RIDE INC, 10-K, 1999-09-28

RIDE INC
10-K, 1999-09-28
SPORTING & ATHLETIC GOODS, NEC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-K

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

FOR THE FISCAL YEAR ENDED JUNE 30, 1999
OR

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

COMMISSION FILE NUMBER: 1-13042
------------------------

RIDE, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
WASHINGTON 91-1571027
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

8160 304TH AVENUE SOUTHEAST 98050
PRESTON, WASHINGTON (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (425) 222-6015
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /

As of September 27, 1999, the aggregate market value of the registrant's
common stock held by nonaffiliates of the registrant was $10,876,655 based on
the closing sale price of the registrant's Common Stock on the OTC Bulletin
Board.

As of September 28, 1999, the number of shares of the registrant's Common
Stock outstanding was 14,311,401.

DOCUMENTS INCORPORATED BY REFERENCE:

(1) NONE

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Items 1, 2, 3 and 7 of this Form 10-K contain forward-looking statements
within the meaning of that term in the Private Securities Litigation Reform Act
of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). Statements contained herein that are not
historical facts are forward-looking statements made pursuant to the safe harbor
provisions referenced above. Forward-looking statements may include, but are not
limited to, projections of revenue, income or loss and capital expenditures,
statements regarding future operations, financing needs, compliance with
financial covenants in loan agreements, plans for acquisitions or sales of
assets or businesses and consolidation of operations of newly acquired
businesses, and plans relating to products or services of the Company,
assessments of materiality, predictions of future events and the effects of
pending and possible litigation, as well as assumptions relating to the
foregoing. In addition, the words "anticipates," "believes," "estimates,"
"expects," "intends," "plans" and variations thereof and similar expressions are
intended to identify forward-looking statements.

Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained in this Annual Report. Factors that could
cause such future events or actual results to differ include, but are not
limited to, those set forth in "Item 1. Business--Risk Factors" below.

Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unexpected
events.

PART I

ITEM 1. BUSINESS

INTRODUCTION

Ride, Inc. (the "Company") is a leading designer, manufacturer and marketer
of contemporary sporting goods equipment and apparel for snowboard and wakeboard
consumers. The Company markets its equipment and apparel throughout the world
under multiple brands specifically targeted to serve certain price points,
product lines and distribution channels.

The Company was founded in September 1992 and acts as a holding company for
the following subsidiaries: Ride Snowboard Company ("Ride Snowboards"), Ride
Manufacturing, Inc. ("Ride Manufacturing"), Ride Canada, Inc. ("Ride Canada"),
SMP Clothing, Inc. ("SMP"), Smiley Hats, Inc. ("Smiley"), and Carve, Inc. d/b/a
US2 Sports ("US2"). The Company acquired C.A.S. Sports International, Inc. and
C.A.S. Sports Agency, Inc. (collectively, "CAS") in August 1994. The Company
acquired Ride Manufacturing and 5150 Snowboards, Inc. ("5150") and SMP in
September and October 1995, respectively. The Company later merged 5150 with and
into Ride Snowboards. In October 1996, the Company transferred certain of its
assets and liabilities of the CAS business to Ride Canada and Ride Snowboards,
and sold the CAS entities. In June 1997, the Company acquired substantially all
of the assets (except cash and accounts receivable) and liabilities of Device
Mfg Corp. ("Device") and transferred those assets and liabilities to Ride
Snowboards. In July 1997, the Company purchased substantially all of the assets
of Galena Creek Trading Company, Inc., d/b/a Smiley Hats, and transferred those
assets to its Smiley subsidiary, which the Company formed specifically for that
purpose. In December 1997, the Company acquired US2 Sports Group, Inc. d/b/a
FullTilt Wakeboards, through a merger of that company with and into Carve, Inc.,
a newly-formed corporation. The Company sold substantially all of the assets of
SMP in November 1998.

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the affirmative vote of 66 2/3% of the outstanding shares of the Company's
common stock. A Special Meeting of Shareholders of the Company will be held on
October 5, 1999 for the purpose of voting to approve the merger transaction.

Ride Snowboards sells premium to mid-range snowboards and related products
primarily through specialty snowboard and ski shops. Ride Manufacturing is a
manufacturer of premium snowboards principally for Ride Snowboards and, to a
lesser extent, a limited number of other snowboard companies on an OEM basis.
Until its November 1998 sale, SMP designed and manufactured snowboard, surf,
skate, motocross and street apparel which was sold primarily through specialty
shops. Ride Canada acts as the Company's Canadian distributor. Smiley designs
and manufactures premium head and neck wear for the winter sports industry which
products are sold through specialty shops. US2 designs, manufactures and
distributes wakeboards, wakeboard bindings and accessories under the "FullTilt"
and "Sub Rosa" brand names through sporting goods, marine and specialty
retailers. Until its disposition in October 1996, CAS marketed entry-level
snowboards and related products under various brand names and on a private label
basis, primarily to regional sporting goods stores and large-format sporting
goods retailers. In addition, CAS sold snowboards and related products on an OEM
basis to other snowboard companies and bought excess snowboard and sporting
goods inventories from manufacturers and sold such products to retailers
throughout the world. The OEM and excess inventory portions of the CAS business
were sold in October 1996 while the branded and private label portions of the
business were retained by the Company and have been integrated as an additional
component of the Company's product offering.

INDUSTRY BACKGROUND

SNOWBOARDING

Tracing its roots to surfing and skateboarding, snowboarding was invented in
the late 1970's. The first products available were unsophisticated in design and
were made almost entirely by small "backyard" manufacturers. In the early
1990's, snowboard design advanced to higher performance standards and the sport
began to attract broader demographic participation.

The majority of snowboarders continue to be young males, however, the sport
is growing in popularity among females and older sports enthusiasts, especially
downhill skiers. The sport is now welcome and promoted at nearly all of the ski
areas worldwide. Snowboarding recently made its debut with four full medal
events at the 1998 Winter Olympic Games in Nagano, Japan.

The Company believes that the growth of snowboarding is attributable in
large part to advantages the sport holds over alpine skiing. Many people find
that snowboarding not only is more natural and easier to learn than alpine
skiing, but also provides a greater degree of excitement over more diverse
terrain. For many, snowboarding equipment is also less cumbersome and more
comfortable than alpine ski equipment; poles are unnecessary and the boots are
softer and lighter than ski boots. Moreover, recent design improvements are
making step-in snowboard bindings a more attractive option for crossover skiers
and others seeking the functionality and ease of use of alpine ski step-in
products.

The Company believes the snowboard industry is dominated by approximately
seven major competitors, including one industry market share leader, three
predominantly snowboard-related companies, including the Company, and three ski
manufacturers. The remainder of the market is highly fragmented among scores of
competitors. The Company believes that recent acquisitions of smaller brands by
larger competitors represents a broader consolidation trend in the industry as
weaker brands are either absorbed by larger companies or cease business
operations.

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OPERATING STRATEGY

The Company's operating strategy is to creatively market high quality,
technologically innovative contemporary sports products and extend its position
in the sporting goods equipment market into the apparel marketplace.

BRAND MARKETING OF SPORTING GOODS EQUIPMENT: The Company uses a multiple
brand strategy to serve the product needs, price points and demographics of its
diverse consumer base. The "Ride" brand is specifically positioned to appeal to
a broad range of snowboard enthusiasts at mid to higher price points; "5150" is
targeted at the Company's more aggressive counterculture snowboard consumers;
"Liquid" produces entry level products at moderate price points.

TECHNOLOGY BASED PRODUCTS: The Company uses its in-house production
capabilities at Ride Manufacturing, an extensive engineering staff and its team
of world-class professional snowboarders and wakeboarders to develop
high-performance snowboard and wakeboard equipment incorporating the most
advanced technologies currently available. The Company believes the products
designed by these professional athletes, with production and management
oversight provided by Company engineers, gives its snowboard brands competitive
advantages in the consumer marketplace. This strategy was rewarded in 1997 with
SNOWBOARDINGONLINE's first ever product review in which the Company's "Ride"
Timeless and Jeff
Brushie snowboards were selected as the best in their respective product
categories. The awards have continued in 1998 with MOUNTAIN SPORTS & LIVING
(f.k.a. SNOWCOUNTRY) naming the Company's "Ride" Timeless and Control snowboards
"Tester's Choice" in their respective categories.

EXPANSION INTO APPAREL. The Company seeks to broaden its revenue base by
marketing accessories and soft goods specifically targeted to snowboard and
wakeboard enthusiasts. The Ride Snowboards apparel brand is targeted at the
middle to high end snowboard enthusiast who requires extensive technical
features such as waterproof breathable fabrics. The Company intends to expand
the recognition of its equipment brands with accessories such as backpacks,
snowboard bags, gloves and hats. Smiley Hats produces high-quality head and
neck-wear for winter sports enthusiasts, further increasing The Company's
presence in the winter sports accessories marketplace.

PRODUCTS

SNOWBOARD EQUIPMENT. The "Ride" brand is designed for high performance,
capitalizes on the Company's most advanced technologies and has historically
been positioned toward the higher price points in the snowboard market. In 1997,
the Company began offering moderate price point products under the "Ride" brand
to target entry and intermediate level consumers, thus expanding recognition of
the "Ride" brand name. Designed to connect the snowboarder to the snowboard, the
"Ride" product line includes both traditional "strap" snowboard bindings and
boots and a complete line of "Device-compatible" step-in snowboard bindings and
boots. Included in the Company's products for the first time in 1997, step-in
snowboard bindings provide an increased level of convenience by allowing the
user to simply step-in to the binding to connect himself to the snowboard as
opposed to sitting down in the snow to "strap-in" to traditional snowboard
bindings. In order to maximize the strength and positioning of the "Ride"
product series, the Company merged its "Preston" high end strap-in bindings into
the '98-'99 "Ride" product line. The mounting features of all of the Company's
bindings are compatible with the Company's snowboards and those offered by
virtually all competitors.

The Ride product lines currently include:

- 47 sizes of snowboards within 12 board series with suggested retail prices
ranging from $165 for a children's board to $525 for a high-end expert
board,

- five models of traditional strap snowboard bindings with suggested retail
prices ranging from $100 to $170,

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- two models of Device-compatible step-in snowboard bindings with suggested
retail prices from $130 to $160, and

- 13 models of Device-compatible step-in and 13 models of traditional strap
snowboard boots with suggested retail prices ranging from $130 to $250.

The Liquid and 5150 product lines are aimed at entry level snowboarders who
require quality products at a competitive price. The lines currently include:

- fifty sizes of snowboards within two board series with suggested retail
prices ranging from $230 to $300,

- thirteen models of traditional strap snowboard bindings with suggested
retail prices ranging from $35 to $85,

- two models of device-compatible step-in snowboard bindings with a
suggested retail price of $115, and

- four and eight models, respectively, of device-compatible step-in and
traditional snowboard boots with suggested retail prices ranging from $80
to $110.

APPAREL. The Company believes that clothing is an important element of the
snowboarding subculture and that the demand for snowboarding apparel will grow
with the popularity of the sport. In addition, snowboard apparel has crossed
over into everyday fashion, thereby increasing the potential market for the
Company's apparel products.

The Company's line of technical snowboard outerwear and apres snowboard
apparel is sold under the "Ride Snowboard Apparel" brand name. This product line
extends the "Ride" brand's reputation for equipment quality and performance to
the snowboard apparel market. "Ride" brand apparel is intended for the consumer
who desires technology and function in his or her snowboard clothing. Retail
value for outerwear ranges from $90 for an entry level pair of pants to $270 for
the line's full featured waterproof, breathable parka.

ACCESSORIES. The Company offers a variety of snow and wakeboarding
accessories, including snowshoes, gloves, bags, packs, hats and caps under the
"Ride," "5150," "Liquid," "FullTilt" and "Smiley" brands. The Company's
subsidiary, Smiley, offers high quality head and neck wear for wintersports
enthusiasts ranging from basic wool hats to alternative synthetic fleece hats
and headbands. Smiley's products generally retail for $10 to $40.

WAKEBOARDS AND WAKEBOARD BINDINGS. The Company's December 1997 acquisition
of US2 Sports Group has extended the Company's product line to wakeboards and
wakeboard bindings. In 1998, the Company offered 15 models of wakeboards under
the "FullTilt" brand with suggested retail prices ranging from $270 to $700 and
five models of wakeboard bindings under the "Sub Rosa" brand with suggested
retail prices ranging from $100 to $280. The Company's wakeboard products are
distributed through specialty retailers, marine dealerships and large format
sporting goods chains. The Company has recently made the decision to restructure
its wakeboard business and as part of that process suspend production for the
1999 season.

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The following table sets forth the contribution to net sales (in thousands
and as a percentage of net sales) attributable to each of the Company's product
groups for the twelve month period ended June 30, 1998 the twelve month period
ended June 30, 1999.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
JUNE 30, 1998 JUNE 30, 1999
---------------------- ----------------------
<S> <C> <C> <C> <C>
Snowboards..................................... $ 12,315 34% $ 17,689 44%
Bindings....................................... 8,349 24 9,150 24
Boots.......................................... 3,390 9 6,256 15
Skate, wake and other.......................... 1,977 5 1,550 4
--------- --- --------- ---
Total hard goods............................... 26,032 72 34,645 87

Apparel........................................ 7,520 21 2,837 37
Accessories.................................... 2,644 7 2,230 6
--------- --- --------- ---
Total soft goods............................... 10,164 28 5,067 13
--------- --- --------- ---
Net sales...................................... $ 36,195 100% $ 39,712 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

TIERED DISTRIBUTION STRATEGY

The Company's worldwide distribution strategy is centered around a policy of
limited distribution and market segmentation. Although the Company believes that
more rapid sales growth might be achieved in the short term by selling all
brands across all distribution channels, the Company believes that continued
growth and brand loyalty can be best achieved by selling each of the Company's
brands primarily through those retailers that best serve the market segment to
which the particular brand is targeted.

NORTH AMERICA. The Company distributes its branded products to retailers
through its independent sales representatives and a limited number of employee
sales representatives. The following table details the Company's tiered
distribution strategy for each of its brands:

<TABLE>
<CAPTION>
REGIONAL SPORTING
GOODS AND
APPAREL CHAINS
---------------------
SPECIALTY SNOW PRIMARY RETAIL
AND SKI SHOPS OUTLETS LARGE FORMAT
-------------- --------------------- SPORTING GOODS
RETAILERS
--------------
<S> <C> <C> <C>
Snowboard equipment & accessories............... Ride Ride, Liquid, 5150 Liquid, 5150
Accessories..................................... Smiley Smiley Smiley
Apparel......................................... Ride Ride None
</TABLE>

The three main retail channels of distribution for the Company's branded
products in North America are as follows:

SPECIALTY SNOWBOARD AND SKI SHOPS. These retailers generally operate one to
three relatively small shops specifically targeted at the core of their
respective markets. Providing the highest amount of customer service and
significantly influencing the purchasing decisions of consumers, they tend to
cater to experienced snowboarders, a majority of whom are repeat buyers, as well
as intermediate snowboarders, cross-over skiers and other winter sports
enthusiasts. These retailers primarily sell the Company's premium and mid-priced
snowboards, including bindings, boots, accessories and Ride Snowboards apparel.

REGIONAL SPORTING GOODS STORES AND APPAREL CHAINS. These retailers
typically have 10 or more large to moderate size stores within a large
geographical area, target their product lines at specific sport sectors and
generally appeal to intermediate and novice sports enthusiasts. Accordingly,
they offer trained sport specific sales assistance for their customers at the
moderate to upper price points. These stores primarily sell Ride, Liquid and
5150 product lines.

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LARGE-FORMAT SPORTING GOODS RETAILERS. These retailers typically carry the
Company's Liquid and 5150 product lines. Offering the broadest range of sporting
goods equipment, these stores maximize volume based on providing price point
products and offer a modest amount of sales and service support for their
customers. These retailers typically carry the Company's Liquid and 5150 product
lines.

INTERNATIONAL. The Company has historically generated the largest portion
of its international revenues in the Japanese marketplace through sales of its
"Ride" and "5150" brands to independent distributors who, in turn, sell these
product lines to Japanese retailers. Due to the oversupply of snowboard
equipment in the Japanese marketplace, the Company determined that its ability
to maintain market share and control its "Ride" brand image is directly related
to the level of control the Company has over its distribution channels in that
marketplace. During 1997, the Company implemented a two-tiered distribution
strategy in Japan for the "Ride" brand whereby it sells directly to the top
retailers in that market and distributes to specialty retailers through a
sub-distributor.

Throughout the rest of the world, the Company sells to independent
distributors who in turn market and sell products to retailers in their
respective markets, except in Canada, France and Great Britain, where the
Company sells directly to retailers through independent sales representatives.
The Company works closely with its international distributors to ensure that its
policies of limited distribution and market segmentation are followed worldwide.

The Company's North American and export sales, in thousands, are set forth
below for the twelve month period ended June 30, 1998, the twelve month period
ended June 30, 1999. No customer accounted for more than 10% of sales in any of
the periods.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
JUNE 30, 1998
---------------------- TWELVE MONTHS ENDED
JUNE 30, 1999
----------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
North America............................................ $ 26,782 74% $ 30,918 78%
Japan.................................................... 6,022 17 5,288 13
Europe and other......................................... 3,391 9 3,506 9
Net Sales................................................ $ 36,195 100% $ 39,712 100%
</TABLE>

INNOVATIVE PRODUCT DESIGNS

A key component of the Company's progressive image and operating strategy is
its commitment to be the industry leader in technologically innovative product
design. Unlike many other snowboard companies, which rely largely on third-party
design technicians and engineers, the Company uses in-house product development
teams in collaboration with Company team riders to develop high-performance
products that incorporate the most advanced snowboarding technology. The Company
continues advances in the use of light weight, durable materials in the
construction of its snowboards. For the 1999-2000 snowboard product line,
Company has introduced several new construction styles, including the "Profile"
board, which incorporates a new, progressive-angle cap design, and the "Yukon"
board, which brings the construction of the Company's popular "Timeless" series
to riders with larger feet. The Company has pioneered the use of lightweight and
durable aircraft-grade aluminum in traditional strap-in snowboard bindings.
Research and development expenses totaled approximately $338,000 in 1997,
$180,000 in 1998 and $200,000 in 1999. The Company expects to spend comparable
amounts in the 2000 fiscal year as it has in recent past fiscal years on
research and development efforts for snowboard equipment and apparel.

IN-HOUSE MANUFACTURING CAPABILITY

The Company produces a majority of its snowboards in its factory in Corona,
California. A portion of the remaining production of snowboards are produced at
an independent manufacturing facility in China.

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MARKETING

The Company has established its flagship "Ride" brand name as an aggressive,
technologically advanced brand on the leading edge of snowboarding. The Company
has established different brands for other target markets and seeks to increase
consumer awareness of these brands without jeopardizing the Ride brand image. An
important element of this strategy is the Company's professional snowboard
riders, who are prominently featured in the Company's print advertising in
leading industry magazines and several underground snow/surf/skate publications.
Participating in their respective sports approximately 250 days a year, the
Company's professional teams provide significant brand exposure through
photographic and editorial coverage in major industry magazines and at organized
events. The Company also sponsors top local riders in various markets with free
products. Additionally, the Company's product demo program, We Put the Ass Back
in Passion, provides trial rides to customers and potential customers at ski
areas around the country through the Company's five demo vans. The Company has
also increased its efforts to bring industry media attention to the
technological features of its products through Company-sponsored tours of its
state-of-the-art Ride Manufacturing factory and on-hill demonstration events.
These programs are each designed to improve the visibility of the Company's
products while enhancing the high-performance reputation of the Ride brand. The
Company also markets its products through regular attendance at industry trade
shows.

SUPPLIERS

In fiscal 1999, the Company sourced all of its strap and Device-compatible
step-in snowboard bindings from the Asia-based Snowboard Factory, Inc. to
capitalize on lower product cost opportunities available in the Far East. The
Company expects to continue this arrangement in 2000. The Company's apparel,
boot and accessory products will continue to be sourced through a variety of
U.S. and foreign manufacturers.

The Company generally does not have contracts with its manufacturing sources
and competes with other companies for the production capacity of some
manufacturers. Although the Company believes that it has established close
relationships with its principal manufacturing sources, its future success may
depend on its ability to maintain these relationships. If the Company's
relationship with any of its binding, boot, apparel or other product
manufacturers were interrupted, the Company could find it difficult to locate
another source with sufficient production capacity to meet the Company's
short-term needs, and the Company could miss the retailing season for that
product. The establishment of new manufacturing relationships involves numerous
uncertainties, including those relating to:

- payment terms,

- costs of manufacturing,

- adequacy of manufacturing capacity,

- quality control, and

- timeliness of delivery.

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The Company is unable to predict whether these new relationships would be on
terms that the Company regards as satisfactory. Should an unexpected change in
binding, boot, apparel or other product suppliers become necessary, the Company
would likely experience increased costs, as well as a substantial disruption and
a potential loss of sales. In addition, from time to time, manufacturers in the
snowboard industry have experienced shortages and, in some cases, price
increases in certain raw materials, and shortages or price increases may recur.
At times, the Company has also experienced delays in the receipt of products
from its suppliers as a result of shortages in raw materials, including
fiberglass and P-Tex. Although the Company believes that it is well-positioned
to minimize the impact of raw material shortages and delays in supplier
shipments, shortages and delays could have a material adverse affect on the
Company's business, financial condition and results of operations.

COMPETITION

The snowboarding businesses are highly competitive and has relatively few
technological or manufacturing barriers to entry. The Company's technology is
generally not proprietary. The Company competes with a number of established
manufacturers and distributors whose brand names enjoy recognition that exceeds
that of the Company's brand names. In all its product categories, the Company
competes with numerous manufacturers and distributors that have significantly
greater financial, distribution, advertising and marketing resources than the
Company. The Company cannot assure that it will compete successfully in the
future due to one or more of the following conditions:

- the current industry oversupply position,

- future events affecting the Company or its competitors,

- consumer buying patterns,

- the introduction of new products by the Company or its competitors,

- weather patterns that may affect the demand for the Company's products,

- product supply fluctuations in the Company's markets,

- regulations affecting the Company's products,

- the financial condition of the Company's suppliers, and

- the entry of additional competitors in the Company's markets,

among other factors, could result in insufficient or excess inventory levels,
missed market opportunities or higher markdowns, any of which could have a
material adverse effect on the Company's financial condition and results of
operations.

LICENSING

The Company is currently licensing its Device-compatible step-in snowboard
binding technology to several competitors in the snowboard boot and binding
market and anticipates licensing this technology to additional snowboard boot
and binding manufacturers in the future. The Company expects these licensing
arrangements will increase the market penetration of its Device-compatible
snowboard boot and binding system in North America, Europe and Japan. The
Company is also licensing its Liquid brand name for North American apparel
distribution.

INTELLECTUAL PROPERTY

The Company aggressively seeks to protect its intellectual property rights
such as trademarks, product designs and new concepts. These rights are protected
through trademark registrations, the maintenance of trade secrets, the
development of trade dress and, when necessary, appropriate action against those
who

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are, in the Company's opinion, unfairly competing. In addition, the Company is
seeking and, when appropriate, will continue to seek patent protection for
product function and design innovations.

The Company has applied for or been granted trademark registration in the
United States and certain foreign jurisdictions for

- Ride,

- Liquid,

- 5150,

- Preston,

- Cappel,

- Device,

- Smiley,

- FullTilt, and

- Sub Rosa,

as well as some associated logos. The Company also claims rights to the
trademarks above and to various other trademarks arising out of use of these
marks. Although the Company believes these rights are enforceable, there can be
no assurance that any of these trademarks are enforceable or that the Company is
otherwise capable of protecting the goodwill associated with them. The Company
believes that the failure to protect its trademarks could have a material
adverse effect on the Company's business.

RECENT DEVELOPMENTS

a. MERGER WITH K2, INC.

The Company has entered into an Amended and Restated Agreement and Plan of
Merger ("Merger Agreement"), dated as of July 22, 1999, with K2, Inc. ("K2") and
KT Acquisition, Inc., pursuant to which the Company will become a wholly-owned
subsidiary of K2. Adoption of the Merger Agreement requires the affirmative vote
of 66 2/3% of the outstanding shares of the Company's common stock. A Special
Meeting of Shareholders of the Company will be held on October 5, 1999 for the
purpose of voting to approve the merger transaction. As part of the contemplated
merger transaction, the Company transferred all of its existing North American
customers' apparel and binding orders to K2, and borrowed the sum of $2.0
million from K2 pursuant to the terms of a Convertible Promissory Note, dated
July 22, 1999, to fund immediate and on going working capital needs.

b. SERIES B PREFERRED SHARE CONVERSION

By the terms of the Loan and Security Agreement and related instruments,
dated February 19, 1999, by and between the Company and the holder of the
Company's Series B 5% Cumulative Preferred Stock, Advantage Fund II, Ltd.
("Holder"), the remaining 1,500 shares of the Series B 5% Cumulative Preferred
Stock of the Company issued to Holder have been converted to debt in the form of
a promissory note in the amount of $1,725,000 (the "Note"). The Note bears
interest at the rate of ten percent (10%) per annum, payable on each March 31,
June 30, September 30 and December 31, has a term due date of June 30, 1999,
which date is automatically extended to September 30, 1999 in the event the
Company has executed a letter of intent for a transaction which would raise
capital sufficient to fully redeem the Note. This condition has been further
modified in connection with the pending merger transaction with K2, Inc. whereby
the Note redemption date has been extended to December 1, 1999. The Note is
secured by a security interest in the Company's assets subordinate to the
outstanding security interests of the Company's senior secured creditors. The
Note has a default interest rate of eighteen percent (18%) per annum. The
Company's inability to successfully redeem the Note when due could have a
material and adverse impact on the Company's financial condition.

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c. NASDAQ LISTING REQUIREMENTS

By letter dated July 7, 1999, the Company was notified by the Qualifications
Panel of the Nasdaq Stock Market that the Company's securities would be delisted
from the Nasdaq national Market, effective the close of business on July 7,
1999. The Panel's decision was based on its conclusion that the Company was not
then in a position to regain compliance with certain National Market listing
requirements in the near term and to sustain compliance with those requirements
over the long term. From and after their delisting from the Nasdaq National
Market, the Company's securities have been eligible for, and have traded on, the
OTC Bulletin Board.

EMPLOYEES

As of September 28, 1999, the Company had 232 full-time (including seasonal)
employees. None of the Company's employees are subject to a collective
bargaining agreement. The Company considers its employee relations to be good.

RISK FACTORS

In evaluating the Company's business, careful consideration should be given
to the following factors in addition to the other information presented in this
Annual Report on Form 10-K:

LIQUIDITY; DEPENDENCE ON LINE OF CREDIT; FAILURE OF MERGER. The Company
requires capital for the development of its technology and products, procurement
of raw materials and finished goods manufactured by others and capital
equipment. The Company operates in a highly seasonal business, generating the
majority of its sales in the months of July through December. The Company's cash
receipts from its North American customers are received predominantly in the
months of December, January and February while its international customers
generally pay by letter of credit or in cash immediately prior to shipment. In
order to finance operations and manufacture and purchase products during the
remainder of the year, the Company has historically utilized a revolving line of
credit.

On August 31, 1998, the Company entered into a loan and security agreement
with CIT, which replaced the Company's prior credit facility. The Company's line
of credit under the new facility is up to $15.0 million, to be increased to
$17.0 million from October 15 to December 15 of each year for a term of three
years. The amount that may be borrowed is also limited to the sum of (1) 85% of
eligible accounts receivable, provided the dilution does not exceed 5.0% and
after implementation of an 11.0% dilution reserve against loan availability
during the season, and (2) 55% of eligible finished goods inventory, not to
exceed $6.5 million during April through September, $3.25 million in October,
$2.5 million in November, and $2.0 million in December. Although the credit
facility provides that there cannot be advances against inventory during January
through March of each year, CIT agreed to allow advances during that period in
1999. In order to obtain advances during that period from January through March
of 1999, the Company agreed that the sub-limit during all periods would be
subject to periodic renegotiations, and the sub-limit is $4.5 million, subject
to availability. The facility now provides for a maximum letter of credit
subline of $8.0 million. The facility bears interest at the prime interest rate
plus 1.5% and is collateralized by substantially all the assets of the Company.
Additionally, the facility requires an annual facility fee of 0.5% due each
anniversary of the execution of the credit facility and a monthly letter of
credit fee of 1.5% per annum of the face amount of any standby and documentary
letters of credit.

The CIT line of credit is subject to cancellation in the event of enumerated
events of default, one or more of which may have already occurred by reason of
the following:

- if the existing financial condition of the Company and its subsidiaries is
deemed to constitute insolvency;

- failure of the Company to remain in technical compliance with the
inventory collateral sublimit set forth in the CIT agreement;

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<PAGE>
- possible delinquency in the delivery of financial and other reports
required to be delivered to CIT;

- default under the CIT agreement by reason of the Company's recent sale and
license-back of its Smiley-related trademarks without the CIT's prior
approval;

- default in the payment of amounts currently owing to Advantage Fund II
Ltd., under the Loan and Security Agreement dated February 19, 1999 and
related instruments, which constitutes a cross default under the CIT
agreement;

- delinquencies in the payment of amounts currently owing to vendors, legal
and financial advisors and others; and

- default of specific monthly payment obligations currently due for
professional snowboard athlete services.

As described below, CIT has agreed with K2 in connection with the
contemplated merger transaction not to exercise its default rights with respect
to these enumerated existing events of default for so long as the merger
agreement remains in effect, but in no event past December 1, 1999. In the event
of subsequent defaults under the CIT line of credit, however, CIT would have the
right to refuse future borrowings by the Company and to declare all then
existing indebtedness due and payable.

On August 31, 1998, the Company entered into a consent, reaffirmation, and
release agreement with US Bank under which the Company retained a $3.0 million
credit facility with that institution. The US Bank facility bears interest at
prime rate plus 1.5% per year until February 28, 1999 and prime rate plus 2.0%
per year from March 1, 1999 through and including the date the Company repays
the principal amount owed, is subordinated to the CIT credit line, and is
secured by promissory notes with a principal amount of $1.4 million, as of July
22, 1999, from Global Sports, Inc. Additionally, the facility is secured by the
personal guarantee of one of the Company's outside directors, including specific
real property owned by that director. All indebtedness due under the US Bank
facility is due and payable August 30, 1999, which date has been extended to the
earlier of the closing of the pending merger transaction with K2, Inc. or
December 1, 1999. The Company was required to make quarterly principal payments
under the US Bank facility of $100,000, beginning with a payment due on April
10, 1999. The Company failed to make payments due on April 10, 1999 and July 10,
1999, and therefore was in default of the US Bank facility. The overdue
principal amounts were repaid on July 27, 1999 utilizing a portion of the
proceeds from the $2.0 million loan from K2.

By the terms of a loan and security agreement and related instruments, dated
February 19, 1999, by and between the Company and the holder of the Company's
series B 5% cumulative preferred stock, Advantage, the remaining 1,500 shares of
the series B 5% cumulative preferred stock of the Company issued to Advantage
were converted to debt in the form of a promissory note in the amount of $1.725
million. The note bears interest at the rate of 10% per year, payable on each
March 31, June 30, September 30 and December 31, and the principal amount and
all accrued interest was due and payable in full on June 30, 1999. The note is
secured by a security interest in the Company's assets subordinate to the
outstanding security interests of the Company's senior secured creditors. The
note has a default interest rate of eighteen percent per year. The Company was
unable to repay this indebtedness when due, and is currently in default.
Pursuant to an agreement negotiated with Advantage, dated July 22, 1999, the
deadline for payment of the principal and accrued interest was extended to the
earlier of the closing of the merger or December 1, 1999.

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<PAGE>
are, for all practical purposes, precluded from exercising their default rights
and remedies. However, in the event of further defaults under the CIT loan and
security agreement, or termination of the merger agreement for any reason, CIT
would have the right to refuse all further loans to the Company and all of CIT,
US Bank and Advantage would have the right to demand immediate payment of the
debts owing to them, although US Bank and Advantage would be precluded under the
intercreditor agreements from taking any collection actions against the Company
until all amounts owed to CIT were paid in full.

Any such event would have a material adverse effect on the Company, and
would entitle K2 under the merger agreement to decline to proceed with the
merger. In addition, if the merger is rejected or otherwise is not completed,
regardless of whether any new defaults arise, the entire debt to CIT will be
immediately due and payable. CIT will again be free to exercise default remedies
with respect to past defaults. If the Company is not otherwise able to raise
sufficient capital in order to continue its current operations, the Company may
be unable to meet its obligations under the CIT line of credit or to provide
sufficient evidence of financial stability to cause CIT to continue to refrain
from exercising default remedies. As a result, the Company might be unable to
continue as a going concern, and it would then be necessary to consider other
more drastic strategic alternatives, such as substantially curtailing the
Company's operations or seeking protection from its creditors under the
bankruptcy laws.

As the result of the foregoing, absent completion of the merger, the
agreement of the Company's lenders to extensions of existing debt, or an
alternative transaction acceptable to the Company lenders, the Company's ability
to continue in business as a going concern is highly uncertain.

RISKS OF INTERNATIONAL BUSINESS. In fiscal 1999, approximately 22% of the
Company's sales were outside of North America. The Company's business is subject
to the risks generally associated with doing business internationally, such as
fluctuations in exchange rates, foreign governmental regulation, product
distribution patterns and changes in economic conditions. These factors, among
others, could influence the Company's ability to sell its products in
international markets, as well as its ability to procure products or components.
The Company sources all of its binding and boot production in China. A large
portion of its apparel is manufactured in Asia as well. While the Company
believes the financial health of its Asian suppliers to be good, there can be no
assurance that the economic slowdown affecting Asia today will not have an
adverse effect on the Company's Asian suppliers' ability to source or fund their
production requirements, or fulfill the Company's orders. The Company ships its
Asian-sourced products in sea-borne containers from a central facility in Hong
Kong to central distribution centers in North America and Europe, and to
individual customers in Japan. The economic slowdown in Asia has dramatically
reduced the availability of such containers and increased the cost of those
containers that are available. The Company's inability to timely ship its
Asian-sourced products, or its being forced to use alternative, higher cost air
freight, as a result of the paucity of sea-borne containers available to the
Company's shipper may adversely effect the Company's business, financial
condition and results of operations. In addition, the Company believes that its
relationship with its current Japanese retailer customers is good and that they
will continue to do business with the Company. However, the Company believes
that current adverse economic conditions in Japan may negatively affect end-user
buying patterns in that country, which may in turn cause a reduction in future
orders from its Japanese retailer customers. Any such reduction may adversely
effect the Company's business and results of operations. The Company purchases
many of its products and components from sources outside of the United States,
with purchase prices often denominated in foreign currencies. From time to time,
the Company enters into foreign currency forward contracts to either buy or sell
foreign currencies at future dates in order to minimize currency risk. Despite
this hedging program, unanticipated or long-term changes in the value of the
U.S. dollar relative to that of certain foreign currencies could have a material
adverse effect on the Company's results of operations through either higher
product costs or reduced export sales prices and/or export sales volumes. The
Company is also subject to risks inherent in hedging programs and in 1997 and
1996 the Company recognized losses on foreign currency contracts totalling
$17,000 and $160,000, respectively. In addition, the Company's business is
subject to the risks associated with the imposition of legislation and
regulation relating to imports, including quotas, duties or taxes and other
charges, restrictions or retaliatory actions

13
<PAGE>
on imports to the United States and other countries in which the Company's
products are sold or manufactured. The Company cannot predict whether the
foregoing legislation and regulation will be imposed by the United States or
other countries, nor can it predict what effect such imposition would have on
its business or results of operations.

POTENTIAL APPLICABILITY OF "PENNY STOCK RESTRICTIONS". Stocks selling for
less than $5.00 per share, excluding broker or dealer commissions, may be
designated as "penny stocks" and may be subject to certain requirements imposed
by Rules 15g-1 through 15g-9 under the Exchange Act. The net effect of these
regulations may be to delay transactions in stocks that are deemed to be penny
stocks. The Company's Common Stock is currently trading for less than $5.00 per
share. Because of its recent delisting from the Nasdaq National Market, the
"penny stock restrictions" may be applicable pursuant to Rules 15g-1 through
15g-9 under the Exchange Act if exemptions provided in Rule 3a51-1 under the
Exchange Act, which among other things provides an exemption from the penny
stock restrictions for securities that have tangible assets in excess of $2.0
million, don't apply. If the Company's net worth were to drop below $2.0
million, and if no other exemption from the penny stock restrictions were
available to the Company, then its Common Stock could be subject to such
restrictions and sales of the Company's Common Stock by brokers and dealers and
resales by investors would likely be adversely affected. The fact that the
Company's Common Stock has been delisted from the Nasdaq National Market may
adversely affect the ability of shareholders to buy and sell shares of Common
Stock.

YEAR 2000 PROBLEM. The "year 2000 problem" is the result of computer
programs being written using two digits rather than four to define the
applicable year. Software programs and systems that have date-sensitive features
may recognize a date using "00" as the year 1900 instead of the year 2000. Ride
has assessed its year 2000 needs and has purchased and installed year
2000-compliant software in all its known non-compliant hardware and software
systems. The cost of the purchase and installation of the year 2000-compliant
software is $263,000. Ride is in the process of reviewing with each of its
material suppliers, service providers and customers the steps each is taking to
insure their respective computer systems are presently or will be year
2000-compliant in a timely fashion. Ride's shipper has confirmed to Ride it has
installed year 2000-compliant software in all of its material systems. There can
be no assurance the computer systems of third parties on whose commercial
efforts Ride directly or indirectly relies, will be year 2000-compliant in a
timely fashion. Because Ride has not completed its review of its material third
party suppliers, service providers and customers, it has not created a
contingency plan setting forth what steps will be taken if these third parties
are not year 2000 compliant by December 31, 1999. Based on information received
from its third party vendors, service providers and customers, Ride intends to
have a contingency plan in place by October 1999. The failure of third parties
to be year 2000 compliant could cause material delays in the design, manufacture
and shipment of products, delay in payment for products, and delay in the
availability of credit or funds necessary to operate the business of Ride. The
failure of Ride's or one or more third-party's computer systems as a result of
year 2000 non-compliance may have a material adverse effect on Ride's business
and results of operations.

INDUSTRY AND PRODUCT CONCENTRATION. The Company's current product offerings
consist predominantly of snowboards and related products. As a result of this
concentration, the Company's future success will depend in large part on the
continued growth of the snowboard market. Snowboarding is a relatively new
sport, and there can be no assurance that the sport will continue to grow at the
rate experienced in recent years, or that its popularity will not decline.
Moreover, the market for snowboards is characterized largely by image-conscious,
brand-driven younger consumers, and the Company's future success depends on its
ability to regularly update its products and maintain its progressive,
cutting-edge image, particularly with respect to its flagship "Ride" brand. Any
failure by the Company to accurately predict and target future trends or to
maintain its progressive image could have a material adverse effect on its
results of operations.

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The Company believes that controlling its channels of distribution is
critical to maintaining the premium image of its brands. While the Company can
control the initial wholesale distribution of its products, it has limited
ability to monitor or control the resale of its products through alternative
channels. Failure to adequately control distribution of its products could have
an adverse effect on its brand image and sales which in turn could have a
material impact on the Company's financial position and results of operations.
In addition, supply and demand imbalances in the snowboard industry could also
have a material adverse effect on the Company's growth prospects, financial
condition and results of operations. The Company believes that its future
success will depend, among other things, on its ability to introduce innovative,
well-received products, and there can be no assurance of its ability to do so.
In addition, a major innovation by one or more of the Company's competitors
could have a negative effect on the sales of one or more of the Company's
product lines or brands.

ACQUISITION-RELATED RISKS; ABILITY TO MANAGE CHANGE. During 1997 the
Company completed three acquisitions. In June, the Company purchased
substantially all of the assets (except cash and accounts receivable) and the
liabilities of Device Mfg Corp., a manufacturer of step-in snowboard bindings.
In July, the Company purchased substantially all of the assets of Galena Creek
Trading Company, Inc. (dba Smiley Hats), a manufacturer of winter head and
neckwear. In December, the Company purchased the stock of US2 Sports Group,
Inc., a manufacturer of wakeboards and related products. Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
technologies and products of the acquired companies, the diversion of
management's attention from other business concerns, risks associated with
entering markets or conducting operations with which the Company has no or
limited direct prior experience, and the potential loss of key employees of the
acquired company. Moreover, there can be no assurance that the anticipated
benefits of an acquisition will be realized. Acquisitions also place
considerable demands on existing financial and management control systems.
Acquired operations entail transition of key systems, establishment of new
systems and often require improvement, upgrade or replacement of existing
financial and management control systems. Failure to adequately absorb acquired
operations into the Company's systems or difficulties encountered during such
improvements and upgrades could adversely affect the Company's financial
condition and results of operations. The Company may, when and if the
opportunity arises, acquire other businesses.

DEPENDENCE ON OUTSIDE MANUFACTURERS. Many of the Company's products are
manufactured by outside suppliers. In 1999, the Company sourced its entire line
of "Ride," "Liquid" and "Slim" traditional "strap" and "Device-compatible"
step-in bindings from Taiwan-based Snowboard Factory, Inc. In addition, all of
the Company's snowboard boots and the majority of its apparel are manufactured
to the Company's specifications by independent contractors. The Company
generally does not have contracts with its manufacturing sources and competes
with other companies for the production capacity of certain manufacturers.
Although the Company believes that it has established close relationships with
its principal manufacturing sources, its future success may depend on its
ability to maintain such relationships. If the Company's relationship with any
of its binding, boot, apparel or other product manufacturers were interrupted,
the Company could find it difficult to locate another source with sufficient
production capacity to meet the Company's short-term needs, and the Company
could miss the retailing season for that product. The establishment of new
manufacturing relationships involves numerous uncertainties, including those
relating to payment terms, costs of manufacturing, adequacy of manufacturing
capacity, quality control and timeliness of delivery, and the Company is unable
to predict whether such relationships would be on terms that the Company regards
as satisfactory. Should an unexpected change in binding, boot, apparel or other
product suppliers become necessary, the Company would likely experience
increased costs, as well as a substantial disruption and a potential loss of
sales. In addition, from time to time manufacturers in the snowboard industry
have experienced shortages and, in some cases, price increases in certain raw
materials, and such shortages or price increases may recur. At times, the
Company has also experienced delays in the receipt of products from its
suppliers as a result of shortages in raw materials, including fiberglass and
P-Tex. Although the Company believes that it is well-positioned to minimize the

15
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impact of raw material shortages and delays in supplier shipments, such
shortages and delays could have a material adverse affect on the Company's
business, financial condition and results of operations.

SEASONALITY; FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Because
snowboarding is traditionally a winter sport and the Company's sales are
concentrated in the northern hemisphere, sales of the Company's products
predominantly occur in what was traditionally the Company's quarters ending
September 30 and December 31. Since much of the Company's operating expenses are
fixed in nature and will now be budgeted based on higher first and second
quarter net sales, a decline in net sales relative to internal expectations
would have a significant adverse effect on results of operations. Because
relatively lower net sales are to be realized in the quarters ending March 31
and June 30 of each year, the Company expects to incur operating losses in such
quarters for the foreseeable future. Apart from seasonal factors, demand for the
Company's products fluctuates in response to consumer buying patterns, weather
conditions, discretionary spending habits, general economic conditions in the
United States and abroad, product supply fluctuations in the United States and
abroad and other factors. In addition to seasonal fluctuations, the Company's
operating results fluctuate from quarter to quarter as a result of the timing of
order shipments, new product introductions and new retailer openings.
Furthermore, the Company's gross margins will fluctuate with product mix, the
timing of product price adjustments, the mix of international and domestic sales
and in-house production cost fluctuations. The Company's operating results for
any interim period may not be indicative of the results for the entire year.

RISKS ASSOCIATED WITH THE APPAREL BUSINESS. Fashion trends are volatile,
and there can be no assurance that the Company will accurately anticipate shifts
in fashion trends and adjust its merchandise mix to appeal to changing consumer
tastes in a timely manner. If the Company is unsuccessful in responding to
changes in fashion trends or market demand, the Company could experience
insufficient or excess inventory levels, missed market opportunities or higher
markdowns, any of which would have a material adverse effect on the Company's
financial condition and results of operations.

MANUFACTURING. As a manufacturer of certain of the Company's products, the
Company continually faces risks regarding the availability and cost of raw
materials and labor, the potential need for additional capital equipment,
increased manufacturing costs, potential organized labor issues, plant and
equipment obsolescence, worker's safety and compensation issues and quality
control. A disruption in the Company's production or distribution could have a
material adverse effect on the Company's results of operations. Like certain of
its suppliers, the Company has experienced delays in the receipt of raw
materials used in the manufacturing process.

DEPENDENCE ON THIRD-PARTY SELLING EFFORTS. The Company primarily relies on
third parties to sell, and in some cases to distribute, its products to
retailers. In the United States and Canada, the Company generally uses
independent sales representatives who work under contract. Generally, such
contracts may be terminated by either party upon 30 days' notice. The Company
uses distributors under long-term contractual arrangements in certain
international markets. Loss of services, poor performance or difficulties
encountered with any of the Company's independent sales representatives or
distributors could each have a material adverse effect on the Company's results
of operations.

DEPENDENCE ON KEY INDIVIDUALS. The Company's future success depends in
large part on the continued service of Robert F. Marcovitch, the Company's
President and Chief Executive Officer and Greg Cook, the Company's Chief
Operating Officer and Chief Financial Officer. The loss of the services of
either of these officers could have a material adverse effect on the Company's
business. Further, the Company believes that the market for key personnel in its
industry is highly competitive. There can be no assurance that the Company will
be able to attract and retain key personnel with the skills and expertise
necessary to manage the Company's business, both in the United States and
abroad.

COMPETITION. The snowboarding and wakeboarding businesses are highly
competitive and have relatively few technological or manufacturing barriers to
entry. The Company's technology is generally not

16
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proprietary. The Company competes with a number of established manufacturers and
distributors whose brand names enjoy recognition that exceeds that of the
Company's brand names. In all its product categories, the Company competes with
numerous manufacturers and distributors that have significantly greater
financial, distribution, advertising and marketing resources than the Company.
There can be no assurance that the Company will continue to compete successfully
in the future. Moreover, the current industry oversupply position, future events
affecting the Company or its competitors, consumer buying patterns, the
introduction of new products by the Company or its competitors, weather patterns
that may affect the demand for the Company's products, product supply
fluctuations in the Company's markets, regulations affecting the Company's
products, the financial condition of the Company's suppliers and the entry of
additional competitors in the Company's markets, among other factors, could
result in insufficient or excess inventory levels, missed market opportunities
or higher markdowns, any of which could have a material adverse effect on the
Company's financial condition and results of operations.

PRODUCT LIABILITY. The Company's products are often used in relatively
high-risk recreational settings. Consequently, the Company is exposed to the
risk of product liability claims in the event that users of the Company's
products are injured in connection with such use. In many cases, users of the
Company's products may engage in imprudent or even reckless behavior while using
such products, thereby increasing the risk of injury. The Company maintains
product liability, general liability and excess liability insurance coverage.
There can be no assurance that such coverages will continue to be available on
acceptable terms, or will be available in sufficient amounts to cover one or
more large claims, or that the insurer will not disclaim coverage as to any
claim. The successful assertion of one or more large claims against the Company
that exceed available insurance coverage or changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could have a material adverse effect on the Company's
financial condition and results of operations.

LIMITED PROTECTION OF TECHNOLOGY. Most of the Company's products are not
based on proprietary technology. As a result, there are relatively few
technological or other barriers to entry, and the Company's products may be
replicated by competitors. There can be no assurance that current or future
competitors will not offer products substantially identical to the Company's
products, or competing products to customers at lower prices. The Company has
filed for trademark and patent registration in the United States and certain
foreign countries for certain of its trademarks and product designs and/or
functions. There can be no assurance that trademark or patent protection, as the
case may be, will be granted in any or all of the countries in which
applications are currently pending, or granted on the breadth of the current
description of goods or designs. The Company has substantial international
sales; the laws of foreign countries treat the protection of proprietary rights
and intellectual property differently from, and may not protect the Company's
proprietary or intellectual property rights to the same extent as do, the laws
in the United States.

VOLATILITY OF STOCK PRICE. The market price of the Common Stock has
fluctuated substantially in the past. There can be no assurance that the market
price of the Common Stock will not significantly fluctuate from its current
level. Future announcements concerning the Company or its competitors, quarterly
variations in operating results, the introduction of new products or changes in
product pricing policies by the Company or its competitors, weather patterns
that may be perceived to affect the demand for the Company's products, changes
in earnings estimates by analysts, changes in accounting policies, future
inventory supply situations and events in current or future legal proceedings,
among other factors, could cause the market price of the Common Stock to
fluctuate substantially. In addition, stock markets have experienced extreme
price and volume volatility in recent years. This volatility has had a
substantial effect on the market prices of securities of many smaller public
companies for reasons frequently unrelated to the operating performance of the
specific companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock.

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<PAGE>
LEGAL PROCEEDINGS. Ride is the subject of claims and lawsuits in the normal
course of its business; however, there are no claims or lawsuits presently
pending that are expected to result in uninsured liabilities that are material
in amount. In addition, as of June 30, 1999, as described elsewhere in this
report, Ride was overdue in the payment of approximately $5.0 million of
accounts payable to providers of goods and services, some of whom have commenced
or threatened lawsuits to collect the amounts owing. The expenditure of
significant sums in the defense and/or payment of any one or more collection
action could have a material adverse effect on the Company's financial condition
and results of operations.

POTENTIAL ADVERSE EFFECT OF ENVIRONMENTAL REGULATIONS. The Company is
subject to federal, state and local governmental regulations relating to the
storage, use, discharge and disposal of toxic, volatile or otherwise hazardous
chemicals used in its manufacturing process. There can be no assurance that
changes in environmental regulations or in the kinds of raw materials used by
the Company will not impose the need for additional capital equipment or other
requirements. Any failure by the Company to control the use of, or adequately
restrict the discharge of, hazardous substances under present or future
regulations could subject the Company to substantial liability or could cause
its manufacturing operations to be suspended. Such liability or suspension of
manufacturing operations could have a material adverse effect on the Company's
results of operations.

ITEM 2. PROPERTIES

Ride leases all of its offices, warehouse and manufacturing facilities as
follows:

- Preston, Washington - approximately 100,000 square feet of office and
warehouse space, under a lease that expires December 31, 2003,

- Etobicoke, Ontario - approximately 13,000 square feet of warehouse and
office space under a lease that expires November 30, 2001,

- Corona, California - approximately 25,000 square feet of manufacturing and
office space under a lease that expires August 31, 2001, and approximately
16,300 square feet under an adjacent sublease that expires March 31, 2000,
and

- Sparks, Nevada - 21,000 square feet of office, warehouse and light
manufacturing space under a lease that expires December 31, 1999.

Ride is currently subletting approximately 34,000 square feet of its space
in its Preston facility. It anticipates that its current facilities will be
sufficient for its needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

Ride is the subject of claims and lawsuits in the normal course of its
business; however, there are no claims or lawsuits presently pending that are
expected to result in uninsured liabilities that are material in amount. In
addition, as of June 30, 1999, as described elsewhere in this report, Ride was
overdue in the payment of approximately $5.0 million of accounts payable to
providers of goods and services, some of whom have commenced or threatened
lawsuits to collect the amounts owing.

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

The Company will hold a 1999 annual meeting of shareholders only if the
contemplated merger between the Company and K2 is not completed before the time
of the 1999 annual meeting. The annual meeting would normally be held on or
about November 18, 1999. As of the date of this report, the Ride board of
directors know of no matters that will be presented for consideration at the
Ride annual meeting.

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PART II

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

STOCK TABLE

The following table sets forth for the calendar quarters indicated the high
and low closing bid prices as reported by NASDAQ:

<TABLE>
<CAPTION>
1996 1997 1998 1999
------------------- ------------------- ------------------- -------------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quarter Ended:
March 31.......... $33.50 $13.88 $7.13 $3.13 $2.88 $1.88 $1.00 $0.59
June 30........... 14.19 10.38 5.13 3.38 2.56 1.50 1.88 0.75
September 30...... 13.38 9.25 3.94 2.81 1.81 0.81
December 31....... 12.44 5.81 3.19 1.78 1.38 0.50
</TABLE>

The prices quoted reflect inter-dealer quotations, without retail mark-ups,
mark-downs or commissions, and do not necessarily represent actual transactions.
As of September 28, 1999, there were 676 record holders of the Company's common
stock.

Except for distributions paid to shareholders when the Company was an S
Corporation, the Company has never paid dividends on its common stock and does
not anticipate paying regular cash dividends in the foreseeable future. The
Company's bank loan agreement restricts the payment of dividends.

SALES OF UNREGISTERED SECURITIES

None

19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
YEAR ENDED DECEMBER 31, JUNE 30, ENDED
------------------------------------------ -------------------- JUNE 30,
1994(1) 1995(2) 1996(3) 1997(4) 1997 1998 1999(5)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................................. $ 25,349 $ 74,850 $ 75,728 $ 36,475 $ 7,559 $ 7,279 $ 39,712
Cost of goods sold........................ 18,398 54,988 61,641 26,656 5,567 8,287 31,680
--------- --------- --------- --------- --------- --------- ---------
Gross profit (loss)....................... 6,951 19,862 14,087 9,819 1,992 (1,008) 8,032
Selling, general and administrative
expenses................................ 4,022 10,868 20,487 18,278 8,392 10,735 17,529
Goodwill write down....................... -- -- -- 8,600 -- -- 2,157
Restructuring charges..................... -- -- 2,500 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Operating expenses...................... 4,022 10,868 22,987 26,878 8,392 10,735 19,686
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)................... 2,929 8,994 (8,900) (17,059) (6,400) (11,743) (11,654)
Interest expense.......................... (1) (18) (268) (426) (43) (147) (1,129)
Interest income........................... 72 406 333 195 103 117 113
Other income, net......................... -- -- -- -- -- -- (317)
Gain on sale of subsidiary................ -- -- 482 -- -- -- 680
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes......... 3,000 9,382 (8,353) (17,290) (6,340) (11,773) (12,307)
Income tax provision (benefit)............ 1,134 3,427 (2,863) (595) (1,940) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)......................... $ 1,866 $ 5,955 $ (5,490) $ (16,695) $ (4,436) $ (11,773) $ (12,307)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share:
Basic................................... $ 0.29 $ 0.67 $ (0.52) $ (1.51) $ (0.41) $ (0.99) $ (0.93)
Diluted................................. $ 0.28 $ 0.59 $ (0.52) $ (1.51) $ (0.41) $ (0.99) $ (0.93)
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------ -------------------------------
1994(1) 1995(2) 1996(3) 1997(4) 1997 1998 1999(5)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................... $ 7,663 $ 26,104 $ 20,941 $ 14,823 $ 15,644 $ 2,489 $ (6,903)
Total assets....................... 15,718 57,599 50,655 40,610 50,728 34,608 27,410
Long-term obligations.............. -- -- 832 1,582 555 979 710
Shareholders' equity............... 11,524 46,495 42,309 31,070 39,627 19,252 5,446
</TABLE>

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

(1) Results for the year ended December 31, 1994 reflect the Company's August
18, 1994 acquisition of CAS Sports.

(2) Results for the year ended December 31, 1995 reflect the Company's September
1, 1995 acquisitions of Ride Manufacturing, Inc. and 5150 Snowboards, Inc.
and the October 20, 1995 acquisition of SMP Clothing, Inc.

(3) Results for the year ended December 31, 1996 include the CAS Sports excess
inventory and OEM businesses from January 1, 1996 through October 11, 1996,
the date those businesses were sold.

(4) Results for the year ended December 31, 1997 reflect the Company's June 12,
1997 acquisition of the assets and liabilities of Device Mfg Corp, the July
22, 1997 acquisition of the assets of Galena Creek Trading Company (dba
Smiley Hats), and the December 19, 1997 acquisition of US2 Sports Group,
Inc.

(5) Results for the year ended June 30, 1999 include SMP Clothing, Inc. through
November 6, 1998, the date this business was sold.

20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

The Company was founded in September 1992. It

- acquired C.A.S. Sports International, Inc. and C.A.S. Sports Agency, Inc.,
collectively referred to as C.A.S., in August 1994,

- acquired Thermal Snowboards Inc., later named Ride Manufacturing, in
September 1995, SMP in October 1995, and 5150 Snowboards, Inc., referred
to as 5150, in September 1995,

- sold the C.A.S. entities in October 1996,

- acquired substantially all of the assets and liabilities of Device Mfg
Corp. in June 1997,

- acquired substantially all of the assets of Galena Creek Trading Corp.,
doing business as Smiley Hats, in July 1997,

- acquired US2 Sports Group Inc., doing business as Full-Tilt Wakeboards, in
December 1997, and

- sold the operating assets and inventory of SMP to SMP's Australian
licensee in November 1998.

The results of operations of the acquired businesses are included in the
Company's financial statements from their respective dates of acquisition
through their applicable dates of disposition.

Because snowboarding traditionally is a winter sport and the Company's sales
are concentrated in the northern hemisphere, sales of the Company's products
predominantly occur in the months of July through December. Lower sales are
realized in the months of January through June of each year. The Company
accumulates a backlog of orders beginning in February as a result of pre-season
orders placed in connection with winter sports trade shows. The backlog
decreases beginning in late spring as product begins to be shipped. Backlog in
the snowboarding industry is subject to delay or cancellation. Ride's backlog of
orders as of June 30, 1999 was approximately $43.8 million, compared to a
backlog of $35.0 million as of June 30, 1998.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED JUNE 30, 1998 COMPARED WITH TWELVE MONTHS ENDED
JUNE 30, 1999

Net sales increased 10% to $39,712 million for the twelve months ended June
30, 1999 from $36,195 million for the corresponding period ended June 30, 1998.
SMP net sales contribution decreased $3,908 million in the period ending 1999
from the corresponding period of 1998.

21
<PAGE>
SALES BY PRODUCT GROUP
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JUNE 30,
------------------------------------------
<S> <C> <C> <C> <C>
1998 1999
-------------------- --------------------

<CAPTION>
(DOLLARS IN 000'S)
<S> <C> <C> <C> <C>
Snowboards.................................................................. $ 12,315 34% $ 17,689 44%
Bindings.................................................................... 8,349 24 9,150 24
Boots....................................................................... 3,390 9 6,256 15
Skate, wake and other....................................................... 1,977 5 1,550 4
--------- --- --------- ---
Total hard goods............................................................ 26,301 72 34,645 87
Apparel..................................................................... 7,520 21 2,837 7
Accessories................................................................. 2,644 7 2,230 6
--------- --- --------- ---
Total soft goods............................................................ 10,164 28 5,067 13
--------- --- --------- ---
Total....................................................................... $ 36,195 100% $ 39,712 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

Snowboard hardgood sales, comprising boards, boots and bindings, increased
by $9.04 million from the corresponding period of 1998. Hardgood sales of wake,
skate and other decreased $427,000 due to the cancellation of skate and lower
than expected fulltilt sales.

In the twelve months ended June, 30 1999, sales in North America made up 78%
of total sales with international sales making up the difference of 22%. Amounts
for the corresponding period in the previous year were 74% and 26%,
respectively. The change in sales mix was primarily due to a relative increase
in North American sales.

Gross profit for the twelve months ended June 30, 1999 was $8.0 million
versus a profit of $6.8 million for the twelve months ended June, 30 1998. Gross
profit margin increased to 20% in 1999 from 19% in 1998.

Selling, general and administrative expenses excluding goodwill writedowns
for the twelve months ended June 30, 1999 were $17.5 million versus $20.6
million for the corresponding period in 1998. The reduction is due primarily to
fixed cost savings and the sale of SMP.

Interest expense increased by $600,000 in the twelve month period ended June
30, 1999 due to higher borrowing levels and increased borrowing costs attributed
to the Company's cash losses.

For the twelve months ended June 30, 1999, there was no income tax benefit
recorded as the Company was in a net operating loss carryforward position. For
the twelve months ended June 30, 1998, a tax benefit was recorded based upon the
amount of income tax that was recoverable in carryback periods.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998

Net sales decreased 4% to $7.3 million for the six months ended June 30,
1998 from $7.6 million for the corresponding period in 1997. Device, Smiley and
US2 contributed a total of $1.2 million to net sales in the fiscal 1998 period.
The remaining net decrease was due primarily to higher sales of closeout
products in the 1997 period as the Company worked down its excess inventories
remaining for the 1996 calendar year.

22
<PAGE>
SALES BY PRODUCT GROUP

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------
1997 1998
---------------------- ----------------------
(DOLLARS IN 000'S)
<S> <C> <C> <C> <C>
Snowboards................................................... $ 2,362 31% $ 2,034 28%
Bindings..................................................... 527 7 863 12
Boots........................................................ 360 5 115 2
Skate, wake and other........................................ 540 7 1,277 17
--------- --- --------- ---
Total hard goods............................................. 3,789 50 4,289 59

Apparel...................................................... 3,510 46 2,649 36
Accessories.................................................. 260 4 341 5
--------- --- --------- ---
Total soft goods............................................. 3,770 50 2,990 41
--------- --- --------- ---
Total........................................................ $ 7,559 100% $ 7,279 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

Snowboard hardgood sales, comprising boards, boots and bindings, decreased
by $237,000 from the corresponding period of 1997. Sales from January through
June of each year are traditionally closeout in nature and are highly dependent
on market price at the time of sale. Hardgood sales of wake, skate and other are
up $737,000 due to the inclusion this year of the Fulltilt brand of wake boards
in 1998.

In the first six months of 1998, sales in North America made up 82% of total
sales with international sales making up the difference of 18%.

Gross profit for the six months ended June 30, 1998 was negative $1.0
million versus a profit of $2.0 million for the first six months of 1997. A
number of factors contributed to this change. In fiscal 1998, the Company
transferred its US2 operations to Ride Manufacturing incurring closure and
consolidation costs, had close out sales at lower than expected margins, and
increased its inventory reserves for the remaining close out merchandise due to
the continued soft market conditions.

Selling, general and administrative expenses for the first six months of
1998 were $10.7 million versus $8.4 million for the corresponding period in
1997. Approximately $1.0 million of the increase was due to non-recurring costs
associated with the settlement of the Class Action Lawsuit, certain severance
and other costs associated with management reorganization and restructuring SMP.
Bad debts expense increased by approximately $700,000 in the 1998 period due to
slower than expected collection of accounts receivable from 1997 and write off
of the remaining CAS sales accounts receivable. The balance was attributable to
additional administrative cost related to the inclusion of Device, Smiley Hats,
and US2 acquisitions made in the second half of 1997 and included in the first
six months of 1998.

Interest expense increased by $104,000 in fiscal 1998 due to higher
borrowing levels attributed to the Company's cash losses.

For the six months ended June 30, 1998, there was no income tax benefit
recorded as the Company was in a net operating loss carryforward position. For
the six months ended June 30, 1999, a tax benefit was recorded based upon the
amount of income tax that was recoverable in carryback periods.

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

Net sales decreased 52% to $36.5 million in 1997 from $75.7 million in 1996.
Device, Smiley and US2 contributed a total of $2.5 million to net sales in 1997,
subsequent to their respective acquisition dates. The CAS excess inventory and
OEM businesses contributed $15.4 million to sales in 1996 through their October
11, 1996 disposition date. The remaining net decrease was due primarily to soft
market conditions throughout the industry due to an oversupply of snowboard
products.

23
<PAGE>
SALES BY PRODUCT GROUP

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1997
---------------------- ----------------------
(DOLLARS IN 000'S)
<S> <C> <C> <C> <C>
Snowboards................................................ $ 39,926 53% $ 12,520 34%
Bindings.................................................. 12,241 16% 8,287 23%
Boots..................................................... 4,458 6% 3,714 10%
Skate, wake and other..................................... 3,464 5% 971 3%
--------- --- --------- ---
Total hard goods.......................................... 60,089 80% 25,492 70%
--------- --- --------- ---

Apparel................................................... 13,597 18% 8,387 23%
Accessories............................................... 2,042 2% 2,596 7%
--------- --- --------- ---
Total soft goods.......................................... 15,639 20% 10,983 30%
--------- --- --------- ---
Total..................................................... $ 75,728 100% $ 36,475 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

Net sales of hard goods (snowboards, bindings, boots, wakeboards and
skateboards) represented 70% of total sales in 1997 while soft goods (apparel
and accessories) made up 30%. In 1996, hard goods comprised 80% of total sales
and soft goods 20%. The increase in percentage of soft goods sales to total
sales is attributable to additional sales added by the Smiley acquisition and to
relatively smaller declines in sales of soft goods as compared to hard goods due
to relatively less severe oversupply conditions. In the hard goods categories,
snowboards declined to 34% of sales in 1997 from 53% in 1996 due to the
disposition of the CAS entities. Snowboard bindings increased to 23% of sales in
1997 from 16% in 1996 due to the relative strength of the Company's "Preston"
brand strap-in series of bindings and the step-in binding sales added from the
acquisition of Device. Boots increased to 10% of sales in 1997 compared to 6% in
the prior year due to the 1997 introduction of boots under the Ride label as
well as the step-in boot sales added as a result of the acquisition of Device.
Skate, wake and other hard goods declined to 3% of sales in 1997 from 5% in 1996
primarily due to the disposition of the CAS excess inventory business which was
involved in numerous non-snowboard close-out categories. Apparel increased to
23% of sales in 1997 from 18% in 1996 due to smaller net declines than seen in
the hard goods categories. Accessories increased to 7% of net sales in 1997 due
primarily to the addition of Smiley in July 1997.

In 1997, net sales in North America made up 68% of total sales with
international sales making up the remaining 32%. In 1996, North American sales
comprised 54% and international sales 46%. The decrease in international sales
in 1997 is attributable to the relatively more severe excess inventory
conditions in the Japanese market.

Gross profit decreased to $9.8 million in 1997 from $14.1 million in 1996
while gross margins increased to 27% in 1997 from 19% in 1996. The dollar
decrease was due to the large drop in sales volume in 1997. The increase in
gross margins was due to the $6.5 million inventory write down taken by the
Company in 1996 related to canceled commitments from the Company's principal
Japanese distributor. Absent the 1996 inventory write down, gross margins would
also have been 27% in 1996. Gross margins in 1997 were positively impacted by
the sale of the CAS businesses, which generally had lower gross margins than
other divisions, the addition of the relatively high gross margin Smiley
business, and cost savings associated with moving the Company's binding
operations offshore.

24
<PAGE>
Offsetting these improvements was the sale of lower margin 1996 close out
products and the under-utilization of the Company's manufacturing facility as a
result of the decline in snowboard sales volumes. The Company began moving the
"FullTilt" wakeboard production to its Corona facility in April 1998. The
Company anticipates that this production shift will consume production time and
capacity in the fall and early winter months when the factory would otherwise be
operating below capacity due to the seasonality of snowboard production.

Selling, general and administrative expenses decreased 11% to $18.3 million
in 1997 from $20.5 million in 1996. This decrease was due primarily to staff
reductions, lower executive salaries, lower variable expenses associated with
the lower sales volumes (primarily commissions and bad debt accruals) and the
disposition of the CAS businesses, offset partly by increased occupancy and
legal expenses as well as the expenses of Device, Smiley and US2 acquired in
1997. The primary components of selling, general and administrative expenses
were salaries, wages, commissions and other compensation ($7.5 million in 1997
and $8.6 million in 1996), advertising, promotion and team ($3.7 million in 1997
and $4.3 million in 1996), and occupancy, depreciation and amortization expense
($2.1 million in 1997 and $1.9 million in 1996).

Also included in operating expenses in 1997 is an $8.6 million loss on
impairment of goodwill. FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of, requires the
Company to periodically review the events and circumstances affecting its
operations for indications that the Company's long-lived assets might be
impaired. During the fourth quarter of 1997, the Company determined that
reorders for its primary products would not meet previously anticipated levels
and the Company realized pricing pressure on its lower-end products, thus
suggesting that the Company's current production capacity and infrastructure
were underutilized. Based on this evaluation, the Company determined that the
$13.9 million of goodwill associated with its acquisitions of CAS, SMP and Ride
Manufacturing was impaired and wrote it down by $8.6 million. The Company's
estimates of the discounted cash flows expected to be generated from these
entities indicate that the remaining carrying amounts are expected to be
recovered. However, it is possible that the current industry oversupply of
snowboard products may be a sign of a permanent shift in demand and there can be
no assurance that the carrying value of the goodwill associated with these
acquisitions will be fully recoverable. Operating expenses in 1996 included $2.5
million in restructuring charges associated with the moving the Company's
snowboard binding operations offshore and the withdrawal of snowboard production
from two outside snowboard manufacturers. The primary components of the
restructuring charges are write-offs of abandoned equipment, tooling and
leasehold improvements, accrual of future lease costs and vendor cancellation
fees.

Interest income decreased to $195,000 in 1997 from $333,000 in 1996. The
decrease was due to lower invested cash balances on hand in 1997 as a result of
operating losses incurred in 1996 and 1997. Interest expense increased to
$426,000 in 1997 from $268,000 in 1996. This increase was due principally to
higher seasonal utilization of the Company's line of credit for working capital
purposes. Also included in the 1996 results is a gain of $482,000 on the
disposition of the CAS excess inventory and OEM businesses.

At December 31, 1997, the Company was in a tax loss carryforward position.
Accordingly, the Company's tax benefit is limited to the amount of income taxes
recoverable from prior years, or approximately $0.6 million, resulting in an
effective tax rate of 3.4%. The effective tax rate in 1996 was 34.3% which
reflects full recoverability of tax losses through carryback of such losses
against taxes paid in 1994 and 1995.

As a result of the foregoing, the Company's net loss increased to $16.7
million in 1997 from $5.5 million in 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires capital for the development of its technology and
products, procurement of raw materials and finished goods manufactured by others
and capital equipment. The Company operates

25
<PAGE>
in a highly seasonal business, generating the majority of its sales in the
months of July through December. The Company's cash receipts from its North
American customers are received predominantly in the months of December, January
and February while its international customers generally pay by letter of credit
or in cash immediately prior to shipment. In order to finance operations and
manufacture and purchase products during the remainder of the year, the Company
has historically utilized a revolving line of credit.

On August 31, 1998, the Company entered into a loan and security agreement
with CIT, which replaced the Company's prior credit facility. The Company's line
of credit under the new facility is up to $15.0 million, to be increased to
$17.0 million from October 15 to December 15 of each year for a term of three
years. The amount that may be borrowed is also limited to the sum of (1) 85% of
eligible accounts receivable, provided the dilution does not exceed 5.0% and
after implementation of an 11.0% dilution reserve against loan availability
during the season, and (2) 55% of eligible finished goods inventory, not to
exceed $6.5 million during April through September, $3.25 million in October,
$2.5 million in November, and $2.0 million in December. Although the credit
facility provides that there cannot be advances against inventory during January
through March of each year, CIT agreed to allow advances during that period in
1999. In order to obtain advances during that period from January through March
of 1999, the Company agreed that the sub-limit during all periods would be
subject to periodic renegotiations, and the sub-limit, as of July 22, 1999, was
$4.5 million, subject to availability. The facility now provides for a maximum
letter of credit subline of $8.0 million. The facility bears interest at the
prime interest rate plus 1.5% and is collateralized by substantially all the
assets of the Company. Additionally, the facility requires an annual facility
fee of 0.5% due each anniversary of the execution of the credit facility and a
monthly letter of credit fee of 1.5% per annum of the face amount of any standby
and documentary letters of credit.

The CIT line of credit is subject to cancellation in the event of enumerated
events of default, one or more of which may have already occurred by reason of
the following:

- if the existing financial condition of the Company and its subsidiaries is
deemed to constitute insolvency;

- failure of the Company to remain in technical compliance with the
inventory collateral sublimit set forth in the CIT agreement;

- possible delinquency in the delivery of financial and other reports
required to be delivered to CIT;

- default under the CIT agreement by reason of the Company's recent sale and
license-back of its Smiley-related trademarks without the CIT's prior
approval;

- delinquencies in the payment of amounts currently owing to vendors, legal
and financial advisors and others; and

- default of specific monthly payment obligations currently due for
professional snowboard athlete services.

On August 31, 1998, the Company entered into a consent, reaffirmation, and
release agreement with US Bank under which the Company retained a $3.0 million
credit facility with that institution. The US

26
<PAGE>
Bank facility bears interest at prime rate plus 1.5% per year until February 28,
1999 and prime rate plus 2.0% per year from March 1, 1999 through and including
the date the Company repays the principal amount owed, is subordinated to the
CIT credit line, and is secured by promissory notes with a principal amount of
$1.4 million, as of July 22, 1999, from Global Sports, Inc. Additionally, the
facility is secured by the personal guarantee of one of the Company's outside
directors, including specific real property owned by that director. All
indebtedness due under the US Bank facility is due and payable August 30, 1999.
The Company was required to make quarterly principal payments under the US Bank
facility of $100,000, beginning with a payment due on April 10, 1999. The
Company failed to make payments due on April 10, 1999 and July 10, 1999, and
therefore was in default of the US Bank facility. The overdue principal amounts
were repaid on July 27, 1999 utilizing a portion of the proceeds from the $2.0
million loan from K2.

In connection with the merger agreement, CIT entered into a forbearance
agreement with K2 by which CIT agreed to forbear from exercising its default
rights under the CIT Loan and Security Agreement with respect to existing events
of default enumerated in the agreement. The forbearance agreement will remain in
effect so long as the merger agreement remains in full force and effect, but in
no event past December 1, 1999. Under the terms of intercreditor agreements
among CIT, US Bank and Advantage, US Bank and Advantage have, with limited
exceptions, agreed that they may not take steps to foreclose on assets of the
Company until all indebtedness to CIT has been paid. Accordingly, US Bank and
Advantage are, for all practical purposes, precluded from exercising their
default rights and remedies. However, in the event of further defaults under the
CIT loan and security agreement, or termination of the merger agreement for any
reason, CIT would have the right to refuse all further loans to the Company and
all of CIT, US Bank and Advantage would have the right to demand immediate
payment of the debts owing to them, although US Bank and Advantage would be
precluded under the intercreditor agreements from taking any collection actions
against the Company until all amounts owed to CIT were paid in full.

27
<PAGE>
There was a net cash surplus of $0.5 million in investing activities in 1999
versus $(0.8) million used in 1998. The 1999 amount included approximately $1.8
million cash proceeds from notes receivable and the sale of SMP offset by
capital expenditures of $1.4 million.

Net cash provided by financing activities totaled $3.2 million in 1999
compared with $2.3 million in 1998. In both years the financing was primarily
provided by net advances on the Company's line of credit.

YEAR 2000

The "year 2000 problem" is the result of computer programs being written
using two digits rather than four to define the applicable year. Software
programs and systems that have date-sensitive features may recognize a date
using "00" as the year 1900 instead of the year 2000. Ride has assessed its year
2000 needs and has purchased and installed year 2000-compliant software in all
its known non-compliant hardware and software systems. The cost of the purchase
and installation of the year 2000-compliant software is anticipated to exceed
$250,000. Ride is in the process of reviewing with each of its material
suppliers, service providers and customers the steps each is taking to insure
their respective computer systems are presently or will be year 2000-compliant
in a timely fashion. Ride's shipper has confirmed to Ride it has installed year
2000-compliant software in all of its material systems. There can be no
assurance the computer systems of third parties on whose commercial efforts Ride
directly or indirectly relies, will be year 2000-compliant in a timely fashion.
Because Ride has not completed its review of its material third party suppliers,
service providers and customers, it has not created a contingency plan setting
forth what steps will be taken if these third parties are not year 2000
compliant by December 31, 1999. Based on information received from its third
party vendors, service providers and customers, Ride intends to have a
contingency plan in place by October 1999. The failure of third parties to be
year 2000 compliant could cause material delays in the design, manufacture and
shipment of products, delay in payment for products, and delay in the
availability of credit or funds necessary to operate the business of Ride. The
failure of Ride's or one or more third-party's computer systems as a result of
year 2000 non-compliance may have a material adverse effect on Ride's business
and results of operations.

MARKET RISK

Ride's Ride Canada subsidiary operates and maintains its accounting records
using the Canadian dollar as its functional currency. In accordance with
generally accepted accounting principles, upon consolidation the assets,
liabilities, revenues and expenses of this subsidiary are translated into U.S.
dollars at the appropriate exchange rate prevailing during the period and are
therefore subject to fluctuations in the exchange rates between the Canadian
dollar and the U.S. dollar.

Ride purchases some raw materials from foreign suppliers with payments
denominated in foreign currencies. Accordingly, Ride may face exposure to gains
and losses from currency fluctuations. In addition, during the contractual
periods, Ride is exposed to certain losses in the event of nonperformance by the
counterparties to the forward contracts. At December 31, 1997, June 30, 1998 and
June 30, 1999, Ride did not have any open forward contracts.

28
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders
Ride, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Ride, Inc.
and Subsidiaries as of June 30, 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ride, Inc. and
Subsidiaries as of June 30, 1999, and the consolidated results of their
operations and their consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles.

We have also audited Schedule II of Ride, Inc. and Subsidiaries for the year
ended June 30, 1999. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of approximately $12.3 million during the year
ended June 30, 1999, and, as of that date, the Company has negative working
capital of approximately $6.9 million. These factors, among others, as discussed
in Note 3 to the financial statements, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

GRANT THORNTON LLP

Seattle, Washington
September 27, 1999

29
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Ride, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Ride, Inc.
and subsidiaries as of December 31, 1997 and June 30, 1998 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the two years in the period ended December 31, 1997 and the six months
ended June 30, 1998. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ride, Inc. and
subsidiaries at December 31, 1997 and June 30, 1998 and the consolidated results
of their operations and their cash flows for each of the two years in the period
ended December 31, 1997 and for the six months ended June 30, 1998 in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As more fully
described in Note 3, the Company has incurred significant operating losses and
negative cash flows from operations for the year ended December 31, 1997, and
for the six months ended June 30, 1998. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 3. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.

ERNST & YOUNG LLP

Seattle, Washington
September 11, 1998

30
<PAGE>
RIDE, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1997 1998 1999
------------ --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 1,332 $ 165 $ --
Accounts receivable, less allowance for doubtful Accounts of $925 in 1997,
$981 in 1998, and $1,854 in 1999........................................ 12,588 4,487 4,832
Inventories............................................................... 6,564 9,752 9,159
Prepaid expenses and other current assets................................. 728 887 333
Income taxes receivable................................................... 1,569 1,571 27
------------ --------- ---------
Total current assets........................................................ 22,781 16,862 14,351
Plant and equipment, net.................................................... 5,670 5,792 4,376
Notes receivable............................................................ 1,600 1,400 1,643
Goodwill, net of accumulated amortization of $842 in 1997, $1,044 in 1998,
and $1,549 in 1999........................................................ 9,358 9,205 6,275
Other assets................................................................ 1,201 1,345 765
------------ --------- ---------
Total assets................................................................ $ 40,610 $ 34,604 $ 27,410
------------ --------- ---------
------------ --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft............................................................ $ -- $ -- $ 540
Accounts payable.......................................................... 3,719 5,918 7,246
Accrued expenses and other current liabilities............................ 1,555 2,911 3,428
Short-term borrowings..................................................... 1,995 5,236 10,040
Notes payable............................................................. 689 308 --
------------ --------- ---------
Total current liabilities................................................... 7,958 14,373 21,254
Other long-term liabilities................................................. 1,582 979 710
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, no par value, 10,000 shares authorized Series
A: 100 shares issued and outstanding
Aggregate liquidation preference of $500.............................. 500 500 500
Series B: 3 shares 1997, and 2 shares in 1998 issued and outstanding
Aggregate liquidation preference of $3,000............................ 2,841 2,332 --
Common stock, no par value, 40,000 shares authorized with 12,092 in 1997,
12,619 in 1998, and 14,301 in 1999 issued and outstanding,
respectively............................................................ 42,393 43,257 44,129
Accumulated other comprehensive loss...................................... (125) (163) (110)
Accumulated deficit....................................................... (14,539) (26,674) (39,073)
------------ --------- ---------
Total shareholders' equity.............................................. 31,070 19,252 5,446
------------ --------- ---------
Total liabilities and shareholders' equity.................................. $ 40,610 $ 34,604 $ 27,410
------------ --------- ---------
------------ --------- ---------
</TABLE>

See accompanying notes.

31
<PAGE>
RIDE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1996 1997 1998 1999
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 75,728 $ 36,475 $ 7,279 $ 39,712
Cost of goods sold........................................... 61,641 26,656 8,287 31,680
------------ ------------ ---------- ----------
Gross profit (loss).......................................... 14,087 9,819 (1,008) 8,032
Selling, general and administrative expenses................. 20,487 18,278 10,735 17,529
Loss on impairment of goodwill............................... -- 8,600 -- 2,157
Restructuring charges........................................ 2,500 -- -- --
------------ ------------ ---------- ----------
Operating expenses........................................... 22,987 26,878 10,735 19,686
------------ ------------ ---------- ----------
Operating loss............................................... (8,900) (17,059) (11,743) (11,654)
Interest expense............................................. (268) (426) (147) (1,129)
Interest income.............................................. 333 195 117 113
Other expense, net........................................... -- -- -- (317)
Gain on sale of subsidiary 482 -- -- 680
------------ ------------ ---------- ----------
Loss before income taxes..................................... (8,353) (17,290) (11,773) (12,307)
Income tax benefit........................................... (2,863) (595) -- --
------------ ------------ ---------- ----------
Net loss..................................................... $ (5,490) $ (16,695) $ (11,773) $ (12,307)
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Net loss per share:
Basic...................................................... $ (0.52) $ (1.51) $ (0.99) $ (0.92)
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Diluted.................................................... $ (0.52) $ (1.51) $ (0.99) $ (0.92)
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Share used in the computation of net loss:
Basic...................................................... 10,614 11,128 12,261 13,390
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Diluted.................................................... 10,614 11,128 12,261 13,390
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>

See accompanying notes.

32
<PAGE>
RIDE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK
-----------------------------------------
SERIES A SERIES B COMMON STOCK
--------------------- ----------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1996........ 100 $ 500 -- -- 10,518 $38,244
Net loss for the year............
Preferred stock dividends........
Stock option exercises........... 231 1,258
Issuance of common stock under
employee stock purchase plan... 11 81
--- --------- ----- --------- --------- ---------
Balances at December 31, 1996...... 100 500 -- -- 10,760 39,583
Net loss for the year............
Preferred stock dividends........ 30
Stock option exercises........... 98 307
Issuance of common stock under
employee stock purchase plan... 24 53
Issuance of preferred stock, net
of offering costs.............. 3 2,811
Common stock issued in
acquisitions................... 1,210 2,450
Foreign currency translation
loss...........................
--- --------- ----- --------- --------- ---------
Balances at December 31, 1997...... 100 500 3 2,841 12,092 42,393
Net loss for the period..........
Preferred stock dividends........ 270 41 75
Conversion of preferred stock.... (1) (779) 442 734
Other common stock issued........ 35 42
Issuance of common stock under
employee stock purchase plan... 9 13
Accrue class action settlement...
Foreign currency translation
loss...........................
--- --------- ----- --------- --------- ---------
Balances at June 30, 1998.......... 100 500 2 2,332 12,619 43,257
Net loss for the period..........
Preferred stock dividends........ 76 55
Conversion of preferred stock.... (804) 1,603 806
Conversion of preferred to note
payable........................ (2) (1,528)
Issuance of common stock under
employee stock purchase plan... 13 11
Foreign currency translation
loss...........................
--- --------- ----- --------- --------- ---------
Balances at June 30, 1999.......... 100 $ 500 0 $ 0 14,311 $44,129
--- --------- ----- --------- --------- ---------
--- --------- ----- --------- --------- ---------

CUMULATIVE
TRANSLATION ACCUMULATED
ADJUSTMENT DEFICIT TOTAL
--------------- ------------- ---------
<S> <C> <C> <C>
Balances at January 1, 1996........ -- $ 7,751 $46,495
Net loss for the year............ (5,490) (5,490)
Preferred stock dividends........ (35) (35)
Stock option exercises........... 1,258
Issuance of common stock under
employee stock purchase plan... 81
----- ------------- ---------
Balances at December 31, 1996...... -- 2,226 42,309
Net loss for the year............ (16,695) (16,695)
Preferred stock dividends........ (70) (40)
Stock option exercises........... 307
Issuance of common stock under
employee stock purchase plan... 53
Issuance of preferred stock, net
of offering costs.............. 2,811
Common stock issued in
acquisitions................... 2,450
Foreign currency translation
loss........................... (125) (125)
----- ------------- ---------
Balances at December 31, 1997...... (125) (14,539) 31,070
Net loss for the period.......... (11,773) (11,773)
Preferred stock dividends........ (362) (17)
Conversion of preferred stock.... (45)
Other common stock issued........ 42
Issuance of common stock under
employee stock purchase plan... 13
Accrue class action settlement...
Foreign currency translation
loss........................... (38) (38)
----- ------------- ---------
Balances at June 30, 1998.......... (163) (26,674) 19,252
Net loss for the period.......... (12,307) (12,307)
Preferred stock dividends........ (90) (35)
Conversion of preferred stock.... (2)
Conversion of preferred to note
payable........................ (1,528)
Issuance of common stock under
employee stock purchase plan... 11
Foreign currency translation
loss........................... 53 53
----- ------------- ---------
Balances at June 30, 1999.......... $ (110) $ (39,073) $ 5,446
----- ------------- ---------
----- ------------- ---------
</TABLE>

See accompanying notes.

33
<PAGE>
RIDE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS YEAR ENDED
DECEMBER 31, DECEMBER 31, ENDED JUNE 30, JUNE 30
1996 1997 1998 1999
------------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Reconciliation of net income to net cash provided by
(used in) operations:
Net income (loss).............................................. $ (5,490) $ (16,695) $ (11,773) $ (12,307)
Depreciation................................................... 1,288 1,560 616 1,380
Amortization................................................... 421 453 227 501
Deferred income tax (benefit) expense.......................... (876) 1,088 -- --
Loss on impairment............................................. -- 8,600 -- 2,157
Loss on write-down of fixed assets............................. -- -- -- 1,107
Loss on write-down of trademarks............................... -- -- -- 191
Non-cash restructuring charges................................. 2,397 -- -- --
Gain on sale of subsidiary..................................... (482) -- -- (680)
Amortization of discount on notes receivable................... (34) (116) -- --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivables.................. (637) 2,689 8,101 (345)
(Increase) decrease in inventories........................... (1,577) 308 (3,188) 145
(Increase) decrease in prepaid expenses...................... 294 (227) (159) 491
(Increase) decrease in income taxes receivable............... (2,894) 1,267 -- 1,544
Increase (decrease) in accounts payable...................... (3,065) (1,652) 2,199 1,328
Increase (decrease) in accrued expenses and other current
liabilities................................................ (102) (1,247) 1,354 569
------------- ------------- -------------- -----------
Net cash used in operating activities.......................... (10,757) (3,972) (2,623) (3,919)
INVESTING ACTIVITIES
Purchases of plant and equipment............................... (5,364) (753) (738) (1,381)
Acquisitions, net of cash acquired............................. -- (1,979) -- --
Sales of (purchases) of securities available-for-sale.......... 3,840 -- -- --
Proceeds from sale of subsidiary, net of costs................. 884 -- -- 250
Cash received from note receivable............................. -- -- 200 1,512
Increase in other assets....................................... (532) (223) (280) 158
------------- ------------- -------------- -----------
Net cash provided by (used in) investing activities............ (1,172) (2,955) (818) 539
FINANCING ACTIVITIES
Net advances on line of credit................................. -- 1,995 2,552 2,968
Bank overdraft................................................. -- -- -- 540
Net proceeds from sale of preferred stock...................... -- 2,811 (45) --
Proceeds from exercise of common stock options................. 1,087 307 -- --
Proceeds from Employee Stock Purchase Plan..................... 81 53 13 11
Proceeds from long-term borrowings............................. 750 -- -- --
Repayments of notes payable and long-term borrowings........... (993) (99) (229) (269)
Dividends paid................................................. (35) (40) (17) (35)
------------- ------------- -------------- -----------
Net cash provided by financing activities...................... 890 5,027 2,274 3,215
------------- ------------- -------------- -----------
Net increase (decrease) in cash and cash equivalents........... (11,039) (1,900) (1,167) (165)
Cash at beginning of period.................................... 14,271 3,232 1,332 165
------------- ------------- -------------- -----------
Cash at end of period.......................................... $ 3,232 $ 1,332 $ 165 $ 0
------------- ------------- -------------- -----------
------------- ------------- -------------- -----------
SUPPLEMENTAL DISCLOSURE
Cash paid for interest......................................... $ 275 $ 414 $ 123 $ 1,129
Cash paid (received) for income taxes.......................... $ 910 $ 68 $ -- $ (1,418)
NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock and notes payable issued in acquisitions.......... $ -- $ 2,450 $ -- $ --
Issuance of Common stock to retire note payable................ $ -- $ -- $ 66 $ --
Conversion of Series B Preferred to note payable............... $ 1,725
</TABLE>

See accompanying notes.

34
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1999

1. SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

The consolidated financial statements include the accounts of Ride, Inc.
("Ride" or the "Company") and its subsidiaries: Ride Snowboard Company ("Ride
Snowboards"), Ride Manufacturing, Inc. ("Ride Manufacturing"), Ride Canada, Inc.
("Ride Canada"), SMP Clothing, Inc. ("SMP"), Smiley Hats, Inc. ("Smiley") and
Carve, Inc. ("US2"). The Company was founded in September 1992 and acquired
C.A.S. Sports International, Inc. and C.A.S. Sports Agency, Inc. (collectively,
"CAS") in August 1994, Ride Manufacturing in September 1995 and SMP in October
1995. The Company also acquired 5150 Snowboards, Inc. ("5150") in September 1995
and later merged 5150 with and into Ride Snowboards. In October 1996, the
Company transferred substantially all of the Canada-based operating assets and
liabilities of CAS (other than fixed assets) into Ride Canada, a newly formed
corporation, and all of the US-based operating assets and liabilities of CAS
into Ride Snowboards, and sold the CAS entities. In June 1997, the Company
acquired substantially all of the assets and liabilities of Device Mfg Corp. and
transferred those assets and liabilities to Ride Snowboards. In July 1997, the
Company's newly formed Smiley subsidiary acquired substantially all of the
assets of Galena Creek Trading Corp. In December 1997, the Company acquired US2
Sports Group Inc. through a merger of that company with and into Carve, Inc., a
newly formed corporation. In November 1998, the Company sold substantially all
of the assets of its San Diego, California-based SMP Clothing, Inc. subsidiary
to SMP's Australian licensee. As part of the transaction, the Company retained
certain SMP liabilities as well as SMP's accounts receivable. The results of
operations of these acquired subsidiaries are included in the Company's
financial statements from their respective dates of acquisition through their
applicable dates of disposition. See Notes 4 and 5.

Ride Snowboards sells premium to mid-range snowboards and related products
primarily through specialty snowboard and ski shops. Ride Manufacturing is a
manufacturer of premium snowboards which are produced principally for Ride
Snowboards. Ride Manufacturing also produces a limited number of snowboards for
other snowboard companies on an OEM basis. Prior to its November 1998 sale, SMP
designed and manufactured snowboard, surf, skate, motocross and street apparel
which were sold primarily through specialty shops. Ride Canada acts as the
Company's Canadian distributor for the Company's branded products. Smiley
designs and manufactures premium head and neck wear for the winter sports
industry and is sold through specialty shops. In fiscal year 1999, US2 designed,
manufactured and distributed wakeboards, wakeboard bindings and accessories
under the "FullTilt" and "Sub Rosa" brand names through marine and specialty
retailers. Until its disposition in October 1996, CAS marketed entry-level
snowboards and related products under various brand names and on a private label
basis primarily to regional sporting goods stores and large-format sporting
goods retailers. In addition, CAS sold snowboards and related products on an OEM
basis to other snowboard companies and bought excess snowboard and sporting
goods inventories from manufacturers and sold such products to retailers
throughout the world. The OEM and excess inventory portions of the CAS business
were sold in October 1996 (see Note 5) while the branded and private label
portions of the business were retained by the Company.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Intercompany transactions have been
eliminated in consolidation.

35
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

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

FOREIGN CURRENCY

The local currency is considered the functional currency of the Company's
Canadian operations. The financial statements of the Company's Canadian
subsidiary are translated into U.S. dollars using the exchange rate at the
balance sheet date for assets and liabilities and the average exchange rate for
the period for revenues and expenses. Resulting translation adjustments are
recorded as a separate component of shareholders' equity.

As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities and the foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of Statement 130.

The Company enters into foreign currency forward contracts, generally with
terms of 270 days or less, as a hedge against some of its foreign currency
commitments. Offsetting gains and losses on these contracts are recognized
concurrently with the exchange gains and losses stemming from the associated
commitments. During the contractual periods, the Company is exposed to certain
losses in the event of nonperformance by the counterparties to the forward
contracts. At June 30, 1999, the Company did not have any open forward
contracts.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are carried at the lower of cost or market using the first-in,
first-out method.

PLANT AND EQUIPMENT

Plant and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
five to ten years. Leasehold improvements are amortized over the lesser of the
estimated useful life of the asset or the term of the related lease. Snowboard,
snowboard binding, and snowboard boot molds are amortized to cost of goods sold
over one to three years based on the number of related snowboards, bindings, and
boots sold.

36
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL

Goodwill is being amortized over 15 to 40 years using the straight-line
method. The Company periodically reviews the carrying value of goodwill to
determine if the facts and circumstances suggest that the value may be impaired.

REVENUE RECOGNITION

The Company recognizes revenue from the sale of its products when the
products are shipped to customers.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense as incurred and
totaled approximately $417,000 in 1996, $338,000 in 1997, $180,000 for the six
months ended June 30, 1998, and $200,000 in the year ended June 30, 1999.

ADVERTISING COSTS

The Company expenses the production costs of advertising the first time the
advertising takes place. Advertising expense totaled $847,000 in 1996,
$1,090,000 in 1997, $596,000 for the six months ended June 30, 1998, and
$1,070,000 in the year ended June 30, 1999.

WARRANTY COSTS

The Company generally offers a one-year warranty on its products from the
time of retail sale. Anticipated net costs associated with warranties are
charged to expense at the time of the sale of its products. The Company is
reimbursed for a portion of the cost of defective products by the manufacturers.

INCOME TAXES

The Company accounts for income taxes under the liability method. Deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the tax
rates and laws that will be in effect when the differences are expected to
reverse. Valuation allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized.

NET LOSS PER SHARE

Basic earnings per share is computed by dividing net loss by the average
number of common shares outstanding during the period. Diluted loss per share is
computed by dividing net loss by the average number of common and dilutive
common equivalent shares outstanding during the period.

37
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION

The Company has elected to apply the disclosure-only provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation." Accordingly, the
Company accounts for stock-based compensation using the intrinsic method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Compensation cost for stock
options is measured at the excess, if any, of the fair value of the Company's
common stock at the date of the grant over the stock option price.

COMPREHENSIVE INCOME

As of January 1, 1998 the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities and the foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of Statement 130. The Company's
total comprehensive loss for the years ended December 31, 1996, 1997, the six
months ended June 30, 1998, and the year ended June 30, 1999 was $5,490,000,
$16,820,000, $11,811,000, and $12,360,000, respectively.

RECLASSIFICATIONS

Certain reclassifications have been made to prior year balances to conform
with current year presentation.

2. CHANGE IN YEAR END

The Company's Board of Directors approved a change in the Company's fiscal
year-end from December 31 to June 30, beginning with the six month period ended
June 30, 1998. The change in fiscal year end was made to more closely align the
Company's accounting and reporting practices with its product cycle.

3. GOING CONCERN

The company incurred a net loss of $12,307,000 during the year ended June
30, 1999, and, as of that date, the Company has a negative working capital of
$6,903,000. The Company's present financial condition has resulted in the
Company being in default of loan agreements. In view of these matters,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued operation of the Company,
which in turn is dependent upon the Company's improving its overall level of
profitability and its ability to successfully cure its loan defaults. In
addition, the success of the Company could also, among other things, require
obtaining additional financing or capital infusions. These factors, among
others, raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

38
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

3. GOING CONCERN (CONTINUED)
On July 23, 1999 the Company entered into an Amended and Restated Agreement
and Plan of Merger with K2, Inc. (K2), pursuant to which the Company will become
a wholly owned subsidiary of K2. Additional interim financing in the amount of
$2.0 million was obtained from K2 in connection with the contemplated merger
transaction between the Company and K2, as more fully discussed in Note 19.

In connection with the merger agreement, CIT Group/Credit Finance, Inc.
(CIT) entered into a forbearance agreement with K2 by which CIT agreed to
forbear from exercising its default rights under the CIT Loan and Security
Agreement with respect to existing events of default enumerated in the
agreement. The forbearance agreement will remain in effect so long as the merger
agreement remains in full force and effect, but in no event past December 1,
1999. Under the terms of intercreditor agreements among CIT, US Bank and
Advantage, US Bank and Advantage have, with limited exceptions, agreed that they
will not take steps to foreclose on assets of the Company until all indebtedness
to CIT has been paid. Accordingly, US Bank and Advantage are, for all practical
purposes, precluded from exercising their default rights and remedies. However,
in the event of further defaults under the CIT loan and security agreement, or
termination of the merger agreement for any reason, CIT would have the right to
refuse all further loans to the Company and all of CIT, US Bank and Advantage
would have the right to demand immediate payment of the debts owing to them,
although US Bank and Advantage would be precluded under the intercreditor
agreements from taking any collection actions against the Company until all
amounts owed to CIT were paid in full.

4. ACQUISITIONS

DEVICE

On June 12, 1997, the Company purchased substantially all of the assets
(except cash and accounts receivable) and liabilities of Device, a manufacturer
of step-in snowboard bindings and boots based in Boulder, Colorado. The purchase
price was comprised of approximately $1.0 million in assumed liabilities and
276,220 newly-issued shares of Common Stock valued at $764,900. The transaction
has been accounted for as a purchase with the excess of the purchase price over
the fair value of the assets acquired allocated primarily to goodwill.

SMILEY HATS

On July 22, 1997, the Company purchased substantially all of the assets of
Galena Creek Trading Company, Inc. (d.b.a. Smiley Hats), a manufacturer of
winter hats based in Sparks, Nevada. The purchase

39
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

4. ACQUISITIONS (CONTINUED)
price was comprised of approximately $550,000 in cash and 320,000 shares of
Common Stock valued at $750,000. Galena Creek Trading Company was majority owned
and controlled by the Company's then Chief Executive Officer. The transaction
has been accounted for as a purchase with the excess of the purchase price over
the fair value of the assets acquired allocated primarily to goodwill.

US2

On December 19, 1997, Carve, Inc., a newly-formed, wholly owned subsidiary
of the Company acquired the stock of US2 Sports Group, Inc., a manufacturer of
wakeboards and wakeboard bindings. The purchase price was comprised of 605,263
newly-issued shares of Common Stock valued at $910,000 plus the assumption of
net liabilities of $652,000. The transaction has been accounted for as a
purchase with the excess of the purchase price over the fair value of the assets
acquired allocated primarily to goodwill.

5. IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of, the Company
periodically reviews the events and circumstances affecting its operations for
indications that the Company's long-lived assets might be impaired.

During the year ended June 30, 1999, the Company made the decision to
suspend production of its wakeboard line. As a result, the goodwill associated
with the purchase of US2 Sports Group, Inc. totalling $2.157 million was written
off.

In December 1997, the Company determined that reorders for its primary
products would not meet previously anticipated levels and the Company realized
pricing pressure on its lower-end products, thus suggesting that the Company's
current production capacity and infrastructure were underutilized. Based on this
evaluation, the Company determined that the $13.9 million of goodwill associated
with its acquisitions of CAS, SMP and Ride Manufacturing was impaired and wrote
it down by $8.6 million. The Company's estimates of the discounted cash flows
expected to be generated from these entities indicate that the remaining
carrying amounts are expected to be recovered. However, it is possible that the
current industry oversupply of snowboard products may be a sign of a permanent
demand shift and there can be no assurance that the carrying value of the
goodwill related to these acquisitions will be recoverable which could result in
additional write-down of goodwill in the future.

40
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

6. DISPOSITION

On October 11, 1996, the Company sold the stock of CAS to two former Company
executives and a number of CAS employees. The $3.0 million sales price was
comprised of $1,000,000 in cash and short-term notes and $2.0 million in
long-term notes. The Company recognized a pre-tax gain of $482,000 in connection
with this sale.

The long-term notes are secured by the stock of the sold corporations and
bear interest at prime. Principal payments of $100,000 plus interest are due
quarterly through September 2002. The balance outstanding on the note at June
30, 1999 was $1.5 million. The $500,000 current portion of the notes due in
fiscal year 2000 is included in Accounts Receivable.

In May 1998, Gen-X was sold to Global Sports, Inc. (GSI) and the notes
payable to Ride were assumed by GSI. GSI, a publicly held company, designs and
markets branded footwear and distributes off-priced athletic sporting goods.
Realization of the Company's $1.5 million Notes receivable is dependent on GSI's
successful conduct of future operations. The eventual outcome of these matters
cannot be determined at this time.

Effective November 2, 1998, the Company sold the operating assets and
inventory of its Chula Vista, California-based, subsidiary SMP Clothing, Inc. to
SMP's Australian licensee for the sum of $2,081,412. The purchase price consists
of a cash payment of $250,000 and promissory notes for the balance due on or
before March 31, 1999 (extended to September 30, 1999 by agreement of the
parties) of which balance, approximately $639,000 remains due and payable as of
June 30, 1999. The notes are secured by a first position in the assets being
sold. As part of the transaction, Ride retains SMP's current liabilities and
accounts receivable which as of June 30, 1999 totaled approximately $377,000 and
$80,000, respectively.

7. RESTRUCTURING AND INVENTORY WRITE-DOWN

On December 12, 1996 the Company's Board of Directors approved a plan to
writedown excess inventories and restructure the Company's manufacturing
operations. Due to canceled commitments from the Company's principal Japanese
distributor and an oversupply of snowboards from other manufacturers, the
Company recognized a $6.5 million write-down of its inventories. This amount has
been included in cost of sales for the year ended December 31, 1996. In
addition, the Company recognized a $2.5 million restructuring charge in
connection with moving the Company's binding production offshore and the
withdrawal of snowboard production from two outside snowboard manufacturers used
in 1996. The primary components of this charge were write-offs of abandoned
equipment, tooling and leasehold improvements, cancellation fees paid to U.S.
vendors and future lease costs. The Company anticipates future cash outlays will
not exceed the $70,000 included in other long-term liabilities for future
minimum lease payments and will be funded through normal operating cash flows.

41
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

8. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1997 1998 1999
------------- ----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Finished goods............................................. $ 6,186 $ 8,283 $ 8,969
Work in process............................................ 228 491 74
Raw materials and supplies................................. 2,189 2,425 1,466
Obsolescence reserve....................................... (2,039) (1,447) (1,350)
------ ----------- -----------
$ 6,564 $ 9,752 $ 9,159
------ ----------- -----------
------ ----------- -----------
</TABLE>

9. PLANT AND EQUIPMENT

Plant and equipment consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1997 1998 1999
------------ --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Office equipment.......................................... $ 1,609 $ 1,828 $ 2,127
Production equipment and tooling.......................... 3,147 3,413 3,105
Leasehold improvements.................................... 2,211 2,264 2,247
Vehicles and other........................................ 753 831 899
Construction in process................................... 205 327 --
------------ --------- ---------
7,925 8,663 8,378
Accumulated depreciation.................................. (2,255) (2,871) (4,002)
------------ --------- ---------
$ 5,670 $ 5,792 $ 4,376
------------ --------- ---------
------------ --------- ---------
</TABLE>

10. SHORT TERM BORROWINGS

On August 31, 1998, the Company entered into a loan and security agreement
with CIT, which replaced the Company's prior credit facility. The Company's line
of credit under the new facility is up to $15.0 million, to be increased to
$17.0 million from October 15 to December 15 of each year for a term of three
years. The amount that may be borrowed is also limited to the sum of (1) 85% of
eligible accounts receivable, provided the dilution does not exceed 5.0% and
after implementation of an 11.0% dilution reserve against loan availability
during the season, and (2) 55% of eligible finished goods inventory, not to
exceed $6.5 million during April through September, $3.25 million in October,
$2.5 million in November, and $2.0 million in December. Although the credit
facility provides that there cannot be advances against inventory during January
through March of each year, CIT agreed to allow advances during that period in
1999. In order to obtain advances during that period from January through March
of 1999, the Company agreed that the sub-limit during all periods would be
subject to periodic renegotiations, and the sub-limit, as of July 22, 1999, was
$4.5 million, subject to availability. The facility now provides for a maximum
letter of credit subline of $8.0 million. The facility bears interest at the
prime interest rate plus 1.5% and is collateralized by substantially all the
assets of the Company. Additionally, the facility requires an annual

42
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

10. SHORT TERM BORROWINGS (CONTINUED)
facility fee of 0.5% due each anniversary of the execution of the credit
facility and a monthly letter of credit fee of 1.5% per annum of the face amount
of any standby and documentary letters of credit. The outstanding debt balance
with CIT was $4,898,167 at June 30, 1999.

On August 31, 1998, the Company entered into a consent, reaffirmation, and
release agreement with US Bank under which the Company retained a $3.0 million
credit facility with that institution. At June 30, 1999 the balance under this
agreement totalled $2,934,165. The US Bank facility bears interest at prime rate
plus 1.5% per year until February 28, 1999 and prime rate plus 2.0% per year
from March 1, 1999 through and including the date the Company repays the
principal amount owed, is subordinated to the CIT credit line, and is secured by
promissory notes with a principal amount of $1.4 million, as of July 22, 1999,
from Global Sports, Inc. Additionally, the facility is secured by the personal
guarantee of one of the Company's outside directors, including specific real
property owned by that director. All indebtedness due under the US Bank facility
is due and payable August 30, 1999, which has been extended to the earlier of
the closing of the merger or December 1, 1999. The Company was required to make
quarterly principal payments under the US Bank facility of $100,000, beginning
with a payment due on April 10, 1999. The Company failed to make payments due on
April 10, 1999 and July 10, 1999, and therefore was in default of the US Bank
facility. The overdue principal amounts were repaid on July 27, 1999 utilizing a
portion of the proceeds from the $2.0 million loan from K2.

During 1996, the Company's landlord loaned the Company $750,000 to fund a
portion of the expansion and improvement of the Company's Preston, Washington
office and warehouse facilities. The loan has an effective interest rate of
approximately 3% and is due in monthly payments of principal and interest of
$9,100 through December 2003. The total amount owed at June 30, 1999 was
$459,000.

43
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

11. INCOME TAXES

Deferred tax assets and (liabilities) consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1997 1998 1999
------------ --------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Deferred tax assets:
Net operating loss carryforwards....................... $ 2,931 $ 6,279 $ 10,059
Goodwill writedown..................................... 2,924 2,924 3,588
Inventory reserves..................................... 641 929 571
Allowance for bad debts................................ 220 431 649
Warranty reserves...................................... 82 35 87
Restructuring reserves................................. 68 152 40
Other accruals......................................... 165 141 107
------------ --------- ----------
Total deferred tax assets................................ 7,031 10,891 15,101
Less: Valuation allowance for deferred tax assets........ (6,646) (10,158) (14,170)
------------ --------- ----------
385 733 931
Deferred tax liabilities:
Depreciation and amortization.......................... (385) (733) (931)
------------ --------- ----------
Total deferred tax liabilities........................... (385) (733) (931)
------------ --------- ----------
Net deferred tax assets................................ $ -- $ -- $ --
------------ --------- ----------
------------ --------- ----------
</TABLE>

At June 30, 1998, the Company had net operating loss carryforwards for
income tax purposes of $29.3 million, which are available to offset future
federal taxable income, if any. The federal operating loss carryforwards begin
to expire in 2007 through 2019. Recognition of approximately $3.2 million of the
Company's federal operating loss carryforwards may be limited pursuant to
Section 382 of the Internal Revenue Code. The valuation allowance was
established for the deferred tax assets in excess of deferred tax liabilities.

44
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

11. INCOME TAXES (CONTINUED)
Significant components of the provision (benefit) for income taxes are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, SIX MONTHS YEAR
-------------------- ENDED JUNE ENDED
1996 1997 30, 1998 JUNE 30, 1999
--------- --------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal.................................. $ (1,713) $ (1,760) -- --
State.................................... 106 -- -- --
Canada................................... (380) 77 -- --
--------- --------- ------------- -------------
(1,987) (1,683) -- --
--------- --------- ------------- -------------
Deferred:
Federal.................................. (928) 996 -- --
State.................................... 52 301 -- --
Canada................................... -- (209) -- --
--------- --------- ------------- -------------
(876) 1,088 -- --
--------- --------- ------------- -------------
Total provision (benefit).................. $ (2,863) $ (595) $ -- $ --
--------- --------- ------------- -------------
--------- --------- ------------- -------------
</TABLE>

The Company's effective income tax rate varied from the U.S. federal statutory
tax rate as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS YEAR
ENDED ENDED
--------------------------- JUNE 30, JUNE 30,
1996 1997 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. federal statutory tax rate......... (34.0%) (34.0%) (34.0%) (34.0%)
Change in tax rate resulting from:
State income taxes, net of federal
benefit............................. 1.2 (1.7) -- --
Foreign taxes......................... 0.5 (0.2) -- (1.7)
Nondeductible goodwill amortization... 0.3 0.1 0.2 0.2
Benefit of foreign sales
corporation......................... (1.1) -- -- --
Valuation allowance................... -- 32.1 29.8 35.5
Other................................. (1.2) 0.3 4.0 --
----- ----- ----- -----
Effective tax rate...................... (34.3%) (3.4%) (0.0%) (0.0%)
----- ----- ----- -----
----- ----- ----- -----
</TABLE>

45
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

12. SHAREHOLDERS' EQUITY

PREFERRED STOCK

SERIES A

On December 31, 1993, the Company issued 100,000 shares of Series A 7%
cumulative convertible nonvoting preferred stock for $500,000 ("Series A
Preferred"). Dividends on the Series A Preferred accrue quarterly and must be
paid before dividends can be declared and paid on the Company's Common Stock. In
the event of liquidation, the holders of the Series A Preferred will be entitled
to $5.00 per share plus unpaid dividends before any payments are made to the
holders of Common Stock. The Series A Preferred is convertible at the holder's
option into 200,000 shares of Common Stock. The Series A Preferred may be
redeemed by the Company at $5.00 per share beginning January 1, 1999 and ending
December 31, 2004. The Company has reserved 200,000 shares of Common Stock for
issuance upon the conversion of the Series A Preferred.

STOCK PURCHASE PLAN

In 1995, the Company adopted an Employee Stock Purchase Plan which allows
eligible employees to buy the Company's Common Stock at a 15% discount from
market price utilizing payroll deductions. A total of 100,000 shares have been
reserved for issuance under this Plan. During the years ended December 31, 1996,
1997, the six months ended June 30, 1998, and the year ended June 30, 1999,
11,123, 23,600, 8,690, and 12,907 shares of Common Stock were purchased by
employees under this Plan, respectively. As of June 30, 1999, 40,285 shares were
available for future sale under the Plan.

WARRANTS

At June 30, 1999, the Company had outstanding warrants entitling the holders
to purchase 300,000 common stock shares at $1.25 per share.

13. STOCK-BASED COMPENSATION

The Company adopted two stock option plans in 1994 that provide for the
grant of incentive and nonqualified stock options to the Company's employees,
officers, and directors. At June 30, 1999, the Company had 2,815,035 shares of
Common Stock reserved for issuance pursuant to these plans. Options generally
vest over a four-year period commencing one year from the date of grant.

Pro forma information regarding net loss per share is required by FASB
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method

46
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

13. STOCK-BASED COMPENSATION (CONTINUED)
of that Statement. The value for these options was estimated at the date of
grant using a Black-Scholes option-pricing model with the following weighted
average assumptions:

<TABLE>
<CAPTION>
1996 1997 1998 1999
--------- --------- --------- -----
<S> <C> <C> <C> <C>
Expected dividend yield................................ 0% 0% 0% %0
Expected stock price volatility........................ 48.5% 61.3% 64.9% 102.0%
Risk-free interest rate................................ 6.1% 6.1% 5.8% 6.0%
Expected life of options in years...................... 3.1 3.1 3.1 3.1
</TABLE>

<TABLE>
<CAPTION>
JUNE 30
DECEMBER 31, ---------------------- JUNE 30
1996 1997 1998 1999
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss--as reported...................... $ (5,490) $ (16,695) $ (11,773) $ (12,307)
Net loss--pro forma........................ $ (6,731) $ (17,586) $ (12,007) $ (12,806)

Diluted earnings per share--as reported.... $ (0.52) $ (1.51) $ (0.99) $ (0.92)
Diluted earnings per share--pro forma...... $ (0.64) $ (1.59) $ (1.01) $ (0.96)
</TABLE>

A summary of options granted and outstanding are as follows (in thousands
except per share amounts):

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
--------------- -----------------------
<S> <C> <C>
Balance at January 1, 1996 (exercisable 237)........... 1,855 $ 6.32
Granted.............................................. 278 $ 13.43
Exercised............................................ (231) $ 4.80
Forfeited/Canceled................................... (222) $ 9.94
-----

Balance at December 31, 1996 (exercisable 801)......... 1,680 $ 7.21
Granted.............................................. 492 $ 5.74
Exercised............................................ (98) $ 3.17
Forfeited/Canceled................................... (566) $ 10.19
-----

Balance at December 31, 1997 (exercisable 904)......... 1,508 $ 5.29
Granted.............................................. 571 $ 1.98
Exercised............................................ --
Forfeited/Canceled................................... (202) $ 4.82
-----

Balance at June 30, 1998 (exercisable 1,081)........... 1,877 $ 4.34
Granted.............................................. 124 $ 0.67
Exercised............................................ --
Forfeited/Canceled................................... (261) $ 4.51
-----

Balance at June 30, 1999 (exercisable 1,240)........... 1,740 $ 4.10
-----
-----
</TABLE>

47
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

13. STOCK-BASED COMPENSATION (CONTINUED)
The following table summarizes information concerning currently outstanding and
exercisable options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OUTSTANDING CONTRACTUAL EXERCISE NUMBER EXERCISABLE EXERCISE
EXERCISE PRICES (IN THOUSANDS) LIFE PRICE (IN THOUSANDS) PRICE
- --------------- ------------------- --------------- ------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
$ 0.50-$2.50 518 8.6 years $ 1.69 229 $ 1.87
$ 2.50-$4.50 485 5.8 years $ 3.28 382 $ 3.34
$ 4.50-$6.50 677 6.0 years $ 5.59 589 $ 5.47
$ 6.50-$17.50 60 6.5 years $ 14.63 40 $ 15.17
----- -----
1,740 6.8 years $ 4.10 1,240 $ 4.40
----- -----
----- -----
</TABLE>

14. COMMITMENTS AND CONTINGENCIES

LEASES

The Company is committed under noncancelable operating leases expiring at
various dates through 2003 for warehouse, manufacturing and office facilities.
The leases generally require that the payments of taxes, insurance and
maintenance are the responsibility of the Company.

At June 30, 1999, the Company's future minimum rental payments with respect
to capital leases, non-cancelable operating leases with terms in excess of one
year and related sublease receivables were as follows:

<TABLE>
<CAPTION>
RENTS
RECEIVABLE
CAPITAL OPERATING UNDER
YEARS ENDING JUNE 30, LEASES LEASES SUBLEASES
- ------------------------------------------------------------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
2000..................................................... $ 116 $ 1,300 $ 451
2001..................................................... 110 1,162 382
2002..................................................... 102 902 301
2003..................................................... 85 854 168
2004..................................................... -- 407 84
----- ----------- -----------
$ 413 $ 4,625 $ 1,386
----------- -----------
----------- -----------
Amount representing interest................................. (63)
-----
$ 350
-----
</TABLE>

Rent expense, net of sublease income, for the years ended December 31, 1996,
1997, the six month period ended June 30, 1998, and for the year ended June 30,
1999 was approximately $1,042,000, $1,053,000, and $401,000, and $807,000
respectively.

48
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CLASS ACTION LAWSUIT

In August 1998, the Company, together with the individually named
defendants, entered into a Memorandum of Understanding with the plaintiffs in
the lawsuit filed by certain current and/or former shareholders of the Company
styled MURRAY V. RIDE, INC., ET AL., wherein the parties have settled the
lawsuit upon the following principal terms: (1) the creation of a settlement
fund consisting of: (a) $3,000,000 cash paid by the Company's insurance carrier;
and (b) warrants to purchase 600,000 shares of the Company's Common Stock,
exercisable for a four year period ending December 31, 2002 at a price of $3.00
per share resulting in an expense of approximately $384,000; and (2) the
dismissal of the lawsuit against all named defendants with prejudice. A Final
Judgment and Order of Dismissal incorporating the terms of settlement was
entered on March 8, 1999.

From time to time, the Company is subject to various other pending and
threatened legal actions that arise in the normal course of business. In the
opinion of management, liabilities arising from these claims will not have a
material effect on the financial position of the Company. In addition, as of
June 30, 1999, Ride was overdue in the payment of approximately $5.0 million of
accounts payable to providers of goods and services, some of whom have commenced
or threatened lawsuits to collect the amounts owing.

15. EMPLOYEE BENEFIT PLANS

Beginning January 1996, the Company provided a 401(k) plan covering
substantially all of its U.S. employees. Under this plan, participating
employees may defer up to 15% of their pre-tax earnings, subject to certain
Internal Revenue Service limitations. The Company provides matching
contributions which vest 20% annually over a five year period equal to 25% of
each employee's contribution. The Company's 1996, 1997, and 1998 matching
contributions for this plan were approximately $31,000, $39,000, and $21,000
respectively. Contributions for the period ending June 30, 1999 were $53,000.

16. CONCENTRATION OF CREDIT RISK AND GEOGRAPHICAL INFORMATION

The Company sells its products to customers predominantly located throughout
North America, Japan and Europe. The concentrations of credit risk with respect
to trade receivables are considered minimal due to the Company's ongoing credit
evaluations of its customers. Based on the Company's assessment of credit risk,
sales in the United States and Canada are made on open credit, C.O.D., cash in
advance, or by postdated check. International sales are generally made on a cash
in advance or letter of credit basis. In 1996, sales to the Company's principal
Japanese distributor accounted for approximately 17% of net sales. In 1996,
sales to another of the Company's Japanese distributors accounted for 12%. No
one customer accounted for more than 10% of revenues in 1997, 1998 or 1999.

49
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

16. CONCENTRATION OF CREDIT RISK AND GEOGRAPHICAL INFORMATION (CONTINUED)
Worldwide sales of the Company's products were (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
-------------------- ----------- ---------
1996 1997 1998 1999
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
North America...................................... $ 41,016 $ 24,907 $ 5,976 $ 30,918
Japan.............................................. 28,470 7,989 821 5,288
Europe and other................................... 6,242 3,579 482 3,506
--------- --------- ----------- ---------
$ 75,728 $ 36,475 $ 7,279 $ 39,712
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>

17. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, YEAR ENDED
--------------------- SIX MONTHS JUNE 30,
1996 1997 ENDED 1998 1999
--------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Numerator:
Net loss......................................................... $ (5,490) $ (16,695) $ (11,773) $ (12,307)
Preferred stock dividends........................................ (35) (70) (362) (90)
--------- ---------- ---------- ----------
Numerator for basic loss per share--income available to common
stockholders................................................... (5,525) (16,765) (12,135) (12,397)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
Denominator:
Denominator for basic loss per share--weighted average shares.... 10,614 11,128 12,261 13,390
Effect of dilutive securities: (1)
Employee stock options......................................... -- -- -- --
Convertible preferred stock.................................... -- -- -- --
--------- ---------- ---------- ----------
Dilutive potential common shares................................. -- -- -- --
--------- ---------- ---------- ----------
Denominator for diluted loss per share--adjusted weighted average
shares and assumed conversions................................. 10,614 11,128 12,261 13,390
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
Basic loss per share............................................. $ (0.52) $ (1.51) $ (0.99) $ (0.92)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
Diluted loss per share........................................... $ (0.52) $ (1.51) $ (0.99) $ (0.92)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>

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

(1) The effects of potential common securities are excluded from the diluted
calculation for 1996, 1997, 1998, and 1999 as their effects would be
antidilutive.

50
<PAGE>
RIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999

18. BUSINESS SEGMENTS

The Company reports operating results in two segments due to distinct
product differences. These two segments include the Company's hardgoods and
softgoods product lines. The hardgoods segment includes snowboards, snowboard
bindings, snowboard boots, wakeboards, and wakeboard boots. The softgoods
segment includes apparel and accessories.

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------
JUNE 30, 1998 JUNE 30, 1999
----------------------------------- -----------------------------------
SOFTGOODS HARDGOODS TOTAL SOFTGOODS HARDGOODS TOTAL
----------- ----------- --------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers
USA...................................... 7,904 18,878 26,782 4,620 26,298 30,918
Foreign.................................. 2,260 7,153 9,413 447 8,347 8,794
----------- ----------- --------- ----- ----------- ---------
Total.................................... 10,164 26,031 36,195 5,067 34,645 39,712
Interest Expense........................... 48 481 529 44 1,085 1,129
Depreciation and amortization exp.......... -- 1,084 1,084 38 1,342 1,380
Segment loss............................... (3,129) (20,902) (24,031) (282) (12,025) (12,307)
Segment assets............................. 6,606 27,997 34,603 2,570 24,840 27,410
Expenditures for long-lived assets......... 9 912 921 43 1,338 1,381
</TABLE>

The SMP apparel and Smiley Hats subsidiaries are stand-alone units and make
up in excess of 50% of the Softgoods segment. The remaining softgoods revenues
are comprised of the Ride softgoods lines which are sold through the traditional
hardgoods distribution units, namely Ride Snowboards and Ride Canada. The sales
for this remaining portion are specifically calculated. Expenses and assets for
the Softgoods segments of Ride Snowboards and Ride Canada are allocated based on
sales. The operating assets of the SMP subsidiary were sold on November 2, 1998.
This accounts for most of the decrease in the Softgoods segment revenues for the
year ended June 30, 1999.

Plant and equipment, goodwill and other long-lived assets of $11.4 million
represent $11.1 million located in the United States, the Company's country of
domicile, and $0.3 million located in Canada.

19. SUBSEQUENT EVENT

The Company has entered into an Amended and Restated Agreement and Plan of
Merger, dated as of July 22, 1999, with K2, Inc. ("K2") and KT Acquisition, Inc.
("KT") pursuant to which the Company will merge with KT and become a
wholly-owned subsidiary to K2. To be effective, the merger agreement must, among
other conditions, be approved by two-thirds of the shares entitled to vote at a
meeting of shareholders called for that purpose on October 4, 1999. In
connection with the merger transaction, the Company has obtained interim
financing in the amount of $2.0 million from K2. The loan obligation is
evidenced by a convertible promissory note, dated July 22, 1999, which bears
interest at the rate of 8% per annum, increasing by 1 per annum at the end of
each 180-day period after the date of the note if any portion of principal or
interest owing under the note then remains outstanding up to a maximum interest
rate of 18% per annum.

52
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

On August 9, 1999, Ride, Inc. (the "Company") retained Grant Thornton LLP
("New Auditors") as its new independent auditor. During the preceding two years
in the period ended December 31, 1997 and the six months ended June 30, 1998,
and through the date of this report, the Company has not consulted the New
Auditors on any matter of accounting principles or practices, financial
statement disclosure, or auditing, scope or procedure. The New Auditors replaced
Ernst & Young LLP ("Former Auditors") who resigned as the Company's independent
auditors on May 21, 1999. During the preceding two years in the period ended
December 31, 1997 and the six months ended June 30, 1998, and through the date
of this report, there were no disagreements with the Former Auditors on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement if not resolved to the
satisfaction of the Former Auditors would have caused them to make reference
thereto in their report on the financial statements for such periods.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The Directors of the Registrant are as follows:

Cory J. Hechler, age 34, has served as a director of the Company since
December 1993. Mr. Hechler joined Bear Stern Securities, Inc., an investment
banking firm, in January 1986 and has been a Senior Managing Director since
September 1993. Mr. Hechler received his B.A. degree from the State University
of New York at Oneonta.

Robert F. Marcovitch, age 42, was elected as a director of the Company on
June 16, 1998 to fill the vacancy created by the resignation of Robert E. Hall.
Mr. Marcovitch was also appointed to serve as the Company's President and Chief
Executive Officer. Prior to that time, Mr. Marcovitch served as Sr. Vice
President of the Company's Apparel and International divisions since October
1996. Before that he was employed by C.A.S. Sports International, Inc., a
Canadian-based former subsidiary of the Company, where he served as President
from August 1994 through October 1996. From December 1992 to August 1994, Mr.
Marcovitch was Director of Apparel for Nike Canada, where he was responsible for
all of Nike's non-footwear business in Canada. From 1989 to 1992, Mr. Marcovitch
was Strategic Account Manager of Nike Canada's apparel division. Mr. Marcovitch
attended Concordia University in Montreal.

Mark M. Salter, age 39, has been a director of the Company since April 1993,
and served as Vice Chairman of the Board from November 1993 to December 1995. He
also served as the Company's Director of Investor Relations from October 1994
until September 1995. Mr. Salter has been the Director of fixed Income
Securities for Amherst Securities Group, Inc., a Houston-based securities
broker-dealer, since October 1995. Mr. Salter received his B.A. degree from York
University in Toronto.

Robin "Bob" Hernreich, age 53, has been a director of the Company since
November 1998. Bob is past Chairman of USRAC and Sigma Broadcasting. He
currently serves as Chairman of the Board of Directors of the Colorado State
Parks and Outdorr Recreation

The Executive Officers of the Registrant who are not also Directors are as
follows:

Gregory S. Cook, 51, joined the Company in March 1996 as Chief Financial
Officer and Chief Operating Officer for the Company's C.A.S. Sports
International subsidiary. In October 1996, Mr. Cook was appointed President of
the Company's Ride Canada subsidiary, a position he served until his appointment
as the Company's Chief Operating Officer in June 1998. Mr. Cook served as
President of Head/Tyrollia Sports Canada from 1985 until his departure in 1996
to join the Company. Mr. Cook is a

53
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (CONTINUED)
Certified Management Accountant and holds a degree in Business Administration
and Accounting from Mohawk College in Hamilton, Ontario.

David H. Davis, 40, joined the Company as Secretary and General Counsel in
September 1996. Prior to that he served as Corporate Counsel and Assistant
Secretary of Egghead, Inc., a reseller of computer software, hardware and
peripherals, where he was employed from September 1994 through August 1996. Mr.
Davis earned his BA degree from Whitman College and his JD from the University
of Oregon.

Scott C. Mavis, 31, joined the Company in March 1993 as its Customer
Services Manager. Mr. Mavis worked his way through the organization, performing
duties as an Assistant Product Manager, an Inventory Trafficking Manager and
International Sales Coordinator, before being appointed to Managing Director of
European Sales, a position he held until being promoted to the Company's Vice
President of Marketing in June 1998. Mr. Mavis graduated from the University of
Vermont with a BS in Business Administration with a focus on International
Marketing.

Former executive officer Robert E. Hall, age 59, joined the Company in
August 1996 as Chief Executive Officer and President, was appointed to the Board
of Directors in September 1996, and resigned as a director and employee of the
Company in June 1998.

Former executive officer Bruce Manke, age 63, joined the Company in
September 1996 as Senior Vice President of Winter Sports and Administration and
resigned his position in June 1998.

Former executive officer G. Scott Stewart, 37, served as the Company's Vice
President from April 1995 until September 1996, when he was appointed Senior
Vice President of Finance, a position he held until his resignation in August
1998.

Former officer Mark Brasier, age 36, joined the Company in June 1995 as Vice
President of Sales for the Company's C.A.S. Sports International subsidiary, was
appointed the Company's Vice President of Sales in June 1998 and resigned as an
employee of the Company in September 1999.

ITEM 11. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

The following table sets forth annual and long-term compensation for
services rendered during the year ended June, 30, 1999, the six months ended
June 30, 1998 and the years ended December 31, 1997, and 1996 by the Named
Executive Officers.

54
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION. (CONTINUED)
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------------- --------- --------- ----------- ----------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Marcovitch(1) 1999 225,000 0 7,200 15,000 0
President and Chief 1998 100,000 0 913 27,500 0
Executive Officer 1997 200,000 0 1,957 7,500 0
1996 200,000 0 1,957 0 0

G. Scott Stewart(2) 1999 20,000 0 1,000 0 0
Former Vice President, 1998 60,000 0 4,150 27,500 0
Chief Financial Officer 1997 110,000 0 4,550 7,500 0
and Treasurer 1996 100,000 10,000 1,479 0 0

Gregory S. Cook(3) 1999 140,000 0 7,947 10,000 0
Chief Operating Officer 1998 50,000 0 4,000 14,500 0
1997 100,000 0 8,571 12,500 0
1996 79,167 4,166 6,884 0 0

David H. Davis(4) 1999 110,000 0 2,538 5,000 0
Secretary and General Counsel 1998 55,000 0 1,375 14,500 0
1997 103,332 0 2,375 12,500 0
1996 33,334 0 792 10,000 0

Mark Brasier(5) 1999 150,000 0 3,600 8,000 0
Vice President, Sales 1998 75,000 0 5,986 14,500 0
1997 150,000 0 5,507 17,500 0
1996 150,000 6,250 2,750 0 0

Scott Mavis(6) 1999 83,333 0 1,935 8,000 0
Vice President, Marketing 1998 25,000 0 625 8,500 0
1997 50,000 0 1,250 4,500 0
1996 50,000 2,083 1,250 0 0
</TABLE>

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

(1) The amount shown for other annual compensation for Mr. Marcovitch represents
contributions by the Company to the Company's Retirement Savings Plan on
behalf of Mr. Marcovitch. The amount shown for other annual compensation
represents an automobile allowance.

(2) Mr. Stewart joined the Company in April 1995 and resigned his position in
August 1998; the salary shown for 1995 is for a partial year's employment.
The amount shown for other annual compensation represents contributions by
the Company to the Company's 401(k) savings plan on behalf of Mr. Stewart
and an automobile allowance in 1997 and 1998.

(3) Mr. Cook joined the Company in March 1996; the salary shown for that year is
for a partial year's employment. The amount shown for other annual
compensation represents contributions by the Company to the Company's
Retirement Savings Plan on behalf of Mr. Cook and an automobile allowance.

(4) Mr. Davis joined the Company in September 1996; the salary shown for that
year is for a partial year's employment. The amount shown for other annual
compensation represents contributions by the

55
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION. (CONTINUED)
Company to the Company's 401(k) savings plan on behalf of Mr. Davis. Stock
option grants for 1997 include the cancellation, repricing and reissuance of
10,000 options originally issued in 1996.

(5) Mr. Braiser joined the Company in June 1995; the salary shown for that year
is for a partial year's employment. The amount shown for other annual
compensation represents contributions by the Company to the Company's
Retirement Savings Plan on behalf of Mr. Brasier and an automobile
allowance.

(6) The amount shown for other annual compensation represents contributions by
the Company to the Company's 401(k) savings plan on behalf of Mr. Mavis.

56
<PAGE>
Option Grants in 1999

The following table provides information on option grants to the Named
Executive Officers in 1999.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS/ SARS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM(2)
OPTIONS/SARS FISCAL BASE PRICE EXPIRATION --------------------
GRANTED(#) YEAR(1) ($/SH) DATE 5% 10%
------------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Marcovitch................... 15,000 12.10% $ 0.625 2/8/2009 $ 5,896 $ 14,942
Greg Cook.............................. 10,000 8.06% $ 0.625 2/8/2009 $ 3,931 $ 9,961
David H. Davis......................... 5,000 4.03% $ 0.625 2/8/2009 $ 1,966 $ 4,981
Mark Braiser........................... 8,000 6.45% $ 0.625 2/8/2009 $ 31 $ 61
Girish Govind.......................... 5,000 4.03% $ 0.625 2/8/2009 $ 1,966 $ 4,981
Scott Mavis............................ 8,000 6.45% $ 0.625 2/8/2009 $ 3,145 $ 7,969
51,000
</TABLE>

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

(1) Based on an aggregate of 124,000 stock options granted to employees during
the year ended June 30, 1999.

(2) Potential realizable value is based on an assumption that the value of the
Common Stock appreciates at the annual rate shown (compounded annually) from
the date of grant until the end of the option term. This formula is
calculated based on SEC requirements and does not reflect the Company's
estimate of future stock price growth.

The Company's Stock Option Plan is administered by the Compensation
Committee of the Board of Directors, which consists of Messrs. Hechler, and
Salter. The Compensation Committee determines to whom options are granted, the
number of shares subject to each option, the vesting schedule and the exercise
price. The exercise price may not be less than the fair market value of the
Common Stock on the date of grant. Options generally vest over four years and
have a duration of ten years from the date of grant. The exercise price may be
paid in cash, by delivering shares of Common Stock already owned by the option
holder or by complying with any other payment mechanism approved by the plan
administrator. Subject to certain limitations, the Compensation Committee may
modify the terms of and reprice outstanding options.

57
<PAGE>
Option Exercises and Fiscal Year-End Option Values

The following table shows data relating to stock options exercised by the
Company's Named Executive Officers and unexercised options held by such persons
at June 30, 1999.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE- MONEY OPTIONS AT
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED FISCAL YEAR-END ($)
ON EXERCISE REALIZED OPTIONS AT FISCAL YEAR-END EXERCISABLE/
NAME (#) ($) (#) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------- --------------- ----------- ----------------------------- --------------------------
<S> <C> <C> <C> <C>
Robert F. Marcovitch........... -0- N/A 101,875 / 30,625 $1,799 / $600
Greg Cook...................... -0- N/A 20,375 / 16,625 $1,200 / $400
David H. Davis................. -0- N/A 19,125 / 12,875 $600 / $200
Mark Braiser................... -0- N/A 31,375 / 0 $960 / $0
Girish Govind.................. -0- N/A 14,125 / 12,875 $600 / $200
Scott Mavis.................... -0- N/A 21,875 / 9,125 $960 / $320
</TABLE>

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

(1) The amount shown is the aggregate number of shares of Common Stock that may
be purchased pursuant to the exercise of outstanding options, multiplied by
the difference between the closing price of the Common Stock reported on
Nasdaq National Market on September 23, 1999, $0.785, and the per share
exercise price of such options.

COMPENSATION OF DIRECTORS

Directors who are employees of the Company are not compensated for service
as directors. Non-employee directors of the Company receive $1,000 per board
meeting attended in person. The Company also reimburses each director for
reasonable expenses incurred in attending meetings of the Board of Directors. In
addition, in June 1998 the Directors approved, subject to shareholder approval,
a Non-Employee Directors' Nonqualified Stock Option Plan whereby upon election
or appointment to the Board of Directors, each non-employee director receives an
option under such Plan to purchase 5,000 shares of Common Stock. The option
vests and is exercisable on the earlier of one year from the date of grant or
the last business preceding the next following Annual Shareholders' Meeting.
Unvested and unexpired options terminate upon the first of the following events:
(i) ten years from the date of grant; (ii) the expiration of 90 days from the
date of an optionee's termination as a director for any reason other than death
or disability; or (iii) the expiration of one year from the date of death of an
optionee or cessation of the optionee's service as a director by reason of
disability.

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

PRINCIPAL SHAREHOLDERS OF RIDE

The following table sets forth information regarding the beneficial
ownership of Ride's common and preferred stock as of September 24, 1999 by each
person known by Ride to be the beneficial owner of more

58
<PAGE>
than five percent of Ride's common stock, by each director, by the four most
highly paid executive officers of Ride and the chief executive officer, and by
all directors and executive officers of Ride as a group.

<TABLE>
<CAPTION>
SERIES A
PREFERRED PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) COMMON STOCK STOCK OUTSTANDING
- -------------------------------------------------------------------- -------------- -------------- -----------
NUMBER OF SHARES
BENEFICIALLY OWNED
------------------------------
<S> <C> <C> <C>
James J. Salter(3) ................................................. 708,000 -- 4.96%
25 Vanley Crescent
North York, On M3J2B7
Mark M. Salter(4) .................................................. 1,027,318 200,000 7.20%
1900 W. Loop South, #550
Houston, TX 77027
Cory J. Hechler(5) ................................................. 419,000 -- 2.93%
c/o Ride, Inc.
8160 304th Avenue, Southeast
Preston, WA 98050
Roger B. Madison, Jr.(6) ........................................... 343,546 -- 2.41%
22229 NE 140th Way
Woodinville, WA 98072
Robin Hernreich .................................................... 6,510 -- *
Remenov & Co. Inc.
P.O. Box 1888
Edwards, CO 81632
Robert F. Marcovitch(7)............................................. 112,409 -- *
David H. Davis(8)................................................... 23,874 -- *
Gregory S. Cook(9).................................................. 20,375 -- *
Mark Brasier(10).................................................... 31,375 -- *
Girish Govind(11)................................................... 14,125 -- *
All directors and executive officers as a group (11 persons)........ 2,732,193 200,000 19.1%
</TABLE>

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

* Less than 1%.

(1) Except as otherwise noted in these footnotes, each of the persons named in
the table has sole voting and investment power with respect to the shares
shown beneficially owned by such person. As noted in these footnotes,
shares beneficially owned may include shares subject to options that are
exercisable on or before September 19, 1999.

(2) The address of each of the following owners, unless indicated otherwise, is
c/o Ride, Inc., 8160 304th Avenue, Southeast, Preston, WA 98050.

(3) Includes 120,000 shares issuable upon exercise of options awarded to James
Salter pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

(4) Mark Salter beneficially owns (1) 835,000 shares of common and 200,000
shares of preferred held by Salter Family Partners, Ltd., a limited
partnership of which Mark Salter and his wife are the sole general
partners, with shared voting and investment control; (2) 6,000 shares held
by Mark Salter as custodian for his three minor children, for which Mr.
Salter disclaims beneficial ownership; and (3) 50,000 shares in his own
name. Includes 136,318 shares issuable upon exercise of options awarded to
Mark Salter pursuant to Ride's stock option plans which are exercisable
within the next 60 days.

(5) Includes 80,000 shares issuable upon exercise of options awarded to Cory
Hechler pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

59
<PAGE>
(6) Includes 136,318 shares issuable upon exercise of options awarded to Roger
Madison pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

(7) Includes 101,875 shares issuable upon exercise of options awarded to Robert
Marcovitch pursuant to Ride's stock option plans which are exercisable in
the next 60 days.

(8) Includes 19,125 shares issuable upon exercise of options awarded to David
Davis pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

(9) Includes 20,375 shares issuable upon exercise of options awarded to Gregory
Cook pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

(10) Includes 31,375 shares issuable upon exercise of options awarded to Mark
Brasier pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

(11) Includes 14,125 shares issuable upon exercise of options awarded to Girish
Govind pursuant to Ride's stock option plans which are exercisable in the
next 60 days.

ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS.

None.

PART IV

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

(a) Documents filed as part of this report:

1. Financial Statements.

<TABLE>
<CAPTION>
FORM 10-K
PAGE NUMBER
<S> <C> <C>
A. Report of Grant Thornton LLP, Independent Auditors..........................
B. Report of Ernst & Young LLP, Independent Auditors...........................

C. Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998 and
June 30, 1999...............................................................

D. Consolidated Statements of Operations for the years ended December 31, 1996,
1997, the six months ended June 30, 1998, and the year ended June 30,
1999........................................................................

E. Consolidated Statements of Shareholders' Equity for the years ended December
31, 1996, 1997, the six months ended June 30, 1998, and the year ended June
30, 1999....................................................................

F. Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1997, the six months ended June 30, 1998 and the year ended June 30, 1999...

G. Notes to Consolidated Financial Statements..................................
</TABLE>

2. Financial Statement Schedules.

<TABLE>
<CAPTION>
FORM 10-K
PAGE NUMBER
<S> <C>
Schedule II--Valuation and Qualifying Accounts..................................

Financial statements and schedules not included herein have been omitted because
of the absence of conditions under which they are required or because the
required information, where material, is shown in the consolidated financial
statements or notes thereto.
</TABLE>

60
<PAGE>
3. Exhibits.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
3.1 Restated Articles of Incorporation and Certificate of Designation of Relative Rights and Preferences
of the Series A 7% Cumulative Nonvoting Preferred Stock(1)

3.2 Bylaws of the Company(1)

3.3 Articles of Amendment to Articles of Incorporation(9)

3.4 Articles of Amendment to Articles of Incorporation(11)

3.5 Articles of Correction(12)

3.6 Amendment to Certificate of Designation of Relative Rights and Preferences of the Series A 7%
Cumulative Nonvoting Preferred Stock(26)

3.7 Certificate of Designation of Relative Rights and Preferences of the Series B 5% Cumulative
Convertible Nonvoting Preferred Stock(27)

4.1 Article VI of the Articles of Incorporation regarding Shareholder Rights (See Exhibit 3.1)(1)

4.2 Article VIII of the Articles of Incorporation regarding Voting Rights (See Exhibit 3.1)(1)

4.3 Specimen Stock Certificate(2)

10.10 Exclusive Distributorship Agreement dated December 7, 1992, by and between Ride Snowboard Company and
Far East Trading Co., Ltd.(3)

10.24 Exchange Agreement dated December 31, 1993, between Ride Snowboard Company and Mark M. Salter(1)

10.25 Employment Agreement, dated August 18, 1994, by and between Ride Snowboard Company and James J.
Salter(4)

10.26 Form of Employment Agreement between Ride Snowboard Company and Roger B. Madison, Jr.(1)

10.27 Employment Agreement, dated January 1, 1995, by and between Ride Snowboard Company and Timothy G.
Pogue(7)

10.28 Form of Ride Snowboard Company 1994 Stock Option Plan(1)

10.29 Form of Ride Snowboard Company 1994 Directors' Nonqualified Stock Option Plan(1)

10.30 Lease Agreement with Teachers Insurance & Annuity Association dated January 10, 1994(1)

10.32 Amended Form of Underwriting Agreement(5)

10.34 Standard Form Multiple Occupancy Lease, dated November 29, 1994, by and between Ride Snowboard
Company and BDC Preston Properties One Limited Partnership(6)

10.35 Business Loan Agreement, dated June 30, 1997, by and between Ride, Inc. and U.S. Bank of Washington,
N.A.(25)

10.36 Stock Purchase Agreement, dated August 18, 1994, between Ride Snowboard Company and James J. Salter,
the James Salter Family Trust, Kenneth Finkelstein Family Trust, The Snow Trust, Robert Marcovitch,
Kerry Wasserman, Rick Clarfield, Howard Cohen, Gary Kell, Sandra Pelegrin, Alan Langer, Dan Opyc,
C.A.S. Sports International, Inc. and C.A.S. Sports Agency, Inc.(8)

10.45 Ride Snowboard Company 1995 Employee Stock Purchase Plan(9)

10.46 Ride Snowboard Company 1995 Foreign Subsidiary Employee Stock Purchase Plan(9)
</TABLE>

61
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.47* Exclusive OEM Agreement, dated July 26, 1995, by and between Ride Snowboard Company and Straight Line
Water Sports, Inc.(11)

10.48 Employment Agreement, dated September 1, 1995, between the Company and David A. Janes, Jr.(13)

10.49 Employment Agreement, dated September 1, 1995, between the Company and Bernard Gervasoni(13)

10.50 Employment Agreement, dated October 19, 1995, between the Company and David Milo Myers(14)

10.51 Registration Rights Agreement dated October 19, 1995, between the Company and David Milo Myers,
Lawrence Kraus and Michael Wise(14)

10.52 Stock Purchase Agreement, dated September 1, 1995, between the Company and the shareholders and
option holders of 5150 Snowboards, Inc. and Thermal Snowboards, Inc.(15)

10.53 Asset Purchase Agreement, dated October 19, 1995, among the Company, Sex Money Power Clothing, Inc.,
David Milo Myers, Lawrence Kraus and Michael Wise(16)

10.54 Form of Underwriting Agreement by and between the Company and Hambrecht & Quist LLC and Dain Bosworth
Incorporated(17)

10.55* Amendment No.1 to Exclusive Distributorship Agreement, dated October 24, 1995, by and between Ride
Snowboard Company, 5150 Snowboards, Inc., SMP Clothing, Inc. and Far East Trading Company Ltd.(18)

10.56 Employment Agreement, dated October 14, 1995, by and between the Company and Kenneth J.
Finkelstein(19)

10.57 Employment Agreement, dated January 1, 1996, by and between C.A.S. Sports International, Inc. and
Robert F. Marcovitch(19)

10.58 First Amendment, dated August 4, 1995, to Lease Agreement by and between Ride Snowboard Company and
BDC Preston Properties One Limited Partnership(19)

10.59 Second Amendment, dated November 21, 1995, to Lease Agreement by and between Ride Snowboard Company
and BDC Preston Properties One Limited Partnership(19)

10.60 Third Amendment, dated March 26, 1996, to Lease Agreement by and between Ride Snowboard Company and
BDC Preston Properties One Limited Partnership(19)

10.61 Amendment No. 2 to Exclusive Distributorship Agreement, dated March 1996, by and between Ride
Snowboard Company, SMP Clothing, Inc. and Far East Trading Company Ltd.(20)

10.63 Agreement, dated May 7, 1996, by and between Ride, Inc. and James J. Salter(21)

10.64 Agreement, dated August 2, 1996, by and between Ride, Inc. and Kenneth J. Finkelstein(21)

10.65 Agreement, dated August 7, 1996, by and between Ride, Inc. and Robert E. Hall(21)

10.66 Stock Purchase Agreement, dated October 11, 1996, by and between Ride, Inc. and Gen-X Equipment,
Inc.(22)

10.67 Amendment No. 1 to Resignation Agreement, dated October 11, 1996, by and between Ride, Inc. and James
J. Salter.(22)

10.68 Amendment No. 1 to Resignation Agreement, dated October 11, 1996, by and between Ride, Inc. and
Kenneth J. Finkelstein.(22)
</TABLE>

62
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.69 Resignation and Release Agreement, dated October 28, 1996, by and between Ride, Inc. and Timothy G.
Pogue(23)

10.70 Letter agreement, dated December 6, 1996, by and between Ride Inc. and Straight Line Water Sports,
Inc.(23)

10.71 Letter agreement, dated December 12, 1996, by and between Ride Inc. and Straight Line Water Sports,
Inc.(23)

10.72* Financial Advisory Agreement, dated January 15, 1997, by and between Ride, Inc. and Roger Madison,
Jr.(24)

10.73 Asset Purchase Agreement, dated July 15, 1997, by and between Ride, Inc. and Galena Creek Trading
Company, Inc. (dba Smiley Hats)(25)

10.74 Subscription Agreement, dated December 19, 1997 by and between Ride, Inc. and Advantage Fund II,
Ltd.(28)

10.75 Registration Rights Agreement, dated December 19, 1997 by and between Ride, Inc. and Advantage Fund
II, Ltd.(28)

10.76 Warrant Agreement, dated December 18, 1997 by and between Ride, Inc. and Rochon Capital Group,
Ltd.(28)

10.77 Placement Agency Agreement, dated December 18, 1997 by and between Ride, Inc. and Rochon Capital
Group, Ltd.(28)

10.78 Common Stock Purchase Warrant issued to Advantage Fund II, Ltd. dated December 19, 1997(28)

10.79 Common Stock Purchase Warrant issued to Rochon Capital Group, Ltd. dated December 19, 1997(29)

10.80 Loan and Security Agreement, dated August 31, 1998, by and between CIT Group/Credit Finance, Inc.,
Ride Snowboard Company, Ride Manufacturing, Inc., SMP Clothing, Inc., and Smiley Hats, Inc.

10.81 Consent, Reaffirmation and Release Agreement, dated August 31, 1998, by and between US Bank NA, Ride,
Inc., Carve, Inc., Preston Binding Company, Ride International, Inc., Ride Manufacturing, Inc.,
Ride Snowboard Company, Smiley Hats, Inc., and SMP Clothing, Inc.

10.82 Asset Purchase Agreement, dated as of November 2, 1998, by and between SMP Clothing PTY Ltd., SMP
[USA], Inc., Ride, Inc., and SMP Clothing, Inc.(32)

10.83 Intellectual Property Purchase Agreement, dated as of November 2, 1998, by and between SMP Clothing
[International] PTY Ltd., Ride, Inc. and SMP Clothing, Inc.(33)

10.84 Loan & Security Agreement, dated February 19, 1999, by and between Ride, Inc., Ride Snowboard
Company, Ride Manufacturing, Inc., Carve, Inc., Smiley Hats, Inc., Ride Canada, Inc., and Advantage
Fund II Ltd.(34)

10.85 Secured Subordinated Promissory Note, dated February 19, 1999, made by Ride, Inc. to the order of
Advantage Fund II Ltd.(35)

10.86 Warrant to Purchase Shares of Ride, Inc. Common Stock, dated February 19, 1999, issued by Ride, Inc.
to Advantage Fund II Ltd.(36)

10.87 Amendment to Warrant to Purchase Shares of Ride, Inc. Common Stock, dated February 19, 1999, issued
by Ride, Inc. to Advantage Fund II Ltd.(37)
</TABLE>

63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.88 Registration Rights Agreement, dated February 19, 1999, by and between Ride, Inc. and Advantage Fund
II Ltd.(38)

16.1 Letter of Resignation of Ernst & Young LLP, dated May 21, 1999(40)

21.1 Schedule of Subsidiaries of Ride, Inc.

23.1 Consent of Grant Thornton LLP, Independent Auditors

23.2 Consent of Ernst & Young LLP, Independent Auditors

27.1 Financial Data Schedule
</TABLE>

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

(1) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Registration Statement on Form SB-2, file no. 33-75770-LA.

(2) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Amendment No. 1 to Registration Statement on Form SB-2, file
no. 33-75770-LA.

(3) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Registration Statement on Form SB-2, file no. 33-75770-LA,
with confidential portions omitted and filed separately with the Commission
pursuant to a Request of Confidential Treatment under Rule 406 of the
Securities Act of 1933.

(4) Exhibit is incorporated by reference to Exhibit No. 10.1 to the Company's
Current Report on Form 8-K, dated August 31, 1994.

(5) Exhibit is incorporated by reference to Exhibit No. 1.1A to the Company's
Amendment No. 1 to Registration Statement on Form SB-2, file no.
33-75770-LA.

(6) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994.

(7) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Post-Effective Amendment No. 1 to the Registration Statement
on Form SB-2, file no. 33-75770-LA.

(8) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Post-Effective Amendment No. 2 to the Registration Statement
on Form SB-2, file no. 33-75770-LA.

(9) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Registration Statement on Form S-1, file no. 33-94814.

(10) Exhibit is incorporated by reference to an identically numbered exhibit to
Amendment No. 1 to the Company's Registration Statement on Form S-1, file
no. 33-94814.

(11) Exhibit is incorporated by reference to an identically numbered exhibit to
Amendment No. 1 to the Company's Registration Statement on Form S-1, file
no. 33-94814, with confidential portions omitted and filed separately with
the Commission pursuant to a Request of Confidential Treatment under Rule
406 of the Securities Act of 1933.

(12) Exhibit is incorporated by reference to an identically numbered exhibit to
Amendment No. 2 to the Company's Registration Statement on Form S-1, file
no. 33-94814.

(13) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Current Report on Form 8-K, dated September 1, 1995.

(14) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Current Report on Form 8-K, dated October 20, 1995.

64
<PAGE>
(15) Exhibit is incorporated by reference to Exhibit No. 2.1 to the Company's
Current Report on Form 8-K, dated September 1, 1995.

(16) Exhibit is incorporated by reference to Exhibit No. 2.2 to the Company's
Current Report on Form 8-K, dated October 20, 1995.

(17) Exhibit is incorporated by reference to Exhibit No. 1.1 to the Company's
Registration Statement on Form S-1, file no. 33-94814.

(18) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q, for the fiscal quarter ended
September 30, 1995.

(19) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.

(20) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996.

(21) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1996.

(22) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Current Report on Form 8-K, dated October 11, 1996.

(23) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.

(24) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997.

(25) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.

(26) Exhibit is incorporated by reference to exhibit 4.6 to the Company's
Current Report on Form 8-K, dated January 8, 1998.

(27) Exhibit is incorporated by reference to exhibit 4.5 to the Company's
Current Report on Form 8-K, dated January 8, 1998.

(28) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Current Report on Form 8-K, dated January 8, 1998.

(29) Exhibit is incorporated by reference to exhibit 4.4 to the Company's
Current Report on Form 8-K, dated January 8, 1998.

(30) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1998.

(31) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1998.

(32) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998.

(33) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998.

(34) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999.

65
<PAGE>
(35) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999.

(36) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999.

(37) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999.

(38) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999.

(39) Exhibit is incorporated by reference to Appendix A to the Prospectus/Proxy
Statement filed by K2, Inc. with the Securities and Exchange Commission
under Rule 424(b)3 on August 18, 1999.

(40) Exhibit is incorporated by reference to Appendix D to the Prospectus/Proxy
Statement filed by K2, Inc. with the Securities and Exchange Commission
under Rule 424(b)3 on August 18, 1999.

(41) Exhibit is incorporated by reference to Appendix C to the Prospectus/Proxy
Statement filed by K2, Inc. with the Securities and Exchange Commission
under Rule 424(b)3 on August 18, 1999.

(42) Exhibit is incorporated by reference to Exhibit 10 to the Form S-4 filed by
K2, Inc. with the Securities and Exchange Commission on August 9, 1999.

(43) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Current Report on Form 8-K, dated May 28, 1999.

* Certain portions of this exhibit have been omitted and filed separately with
the Commission pursuant to an Application for Confidential Treatment.

(b) Reports on Form 8-K

The Company filed two reports on Form 8-K, dated May 28, 1999 and August 13,
1999, respectively, related to the resignation of Ernst & Young LLP and the
retaining of Grant Thornton LLP as the Company's independent auditors.

66
<PAGE>
SIGNATURES

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

RIDE, INC.
(REGISTRANT)

/s/ ROBERT F. MARCOVITCH
-----------------------------------------
Robert f. Marcovitch
CHIEF EXECUTIVE OFFICER AND PRESIDENT
DATE: September 28, 1998

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

<TABLE>
<C> <S> <C>
Chief Executive Officer,
/s/ ROBERT F. MARCOVITCH President and Director Date: September 28,
- ------------------------------ (Principal Executive 1999
Robert F. Marcovitch Officer)

Vice President and Chief
/s/ GREG COOK Operating Officer Date: September 28,
- ------------------------------ (Principal Financial and 1999
Greg Cook Accounting Officer)

/s/ MARK M. SALTER
- ------------------------------ Director Date: September 28,
Mark M. Salter 1999

/s/ CORY J. HECHLER
- ------------------------------ Director Date: September 28,
Cory J. Hechler 1999

/s/ ROBIN HERNREICH
- ------------------------------ Director Date: September 28,
Robin Hernreich 1999
</TABLE>

67
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
MANUAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------- ------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of July 22, 1999, among K2,
Inc., Ride, Inc. and KT Acquisition, Inc.(39)

3.8 Certificate of Designations of Series C Cumulative Convertible Preferred Stock of Ride,
Inc., dated July 22, 1999(40)

10.82 Asset Purchase Agreement, dated as of November 2, 1998, by and between SMP Clothing PTY
Ltd., SMP [USA], Inc., Ride, Inc., and SMP Clothing, Inc.(32)

10.83 Intellectual Property Purchase Agreement, dated as of November 2, 1998, by and between SMP
Clothing [International] PTY Ltd., Ride, Inc. and SMP Clothing, Inc.(33)

10.84 Loan & Security Agreement, dated February 19, 1999, by and between Ride, Inc., Ride
Snowboard Company, Ride Manufacturing, Inc., Carve, Inc., Smiley Hats, Inc., Ride Canada,
Inc., and Advantage Fund II Ltd.(34)

10.85 Secured Subordinated Promissory Note, dated February 19, 1999, made by Ride, Inc. to the
order of Advantage Fund II Ltd.(35)

10.86 Warrant to Purchase Shares of Ride, Inc. Common Stock, dated February 19, 1999, issued by
Ride, Inc. to Advantage Fund II Ltd.(36)

10.87 Amendment to Warrant to Purchase Shares of Ride, Inc. Common Stock, dated February 19,
1999, issued by Ride, Inc. to Advantage Fund II Ltd.(37)

10.88 Registration Rights Agreement, dated February 19, 1999, by and between Ride, Inc. and
Advantage Fund II Ltd.(38)

10.89 Convertible Promissory Note issued by Ride, Inc. to K2, Inc., dated July 22, 1999(41)

10.90 Bindings and Approved Agreement, dated as of July 22, 1999, by and between Ride, Inc. and
K2, Inc.(42)

16.1 Letter of Resignation of Ernst & Young LLP, dated May 21, 1999(40)

21.1 Schedule of Subsidiaries

23.1 Consent of Grant Thornton LLP, Independent Auditors

23.2 Consent of Ernst & Young LLP, Independent Auditors

27.1 Financial Data Schedule
</TABLE>

68
<PAGE>
RIDE, INC.

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

COL. A COL. B COL. C COL. D COL. E

<TABLE>
<CAPTION>
ADDITIONS
--------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ------------------------------------------------ ----------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1999
Reserves and allowances deducted from asset
accounts
Allowance for bad debts..................... $ 981 $ 1,496 $ 623(2) $ 1,854
Inventory reserves.......................... $ 1,447 $ 1,151 $ 1,248(3) $ 1,350

SIX MONTHS ENDED JUNE 30, 1998
Reserves and allowances deducted from asset
accounts
Allowance for bad debts..................... $ 925 $ 735 $ 679(2) $ 981
Inventory reserves.......................... $ 2,039 $ 859 $ 1,451(3) $ 1,447

YEAR ENDED DECEMBER 31, 1997
Reserves and allowances deducted from asset
accounts
Allowance for bad debts..................... $ 655 $ 361 $ 109(1) $ 200(2) $ 925
Inventory reserves.......................... $ 5,916 $ 42(1) $ 3,919(3) $ 2,039

YEAR ENDED DECEMBER 31, 1996
Reserves and allowances deducted from asset
accounts
Allowance for bad debts..................... $ 359 $ 495 $ 199(2) $ 655
Inventory reserves.......................... $ 100 $ 6,500 $ 684(3) $ 5,916
</TABLE>

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

(1) Amounts acquired in purchase acquisitions.

(2) Uncollectible accounts written off, net of recoveries.

(3) Cost of goods sold in excess of net realized value and obsolete inventories
written off, net of recoveries.

<PAGE>

EXHIBIT 21.1

Subsidiary List
as of September 24, 1999

The following sets forth the wholly-owned subsidiary corporations of Ride,
Inc. (a Washington corporation):

1. Ride Manufacturing, Inc. (a California corporation)

2. SMP Clothing, Inc. (a Washington corporation)

3. Ride Snowboard Company (a Washington corporation)

(a) Preston Binding Company (a Washington corporation) (a
subsidiary of Ride Snowboard Company)

4. Ride Canada, Inc. (an Ontario corporation)

5. Ride International, Inc. (a Barbados corporation)

6. Smiley Hats, Inc. (a Nevada corporation)

7. Carve, Inc. (a Washington corporation)

<PAGE>
EXHIBIT 23.1

CONSENT OF GRANT THORNTON LLP, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated September 27, 1999, accompanying the
consolidated financial statements and schedule included in the Annual Report of
Ride, Inc. and Subsidiaries on Form 10-K for the year ended June 30, 1999. We
hereby consent to the incorporation by reference of said reports in the
Registration Statement (Form S-8 No. 33-92034) pertaining to the Ride Snowboard
Company 1994 Stock Option Plan and Ride Snowboard Company 1994 Directors
Nonqualified Stock Option Plan and in the Registration Statement (Form S-8 No.
33-81029) pertaining to Ride, Inc. 1995 Employee Stock Purchase Plan and Ride,
Inc. foreign Subsidiary 1995 Employee Stock Purchase Plan, and in Amendment No.
3 to the Registration Statement (Form S-3 No. 333-44637).

GRANT THORNTON LLP

Seattle, Washington
September 27, 1999

<PAGE>
EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-92034) pertaining to the Ride Snowboard Company 1994 Stock
Option Plan and Ride Snowboard Company 1994 Directors Nonqualified Stock Option
Plan, the Registration Statement (Form S-8 No. 33-81029) pertaining to the Ride,
Inc. 1995 Employee Stock Purchase Plan and Ride, Inc. foreign Subsidiary 1995
Employee Stock Purchase Plan, and in Amendment No. 3 to the Registration
Statement (Form S-3 No. 333-44637) pertaining to the registration of 2,608,729
shares of its common stock, of our report dated September 11, 1998, with respect
to the consolidated financial statements and schedule of Ride, Inc. included in
its Annual Report (Form 10-K) for the year ended June 30, 1999 filed with the
Securities and Exchange Commission.

ERNST & YOUNG LLP

Seattle, Washington
September 27, 1999

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 6,686
<ALLOWANCES> 1,854
<INVENTORY> 9,159
<CURRENT-ASSETS> 14,351
<PP&E> 5,756
<DEPRECIATION> 1,380
<TOTAL-ASSETS> 27,410
<CURRENT-LIABILITIES> 21,254
<BONDS> 0
0
500
<COMMON> 44,129
<OTHER-SE> (39,183)
<TOTAL-LIABILITY-AND-EQUITY> 27,410
<SALES> 39,712
<TOTAL-REVENUES> 39,712
<CGS> 31,680
<TOTAL-COSTS> 31,680
<OTHER-EXPENSES> 19,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,129
<INCOME-PRETAX> (12,307)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,307)
<EPS-BASIC> (0.93)
<EPS-DILUTED> (0.93)

</TABLE>