300,633
shares and 28.9%; for Ralph E. Heyman, individually and as trustee, would
be 395,196 shares and 9.7%; for Stuart A. Shiel would be 141,338 shares and
3.5%; for Frederick J. Kroger would be 164,638 shares and 4.1%; for Susan
M. Mills Charitable Remainder Unitrust would be 21,627 shares and less than
1%; for Frederic H. Mayerson would be 51,834 shares and 1.3%; for Deryl L.
Patterson would be 12,999 shares and less than 1%; for Philip H. Steiner
would be 29,253 shares and less than 1%; and for Richard H. Steiner would
be 29,253 shares and less than 1%. The Company plans to repurchase all
outstanding shares of Series A Preferred Stock upon completion of this
offering. See "Use of Proceeds."

(2) Percentages are calculated on the basis of the number of shares outstanding
on February 4, 1998, plus the number of shares issuable pursuant to options
and warrants held by the individual which are exercisable within 60 days
after February 4, 1998.

(3) The address of each director and executive officer of the Company is 411
Farwell Avenue, South St. Paul, Minnesota 55075.

(4) Includes 572,351 common shares (147,348 of which represent shares issuable
upon the exercise of warrants) held in the name of Dr. Shiel as Trustee of
the Vincent W. Shiel Revocable Trust and 120,002 common shares (45,001 of
which represent shares issuable upon the exercise of warrants) held in the
name of Helen M. Shiel, wife of Dr. Shiel, as Trustee of the Helen M. Shiel
Revocable Trust. Does not include 824,321 common shares (157,652 of which
represent shares issuable upon the exercise of warrants) held by Dr. and
Mrs. Shiel's children or in trusts for the benefit of Dr. and Mrs. Shiel
and their children and grandchildren, of which Dr. Shiel expressly
disclaims beneficial ownership. Preferred share number includes 7,500
shares held in the name of Dr. Shiel as Trustee of the Vincent W. Shiel
Revocable Trust and 2,500 shares held in the name of Helen M. Shiel as
Trustee of the Helen M. Shiel Revocable Trust.

(5) Includes 69,273 shares issuable upon the exercise of options prior to this
offering and 136,773 shares issuable upon the exercise of options upon the
completion of this offering.

(6) Includes 2,000 shares held in the name of Mr. Binkley's wife, 31,708 shares
issuable upon the exercise of options prior to this offering and 46,583
shares issuable upon the exercise of options upon the completion of this
offering.

(7) Includes 23,400 shares issuable upon the exercise of options prior to this
offering and 31,900 shares issuable upon the exercise of options upon the
completion of this offering.

(8) Includes 21,983 shares issuable upon the exercise of options prior to this
offering and 32,608 shares issuable upon the exercise of options upon the
completion of this offering.

(9) Includes 46,020 shares issuable upon the exercise of warrants.

(10) Includes 14,501 common shares issuable upon the exercise of warrants.

40
<PAGE>
(11) Includes 128,000 shares (of which 40,000 shares are issuable upon the
exercise of warrants) held as trustee of various trusts for the benefit of
Dr. and Mrs. Shiel and their children, of which Mr. Sena has no pecuniary
interest.

(12) Includes 439,234 common shares issuable upon the exercise of warrants and
options prior to this offering and 540,734 common shares issuable upon the
exercise of warrants and options upon the completion of this offering.

(13) Includes 495,488 shares (of which 97,652 shares are issuable upon the
exercise of warrants) held as trustee of various trusts for the benefit of
Dr. and Mrs. Shiel and their children and grandchildren, of which Mr.
Heyman has no pecuniary interest. Mr. Heyman's address is 1100 Courthouse
Plaza, S.W., Dayton, Ohio 45402.

(14) Includes 20,000 shares issuable on the exercise of warrants held for his
own account. Does not include (i) 56,000 shares held by Mr. Heyman as
trustee of a trust for the benefit of Mr. Shiel, of which Mr. Shiel
expressly disclaims beneficial ownership and (ii) an aggregate of 184,863
shares (of which 12,198 shares are issuable upon the exercise of warrants)
held by Mr. Heyman as trustee of various trusts for the benefit of children
of Mr. Shiel, of which Mr. Shiel expressly disclaims beneficial ownership.
Mr. Shiel is the son of Dr. Shiel. Mr. Shiel's address is 1926 Rankin Road,
#110, Houston, Texas 77073.

(15) Does not include (i) 44,000 shares held by Mr. Sena as trustee of a trust
for the benefit of Ms. Patterson, of which Ms. Patterson expressly
disclaims beneficial ownership, (ii) 4,000 shares issuable upon the
exercise of warrants held by Mr. Heyman as trustee of a trust for the
benefit of Ms. Patterson, of which Ms. Patterson expressly disclaims
beneficial ownership and (iii) an aggregate of 176,625 shares (of which
7,454 shares are issuable upon the exercise of warrants) held by Mr. Heyman
as trustee of various trusts for the benefit of Ms. Patterson's children,
of which Ms. Patterson expressly disclaims beneficial ownership. Ms.
Patterson is the daughter of Mrs. Shiel. Ms. Patterson's address is 9770
Baymeadows Road, Suite 113, Jacksonville, Florida 32256.

(16) Includes 1,501 common shares issuable upon the exercise of warrants held
for his own account and 73,376 common shares issuable upon the exercise of
warrants held as a co-trustee of various trusts for the benefit of his
grandchildren. Mr. Kroger will exercise warrants to purchase 3,574 common
shares for sale to the Underwriters in this offering if the Underwriters'
over-allotment option is exercised in full. Mr. Kroger is the father of
Mark F. Kroger. Mr. Kroger's address is 500 Bruton Circle, Kettering, Ohio
45429.

(17) Includes 11,760 shares issuable upon the exercise of warrants. Ms. Mills'
address is 630 Hay Avenue, Brookville, Ohio 45309.

(18) Marshall & Ilsley Trust Company of Florida's address is 800 Laurel Oak
Drive, Suite 101, Naples, Florida 34108.

(19) Includes 17,168 common shares issuable upon the exercise of warrants. Mr.
Mayerson's address is 7585 Ridge Road, Cincinnati, Ohio 45237.

(20) Includes 11,918 common shares issuable upon the exercise of warrants.
Philip Steiner's address is 1112 Fort View Place, Cincinnati, Ohio 45202.

(21) Includes 11,918 common shares issuable upon the exercise of warrants.
Richard Steiner's address is 4044 Rose Hill Avenue, Cincinnati, Ohio 45229.

41
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 36,800,000 shares of
Common Stock, par value of $.01 per share, 200,000 shares of Series A Preferred
Stock, par value $.01 per share, and 3,000,000 undesignated shares. The
following description of the Company's capital stock is qualified in its
entirety by reference to the Company's Restated Articles of Incorporation, its
Bylaws and the Minnesota Business Corporation Act ("MBCA").

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by the shareholders and are entitled to
cumulate their votes for the election of directors. Under cumulative voting,
each shareholder has the right to cast that number of votes equal to the number
of shares held by the shareholder multiplied by the number of directors to be
elected and such shareholder may cast all of the shareholder's votes for a
single candidate or distribute the shareholder's votes among any number of
candidates in any proportion the shareholder chooses. Because of cumulative
voting, shareholders owning less than a majority of the outstanding shares of
Common Stock may be able to elect one or more directors.

Subject to the rights of holders of Series A Preferred Stock and any
undesignated shares, each share of Common Stock is entitled to participate
equally in any distribution of the net assets made to the shareholders in
liquidation of the Company and is entitled to participate equally in dividends
if and when declared by the Board of Directors. The Company's Restated Articles
of Incorporation further empower the Board of Directors to authorize a dividend
or distribution of shares of Common Stock or any other class or series PRO RATA
to the holders of the same or any other class or series of shares. There are no
redemption, sinking fund, conversion or preemptive rights with respect to the
Common Stock unless, with respect to any undesignated shares, the Board of
Directors grants preemptive rights. The outstanding shares of Common Stock are,
and the Shares offered by the Company hereby when issued will be, fully paid and
nonassessable.

Under the Restated Articles of Incorporation, the voting shareholders of the
Company have the power, by affirmative vote of the holders of a majority of the
voting power of all shares entitled to vote: (a) when required by law, to
authorize the sale, lease, exchange or other disposition of all or substantially
all of the Company's property and assets, including its goodwill, not in the
usual and ordinary course of business; (b) when required by law, to adopt an
agreement or plan of exchange or merger; (c) to amend the Restated Articles of
Incorporation; or (d) to dissolve the Company; provided that such actions are
subject to a veto by shareholders owning more than 40% of the voting power of
all shareholders entitled to vote.

SERIES A PREFERRED STOCK

Except as otherwise required by law, shares of Series A Preferred Stock have
no voting rights. The holders of Series A Preferred Stock are entitled to
receive, when and as declared by the Board of Directors, dividends at the same
rate per share of Series A Preferred Stock as dividends are paid to holders of
Common Stock. In the event of any liquidation, dissolution or winding up of the
Company (including any acquisition of the Company by merger or other form of
reorganization or a sale of substantially all the assets of the Company), the
holders of Series A Preferred Stock then outstanding are entitled to be paid out
of funds available for distribution to shareholders an amount per share equal to
the value of the liquidation proceeds times a fraction, the numerator of which
is 19.4483 and the denominator of which is the number of shares of Common Stock
then outstanding (2,333,600 shares as of July 1, 1997, the date the Company's
Board of Directors approved the repurchase of the Series A Preferred Stock),
provided that solely for purposes of calculating the liquidation preference, the
liquidation proceeds shall not exceed $6,000,000. After setting apart or paying
in full the liquidation preference to the holders of Series A Preferred Stock,
the holders of Common Stock share ratably in all remaining assets available for
distribution to shareholders to the exclusion of the holders of Series A
Preferred Stock.

42
<PAGE>
As of the date of this Prospectus, there were 20,000 shares of Series A
Preferred Stock outstanding, all of which will be repurchased by the Company
upon completion of this offering using a portion of the net proceeds of this
offering. See "Use of Proceeds" and "Certain Transactions."

UNDESIGNATED SHARES

The Board of Directors, without action by the shareholders, is authorized to
establish and designate classes or series of the undesignated shares and to fix
the relative rights and preferences of such classes or series of shares
(including terms with respect to redemption, sinking fund, dividend,
liquidation, preemptive, conversion and voting rights and preferences).
Accordingly, the Board of Directors, without shareholder approval, may issue
undesignated shares with terms that could adversely affect the voting power and
other rights of the holders of Common Stock.

The existence of the undesignated shares may have the effect of discouraging
an attempt, through acquisition of a substantial number of shares of Common
Stock, to acquire control of the Company with a view to effecting a merger, sale
or exchange of assets or a similar transaction. The anti-takeover effects of the
undesignated shares may deny shareholders the receipt of a premium on their
Common Stock and may also have a depressive effect on the market price of the
Common Stock.

As of the date of this Prospectus, no undesignated shares have been issued
or authorized for issuance.

MINNESOTA TAKEOVER STATUTES

Section 302A.673 of the MBCA generally prohibits an "issuing public
corporation" from entering into certain business combination transactions with
any "interested shareholder" (generally defined as any person other than the
corporation or its subsidiaries beneficially owning at least 10% of the voting
stock of the corporation), unless a committee composed of disinterested
directors from the corporation's board of directors approves the business
combination prior to the date the interested shareholder became an interested
shareholder. The shareholders of a Minnesota corporation may amend the articles
of incorporation or bylaws under certain circumstances to opt out of these
provisions. The Company's Restated Articles of Incorporation and Bylaws do not
opt out of these provisions.

Section 302A.671 of the MBCA provides that all shares of an issuing public
corporation acquired above specified thresholds are deemed "control shares."
Unless a proposed acquisition of control shares is approved by (i) the
affirmative vote of the holders of a majority of the voting power of all shares
entitled to vote including all shares held by the acquiring person and (ii) the
affirmative vote of the holders of a majority of the voting power of all shares
entitled to vote excluding all interested shares, and the proposed acquisition
is consummated within 180 days after such shareholder approval, the control
shares are denied voting rights and may be redeemed by the corporation. As
permitted by the MBCA, the Company's Restated Articles of Incorporation provide
that the provisions of the MBCA relating to control share acquisitions do not
apply to the Company.

TRANSFER AGENT

The transfer agent and registrar for the Company's Common Stock is Corporate
Stock Transfer, Inc., Denver, Colorado.

SHARES ELIGIBLE FOR FUTURE SALE

43
<PAGE>
Of the shares of Common Stock outstanding as of February 4, 1998 (other than
the 200,000 Shares offered by the Selling Shareholders hereby), approximately
411,086 shares are not subject to the lock-up agreements described below and are
freely tradeable pursuant to Rule 144(k) or other exemptions from registration
under the Securities Act of 1933. In connection with this offering, all
directors, officers and certain other shareholders of the Company have agreed
not to offer, sell or otherwise dispose of a total of 1,748,563 shares held by
them (in addition to all shares issuable upon exercise of options and warrants
held by them as described below) for a period of 180 days from the effective
date of this offering, without the prior written consent of Cruttenden Roth
Incorporated. After such 180 day period, all shares beneficially owned by such
directors, officers and certain other shareholders of the Company will be
eligible for sale in the public market in accordance with Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who is an affiliate of the Company and any person
who has beneficially owned restricted shares for at least one year is entitled
to sell in the public market within any three month period a number of shares
that does not exceed the greater of 1% of the then outstanding shares of Common
Stock or the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the filing of a notice of the proposed sale with the
Securities and Exchange 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. A person who is deemed not to have
been an affiliate of the Company at any time during the 90 calendar days
preceding a sale by such person and who has beneficially owned restricted shares
for at least two years, would be entitled to sell such shares in the public
market under Rule 144 without regard to the foregoing restrictions and
requirements.

The Securities and Exchange Commission has proposed further revisions to the
holding periods and volume limitations contained in Rule 144. The adoption of
amendments effecting such proposed revisions may result in resales of restricted
securities sooner than would be the case under Rule 144 as currently in effect.
However, there can be no assurance of when, if ever, such amendments will be
proposed or adopted.

The Company has registered under the Securities Act of 1933 a total of
739,878 shares of Common Stock reserved for issuance under the Company's 1996
Stock Option Plan, 1994 Nonqualified Performance Option Plan, 1993 Executive
Stock Option Plan and 1991 Incentive Stock Option Plan. Shares issued upon the
exercise of outstanding options under the Plans will generally be available for
immediate resale in the public market. As of February 4, 1998, options to
purchase an aggregate of 345,564 shares at exercise prices ranging from $2.50 to
$8.70 per share were held by 27 individuals under the Plans, including options
for 149,615 shares held by Gary Olen, options for 47,263 shares held by Gregory
R. Binkley, options for 34,965 shares held by Charles B. Lingen, options for
34,920 shares held by William G. Luth and options for 15,500 shares held by John
M. Casler. As of February 4, 1998, options to purchase 193,439 shares under the
Plans (including options to purchase 154,364 shares held by directors and senior
management of the Company) were exercisable. Additionally, the Board of
Directors has approved the grant of options to purchase an aggregate of 220,000
shares of Common Stock to Messrs. Olen, Binkley, Lingen, Luth and Casler
contingent upon the completion of this offering. See "Management--1997 Stock
Option Grants." All of the options held by such officers and the directors of
the Company are subject to the lock-up agreements described above.

In connection with private placements of subordinated notes payable in 1993
and 1994, the Company issued to the note holders warrants to purchase 50,000
shares of Common Stock at an exercise price of $2.50 per share expiring in June
1998 and warrants to purchase 324,680 shares at $1.88 per share expiring in
April 1999. In May 1996, the Company issued subordinated notes payable to
replace and renew the 1993 and 1994 subordinated notes and certain other notes
payable and, in connection with the refinancing, issued warrants to purchase
341,347 shares of Common Stock at $1.81 per share expiring in May 2001. All of
the warrants are currently exercisable. The warrants will expire 30 days
following completion of this offering unless exercised prior to such time. The
Company expects that all or substantially all of the

44
<PAGE>
warrants will be exercised and intends to register the resale of the 695,603
shares issuable thereunder following the completion of this offering for the
benefit of the warrant holders. If so registered, such shares will be saleable
by the holders thereof in the public market, but all of such shares shall be
subject to the restrictions of the lock-up agreements described above.

The Company cannot predict the effect, if any, that sales of restricted
securities or the availability of such securities for sale could have on the
market price, if any, prevailing from time to time. Nevertheless, sales of
substantial amounts of the Company's Common Stock, including the Shares offered
hereby, or the perception that such sales might occur, could adversely affect
the market price of the Common Stock.

45
<PAGE>
UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Cruttenden Roth
Incorporated and John G. Kinnard and Company, Incorporated are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
and the Selling Shareholders the 1,800,000 shares of Common Stock offered
hereby. The number of Shares that each Underwriter has agreed to purchase is set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Cruttenden Roth Incorporated..................................................... 675,000
John G. Kinnard and Company, Incorporated........................................ 675,000
NationsBanc Montgomery Securities LLC............................................ 100,000
Josephthal & Co. Inc............................................................. 50,000
Scott & Stringfellow, Inc........................................................ 50,000
Wessels, Arnold & Henderson...................................................... 50,000
Barrington Research Associates, Inc.............................................. 25,000
Cleary Gull Reiland & McDevitt Inc............................................... 25,000
Dougherty Summit Securities LLC.................................................. 25,000
Ferris, Baker Watts Inc.......................................................... 25,000
Frederick & Company, Inc......................................................... 25,000
C.L. King & Associates, Inc...................................................... 25,000
Kirkpatrick, Pettis, Smith, Polian Inc........................................... 25,000
Miller, Johnson & Kuehn Inc...................................................... 25,000
----------
Total.......................................................................... 1,800,000
----------
----------
</TABLE>

The Underwriting Agreement provides that the several Underwriters will be
obligated to purchase all of the Shares offered hereby, if any are purchased.

The Underwriters propose to offer the Shares to the public at the Price to
Public set forth on the cover page of this Prospectus and to dealers at such
price less a concession not in excess of $.31 per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $.05 per
share to certain other brokers and dealers. After the public offering, the Price
to Public, concession and reallowance may be changed by the Representatives.

The Selling Shareholders have granted the Underwriters an option exercisable
within 30 days after the date of this Prospectus to purchase up to an additional
270,000 shares of Common Stock at the Price to Public, less the Underwriting
Discount shown on the cover page of this Prospectus. The Underwriters may
exercise such option only for the purpose of covering any over-allotments in the
sale of the Shares of Common Stock offered hereby.

The Company has agreed to pay the Representatives a non-accountable expense
allowance equal to 2% of the total Price to Public shown on the cover page of
this Prospectus. The Company has paid the Representatives $50,000 as a deposit
against such non-accountable expense allowance.

The Company has agreed to sell to the Representatives, for nominal
consideration, a warrant to purchase up to 100,000 shares of Common Stock (the
"Representatives' Warrant"). The Representatives' Warrant may be exercised in
whole or in part commencing twelve months after the date of this Prospectus and
for a period of four years thereafter, at an exercise price equal to 130% of the
Price to Public. During the term of the Representatives' Warrant, it may not be
transferred, sold, assigned or hypothecated except to officers of the
Representatives. The Representatives' Warrant contains anti-dilution provisions
providing for appropriate adjustments on the occurrence of certain events, and
contains customary demand and participatory registration rights. Any profits
realized by the Representatives upon the sale of such warrant

46
<PAGE>
or the securities issuable upon exercise thereof may be deemed to constitute
additional underwriting compensation.

The Underwriting Agreement provides for reciprocal indemnification between
the Company, the Selling Shareholders, the Underwriters and their controlling
persons against civil liabilities in connection with this offering, including
liabilities under the Securities Act of 1933.

In connection with the offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
These transactions may include stabilizing bids, the imposition of penalty bids,
the purchase of securities to cover syndicate short positions and overallotments
in connection with the offering. The Underwriters may overallot the offering
creating a syndicate short position. A "stabilizing bid" is a bid for or the
purchase of the Common Stock on behalf of the Underwriters to reduce a short
position incurred by the Underwriters in connection with the offering. A
"penalty bid" is an arrangement permitting the Representatives to reclaim the
selling concession otherwise accruing to an Underwriter or syndicate member in
connection with the offering if the Common Stock originally sold by such
Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. These activities may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

Each of the directors, officers and certain other shareholders of the
Company have agreed, for a period of 180 days from the effective date of this
offering (the "Lock-up Period"), not to offer, sell or otherwise dispose of an
aggregate of 1,748,563 shares of Common Stock held by them without the prior
written consent of Cruttenden Roth Incorporated. In addition, each of such
shareholders has agreed that any shares sold by such shareholder in the 90 day
period following the Lock-up Period will be sold through the Representatives.
The Company has agreed, for a period of 180 days from the effective date of this
offering, that it will not offer, sell or otherwise dispose of any shares of
Common Stock, options or warrants to acquire Common Stock or securities
convertible into Common Stock (other than pursuant to existing employee stock
option plans and outstanding options, warrants and convertible securities)
without the prior written consent of Cruttenden Roth Incorporated.

Although the Common Stock was traded in the local over-the-counter market
prior to this offering, such trading was limited and sporadic. See "Price Range
of Common Stock." The public offering price has been determined by negotiation
among the Company, the Selling Shareholders and the Representatives. The factors
considered in determining the public offering price included, in addition to the
prices prevailing in the local over-the-counter market for the Common Stock, the
history of, and the prospects for, the Company and the industry in which it
competes, an assessment of the Company's management, the Company's past and
present operations, its past and present earnings and the trend of such
earnings, the general conditions of the securities markets at the time of the
offering and the market prices of publicly traded common stocks of comparable
companies in recent periods.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Chernesky, Heyman & Kress P.L.L.,
Dayton, Ohio. Ralph E. Heyman, a partner of Chernesky, Heyman & Kress P.L.L.,
owns 2,000 shares of Common Stock for his own account and holds an aggregate of
397,836 shares of Common Stock and warrants to purchase 97,652 shares of Common
Stock as trustee of various trusts for the benefit of Vincent W. Shiel and Helen
M. Shiel and their children and grandchildren. Certain legal matters in
connection with the sale of the Common Stock offered hereby will be passed upon
for the Underwriters by Dorsey & Whitney LLP, Minneapolis, Minnesota.

47
<PAGE>
EXPERTS

The financial statements of the Company included or incorporated by
reference in this Prospectus and elsewhere in the Registration Statement to the
extent and for the periods indicated in their report have been audited by Grant
Thornton LLP, independent certified public accountants, and are included or
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information filed by the
Company with the Commission can be inspected and copied at the office of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, or at
certain of its Regional Offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of such material can be obtained from the Public Reference
Section of the Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the web site is
http:// www.sec.gov.

This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and the related exhibits
for further information with respect to the Company and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and in such instance reference is made to
the copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.

DOCUMENTS INCORPORATED BY REFERENCE

The Company's Annual Report on Form 10-K for the fiscal year ended December
27, 1996 and Quarterly Reports on Form 10-Q for the fiscal periods ended March
28, 1997, June 27, 1997 and September 26, 1997 are hereby incorporated by
reference in this Prospectus. All other reports filed by the Company with the
Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 since December 27, 1996 and prior to the termination of this offering shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such reports.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents which are not
specifically incorporated by reference in such documents). Written or telephone
requests for such copies should be directed to Charles B. Lingen, Secretary, The
Sportsman's Guide, Inc., 411 Farwell Avenue, South St. Paul, Minnesota 55075,
(612) 451-3030.

48
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Report of Independent Certified Public Accountants......................................................... F-2

Balance Sheets as of December 29, 1995 and December 27, 1996, and September 26, 1997
(unaudited).............................................................................................. F-3

Statements of Operations for the fiscal years ended December 30, 1994, December 29, 1995 and December 27,
1996, and the thirty-nine weeks ended September 27, 1996 (unaudited) and September 26, 1997
(unaudited).............................................................................................. F-4

Statements of Changes in Shareholders' Equity for the fiscal years ended December 30, 1994, December 29,
1995 and December 27, 1996, and the thirty-nine weeks ended September 26, 1997 (unaudited)............... F-5

Statements of Cash Flows for the fiscal years ended December 30, 1994, December 29, 1995 and December 27,
1996, and the thirty-nine weeks ended September 27, 1996 and September 26, 1997 (unaudited).............. F-6

Notes to Financial Statements.............................................................................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

<TABLE>
<S> <C> <C>
[LOGO]
GRANT THORNTON LLP Accountants and
Management
Consultants
The U.S. Member Firm
of
Grant Thornton
International
</TABLE>

Board of Directors and Shareholders

The Sportsman's Guide, Inc.

We have audited the accompanying balance sheets of The Sportsman's Guide,
Inc. (a Minnesota corporation) as of December 27, 1996 and December 29, 1995 and
the related statements of operations, changes in shareholders' equity, and cash
flows for each of the three fiscal years in the period ended December 27, 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 The Sportsman's Guide, Inc.
as of December 27, 1996 and December 29, 1995, and the results of its operations
and its cash flows for each of the three fiscal years in the period ended
December 27, 1996 in conformity with generally accepted accounting principles.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
January 29, 1997 (except for the last paragraph of Note H,
as to which the date is March 5, 1997 and Note A12
as to which the date is December 28, 1997)

F-2
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

BALANCE SHEETS

(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 27, SEPTEMBER 26,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS
Accounts receivable--net........................................... $ 2,231 $ 3,038 $ 2,353
Inventory.......................................................... 14,208 17,765 29,552
Prepaid expenses................................................... 858 538 1,470
Promotional material............................................... 2,114 2,194 2,945
------------ ------------ -------------
Total current assets........................................... 19,411 23,535 36,320

PROPERTY AND EQUIPMENT--NET.......................................... 4,298 4,355 4,345
------------ ------------ -------------
Total assets................................................... $ 23,709 $ 27,890 $ 40,665
------------ ------------ -------------
------------ ------------ -------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Bank overdraft..................................................... $ 1,619 $ 3,539 $ 1,156
Notes payable--bank................................................ 965 1,497 13,256
Current maturities of long-term debt
Related parties.................................................. 2,095 -- 1,795
Other............................................................ 1,368 52 1,662
Accounts payable................................................... 13,554 10,710 14,842
Accrued expenses................................................... 794 1,809 1,205
Customer deposits and other liabilities............................ 1,479 2,316 2,013
------------ ------------ -------------
Total current liabilities...................................... 21,874 19,923 35,929

LONG-TERM LIABILITIES
Long-term debt
Related parties.................................................. -- 1,795 --
Other............................................................ 287 1,811 118
Deferred income taxes.............................................. -- 486 389
------------ ------------ -------------
Total liabilities.............................................. 22,161 24,015 36,436

COMMITMENTS AND CONTINGENCIES........................................ -- -- --

SHAREHOLDERS' EQUITY
Series A Preferred Stock--$.01 par value; 200,000 shares
authorized; 20,000 shares issued and outstanding................. -- -- --
Common Stock--$.01 par value; 36,800,000 shares authorized;
2,333,600 shares issued and outstanding at December 29, 1995 and
December 27, 1996 and 2,339,225 shares issued and outstanding at
September 26, 1997............................................... 23 23 23
Additional paid-in capital......................................... 2,350 2,350 2,365
Accumulated earnings (deficit)..................................... (825) 1,502 1,841
------------ ------------ -------------
Total shareholders' equity..................................... 1,548 3,875 4,229
------------ ------------ -------------
Total liabilities and shareholders' equity..................... $ 23,709 $ 27,890 $ 40,665
------------ ------------ -------------
------------ ------------ -------------
</TABLE>

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

F-3
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
---------------------------------------- ----------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 27, SEPTEMBER 27, SEPTEMBER 26,
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.................................. $ 96,398 $ 101,832 $ 112,270 $ 69,273 $ 77,611
Cost of sales.......................... 64,367 67,137 72,200 45,624 47,234
------------ ------------ ------------ ------------- -------------
Gross profit....................... 32,031 34,695 40,070 23,649 30,377

Selling, general and administrative
expenses............................. 28,299 35,924 36,014 23,017 28,892
------------ ------------ ------------ ------------- -------------
Earnings (loss) from operations.... 3,732 (1,229) 4,056 632 1,485

Interest expense....................... (582) (943) (981) (714) (963)
Miscellaneous income (expense), net.... (43) 73 11 10 (4)
------------ ------------ ------------ ------------- -------------
Earnings (loss) before income
taxes............................ 3,107 (2,099) 3,086 (72) 518

Income taxes........................... (385) 355 (759) -- (179)
------------ ------------ ------------ ------------- -------------
Net earnings (loss)................ $ 2,722 $ (1,744) $ 2,327 $ (72) $ 339
------------ ------------ ------------ ------------- -------------
------------ ------------ ------------ ------------- -------------
Net earnings (loss) per share:
Basic.............................. $ 1.17 $ (.75) $ 1.00 $ (.03) $ .15
------------ ------------ ------------ ------------- -------------
------------ ------------ ------------ ------------- -------------
Diluted............................ $ 1.06 $ (.75) $ .96 $ (.03) $ .12
------------ ------------ ------------ ------------- -------------
------------ ------------ ------------ ------------- -------------
Weighted average shares outstanding:
Basic.............................. 2,333 2,334 2,334 2,334 2,335
------------ ------------ ------------ ------------- -------------
------------ ------------ ------------ ------------- -------------
Diluted............................ 2,576 2,334 2,431 2,334 2,884
------------ ------------ ------------ ------------- -------------
------------ ------------ ------------ ------------- -------------
</TABLE>

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

F-4
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1994................................. 20 $ -- 2,334 $ 23 $ 2,350
Net earnings for fiscal year ended December 30, 1994...... -- -- -- -- --
--
--- ----- --- -----------
Balances at December 30, 1994............................... 20 -- 2,334 23 2,350
Net loss for fiscal year ended December 29, 1995.......... -- -- -- -- --
--
--- ----- --- -----------
Balances at December 29, 1995............................... 20 -- 2,334 23 2,350
Net earnings for fiscal year ended December 27, 1996...... -- -- -- -- --
--
--- ----- --- -----------
Balances at December 27, 1996............................... 20 -- 2,334 23 2,350
Exercise of stock options (unaudited)..................... -- -- 5 -- 15
Net earnings for thirty-nine weeks ended September 26,
1997 (unaudited)........................................ -- -- -- -- --
--
--- ----- --- -----------
Balances at September 26, 1997 (unaudited).................. 20 $ -- 2,339 $ 23 $ 2,365
--
--
--- ----- --- -----------
--- ----- --- -----------

<CAPTION>
ACCUMULATED
EARNINGS
(DEFICIT)
------------
<S> <C>
Balances at January 1, 1994................................. $ (1,803)
Net earnings for fiscal year ended December 30, 1994...... 2,722

------------
Balances at December 30, 1994............................... 919
Net loss for fiscal year ended December 29, 1995.......... (1,744)

------------
Balances at December 29, 1995............................... (825)
Net earnings for fiscal year ended December 27, 1996...... 2,327

------------
Balances at December 27, 1996............................... 1,502
Exercise of stock options (unaudited)..................... --
Net earnings for thirty-nine weeks ended September 26,
1997 (unaudited)........................................ 339

------------
Balances at September 26, 1997 (unaudited).................. $ 1,841

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

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

F-5
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------- ------------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 27, SEPTEMBER 27, SEPTEMBER 26,
1994 1995 1996 1996 1997
------------- ------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net earnings (loss).................. $ 2,722 $ (1,744) $ 2,327 $ (72) $ 339
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization................. 455 708 1,092 751 1,026
Deferred income taxes.......... 290 (290) 486 -- (97)
Other.......................... 94 (38) (44) (40) (42)
Changes in assets and
liabilities:
Accounts receivable.......... (521) (1,446) (807) (11) 685
Inventory.................... (3,419) (637) (3,557) (4,659) (11,787)
Prepaid expenses............. (594) (131) 320 119 (932)
Promotional material......... (688) 41 (80) (87) (751)
Bank overdraft............... -- 1,619 1,920 175 (2,383)
Accounts payable............. 1,979 2,664 (2,844) (3,162) 4,132
Accrued expenses............. 636 (249) 1,015 205 (604)
Customer deposits and other
liabilities................ (1,079) 779 834 1 (303)
------------- ------------- ------------- ------- -------------

Cash flows provided by (used
in) operating activities... (125) 1,276 662 (6,780) (10,717)

Cash flows from investing activities:
Purchases of property and
equipment.......................... (2,063) (1,911) (1,149) (895) (1,016)
Proceeds from sale of property and
equipment.......................... 28 136 -- -- --
------------- ------------- ------------- ------- -------------

Cash flows used in investing
activities................. (2,035) (1,775) (1,149) (895) (1,016)

Cash flows from financing activities:
Net proceeds from revolving credit
line............................... -- 965 532 7,716 11,759
Payments on trade creditors'
obligation......................... (150) (561) -- -- --
Proceeds from long-term debt......... 2,500 -- -- -- --
Payments on long-term debt........... (258) (558) (45) (41) (41)
Proceeds from exercise of stock
options............................ -- -- -- -- 15
------------- ------------- ------------- ------- -------------
Cash flows provided by (used
in) financing activities... 2,092 (154) 487 7,675 11,733
------------- ------------- ------------- ------- -------------
Decrease in cash and cash
equivalents.......................... (68) (653) -- -- --

Cash and cash equivalents at beginning
of period............................ 721 653 -- -- --
------------- ------------- ------------- ------- -------------
Cash and cash equivalents at end of
period............................... $ 653 $ -- $ -- $ -- $ --
------------- ------------- ------------- ------- -------------
------------- ------------- ------------- ------- -------------
Supplemental disclosure of cash flow
information
Cash paid during the periods for:
Interest......................... $ 613 $ 938 $ 1,019 $ 779 $ 895
Income taxes..................... 28 191 5 3 956
Supplemental disclosure of noncash
investing and financing activities
Fixed assets acquired under capital
lease............................ $ 11 $ 17 $ -- $ -- $ --
Disposal of fixed assets acquired
under capital lease.............. 27 -- -- -- --
</TABLE>

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

F-6
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. DESCRIPTION OF BUSINESS

The Sportsman's Guide, Inc. (the "Company") is a mail order catalog
retailer, offering a variety of products including footwear, clothing and
accessories, hunting and shooting accessories, camping and outdoor recreation
equipment, optics and ammunition as well as a diverse range of additional
offerings in other product catagories. The Company conducts its operations out
of one warehouse and office facility in South St. Paul, Minnesota and two retail
locations in South St. Paul and Moundsview, Minnesota and distributes its
catalogs throughout the United States.

2. INTERIM FINANCIAL INFORMATION (UNAUDITED)

Financial statements and related footnote data as of and for the thirty-nine
weeks ended September 27, 1996 and September 26, 1997 are unaudited, but in the
opinion of the Company include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation thereof. The results of
operations for the thirty-nine weeks ended September 26, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.

3. REVENUE RECOGNITION

Sales are recorded at the time of shipment along with a provision for
anticipated merchandise returns, net of exchanges, which is recorded based upon
historical experience. The provision charged against sales was $4.9 million,
$5.2 million, $7.4 million, $4.3 million and $6.6 million during fiscal years
1994, 1995 and 1996 and thirty-nine weeks ended September 27, 1996 and September
26, 1997. Reserves for returns, net of exchanges, of $218,000, $177,000,
$640,000 and $478,000 were recorded in accrued expenses at December 30, 1994,
December 29, 1995, December 27, 1996 and September 26, 1997.

Amounts billed to customers for shipping of orders are netted against the
associated costs.

Customers can purchase one year memberships in the Company's buyer's club
for a $29.99 annual fee. The Company also offers two and three year memberships
at $53.99 and $80.99. Club members receive merchandise discounts of 10% on
regularly priced items and 5% on sale items and special buys. Membership fees
are deferred and recognized in income as the members place orders and receive
discounts. After 50% of the membership term has expired, members can no longer
cancel their memberships, and any remaining deferred membership fees are
recognized as income.

4. CASH AND CASH EQUIVALENTS

The Company considers all highly liquid temporary investments purchased with
an original maturity of three months or less to be cash equivalents. The Company
also considers credit card settlements in-transit as cash for reporting
purposes. Chargebacks from the credit card companies are charged against
operations at the time initiated by the credit card company.

5. BANK OVERDRAFT

As a result of maintaining a consolidated cash management system, the
Company maintains overdraft positions at its primary bank. When outstanding
checks exceed the bank cash balances, the bank overdraft is included in current
liabilities.

F-7
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
6. ACCOUNTS RECEIVABLE

Accounts receivable consist primarily of amounts owed for merchandise by
customers utilizing the four payment installment plan and amounts owed for list
rental and other advertising services provided by the Company to third parties.
The Company had an allowance for doubtful accounts of $140,000 and $156,000 at
December 27, 1996 and September 26, 1997. No allowance was provided for at
December 29, 1995.

7. INVENTORY

Inventory consists of purchased finished merchandise available for sale and
is recorded at the lower of cost or market with the first-in, first-out ("FIFO")
method used to determine cost.

8. PROMOTIONAL MATERIAL

The cost of producing and mailing catalogs is deferred and expensed over the
estimated useful lives of the catalogs. Catalog production and mailing costs are
amortized over periods ranging from four to six months from the in-home date of
the catalog. The ongoing cost of developing and maintaining the customer list is
charged to operations as incurred.

9. PROPERTY AND EQUIPMENT

Property and equipment is stated at cost less accumulated depreciation and
amortization. The Company capitalizes external and incremental internal costs of
developing computer software for internal use that represent major enhancements
and/or replacements of operating and management systems. Depreciation and
amortization is computed using the straight-line method.

10. INCOME TAXES

Deferred tax assets and liabilities represent the tax effects, based on
current tax law, of future deductible or taxable items that have been recognized
in the financial statements.

11. STOCK OPTIONS

The Company's employee stock option plans are accounted for under the
intrinsic value method.

12. NET EARNINGS (LOSS) PER SHARE

On December 28, 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) 128, EARNINGS PER SHARE. As required by SFAS 128, all net
earnings (loss) per share data have been restated to conform to the provisions
of SFAS 128.

The Company's basic net earnings (loss) per share amounts have been computed
by dividing net earnings (loss) by the weighted average number of outstanding
common shares. The Company's diluted net earnings (loss) per share amounts have
been computed by dividing net earnings (loss) by the weighted average number of
outstanding common shares and common share equivalents relating to stock options
and warrants, when dilutive.

For fiscal years 1994 and 1996 and thirty-nine weeks ended September 26,
1997, 242,202, 97,480 and 549,424 shares of common stock equivalents were
included in the computation of diluted net earnings per share. Options and
warrants to purchase 496,433, 44,878, 830,617 and 18,650 shares of common stock
with

F-8
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a weighted average exercise price of $2.47, $6.50, $2.18 and $8.70 were
outstanding during fiscal years 1995 and 1996 and the thirty-nine weeks ended
September 27, 1996 and September 26, 1997, but were not included in the
computation of diluted net earnings per share because to do so would have been
anti-dilutive.

13. FISCAL YEAR

The Company's fiscal year ends on the Friday nearest December 31 for years
prior to 1997 and the Sunday nearest December 31 for 1997. Fiscal years 1994,
1995 and 1996 consisted of 52 weeks.

14. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

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

15. RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issued SFAS 130, REPORTING
COMPREHENSIVE INCOME, which requires the Company to display an amount
representing total comprehensive income, as defined by the statement, as part of
the Company's basic financial statements. Additionally, SFAS 131, DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, requires the Company to
disclose financial and other information about its business segments, their
products and services, geographic areas, sales, profits, assets and other
information. These statements are effective for financial statements for periods
beginning after December 15, 1997.

The adoption of these statements is not expected to have a material effect
on the financial statements of the Company.

16. RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1995 financial
statements to conform to the 1996 presentation.

NOTE B--RELATED PARTY TRANSACTIONS

The Company purchased $448,000, $175,000, $41,000, $1,000 and $6,000 of
inventory during fiscal years 1994, 1995 and 1996 and thirty-nine weeks ended
September 27, 1996 and September 26, 1997 from companies owned by family members
of certain officers and directors of the Company.

The Company purchased $6.7 million, $4.4 million, $3.0 million, $2.3 million
and $1.3 million of inventory during fiscal years 1994, 1995 and 1996 and
thirty-nine weeks ended September 27, 1996 and September 26, 1997 from companies
partially owned by two directors of the Company.

The Company incurred interest expense on related party subordinated notes
payable of $171,000, $172,000, $172,000, $131,000 and $137,000 during fiscal
years 1994, 1995 and 1996 and thirty-nine weeks ended September 27, 1996 and
September 26, 1997.

F-9
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE C--PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 29, DECEMBER 27, SEPTEMBER 26, USEFUL
1995 1996 1997 LIVES
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Machinery, equipment and furniture.... $ 2,152 $ 2,343 $ 2,618 5-12 years
Equipment under capital leases........ 133 133 133 5 years
Leasehold improvements................ 802 853 1,036 Lease life
Computer equipment and accessories.... 853 935 1,113 5 years
Computer software..................... 1,728 2,553 2,934 5 years
------------ ------------ -------------
5,668 6,817 7,834
Less accumulated depreciation and
amortization........................ (1,370) (2,462) (3,489)
------------ ------------ -------------
$ 4,298 $ 4,355 $ 4,345
------------ ------------ -------------
------------ ------------ -------------
</TABLE>

NOTE D--COMMITMENTS AND CONTINGENCIES

The Company has entered into several long-term contracts related to a
building facility, telecommunications and computer equipment and long-distance
telephone services. The Company occupies approximately 320,000 square feet under
a lease that expires in March 1999. In addition to the base rent, the lease
requires the Company to pay real estate taxes, utilities, insurance and
maintenance; therefore, these costs are included in future minimum lease
payments. The Company has several operating leases relating to telecommunication
and computer equipment with varying terms ranging from 19 to 48 months. During
1996, the Company entered into a three year agreement for long-distance
telephone services with minimum purchase commitments of approximately $900,000
per year.

At September 26, 1997, future minimum commitments under the above agreements
are as follows for the fiscal periods (in thousands):

Rent expense was $900,000, $1.7 million, $1.8 million, $1.3 million and $1.5
million for fiscal years 1994, 1995 and 1996 and thirty-nine weeks ended
September 27, 1996 and September 26, 1997.

The Company is not a party to any pending legal proceedings other than
litigation which is incidental to its business and which the Company believes is
not material.

Several states, where the Company does not currently collect and remit sales
and use taxes, have attempted to enact legislation that seeks to require
out-of-state mail order companies to collect and remit

F-10
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE D--COMMITMENTS AND CONTINGENCIES (CONTINUED)
such taxes. No assessments have been made against the Company and, to its
knowledge, none has been threatened or is contemplated. The United States
Supreme Court has held that such taxes place an unconstitutional burden on
interstate commerce, which may only be resolved by actions of the United States
Congress.

NOTE E--REVOLVING CREDIT FACILITY

During 1996, the Company entered into a credit facility providing a
revolving line of credit up to $10.0 million, subject to an adequate borrowing
base, expiring in May 1998. Funding under the credit facility is subject to a
collateral base consisting of inventory, plus 80% of accounts receivable under
the installment plan, less customer liabilities. The collateral base related to
inventory is limited to $6.0 million December 16 through March 31, $7.0 million
in April and $10.0 million May 1 through December 15 of each year. The revolving
line of credit is for working capital and letters of credit. Commercial letters
of credit may not exceed $1.0 million at any time. Borrowings under the
revolving line of credit bear interest at the bank's prime rate plus an
applicable percentage point spread. The spread cannot exceed 1.50% at any time,
but may be lower if the Company meets certain debt to tangible net worth ratio
levels. As of December 27, 1996, the spread was 1.50%. As of September 26, 1997
interest was at the bank's prime rate. The availability of funding under the
facility is subject to the sum of the principal balance and letters of credit
being paid down to $3.0 million, plus 80% of installment receivables. The
paydown requirement must be maintained for not less than 15 consecutive days
between December 1 and March 31 of each year. The revolving line of credit is
collateralized by substantially all of the assets of the Company. (See Note J).

All borrowings are subject to various monthly covenants. The most
restrictive covenants require certain levels of year-to-date net earnings (loss)
and net worth and have a maximum debt to net worth ratio and a maximum yearly
level of capital spending. As of September 26, 1997 and December 27, 1996, the
Company was in compliance with all applicable covenants under the revolving line
of credit agreement.

The following is a summary of the credit facility (in thousands):

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
------------------------------------- --------------------------
DECEMBER DECEMBER DECEMBER SEPTEMBER
30, 29, 27, SEPTEMBER 27, 26,
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at end of
period.............. $ -- $ 965 $ 1,497 $ 8,681 $ 13,256
Interest rate at end
of period........... 10.00% 9.50% 9.75% 9.75% 8.50%
Maximum month-end
borrowing during the
period.............. $ 6,985 $ 11,720 $ 9,765 $ 9,471 $ 13,256
Average daily
borrowing during the
period.............. $ 2,445 $ 6,729 $ 6,029 $ 5,867 $ 9,692
Weighted average
interest rate during
the period.......... 9.27% 9.23% 10.60% 10.63% 9.18%
</TABLE>

F-11
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE F--LONG-TERM DEBT

Long-term debt is as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 27, SEPTEMBER 26,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Subordinated notes payable to shareholders, interest at
1.75% over prime but not less than 9%, payable quarterly
(effective rate of 10% at December 27, 1996 and 10.25% at
September 26, 1997), principal due June 1998.
Collateralized by the assets of the Company (a).......... $ 3,414 $ 3,414 $ 3,414
Note payable to a government agency, interest at 4%,
principal and interest payable annually through June
1998. Collateralized by machinery, equipment and
furniture and fixtures (b)............................... 220 182 145
Capitalized leases and other............................... 116 62 16
------ ------ ------
3,750 3,658 3,575
Less current maturities.................................... 3,463 52 3,457
------ ------ ------
$ 287 $ 3,606 $ 118
------ ------ ------
------ ------ ------
</TABLE>

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

(a) These notes were renewed during 1996. In connection with the renewal,
the Company issued warrants to purchase 341,347 shares of common stock
(see note H). The above notes payable to shareholders are subordinate to
present and future financial institution borrowings (see note E).

(b) Financing obtained from a government agency in connection with the
Company's new facility lease. Annual principal payments of $30,000 plus
interest are required, with the final payment of $160,000 due in June
1998. Principal of $13,000 will be forgiven each year if the Company
attains certain payroll levels. In 1997, 1996 and 1995, the required
payroll level was achieved. If the Company renews its lease in 1998, the
final payment of $160,000 will be restructured to be payable over five
additional years.

Aggregate maturities of long-term debt at September 26, 1997 are as
follows for the fiscal periods (in thousands):

The fair value of long-term debt approximates the carrying value.

F-12
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE G--INCOME TAXES

The provision for income tax expense (benefit) consists of the following for
fiscal years 1994, 1995 and 1996 and thirty-nine weeks ended September 27, 1996
and September 26, 1997 (in thousands):

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------------------- --------------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 27, SEPTEMBER 27, SEPTEMBER 26,
1994 1995 1996 1996 1997
--------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Current
Federal......................... $ 89 $ (70) $ 263 $ -- $ 268
State........................... 6 5 10 -- 8
----- ----- ----- ----- -----
95 (65) 273 -- 276
Deferred
Federal......................... 290 (290) 486 -- (97)
----- ----- ----- ----- -----
$ 385 $ (355) $ 759 $ -- $ 179
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

Differences between income tax expense (benefit) and amounts derived by
applying the statutory federal income tax rate to earnings (loss) before income
taxes are as follows for fiscal years 1994, 1995 and 1996 and thirty-nine weeks
ended September 27, 1996 and September, 26, 1997:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------------ ----------------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 27, SEPTEMBER 27, SEPTEMBER 26,
1994 1995 1996 1996 1997
--------------- -------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
U.S. federal statutory rate....... 34.0% (34.0)% 34.0% 34.0% 34.0%
Change in valuation allowance..... (21.7) 20.2 (13.7) (34.0) --
Adjustment of prior years'
accruals........................ -- -- 3.8 -- --
Other............................. 0.1 (3.1) 0.5 -- 0.6
----- ----- ----- ----- ---
12.4% (16.9)% 24.6% --% 34.6%
----- ----- ----- ----- ---
----- ----- ----- ----- ---
</TABLE>

F-13
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE G--INCOME TAXES (CONTINUED)

The components of the net deferred tax asset and liability at December 29,
1995, December 27, 1996 and September 26, 1997, calculated at 34% consist of (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 27, SEPTEMBER 26,
1995 1996 1997
------------- ------------- ---------------
<S> <C> <C> <C>
Current deferred tax assets (liabilities):
Inventory capitalization....................... $ 185 $ 219 $ 379
Inventory reserve.............................. 51 218 332
Vacation accrual............................... 100 99 95
Returns reserve................................ 60 218 163
Net operating loss carryforwards............... 1,277 -- --
Promotional material........................... (671) (618) (690)
Prepaid expenses............................... (240) (148) (160)
Income tax credits............................. 66 137 --
Other.......................................... 21 94 101
------ ----- -----
849 219 220
Valuation allowance............................ (424) -- --
------ ----- -----

Deferred tax asset........................... 425 219 220

Long-term deferred tax assets (liabilities):
Depreciation................................... (306) (238) (186)
Internally developed software.................. (107) (467) (423)
Other.......................................... (12) -- --
------ ----- -----
Deferred tax liability....................... (425) (705) (609)
------ ----- -----
Net deferred tax liability................... $ -- $ (486) $ (389)
------ ----- -----
------ ----- -----
</TABLE>

NOTE H--SHAREHOLDERS' EQUITY

The Company has 40,000,000 authorized shares; 200,000 of Series A Preferred
Stock (see Note J), 36,800,000 of Common Stock and 3,000,000 undesignated
shares.

STOCK OPTIONS

The Company has a stock option plan (the "1991 Plan") which provides
participating employees the right to purchase common stock of the Company
through incentive stock options. A total of 35,000 shares of common stock are
reserved for issuance under the 1991 Plan. Options issued under the 1991 Plan
are exercisable over a ten year period from the date of grant. A total of 30,750
options were granted under the 1991 Plan during 1991 through 1993 at a range of
exercise prices from $2.00 to $2.50 per share. A total of 19,750 options at a
range of exercise prices from $2.00 to $2.50 per share were canceled. A total of
250 options at an exercise price of $2.50 were exercised. During 1996, a total
of 6,750 options at an exercise price of $2.00 expired. At December 27, 1996, a
total of 4,000 options were outstanding, of which 3,000 options were
exercisable. At September 26, 1997, a total of 4,000 options were outstanding,
all of which were exercisable.

F-14
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE H--SHAREHOLDERS' EQUITY (CONTINUED)
During 1993, the Company issued options to purchase 55,000 shares of the
Company's common stock at $2.50 per share to an officer of the Company. The
options, which are nontransferable, may only be exercised within six months of
the occurrence of any of the following events or they terminate: the death or
permanent disability of the officer, retirement at age 62, termination of
employment without cause or a public offering of the Company's common stock.
None of the options were exercisable at December 27, 1996 and September 26,
1997.

During 1993, the Company also issued options to purchase 5,000 shares of the
Company's common stock at $2.50 per share to a director and former officer of
the Company. All of the options were exercisable at December 27, 1996 and all
were exercised in 1997.

The Company has a non-qualified stock option plan (the "1994 Plan") which
provided for the issuance of up to 100,000 options to purchase shares of the
Company's common stock to certain employees, contingent upon meeting certain
quarterly pre-tax earnings levels. Options issued under the 1994 Plan are
exercisable over a three year period from the date of grant. During 1997, a
total of 36,564 options issued and outstanding under the 1994 Plan were amended
to extend the term of exercise from three years from the date of grant to ten
years from the date of grant. A total of 50,003 options were granted under the
1994 Plan during 1994 and 1995 at a range of exercise prices from $3.70 to $8.70
per share. During 1995, a total of 1,000 options at a range of exercise prices
from $3.70 to $8.70 were canceled. During 1996, a total of 4,125 options at a
range of exercise prices from $3.70 to $8.70 were canceled. During 1997, a total
of 1,501 options at a range of exercise prices from $3.70 to $8.70 were canceled
and a total of 2,500 options at a range of exercise prices of $3.70 to $5.30
expired. At December 27, 1996, a total of 44,878 options were outstanding, all
of which were exercisable, and at September 26, 1997, a total of 40,877 options
were outstanding, all of which were exercisable.

The Company has an incentive stock option plan (the "1996 Plan") which
provides selected key employees the right to purchase common stock of the
Company through the exercise of options granted. A total of 400,000 shares of
common stock are reserved for issuance under the 1996 Plan (see Note J). Options
issued under the 1996 Plan are exercisable over a ten year period from the date
of grant. A total of 125,000 options were granted under the 1996 Plan during
1996 at an exercise price of $2.50. During 1997, a total of 130,000 options were
granted under the 1996 Plan at an exercise price of $4.00. During 1997, a total
of 625 options at a range of exercise prices of $2.50 to $4.00 were exercised
and a total of 4,375 options at a range of exercise prices of $2.50 to $4.00
were cancelled. At December 27, 1996, a total of 125,000 options were
outstanding, all of which were exercisable, and at September 26, 1997, a total
of 250,000 options were outstanding, of which 152,875 options were exercisable.

F-15
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE H--SHAREHOLDERS' EQUITY (CONTINUED)

The following applies to options that are outstanding at September 26, 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
- --------------- ----------- ---------------- ----------------
<C> <C> <S> <C>
$2.50--$3.70 185,950 8 years $2.54
$4.00--$5.50 145,277 9 years $4.15
$8.70 18,650 7 years $8.70
-----------
349,877
-----------
-----------

RANGE OF NUMBER WEIGHTED AVERAGE
EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- --------------- ----------- ----------------
<S> <C> <S> <C>
$2.50--$3.70 130,950 $2.56
$4.00--$5.50 48,152 $4.46
$8.70 18,650 $8.70
-----------
197,752
-----------
-----------
</TABLE>

Exercise prices for all of the options granted were equal to or higher than
the fair value of the Company's common stock on the respective grant dates and,
therefore, no compensation expense has been recorded by the Company. A summary
of the stock option transactions during fiscal years 1994, 1995 and 1996 is as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year...... 82,250 $ 2.43 104,503 $ 3.12 121,753 $ 4.03
Granted............................. 30,003 4.83 20,000 8.70 125,000 2.50
Exercised........................... (250) 2.50 -- -- -- --
Forfeited........................... (7,500) 2.40 (2,750) 3.25 (6,125) 4.26
Expired............................. -- -- -- -- (6,750) 2.00
--------- --------- ---------
Outstanding at end of year............ 104,503 $ 3.12 121,753 $ 4.03 233,878 $ 3.27
--------- --------- ---------
--------- --------- ---------
Options exercisable at end of year.... 38,878 $ 4.20 64,753 $ 5.38 177,878 $ 3.51
--------- --------- ---------
--------- --------- ---------
Weighted average fair value of options
granted during the year............. N/A $ 2.20 $ 1.30
</TABLE>

F-16
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE H--SHAREHOLDERS' EQUITY (CONTINUED)
A summary of the stock option transactions during the thirty-nine weeks
ended September 27, 1996 and September 26, 1997 is as follows:

<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------------------------
SEPTEMBER 27, 1996 SEPTEMBER 26, 1997
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning of period.......................... 121,753 $ 4.03 233,878 $ 3.27
Granted................................................... -- -- 130,000 4.00
Exercised................................................. -- -- (5,625) 2.53
Forfeited................................................. (6,125) 4.26 (5,876) 3.43
Expired................................................... (6,750) 2.00 (2,500) 4.50
--------- ---------
Outstanding at end of period................................ 108,878 $ 4.15 349,877 $ 3.54
--------- ---------
--------- ---------
Options exercisable at end of period........................ 52,878 $ 5.89 197,752 $ 3.60
--------- ---------
--------- ---------
</TABLE>

The FASB issued SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which
introduced an alternative method for recognizing compensation costs based upon
the fair market value of the awards on the date they are granted. SFAS 123
allows entities to continue to account for stock options using the intrinsic
value method, provided pro forma net earnings and net earnings per share as if
the fair value based method had been used are disclosed.

The Company's pro forma net earnings (loss) and net earnings (loss) per
common and common equivalent share for fiscal years 1995 and 1996, had the fair
value based method been used, are set forth below. These effects may not be
representative of the future effects of applying this statement.

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C> <C>
Net earnings (loss)....................................... As reported $ (1,744) $ 2,327
Pro forma (1,788) 2,164

Net earnings (loss) per common and common equivalent share

Primary............................................... As reported $ (.75) $ .92
Pro forma (.77) .86

Fully diluted......................................... As reported $ (.75) $ .91
Pro forma (.77) .84
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions used: zero dividend yield; expected volatility of 25 percent;
risk-free interest rate of six percent; and expected life of 10 years.

F-17
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE H--SHAREHOLDERS' EQUITY (CONTINUED)
WARRANTS

In connection with private placements of subordinated notes payable in 1993
and 1994, warrants to purchase 374,680 shares of the Company's common stock were
issued to the debt holders. Of these warrants, 50,000 were issued at $2.50 per
share and expire in June 1998, and 324,680 were issued at $1.88 per share and
expire in April 1999.

In connection with the extension of $3.4 million in subordinated notes
payable in May 1996, warrants to purchase 341,347 shares of the Company's common
stock at an exercise price of $1.81 per share were issued to the debt holders.
The warrants expire in 2001.

In the aggregate, warrants to purchase 716,027 shares of common stock were
exercisable at December 27, 1996 and September 26, 1997.

All of the warrants contain a provision for the warrants to be terminated if
not exercised within 30 days after a sale, dissolution, public offering, merger
or consolidation of the Company.

STOCK SPLIT

The Company's Board of Directors approved a one-for-ten reverse stock split
which was approved by the shareholders on March 5, 1997. All share and per share
amounts have been restated to reflect the effect of the reverse stock split.

NOTE I--ADVERTISING EXPENSE

Selling, general and administrative expenses include advertising expenses of
$15.4 million, $21.6 million, $19.5 million, $12.7 million and $17.0 million for
fiscal years 1994, 1995 and 1996 and thirty-nine weeks ended September 27, 1996
and September 26, 1997.

NOTE J--EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS' REPORT

On April 18, 1997 the Company entered into an Amended and Restated Credit
and Security Agreement ("the amended agreement") with its bank which expires in
May 2000. The amended agreement contains substantially the same terms and
conditions as the previous agreement except that the maximum borrowing under the
line of credit was increased from $10.0 million to $15.0 million, the interest
rate was reduced to the bank's prime rate and the limit on letters of credit was
increased from $1.0 million to $5.0 million. The amended credit facility has an
increased collateral base related to inventory of $10.0 million December 16
through March 31, $12.0 million April 1 through April 15 and $15.0 million April
16 to December 15 of each year. In September 1997, the Company further amended
its credit facility to provide a revolving line of credit up to $16.5 million,
subject to an adequate borrowing base. The additional $1.5 million of
availability expired on December 15, 1997. All other terms and conditions
remained substantially the same as in the previous agreement.

On June 20, 1997 the Company's Board of Directors approved increasing the
number of shares reserved for issuance under the 1996 Plan from 400,000 to
600,000, subject to shareholder approval which was obtained on July 16, 1997.

F-18
<PAGE>
THE SPORTSMAN'S GUIDE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE J--EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS' REPORT (CONTINUED)
On July 1, 1997 the Company's Board of Directors approved the grant to
officers of the Company options to purchase 220,000 shares of common stock
contingent upon the completion of the Company's public offering. The exercise
price will be the same as the price to public in the offering document and 25%
of the options will vest immediately upon the date of grant with the balance
vesting over the next three years. The options will expire ten years from the
date of grant.

On July 1, 1997 the Company's Board of Directors approved the repurchase of
all of the Company's Series A Preferred Stock for $1.0 million upon completion
of the Company's public offering.

In July 1997 the Company entered into employment agreements with five of its
officers. The agreements contain various terms and conditions including a
provision for the officers to receive up to three years of base salary upon the
occurrence of certain events as defined in the agreements. The agreements
provide for automatic annual renewals unless two months' prior written notice is
provided by the Company or the officer.

F-19
<PAGE>

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[The Sportsman's Guide Logo]
[Sample ads from the Company's catalogs]

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YOU CAN SAVE $30.00 BUCKS ON GREAT-LOOKING, RUGGED, EASY-CARE
DOCKERS-REGISTERED TRADEMARK- MOC SHOES!

NEW! [Dockers -Registered Trademark- LOGO]
[Photograph of One-eye Moc Shoes]

Top quality, casual comfort. Who knows that tradition better than Dockers?
Heck, they practically INVENTED great-looking casual work wear. What's more,
SINCE THESE ARE LAST YEAR'S MODELS, YOU CAN SAVE A WHOPPING $30.00 OFF THESE
DOCKERS ONE-EYE MOC SHOES. Now isn't that a lot better than winning the
lottery? Okay, so I fudged a little. I'd rather win the lottery too...but,
this is still A GREAT DEAL ON RUGGED LEATHER BOAT SHOES FROM ONE OF THE BEST
NAMES IN THE BUSINESS!
-Soft, yet rugged, unlined pebbled full grain brown leather uppers
-ARCH-SUPPORTING, CONTOURED, LEATHER COVERED INSOLES
-Shock-absorbent EVA midsoles
-DUAL DENSITY, FLEXIBLE RUBBER MINI-LUG OUTSOLES
-Classic slip-on Moc Shoe styling...combined with a leather tie
-Each stands 4" tall, with a 1/2" heel and weighs just 16 ozs.
YOU KNOW YOU CAN'T GO WRONG WITH DOCKERS...ESPECIALLY AT MY
BLOW-THE-COMPETITION-OUT-OF-THE-WATER-PRICE OF LESS THAN 40 BILLS! STATE
SIZE: 7 1/2, 8, 8 1/2, 9, 9 1/2, 10, 10 1/2, 11, 11 1/2, 12 or 13. Come in
medium width. Order your normal size. Hurry! !!!FACTORY CLOSE-OUT/LIMITED
QUANTITIES!!!
Compare at $70.00

P7-23302X-Brown Dockers-Registered Trademark- One-eye Moc
Shoes............................CLOSE-OUT $39.97
(G.O.'s Club $35.97)

The "Fun-to-Read" Catalog -TM-

<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 5
Dilution.................................................................. 11
Use of Proceeds........................................................... 12
Price Range of Common Stock............................................... 13
Dividend Policy........................................................... 13
Capitalization............................................................ 14
Selected Financial Data................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 16
Business.................................................................. 23
Management................................................................ 32
Certain Transactions...................................................... 37
Principal and Selling Shareholders........................................ 39
Description of Capital Stock.............................................. 42
Shares Eligible for Future Sale........................................... 43
Underwriting.............................................................. 46
Legal Matters............................................................. 47
Experts................................................................... 48
Available Information..................................................... 48
Documents Incorporated by Reference....................................... 48
Index to Financial Statements............................................. F-1
</TABLE>

1,800,000 SHARES

[LOGO]

COMMON STOCK

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PROSPECTUS

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CRUTTENDEN ROTH
I N C O R P O R A T E D

JOHN G. KINNARD AND COMPANY,
I N C O R P O R A T E D

FEBRUARY 5, 1998

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