APPENDIX B

The Conference Call Script

FINAL - 1

X SPORTS USA INC.

THIRD QUARTER 2003

CONFERENCE CALL SCRIPT

Thank you, Brian.

Good afternoon and thank you for joining us today to review X SPORTS third quarter

and nine month 2003 results. This is Taylor Mac, CEO of X Sports and as always,

we will open the call to questions after my prepared comments.

Third quarter sales were $221.8 million compared to $261.1 million in the third

quarter of 2002. Sales were higher than we expected when we gave guidance on July

24, 2003, mainly due to our aggressive approach to reduce our inventory levels. As

we anticipated, this approach to reducing our inventory resulted in lower gross margins

and earnings for the third quarter. Our net loss was $5.9 million or $0.15 per

share.

In the third quarter, we received positive sell-through data at retail from our

larger wholesale customers for the back-to-school season, but we did not experience

significant re-order business, and what we did receive was largely close-out merchandise

rather than in-line merchandise. We believe the trend toward less reorder

business was in part due to retailers having a more conservative approach to inventory

planning as well as a recent tendency among some accounts to better plan our

brand, as X SPORTS is becoming a more mature and stable business. We believe that

our product was, and continues to be, fashion right and in demand by consumers,

and that we will continue to be a basic and important part of our accounts’ inventory

plan. We will continue to focus on our product to ensure that it is on target.

On our second quarter conference call, we stated we were going to be aggressive

in our approach to move excess levels of inventory during the back half of the year.

We believed, and continue to believe, it was, and still is, prudent to assertively work

through our inventory to achieve our year-end goal. We are pleased that we made

significant strides in our inventory, reducing it by $66.4 million or almost 31% from

second quarter 2003 levels, which resulted in an increase in cash of $39.2 million to

$80.7 million and a decrease in accounts payable of $71 million to $56 million. We

believe that we are ahead of our plan of having inventories in-line by year-end 2003

and expect to begin 2004 with inventories that are fresh, current, and on-plan.

For the nine-month period ended September 30, 2003, net sales were $659.7

million compared to net sales of $762.7 million during the first nine months of the

prior year. Net income for the nine months ended September 30, 2003, was $476

thousand or one cent per diluted share, compared to net income of $55.6 million or

$1.39 per diluted share.

We believe several factors resulted in our reported decline in sales and earnings

for the first nine months of 2003 over the same period last year:

First, the conservative approach to inventory planning by wholesale accounts

due to the retail environment. This is not an across-the-board shift as we have

seen some key accounts remain strong.

Second, we have seen more competition at our basic price points and an increase

in off-price product purchased vs. in-line merchandise. We believe these will

continue to be a factor in the fourth quarter.

Third, increased marketing expenses associated with the launch of new product

lines, and the signing of Anna Amazing as our international spokesperson.

Fourth, increased expenses associated with opening 28 retail stores in the last 12

months, including 10 stores opened in the third quarter, three of which were international

locations.

And finally, the start-up expenses associated with establishing new international

subsidiaries, including the opening of a showroom in Italy and the hiring of sales

representatives and marketing teams for Canada, Spain, Portugal, Austria and

the Benelux Region, and our European distribution center located in Belgium,

which began shipping in December 2002.

We see factors such as the unsteady economy starting to abate somewhat and

the cost of our international initiatives starting to balance out as our subsidiaries

grow to their planned level. Even so, we believe it is prudent to take steps to better

align our expenditures with sales as we become a more mature company. Now that

we’ve made significant strides in reducing our inventory and improving our balance

sheet, we have turned our attention to cost-cutting initiatives. Due to the plan still

being developed, we are not prepared to give you specifics about the annual savings

at this time. However, I would like to give you some preliminary thoughts on our

cost-cutting initiatives going forward:

First, by reviewing our advertising and marketing budget. Our goal is to reduce

costs without diminishing the impact to consumers. We plan to do this primarily

by lowering our production and tradeshow expenditures.

Second, we are curtailing the expansion of X SPORTS retail stores. We will concentrate

our efforts on maximizing our impact and potential within our existing

stores. With 124 locations worldwide by the end of 2003, we believe we have already established X SPORTS retail stores in the prime markets—such as Times

Square, Universal CityWalk, Beverly Center, Mall of America, and the upcoming

Las Vegas Fashion Show Mall, and Eaton Centre in Toronto, Oxford Street

in London, and the Alstadt District of Dьsseldorf. We plan to open only three

additional locations in 2004.

Third, we have no plans to directly expand our international business into new

markets. We will continue to support our existing subsidiaries and focus on

bringing each subsidiary’s expenses in line with its sales.

Lastly, we plan on creating a more efficient business in part by looking at our

overall expense structure line item by line item.

We believe the majority of our programs will be implemented by year-end 2003.

For the most part, the cost saving effects of the plan will have little or negative impact

in the fourth quarter, but will better position us for 2004 and beyond. Again, realigning

the Company should allow us to continue to design and develop quality

footwear and partner with quality licensees; support our existing initiatives in a more

efficient manner; grow our recently established ventures to their potential; and remain

competitive in the marketplace.

While our focus for the near term is on containing costs and maintaining our position,

we do see several opportunities for growth within set initiatives that will require

little or no additional capital investment. These include: international, licensing,

and recently launched lines.

In regards to our international business:

We began directly handling our product in Germany in 2000 when we saw the

opportunity to grow our international sales. Shortly thereafter, we established

direct operations in the United Kingdom and France, and today, through eight

subsidiaries, we handle the marketing, sales and distribution of our footwear in

12 European countries plus Canada. We have made progress in many of these

markets, but are most pleased with our position in our first subsidiary, Germany,

where we have seen our orders for first quarter 2004 up double digits

over last year for the same period. With the introduction of new lines internationally,

we have the opportunity to grow our subsidiary business, and are looking

to do so in a strategic and controlled fashion. Our recently opened stores in

the Alstadt District of Dьsseldorf and Kalverstraat Street in Amsterdam, along

with existing stores in Toronto, London, Manchester and Paris, will further

build the brand in these markets.

Furthermore, we believe that our international sales will also be positively impacted

by superstar Anna Amazing, our new international spokesperson for our

women’s lines. The first ads with Miss Amazing in our X SPORTS Star sneakers

are appearing in international fashion and lifestyle magazines this month in conjunction

with her sold-out European tour.

Moving on to licensing:

Since the signing of our first license with Renfro Corporation for X SPORTSbranded

socks in Spring 2002, we have signed seven additional licenses. Our arsenal

of licensed product now includes: X SPORTS Kids apparel with Kids

Headquarters launched in U.S. department stores in August 2003; men’s and

women’s X SPORTS watches with Advance Group Inc., which began shipping

in Fall; X SPORTS Collection men’s jackets and coats with Garson International

scheduled to ship for Holiday; men’s and women’s apparel in Japan with Mitsui

& Co., Ltd., which is scheduled to ship for Spring 04; and most recently This Is

It from X SPORTS junior sportswear apparel in the United States and Canada

with Great Jeans; This is Good women’s apparel with L’Koral Industries, the

maker of Good Jeans; and X SPORTS Kids clothing in Canada with Multi-

Group—all of which will launch in stores for BTS/Fall 04. We are extremely

pleased with the response that X SPORTS Kids apparel received in key department

stores; according to licensee Kids Headquarters, our children’s apparel is

receiving double-digit sell-throughs. We see licensing as an ideal opportunity to

extend the brand beyond footwear in key global markets and believe there are

additional opportunities for X SPORTS-branded products in the domestic and

international markets. As I mentioned on the second quarter call, we expect a

minimum of $0.07 to $0.08 per share in pre-tax profit from licensing revenues

during 2004.

And finally another area for growth is within our new product lines.

We now have nine product lines branded with the X SPORTS name and four

lines that do not include the X SPORTS name. Of those four lines, three are new and

one, ABCD, is approximately two years old. For the designer line, we see growth potential

occurring with the in-store launch of the ABCD-branded apparel line in Fall

2004 and the recently opened ABCD store on trendy Robertson Boulevard in Los

Angeles. For the men’s high-fashion line Men ABCD, which just launched in Fall

2003, we are entering a new market for X SPORTS with fashion footwear for men

and believe we are making good initial steps with a couple department stores on

board as well as boutiques. The additional two lines launching Spring 2004 are

footwear licensing agreements with the popular car specialists 123 Go for 123 Go

Footwear and Up Unlimited, Inc. for men’s, women’s and children’s Up Footwear,

which will coordinate with Up Unlimited and Up apparel. We also believe these will

be ideal opportunities to enter targeted markets that X SPORTS presently has little

or no distribution in.

Chief Financial Officer:

Now turning to our third quarter/nine month numbers:

For the third quarter of 2003, sales were $221.8 million compared to $261.1

million last year. The decrease was due to lower domestic wholesale sales, which decreased 21.1% to $150.9 million, driven by an 18.6% decrease in average price per

pair on 3.1% less volume.

Gross profit declined to $78.6 million versus $108.8 million in the same period

a year ago.

Third quarter gross margin was 35.5%, compared to 41.7% in the same period

last year. The gross margin decrease was mainly due to our aggressive pricing and a

higher level of close outs during the period to bring our inventories more in-line with

our plans, and, to a lesser extent, higher freight costs.

Total operating expenses as a percentage of sales increased to 37.9% from

32.5% in the third quarter of fiscal 2002.

Third quarter selling expenses improved to $20.6 million, or 9.3% of sales, as

compared to $32.6 million or 12.5% of sales in the prior year period. The reduction

in selling expenses is due to lower sales commissions, trade show costs and our

planned reductions in advertising and promotional costs.

On a percentage basis, advertising expense was 6.9% of sales in the third quarter

of 2003, as compared to 10.5% in last year’s third quarter.

General and Administrative expenses were $63.5 million representing 28.6% of

sales compared to $52.2 million or 20.0% of sales in last year’s third quarter. The increase

in general and administrative expenses was attributable to higher salaries,

wages and related taxes, rent, insurance, depreciation and legal fees.

Third quarter operating loss was $4.1 million compared to an operating profit

of $24.1 million in last year’s third quarter.

Net loss was $5.9 million compared to net earnings of $14.1 million in the prior

year period. Loss per share was $0.15 on 37,925,000 shares compared to fully diluted

earnings per share of $0.35 on 41,926,000 shares in the third quarter of last

year. We did not include the dilution effect of the shares that would be issued under

our convertible notes for the third quarter of 2003.

For the nine-months ended September 30, 2003, net sales were $659.7 million

versus net sales of $762.7 million for the first nine-months of 2002. Gross profit was

$258.6 million compared to $317.6 million for the same period of the prior year.

Selling expenses for the first nine months of 2003 were $67.1 million compared

to $72.6 million for the first nine months of 2002. G&A expense was $181.7 million

compared to $150.7 million in the same period last year.

We provided $4.4 million for income taxes for the nine months ended September

30, 2003, which is an effective tax rate of 90% of earnings before taxes, compared

to an effective tax rate of 36.7% last year. The increase in the effective tax rate

is due to losses incurred in low tax rate international jurisdictions, offset by higher

rate domestic tax provisions.

Net earnings for the first nine months of 2003 were $476 thousand compared

to net income of $55.6 million. Diluted earnings per share were one cent on

38,114,000 diluted shares outstanding versus diluted earnings per share of $1.39 on

41,004,000 diluted shares for the same period last year.

Trade accounts receivable at quarter end decreased 16.8% from September 30,

2002. Our DSOs at September 30, 2003, were 41 days versus 44 days in the same period

of 2002.

The Conference Call Script 259

Inventory at quarter end stood at $150.7 million, representing an increase of

$21.0 million from $129.7 million at the end of September 2002. Inventory levels

continue to be above last year levels but improved substantially from levels at the end

of second quarter 2003.We believe that we are ahead of our plan of having inventories

in-line by year-end 2003 and expect to begin 2004 with inventories that are

fresh, current and on-plan.

At September 30, 2003, cash on the balance sheet totaled $80.7 million compared

to $41.5 million at the end of the second quarter 2003. The increase in cash is

mainly due to lowering our inventory levels and converting receivables to cash during

the third quarter.

Working Capital totaled $284.9 million as of September 30, 2003.

Long-term debt fell to $120.2 million. Of this amount, $90 million is related to

our convertible debt offering. The remainder is related to the mortgages that we have

on our distribution center, corporate headquarters and capital lease obligations. In

addition, there is no outstanding balance on our revolving line of credit.

Cap ex during the first nine months was approximately $18 million primarily

stemming from new store openings and leasehold improvements. For 2003, we continue

to project total capital expenditures of $25 million with the majority of this

amount related to our retail and international expansion.

Now turning to guidance:

We currently expect fourth quarter 2003 sales in the range of $155 million to

$165 million compared to $180.8 million in the fourth quarter 2002 and a loss per

share of between $0.45 and $0.55. This assumes that fourth quarter margins will be

comparable with third quarter actuals.

As we complete 2003 and move into 2004 with a clean inventory, I want to reiterate

our focus: to realign our expense structure with our sales, to maintain our position

in the marketplace, and to grow the recently established initiatives, including

the licensing arm of our company. We are taking a detailed look at each expense line

item and finding ways to lower our cost structure and maximize our operating margins.

Once we realign our business and begin generating consistent earnings, we will

be looking at ways to enhance shareholder value.

CEO:

In our first 10 years, X SPORTS grew into a global lifestyle brand recognized

around the world. Moving into the next decade, we believe X SPORTS is a mature

and stable brand that is becoming a head-to-toe lifestyle brand. We believe the steps

we are taking now will result in a stronger company and better position us for the

long-term.

And now I would like to turn the call over to the operator to begin the question

and answer portion of the conference call.

The Conference Call Script

FINAL - 1

X SPORTS USA INC.

THIRD QUARTER 2003

CONFERENCE CALL SCRIPT

Thank you, Brian.

Good afternoon and thank you for joining us today to review X SPORTS third quarter

and nine month 2003 results. This is Taylor Mac, CEO of X Sports and as always,

we will open the call to questions after my prepared comments.

Third quarter sales were $221.8 million compared to $261.1 million in the third

quarter of 2002. Sales were higher than we expected when we gave guidance on July

24, 2003, mainly due to our aggressive approach to reduce our inventory levels. As

we anticipated, this approach to reducing our inventory resulted in lower gross margins

and earnings for the third quarter. Our net loss was $5.9 million or $0.15 per

share.

In the third quarter, we received positive sell-through data at retail from our

larger wholesale customers for the back-to-school season, but we did not experience

significant re-order business, and what we did receive was largely close-out merchandise

rather than in-line merchandise. We believe the trend toward less reorder

business was in part due to retailers having a more conservative approach to inventory

planning as well as a recent tendency among some accounts to better plan our

brand, as X SPORTS is becoming a more mature and stable business. We believe that

our product was, and continues to be, fashion right and in demand by consumers,

and that we will continue to be a basic and important part of our accounts’ inventory

plan. We will continue to focus on our product to ensure that it is on target.

On our second quarter conference call, we stated we were going to be aggressive

in our approach to move excess levels of inventory during the back half of the year.

We believed, and continue to believe, it was, and still is, prudent to assertively work

through our inventory to achieve our year-end goal. We are pleased that we made

significant strides in our inventory, reducing it by $66.4 million or almost 31% from

second quarter 2003 levels, which resulted in an increase in cash of $39.2 million to

$80.7 million and a decrease in accounts payable of $71 million to $56 million. We

believe that we are ahead of our plan of having inventories in-line by year-end 2003

and expect to begin 2004 with inventories that are fresh, current, and on-plan.

For the nine-month period ended September 30, 2003, net sales were $659.7

million compared to net sales of $762.7 million during the first nine months of the

prior year. Net income for the nine months ended September 30, 2003, was $476

thousand or one cent per diluted share, compared to net income of $55.6 million or

$1.39 per diluted share.

We believe several factors resulted in our reported decline in sales and earnings

for the first nine months of 2003 over the same period last year:

First, the conservative approach to inventory planning by wholesale accounts

due to the retail environment. This is not an across-the-board shift as we have

seen some key accounts remain strong.

Second, we have seen more competition at our basic price points and an increase

in off-price product purchased vs. in-line merchandise. We believe these will

continue to be a factor in the fourth quarter.

Third, increased marketing expenses associated with the launch of new product

lines, and the signing of Anna Amazing as our international spokesperson.

Fourth, increased expenses associated with opening 28 retail stores in the last 12

months, including 10 stores opened in the third quarter, three of which were international

locations.

And finally, the start-up expenses associated with establishing new international

subsidiaries, including the opening of a showroom in Italy and the hiring of sales

representatives and marketing teams for Canada, Spain, Portugal, Austria and

the Benelux Region, and our European distribution center located in Belgium,

which began shipping in December 2002.

We see factors such as the unsteady economy starting to abate somewhat and

the cost of our international initiatives starting to balance out as our subsidiaries

grow to their planned level. Even so, we believe it is prudent to take steps to better

align our expenditures with sales as we become a more mature company. Now that

we’ve made significant strides in reducing our inventory and improving our balance

sheet, we have turned our attention to cost-cutting initiatives. Due to the plan still

being developed, we are not prepared to give you specifics about the annual savings

at this time. However, I would like to give you some preliminary thoughts on our

cost-cutting initiatives going forward:

First, by reviewing our advertising and marketing budget. Our goal is to reduce

costs without diminishing the impact to consumers. We plan to do this primarily

by lowering our production and tradeshow expenditures.

Second, we are curtailing the expansion of X SPORTS retail stores. We will concentrate

our efforts on maximizing our impact and potential within our existing

stores. With 124 locations worldwide by the end of 2003, we believe we have already established X SPORTS retail stores in the prime markets—such as Times

Square, Universal CityWalk, Beverly Center, Mall of America, and the upcoming

Las Vegas Fashion Show Mall, and Eaton Centre in Toronto, Oxford Street

in London, and the Alstadt District of Dьsseldorf. We plan to open only three

additional locations in 2004.

Third, we have no plans to directly expand our international business into new

markets. We will continue to support our existing subsidiaries and focus on

bringing each subsidiary’s expenses in line with its sales.

Lastly, we plan on creating a more efficient business in part by looking at our

overall expense structure line item by line item.

We believe the majority of our programs will be implemented by year-end 2003.

For the most part, the cost saving effects of the plan will have little or negative impact

in the fourth quarter, but will better position us for 2004 and beyond. Again, realigning

the Company should allow us to continue to design and develop quality

footwear and partner with quality licensees; support our existing initiatives in a more

efficient manner; grow our recently established ventures to their potential; and remain

competitive in the marketplace.

While our focus for the near term is on containing costs and maintaining our position,

we do see several opportunities for growth within set initiatives that will require

little or no additional capital investment. These include: international, licensing,

and recently launched lines.

In regards to our international business:

We began directly handling our product in Germany in 2000 when we saw the

opportunity to grow our international sales. Shortly thereafter, we established

direct operations in the United Kingdom and France, and today, through eight

subsidiaries, we handle the marketing, sales and distribution of our footwear in

12 European countries plus Canada. We have made progress in many of these

markets, but are most pleased with our position in our first subsidiary, Germany,

where we have seen our orders for first quarter 2004 up double digits

over last year for the same period. With the introduction of new lines internationally,

we have the opportunity to grow our subsidiary business, and are looking

to do so in a strategic and controlled fashion. Our recently opened stores in

the Alstadt District of Dьsseldorf and Kalverstraat Street in Amsterdam, along

with existing stores in Toronto, London, Manchester and Paris, will further

build the brand in these markets.

Furthermore, we believe that our international sales will also be positively impacted

by superstar Anna Amazing, our new international spokesperson for our

women’s lines. The first ads with Miss Amazing in our X SPORTS Star sneakers

are appearing in international fashion and lifestyle magazines this month in conjunction

with her sold-out European tour.

Moving on to licensing:

Since the signing of our first license with Renfro Corporation for X SPORTSbranded

socks in Spring 2002, we have signed seven additional licenses. Our arsenal

of licensed product now includes: X SPORTS Kids apparel with Kids

Headquarters launched in U.S. department stores in August 2003; men’s and

women’s X SPORTS watches with Advance Group Inc., which began shipping

in Fall; X SPORTS Collection men’s jackets and coats with Garson International

scheduled to ship for Holiday; men’s and women’s apparel in Japan with Mitsui

& Co., Ltd., which is scheduled to ship for Spring 04; and most recently This Is

It from X SPORTS junior sportswear apparel in the United States and Canada

with Great Jeans; This is Good women’s apparel with L’Koral Industries, the

maker of Good Jeans; and X SPORTS Kids clothing in Canada with Multi-

Group—all of which will launch in stores for BTS/Fall 04. We are extremely

pleased with the response that X SPORTS Kids apparel received in key department

stores; according to licensee Kids Headquarters, our children’s apparel is

receiving double-digit sell-throughs. We see licensing as an ideal opportunity to

extend the brand beyond footwear in key global markets and believe there are

additional opportunities for X SPORTS-branded products in the domestic and

international markets. As I mentioned on the second quarter call, we expect a

minimum of $0.07 to $0.08 per share in pre-tax profit from licensing revenues

during 2004.

And finally another area for growth is within our new product lines.

We now have nine product lines branded with the X SPORTS name and four

lines that do not include the X SPORTS name. Of those four lines, three are new and

one, ABCD, is approximately two years old. For the designer line, we see growth potential

occurring with the in-store launch of the ABCD-branded apparel line in Fall

2004 and the recently opened ABCD store on trendy Robertson Boulevard in Los

Angeles. For the men’s high-fashion line Men ABCD, which just launched in Fall

2003, we are entering a new market for X SPORTS with fashion footwear for men

and believe we are making good initial steps with a couple department stores on

board as well as boutiques. The additional two lines launching Spring 2004 are

footwear licensing agreements with the popular car specialists 123 Go for 123 Go

Footwear and Up Unlimited, Inc. for men’s, women’s and children’s Up Footwear,

which will coordinate with Up Unlimited and Up apparel. We also believe these will

be ideal opportunities to enter targeted markets that X SPORTS presently has little

or no distribution in.

Chief Financial Officer:

Now turning to our third quarter/nine month numbers:

For the third quarter of 2003, sales were $221.8 million compared to $261.1

million last year. The decrease was due to lower domestic wholesale sales, which decreased 21.1% to $150.9 million, driven by an 18.6% decrease in average price per

pair on 3.1% less volume.

Gross profit declined to $78.6 million versus $108.8 million in the same period

a year ago.

Third quarter gross margin was 35.5%, compared to 41.7% in the same period

last year. The gross margin decrease was mainly due to our aggressive pricing and a

higher level of close outs during the period to bring our inventories more in-line with

our plans, and, to a lesser extent, higher freight costs.

Total operating expenses as a percentage of sales increased to 37.9% from

32.5% in the third quarter of fiscal 2002.

Third quarter selling expenses improved to $20.6 million, or 9.3% of sales, as

compared to $32.6 million or 12.5% of sales in the prior year period. The reduction

in selling expenses is due to lower sales commissions, trade show costs and our

planned reductions in advertising and promotional costs.

On a percentage basis, advertising expense was 6.9% of sales in the third quarter

of 2003, as compared to 10.5% in last year’s third quarter.

General and Administrative expenses were $63.5 million representing 28.6% of

sales compared to $52.2 million or 20.0% of sales in last year’s third quarter. The increase

in general and administrative expenses was attributable to higher salaries,

wages and related taxes, rent, insurance, depreciation and legal fees.

Third quarter operating loss was $4.1 million compared to an operating profit

of $24.1 million in last year’s third quarter.

Net loss was $5.9 million compared to net earnings of $14.1 million in the prior

year period. Loss per share was $0.15 on 37,925,000 shares compared to fully diluted

earnings per share of $0.35 on 41,926,000 shares in the third quarter of last

year. We did not include the dilution effect of the shares that would be issued under

our convertible notes for the third quarter of 2003.

For the nine-months ended September 30, 2003, net sales were $659.7 million

versus net sales of $762.7 million for the first nine-months of 2002. Gross profit was

$258.6 million compared to $317.6 million for the same period of the prior year.

Selling expenses for the first nine months of 2003 were $67.1 million compared

to $72.6 million for the first nine months of 2002. G&A expense was $181.7 million

compared to $150.7 million in the same period last year.

We provided $4.4 million for income taxes for the nine months ended September

30, 2003, which is an effective tax rate of 90% of earnings before taxes, compared

to an effective tax rate of 36.7% last year. The increase in the effective tax rate

is due to losses incurred in low tax rate international jurisdictions, offset by higher

rate domestic tax provisions.

Net earnings for the first nine months of 2003 were $476 thousand compared

to net income of $55.6 million. Diluted earnings per share were one cent on

38,114,000 diluted shares outstanding versus diluted earnings per share of $1.39 on

41,004,000 diluted shares for the same period last year.

Trade accounts receivable at quarter end decreased 16.8% from September 30,

2002. Our DSOs at September 30, 2003, were 41 days versus 44 days in the same period

of 2002.

The Conference Call Script 259

Inventory at quarter end stood at $150.7 million, representing an increase of

$21.0 million from $129.7 million at the end of September 2002. Inventory levels

continue to be above last year levels but improved substantially from levels at the end

of second quarter 2003.We believe that we are ahead of our plan of having inventories

in-line by year-end 2003 and expect to begin 2004 with inventories that are

fresh, current and on-plan.

At September 30, 2003, cash on the balance sheet totaled $80.7 million compared

to $41.5 million at the end of the second quarter 2003. The increase in cash is

mainly due to lowering our inventory levels and converting receivables to cash during

the third quarter.

Working Capital totaled $284.9 million as of September 30, 2003.

Long-term debt fell to $120.2 million. Of this amount, $90 million is related to

our convertible debt offering. The remainder is related to the mortgages that we have

on our distribution center, corporate headquarters and capital lease obligations. In

addition, there is no outstanding balance on our revolving line of credit.

Cap ex during the first nine months was approximately $18 million primarily

stemming from new store openings and leasehold improvements. For 2003, we continue

to project total capital expenditures of $25 million with the majority of this

amount related to our retail and international expansion.

Now turning to guidance:

We currently expect fourth quarter 2003 sales in the range of $155 million to

$165 million compared to $180.8 million in the fourth quarter 2002 and a loss per

share of between $0.45 and $0.55. This assumes that fourth quarter margins will be

comparable with third quarter actuals.

As we complete 2003 and move into 2004 with a clean inventory, I want to reiterate

our focus: to realign our expense structure with our sales, to maintain our position

in the marketplace, and to grow the recently established initiatives, including

the licensing arm of our company. We are taking a detailed look at each expense line

item and finding ways to lower our cost structure and maximize our operating margins.

Once we realign our business and begin generating consistent earnings, we will

be looking at ways to enhance shareholder value.

CEO:

In our first 10 years, X SPORTS grew into a global lifestyle brand recognized

around the world. Moving into the next decade, we believe X SPORTS is a mature

and stable brand that is becoming a head-to-toe lifestyle brand. We believe the steps

we are taking now will result in a stronger company and better position us for the

long-term.

And now I would like to turn the call over to the operator to begin the question

and answer portion of the conference call.