<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                                      FORM 10-Q

(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                     FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997

                                          Or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM                      TO
                                           --------------------    ----

Commission file number 1-10157

                                   L.A. GEAR, INC.

                (Exact name of registrant as specified in its charter)



              CALIFORNIA                              95-3375118
     (State or other jurisdiction of               (I.R.S. Employer
    incorporation or organization)              Identification Number)
 
              2850 OCEAN PARK BOULEVARD, SANTA MONICA, CALIFORNIA 90405
                 (Address of principal executive offices)  (Zip code)

                                    (310) 452-4327
                 (Registrant's telephone number, including area code)

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

The number of shares outstanding of the registrant's Common Stock, no par value,
at July 11, 1997 was 22,959,070 shares.

THIS FORM 10-Q CONTAINS 110 PAGES.

THE EXHIBIT INDEX APPEARS ON PAGE 20.


<PAGE>

                                   L.A. GEAR, INC.
                                  TABLE OF CONTENTS
                FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997




 PART I. FINANCIAL INFORMATION                                             Page

Item 1.  Financial Statements

            Consolidated Condensed Balance Sheets at                          3
              May 31, 1997 and November 30, 1996

            Consolidated Condensed Statements of Operations and
              Accumulated Deficit for the three months ended
              May 31, 1997 and May 31, 1996                                   4

            Consolidated Condensed Statements of Operations and
              Accumulated Deficit for the six months ended
              May 31, 1997 and May 31, 1996                                   5

            Consolidated Condensed Statements of Cash Flows
              for the six months ended May 31, 1997 and May 31, 1996          6

            Notes to Consolidated Condensed Financial Statements              7

Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                        10



PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                   16

Item 2.  Changes in Securities                                               16

Item 3.  Defaults Upon Senior Securities                                     17

Item 4.  Submission of Matters to a Vote of Security Holders                 17

Item 5.  Other Information                                                   17

Item 6.  Exhibits and Reports on Form 8-K                                    18

Signature                                                                    19

Exhibit Index                                                                20


<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                        CONSOLIDATED CONDENSED BALANCE SHEETS
                          (IN THOUSANDS, EXCEPT SHARE DATA)

 
<TABLE>
<CAPTION>

                                                                         May 31,      November 30,
                                                                          1997           1996
                                                                       -----------    ------------
                                                                       (unaudited)
         ASSETS

<S>                                                                    <C>            <C>
Current assets:
  Cash and cash equivalents                                              $9,331       $ 34,239
  Accounts receivable, net                                               22,211         23,938
  Inventories                                                            26,591         32,809
  Prepaid expenses and other current assets                               1,846          1,933
                                                                       --------       --------

         Total current assets                                            59,979         92,919

Property and equipment, net                                               2,579          4,445
Goodwill, net                                                             1,471          1,538
Other assets                                                              1,832          2,054
                                                                       --------       --------


                                                                        $65,861       $100,956
                                                                       --------       --------
                                                                       --------       --------

         LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

Current liabilities:
  Accounts payable and accrued liabilities                             $ 26,290       $ 46,452
                                                                       --------       --------
                                                                       --------       --------

         Total current liabilities                                       26,290         46,452

7 3/4% convertible subordinated debentures due 2002                      50,000         50,000

Shareholders' (deficit) equity:
  7 1/2% Series B Cumulative Convertible Preferred Stock,
    $100 stated value; 1,161,822 shares authorized; 1,161,337
    shares issued and outstanding at May 31, 1997 and
    November 30, 1996                                                   115,473        115,473
  Preferred stock, no stated value; 8,838,178 shares authorized
    and unissued at May 31, 1997 and November 30, 1996                       --             --
  Common stock, no par value; 80,000,000 shares authorized;
    22,959,070 shares issued and outstanding at
    May 31, 1997; 22,936,433 shares issued and
    outstanding at November 30, 1996                                    128,132        128,093
  Cumulative currency translation adjustment                               (575)           296
  Accumulated deficit                                                  (253,459)      (239,358)
                                                                       --------       --------
         Total shareholders' (deficit) equity                           (10,429)         4,504
                                                                       --------       --------
Commitments and contingencies                                                --             --
                                                                       --------       --------

                                                                        $65,861       $100,956
                                                                       --------       --------
                                                                       --------       --------

</TABLE>
 
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.


                                          3
<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                               AND ACCUMULATED DEFICIT
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                     (UNAUDITED)

                                                  Three months ended May 31,
                                                  --------------------------
                                                    1997           1996
                                                  ---------     ----------

Net sales                                          $ 28,772        $38,472
Cost of sales                                        23,771         28,774
                                                  ---------     ----------

    Gross profit                                      5,001          9,698

Selling, general and administrative expenses         11,488         20,517
Litigation settlement expense (income), net             527         (1,955)
Restructuring credits                                (1,899)            --
Other income                                         (1,617)            --
Interest expense, net                                   913            521
                                                  ---------     ----------

    Loss before minority interest                    (4,411)        (9,385)

Minority interest                                        --         1,905
                                                  ---------     ----------

    Net loss                                         (4,411)        (7,480)

Dividends on Series B Cumulative Convertible
  Preferred Stock                                    (2,239)        (1,108)
Dividends on mandatorily redeemable
  Series A Cumulative Convertible
  Preferred Stock                                        --         (1,002)
                                                  ---------     ----------

    Loss applicable to common stock                  (6,650)        (9,590)

Accumulated deficit, beginning of period           (246,809)      (170,224)
                                                  ---------     ----------

Accumulated deficit, end of period                $(253,459)    $ (179,814)
                                                  ---------     ----------
                                                  ---------     ----------

Loss per common share                                $(0.29)   $     (0.42)
                                                  ---------     ----------
                                                  ---------     ----------

Weighted average common shares outstanding           22,959         22,937
                                                  ---------     ----------
                                                  ---------     ----------


SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.




                                          4
<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                               AND ACCUMULATED DEFICIT
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                     (UNAUDITED)

                                                   Six months ended May 31,
                                                   ------------------------
                                                      1997          1996
                                                  ---------     ----------

Net sales                                           $63,803        117,138
Cost of sales                                        50,647         82,886
                                                  ---------     ----------

    Gross profit                                     13,156         34,252

Selling, general and administrative expenses         24,497         43,913
Litigation settlement expense (income), net             424         (1,955)
Restructuring credits                                (2,120)            --
Other income                                         (1,617)            --
Interest expense, net                                 1,657          1,134
                                                  ---------     ----------

    Loss before minority interest                    (9,685)        (8,840)

Minority interest                                       --           2,459
                                                  ---------     ----------

    Net loss                                         (9,685)        (6,381)

Dividends on Series B Cumulative Convertible
  Preferred Stock                                    (4,416)        (1,108)
Dividends on mandatorily redeemable
  Series A Cumulative Convertible
  Preferred Stock                                        --         (3,044)
                                                  ---------     ----------

    Loss applicable to common stock                 (14,101)       (10,533)

Accumulated deficit, beginning of period           (239,358)      (169,281)
                                                  ---------     ----------

Accumulated deficit, end of period                $(253,459)    $ (179,814)
                                                  ---------     ----------
                                                  ---------     ----------

Loss per common share                                $(0.61)        $(0.46)
                                                  ---------     ----------
                                                  ---------     ----------

Weighted average common shares outstanding           22,955         22,937
                                                  ---------     ----------
                                                  ---------     ----------


SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.


                                          5
<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                    (IN THOUSANDS)
                                     (UNAUDITED)



                                                       Six months ended May 31,
                                                       ------------------------

                                                          1997         1996
                                                        --------      -------

Net cash (used in) provided by operating activities     $(25,648)     $12,866
                                                        --------      -------

Investing activities:
  Proceeds from assets held for sale                         633           --
  Capital expenditures                                      (387)        (694)
                                                        --------      -------

         Net cash provided by (used in) investing
           activities                                        246         (694)
                                                        --------      -------

Financing activities:
    Proceeds from issuance of common stock                    39           --
    Net repayments under international credit facilities      --       (1,218)
    Other                                                     --         (622)
                                                        --------      -------

         Net cash provided by (used in) financing
           activities                                         39       (1,840)
                                                        --------      -------

Effect of exchange rate changes on cash and
  cash equivalents                                           455           49
                                                        --------      -------

         Net (decrease) increase in cash and cash
           equivalents                                   (24,908)      10,381

Cash and cash equivalents at beginning of period          34,239       35,956
                                                        --------      -------

Cash and cash equivalents at end of period                $9,331      $46,337
                                                        --------      -------
                                                        --------      -------


SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.


                                          6
<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                     (UNAUDITED)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION  In the opinion of management, the accompanying
unaudited consolidated condensed financial statements contain all adjustments,
which consist only of normal recurring adjustments, necessary to present fairly
the consolidated financial position of L.A. Gear, Inc. and its subsidiaries
(collectively referred to as the "Company") at May 31, 1997, the results of
operations for the three months and six months ended May 31, 1997 and 1996 and
the cash flows for the six months ended May 31, 1997 and 1996.  This interim
financial information and notes thereto should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1996.  The Company's results of operations and cash flows for interim periods
are not necessarily indicative of the results to be expected for any other
interim period or the full year.

    STOCK OPTIONS  In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.  The Company will
adopt the disclosure only provisions of SFAS No. 123 in the fiscal year ending
November 30, 1997 and the adoption of SFAS No. 123 will not have a material
impact on the Company's financial position or results of operations.

    LOSS PER COMMON SHARE  Loss per common share has been computed on the loss
applicable to common stock (net loss plus dividends on Series A Cumulative
Convertible Preferred Stock and Series B Cumulative Convertible Preferred Stock)
divided by the weighted average number of common shares outstanding during each
period.

    RECLASSIFICATIONS  Certain reclassifications have been made to 1996 amounts
for conformity to the 1997 presentation.


NOTE 2.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

                                                      SIX MONTHS ENDED MAY 31,
                                                      ------------------------
                                                        1997         1996
                                                       ------      ---------
                                                           (IN THOUSANDS)
  CASH PAID (RECEIVED) DURING THE PERIOD FOR:
    INTEREST PAID                                       $1,908         $2,099
                                                        ------      ---------
                                                        ------      ---------
    INTEREST RECEIVED                                    $(291)         $(950)
                                                        ------      ---------
                                                        ------      ---------

  NONCASH FINANCING ACTIVITY:
    DIVIDENDS ACCRUED AND UNPAID ON SERIES B
       CUMULATIVE CONVERTIBLE PREFERRED STOCK           $4,416            $--
                                                        ------      ---------
                                                        ------      ---------
    EXCHANGE OF SERIES A CUMULATIVE CONVERTIBLE
       PREFERRED STOCK PLUS ACCRUED AND UNPAID
       DIVIDENDS FOR SERIES B CUMULATIVE CONVERTIBLE
       PREFERRED STOCK                                     $--       $110,790
                                                        ------      ---------
                                                        ------      ---------
    SERIES B CUMULATIVE CONVERTIBLE PREFERRED
       STOCK ISSUED IN PAYMENT OF DIVIDENDS DUE
       ON SERIES B CUMULATIVE CONVERTIBLE
       PREFERRED STOCK                                     $--         $1,108
                                                        ------      ---------
                                                        ------      ---------


                                          7
<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                     (UNAUDITED)


NOTE 3.   OTHER INCOME

     Other income consists of foreign exchange gains of $728,000 in
connection with the sale of stock and assets of certain foreign subsidiaries and
of $889,000 of gain from the dissolution of the Company's Far East joint venture
with Inchcape Pacific Limited.

NOTE 4.        ACCOUNTS RECEIVABLE, NET

     Accounts receivable, net of allowance for doubtful accounts and merchandise
returns, consist of the following:

                                                        MAY 31,     NOVEMBER 30,
                                                         1997          1996
                                                       -------        -------
                                                           (IN THOUSANDS)

  TRADE RECEIVABLES
       DOMESTIC                                        $10,208        $12,581
       INTERNATIONAL                                     9,524         14,216
                                                       -------        -------
          TOTAL TRADE RECEIVABLES                       19,732         26,797

  OTHER RECEIVABLES                                      5,267          1,280
                                                       -------        -------
                                                        24,999         28,077
  LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS
     AND MERCHANDISE RETURNS                            (2,788)        (4,139)
                                                       -------        -------

                                                       $22,211        $23,938
                                                       -------        -------
                                                       -------        -------

    During the six months ended May 31, 1997 the Company sold substantially all
of the assets of its Italian and German subsidiaries and the capital stock of
its Dutch subsidiary.  Included in other receivables is $4.2 million owed to the
Company from the purchasers of the assets of its Italian and German 
subsidiaries.

NOTE 5.               ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

    Accounts payable and accrued liabilities consist of the following:

                                                        MAY 31,     NOVEMBER 30,
                                                        1997           1996
                                                       -------        -------
                                                            (IN THOUSANDS)

  ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES       $13,550        $17,869
  ACCRUED INVENTORY PURCHASES                            4,590          8,417
  ACCRUED RESTRUCTURING CHARGES                          3,734         20,166
  ACCRUED DIVIDENDS ON SERIES B CUMULATIVE
    CONVERTIBLE PREFERRED STOCK                          4,416             --
                                                       -------        -------
                                                       $26,290        $46,452
                                                       -------        -------
                                                       -------        -------


                                          8
<PAGE>

                           L.A. GEAR, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                     (UNAUDITED)


    In the fourth quarter of fiscal 1996, management committed to a
restructuring plan aimed at bringing the Company's operating expenses in line
with its sales base and recorded a restructuring charge of $28.8 million.  Of
the $20.2 million remaining reserve at November 30, 1996, $14.4 million was
utilized in the six months ended May 31, 1997 primarily for severance payments,
the transition to service certain of the Company's European customers through
independent distributors rather than through direct subsidiaries, and space
consolidation at the Company's Santa Monica, California headquarters and
Ontario, California distribution center.   During the three months and six
months ended May 31, 1997, the Company recognized $1.9 million and $2.1 million,
respectively, of income representing adjustments to restructuring reserves
relating primarily to: (i) the sublease of premises at its Santa Monica and
Ontario locations at more favorable terms and shorter vacancy periods than
originally anticipated, and (ii) greater consideration than originally
anticipated from the sale of stock and assets of certain European subsidiaries.
The Company anticipates that substantially all of the contemplated restructuring
actions will be completed by November 30, 1997 and believes that the accrued
restructuring charges of $3.7 million at May 31, 1997 appropriately reflect the
remaining liabilities associated with these actions.

NOTE 6.  BANK BORROWINGS

    On May 21, 1997, the Company entered into a Loan and Security Agreement
(the "Agreement") with Congress Financial Corporation which provides the Company
with a new three-year revolving credit facility (the "Revolving Facility")
through May 2000, for loans and letters of credit. The Revolving Facility
replaces the Company's previous revolving credit facility with BankAmerica
Business Credit.

    The  Revolving Facility provides for maximum borrowings outstanding at any
time of the lesser of: (i) $40 million for aggregate loans and letters of
credit, or (ii) an amount equal to a borrowing base calculated on the Company's
eligible accounts receivable and inventory as defined under the Agreement.
There is a $25 million sublimit for outstanding aggregate loans at any time.
Loans bear interest at the publicly announced prime rate of CoreStates Bank,
N.A. plus 1/4% for up to $5 million of loans outstanding, and at such prime rate
plus 1/2% for loans outstanding in excess of $5 million. The Revolving Facility
is secured primarily by the Company's domestic assets .

    As of May 31, 1997, there were no cash borrowings and approximately $15.7
million of letters of credit commitments outstanding under the Revolving
Facility, with $7.2 million available for borrowing.  During the three months
ended May 31, 1997 the Company's maximum loans outstanding under the prior
revolving credit facility with BankAmerica Business Credit were $2.3 million.

NOTE 7.  SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK

    The Series B Cumulative Convertible Preferred Stock, stated value $100 
per share, accrues dividends at a rate of 7 1/2% per annum, and is 
convertible into shares of the Company's Common Stock at a conversion price 
of $6.75 per share.  The Company elected not to pay the cash dividends 
aggregating $4.4 million required on the Series B Preferred Stock due 
February 28, 1997 ($2.2 million) and May 31, 1997 ($2.2 million).  The 
aggregate unpaid dividends will bear additional dividends accruing at a rate 
of 8 5/8% per annum, compounded quarterly, until all such arrearages are paid.

                                          9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ALL REFERENCES TO YEARS ARE TO FISCAL YEARS ENDING NOVEMBER 30, 1997 OR 1996, AS
APPLICABLE.

NET SALES
--------------------------------------------------------------------------------

    In the second quarter of 1997, the Company's net sales decreased by 25.2%
to $28.8 million, compared to $38.5 million in the second quarter of 1996.  For
the six months ended May 31, 1997, the Company's net sales decreased by 45.5% to
$63.8 million, compared to $117.1 million in the year earlier period.  Domestic
net sales in the second quarter and six months ended May 31, 1997 decreased by
36.6% and 52.7% from the comparable 1996 periods, respectively.  Net
international sales, which accounted for approximately 43% and 37% of the
Company's total net sales for the quarter and six months ended May 31, 1997,
respectively, decreased by 1.5% and 26.4% from the comparable 1996 periods.

    The following tables set forth certain information regarding the Company's
net sales:

THREE MONTHS ENDED MAY 31,                         NET SALES
--------------------------          ----------------------------------------
                                          1997                    1996
                                    ----------------        ----------------
                                             (DOLLARS IN THOUSANDS)

  DOMESTIC FOOTWEAR
    CHILDREN'S                   $8,013             28%     $13,357        35%
    WOMEN'S                       4,221             15        8,785        23
    MEN'S                         4,165             14        3,109         8
  OTHER                              57              0          721         2
                                -------            ---     --------       ---
    TOTAL DOMESTIC SALES         16,456             57       25,972        68
                                -------            ---     --------       ---

  INTERNATIONAL FOOTWEAR
    CHILDREN'S                    5,416             19        5,775        15
    WOMEN'S                       4,025             14        2,869         7
    MEN'S                         2,556              9        1,621         4
  OTHER                             319              1        2,235         6
                                -------            ---     --------       ---
    TOTAL INTERNATIONAL SALES    12,316             43       12,500        32
                                -------            ---     --------       ---
    TOTAL NET SALES             $28,772            100%     $38,472       100%
                                -------            ---     --------       ---
                                -------            ---     --------       ---

SIX MONTHS ENDED MAY 31,                           NET SALES
--------------------------          ----------------------------------------
                                          1997                    1996
                                    ----------------        ----------------
                                             (DOLLARS IN THOUSANDS)

  DOMESTIC FOOTWEAR
    CHILDREN'S                  $22,313             35%     $40,200        35%
    WOMEN'S                       9,371             15       28,487        24
    MEN'S                         8,444             13       15,437        13
  OTHER                             148              0        1,044         1
                                -------            ---     --------       ---
    TOTAL DOMESTIC SALES         40,276             63       85,168        73
                                -------            ---     --------       ---

  INTERNATIONAL FOOTWEAR
    CHILDREN'S                   11,060             17       16,478        14
    WOMEN'S                       7,401             12        7,280         6
    MEN'S                         4,295              7        4,908         4
  OTHER                             771              1        3,304         3
                                -------            ---     --------       ---
    TOTAL INTERNATIONAL SALES    23,527             37       31,970        27
                                -------            ---     --------       ---
    TOTAL NET SALES             $63,803            100%    $117,138       100%
                                -------            ---     --------       ---
                                -------            ---     --------       ---


                                          10
<PAGE>

    The following tables set forth the percentage changes, by Children's,
Women's and Men's categories, in the number of pairs sold during the 1997 period
as compared to the same period of 1996:

THREE MONTHS ENDED MAY 31,                      VOLUME OF FOOTWEAR SOLD
--------------------------                      -----------------------
                                       INCREASE (DECREASE) BETWEEN 1997 AND 1996
                                       -----------------------------------------
                                        DOMESTIC     INTERNATIONAL      TOTAL
                                        --------     -------------      -----

  CHILDREN'S                             (32%)           18%           (21%)
  WOMEN'S                                (49%)           54%           (30%)
  MEN'S                                   58%            71%            62%

    TOTAL VOLUME INCREASE (DECREASE)     (30%)           37%           (16%)


SIX MONTHS ENDED MAY 31,                        VOLUME OF FOOTWEAR SOLD
------------------------                        -----------------------
                                       INCREASE (DECREASE) BETWEEN 1997 AND 1996
                                       -----------------------------------------
                                        DOMESTIC     INTERNATIONAL      TOTAL
                                        --------     -------------      -----

  CHILDREN'S                             (40%)          (17%)          (35%)
  WOMEN'S                                (67%)           20%           (52%)
  MEN'S                                  (38%)          (10%)          (32%)

    TOTAL VOLUME DECREASE                (49%)           (5%)          (41%)

    The decrease in domestic net sales in the second quarter of fiscal 1997 
was due primarily to: (i) a reduction in the number of pairs sold and in the 
average selling price per pair of children's shoes, and (ii) a decrease in 
women's shoes sold to Wal-Mart.  Domestic men's shoe sales increased during 
the second quarter of 1997 compared to year-ago levels primarily from an 
increase in men's shoes sold to Wal-Mart. The decrease in domestic net sales 
for the first half of fiscal 1997 was primarily attributable to sales of 
$33.1 million to Wal-Mart in the first half of 1996 in fulfillment of 
Wal-Mart's 1995 minimum purchase commitment.  This compares to sales to 
Wal-Mart of $6.9 million in the first half of fiscal 1997.  Additionally, the 
Company experienced lower sales volume and lower average selling prices per 
pair across its product lines in the first half of fiscal 1997 compared to 
the prior year period.  The lower average selling prices per pair for both 
the second quarter and first half of fiscal 1997 were in part due to a 
greater proportion of sales of discontinued product.

    Total international net sales in the second quarter of fiscal 1997 remained
relatively flat with year-ago levels as increased footwear sales, particularly
in adult product of the Company's continuing subsidiary operations in the United
Kingdom and France, were offset by lower footwear and apparel sales in Germany,
Italy, and Holland where operations have been transitioned from direct
subsidiaries to independent distributors.   For the first half of fiscal 1997,
international sales decreased from year-ago levels principally from: (i) the
aforementioned transition of operations in certain European countries, and (ii)
the closure of the Company's Far East joint venture with Inchcape Pacific
Limited in September 1996 and the lack of alternative distribution arrangements
in those markets since that time.

    Total sales of the Company's children's lighted shoes decreased by $4.3
million to $8.1 million in the second quarter of fiscal 1997 from $12.4 million
in the comparable prior year period, primarily due to lower worldwide demand.
For the first half of fiscal 1997, total sales of the Company's children's
lighted shoes decreased by $12.9 million to $19.9 million from $32.8 million in
the comparable prior year period, primarily due to a decrease internationally in
both volume and average selling price per pair.


                                          11


<PAGE>

GROSS MARGIN
--------------------------------------------------------------------------------

    The gross margin for the second quarter and first half of 1997 decreased to
17.4% and 20.6%, respectively, from 25.2% and 29.2% during the comparable
periods in 1996, respectively.  The decrease principally resulted from
a decline in domestic gross margins to 13.4% and 17.8% in the second quarter and
first half of fiscal 1997, respectively, from 28.5% and 30.2% during the
comparable periods of fiscal 1996.  The decline in domestic gross margins is
attributable to a combination of increases in reserves for slow moving and
discontinued inventory and a greater proportion of sales of discontinued
product.  The aforementioned reduction of sales to Wal-Mart during fiscal 1997
also contributed to the Company's lower domestic margins in the first half of
fiscal 1997 over the comparable prior year period.

    International gross margins increased from 18.4% in the second quarter of 
fiscal 1996 to 22.7% in the comparable period of 1997.  The international 
gross margin in the second quarter of fiscal 1996 was adversely impacted by 
margins recorded by the Company's Far East joint venture which was closed in 
September 1996. For the first half of fiscal 1997, international margins 
decreased  to 25.5% from 26.6% in the comparable period in fiscal 1996.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------------------------------------------

    Total selling, general and administrative expenses decreased by $9.0
million, or 44.0%, to $11.5 million in the second quarter of 1997 and decreased
by $19.4 million, or 44.2%, to $24.5 million in the first half of 1997 compared
to the respective prior year periods.   Approximately $5.8 million and $14.4
million in restructuring costs incurred in the second quarter and first half of
fiscal 1997, respectively, were applied against the restructuring reserve
established in 1996.  As a percentage of net sales, selling, general and
administrative expenses were 39.9% and 38.4% in the second quarter and first
half of fiscal 1997, respectively, compared to 53.3% and 37.5% in the comparable
prior year periods.

    Domestic selling, general and administrative expenses decreased by $4.9 
million, or 33.4%, to $9.8 million in the second quarter of 1997 and 
decreased by $12.8 million, or 39.8%, to $19.4 million in the first half of 
fiscal 1997 compared to the comparable prior year periods.  These decreases 
were largely due to expense reductions realized from the implementation of 
the Company's 1996 corporate reorganization plan and includes reductions in 
(i) compensation and benefit expenses, and (ii) advertising and promotional 
expenses.

    International selling, general and administrative expenses decreased by 
$4.1 million, or 70.8%, to $1.7 million in the second quarter of fiscal 1997, 
and decreased by $6.6 million, or 56.3%, to $5.1 million in the first half of 
fiscal 1997 compared to the comparable prior year periods.  These decreases 
were primarily due to (i) the transition of operations in Germany, Italy, and 
Holland from direct subsidiaries to independent distributors, and (ii) the 
elimination of all operating expenses associated with the Company's Far East 
joint venture.

OTHER INCOME
--------------------------------------------------------------------------------

    Other income consists of foreign exchange gains of $728,000 in connection 
with the sale of stock and assets in certain foreign subsidiaries and of 
$889,000 of gain from the dissolution of the Company's Far East joint venture 
with Inchcape Pacific Limited.

RESTRUCTURING CREDITS
--------------------------------------------------------------------------------

    During the second quarter and first half of fiscal 1997, the Company
recognized $1.9 million and $2.1 million, respectively, of income representing
adjustments to restructuring reserves relating primarily to: (i) the sublease 
of premises at its Santa Monica and Ontario locations at more favorable terms 
and shorter vacancy periods than originally anticipated, and (ii) greater 
consideration than orginally anticipated from the sale of stock and assets of 
certain European subsidiaries.


                                          12

<PAGE>

INTEREST EXPENSE, NET
--------------------------------------------------------------------------------

    Interest expense of $1.0 million and $1.9 million for the three and six 
months ended May 31, 1997, respectively, and $1.0 million and $2.1 for the 
three and six months ended May 31, 1996, respectively, was primarily related 
to interest costs on the $50 million, 7 3/4% convertible subordinated 
debentures due 2002 issued in December 1992.   Interest income decreased to 
$58,000 and $291,000 for the three and six months ended May 31, 1997, 
respectively, compared to $516,000 and $950,000 in the comparable prior year 
periods primarily as a result of decreased average cash balances.

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------

    The following table sets forth certain information regarding the Company's
liquidity and capital resources:

                                            MAY 31,          NOVEMBER 30,
                                             1997                1996
                                             ----                ----
                                              (DOLLARS IN THOUSANDS)

CASH AND CASH EQUIVALENTS                  $  9,331            $ 34,239
WORKING CAPITAL                              33,689              46,467

OUTSTANDING LETTERS OF CREDIT                15,697              26,467
CONVERTIBLE SUBORDINATED DEBENTURES          50,000              50,000

                                        THREE MONTHS ENDED  SIX MONTHS ENDED
                                             MAY 31,             MAY 31,
                                         ---------------     --------------
                                         1997       1996     1997      1996
                                         ----       ----     ----      ----

AVERAGE DAILY SHORT-TERM BORROWINGS     $412       $--      $208        $4
WEIGHTED AVERAGE INTEREST RATES         9.91%       --%     9.91%     8.25%

    CASH AND CASH EQUIVALENTS  Cash and cash equivalent balances decreased by
$24.9 million from November 30, 1996 to a balance of $9.3 million at May 31,
1997 primarily due to $25.6 million in net cash used for operating activities
including the payment of certain restructuring costs of $8.0 million in the
first half of fiscal 1997.

    WORKING CAPITAL  Working capital decreased by $12.8 million to $33.7
million during the six month period ended May 31, 1997.  The decrease was
primarily due to the reduction in cash and cash equivalents that were used to
finance the Company's operating losses and due to a reduction in inventories.

    BORROWING FACILITIES  On May 21, 1997, the Company entered into a Loan and
Security Agreement (the "Agreement") with Congress Financial Corporation which
provides the Company with a new three-year revolving credit facility (the
"Revolving Facility") through May 2000, for loans and letters of credit. The
Revolving Facility replaces the Company's previous revolving credit facility
with BankAmerica Business Credit.

    The  Revolving Facility provides for maximum borrowings outstanding at any
time of the lesser of: (i) $40 million for aggregate loans and letters of
credit, or (ii) an amount equal to a borrowing base calculated on the Company's
eligible accounts receivable and inventory as defined under the Agreement.
There is a $25 million sublimit for outstanding aggregate loans at any time.
Loans bear interest at the publicly announced prime rate of CoreStates Bank,
N.A. plus 1/4% for up to $5 million of loans outstanding, and at such prime rate
plus 1/2% for loans outstanding in excess of $5 million. The Revolving Facility
is secured primarily by the Company's domestic assets .

    As of May 31, 1997, there were no cash borrowings and approximately $15.7
million of letters of credit commitments outstanding under the Revolving
Facility, with $7.2 million available for borrowing.  During the three months
ended May 31, 1997 the Company's maximum loans outstanding under the prior
revolving credit facility with BankAmerica Business Credit were $2.3 million.


                                          13

<PAGE>

    The Company's liquidity is contingent primarily on attaining forecast
levels of sales, gross margins and operating expenses.  The Company believes
that based on its current forecast, its present funding sources are sufficient
to meet its liquidity needs.  However, the Company can make no assurances that
it will meet its current forecast. In the event that the Company's future
operating results fall below management's expectations, additional sources of
working capital funding may be necessary and difficult to obtain.

    CONVERTIBLE SUBORDINATED DEBENTURES  The $50 million Debentures are 
convertible into shares of the Company's Common Stock at a conversion rate of 
$12.30 per share, and are redeemable by the Company at any time, initially at 
a specified premium to par, declining to par for redemptions on or after 
November 30, 2000.

         SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK The Series B 
Cumulative Convertible Preferred Stock, stated value $100 per share, accrues 
dividends at a rate of 71/2% per annum, and is convertible into shares of the 
Company's Common Stock at a conversion price of $6.75 per share.  The Company 
elected not to pay cash dividends aggregating $4.4 million required on 
the Series B Preferred Stock due February 28, 1997 ($2.2 million) and May 31, 
1997 ($2.2 million).  The aggregate unpaid dividends will bear additional 
dividends accruing at a rate of 8 5/8% per annum, compounded quarterly, until 
all such arrearages are paid.

FUTURE OUTLOOK
--------------------------------------------------------------------------------

    THIS DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE TIMING OF CERTAIN
EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS DUE TO A NUMBER OF FACTORS, INCLUDING THOSE SET FORTH IN THIS
DISCUSSION.  SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 15.

    Beginning with the Fall 1997 product line, the Company has adopted a new
strategy aimed at differentiating its products among its various tiers of
distribution channels.  This strategy involves two major components:

    (i)  NEW COMPANY BRANDS  These new brands are designed to appeal to
         demographic groups with whom the Company is not currently achieving
         significant market share penetration.  Two new brands being introduced
         for Fall 1997 are Mongo-TM-, a fashion-forward casual shoe designed to
         appeal to trend-setting young adults; and Digit3-TM-, a performance
         brand for the extreme sports enthusiast.

    (ii) SUB-BRANDS AND CO-LABELING  The Company is now introducing the sub-
         brand L.A. Lights-Registered Trademark- by L.A. Gear as the umbrella
         brand for all four of its children's lighted product lines. Within the
         women's product line, the Company has added the co-label ABS+-TM- to
         its women's athletic shoes containing new cushioning technology.

    Successful product differentiation and distribution segmentation are vital
to the Company's attempts to realize revenue growth and margin improvement.
Accordingly, the Company will now offer its newest technologies, brands and
co-labels at higher tiered distribution channels while continuing to offer its
basic lines through all of its distribution channels.

    Although the Company's strategy has been favorably received by many of the
Company's key retailers, it is too early to assess the impact of this strategy
on the Company's future operations as the initial shipments of the Fall 1997
products are currently taking place.  Successful sell-through of these initial
shipments at the retail level and subsequent "at once" re-orders will be
critical to the Company's financial performance for the balance of the year.

    The Company had a combined domestic and international order backlog of 
$33.5 and $51.8 million at June 30, 1997 and 1996, respectively.  The 
domestic backlog declined by $14.0 million from $36.5 million at June 30, 
1996 to $22.5 million at June 30, 1997 while the international backlog 
declined by $4.3 million from $15.3 million at June 30, 1996 to $11.0 million 
at June 30, 1997. Year-ago backlog data includes orders for the children's 
Graf/x-TM- product line that was subsequently discontinued.  In addition, 
year-ago international backlog includes orders for direct subsidiary 
operations in certain European countries which have since been converted to 
independent distributorships as well as including orders for the Company's 
Far East joint venture which was subsequently terminated.  Orders for 
children's lighted shoes as a percentage of the total backlog at June 30, 
1997 and 1996 were 37.4% and 30.9%, respectively.  The trends in backlog from 
period to period may not be indicative of future actual shipment trends.

                                          14
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Certain statements in this report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  Such factors include, among others, the following: general economic
and business conditions; the size and growth of the overall athletic footwear
market; changes in consumer preferences and demographics; competition; success
of operating initiatives; development and operating costs; advertising and
promotional efforts; brand awareness; the existence or adherence to development
schedules; the existence of adverse publicity; new product development and
introduction; the loss of significant customers; availability, location and
terms of product distribution channels; changes in business strategy or
development plans; quality of management; availability, terms and deployment of
capital; business abilities and judgment of personnel; business disruptions; the
ability to reverse recent trends that have caused reductions in market share and
substantial losses; continued access to licensed intellectual property rights;
continued access to adequate sources of product supply; risks associated with
unaffiliated manufacturers and international operations; and other factors
referenced in this report.  Given such uncertainties, shareholders are cautioned
not to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such forward-looking statements to
reflect future events or developments.

    In addition, the Company has implemented several measures in fiscal 1996 
and 1997 discussed elsewhere in this Form 10-Q in an effort to reorganize its 
production and distribution structures and to reduce its overhead and other 
costs.  The Company's ability to capitalize on these measures will depend in 
large part on its ability to predict and quickly exploit fashion trends in 
the footwear market and thereby attain its revenue and margin goals. The 
Company believes that its business strategy for fiscal 1997 will better 
position it to address changes in the marketplace and to build on its past 
successes in offering branded footwear in the market.  However, if sales, 
margins and operating expense savings in fiscal 1997 fall below management's 
expectations, additional sources of working capital may be necessary and 
difficult to obtain.  There can be no assurance that the Company will be able 
to successfully exploit this strategy or that the strategy will have the 
desired effect.

                                          15
<PAGE>

                             PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

    (a)  The Company entered into agreements on May 24, 1997 with Aaron Design,
         Inc. and Tseng-Lu Chein whereby: (i) the Company received an exclusive
         license to use certain of Aaron Design's and Tseng-Lu Chein's patents
         and patents pending in the Company's lighted footwear products; (ii)
         the parties entered into a footwear electronic component supply
         agreement to supply certain electronic components for the Company's
         lighted footwear; and (iii) the parties agreed to settle and dismiss
         that certain action entitled LA GEAR, INC. V. AARON DESIGN, INC.,
         TSENG-LU CHEIN, A.K.A. IVAN CHEIN, CV 96-6351 LGB (Ex), which
         dismissal with prejudice was entered in the U.S. District Court for
         the Central District of California on June 3, 1997.

    (b)  L.A. GEAR, INC. V. NICHOLAS RODGERS, ET. AL. On November 6, 1996 
         L.A. Gear filed a complaint and motion in the United States District 
         Court for the Central District of California for an injunction 
         against Nicholas Rodgers and two companies owned and/or controlled 
         by him entitled L.A. GEAR, INC. V. ORLAFORD LIMITED, ET. AL., Civil 
         Case No. 96-7767 LGB (Cwx.).  Rodgers is the holder of a patent that 
         relates to the lighted shoe technology previously employed in styles 
         marketed under the name "L.A. Lights" that Rodgers had licensed to 
         L.A. Gear's sourcing agent for its lighted shoes, BBC International, 
         Ltd. ("BBC"), in return for royalty payments.  BBC had in turn 
         granted a sublicense to the Company to allow the Company to sell 
         such lighted shoes in return for a commission covering, among other 
         things, the royalty BBC was required to pay Rodgers.  Early in 1996, 
         and unbeknown to L.A. Gear, Rodgers filed suit against BBC in 
         Wisconsin for patent infringement claiming that in addition to the 
         Company's shoes, BBC was sourcing the manufacture of shoes for Kmart 
         Corporation and others for which no royalty was being paid.  Rodgers 
         sought to terminate BBC's license on the patent. Once L.A. Gear 
         learned of this suit, it began using a technology different from
         the technology described in Rodgers' patent to manufacture lighted 
         shoes.  In imposing sanctions against BBC, however, the Wisconsin 
         court specifically ruled that L.A. Gear was not a party to the 
         Wisconsin action and hence no sanctions could be imposed against L.A. 
         Gear. Meanwhile, BBC, after having contempt sanctions imposed on it in 
         Wisconsin, appealed the Wisconsin court's ruling.  Subsequently, BBC 
         and Rodgers reached settlement.

         L.A. Gear, in its suit, seeks a determination that the technologies
         currently used in its lighted shoes are different than the technology
         that was the subject of the action brought against BBC in Wisconsin,
         and that such shoes do not infringe any patent held by Rodgers.  L.A.
         Gear's motion for an injunction, which seeks to prevent Rodgers from
         enforcing his patent against L.A. Gear, currently is due to be heard
         by the court in August 1997.  Pending a hearing, L.A. Gear and Rodgers
         have agreed upon a stipulated order which prevents Rodgers from
         interfering with the sale of L.A. Gear shoes.

         Rodgers filed an action in Wisconsin against L.A. Gear on January 17,
         1997 for patent infringement.  Rodgers has dismissed his Wisconsin
         action and will refile it as a counterclaim to L.A. Gear's California
         action.  L.A. Gear believes any such claims against it are without
         merit and intends to vigorously defend any such claims.

    (c)  FINEXPANCE S.P.A V. L.A. GEAR, INC., TRIBUNAL OF CHIAVARI, ITALY.  On
         February 9, 1993, Finexpance S.p.A ("Finexpance"), the exclusive
         distributor of the Company's products in Italy from January 22, 1988
         until February 1, 1993, filed a complaint against L.A. Gear alleging,
         among other things, unfair competition and loss of customer base and
         goodwill.  Plaintiff is seeking damages in excess of $22 million.
         L.A. Gear believes Finexpance's claims are without merit and intends
         to vigorously defend the action.  A further hearing was held on the
         matter on April 23, 1997.  No additional action is required in this
         matter until late 1997 or early 1998.

ITEM 2 - CHANGES IN SECURITIES

         Not applicable


                                          16
<PAGE>

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

         The Series B Preferred Stock, stated value $100 per share, accrues
         dividends at a rate of 7 1/2% per annum, and is convertible into shares
         of the Company's Common Stock at a conversion price of $6.75 per
         share.

         The Company elected not to pay cash dividends aggregating $4.4 
         million required on the Series B Preferred Stock due February 28, 
         1997 ($2.2 million) and May 31, 1997 ($2.2 million).  The aggregate 
         unpaid dividends will bear additional dividends accruing at a rate 
         of 8 5/8% per annum, compounded quarterly, until all such arrearages 
         are paid.

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

    (a)  The Annual Meeting of Shareholders of the Company was held on April
15, 1997.

    (b)  Not applicable.

    (c)(i)    PROPOSAL ONE: Election of Directors
                                                             Total Vote
                                          For                 Withheld
                                          ---                 --------
              William L. Benford       36,442,745             643,762
              Walter C. Bladstrom      36,433,013             653,494
              Allan E. Dalshaug        36,432,752             653,755
              Willie D. Davis          36,432,752             653,755
              Stanley P. Gold          36,444,830             641,677
              Stephen A. Koffler       36,433,137             653,370
              Ann E. Meyers            36,434,972             651,535
              Clifford A. Miller       36,448,352             638,155
              Robert G. Moskowitz      36,435,037             651,470
              Vappalak A. Ravindran    36,435,037             651,470

    (c)(ii)   PROPOSAL TWO: Ratification of the appointment of Price Waterhouse
              LLP as the Company's independent accountants for the fiscal year
              ending November 30, 1997.

              For:                     36,642,433
              Against:                    266,866
              Abstain:                    177,208

    (d)       Not applicable.

ITEM 5 - OTHER INFORMATION

    (a)  As reported in the Company's Form 10-K, in November 1996, the Company
         announced a plan for the consolidation and restructuring of its
         European operations.  As part of that plan, the Company in fiscal 1997
         sold the stock of its subsidiary in The Netherlands, and placed its
         Italian and German subsidiaries in liquidation and dormancy,
         respectively.  In addition, the Company entered into independent
         distributorship agreements for the servicing of its customers in The
         Netherlands, Italy, and Germany while continuing to service its
         customers in Belgium, France and the United Kingdom through its direct
         subsidiaries.

    (b)  On July 1, 1997, L.A. Gear announced certain changes in the senior
         management of the Company.

         David F. Gatto, has returned to the Company as Executive Vice
         President and Chief Administrative Officer overseeing the Company's
         legal, finance, human resources, distribution and information
         technology functions.

         D. Garn Anderson will be joining the Company as Vice President of
         Finance.

         William R. Sherman was promoted to Vice President, General Counsel and
         Secretary.

         Victor J. Trippetti, the Company's Senior Vice President and Chief
         Financial Officer, has elected early retirement.


                                          17
<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits:

              10.1 Loan and Security Agreement, dated May 21, 1997, by and
              between L.A. Gear California, Inc. and Congress Financial
              Corporation (Western) ("Congress").

              10.2 Continuing Guaranty and Waiver, dated as of May 21, 1997, by
              L.A. Gear, Inc. in favor of Congress.

              10.3 General Security Agreement, dated May 21, 1997, by L.A.
              Gear, Inc. in favor of Congress.

              10.4 Patent and Trademark Security Agreement, dated as of May 21,
              1997, between L.A. Gear California, Inc. and Congress.

              10.5 Patent and Trademark Security Agreement, dated as of May 21,
              1997, between L.A. Gear, Inc. and Congress.

              10.6 Assignment of Proceeds of Letter of Credit, dated May 21,
              1997, between L.A. Gear California, Inc. and Congress.

              27.1 Financial Data Schedule

    (b)  Reports on Form 8-K:

              Not applicable.


                                          18
<PAGE>

                                      SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Dated:        July 15, 1997                 L.A. GEAR, INC.
       --------------------------



                                            By:  /s/ Bruce W. MacGregor
                                                 -----------------------------

                                                 Bruce W. MacGregor
                                                 President and
                                                 Chief Operating Officer


                                            By:  /s/ Victor J. Trippetti
                                                 -----------------------------

                                                 Victor J. Trippetti
                                                 Senior Vice President and
                                                 Chief Financial Officer


                                          19
<PAGE>

                                    EXHIBIT INDEX


<TABLE>
<CAPTION>

Exhibit No.  Document                                                          Page No.
-----------  --------                                                          --------
<S>          <C>                                                               <C>
       10.1  Loan and Security Agreement, dated May 21, 1997, by and between
             L.A. Gear California, Inc. and Congress Financial Corporation
             (Western) ("Congress").                                              21

       10.2  Continuing Guaranty and Waiver, dated as of May 21, 1997, by
             L.A. Gear, Inc. in favor of Congress.                                70

       10.3  General Security Agreement, dated May 21, 1997, by L.A. Gear,
             Inc. in favor of Congress.                                           76

       10.4  Patent and Trademark Security Agreement, dated as of May 21,
             1997, between L.A. Gear California, Inc. and Congress.               91

       10.5  Patent and Trademark Security Agreement, dated as of May 21,
             1997, between L.A. Gear, Inc. and Congress.                          99

       10.6  Assignment of Proceeds of Letter of Credit, dated May 21,
             1997, between L.A. Gear California, Inc. and Congress.              108

       27.1  Financial Data Schedule                                             110
</TABLE>

                                          20