On February 6, 2001, the Company issued and sold an aggregate of 1,710,000 shares of its common stock (the “Restricted Shares”) to accredited institutional investors in a private placement under Rule 506 under the Securities Act of 1933.  The Restricted Shares were sold for cash at a price of $18.00 per share, for gross proceeds of $30.8 million.  The purchase price was established on January 23, 2001 and represented an 18% discount from the Nasdaq closing price on that date.  The Company paid a fee of 6.0% of the gross proceeds from the sale of the Restricted Shares to the Company’s placement agent for the sale of the Restricted Shares, and incurred other expenses of approximately $0.2 million in the transaction, resulting in net proceeds to the Company, after placement agent fees and other expenses, of $28.7 million.  On February 21, 2001 a registration statement on Form S-3 relating to resale of the Restricted Shares became effective.

             The Company’s cash and cash equivalents (“cash”) increased by $18.4 million during the six months ended June 30, 2001 largely as a result of proceeds received from the Company’s private placement of common stock in February 2001.  In addition, $4.8 million in cash was generated from operating activities during the period.  Approximately $3.1 million in cash was used to pay down debt and $12.0 million was invested in property and equipment, primarily related to retail store construction. During the six months ended June 30, 2001, net income before depreciation and amortization and collections on accounts receivable were the primary sources of cash from operations.  The primary use of cash from operations was decreases in accounts payable.

             Accounts receivable balances at June 30, 2001 were 81.8% lower than at December 30, 2000 primarily as a result of collections associated with the Company’s deferred billing program and landlord allowances.  Accounts receivable balances at June 30, 2001 were 29.0% lower than at June 24, 2000.

             Accounts payable balances were 30.1% lower than at December 30, 2000 and 35.9% higher than at June 24, 2000.  The decrease in accounts payable at June 30, 2001 compared to December 30, 2001 is primarily due to lower amounts payable for inventory and retail store rollout costs.  The increase in accounts payable at June 30, 2001 compared to June 24, 2000 is primarily related to increased amounts payable for retail store rollout costs, catalog costs and general corporate expenses.

             Inventory levels at June 30, 2001 were 4.2% and 61.9% higher than at December 30, 2000 and June 24, 2000, respectively. The increase in inventory levels at June 30, 2001 compared to June 24, 2000 is primarily attributable to the growth in the Company's retail business.  In addition, inventory balances associated with the direct segment reflect a better in-stock position this year compared to last year and, due to spring season sales volumes being lower than expected, the Company has more overstocks than planned at June 30, 2001.  The Company believes it has the capacity and the liquidation vehicles necessary to liquidate its overstocks, including those generated in the fiscal 2001 spring season.

             During the six months ended June 24, 2000 cash and cash equivalents decreased by $2.4 million. Approximately $8.0 million in cash was generated from operating activities during the period and $9.4 million was invested in property and equipment, primarily related to retail store and corporate headquarters construction. During the six months ended June 24, 2000, net income before depreciation and amortization, decreases in accounts receivable and increases in accrued expenses were the primary sources of cash from operations.  Increased inventory was the primary use.

             At June 24, 2000 the Company owned a warehouse and distribution center in Meredith, New Hampshire.  This asset was classified as assets held for sale in the accompanying consolidated balance sheet at June 24, 2000.  This facility was sold in December 2000.  Other non-current liabilities include deferred credits related to retail stores leases.  The increase in non-current liabilities since June 24, 2000 is associated with the deferred credits related to retail stores opened since that date.

              The Company's credit facilities at June 30, 2001 consisted of (i) a $50.0 million revolving credit facility (the “Revolving Credit Facility”); (ii) a $12.0 million real estate loan (the "Tilton Facility Loan"); (iii) a $9.5 million equipment loan (the "Equipment Loan"); and (iv) a $1.0 million furniture loan (the "Furniture Loan").  The Company entered into the Revolving Credit Facility on June 29, 2001 to replace its prior revolving credit facility.  The Revolving Credit Facility is collateralized by substantially all the personal property, both tangible and intangible, of the Company and matures on June 1, 2003.  The amount available under the Revolving Credit Facility is reduced by outstanding borrowings and outstanding letters of credit.  Outstanding borrowings may not exceed $20.0 million and bear interest at an annual rate equal to the prime lending rate announced by one of the participating banks or the LIBOR lending rate.  There were no outstanding borrowings on the Revolving Credit Facility at June 30, 2001 and none on the prior revolving credit facility at June 24, 2000.  Outstanding letters of credit totaled $22.1 million at June 30, 2001 compared to $20.2 million under the prior revolving credit facility at June 24, 2000.  Availability under the Revolving Credit Facility at June 30, 2001 was $27.9 million.  Outstanding letters of credit do not bear interest.  The Company is required to pay a commitment for of ¼ of 1% per annum on the unused portion of the Revolving Credit Facility.  The Tilton Facility Loan is collateralized by a mortgage lien on the Tilton facility.  The Tilton facility is owned by Birch Pond Realty Corporation, a wholly owned subsidiary of The J. Jill Group, Inc., and leased to The J. Jill Group, Inc. The Equipment Loan is collateralized by substantially all of the Company's materials handling equipment.  The Furniture Loan is collateralized by certain workstations and office furniture.  The weighted average interest rate for amounts outstanding under the Company’s credit facilities during the six months ended June 30, 2001 was 7.47% per annum. The Company’s credit facilities contain various lending conditions and covenants including restrictions on permitted liens. Certain credit facilities also require compliance with certain debt service coverage and other financial ratios.  The Company was in compliance with the financial covenants associated with its credit facilities as of and for the quarters ended June 30, 2001 and June 24, 2000.