According to Sporting Goods Intelligence, the combined worldwide market for athletic footwear and apparel generated approximately $57.7 billion in wholesale revenue in 2001. The athletic footwear market comprised $16.2 billion of wholesale sales in 2001, which were relatively concentrated with Nike, Reebok and adidas generating approximately 58% of total wholesale sales. The athletic apparel market comprised $41.5 billion in wholesale sales in 2001 with market share highly fragmented among many athletic and apparel brands. The athletic footwear and apparel industry is characterized by rapidly changing consumer preferences and purchasing patterns. Market share gains in the wholesale industry have historically been driven by the ability to build brand recognition and loyalty, offer innovative products and conduct successful marketing campaigns, including athlete endorsements and celebrity product usage. Retailers are increasingly focused on suppliers capable of delivering products quickly to meet changing consumer preferences.

It is believed the U.S. market is important, not only because it is the largest footwear market in the world, with $7.6 billion in wholesale sales in 2001, but also because brand strength in the U.S. market drives global demand for these products. The four largest product categories in the U.S. athletic footwear market in 2001 were: running (27%), basketball (18%), sports casual (16%) and cross-training (14%). Basketball and sports casual product categories are increasing as a percent of the total market at the expense of the running and cross-training categories. Currently, the U.S. market is experiencing resurgence in the popularity of "retro" models and modernized classic footwear models as well as an increased demand for moderately priced footwear. According to the NPD Group, a market data provider, basketball was the fastest growing major U.S. athletic footwear category in dollar volume during the 12 months ended September 30, 2002, while average retail prices for basketball footwear products declined from $56.95 to $52.91. Another key market trend is the strong demand from specialty athletic footwear retailers for new high growth brands to reduce their dependence on the top three brands. Athletic footwear is sold through many channels, including athletic specialty, sporting goods, specialty, department and national chain stores.

The Company’s sports classics category is the most established of its product categories and includes heritage products such as the All Star(R), the Jack Purcell(R) and the One Star(R), which have been selling for over 85, 65 and 25 years, respectively. This category also includes other revivals of shoes previously worn by sports champions. These products have a rich heritage, a strong association with sports legends and are readily identifiable by consumers.

Over the last century, the Company’s high performance athletic shoes have been the choice of many world-class athletes and champions in most major professional sports. The Company plans to reestablish its position as a leading multi-category performance sports supplier by introducing sports performance products in several categories, including basketball, cross training, running, walking and tennis. The Company offers a collection of sports performance basketball shoes, including the Aggressor and Overtime models launched in the Fall of 2002. These new models, as well as the Pro Leather and the Weapon(TM), are being worn by NBA players.

The Company pioneered the sports lifestyle category with the introduction of the A Train in Spring 1997. The category includes products that are multipurpose, for use in sports or as casual wear, and are designed to appeal to trend conscious consumers seeking stylish alternatives to traditional athletic footwear. The Company is planning to expand the number of footwear products offered in this category in 2003, including the launch of two new collections. The first targets the young urban market and features designs inspired by the Company’s successful A Train and Cynch products. The second is aimed at the suburban mall consumer and seeks to emulate the wide acceptance of the Company’s EV Pro(TM) collection.

The Company offers a selection of footwear for women and children, comprised of modified versions from its three footwear product categories. Only 15% of the Company’s styles are currently targeted toward women. The Company is in the process of building a dedicated women's design team and are planning to roll out an expanded women's footwear collection for Fall 2003. Children's footwear provides a similar opportunity. The Company has hired dedicated designers and plans to introduce a full line of children's footwear for 2004, including children's sizes of selected popular adult models as well as models designed exclusively for children.

For the three-month period ended March 31, 2003, licensing revenue increased to $8.9 million from $5.5 million for the three-month period ended March 31, 2002, an increase of 62%.

For the three-month period ended March 31, 2003, selling, general and administrative expenses increased to $15.6 million or 23.3% of net revenue, compared to $10.8 million or 21.9% of net revenue, for the three-month period ended March 31, 2002.

For the three-month period ended March 31, 2003, interest expenses increased 144% to $0.5 million compared to $0.2 million for the three-month period ended March 31, 2002.

For the three-month period ended March 31, 2003 net income available to common stockholders increased to $7.4 million from $4.6 million for the three-month period ended March 31, 2002.