SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-K

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

                   For the fiscal year ended December 31, 1996

                                       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 0-1282-3

                             Swiss Army Brands, Inc.
             (Exact name of registrant as specified in its charter)

                Delaware                      13-2797726
          (State of incorporation) (I.R.S. Employer Identification No.)

         One Research Drive, Shelton, Connecticut          06484
         (Address of principal executive offices)        (Zip Code)

       Registrant's telephone number, including area code: (203) 929-6391

Securities registered pursuant to Section 12(b) of the Act:
                                           Name of each exchange on
          Title of each class                 which registered
                None                            Not applicable

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $.10 par value per share
                                (Title of Class)

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

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

     The  aggregate  market value of voting stock held by  nonaffiliates  of the
registrant on March 17, 1997, was approximately  $56,206,950.  On such date, the
closing  price of  registrant's  common  stock was $12.50 per share.  Solely for
purposes of this calculation,  shares beneficially owned by directors, executive
officers and stockholders of the registrant that  beneficially own more than 10%
of the registrant's common stock have been excluded,  except shares with respect
to which  such  directors  and  officers  disclaim  beneficial  ownership.  Such
exclusion  should not be deemed a  determination  or admission by the registrant
that such individuals are, in fact, affiliates of the registrant.

     The  number  of  shares  of  Registrant's  Common  Stock,  $.10 par  value,
outstanding on March 17, 1997, was 8,209,610 shares.


                    DOCUMENTS INCORPORATED BY REFERENCE: NONE





<PAGE>
                            SWISS ARMY BRANDS, INC.
                                AND SUBSIDIARIES
                                     INDEX
<TABLE>
<CAPTION>

PART I:        INFORMATION                                       Page No.
<S>           <C>                                               <C>

Item 1.        Business                                          3 - 8

Item 2.        Properties                                            9

Item 3.        Legal Proceedings                                     9

Item 4.        Submission of Matters to a Vote of Security
               Holders                                               9

PART II:

Item 5.        Market for Registrant's Common Equity and Related
               Stockholder Matters                                  10

Item 6.        Selected Financial Data                              11

Item 7.        Management's Discussion and Analysis of
               Financial Condition and Results of Operations   12 - 15

Item 8.        Financial Statements and Supplementary Data          16

Item 9.        Disagreements on Accounting and Financial
               Disclosure                                           16

PART III:

Item 10:       Directors and Executive Officers of the
               Registrant                                      17 - 22

Item 11:       Executive Compensation                          23 - 28

Item 12.       Security Ownership of Certain Beneficial
               Owners and Management                           28 - 31

Item 13.       Certain Relationships and Related Transactions  31 - 33


PART IV:       FINANCIAL INFORMATION

Item 14.       Exhibits, Financial Statement Schedules, and
               Reports on Form 8-K

                 Report of Independent Public Accountants          F-1

                 Consolidated Balance Sheets as of
                  December 31, 1996 and 1995.               F-2 to F-3

                 Consolidated Statements of Operations for the
                  Years Ended December 31, 1996, 1995
                  and 1994.                                        F-4

                 Consolidated Statements of Stockholders Equity
                  for the Years Ended December 31, 1996,
                  1995 and 1994.                                   F-5

                 Consolidated Statements of Cash Flows for the
                  Years Ended December 31, 1996, 1995
                  and 1994.                                        F-6

                 Notes to Consolidated Financial Statements F-7 to F-25

                 Schedule II                                       F-26

               Exhibits and Reports                                 43

</TABLE>
                                       2
<PAGE>


                                     PART I

Item 1.    Business

     Swiss  Army  Brands,  Inc.  ("SABI"  or the  "Company")  is  the  exclusive
distributor in the United States,  Canada (with one minor exception for cutlery)
and the  Caribbean  of the  Victorinox  Original  Swiss Army  Knife,  Victorinox
cutlery and  Victorinox  watches.  SABI also  markets its own line of Swiss Army
Brand Watches and other high quality  Swiss-made  products  under its Swiss Army
Brand worldwide.  The Company has been marketing  Victorinox Original Swiss Army
Knives and  Victorinox  cutlery for over fifty years and has been the  exclusive
United States  distributor of such products since 1972, an arrangement  that was
formalized in 1983. SABI added Canada and the Caribbean  (including  Bermuda) to
its exclusive  territory for  Victorinox  Original Swiss Army Knives in 1992 and
1993, respectively. Victorinox Original Swiss Army Knives as well as watches and
other Swiss Army Brand products are marketed  primarily to retailers and also to
corporate gift buyers as advertising  specialty  products.  SABI's cutlery line,
which also includes imported products from Germany,  England and France, is sold
primarily to the food processing and service industries.

     Sales of Victorinox  Original Swiss Army Knives accounted for approximately
34% of SABI's  1996 sales  while  watches  and other  Swiss Army Brand  products
accounted for  approximately  48%. Sales of  professional  and consumer  cutlery
accounted for approximately  18% of SABI's 1996 sales.  Total SABI sales for the
calendar  years  1996,  1995  and  1994  were  $130,030,000,   $126,695,000  and
$144,437,000,  respectively.  Approximately  1%, 6% and 25% of the Company's net
sales  for each of the three  years  ended  December  31,  1996,  1995 and 1994,
respectively, were to Cyrk, Inc. ("Cyrk"), a Massachusetts- based company in the
business of developing,  manufacturing and distributing products for promotional
programs.  No other customer accounted for more than 10% of net sales during any
year in the three year  period  ended  December  31,  1996.  Foreign  operations
accounted  for 13% of the  Company's  net  sales  in  1996.  See  Note 14 to the
Company's Financial Statements included herein for further information regarding
the Company's foreign operations.  At December 31,  1996 SABI had backlog orders
of  approximately  $5,193,000,  compared  to  backlog  orders of  $4,631,000  at
December 31, 1995.

     In the second  quarter of 1996,  as part of an  extensive  analysis  of the
Company's  operations,  the Company  recorded a special charge of  approximately
$7.4  million.  The special  charge  consisted  of a $4.5  million  write-off of
discontinued  inventory  and a $2.9  million  write-off  of  obsolete  displays,
goodwill,non-  strategic  investments and other assets. In the fourth quarter of
1996,  the Company  completed  its analysis and recorded an  additional  special
charge of  approximately  $2.5 million. The special  charge  consisted of a $1.6
million  write-down  related  to a  non-strategic  investment,  a  $0.4  million
write-off of  discontinued  inventory  and a $0.5 million  write-off of obsolete
displays and other assets.  See further  discussion in Management's  Discussions
and  Analysis  of  Financial   Condition  and  Results  of  Operations  and  the
Consolidated Financial Statements and related notes included herein.

     The Company was  incorporated  on December 12, 1974 as a successor to a New
York corporation. SABI's principal executive offices are located at One Research
Drive, Shelton, Connecticut 06484 and its telephone number is (203) 929-6391. As
of December 31, 1996,  SABI and its  subsidiaries  had 223 full- time employees,
including 10 in Canada and 4 in Switzerland.


                 Swiss Army Knives and Swiss Army Brand Products

     SABI is the exclusive United States,  Canadian and Caribbean distributor of
Victorinox  Original Swiss Army Knives and Victorinox  Watches under  agreements
with SABI's principal supplier of pocket knives and cutlery,  Victorinox Cutlery
Company  ("Victorinox"),  a  Swiss  corporation  and  Europe's  largest  cutlery
producer.  SABI also sells  watches and other high  quality  products  under the
Swiss Army Brand worldwide.

                                       3
<PAGE>

     Victorinox   Original  Swiss  Army  Knives  are  multiblade  pocket  knives
containing implements capable of more functions than standard pocket knives. For
example,  SABI's  most  popular  Swiss Army Knife  model,  the  Classic,  with a
suggested  retail  price of $20,  features  a knife,  scissors,  nail  file with
screwdriver  tip,  toothpick and  tweezers.  SABI markets more than 40 different
models of Victorinox  Original  Swiss Army Knives  containing up to 30 different
implements (with up to 40 separate features),  ranging from a basic knife with a
suggested retail price of $10 to the highest priced model at approximately  $145
as well as a  SwissChamp  Deluxe SOS kit with a suggested  retail price of $175.
SABI also sells  multi-function  lock-back  knives  designed for the hunting and
sporting  goods  market.  In 1997,  the Company  added to its  product  line the
SwissCard, a credit card shaped, ten function instrument, and will introduce the
SwissTool,  a multi-tool.  The Company's line of Victorinox watches,  which were
recently  redesigned,  currently includes 15 models with suggested retail prices
ranging from $75 to $150. The Company  distributes its Victorinox Original Swiss
Army Knives  throughout the United States,  Canada and the Caribbean through its
direct  sales  force  and  independent  sales   representatives  to  over  3,800
wholesalers  and  retailers,  including  cutlery shops,  department,  specialty,
jewelry and sporting goods stores,  catalog  showrooms,  mass  merchandisers and
mail order houses.  In Canada and the  Caribbean,  the Company  distributes  its
Victorinox  Original Swiss Army Knives  principally  through  independent  sales
representatives.  In addition,  SABI sells Victorinox Original Swiss Army Knives
through  distributors to corporations  and other  organizations  for promotional
purposes, premium, employee gift award programs and corporate identity catalogs.
SABI imprints these knives  primarily at its own facilities  with the customer's
corporate name or logo.

     SABI's line of Swiss Army Brand products  includes ten models of Swiss Army
Brand Watches ranging from the Renegade, with a suggested retail price of $85 to
the Chronograph  with a stainless steel bracelet,  with a suggested retail price
of $495.  Swiss Army Brand  Watches are sold both through the direct sales force
which  markets  Victorinox  Original  Swiss Army  Knives and  through a separate
direct  sales force  selling to  approximately  550  department,  specialty  and
jewelry  stores.  In addition to its Swiss Army Brand Watches,  SABI sells Swiss
Army Brand Pens and Compasses.  SABI  currently  obtains a majority of its Swiss
Army Brand  Watches from a single Swiss  supplier,  who is  responsible  for the
final assembly of watch components  manufactured by several  manufacturers.  The
Company  believes that alternate  suppliers  would be available if necessary and
that the loss of its current supplier of Swiss Army Brand Watches would not have
a material adverse effect on the Company's business.

     In the first  quarter of 1997,  the Company added to its product line newly
designed Swiss Army Brand Sunglasses.  The Company's  sunglass line will include
forty-eight styles with suggested retail prices ranging $100 to $185.

     In 1997,  SABI  will add to its line of Swiss  Army  Brand  Watches a small
group of watches made of  titanium,  as well as several  extensions  of existing
models. Also, in 1997, the Company added to its watch line a new line of watches
marketed under the Allenby trademark.

     Sales of Swiss Army Knives and Swiss Army Brand  products are seasonal with
sales typically stronger during July through December.

     Although  the Company is the  largest  United  States  seller of Swiss Army
Knives, it faces competition from Precise Imports Corp. ("Precise"),  the United
States and Canadian distributor of Swiss Army Knives manufactured by Wenger S.A.
("Wenger"),  the only company other than Victorinox  supplying  pocket knives to
the Swiss armed forces. Precise imports a substantially smaller number of knives
into the United States than does SABI. The Company also faces  competition  from
the  manufacturers  and  importers of other  multiblade  knives and  multi-tools
including  importers  which sell non  Swiss-made  pocket knives under the "Swiss
Army Knife" name.  SABI is unable to determine  its  competitive  position  with
respect to the estimated  seven major  competitors  in the general United States
pocket knife market.  SABI's  direct  competitors  in the specialty  advertising
market are  manufacturers  of name brand  products of similar price and quality.
SABI has many  competitors  in the sale of watches and  sunglasses  at all price
points. Many of these competitors have market shares and resources substantially
greater than those of SABI.

                                       4
<PAGE>

     In 1992, in connection with the settlement of litigation with Precise, SABI
granted Precise a perpetual  worldwide royalty free license to use the trademark
Swiss  Army in  connection  with  Swiss made  non-knife  goods,  other than time
pieces,  sunglasses and compasses.  Under this agreement,  Precise  acknowledges
SABI's  exclusive  rights to the Swiss Army  trademark  for  non-knife  products
including time pieces, compasses and sunglasses.

     The  Company is the owner of United  States and certain  foreign  trademark
registrations  for "Swiss Army",  as applied to watches and  sunglasses  and has
successfully defended this trademark in lawsuits in Federal courts. Although the
Company's registrations have been challenged,  on the basis of the advice of its
trademark counsel, SABI expects to prevail in those proceedings.  The Company is
dedicated to a vigorous enforcement of these exclusive trademark rights.

     No U.S.  trademark  registrations have ever been issued for "Swiss Army" as
applied to multi-bladed  knives.  In 1994, in a case originally  brought by SABI
against  Arrow  Trading Co.,  Inc.  ("Arrow") in September  1992 in the District
Court for the Southern  District of New York,  the U.S. Court of Appeals for the
Second Circuit reversed a judgment  originally issued in the Company's favor and
held that the use of "Swiss  Army" on Chinese  made knives could not be enjoined
on grounds of geographic misdescriptiveness. On remand, the District Court ruled
that Arrow had violated  Section 43(a) of the Lanham Act and New York common law
in connection  with its sale of  Chinese-made  multi-bladed  pocketknives  which
Arrow  called  "Swiss  Army  Knives."  The court  found that SABI had proved its
contention  that  Arrow  engaged  in unfair  competition  and held  that  Arrow,
although  free to use the phrase  "Swiss Army Knife" to  designate  its product,
must  amply  distinguish  it from the SABI  product  and  prohibited  Arrow from
selling any multi-function pocketknives as "Swiss Army Knives" unless the phrase
"Swiss Army Knife" is immediately preceded or followed by Arrow's name in such a
way as to clearly designate its origin and that the size of the type designating
origin be no smaller or less  prominent  than the type used in the phrase "Swiss
Army Knife.".  The Company intends to utilize all reasonable  means to safeguard
the public from being misled by inferior imitation products.

     On January 17, 1995,  Victorinox and Wenger  confirmed and  memorialized in
writing  the grant of  separate  trademark  licenses of Swiss Army as applied to
multifunction  pocket  knives to each of SABI and  Precise.  The  license to the
Company  is  royalty  free and  continues  so long as SABI is a  distributor  of
Victorinox.  Victorinox and Wenger have filed with the U.S. Patent and Trademark
Office a dual  application  for "Swiss Army" as applied to  multibladed  knives,
which application has been opposed by various third parties.

     If  the  Company's   efforts  to  protect  its   trademarks   prove  to  be
unsuccessful,  the Company may incur increased  competition  from non-Swiss made
knives and other products sold under the "Swiss Army" name. No assurances can be
given  that such  competition  from  non-Swiss  made  products  would not have a
material adverse effect on the business and prospects of the Company.


                   The Swiss Confederation Trademark Agreement

     On December 18, 1996, the Swiss Military Department  representing the Swiss
Confederation  ("Swiss   Confederation")  and  SABI  entered  into  a  trademark
agreement (the "Trademark Agreement") pursuant to which SABI was granted certain
worldwide use and sublicensing  rights in connection with trademarks  containing
the words "Swiss Army" registered by the Swiss Confederation in Switzerland (the
"Swiss Confederation  Trademarks").  The Swiss Confederation acknowledged SABI's
exclusive right to use SABI's trademarks in the countries of their  registration
or application and agreed to assist SABI in enforcing SABI's rights with respect
to its trademarks.  In addition, the Swiss Confederation stated its intention to
assist  Victorinox,  Wenger,  SABI and Precise in safeguarding their rights with
respect to "Swiss Army" as applied to knives and in preventing the use of "Swiss
Army" with respect to multi-blade  pocketknives,  multi-tools and other products
which are not Swiss products.

     The Trademark  Agreement grants SABI the right to an exclusive royalty free
license  of the  Swiss  Confederation  Trademarks  as  applied  to  watches  and
sunglasses in the United States, Canada and the Caribbean.  SABI is also granted
such rights with respect to certain  designated  products  that either it or its
licensees  sell in commercial  quantities in the United  States,  Canada and the
Caribbean within designated time periods.  In the event SABI or its licensees do
not sell commercial quantities of product categories within the time periods set
by the  agreement,  the Swiss  Confederation  shall have the  right,  subject to
certain  conditions,  to license the Swiss  Confederation  Trademarks to a third
party and, in such event,  SABI shall be  obligated  to offer such third party a
license of SABI's appropriate trademark.

                                       5
<PAGE>

     Outside  of the United  States,  Canada and the  Caribbean,  the  Trademark
Agreement  provides for the grant to SABI of the right to an exclusive  license,
subject to the existing legal rights of others,  for watches and sunglasses at a
royalty equal to 3% of net sales.  In addition,  SABI has the right to a license
for certain  designated  products  outside of the United  States,Canada  and the
Caribbean,  also  at a  royalty  equal  to 3% of net  sales,  to use  the  Swiss
Confederation  Trademarks  provided  that SABI  commences the sale of commercial
quantities  of such  products  within time periods  prescribed  by the Trademark
Agreement.

     The  Trademark  Agreement  also  provides  that all products sold under the
license must be of a quality at least equal in workmanship  and materials to the
products currently sold by SABI, Victorinox or Wenger and that in the event SABI
discontinues  sales of goods in  commercial  quantities in any category of goods
for three  consecutive  years, the Swiss  Confederation  shall have the right to
terminate  the  license as to that  category  after  giving  SABI  notice and an
opportunity to resume sales. Except for the foregoing limitation,  the rights of
SABI with  respect to the use of the Swiss  Confederation  Trademarks  under the
Trademark  Agreement are perpetual.  It is anticipated that the right to utilize
the Swiss Confederation Trademarks on certain products other than timepieces and
sunglasses  will be made  available  to  Precise  by  SABI  on  terms  yet to be
discussed.


                        Professional and Consumer Cutlery

     The majority of SABI's  professional  cutlery  products,  made of stainless
steel,  are  manufactured  by Victorinox and by other  manufacturers  located in
Germany,  England  and France.  Although  the  majority  of SABI's  professional
cutlery  products  are  marketed  under  the  trademarks  "Forschner"  and  R.H.
Forschner," the Company also has a private label business.  SABI's customers for
professional  cutlery  include  distributors  of  hotel,  restaurant,   butcher,
institutional, commercial fishing and slaughterhouse supplies and retail cutlery
stores  located  throughout  the United  States and Canada.  In  addition,  SABI
markets the Victorinox line of floral knives to wholesale  florists.  Except for
retail sales made by the Company's  sales force,  the majority of SABI's cutlery
is  sold  through  manufacturers'  representatives  and  can  be  obtained  from
approximately 2,500 dealers.

     Professional  cutlery  imported from  Switzerland  and Germany is generally
more expensive than domestic United States  products.  SABI believes that it has
the largest market share of imported  professional  cutlery products sold in the
United  States  and that its  share of all  professional  cutlery,  foreign  and
domestic,  sold in  this  country  is  second  to the  dominant  seller  of such
products. SABI believes that it has achieved and maintained its market share due
to the  quality  of  its  products  and  its  merchandising  efforts.  Sales  of
professional cutlery products are not seasonal.

     Until January 31, 1997, SABI's wholly owned  subsidiary,  Cuisine de France
Limited,  imported and distributed  cutlery  products for consumer use under the
"Cuisine de France  Sabatier"  brand.  Cuisine de France  Limited  held the U.S.
trademark  for  "Cuisine de France" and had been granted the right by the holder
of the U.S. trademark  registration for "Sabatier" to use the name as applied to
knives in the United States.  Cuisine de France Limited distributed its consumer
cutlery  through sales  representatives  to retail cutlery stores and department
stores.  On January 31, 1997 Cuisine de France Limited entered into an agreement
providing for the sale of  substantially  all of the assets of Cuisine de France
Limited.

                                       6
<PAGE>

                              Victorinox Agreements

     All of SABI's products are  manufactured by independent  suppliers.  SABI's
principal  supplier  of pocket  knives  and  cutlery  is  Victorinox,  which has
manufactured  the Original Swiss Army Knife for the Swiss Army for more than 100
years.  The loss of this supplier would have a material adverse effect on SABI's
business.  SABI, now Victorinox's largest single customer, has been distributing
Victorinox's products since 1937.  Distribution was on a non-exclusive basis for
more than 45 years when, as a result of understandings  reached on SABI's behalf
by Mr. Louis Marx,  Jr. and Mr. Stanley R. Rawn,  Jr., both now SABI  Directors,
and Mr. Charles Elsener, Sr., Chief Executive Officer of Victorinox, SABI became
Victorinox's  exclusive United States  distributor of Victorinox  Original Swiss
Army Knives under an agreement dated December 12, 1983 (as subsequently amended,
the "U.S.  Distribution  Agreement").  In 1992 and 1993, Messrs.  Marx and Rawn,
together  with Mr. James W.  Kennedy,  then  Co-Chairman  of the  Company,  held
extensive conversations,  principally in Switzerland, with Victorinox looking to
expand the scope of SABI's exclusive territory.  This resulted in SABI obtaining
exclusive  distributorship  rights first in Canada,  and then in Bermuda and the
Caribbean  areas,  as well as SABI's  receipt of  exclusive  U.S.,  Canadian and
Caribbean  distribution rights to the Victorinox watch, which is supplied to the
Company by another Swiss manufacturer.

     The U.S.  Distribution  Agreement,  together with the Company's  agreements
with respect to the rights obtained in 1992 and 1993 (together,  the "Victorinox
Agreements"), provides:

     -    SABI  is  the  exclusive   distributor  in  the  United  States,   its
          territories  and  possessions,  Canada  (with  one  minor  exception),
          Bermuda  and  the  Caribbean  (excluding  Cuba  so  long  as  SABI  is
          prohibited by United States law from operating therein) (together, the
          "Territories"),  of  Victorinox  Original  Swiss Army  Knives and most
          other Victorinox  cutlery products and Victorinox  Swiss-made  watches
          (collectively,  "Products").

     -    The U.S. Distribution  Agreement was renewed through December 12, 1998
          and is  subject to renewal  at five year  intervals  at SABI's  option
          unless,  in any two consecutive  years,  purchases of Products by SABI
          fall  below  the  average  purchases  for 1981  and  1982,  which  was
          19,766,035 Swiss francs.  SABI's distribution rights in Canada and the
          Caribbean are for initial  terms of seven years  (expiring in 1999 and
          2000,  respectively),  subject to  renewal  for  successive  five year
          periods.  In the event  that  Victorinox  elects  not to renew  SABI's
          Canada  distribution  rights,  Victorinox will be required to pay SABI
          the amount of $3,500,000.

     -    During each calendar year SABI must purchase from  Victorinox at least
          85% of the maximum quantities of each of Swiss Army Knives and cutlery
          (expressed  in Swiss  francs)  purchased  in any prior year.  The only
          remedy of Victorinox  for SABI's  failure to achieve these goals would
          be the termination of SABI's U.S.  distribution  rights.  By agreement
          dated  December 18, 1995,  Victorinox  and the Company agreed that for
          1996 the minimum  purchase  requirement for Swiss Army Knives would be
          reduced to 75% of the maximum  quantity  purchased  in any prior year.
          The Company met this requirement in 1996. In 1996,  Victorinox  agreed
          to reduce the 1997 minimum purchase requirements for Swiss Army Knives
          to 65% of the maximum quantity purchased in any preceding year.

     -    In each calendar year Victorinox must, if requested, furnish SABI with
          up to 105% of each type of product  purchased  during the  immediately
          preceding year.  Victorinox has historically  been able to accommodate
          SABI's supply  requirements  even when they have exceeded such amount.
          However,  Victorinox's  plant has a finite  capacity and no assurances
          can be given  that  Victorinox  will  continue  to meet any  increased
          supply requirements of SABI.

     -    Pricing  provisions  assure that the prices paid by SABI for  products
          shipped  to the  United  States  will be as low or  lower  than  those
          charged to any other Victorinox customer. In addition, SABI is granted
          a 4%  discount  on  purchases  of pocket  knives and a 3%  discount on
          purchases of cutlery.  For products shipped directly to Canada and the
          Caribbean   (including   Bermuda),   the  prices   paid  by  SABI  are
          Victorinox's  regular  export  prices.  SABI also  pays a  royalty  to
          Victorinox  of 1% of net sales of  Victorinox  Watches.  In  addition,
          Victorinox  has informally  undertaken to share in SABI's  promotional
          costs  with  respect  to the  Victorinox  brand in an  amount of up to
          750,000 Swiss francs per year.
                                       7
<PAGE>
     -    SABI will not sell any new  cutlery  items  without the  agreement  of
          Victorinox.

     -    SABI will  have  complete  discretion  as to  advertising,  packaging,
          pricing and other marketing matters.


     In consideration of the grant of the Canada distributorship rights in 1992,
SABI issued to Victorinox  277,066  shares of common  stock,  par value $.10 per
share, of SABI ("Common Stock"). In consideration for the grant of the Caribbean
distribution  rights in 1993, the Victorinox watch  distribution  rights and the
acquisition by SABI of  Victorinox's  20% interest in a subsidiary of SABI, SABI
issued to Victorinox a five-year warrant to purchase  1,000,000 shares of Common
Stock at a discount  from the market price on the date of  exercise.  Victorinox
exercised  the  warrant in full in April  1994 at a price per share of $9.75,  a
discount of $4.25 per share from the then  current  market  price of SABI Common
Stock.  All of the shares issued upon exercise of the warrant were  subsequently
sold to Brae  Group,  Inc.  ("Brae"),  a corporate  shareholder  of SABI that is
controlled by Louis Marx, Jr., a Director of SABI, in exchange for shares of the
common stock of that corporation.

                            Hudson River Capital LLC

     In 1994, in furtherance of its acquisition strategy,  SABI invested a total
of  $7,002,990,  paid in cash  and in  shares  of  stock  of a  publicly  traded
corporation,  to acquire 700,299 shares of Series A Preferred Stock of Forschner
Enterprises,  Inc., a privately held  corporation  which was merged into Victory
Capital  LLC. In 1996,  Victory  Capital  LLC  changed its name to Hudson  River
Capital LLC ("Hudson River"). In 1996, SABI invested  $2,000,009,  paid in cash,
to acquire 190,477 Series B Preferred Units of Hudson River.  SABI's interest in
Hudson River currently represents,  in the aggregate,  approximately 9.1% of the
equity of Hudson River.  Hudson River is a private equity firm  specializing  in
middle market acquisitions, recapitalizations and expansion capital investments.
Hudson River  currently  has equity and other  interests in several  private and
publicly  traded  companies.  The  preferred  units of Hudson River held by SABI
carry a preference on liquidation equal to their cost and, in certain instances,
are entitled to an annual preferred return.

     In 1996,  Hudson  River  distributed  pro-rata  to its  members  all of its
interest in Victory  Ventures LLC, a private equity firm  specializing  in small
market venture capital investments  ("Victory  Ventures").  SABI received in the
distribution, and continues to hold, 890,776 Series A Preferred Units of Victory
Ventures valued at $1.23 per unit, currently representing  approximately 4.2% of
the equity of Victory Ventures.  The preferred units of Victory Ventures held by
SABI  carry a  preference  on  liquidation  equal to the  value of the  Series A
Preferred Units on the date of the distribution and, in certain  instances,  are
entitled to an annual preferred return.

     490,000 of Hudson  River's  common units and  2,338,170  of Hudson  River's
Series  B  Preferred   Units   (currently   representing,   in  the   aggregate,
approximately  29.2% of  Hudson  River's  outstanding  equity)  are held by Brae
Capital Corporation ("Brae Capital"), a wholly-owned subsidiary of Brae. 490,000
of Victory  Ventures'  common units and 4,697,985 of Victory  Ventures' Series A
Preferred Units (currently representing in the aggregate, approximately 25.1% of
Victory Ventures'  outstanding equity) are held by Brae Capital.  Pursuant to an
agreement between Hudson River and Brae, if certain  conditions are met, Brae is
required  to purchase  from Hudson  River at Hudson  River's  cost 10%,  and may
purchase up to 20%, of the "equity  portion"  (defined as the common and warrant
portion, or the preferred and warrant portion if no common is purchased provided
that the preferred  portion is  participating) of each investment made by Hudson
River.  Brae may  allocate  all or a portion of the  securities  to be  acquired
pursuant to such agreement among the officers, directors, employees, consultants
and common  equityholders of Hudson River and such other persons who may be in a
position to benefit Hudson River in such  proportions  as Brae shall  determine.
Brae is party to a similar agreement with Victory Ventures.

     Mr. Marx, a Director of SABI, is a Co-Chairman  of the Board and a Director
and an equityholder of Hudson River and, a director and,  indirectly,  an equity
holder of Victory  Ventures.  Mr.  Clarke H.  Bailey,  a Director of SABI,  is a
Co-Chairman of the Board and a Director and an  equityholder of Hudson River and
a Director and  equityholder  of Victory  Ventures.  Mr.  Stanley R. Rawn,  Jr.,
Senior Managing Director and a Director of SABI, and Mr. Herbert M. Friedman,  a
Director  of SABI,  also serve as  directors  and are  equityholders  of each of
Hudson River and Victory  Ventures.  Messrs.  A. Clinton  Allen and M. Leo Hart,
Directors of SABI, also serve as directors of Victory Ventures.

                                       8
<PAGE>


Item 2.  Properties.

     The  executive  and  administrative  offices of SABI  occupy  approximately
37,500  square feet of leased  space in an office  building  located in Shelton,
Connecticut. SABI moved into these premises in September, 1993. The initial term
of the lease on this space  expires on September  1, 2001,  subject to a renewal
option for an additional five-year term.

     In addition,  SABI leases  approximately 7.4 acres in Shelton,  Connecticut
upon which the landlord has constructed a 85,000 square foot building, increased
in January  1995 from  60,000  square  feet,  which SABI uses as a facility  for
warehousing, distribution, imprinting and assembly. The lease commenced in June,
1991 and has a term of ten years. SABI also leases  approximately  13,000 square
feet in a  building  in  Toronto,  Canada  which it uses for  office  space  and
warehousing of products. The lease commenced in December, 1992 and has a term of
five years.

     In 1996, SABI entered into a four-year lease for 7,000 square feet of space
in a 30,000 square foot building in Nidau, Switzerland for use as a distribution
center.

     SABI believes its properties are sufficient for the current and anticipated
needs of its business.


Item 3.  Legal Proceedings.

     Except as set forth or referenced below, the Company is not involved in any
material pending legal proceedings.

     Arrow filed on November  15, 1994  petitions to cancel the  Company's  U.S.
Trademark Reg. No.  1,734,665 for watches and Reg. No.  1,715,093 for sunglasses
for "Swiss Army".  Arrow failed to file evidence in support of its  cancellation
petitions  and the Company  moved to dismiss the  petitions on ground of lack of
prosecution.  Arrow has  opposed the  motions to  dismiss,  arguing  inadvertent
failure to prosecute.  The Company believes it has meritorious defenses to these
petitions although their outcome cannot be predicted at this time.

     The  Company is also a  plaintiff  in several  proceedings  to enforce  its
intellectual property rights.

     In  addition,  see  "Business  - Swiss  Army  Knives  and Swiss  Army Brand
Products".


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

                  Not Applicable.

                                       9
<PAGE>


                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         A.       Market Information.

     Shares of SABI's Common Stock are traded on the Nasdaq National Market tier
of The Nasdaq  Stock  Market  under the symbol  SABI.  The range of high and low
transactions  for  shares of Common  Stock,  which is the only  class of capital
stock of SABI outstanding, as reported by Nasdaq since the first quarter of 1995
were as follows:
<TABLE>
<CAPTION>

                        Fiscal 1995        Fiscal 1996         Fiscal 1997*
                       High      Low      High      Low       High      Low
<S>                   <C>       <C>      <C>        <C>       <C>       <C>
First Quarter         $12.88    $10.50   $12.50     $11.25    $14.13    $12.25
Second Quarter         10.88     10.00    15.00      12.00
Third Quarter          12.50     10.25    14.00      11.50
Fourth Quarter         12.38     11.13    14.25      12.75

*Through March 17, 1997.
</TABLE>


     The public market for Common Stock is limited and the foregoing  quotations
should not be taken as necessarily  reflective of prices which might be obtained
in actual market transactions or in transactions  involving  substantial numbers
of shares.

         B.       Holders.

     On March 17, 1997 shares of Common Stock were held by 352 persons, based on
the number of record holders,  including several holders who are nominees for an
undetermined number of beneficial owners.

         C.       Dividends.

     The  Company  has not paid a cash  dividend  since its  inception,  and its
present  policy  is to  retain  earnings  for use in its  business.  Payment  of
dividends is dependent  upon the  earnings and  financial  condition of SABI and
other factors which its Board of Directors  may deem  appropriate.  Under SABI's
bank loan agreement,  as amended, which expired on January 30, 1997, SABI agreed
not to declare or pay any dividends  unless  immediately  following such payment
SABI's ratio of indebtedness  to tangible net worth,  calculated as set forth in
the  agreement,  does not exceed 0.75 to one, and SABI's ratio of current assets
to current  liabilities  is in excess of 2.5 to one.  The  Company is  currently
negotiating a new bank loan agreement which could contain similar restrictions.

                                       10
<PAGE>

Item 6.  Selected Financial Data

     The following selected financial data for the five years ended December 31,
1996, was derived from the consolidated  financial statements of SABI. This data
should be read in  conjunction  with  Management's  Discussion  and  Analysis of
Financial  Condition and Results of Operations  and the  Consolidated  Financial
Statements, related notes and other financial information included herein.

<TABLE>
<CAPTION>

(In thousands, except per share amounts)        Year Ended December 31,

                                 1996(1)      1995        1994       1993        1992
<S>                             <C>         <C>         <C>        <C>          <C>

Net sales...................... $130,030    $126,695    $144,437   $102,543     $74,148
Gross profit...................   40,836      44,264      55,804     42,027      29,779
Selling, general and
  administrative expenses......   46,241      40,265      40,293     30,753      21,016
Operating income...............   (5,405)      3,999      15,511     11,274       8,763
Gain (loss) on sale (write-down)
  of investments...............   (2,382)      1,771          37        -           -
Other income (expense), net....      179        (134)        445        251         143
Income (loss) before income taxes
  and cumulative effect of
  accounting change............   (7,608)      5,636      15,993     11,525       8,906
Income tax provision (benefit).   (2,343)      2,523       6,633      4,221       3,974

Income (loss) before cumulative
  effect of accounting change..   (5,265)      3,113       9,360      7,304       4,932
Cumulative effect of accounting
  change for income taxes......       -          -            -         220         -
                                 ---------   ---------   ---------   --------    --------
Net income (loss)..............  ($5,265)     $3,113     $ 9,360    $ 7,524     $ 4,932
Earnings per share:
  Income (loss) before cumulative
   effect of accounting change.   ($0.64)     $ 0.38     $  1.16    $  1.04     $  0.80
  Cumulative effect of accounting
    change for income taxes....       -           -           -        0.03         -
                                 ---------   ---------   ---------   --------    --------
  Net income (loss)............   ($0.64)     $ 0.38     $  1.16    $  1.07     $  0.80
Other Financial Data:
Current assets.................  $70,933     $74,355     $78,641    $57,551     $43,664
Total assets...................   98,643     101,230     105,708     78,004      54,283
Current liabilities............   18,787      16,291      23,932     17,651      10,756
Long-term debt ................       -           -           -          -           -
Stockholders' equity...........   79,856      84,939      81,775     60,353      43,038
Cash dividends per common share  $    -      $    -      $    -     $    -      $    -

Weighted average number of shares
  outstanding..................    8,202       8,236       8,062      7,053       6,186

</TABLE>


     (1) The financial results for 1996 include special charges of approximately
$9.9 million. See Note 3 to the Company's Consolidated Financial Statements. The
special charges consisted of a $4.9 million write-off of discontinued  inventory
(included  in cost of sales),  a $2.6 million  write-off  of obsolete  displays,
goodwill  and other  assets  (included  in selling,  general and  administrative
expenses) and a $2.4 million write-down of non-strategic investments.

                                       11
<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Results of Operations


     In 1996,  net sales  totaled  $130.0  million,  a 2.6%  increase from 1995.
However,  excluding sales to a single customer for special promotional programs,
the Company  experienced sales growth of 8% primarily due to growth in its Swiss
Army Brand Watch and cutlery businesses offset in part by a decrease in sales of
Victorinox  Original Swiss Army Knives.  Sales relating to this single  customer
for these special promotional  programs  represented 1%, 6% and 25% of net sales
in 1996, 1995 and 1994, respectively.  The Company has received orders from this
customer in 1997.

     The  financial  results for 1996 have been  negatively  impacted by special
charges of approximately  $9.9 million which resulted from an extensive analysis
of the Company's  operations.  The special  charges  consisted of a $4.9 million
write-off of discontinued  inventory  (included in total cost of sales),  a $2.6
million write-off of obsolete  displays,  goodwill and other assets (included in
total  selling,  general  and  administrative  expenses),  and  a  $2.4  million
write-down of non-strategic investments.

     The  following  table shows,  as a percentage  of net sales,  the Company's
Consolidated  Statements of Operations for each of the three years in the period
ended December 31, 1996:
<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                             1996         1995         1994
<S>                                         <C>          <C>          <C>

Net sales..............................      100.0%       100.0%       100.0%
Cost of Sales..........................       68.6         65.1         61.4
                                             ------       ------       ------
Gross Profit...........................       31.4         34.9         38.6
Selling, general and administrative
  expenses before special charges and
  special charitable contributions.....       33.6         31.8         26.9
Special charges........................        2.0           -            -
Special charitable contribution........         -            -           1.0
                                             ------       ------       ------
Total selling, general and
  administrative expenses..............       35.6         31.8         27.9
Operating income (loss)................       (4.2)         3.1         10.7
Interest expense.......................        (.1)         (.2)          -
Interest income........................         .1           .4           .3
Gain (loss) on sale (write-down) of
  investments..........................       (1.8)         1.4           -
Equity interest in
  unconsolidated affiliates............         -           (.4)          -
Other income (expense), net............         .2           .1           .1
                                              ------      ------       ------
Income (loss) before income taxes......       (5.8)         4.4         11.1
Income tax provision (benefit).........       (1.8)         2.0          4.6
                                              ------      ------       ------
Net income (loss).................            (4.0)%        2.4%         6.5%
                                              ======      ======       ======

</TABLE>

                                       12
<PAGE>

Comparison of the Years Ended December 31, 1996 and December 31, 1995

     Net sales for the year ended  December 31, 1996 were $130.0  million,  $3.3
million or 2.6% higher than in 1995.  The  comparison  of sales between 1996 and
1995 is effected by the Company's decreased participation in special promotional
programs  with one customer that  accounted for 1% and 6% of the Company's  1996
and 1995 net sales,  respectively.  Excluding the special promotional  programs,
the Company's  net sales  increased by 8% for the year due to an 18% increase in
watch sales and a 15% increase in cutlery  sales offset in part by a 7% decrease
in Victorinox Original Swiss Army Knife sales.

     Gross profit for the year ended December 31, 1996 was $40.8  million,  7.7%
lower than in 1995.  This is due  primarily  to an  inventory  write-off of $4.9
million  in  1996.  The  inventory  write-off  was  the  result  of the  Company
discontinuing  certain products,  including certain cutlery products sold by the
Company's   wholly-owned   subsidiary,   Cuisine  de  France  Limited   ("CDF").
Substantially  all of the  assets  of CDF  were  sold by the  Company  in  1997.
Excluding  the  $4.9  million  inventory  write-off,  the  gross  profit  margin
percentage  increased from 34.9% in 1995 to 35.2% in 1996.  The Company's  gross
profit margin is a function of both product mix and Swiss franc exchange  rates.
Since the Company imports  virtually all of its products from  Switzerland,  its
costs are affected by both the spot rate of exchange and by its foreign currency
hedging program. Increases in the value of the Swiss franc versus the dollar may
effectively  increase the cost of these products to the Company. The increase in
the cost of products to the Company may result in either higher  prices  charged
to customers or reductions  in gross  profit,  both of which may have an adverse
effect on the Company's  results of operations.  The Company enters into foreign
currency  contracts  and options to hedge the exposure  associated  with foreign
currency  fluctuations.  Based upon current estimated Swiss franc  requirements,
the Company  believes it is hedged  through the third quarter of 1997.  However,
such hedging  activity  cannot  eliminate  the long-term  adverse  impact on the
Company's  competitive position and results of operations that would result from
a sustained  decrease in the value of the dollar  versus the Swiss franc.  These
hedging  transactions,  which are meant to reduce foreign  currency  risk,  also
reduce the  beneficial  effects to the  Company  of any  increase  in the dollar
relative to the Swiss franc.  The Company  currently plans to continue to engage
in hedging  transactions;  however,  it is  uncertain as to what extent to which
such  hedging   transactions   will  reduce  the  effect  of  adverse   currency
fluctuations.

     Selling, general and administrative expenses (excluding the special charges
described  below) for the year ended December 31, 1996 were $43.7 million,  $3.4
million or 8.5% higher than in 1995.  The expense  increase  resulted  primarily
from  increased  selling  expenses and  increased  expenditures  in the areas of
merchandising and promotion. As a percentage of net sales, selling,  general and
administrative   expenses   (excluding  the  special  charges  described  below)
increased from 31.8% in 1995 to 33.6% in 1996.

     Special  selling,  general and  administrative  expenses of $2.6 million in
1996  consisted  of the  write- off of  obsolete  displays,  goodwill  and other
assets. The goodwill write-off related to the Company's wholly-owned  subsidiary
CDF,  and was  written-off  due to the  lack  of  recoverability  of the  asset.
Substantially  all of the assets of CDF were sold by the Company in 1997 with no
significant gain or loss.

     As a result of the above,  the Company  recorded an operating  loss of $5.4
million for the year ended December 31, 1996 as compared to operating  income of
$4.0 million in 1995.  Excluding the effects of the inventory  write-off and the
special  selling,  general and  administrative  charges,  the  Company  recorded
operating  income of $2.1 million in 1996,  as compared to  operating  income of
$4.0  million in 1995.  This  decrease  is due to higher  selling,  general  and
administrative expenses, offset in part by higher gross profit.

                                       13

<PAGE>

     Interest  expense of  $147,000  for the year ended  December  31,  1996 was
$70,000 lower than interest  expense in 1995, due to lower borrowings in 1996 as
compared to 1995.

     Interest  income of  $120,000  for the year  ended  December  31,  1996 was
$437,000  lower than  interest  income in 1995,  due to decreased  invested cash
balances during 1996 as compared to 1995.

     The loss on the write-down of  investments  for the year ended December 31,
1996 was $2.4 million,  as compared to a gain on the sale of investments of $1.8
million  in  1995.  The  loss in 1996  was  primarily  due to the  $1.6  million
write-down of the Company's investment in the common stock of SweetWater,  Inc.,
a publicly-traded  entity, and an $800,000 write-off of the Company's investment
in a privately held start-up entity.  Both of these investments  became impaired
in 1996.  Gain on sale of  investments of $1.8 million in 1995 was due primarily
to the sale of the Company's  investment in the common stock of Simmons  Outdoor
Corporation.

     Equity interest in unconsolidated affiliates was a loss of $548,000 in 1995
due to the Company using the equity method of accounting for its  investments in
Simmons Outdoor Corporation and SweetWater, Inc. The equity method of accounting
was not applicable in 1996.

     As a result of the above,  the loss before  income taxes for the year ended
December  31,  1996 was $7.6  million  compared to income  before  taxes of $5.6
million in 1995.

     Income tax expense (benefit) was provided at an effective rate of 30.8% for
the year  ended  December  31,  1996 as  compared  to 44.8%  for the year  ended
December 31, 1995.  The change in the  effective tax rate was due to foreign and
state income taxes.

     As a result of the above, the net loss for the year ended December 31, 1996
was $5.3  million  ($0.64 per share) as compared  to net income of $3.1  million
($0.38 per share) in 1995.


Comparison of the Years Ended December 31, 1995 and December 31, 1994

     Net sales for the year ended  December 31, 1995 was $126.7  million,  $17.7
million  or 12.2%  lower  than in 1994.  Sales of  Swiss  Army  Brands  products
decreased  significantly  in  1995,  due in  part,  to the  Company's  decreased
participation in a special  promotional program with one customer that accounted
for 6% and 25% of the Company's 1995 and 1994 net sales, respectively. Excluding
the special  promotional  program,  the Company's net sales increased by 10% for
the year due to a 19%  increase in watch sales,  a 7% increase in cutlery  sales
and a 3% increase in Victorinox Original Swiss Army Knife sales.

     Gross profit for the year ended December 31, 1995, was $44.3 million, 20.7%
lower than in 1994.  This is due  primarily to lower sales volume as a result of
the  special  promotional  program  with one  customer  in 1994 and  unfavorable
exchange rates.  The Company's gross profit margin is a function of both product
mix and Swiss franc exchange rates.  Since the Company imports  virtually all of
its products from  Switzerland,  its costs are affected by both the spot rate of
exchange and by its foreign currency  hedging  program.  The Company attempts to
mitigate the impact on gross margin of exchange rate changes  through  selective
hedging of anticipated Swiss franc purchases.

     Selling,  general and  administrative  expenses for the year ended December
31, 1995 were $40.3 million, $1.5 million or 3.8% higher than the amount for the
comparable  period in 1994,  excluding special  charitable  contribution of $1.5
million in 1994. The expense increase resulted  primarily from increased selling
expenses and increased expenditures in the areas of merchandising and promotion.
As a  percentage  of net sales,  selling,  general and  administrative  expenses
(excluding the special charitable  contribution) increased from 26.9% in 1994 to
31.8% in 1995.

                                       14
<PAGE>

     Interest  expense of  $217,000  for the year ended  December  31,  1995 was
$189,000 higher than interest expense for the comparable  period in 1994, due to
increased borrowings in 1995 as compared to 1994.

     Interest  income of  $557,000  for the year  ended  December  31,  1995 was
$166,000 higher than interest  income for the comparable  period in 1994, due to
higher invested cash balances during 1995 as compared to 1994.

     Gain on sale of  investments  of $1.8 million was due primarily to the sale
of the common  stock of Simmons  Outdoor  Corporation  in 1995.  Gain on sale of
investments was not significant in 1994.

     Equity  interest in  unconsolidated  affiliates  with a loss of $548,000 in
1995 was due to the  Company  using  the  equity  method of  accounting  for its
investments in Simmons Outdoor  Corporation  and  SweetWater,  Inc. in 1995. The
equity method of accounting was not applicable in 1994.

     As a result of these  changes,  income before  income taxes and  cumulative
effect of  accounting  change  for the year  ended  December  31,  1995 was $5.6
million versus $16.0 million for 1994, a decrease of $10.4 million or 64.8%.

     Income tax expense was provided at an effective  rate of 44.8% for the year
ended December 31, 1995 versus 41.5% in 1994 due to increased state taxes.

     As a result of the above, net income was $3.1 million ($0.38 per share) for
the year ended  December 31, 1995 versus $9.4 million ($1.16 per share) in 1994,
representing a decrease of $6.3 million or 66.7%.


Liquidity and Capital Resources

     As of December 31, 1996,  the Company had working  capital of $52.1 million
compared with $58.1 million as of December 31, 1995, a decrease of $6.0 million.
Significant uses of working capital  included  investments in preferred units of
Hudson  River of $2.0  million,  additions  to other  assets of $3.0 million and
capital  expenditures  of $1.5  million.  The Company  currently has no material
commitments for capital expenditures.

     Cash provided from operating  activities was approximately  $7.6 million in
the year  ended  December  31,  1996  compared  with  cash  used  for  operating
activities  of $16.4  million in the year ended  December 31,  1995.  The change
primarily  resulted  from a decrease  in  inventory  in 1996 as  compared  to an
increase  in 1995,  an  increase  in  accounts  payable in 1996 as compared to a
decrease in 1995, offset in part by the net loss incurred in 1996 as compared to
net income in 1995.

     The Company meets its short-term  liquidity  needs with cash generated from
operations,  and, when  necessary,  bank borrowings  under its revolving  credit
agreements.  As of December 31, 1996, the Company had no outstanding  borrowings
under its revolving line of credit agreements.  The Company currently has a $5.0
million  line of credit which it can use for any  borrowings.  The Company had a
$15.0 million  revolving  credit  agreement  which expired in January 1997.  The
Company is currently  reviewing its options to establish a new revolving  credit
agreement. The Company's short-term liquidity is affected by seasonal changes in
inventory  levels,  payment terms and seasonality of sales. The Company believes
its current liquidity levels and financial  resources will be sufficient to meet
its operating needs.

                                       15
<PAGE>

Item 8.  Financial Statements and Supplementary Data

     The financial  information required by Item 8 is included elsewhere in this
report. See Part IV, Item 14.

Item 9.  Disagreements on Accounting and Financial Disclosure

                  None.


                                       16
<PAGE>

                                    PART III


Item 10. Directors and Executive Officers of the Registrant

     The Directors and Executive Officers of SABI are as follows:

<TABLE>
<CAPTION>
                                                                     Director
                                                                      and/or
 Name                        Age     Position(s)                   Officer Since
<S>                         <C>     <C>                           <C>

J. Merrick Taggart           46      President(1)                  Dec., 1995
Peter W. Gilson              57      Chairman of the Executive
                                     Committee and Director(2)           1994
Stanley R. Rawn, Jr.         69      Senior Managing Director
                                     and Director(3)                     1990
Harry R. Thompson            67      Managing Director                   1994
Stanley G. Mortimer III      54      Executive Vice President
                                     and Director                        1994
Thomas M. Lupinski           44      Senior Vice President, Chief
                                     Financial Officer, Secretary
                                     and Treasurer                       1986
Michael J. Belleveau         40      Vice President - Sales and
                                     General Manager - Swiss Army
                                     Brands Division                     1994

Leslie H. Green              49      Vice President of Marketing   Dec., 1995
David J. Parcells            38      Vice President - Operations         1992
Jerald J. Rinder             50      Vice President and
                                     General Manager -
                                     Victorinox Division           Feb., 1996
Robert L. Topazio            48      Vice President and
                                     General Manager -
                                     R.H. Forschner Division       Feb., 1996
Douglas M. Rumbough          40      Vice President and
                                     General Manager - Corporate
                                     Markets Division                    1992
A. Clinton Allen             53      Director(4)                         1993
Clarke H. Bailey             42      Director(5)                   Jan., 1997
Thomas A. Barron             45      Director                            1983
Vincent D. Farrell, Jr.      50      Director(6)                         1992
Herbert M. Friedman          65      Director(7)                         1981
M. Leo Hart                  48      Director(8)                         1991
James W. Kennedy             46      Director(9)                         1981
Keith R. Lively              45      Director                            1994
Lindsay Marx                 31      Director                            1994
Louis Marx, Jr.              65      Director(10)                        1990
Eric M. Reynolds             44      Director                            1994
John Spencer                 67      Director(11)                        1990
John V. Tunney               62      Director(12)                        1992
</TABLE>

                                       17
<PAGE>


(1)       Mr.  Taggart  is  a  member  of  the  Company's  Executive  Committee,
          Management Committee and Foreign Exchange Committee.

(2)       Mr.  Gilson is Chairman of the  Company's  Executive  Committee  and a
          member of the Nominating Committee.

(3)       Mr. Rawn is a member of the Company's Executive Committee,  Management
          Committee and Nominating Committee.

(4)       Mr. Allen is Chairman of the Company's  Stock Option and  Compensation
          Committee and a member of the Executive Committee.

(5)       Mr. Bailey is a member of the Company's Executive Committee.

(6)       Mr. Farrell is Chairman of the Company's  Audit Committee and a member
          of the Executive Committee and Foreign Exchange Committee.

(7)       Mr. Friedman is a member of the Company's Executive  Committee,  Audit
          Committee and Nominating Committee.

(8)       Mr. Hart is a member of the Company's Nominating Committee.

(9)       Mr. Kennedy is a member of the Company's Foreign Exchange Committee.

(10)      Mr.  Marx  is  Chairman  of the  Company's  Management  Committee  and
          Nominating Committee and a member of the Company's Executive Committee
          and Foreign Exchange Committee. Mr. Marx was Chairman of the Company's
          Executive Committee until June, 1995.

(11)      Mr.  Spencer is a member of the  Company's  Audit  Committee and Stock
          Option and Compensation Committee.

(12)      Mr. Tunney is a member of the Company's Stock Option and  Compensation
          Committee.

                            Biographical Information

     J. Merrick  Taggart,  President and a Director of the Company,  was elected
President  on December  13,  1995.  From 1993 to November  1995 Mr.  Taggart was
President of Duofold,  Inc, a sports  apparel  company,  and Pringle of Scotland
U.S.A., an apparel company. From 1990 to November 1992 Mr. Taggart was President
of O'Brien International, a manufacturer and marketer of water sports equipment.
Prior to that Mr. Taggart was Senior Vice President of Product  Development  for
the Timberland Company, a footwear and apparel company.

     Peter W. Gilson,  Chairman of the Executive Committee and a Director of the
Company,  has served as  President  and Chief  Executive  Officer  of  Physician
Support Systems,  Inc., a company  specializing in the management of physicians'
health care practices, since 1991. From 1989 to the present, Mr. Gilson has also
served as President and Chief Executive Officer of the Warrington Group, Inc., a
manufacturer  of  safety  products  which  was  previously  a  division  of  The
Timberland  Company.  From 1987 to 1988,  Mr.Gilson  served  as Chief  Operating
Officer of The  Timberland  Company,  a  manufacturer  of  footwear  and outdoor
clothing.  From 1978 to 1986,  he  served as  President  of the  Gortex  Fabrics
Division of W.L. Gore  Associates.  Mr. Gilson is also a director of SweetWater,
Inc.  ("SweetWater"),  a manufacturer  and marketer of portable water filtration
systems and Glenayre Technologies, Inc. ("Glenayre Technologies"),  a paging and
messaging infra-structure technology firm.

                                       18
<PAGE>

     Louis Marx, Jr., Chairman of the Management Committee and a Director of the
Company,  has been  associated with the Company for over 20 years and has played
the key role in helping to guide its affairs during that entire period.  Through
discussions  with the Chief  Executive  Officer of  Victorinox  Cutlery  Company
("Victorinox"),   the  Company's  principal  supplier,  he  and  Mr.  Rawn  were
responsible for the Company  obtaining  exclusive U.S.  distribution  rights for
Victorinox  products  and  later,  together  with  Mr.  Rawn  and  Mr.  Kennedy,
negotiated the expansion of the Company's distribution rights to include Canada,
Bermuda  and  the  Caribbean  and  also  obtained  for  the  Company   exclusive
distribution  rights to the  Victorinox  Watch.  In a prior year he and Mr. Rawn
played  an  important  part  in  negotiating,  on  behalf  of the  Company,  the
settlement of potentially expensive litigation,  and more recently, Mr. Marx has
played an active role in the Company's  investment policy and, together with the
Company's  advisors,  has  successfully  managed the Company's  currency hedging
program.  Mr. Marx is a director  and member of the  Compensation  Committee  of
Cyrk,  Inc.  ("Cyrk"),  a distributer of products for  promotional  programs and
custom-designed  sports  apparel  and  accessories.  Mr. Marx has been a venture
capital investor for more than thirty years.  Mr. Marx,  together with his close
business  associates,  have  been  founders  or  substantial  investors  in such
companies as Pan Ocean Oil Corporation,  Donaldson,  Lufkin & Jenrette,  Bridger
Petroleum  Corporation  Ltd.,  Questor  Corporation,  Environmental  Testing and
Certification  Corporation,  Garnet Resources  Corporation,  The Prospect Group,
Inc. and Noel Group, Inc.  ("Noel"),  a publicly held company which conducts its
principal operations through small and medium sized operating companies in which
it holds  controlling  interests.  Mr. Marx served as a director of The Prospect
Group,  Inc.,  a  company  which,  prior  to its  adoption  in 1990 of a Plan of
Complete  Liquidation and Dissolution,  conducted its major  operations  through
subsidiaries  acquired  in  leveraged  buyout  transactions  ("Prospect"),  from
February 1986, and as Chairman of Prospect's  Asset Committee from October 1988,
until  January  1990.  Mr. Marx  serves as a trustee of the New York  University
Medical Center and Middlebury College and as Chairman of the Madison Avenue Fund
for  Children.  Mr.  Marx is also  Co-Chairman  and a director  of Hudson  River
Capital LLC, a private equity firm  specializing in middle market  acquisitions,
recapitalizations  and expansion capital  investments  ("Hudson  River"),  and a
director of Victory  Ventures LLC, a private equity firm  specializing  in small
market venture capital investments ("Victory  Ventures").  He is President and a
director of  Victorinox-Swiss  Army Knife Foundation,  a non-profit  corporation
formed by the Company for charitable  purposes  including the improvement of the
welfare of underprivileged  children.  Mr. Marx is the father of Lindsay Marx, a
Director of the Company.

     Stanley  R. Rawn,  Jr.,  Senior  Managing  Director  and a Director  of the
Company,  actively  participates with Messrs. Marx and Kennedy in furthering the
relationship  between  the  Company and  Victorinox  as well as in  coordinating
management  strategies.  He has also played an important  part in obtaining  and
expanding  the  Company's  exclusive  distribution  rights  covering  Victorinox
products.  Mr. Rawn was Chairman and Chief  Executive  Officer and a director of
Adobe Resources  Corporation,  an oil and gas exploration and production company
from  November,  1985 until the merger of that company in May, 1992. Mr. Rawn is
also the Chief Executive Officer and a director of Noel; a director of Prospect,
Hudson River,  Victory  Ventures,  Staffing  Resources,  Inc., a temporary  help
corporation,  and Victorinox - Swiss Army Knife Foundation; and a Trustee of the
California Institute of Technology.

     Harry R. Thompson,  Managing Director of the Company was appointed Managing
Director in December 1994.  From 1987 to 1995, Mr. Thompson was president of The
Strategy  Group,  a business and marketing  consulting  firm.  Mr.  Thompson had
previously  served as a director of the Company from June 1987 to June 1991, and
as Chairman of the  Company's  Board of  Directors  from January 1990 to October
1990 and served in senior  executive  capacities with the  Interpublic  Group of
Companies, Inc., a leading marketing and communications organization.

                                       19
<PAGE>

     Stanley G. Mortimer  III,  Executive  Vice  President and a Director of the
Company, has served the Company in a variety of capacities since September 1984.
Mr.  Mortimer  was  elected as a director in December  1994.  He had  previously
served as a director from June 1987 to June 1994.

     Thomas  M.  Lupinski,  Senior  Vice  President,  Chief  Financial  Officer,
Secretary and Treasurer of the Company,  has been Vice  President of the Company
for more than five years. Prior to joining the Company, Mr. Lupinski was Finance
Manager  for The Revlon  Health Care Group from 1982 to 1986 and was with Arthur
Andersen & Co., from 1976 through 1982.

     David J.  Parcells,  Vice  President  -  Operations,  joined the Company in
December  1992.  Mr.Parcells  was employed by Arthur  Andersen & Co. as a Senior
Manager - Audit and Business  Advisory Practice from 1989 through 1992 and as an
Audit Manager from 1986 to 1989.

     Michael J.  Belleveau,  Vice President - Sales and General  Manager - Swiss
Army Brands Division,  was elected to the office of Vice President in June 1994.
Mr.  Belleveau has served the Company in various  positions since 1991. Prior to
that  Mr.  Belleveau  was  a  regional  sales  manager  for  Cartier,   Inc.,  a
manufacturer and marketer of watches and luxury goods.

     Leslie H. Green, Vice President of Marketing,  was elected to the office of
Vice  President  in December  1995.  Ms. Green has served the Company in various
positions since January, 1991.

     Jerald J. Rinder, Vice President and General Manager - Victorinox Division,
was elected to the office of Vice President in February, 1996. From 1994 through
1995 Mr Rinder was  Executive  Vice  President  of Pringle of  Scotland  USA, an
apparel   company.   From  1993  to  1994  Mr.  Rinder  was  Vice   President  -
Sales/Marketing  of  Walkover  Shoe Co.  and  from  1991  through  1993 was Vice
President - Sales of Stride Rite Corp.

     Robert L.  Topazio,  Vice  President and General  Manager - R.H.  Forschner
Division,  was elected to the office of Vice  President in February,  1996.  Mr.
Topazio has served the Company in various positions since September,  1992. From
1991 to 1993 Mr.  Topazio  was Vice  President  of Cuisine de  France,  Ltd.,  a
marketer of consumer  cutlery which was purchased by the Company in 1992.  Prior
to that Mr. Topazio was National Sales Manager for J.A. Henckels.

     Douglas M. Rumbough, Vice President and General Manager - Corporate Markets
Division,  was elected to the office of Vice President in June 1992. Mr.Rumbough
has served the Company in various positions since 1981.

     A. Clinton Allen,  a Director of the Company,  is Chairman of A. C. Allen &
Co., a  Massachusetts  based  consulting  firm.  Mr.  Allen also  serves as Vice
Chairman and a director of  Psychemedics  Corporation,  a company that  provides
testing services for the detection of abused  substances  through an analysis of
hair samples,  and of Dewolfe Companies,  Inc., a real estate company,  and as a
director of SweetWater and Victory Ventures.

     Clarke H. Bailey was  elected a director  of the  Company in January  1997.
Since  February  1995,  Mr. Bailey has served as Chairman of the Board and Chief
Executive Officer of United Acquisition  Company,  an acquisition  company,  and
Chairman  of the  Board and  Chief  Executive  Officer  of  United  Gas  Holding
Corporation,  an acquisition company. He is also currently Chairman of the Board
and a director of Arcus,  Inc., the leading national provider of secure off-site
computer data storage and related  disaster  recovery  services and  information
technology staffing solutions, a director and Co-Chairman of the Board of Hudson
River  and  a  director  of  Connectivity   Technologies,   Inc.  ("Connectivity
Technologies"),  an  acquisition  company  with  interests in the wire and cable
industry,  and  Victory  Ventures.  He served as Chief  Executive  Officer and a
director of Glenayre Technologies from December 1990 until March 1994 and as its
Vice Chairman of the Board from  November 1992 to July 1996. In March 1994,  Mr.
Bailey was named  Chairman of the  Executive  Committee of the Board of Glenayre
Technologies, and he relinquished the title of Chief Executive Officer.

                                       20
<PAGE>

     Thomas A.  Barron,  a Director  of the  Company,  is an author and has been
Chairman of Evergreen Management Corp., a private investment firm since January,
1990.  From November,  1983 through  November 1989, Mr. Barron was President and
Chief Operating  Officer and a director of Prospect.  From 1988 through January,
1990, Mr. Barron served as Chairman of the Board of the Company. Mr. Barron also
serves as a director and  Chairman of the Board of  SweetWater.  Mr.  Barron has
served as a Trustee of Princeton University.

     Herbert M.  Friedman,  a Director of the  Company,  is a partner in the law
firm of Zimet, Haines, Friedman & Kaplan, where he has been a member since 1967.
Zimet, Haines, Friedman & Kaplan acts as counsel to the Company. Mr. Friedman is
also a director of Noel, Prospect, Hudson River, Victory Ventures,  Connectivity
Technologies and Victorinox - Swiss Army Knife Foundation.

     Vincent D.  Farrell,  Jr., a Director of the  Company,  has been a Managing
Director of the investment management firm of Spears, Benzak, Salomon & Farrell,
Inc., ("Spears, Benzak") since 1982. Mr. Farrell is a director of Noel.

     M. Leo Hart, a Director of the Company,  is President  and Chief  Executive
Officer of Brae  Group,  Inc.,  a  privately  held  acquisition  company.  Until
December 13, 1995,  Mr. Hart was  Co-Chairman  of the Board and Chief  Executive
Officer of the Company,  which  capacity he had served in since  February  1994.
Previously,  he was Executive Vice President and a Director. Mr. Hart joined the
Company in October 1991.  Prior to this, Mr. Hart spent the previous 15 years in
senior sales and marketing  positions in the  hospitality  industry,  serving as
Senior Vice President of Marketing for The Ritz-Carlton  Hotel Company from 1987
to 1991 and before that as Vice  President  -Sales and  Marketing  for  Fairmont
Hotels from 1983 to 1987.  Until 1991, he was the North American  Chairperson of
Leading Hotels of the World, a hotel marketing association.  Prior to his career
in sales, Mr. Hart played  professional  football with the NFL's Atlanta Falcons
and  Buffalo  Bills.  Mr.  Hart is also a  director  of Victory  Ventures  and a
director of Victorinox - Swiss Army Knife Foundation.

     James W. Kennedy, a Director of the Company, is President of Lahinch Group,
Inc., a start-up company engaged in the garment imprinting and apparel business.
Until  December 13, 1995,  Mr.  Kennedy was  Co-Chairman  of the Board and Chief
Executive Officer of the Company, which capacity he had served in since February
1994. Previously,  he was President of the Company, a position he had held since
1988.  Prior to 1988,  Mr.  Kennedy was Senior Vice President of the Company and
had served in various sales and marketing positions with the Company since 1975.
Mr. Kennedy has served on committees for the Specialty  Advertising  Association
International, the National Restaurant Association, the American Meat Institute,
the Sporting Goods  Manufacturers  Association  and the American  Association of
Exporters and Importers.

                                       21
<PAGE>

     Keith R. Lively, a Director of the Company, is a private investor and, from
January 1995 through December,  1995, was a consultant to the Company. From 1988
through  September 1994, Mr. Lively was the President,  Chief Executive  Officer
and a Director  of The Famous  Amos  Chocolate  Chip  Cookie  Corporation.  From
September  1992  through  September  1994,  Mr.  Lively  was  also  Senior  Vice
President,  a member of the  Executive  Committee  and a Director  of  President
Baking Company,  which purchased The Famous Amos Chocolate Cookie Corporation in
September 1992. Mr. Lively also serves as a director of SweetWater.

     Lindsay  Marx,  a  Director  of the  Company  is a private  investor.  From
November 1992 to January 1994,  she was a production  assistant at Iron Mountain
Productions,  a dramatic  production  company.  Ms. Marx was an assistant to the
director at the Paper Mill  Playhouse in 1992 and, from  September 1989 to March
1992,  an artistic  assistant at The Body  Politic,  also a dramatic  production
company.  Ms. Marx graduated from  Middlebury  College in 1987. Ms. Marx, is the
daughter of Louis Marx, Jr..

     Eric M. Reynolds, a Director of the Company, is President,  Chief Executive
Officer and a director  of  SweetWater,  a position  he has held since  January,
1993.  Previously,  from 1987 through 1990, Mr.  Reynolds  served as a marketing
consultant to various  companies  including  W.L.  Gore & Associates  and Marmot
Mountain  Works,  Ltd., a company founded by Mr. Reynolds in 1974 that is in the
business of designing,  manufacturing and marketing mountaineering,  backpacking
and ski outerwear products.

     John  Spencer,  a  Director  of the  Company,  holds  the  African  Studies
Professorship  at  Middlebury  College  where he has  served  as a member of the
faculty since 1974.  Mr.  Spencer has also served as Dean of Middlebury  College
and Chairman of its History  Department.  Mr.  Spencer is  Vice-Chairman  of the
African  American  Institute and of the Institute of Current  World  Affairs,  a
Trustee of the Cape of Good Hope  Foundation,  the  University of Capetown Fund,
Inc.  and Atlanta  University  and a director of  Victorinox  - Swiss Army Knife
Foundation.

     John V.  Tunney,  a Director of the Company,  is currently  Chairman of the
Board of Cloverleaf Group, Inc. and a general partner of Sun Valley Ventures,  a
partnership  engaged in venture capital and leveraged  buyout  activities.  From
1971 to 1977 Mr.  Tunney  served as a United  States  Senator  from the state of
California  and as a Member of the United States House of  Representatives  from
1965 to 1971.  Mr.  Tunney is also a  director  of  Prospect,  Illinois  Central
Corporation, Illinois Central Railroad Company, and Foamex International,  Inc.,
a foam manufacturer.


      Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers  and  directors,  and  persons  who own  more  than  ten  percent  of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the Securities and Exchange  Commission.
Officers,  directors and greater than  ten-percent  shareholders are required by
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.

     Based  solely on its review of the copies of such forms  received by it, or
written  representations  from  certain  reporting  persons that no Forms 5 were
required for those persons, the Company believes that except for one late filing
of a Form 3 by Mr. Jerald J. Rinder and one late filing of a Form 4 by Mr. Keith
R.  Lively,  during the year ended  December  31,  1996 all filing  requirements
applicable to the Company's  officers,  directors,  and greater than ten-percent
beneficial owners were complied with.

                                       22
<PAGE>

Item 11.  Executive Compensation

                           Summary Compensation Table


     The Summary  Compensation  Table below sets forth  individual  compensation
information  of the  President  and the five other most  highly  paid  executive
officers of the  Company for  services  rendered  in all  capacities  during the
fiscal years ended December 31, 1996, 1995 and 1994.

<TABLE>
<CAPTION>

             Annual Compensation                                  Long-Term Compensation
                                                                      Awards                  Payouts
     (a)                (b)    (c)       (d)       (e)           (f)        (g)          (h)           (i)
                                                    Other
                                                    Annual     Restricted                            All Other
      Name and                                      Compen-       Stock      Options/      LTIP       Compen-
 Principal Position      Year   Salary    Bonus     sation        Award        SARS       Payouts     sation
<S>                     <C>    <C>        <C>       <C>            <C>      <C>             <C>       <C>

J. Merrick Taggart       1996  $250,000   $40,000   $50,809(1)      -        40,000          -        $3,353(2)
President                1995   $33,654       -         -           -       100,000(3)       -           -
                         1994       -         -         -           -           -            -           -

Peter W. Gilson          1996  $200,000       -         -           -        20,000          -           -
Chairman of the          1995  $150,000       -         -           -       150,000          -           -
Executive Committee      1994       -         -         -           -           -            -           -

Thomas D. Cunningham     1996  $210,000    $20,000      -           -           -            -        $4,465(5)
Executive Vice President 1995  $210,000    $10,000      -           -        25,000          -        $4,400(6)
and Chief Financial      1994  $174,308   $100,000      -           -        50,000          -        $2,846(7)
Officer(4)

Stanley G. Mortimer III  1996  $210,000    $17,500      -           -        10,000          -       $10,842(8)
Executive Vice President 1995  $210,000     $5,000      -           -        25,000          -        $8,584(9)
                         1994  $220,000   $100,000      -           -           -                    $12,845(10)

Harry R. Thompson        1996  $200,000    $20,000      -           -        25,000          -        $4,750(11)
Managing Director        1995  $200,000    $15,000      -           -        25,000          -        $2,195(12)
                         1994       -          -        -           -           -            -           -

Leslie H. Green          1996  $175,000    $17,500      -           -        10,000          -        $4,750(13)
Vice President           1995  $175,000    $10,000      -           -        10,000          -        $3,796(14)
                         1994  $175,000    $45,000      -           -           -            -        $3,705(15)

</TABLE>

                                       23
<PAGE>


(1)       Includes relocation benefits of $45,109.

(2)       Consists of $3,353 contributed by the Company to Mr. Taggart's account
          under the Company's 401K savings plan.

(3)       Consists of warrants to purchase Common Stock.

(4)       Mr.  Cunningham  resigned from the offices of Executive Vice President
          and Chief Financial Officer on November 15, 1996.

(5)       Consists  of $4,465  contributed  by the  Company to Mr.  Cunningham's
          account under the Company's 401K savings plan.

(6)       Consists  of $4,400  contributed  by the  Company to Mr.  Cunningham's
          account under the Company's 401K savings plan.

(7)       Consists  of $2,846  contributed  by the  Company to Mr.  Cunningham's
          account under the Company's 401K savings plan.

(8)       Consists  of  $4,750  contributed  by the  Company  to Mr.  Mortimer's
          account under the Company's 401K savings plan and $6,092 in benefit to
          Mr. Mortimer of insurance premiums paid by the Company with respect to
          split dollar life insurance for the benefit of Mr. Mortimer.

(9)       Consists  of  $4,300  contributed  by the  Company  to Mr.  Mortimer's
          account under the Company's 401K savings plan and $4,284 in benefit to
          Mr. Mortimer of insurance premiums paid by the Company with respect to
          split dollar life insurance for the benefit of Mr. Mortimer.

(10)      Consists  of  $4,620  contributed  by the  Company  to Mr.  Mortimer's
          account under the Company's 401K savings plan and $8,225 in benefit to
          Mr. Mortimer of insurance premiums paid by the Company with respect to
          split dollar life insurance for the benefit of Mr. Mortimer.

(11)      Consists  of  $4,750  contributed  by the  Company  to Mr.  Thompson's
          account under the Company's 401K savings plan.

(12)      Consists  of  $2,195  contributed  by the  Company  to Mr.  Thompson's
          account under the Company's 401K savings plans.

(13)      Consists of $4,750  contributed by the Company to Ms. Green's  account
          under the Company's 401K savings plan.

(14)      Consists of $3,796  contributed by the Company to Ms. Green's  account
          under the Company's 401K savings plan.

(15)      Consists of $3,705  contributed by the Company to Ms. Green's  account
          under the Company's 401K savings plan.

                                       24
<PAGE>



                        Option Grants in Last Fiscal Year

     The following table sets forth, for each of the executive officers named in
the Summary  Compensation  Table,  information  regarding  individual  grants of
options made in the last fiscal year,  and their  potential  realizable  values.
<TABLE>
<CAPTION>




                                                                                 Potential Realizable
                                                                                 Value at Assumed
                                                                                 Annual Rates of Stock
                                                                                 Price Appreciation for
                                          Individual Grants                      Option Term
(a)                         (b)        (c)              (d)         (e)          (f)        (g)

                                         % of Total
                                      Options Granted   Exercise or
                            Options   to Employees in    Base Price  Expiration
Name                        Granted    Fiscal Year(1)      ($/Sh)       Date      5% ($)     10% ($)
<S>                        <C>       <C>               <C>          <C>          <C>        <C>



J. Merrick Taggart           40,000     11.5%           $13.625      11/14/06    $342,748   $868,590
Peter W. Gilson              20,000      5.7%           $13.625      11/14/06    $171,374   $434,295
Thomas D. Cunningham              0        -                -           -             -          -
Stanley G. Mortimer III      10,000      2.9%           $13.625      11/14/06     $85,687   $217,147
Harry R. Thompson            25,000      7.2%           $13.625      11/14/06    $214,217   $542,869
Leslie H. Green              10,000      2.9%           $13.625      11/14/06     $85,687   $217,147
<FN>


(1)       Based on 348,750 options granted.
</FN>
</TABLE>


                                       25
<PAGE>




                    Option Exercises and Year-End Value Table

     The following table sets forth option exercise  activity in the last fiscal
year and fiscal  year-end  option  values with respect to each of the  executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>



  Aggregated Option Exercises in Last Fiscal Year, and FY-End Option/SAR Value
(a)                   (b)               (c)        (d)            (e)
                                                                     Value of
                                                      Number of     Unexercised
                                                     Unexercised    In-the-Money
                                                   Options/SARs at  Options/SARs at
                                                      FY-End (#)      FY-End ($)
                      Shares Acquired    Value        Exercisable/   Exercisable/
Name                   on Exercise (#)  Realized($)   Unexercisable  Unexercisable

<S>                  <C>               <C>         <C>             <C>

J. Merrick Taggart         3,000           3,189    57,000/80,000   35,250/37,500
Peter W. Gilson            1,000             750    79,000/90,000   55,500/56,250
Thomas D. Cunningham       1,000           1,000    49,000/25,000   41,188/17,188
Stanley G. Mortimer III      -               -      40,000/20,000   29,688/4,688
Harry R. Thompson          1,000           8,625    27,750/31,250   76,688/4,688
Leslie H. Green              -               -      27,500/12,500   17,638/1,850

</TABLE>



                            Compensation of Directors

     The Company  compensates  those of its  directors who were not employees of
the Company in the amount of $10,000 annually plus $1,000 for attendance at each
meeting of the Board of Directors.  The Chairmen of the Audit  Committee and the
Stock Option and Compensation  Committee of the Board of Directors are each paid
an  additional   annual  fee  of  $10,000  in   recognition  of  the  additional
responsibilities and time commitments associated with such positions.

     In addition, the Company has purchased split dollar life insurance policies
in respect of each of  Messrs.  Louis  Marx,  Jr. and  Stanley R. Rawn,  Jr. See
"Certain Transactions".


                 Employment Agreement and Severance Arrangements

     The Company  entered into an  employment  agreement  dated as of January 2,
1996 with Mr. James W. Kennedy,  a director of the Company and,  until  December
13, 1995,  Co-Chairman of the Board and Chief Executive  Officer of the Company.
The  agreement  provides  that Mr.  Kennedy  shall be employed  in an  executive
capacity  with the Company and shall be available to consult with and advise the
Company  on such  matters  as might be  requested  by senior  management  of the
Company  for at least  eighty-five  hours per month to assist on issues  dealing
with the  maintenance of corporate  trademarks;  corporate  legal  matters;  and
strategic  support  relative to  strategic  relations  with  Victorinox  Cutlery
Company,  the  Company's  key  supplier.  Mr.  Kennedy is to be paid a salary of
$140,000 per annum and, during 1996, was paid a one time bonus of $300,000.  The
agreement,  which has a term of five years,  also  provides  that  following the
termination  of the agreement Mr.  Kennedy would be prohibited  from  competing,
with certain exceptions,  with the business of the Company for a period of three
years.

                                       26
<PAGE>
     In connection  with the  resignation  of Mr. M. Leo Hart, a director of the
Company,  from his  position  as  Co-Chairman  of the Board and Chief  Executive
Officer of the Company in 1996, the Company paid Mr. Hart the sum of $75,000 and
accepted for surrender and  cancellation  all of Mr.  Hart's  outstanding  stock
options to purchase  Common  Stock.  To replace  such  options,  the Company has
issued to Mr. Hart new options  covering  the same number of shares and upon the
same terms and conditions except that the newly issued options were fully vested
upon  grant and the  exercisability  of such  options is not  contingent  on Mr.
Hart's employment with the Company.

     The Company entered into an Employment and Severance  Agreement dated as of
November 15, 1996 with Mr.  Thomas D.  Cunningham,  who was,  until that date, a
Director  and  Executive  Vice  President  and Chief  Financial  Officer  of the
Company.  The  agreement  provides  that in  connection  with  Mr.  Cunningham's
resignation  from those  positions  he would be  employed by the Company to work
with  management  of the Company in  connection  with the sale of the  Company's
subsidiary,  Cuisine  de  France  Limited.  The  agreement  provides  that  such
employment  shall be for a  period  of six  months  provided  that  satisfactory
progress is made with respect to the  disposition of Cuisine de France  Limited.
The Company  entered into an agreement for the sale of Cuisine de France Limited
on January 31, 1997 and has thus  determined  that such  progress has been made.
Mr.  Cunningham  is to paid be a salary at the rate of $210,000 per annum during
the term of his employment under the agreement.  In addition,  subsequent to the
termination  of Mr.  Cunningham's  employment,  the agreement  provides that Mr.
Cunningham  shall be paid a one time  severance  payment of $210,000 and receive
certain other benefits. The agreement also provides that Mr. Cunningham would be
prohibited  from  competing with the business of the Company for a period of two
years.


                                  Pension Plan

     Each employee of the Company at least twenty years of age, becomes eligible
to  participate  in the  Company's  Pension  Trust (the  "Pension  Trust") after
completing  two Years of Credited  Service  (as  defined in the Pension  Trust).
Monthly  benefits at Normal  Retirement  Age,  age  sixty-five,  are computed as
follows:  Average Monthly  Compensation  (as defined below)  multiplied by 0.65%
plus  Average  Monthly   Compensation  in  excess  of  Social  Security  Covered
Compensation  (as defined  below)  multiplied by 0.65%,  such sum  multiplied by
Years of Credited  Service,  not to exceed 35 years.  Accrued benefits under the
prior  formula  used by the  Company's  Pension  Trust are  grandfathered  as of
December 31, 1993 for  Non-Highly  Compensated  Employees and as of December 31,
1988 for Highly Compensated Employees.

     "Average  Monthly  Compensation"  is defined as  one-twelfth of the highest
five  consecutive   years  of  total   compensation.   Social  Security  Covered
Compensation is defined as the average of the Taxable Wage Base over the 35-year
period ending with the year of the Social Security Normal  Retirement (ages 65 -
67, depending on year of birth).

     Participants  will receive  reduced  benefits on a life annuity  basis with
continuation of benefits to their spouses after death unless an optional form of
benefit is selected.  Preretirement  death benefit coverage is also provided.  A
participant  is 100% vested in his accrued  benefits,  as defined in the Pension
Trust, upon such accrual. The Years of Credited Service as of December 31,  1996
of each of the individuals  named in the Cash  Compensation  table herein are as
follows:




       J. Merrick Taggart..............       1 year
       Peter W. Gilson.................       1 year
       Thomas D. Cunningham............       2 years
       Stanley G. Mortimer III.........      12 years
       Harry R.Thompson................       1 year
       Leslie H. Green.................       6 years


                                       27
<PAGE>

     The following  table shows annual pension  benefits under the Pension Trust
assuming  retirement at age  sixty-five in 1997,  payable as a life annuity,  in
various  remuneration  and years of  employment  classifications.  Note that the
maximum  allowable  compensation  for years  beginning in 1994 is  $150,000,  so
remuneration  in excess of that  amount is not  shown.  Some  grandfathering  of
benefits earned at higher compensation levels is provided.
<TABLE>
<CAPTION>



                  Pension Benefits for 1996 Retirees at Age 65

                                       Years of Service
Remuneration      15          20       25         30        35
<C>              <C>         <C>      <C>        <C>       <C>


 50,000          $ 7,061    $ 9,415   $11,769    $14,123   $16,476
 75,000           11,936     15,915    19,894     23,873    27,851
100,000           16,811     22,415    28,019     33,623    39,226
125,000           21,686     28,915    36,144     43,373    50,601
150,000           26,561     35,415    44,269     53,123    61,976

</TABLE>


           Compensation Committee Interlocks and Insider Participation


     In 1996,  the  Compensation  Committee was  comprised of A. Clinton  Allen,
Keith R. Lively,  John V. Tunney and John Spencer.  None of these individuals is
an officer or employee of the Company or any of its subsidiaries.


Item 12.   Security Ownership of Certain Beneficial Owners and Management


     The following table sets forth information  regarding  beneficial ownership
of the Common  Stock on March 17,  1997,  by each  person or group  known by the
Company to own beneficially 5% or more of the outstanding  Common Stock.  Except
as otherwise  noted,  each person  listed  below has sole voting and  investment
power with respect to the shares listed next to his or its name.

                                       28
<PAGE>


<TABLE>
<CAPTION>


                               Number of
Name of Beneficial Owner         Shares                Percent owned(1)

<S>                           <C>                     <C>

Louis Marx, Jr.
667 Madison Avenue
New York, NY  10021            3,082,222(2)            35.4%

Brae Group, Inc.
15710 John F. Kennedy Blvd.
Houston, TX  77032             3,058,200(3)            35.1%

Victorinox A.G.
CH-6438
Ibach-Schwyz
Switzerland                    1,000,000               12.2%

Tweedy, Browne Company L.P.
52 Vanderbilt Avenue
New York, New York 10017         589,150(4)             7.2%

David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142              537,100(5)             6.5%

Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA 90401           467,724(6)             5.7%
<FN>




(1)       Based on 8,209,610 shares of Common Stock  outstanding,  not including
          614,108 shares held as Treasury stock.  Treated as outstanding for the
          purposes of computing  percentage  ownership of each holder are shares
          issuable to such holder upon exercise of options and warrants.

(2)       Consists of 19,730 shares held directly by Mr. Marx, 4,292 shares held
          by a trust for the benefit of Mr. Marx,  2,558,200 shares held by Brae
          Group, Inc., which corporation Mr. Marx may be deemed to control,  and
          500,000  shares  issuable  upon the exercise of a stock option held by
          Brae Group, Inc.

(3)       Includes  500,000 shares  issuable upon the exercise of a stock option
          held by Brae Group, Inc..

(4)       According  to a Schedule  13D filed  February  29,  1996,  consists of
          shares held in the  accounts of customers  of Tweedy,  Browne  Company
          L.P., a broker-dealer.

(5)       According to a Schedule 13G dated February 7, 1997, consists of shares
          which  David L.  Babson & Co.,  Inc.  beneficially  owns by  virtue of
          serving as investment advisor.

(6)       According to a Schedule 13G dated February 5, 1997, consists of shares
          as  to  which   Dimensional  Fund  Advisors,   Inc.  shares  power  of
          disposition by virtue of serving as investment advisor to its clients.
</FN>
</TABLE>


                                       29
<PAGE>


     The  following  table  sets  forth  certain   information   concerning  the
beneficial  ownership of Common Stock on March 17, 1997, by each Director,  each
officer named in the Summary  Compensation Table herein and by all Directors and
officers of the Company as a group.

<TABLE>
<CAPTION>

                             Number of
 Name                          Shares            Percent of Class(1)
<S>                          <C>                 <C>


J. Merrick Taggart            60,000(2)           *
Stanley G. Mortimer III       47,262(3)           *
Harry R. Thompson             33,250(4)           *
Leslie H. Green               30,000(5)           *
A. Clinton Allen              35,000(6)           *
Clarke H. Bailey                 -0-
Thomas A. Barron              72,500(7)           *
Vincent D. Farrell, Jr.       35,000(8)           *
Herbert M. Friedman           15,868(9)           *
Peter W. Gilson               80,000(10)          *
M. Leo Hart                  100,500(11)          1.2%
James W. Kennedy              83,960(12)          1.0%
Keith R. Lively                  -0-              *
Lindsay Marx                  25,000(13)          *
Louis Marx, Jr.            3,082,222(14)         35.4%
Stanley R. Rawn, Jr.         142,711(15)          1.7%
Eric M. Reynolds              25,000(16)          *
John Spencer                   1,000              *
John V. Tunney                   -0-              *
All officers and directors 3,992,835(17)         42.0%
  as a group (25 persons)

*Less than 1% of the Class.
<FN>

(1)       Based on 8,209,610 shares of Common Stock  outstanding,  not including
          614,108 shares held as Treasury Stock.  Treated as outstanding for the
          purpose of computing the percentage  ownership of each director and of
          all  directors  and  officers  as a group are shares  issuable to such
          individuals upon exercise of options.

(2)       Includes  47,000  shares of Common  Stock  issuable  upon  exercise of
          warrants  held by Mr.  Taggart  and  10,000  shares  of  Common  Stock
          issuable upon exercise of Options held by Mr. Taggart.

(3)       Includes  46,250  shares of Common  Stock  issuable  upon  exercise of
          Options held by Mr. Mortimer.

(4)       Consists of 33,250  shares of Common  Stock  issuable upon exercise of
          Options held by Mr. Thompson.

(5)       Consists of 30,000  shares of Common  Stock  issuable upon exercise of
          Options held by Ms. Green.

(6)       Consists of 35,000  shares of Common Stock  issuable  upon exercise of
          Options held by Mr. Allen.

(7)       Includes  37,500  shares of Common Stock  issuable upon exercise of
          Options held by Mr. Barron.

(8)       Consists of 35,000  shares of Common Stock  issuable  upon exercise of
          Options held by Mr.  Farrell.  Excludes shares  beneficially  owned by
          Spears,  Benzak, a general  partnership in which Mr. Farrell has a 22%
          interest.

(9)       Includes  12,500  shares of Common  Stock  issuable  upon  exercise of
          Options held by Mr. Friedman.

(10)      Includes  79,000  shares of Common  Stock  issuable  upon  exercise of
          options held by Mr. Gilson.

(11)      Includes  100,000  shares of Common  Stock  issuable  upon exercise of
          Options held by Mr. Hart.

(12)      Includes  81,250  shares of Common  Stock  issuable  upon  exercise of
          Options  held by Mr.  Kennedy and 1,000 shares held by a trust for the
          benefit  of Mr.  Kennedy's  son,  beneficial  ownership  of  which  is
          disclaimed by Mr. Kennedy.

(13)      Consists of 25,000  shares of Common Stock  issuable  upon exercise of
          Options held by Ms. Marx.

(14)      Consists of 19,730  shares of Common Stock held  directly by Mr. Marx,
          4,292  shares held by a trust for the benefit of Mr.  Marx,  2,558,200
          shares held by Brae Group,  Inc.,  which  corporation  Mr. Marx may be
          deemed to  control,  and  500,000  shares  issuable  upon  exercise of
          options held by Brae Group, Inc.

(15)      Includes  100,000  shares of Common  Stock  issuable upon  exercise of
          Options held by Mr. Rawn.

(16)      Consists of 25,000  shares of Common Stock  issuable  upon exercise of
          Options held by Mr. Reynolds.

(17)      Includes  1,249,750  shares of Common Stock  issuable to directors and
          officers  upon  exercise of Options and 47,000  shares of Common Stock
          issuable upon exercise of warrants.
</FN>
</TABLE>
                                       30
<PAGE>


Item 13.    Certain Relationships and Related Transactions


     Messrs.  Louis Marx, Jr., Chairman of the Company's  Management  Committee,
and a Director of the Company, and Stanley R. Rawn Jr., Senior Managing Director
and a Director of the Company,  devoted  considerable  time and attention to the
affairs of the  Company  during  1996.  During 1996  Messrs.  Marx and Rawn were
principally  compensated through split dollar insurance on their lives, a method
which allows the Company to recover,  without interest, all premiums paid on the
death of the insured and which has substantially  lower earnings impact over the
years than would similar amounts paid as cash  compensation.  Specifically,  the
Company  has  purchased  split  dollar  life  insurance  payable on the death of
Mr. Marx, some of which is payable on the later to die of Mr. Marx and his wife,
and split dollar life  insurance  payable on the death of Mr. Rawn.  Under these
arrangements  the Company will pay  approximately  $4,200,000 over the course of
the next 17 years as premiums under the policies for Mr. Marx and  approximately
$3,000,000  over the course of the next 13 years  under the policy for Mr.  Rawn
(in each case including  amounts paid in the first fiscal quarter of 1997),  and
will be reimbursed,  without interest,  for all of the premiums that it has paid
upon the death of the respective insured.  The actual premiums to be paid may be
higher than estimated  depending upon the performance of the insurance company's
investments  and  other  factors.  Pursuant  to  the  terms  of  life  insurance
agreements  entered into with each of Messrs.  Marx and Rawn,  the Company shall
continue to be obligated to pay these premiums  during the insured's  employment
with the Company and in the event of the  termination of such employment for any
reason,  unless the insured  willfully  and  materially  breaches the terms of a
consulting  agreement  between him and the Company and such breach continues for
30 days after written  notice.  Under the terms of such  consulting  agreements,
each of  Messrs.  Marx and Rawn is to be  engaged  as a  consultant  immediately
following the termination of his employment with the Company and, in such event,
shall receive such  compensation as shall be fair under the  circumstances.  Mr.
Marx has been so engaged as a consultant to the Company since February 15, 1995,
the date on which he  ceased to serve as  Chairman  of the  Company's  Executive
Committee.  The  consulting  agreements  may be  terminated  by the Company upon
thirty days  notice.  In 1996,  the  Company  paid an  aggregate  of $437,072 in
premiums on the policies  pertaining to Mr. Marx and $315,150 in premiums on the
policy  pertaining to Mr. Rawn. There will be a small,  negative earnings impact
through  1998 of the  policies  on  Messrs.  Marx's  and  Rawn's  lives,  and an
increasingly positive impact on earnings in the later years.

     In July 1994,  the  Company  entered  into a Services  Agreement  with Brae
Group,  Inc. ("Brae") which  beneficially  owns 35.4% of the outstanding  Common
Stock and in which Louis Marx, Jr., a Director of the Company, has a controlling
interest, and in which Victorinox Cutlery Company ("Victorinox"), a key supplier
and beneficial owner of approximately 12.2% of the outstanding Common Stock, has
a non- controlling  stock interest.  Mr. M. Leo Hart, a Director of the Company,
is Chief Executive  Officer of Brae.  Under the Services  Agreement,  Brae is to
provide  various  services to the Company for a period of four years relating to
maintaining, enhancing and expanding the Company's relationship with Victorinox.
In exchange  for these  services,  Brae  received an option to purchase  500,000
shares of the Company's  Common Stock at the then current market price of $10.75
per share.  The option is fully vested and can be  exercised  for ten years from
the date of the Services Agreement.

     The Company  loaned to Mr. James W. Kennedy,  a Director of the Company,  a
total of $87,500. The loan bore interest at the prime rate and was paid in full,
together with accrued interest, on January 3, 1996.

     Lahinch  Group,  Inc.,  of which Mr.  James W.  Kennedy,  a Director of the
Company, is president,  director and a significant stockholder, and of which Mr.
Louis Marx, Jr. and Victorinox Cutlery Company are investors, purchased from the
Company products for resale to the golf oriented channel of trade in 1996 in the
amount of $268,679.

     In 1996, the Company paid $528,475 for legal  services  rendered by the law
firm of Zimet,  Haines,  Friedman & Kaplan, of which Mr. Herbert M. Friedman,  a
Director of the Company, is a partner.

     Victorinox  Cutlery  Company owns  approximately  12.2% of the  outstanding
Common  Stock  and  is the  supplier  to  the  Company  of  Swiss  Army  Knives,
professional  cutlery  products and  Victorinox  Watches.  During the year ended
December 31, 1996, the Company purchased Victorinox products in aggregate amount
of approximately $36,360,298.

                                       31
<PAGE>

              Swiss Army Brands, Inc. Charitable Insurance Program

     The Company  recognizes its  responsibility to the communities in which its
products are sold and the importance of charitable  organizations to the country
at large.  The  Company is also aware of the  benefits to  commercial  good will
resulting from the proper discharge of its responsibilities. In order to further
these objectives,  the Company instituted its Charitable Insurance Program. This
program  allows the  Company to  provide  the  maximum  assistance  to  numerous
charities by utilizing tax provisions intended to encourage such activities, and
to eventually recover, without interest, all amounts expended.

     Under the Company's Charitable  Insurance Program (the "Program"),  adopted
by the Company's Board of Directors in 1993, the Company will utilize  insurance
on the lives of each of its directors and other designated persons (the "Insured
Directors") to fulfill  charitable  pledges to the  Victorinox-Swiss  Army Knife
Foundation  (the  "Foundation")  and to  charities  recommended  by the  Insured
Directors.  The  Company  previously  purchased  life  insurance  on  one of the
Company's then  Co-Chairmen  and designated the Foundation as a beneficiary of a
portion  of the  proceeds,  subject  to  the  Company's  right  to  revoke  such
designation.

     The  Program  enables the Company to make a  meaningful  commitment  to the
Victorinox-Swiss  Army Knife  Foundation,  as well as a broad range of charities
benefiting our communities. The Company anticipates that it will be able to make
substantial  contributions in the future to these charities at a minimal cost to
the Company.

     The  Victorinox-Swiss   Army  Knife  Foundation  is  a  tax-exempt  private
foundation,  funded primarily by contributions  from the Company and Victorinox.
It was organized in December,  1992 for general charitable  purposes,  including
the improvement of the welfare of underprivileged  children (and others) through
the encouragement of organized  athletic  activities,  including those sports in
which an  underprivileged  child would not ordinarily  participate.  Louis Marx,
Jr., a director of the Company,  is President and a director of the  Foundation.
Stanley R. Rawn, Jr.,  Senior  Managing  Director and a director of the Company,
and Herbert M. Friedman, M. Leo Hart and John Spencer, directors of the Company,
are directors of the Foundation.

     The Company is the owner and beneficiary of the policies, with the right to
borrow  against  them,  and will  receive  the  proceeds  upon the death of each
Insured.  The proceeds will not be legally segregated from the Company's general
funds and will remain  subject to claims of the  Company's  creditors.  Upon the
death of an Insured  Director,  the Company will retain a share of the insurance
proceeds equal to the cumulative  premiums paid by the Company for the policy on
that Insured  Director's  life. One half of the remaining amount will be used to
fulfill a pledge to the  Foundation  and the other  half will be used to fulfill
pledges to tax-exempt charities recommended by Insured Directors and approved by
the Board.

     Generally, the Company will be bound to continue to pay all premiums on the
policy for the life of the Insured or, in the case of Mr. Marx, as long as he is
an officer or Board member or agrees to serve as a consultant to the Company.

     Generally, there will be a small, negative impact on earnings through 1998,
and an increasingly positive impact on earnings after 1998 as the cash surrender
value of the insurance increases.

     If a  director  were to leave the  Company  prior to the time when the cash
surrender  value of the policy exceeds the aggregate  premiums,  and the Company
received no further substantial benefit from his or her services, the obligation
to pay future  premiums  would  result in a charge to earnings at the time he or
she left. The charge to earnings for 1996 with respect to directors who left the
Company in 1996 is insignificant.

     The Company would not be entitled to a tax deduction, nor would the Company
realize  income  for  regular  income  tax  purposes,  at the time the policy is
obtained  nor as premiums  are paid.  Upon the death of the  director  (when the
policy  matures  and the  insurance  proceeds  are paid) the  Company  would not
realize  income for  "regular"  income tax  purposes,  but the Company  might be
subject to alternative minimum tax ("AMT") on a portion of the receipts from the
policy.  Upon the  making of the cash  contribution  following  the death of the
insured  director,  the  Company  would be entitled  to a  deduction.  Since the
Company is entitled to claim as  charitable  deductions  only 10% of its taxable
income in any year, the extent of the utilization of this deduction would depend
upon income. These deductions may be carried forward for a period of five years.

                                       32
<PAGE>




                                     PART IV
<TABLE>
<CAPTION>


Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K


(a)       Documents filed as part of this report:               Page(s)

<S>      <C>                                                   <C>


(1)       Financial Statements:


          Report of Independent Public Accountants              F-1

          Consolidated Balance Sheets - December 31,
          1996 and 1995                                         F-2 to F-3

          Consolidated Statements of Operations for the
          Years Ended December 31, 1996, 1995 and 1994          F-4

          Consolidated Statements of Stockholders' Equity
          for the Years Ended December 31, 1996, 1995 and
          1994                                                  F-5

          Consolidated Statements of Cash Flows for the
          Years Ended December 31, 1996, 1995 and 1994          F-6

          Notes to Consolidated Financial Statements            F-7 to F-25

(2)       Schedule --

          Schedule II -- Valuation and Qualifying Accounts
          for the Years Ended December 31, 1996, 1995 and 1994  F-26

     All other  schedules  called  for under  Regulation  S-X are not  submitted
because  they are not  applicable  or not  required,  or  because  the  required
information is included in the financial statements or notes thereto.

                                       33
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Swiss Army Brands, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets of Swiss Army
Brands,  Inc., formerly The Forschner Group, Inc., (a Delaware  corporation) and
subsidiaries  as of  December  31, 1996 and 1995,  and the related  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period ended December 31, 1996.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Swiss Army Brands,  Inc. and
subsidiaries  as of  December  31,  1996  and  1995,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole. The schedule listed in Item 14(a)(2) is
presented  for  purposes  of  complying   with  the   Securities   and  Exchange
Commission's  rules  and is not part of the  basic  financial  statements.  This
schedule has been subjected to the auditing  procedure  applied in the audits of
the  basic  financial  statements  and,  in our  opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.




                                                        ARTHUR ANDERSEN LLP


Stamford, Connecticut,
  February 4, 1997






                                       F-1
<PAGE>



                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS



</TABLE>
<TABLE>
<CAPTION>
                                           December 31,            December 31,
                                              1996                     1995
<S>                                        <C>                    <C>

Current assets:
   Cash and cash equivalents               $2,067,346                $608,757
   Accounts receivable, less
    allowance for doubtful accounts
    of $1,032,000 and $975,000,            32,992,281              31,970,449
    respectively
   Inventories                             29,656,511              36,733,146
   Deferred income taxes                    3,295,488               2,395,858
   Prepaid and other                        2,921,134               2,647,121
                                          ------------            ------------
      Total current assets                 70,932,760             74,355,331
                                          ------------            ------------

Deferred income taxes                       1,597,307                 771,371

Property, plant and equipment, net          3,968,461               4,105,865

Investments in preferred units, at cost     9,002,999               7,002,990

Investments in common stock and note
   receivable of unconsolidated affiliates    150,000               2,591,415

Foreign distribution rights, net of
   accumulated amortization of $2,518,116
   and $1,843,812, respectively             4,226,092               4,900,396

Other assets, net of accumulated
   amortization of $496,436 and
   $3,166,339, respectively                 8,764,906               7,502,884
                                           -----------             -----------
Total assets                              $98,642,525            $101,230,252
                                         =============           ============
</TABLE>



The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.


                                      F-2
<PAGE>



                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>

                                           December 31,            December 31,
                                              1996                   1995
<S>                                       <C>                     <C>


Current liabilities
   Accounts payable                        $10,951,269             $6,479,200
   Accrued liabilities                       7,835,149              9,812,383
                                          -------------           ------------
 Total current liabilities                  18,786,418             16,291,583
                                          -------------           ------------

Commitments and contingencies (Note 13)

Stockholders' equity
   Preferred stock, par value $.10 per
      share: shares authorized -
      2,000,000; no shares issued                _                      _
   Common stock, par value $.10 per
      share: shares authorized -
      12,000,000; shares issued - 8,822,968
      and 8,800,718, respectively              882,297                880,072
   Additional paid-in capital               46,181,841             45,897,740
   Foreign currency translation adjustment    (113,401)                (9,216)
   Retained earnings                        38,018,837             43,283,540
                                           -------------          ------------
                                            84,969,574             90,052,136
   Less-cost of common stock in
      treasury; 614,108 shares              (5,113,467)            (5,113,467)
                                           -------------          ------------
Total stockholders' equity                  79,856,107             84,938,669
                                           -------------          ------------

Total liabilities and stockholders' equity $98,642,525           $101,230,252
                                           =============         =============
</TABLE>



The  accompanying  notes to consolidated  financial  statements are an integral
part of these balance sheets.


                                       F-3

<PAGE>
                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                            1996            1995           1994
<S>                                     <C>             <C>            <C>

Net sales                               $130,029,897    $126,694,786   $144,437,320
Cost of sales                             89,193,757      82,430,435     88,633,762
                                        -------------   -------------  -------------
Gross profit                              40,836,140      44,264,351     55,803,558
Selling, general and administrative
   expenses before special charges
   and special charitable contribution    43,679,273      40,265,716     38,792,909


Special charges                            2,562,000           -              -

Special charitable contribution                -               -          1,500,000
                                        -------------   --------------  ------------

Total selling, general and
  administrative expenses                 46,241,273      40,265,716     40,292,909
                                        -------------   --------------  ------------

Operating income (loss)                   (5,405,133)      3,998,635     15,510,649
Interest expense                            (147,005)       (216,937)       (27,674)
Interest income                              120,093         556,631        391,387
Gain (loss) on sale (write-down)
  of investments                          (2,381,733)      1,771,456         36,720
Equity interest in unconsolidated
  affiliates                                   -            (548,200)         -
Other income (expense), net                  205,411          74,276         81,543
                                        -------------    --------------  -----------
Total interest and other
  income (expense), net                   (2,203,234)      1,637,226        481,976
                                        -------------    --------------  -----------

Income (loss) before income taxes         (7,608,367)      5,635,861     15,992,625

Income tax provision (benefit)            (2,343,664)      2,522,645      6,632,895
                                        -------------    --------------  -----------
Net income (loss)                        ($5,264,703)     $3,113,216     $9,359,730
                                        =============    ==============  ===========

Net income (loss) per share                   ($0.64)          $0.38          $1.16
                                        =============    ==============  ===========

Weighted average number of
   shares and equivalents outstanding      8,201,599       8,235,849      8,061,846
                                        =============    ==============  ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                      F-4

<PAGE>


                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>

                                                                      Foreign
                                 Common Stock         Additional      Currency
                               Par Value  $.10          Paid-In     Translation   Retained      Treasury
                            Shares         Amount       Capital      Adjustment   Earnings        Stock
<S>                       <C>            <C>          <C>             <C>        <C>            <C>


BALANCE
December 31, 1993          7,648,968     $764,897     $34,520,872    ($6,829)    $30,810,594   ($5,472,110)
Net income                     -            -               -            -         9,359,730         -
Stock options and warrant
  exercised                1,111,000      111,100      10,467,657        -             -             -
Stock grant                   37,000        3,700         486,925        -             -             -
Issuance of common stock
   from treasury               -              -           391,360        -             -           358,643
Foreign currency
   translation adjustment      -              -             -        (21,256)          -             -
                           ----------     --------     -----------   ---------    ------------   ----------
BALANCE
December 31, 1994          8,796,968      879,697      45,866,814    (28,085)     40,170,324    (5,113,467)

Net income                     -              -             -            -         3,113,216         -
Stock options exercised        3,750          375          30,926        -             -             -
Foreign currency
   translation adjustment      -              -             -         18,869           -             -
                           ----------     ---------    -----------   ---------    -------------  ----------

BALANCE
December 31, 1995          8,800,718      880,072      45,897,740     (9,216)     43,283,540    (5,113,467)

Net loss                       -              -             -            -        (5,264,703)        -
Stock options and warrant
   exercised                  22,250        2,225         284,101        -             -             -
Foreign currency
  translation adjustment       -              -             -       (104,185)          -             -
                           ----------     --------     -----------  ----------    -----------   -----------

BALANCE
December 31, 1996          8,822,968     $882,297     $46,181,841  ($113,401)    $38,018,837   ($5,113,467)
                           ==========     ========     ===========  ==========    ===========   ===========


</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.



                                      F-5
<PAGE>
                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                             1996          1995        1994
<S>                                      <C>           <C>           <C>
Cash flows from operating activities:
   Net income (loss)                    ($5,264,703)   $3,113,216    $9,359,730
   Adjustments to reconcile net income
   (loss) to cash provided from
   (used for) operating activities:
      Depreciation and amortization       4,035,399     3,249,376     3,207,294
      Deferred income taxes              (1,725,566)     (643,155)   (1,644,567)
      Treasury shares contributed to
       charitable foundation                  -               -         750,003
      Stock award                             -               -         303,125
      Equity interest in unconsolidated
       affiliates                             -           548,200           -
      (Gain) loss on sales of property,
       plant and equipment                    3,944         8,788        (9,030)
      (Gain) loss on (sale) write-down
       of investments                     2,381,733    (1,771,456)      (36,720)
                                          ----------   -----------    ----------
                                           (569,193)    4,504,969    11,929,835

Changes in other current assets and liabilities:
   Accounts receivable                   (1,091,241)   (2,329,783)   (6,105,787)
   Inventories                            6,966,002    (9,741,351)   (6,281,294)
   Prepaid and other                       (269,983)   (1,144,356)    3,020,220
   Accounts payable                       4,508,883    (7,580,883)    2,765,024
   Accrued liabilities                   (1,937,712)      (64,206)    3,525,716
                                         -----------   ------------  -----------
    Net cash provided from (used for)
         operating activities             7,606,756   (16,355,610)    8,853,714
                                         -----------   ------------  -----------

Cash flows from investing activities:
   Capital expenditures                  (1,464,699)   (1,430,352)   (1,676,477)
   Proceeds from sales of property,
     plant and equipment                      -            21,500        22,412
   Additions to other assets             (3,021,214)   (2,814,301)   (2,205,205)
   Investments in preferred units        (2,000,009)        -        (6,250,000)
   Investments in common stock                -        (3,709,546)          -
   Sales (purchases) of short-term
     investments                              -         5,311,608    (5,311,608)
   Proceeds from note receivable              -             -           186,120
   Proceeds from sale of investments         59,682     6,822,282       377,490
                                         -----------   -----------   -----------
   Net cash provided from (used for)
     investing activities                (6,426,240)    4,201,191   (14,857,268)
                                         -----------   -----------   -----------

Cash flows from financing activities:
   Proceeds from exercise of stock
     options and warrant                    286,326        31,301    10,766,257
                                         -----------   -----------   -----------
   Net cash provided from
     financing activities                   286,326        31,301    10,766,257
                                         -----------   -----------   -----------

 Effect of exchange rate changes on cash     (8,253)       23,686       109,638
 Net increase (decrease) in cash and cash
    equivalents                           1,458,589   (12,099,432)    4,872,341
   Cash and cash equivalents,
    beginning of period                     608,757    12,708,189     7,835,848
                                         -----------  ------------   -----------
   Cash and cash equivalents,
    end of period                       $ 2,067,346    $  608,757   $12,708,189
                                         ===========  ============   ===========
Cash paid during the period:
   Interest                               $ 147,005    $  251,637   $    27,674
                                         ===========  ============   ===========
   Income taxes                          $  232,985    $3,428,792   $ 6,883,242
                                         ===========  ============   ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                      F-6
<PAGE>


                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1)    NATURE OF BUSINESS
          Swiss Army  Brands,  Inc.  ("Swiss Army" or the  "Company",  formerly
          known as The Forschner Group,  Inc. ) is the exclusive  distributor in
          the United States,  Canada (with one minor  exception for cutlery) and
          the Caribbean of the Victorinox Original Swiss Army Knife,  Victorinox
          cutlery and Victorinox  watches.  Swiss Army also markets its own line
          of Swiss Army Brand Watches and other high quality Swiss made products
          under its Swiss Army Brand worldwide. Swiss Army's cutlery line, which
          also includes imported  products from Germany,  England and France, is
          sold primarily to the food  processing and service  industries.  Swiss
          Army's  wholly-owned  subsidiary,  Cuisine de France Limited  ("CDF"),
          imports and  distributes  high quality  French made  consumer  cutlery
          under the Cuisine de France Sabatier brand.  Substantially  all of the
          assets of CDF were sold by the  Company  in 1997.  Swiss Army has only
          one business  segment - the importation  and  distribution of cutlery,
          knives, watches and other consumer products.  Approximately 1%, 6% and
          25% of Swiss  Army's net sales for the years ended  December 31, 1996,
          1995 and 1994  respectively,  resulted from  participation  in special
          promotional  programs  with one  customer.  The Company  has  received
          orders  from  this  customer  in  1997.

(2)    SUMMARY  OF  SIGNIFICANT ACCOUNTING POLICIES
         Principles of consolidation
          The  consolidated  financial  statements  include the  accounts of the
          Company   and   its   wholly-owned   subsidiaries.   All   significant
          intercompany transactions have been eliminated.

         Use of estimates
          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities  and  disclosures of contingent  assets and liabilities at
          the date of the  financial  statements  and the  reported  amounts  of
          revenues and expenses  during the  reporting  period.  Actual  results
          could differ from those estimates.

         Foreign currency translation and transactions
          Assets  and  liabilities  of  the  Company's  foreign  operations  are
          translated into U.S.  dollars using the exchange rate in effect at the
          balance sheet date.  Results of operations  are  translated  using the
          average exchange rate prevailing throughout the period. The effects of
          exchange rate fluctuations on translating  foreign currency assets and
          liabilities  into U.S.  dollars are  included in the foreign  currency
          translation  adjustment component of stockholders' equity, while gains
          and losses resulting from foreign  currency  transactions are included
          in net income  (loss).  The  Company,  from time to time,  enters into
          foreign  currency   forward   contracts  and  other  currency  trading
          arrangements to hedge specific  foreign  currency  inventory  purchase
          commitments.  Gains and losses on these  contracts  are  deferred  and
          recognized in cost of sales when the related inventory is sold.

                                      F-7
<PAGE>

         Cash and cash equivalents
          Cash and cash  equivalents  consist of all highly  liquid  investments
          with  original  maturities of three months or less.  Investments  with
          maturities  between three and twelve months are considered  short-term
          investments.

         Inventories
          Domestic inventories are valued at the lower of cost determined by the
          last-in,   first-out  (LIFO)  method  or  market.  Had  the  first-in,
          first-out (FIFO) method been used to value domestic  inventories as of
          December  31,  1996 and 1995,  the  balance at which  inventories  are
          stated would have been $3,157,000 and $2,746,000 higher, respectively.
          Foreign  inventories  are  valued  at the  lower  of  cost  or  market
          determined  by the  FIFO  method.  Inventories  primarily  consist  of
          finished goods and packaging material.

         Property, plant and equipment
          Property,  plant and equipment are stated at cost. Major  improvements
          which add to  productive  capacity  or extend the life of an asset are
          capitalized  while repairs and  maintenance  are charged to expense as
          incurred.   Property,   plant  and  equipment  are  comprised  of  the
          following:
<TABLE>
<CAPTION>

                                                   December 31,
                                            1996                   1995
<S>                                      <C>                   <C>

          Leasehold improvements       $  1,030,138           $   818,446
          Equipment                       7,227,788             6,199,914
          Furniture and fixtures          1,669,895             1,473,188
                                         -----------           -----------
                                          9,927,821             8,491,548
          Accumulated depreciation       (5,959,360)           (4,385,683)
                                         -----------           -----------
                                         $3,968,461            $4,105,865
                                         ===========           ===========
</TABLE>

          Depreciation  is  computed  principally  by use  of the  straight-line
          method based on the following estimated useful lives:
<TABLE>
<CAPTION>

                                                               Years
         <S>                                                  <C>
          Equipment                                            3 to 10
          Furniture and fixtures                               7 to 10
</TABLE>


          The provision for  amortization of leasehold  improvements is provided
          on a straight-line basis over the estimated useful lives of the assets
          or terms of the  leases,  whichever  is  shorter.  For the years ended
          December 31,  1996,  1995,  and 1994,  depreciation  and  amortization
          expense of property, plant and equipment was approximately $1,599,000,
          $1,521,000 and $1,273,000, respectively.

         Long-lived assets
          In March 1995, Statement of Financial Accounting Standard ("SFAS") No.
          121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and for
          Long-Lived Assets to Be Disposed Of", was issued.  The Company adopted
          SFAS No.  121 in 1996,  and this  accounting  standard  did not have a
          material  effect on the  Company's  financial  position  or results of
          operations.  The Company continually reviews the recoverability of the
          carrying value of these assets using the provisions of SFAS No. 121.

                                      F-8
<PAGE>


         Investments
          Investments  in common  stock of  companies  in which the Company owns
          between 20% to 50% are accounted for under the equity method, with the
          Company  recording its  proportional  share of net income or losses of
          these  companies  and   amortization   of  goodwill   related  to  the
          acquisition  of the  investments.  These  amounts  equalled  losses of
          $548,200 for 1995.

          Investments  in preferred  units or stock,  are accounted for at cost,
          subject to review for impairment.  Since these investments do not have
          a readily  determinable fair value, the valuation of these investments
          is subject to uncertainty.

          Investments  in common  stock of  companies  in which the Company owns
          less than 20% are accounted  for at fair value,  subject to review for
          impairment.  Changes  between  cost and fair value are  reflected as a
          component of stockholders'  equity.  Any write-down of the cost due to
          impairment are reflected as part of net income (loss).

         Earnings per share
          Earnings per share are based on the weighted  average number of common
          and common  equivalent  shares  outstanding  during the year.  For the
          years ended  December  31,  1995 and 1994,  the  computation  included
          50,000 and 230,000  shares,  respectively,  issuable  upon exercise of
          stock  options and  warrants  after the assumed  repurchase  of common
          shares  with the related  proceeds.  For the year ended  December  31,
          1996, no common  equivalents  have been included in the computation of
          earnings per share as they would have an anti-dilutive  effect.  There
          is no difference between primary and fully diluted earnings per share.

         Stock-based compensation
          In  October  1995,   SFAS  No.  123,   "Accounting   for   Stock-Based
          Compensation",  was issued.  As permitted under the provisions of SFAS
          No. 123,  the Company  has not  changed its method of  accounting  for
          stock-based  compensation;  however,  SFAS No. 123 requires additional
          footnote  disclosures  relating  to the  effect of using a fair  value
          based method of accounting for stock-based compensation cost. See Note
          12 for the additional footnote disclosures required by SFAS No. 123.

         Income taxes
          The Company follows SFAS No. 109 "Accounting for Income Taxes".  Under
          SFAS No. 109, the provision for income taxes, as determined  using the
          liability  method,  includes  deferred taxes  resulting from temporary
          differences  in income for financial and tax purposes.  Such temporary
          differences primarily result from differences between the tax bases of
          assets  and  liabilities  and their  carrying  amounts  for  financial
          reporting purposes.

         Foreign currency
          The  vast  majority  of  the  Company's  products  are  imported  from
          Switzerland  and are paid for in Swiss francs.  Increases in the value
          of the Swiss franc versus the dollar may effectively increase the cost
          of these products to the Company. The increase in the cost of products
          to the Company may result in either higher prices charged to customers
          or  reductions  in gross  margin,  both of which  may have an  adverse
          effect on the Company's results of operations. The Company enters into
          foreign   currency   contracts  and  options  to  hedge  the  exposure
          associated with foreign currency  fluctuations.  However, such hedging
          activity  cannot  eliminate  the  long-term   adverse  impact  on  the
          Company's  competitive  position and results of operations  that would
          result from a sustained decrease in the value of the dollar versus the
          Swiss franc.  These  hedging  transactions,  which are meant to reduce
          foreign  currency  risk,  also  reduce the  beneficial  effects to the
          Company of any increase in the dollar relative to the Swiss franc. The
          Company plans to continue to engage in hedging transactions;  however,
          it is uncertain  as to what extent to which such hedging  transactions
          will reduce the effect of adverse currency fluctuations.

                                      F-9
<PAGE>

         Reclassifications
          Certain  reclassifications  have been made to prior  year's  financial
          statements to conform with the 1996 presentation.

(3)    SPECIAL CHARGES
          In  1996,  the  Company  recorded  special  charges  of  approximately
          $9,887,000 ($0.75 per share after tax) related to the completion of an
          extensive  analysis of the  Company's  operations  and non-  strategic
          assets. The special charges consisted of:
<TABLE>
         <S>                                               <C>
          Write-off of inventory                           $4,932,000 (a)
          Selling, general and administrative charges       2,562,000 (b)
          Write-down of investments                         2,393,000 (c)
                                                          ------------
                                                           $9,887,000
                                                          ============


          (a)  Represents  the write-off of  discontinued  inventory,  including
          certain cutlery products sold by CDF (see Note 7).

          (b)  Consists of an $870,000  write-off  of goodwill  and other assets
          related  to CDF (see  Note 7), a  $1,151,000  write-off  for  obsolete
          displays and a $541,000 write-off of other assets.

          (c) Consists of a $1,593,000  write-down of the Company's common stock
          investment  in  SweetWater,  Inc.  and a  $800,000  write-off  of  the
          Company's  investment in a privately held  affiliated  start-up entity
          (see Note 6).

(4)    PRINCIPAL SUPPLIERS
          Swiss Army imports for resale all of its Swiss Army Knives and certain
          of its other cutlery  products from a principal  supplier,  Victorinox
          Cutlery Company  ("Victorinox"),  a Swiss company.  Effective December
          12, 1993, Swiss Army renewed a five-year agreement  (originally signed
          on December 12, 1983 and as amended) with  Victorinox  which  appoints
          Swiss Army as exclusive  distributor of Victorinox Original Swiss Army
          Knives and most of its other cutlery products in the United States and
          gives Swiss Army  exclusive  rights to use  Victorinox  trademarks and
          trade names in the United States with respect to Swiss Army Knives and
          cutlery.  The  agreement  remains  in  effect  as long as  Swiss  Army
          continues  to  purchase  quantities  of Swiss Army  Knives and cutlery
          (based on the Swiss franc purchase price) at least equal to 85% of the
          maximum  amount of purchases of each in any  preceding  year. In 1995,
          Victorinox agreed to reduce the 1996 minimum purchase  requirements on
          knives to 75% of the  maximum  amount of  purchases  in any  preceding
          year. In 1996,  Victorinox  agreed to reduce the 1997 minimum purchase
          requirements  on knives to 65% of the maximum  amount of  purchases in
          any preceding  years. The Company  purchased the required  minimums in
          1996,   with  total   purchases  from   Victorinox  of   approximately
          $36,400,000.  Pursuant  to this  agreement,  Swiss  Army  must  obtain
          Victorinox's  permission to sell new cutlery  items.  All of the Swiss
          Army Knives and certain of the cutlery  items that Swiss Army sells in
          Canada and the Caribbean also are supplied by Victorinox.

                                      F-10
<PAGE>

          Foreign  distribution  rights with  Victorinox  are  comprised  of the
          following:

</TABLE>
<TABLE>
<CAPTION>

                                          Cost at December 31,     Amortization
                                           1996          1995         Period
         <S>                            <C>           <C>           <C>

          Canadian distribution
            rights (A)                  $3,483,064    $3,483,064     10 years
          Caribbean and Victorinox Watch
            distribution rights (B)      3,261,144     3,261,144     10 years
                                        -----------   -----------
                                         6,744,208     6,744,208
          Accumulated amortization      (2,518,116)   (1,843,812)
                                        -----------   -----------
                                        $4,226,092    $4,900,396
                                        ===========   ===========
</TABLE>


          (A)  In  April  1992,  Swiss  Army  entered  into  an  agreement  with
          Victorinox under which it received the exclusive  distribution  rights
          for Victorinox  Original Swiss Army Knives in Canada and was appointed
          the  principal  distributor  of  Victorinox  professional  cutlery  in
          Canada.  In exchange for the grant of these rights,  Swiss Army issued
          to Victorinox  277,066 shares of its common stock from  treasury.  The
          rights  received  were  awarded  to Swiss Army for a fixed term with a
          continuous  five-year renewal arrangement upon expiration of the fixed
          term.  Victorinox  has the right ot to renew the  agreement;  however,
          should  Victorinox  choose not to renew upon  expiration  of the fixed
          term, Victorinox is required to pay Swiss Army $3,500,000.

          (B) On December  21, 1993,  Swiss Army entered into an agreement  with
          Victorinox under which it received the exclusive  distribution  rights
          for Victorinox Original Swiss Army Knives and professional  cutlery in
          the  Caribbean.  Swiss  Army also  received  the  right to  distribute
          Victorinox  Swiss-made  watches in the United  States,  Canada and the
          Caribbean  and  acquired  the 20% share of the  Company's  subsidiary,
          Victorinox of Switzerland,  Ltd.,  that Victorinox  owned. In exchange
          for the grant of these  rights  and the  stock  acquired,  Swiss  Army
          issued to Victorinox a five-year warrant to purchase  1,000,000 shares
          of common stock at a $3.75 discount to the current market price on the
          date of exercise. The value of the warrant of $3,750,000 was allocated
          between the purchase of the distribution  rights  ($3,261,144) and the
          acquisition  of the 20%  share of  Victorinox  of  Switzerland,  Ltd.,
          ($488,556).  In April 1994, the discount from the current market price
          was  modified to $4.25 in exchange for  Victorinox's  agreement to pay
          the exercise price immediately instead of after one year as allowed by
          the original agreement.  All of the shares issued upon exercise of the
          warrant were  subsequently  sold to a corporate  shareholder  of Swiss
          Army that is  controlled  by a director of Swiss Army, in exchange for
          shares  of the  common  stock  of  that  corporation.  As  part of the
          agreement, Swiss Army will pay Victorinox a royalty of 1% of net sales
          of Victorinox  Watches.  The Caribbean  distribution  rights are for a
          fixed term  automatically  renewable in successive  five-year  periods
          unless  either  party  notifies the other at least six months prior to
          expiration  of such  period of its  intent  not to renew.  The term of
          Victorinox Watch distribution  rights in each territory coincides with
          the term in that territory for Victorinox cutlery products.

                                      F-11
<PAGE>

          The Company  does not have any  manufacturing  facilities  and imports
          virtually  all  of  its  products  from  independent  suppliers.   The
          Company's  business  is  subject  to  certain  risks  related  to  its
          arrangements   with  its   foreign   suppliers,   including   possible
          restrictions on transfer of funds, the risk of imposition of quotas on
          the amount of products  which may be imported  into the United  States
          (although  no quota  currently  exists),  maritime  union  strikes and
          political  instability.  Although  the  Company  has a  United  States
          exclusive  distributorship  agreement with  Victorinox,  its principal
          supplier,  it does not have  such  contractual  arrangements  with its
          other  suppliers.  The agreement with Victorinox  provides for certain
          minimum  annual  purchases of products by the Company,  and failure to
          achieve  these goals would  result in  Victorinox  having the right to
          terminate  the  agreement.  Such a  termination  would have a material
          adverse  effect upon the  Company's  operations.  The  agreement  also
          provides  that the Company  will not add  non-Victorinox  items to its
          line of cutlery  products  without the prior  agreement of Victorinox.
          Although  the  Company  has a  contractual  right to  receive  minimum
          quantities of Swiss Army Knives from  Victorinox,  were this source of
          supply to fail for any reason, the Company would probably be unable to
          find  an  alternative  source.  Any  substantial   disruption  of  the
          Company's  relationships with Victorinox would have a material adverse
          effect on its  operation  and results.  Virtually all of the Company's
          imported products are subject to United States custom duties.

          Although  approximately  73%, or  $18,800,000,  of total  payments for
          watches and watch parts in 1996 were made to a single watch  supplier,
          which is  responsible  for the  final  assembly  of  watch  components
          manufactured  by several  manufacturers,  the  Company  believes  that
          alternate   watch   suppliers   would  be  available,   if  necessary.
          Furthermore,  the Company  believes  that the loss of this supplier of
          Swiss Army Brand Watches would not have a material  adverse  effect on
          the Company's business.

(5)     RELATED PARTY TRANSACTIONS
          One of  Swiss  Army's  directors  is a  partner  in a law  firm  which
          provides legal  services to the Company.  For the years ended December
          31,  1996,  1995 and 1994,  Swiss  Army  incurred  fees of  $598,000 ,
          $516,000 and $588,000,  respectively,  relating to these services.  Of
          the 1994 fees, $176,000 were paid on behalf of Forschner  Enterprises,
          Inc., the predecessor  company to Hudson River Capital LLC and Victory
          Capital  LLC,  and  capitalized  as part of  Swiss  Army's  investment
          therein.

          Four of Swiss Army's  directors  serve as  directors  for Hudson River
          Capital LLC,  including  one who serves as  Co-Chairman.  Six of Swiss
          Army's   directors  serve  as  directors  for  Victory  Ventures  LLC,
          including  two  who  serve  as  Co-Chairman.   Five  of  Swiss  Army's
          directors,  one of which is an executive  officer of Swiss Army, serve
          as directors of SweetWater, Inc. See Note 6 for further discussion.

          A company policy authorizes Swiss Army to compensate, in the form of a
          commission  of  up  to  3%  of  net  sales  for  up  to  three  years,
          non-employees  for their direct role in  introducing  significant  new
          customers  to the  Company.  In 1995 and  1994,  Swiss  Army paid to a
          relative of one of Swiss Army's  directors  half of a 3% commission on
          net sales to a customer,  on whose board the same director also serves
          as a member. In 1995 and 1994 this customer represented  approximately
          6% and 25% of Swiss Army's total revenues (see Note 1).

                                      F-12
<PAGE>


          In July 1994,  Swiss Army entered into a Services  Agreement with Brae
          Group, Inc.  ("Brae"),  a company which is a stockholder of Swiss Army
          and in which a Swiss Army  director  and a principal  supplier  have a
          controlling  and  minority  stock  interest,  respectively.  Under the
          Services Agreement,  Brae is to provide various services to Swiss Army
          for a period of four years  relating  to  maintaining,  enhancing  and
          expanding  Swiss  Army's  relationship  with the  Company's  principal
          supplier.  In exchange for these services,  Brae received an option to
          purchase  500,000  shares  of Swiss  Army's  common  stock at the then
          current   market  price  of  $10.75  per  share.   The  option  vested
          immediately  and can be  exercised  for 10 years  from the date of the
          Services Agreement (see Note 12).

          Effective January 1, 1995, Swiss Army entered into an agreement with a
          director,  under  which the  director  received  $10,000 per month for
          consulting services rendered in 1995. This agreement was terminated on
          December 31, 1995.

          In December 1995, a Swiss Army director and former Co-Chairman entered
          into an  agreement  with the Company to become a sole  distributor  of
          Swiss Army Brand  products to the golf  market.  Investors in this new
          entity include the Company's  principal supplier and a member of Swiss
          Army's Board of Directors,  who is a controlling  stockholder of Brae.
          Sales to this entity were approximately $270,000 in 1996.

(6)    INVESTMENTS
          Investments consist of the following as of December 31, 1996 and 1995:

<TABLE>
<CAPTION>

                                                   Carrying
                                                     Value           Cost
         <S>                                      <C>              <C>
          December 31, 1996:

          Preferred units of Hudson River
            River Capital LLC (A)                $ 7,907,345      $ 7,907,345
          Preferred units of
            Victory Ventures LLC                   1,095,654        1,095,654
                                                  -----------      -----------
          Total investments at cost              $ 9,002,999      $ 9,002,999
                                                  ===========      ===========

          Common stock of SweetWater,              $ 150,000      $ 3,381,742
            Inc. (B)
          Common stock and note receivable
            of affiliated entity  (C)                   -             800,000
                                                  -----------      -----------
          Total investments in common stock
            and note receivable of
            unconsolidated affiliates              $ 150,000      $ 4,181,742
                                                  ===========      ===========


</TABLE>


                                      F-13
<PAGE>
<TABLE>
<CAPTION>
                                                   Carrying
                                                     Value           Cost
         <S>                                      <C>             <C>

          December 31, 1995:

          Preferred stock of Forschner
            Enterprises, Inc. (A)                 $7,002,990      $7,002,990
                                                  ----------      ----------
            Total investment at cost              $7,002,990      $7,002,990
                                                  ==========      ==========
          Common stock of SweetWater,
            Inc. (B)                              $1,791,415      $3,430,175
          Common stock and note receivable of
            affiliated entity (C)                    800,000         800,000
                                                  ----------      ----------

          Total investments in common stock
            and note receivable of
            unconsolidated affiliates             $2,591,415      $4,230,175
                                                  ==========      ==========
</TABLE>
          (A) Hudson  River  Capital LLC  ("Hudson  River"),  formerly  known as
          Victory Capital LLC ("Victory"), is a private equity firm specializing
          in middle market acquisitions,  recapitalization and expansion capital
          investments.  Hudson River currently has equity and other interests in
          several private and publicly  traded  companies.  In 1994,  Swiss Army
          invested a total of $7,002,990  paid in cash and in shares of stock of
          a publicly traded corporation,  to acquire 700,299 shares of preferred
          stock of Forschner Enterprises,  Inc. ("FEI"), the predecessor company
          to  Victory.  On  March 1,  1996,  FEI  merged  into  Victory  and the
          preferred stock of FEI was converted to preferred units of Victory. In
          May 1996,  Swiss  Army  invested  a total of  $2,000,009  in  Victory,
          acquiring  190,477  preferred units. In October 1996,  Victory Capital
          LLC changed its name to Hudson River  Capital  LLC. In November  1996,
          Hudson  River  distributed  to its members its  ownership  interest in
          Victory Ventures LLC ("Victory Ventures").  This event was non-taxable
          and resulted in no gain or loss to the Company.  Victory Ventures is a
          private  equity firm  specializing  in small  market  venture  capital
          investments. As a result of the distribution, the Company owns 890,776
          preferred  units  (representing   approximately  9.1%  of  outstanding
          equity) of Victory  Ventures  valued at $1.23 per unit at December 31,
          1996. At December 31, 1996, the Company owns 890,776  preferred  units
          (representing  approximately  4.2% of  outstanding  equity)  of Hudson
          River.  The preferred units in Hudson River and Victory Ventures owned
          by Swiss Army carry a  preference  on  liquidation  equal to their per
          unit  cost as well as,  in  certain  instances,  an  annual  preferred
          return.  Swiss Army is accounting  for these  investments  on the cost
          basis,  subject to review for impairment.  Since these  investments do
          not have a readily  determinable  fair value,  the  valuation of these
          investments is subject to uncertainty.

          (B) SweetWater,  Inc.  ("SweetWater")  manufactures and sells portable
          water  purification  and  filtration  systems to the  sporting  goods,
          recreational,  travel and tourist, emergency preparedness and military
          markets. As of December 31, 1993, SweetWater was a private company and
          Swiss  Army owned  preferred  stock  with a 40%  voting  interest.  In
          January 1994,  SweetWater  issued 718,750 shares of common stock in an
          initial public offering (resulting in 1,837,243 shares of common stock
          outstanding),  at which time Swiss Army's  holdings of preferred stock
          were converted  into 430,000 shares of common stock.  In January 1994,
          Swiss  Army sold  72,000  shares of  SweetWater  to a  stockholder  of
          Victorinox for approximately $374,000. Swiss Army's cost for the stock
          sold was  approximately  $338,000.  Through  December  31,  1994,  the
          Company  accounted  for this  investment  at fair value  with  changes
          between cost and fair value reflected as a component of  stockholders'
          equity.  During 1995, Swiss Army purchased additional shares of common
          stock  for  $1,837,000,  raising  its  percentage  ownership  to  38%.

                                      F-14
<PAGE>

          Accordingly,  in 1995, the Company accounted for this investment under
          the equity  method.  Swiss Army's  share of the losses of  SweetWater,
          including amortization of goodwill,  totaled $1,638,000.  During 1995,
          SweetWater issued additional shares to outside investors. As a result,
          as of December  31,  1995,  Swiss Army owned 20.5% of the  outstanding
          stock of SweetWater.  Effective  January 1, 1996, Swiss Army decreased
          its percentage of ownership of SweetWater to below 20% due to the sale
          by Swiss Army of SweetWater common stock.  Accordingly,  as of January
          1, 1996,  this investment was accounted for at fair value. In December
          1996, the  investment in SweetWater was written down to $150,000,  its
          estimated  fair  value,  due to the  impairment  in the  value  of the
          investment.  This  write-down  of  approximately  $1,593,000  has been
          included in gain (loss) on sale  (write-down) of  investments.  Due to
          the limited  trading of  SweetWater's  common stock,  the valuation of
          this investment is subject to uncertainty and could change in the near
          term.

          (C) In 1995, the Company purchased 5,160 shares of common stock and an
          8%  convertible  note  due  in  the  year  2000  of a  privately  held
          affiliated  start-up  entity that was in the  business  of  designing,
          manufacturing  and marketing  fine jewelry.  In 1995, the common stock
          and the  convertible  note had been  recorded  at cost.  In the second
          quarter  of 1996,  the  investment  was fully  written  off due to the
          impairment in the value of the investment.  The write-down of $800,000
          has been included in gain (loss) on sale (write-down) of investments.

          Simmons Outdoor Corporation  ("Simmons") was a publicly traded company
          whose primary business is marketing and distributing  branded sporting
          goods products  (principally optical in nature). In the fourth quarter
          of 1995 the Company's  investment in common stock of Simmons was sold,
          resulting in a pre-tax profit of $1,740,000,  which is included in the
          gain (loss) on sale (write-down) of investments. In 1995, prior to the
          sale of the common stock,  the Company  accounted for this  investment
          under the equity method.  Swiss Army's share of the income of Simmons,
          net of amortization of goodwill, totaled $1,090,000.

(7)    OTHER ASSETS
          Other assets in the accompanying  consolidated balance sheets consists
          of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
                                            December 31,         Amortization
                                        1996          1995          Period
<S>                                   <C>           <C>             <C>

       Cash surrender value of
         life insurance (See Note 13) $7,317,215    $5,855,757         N/A

       Goodwill (A)                       -          1,179,189       10 years

       Other                           1,944,127     3,634,277      1-5 years
                                      -----------   -----------

       Accumulated amortization         (496,436)   (3,166,339)
                                      -----------   -----------
                                      $8,764,906    $7,502,884
                                      ===========   ===========
</TABLE>


          (A) On  September 2, 1992,  the Company  acquired  certain  assets and
          assumed certain liabilities of CDF. This acquisition was accounted for
          as a  purchase  with  the  assets  acquired  and  liabilities  assumed
          recorded  at their fair  value.  As  discussed  in Note 3, in 1996 the
          remaining  net book value of the  goodwill was written off. In January
          1997,  the Company  entered into an asset  purchase  agreement to sell
          certain assets and  liabilities  of CDF. No  significant  gain or loss
          will result from this  transaction.  For the years ended  December 31,
          1996,   1995  and  1994,   amortization   expense  was   approximately
          $2,436,000, $1,728,000 and $1,934,000, respectively.

                                      F-15
<PAGE>


(8)    ACCRUED LIABILITIES
          The components of accrued  liabilities  were as follows as of December
          31, 1996 and 1995:
<TABLE>
<CAPTION>

                                                      1996              1995
         <S>                                       <C>               <C>

          Sales, marketing and promotional         $2,631,384       $3,318,970
          Payroll related                           1,425,620        1,623,641
          Pension                                     585,706          628,303
          Income taxes                                314,215        1,114,389
          Other                                     2,878,224        3,127,080
                                                   -----------      -----------
                                                   $7,835,149       $9,812,383
                                                   ===========      ===========
</TABLE>


(9)    REVOLVING CREDIT AGREEMENT
          Swiss Army had a $15,000,000  revolving  credit  agreement  which,  as
          amended,  carried  interest  at either  the bank's  Base Rate,  or the
          London Interbank Offered Rate (LIBOR) rate, plus 1.25%. This agreement
          expired on January 30,  1997.  The  interest  rate was at Swiss Army's
          discretion  subject  to the  terms  of the  loan.  Swiss  Army  had no
          outstanding  balance under this agreement at either  December 31, 1996
          or 1995.  Borrowings  under  this line were used for  working  capital
          requirements  and,  within  certain  restrictions,  for any  corporate
          purpose.   The  revolving  term  loan  agreement   contained   certain
          restrictions  relating  to the  payment of  dividends,  repurchase  of
          stock,  issuance of  additional  debt and sale of certain  assets.  In
          addition,  the agreement  required the  continuation  of the exclusive
          distribution  agreement with Swiss Army's  principal  Swiss Army Knife
          and cutlery supplier (see Note 4). The Company is currently  reviewing
          its options to establish a new revolving credit agreement. The Company
          plans to use the line of credit  described  below for  borrowings,  if
          needed, prior to establishment of a new revolving credit agreement.

          The  Company  maintains a  $5,000,000  line of credit with a financial
          institution.  This facility is unsecured and contains no  restrictions
          or  requirements.  The Company had no  outstanding  balance under this
          agreement at December 31, 1996.


                                      F-16
<PAGE>


(10)   INCOME TAXES
          The income tax provision  (benefit)  for the years ended  December 31,
          1996, 1995 and 1994, consists of the following:
<TABLE>
<CAPTION>


                                            Year Ended December 31,
                                 1996                 1995              1994
         <S>                  <C>                  <C>               <C>

          Current
            Federal          ($1,140,055)          $2,614,025        $7,188,549
            Foreign              292,215               43,720             -
            State                229,742              508,055         1,088,913
                               ----------           ----------        ----------
               Total current    (618,098)           3,165,800         8,277,462

          Deferred
            Federal           (1,331,981)            (492,108)       (1,258,334)
            State               (393,585)            (151,047)         (386,233)
                               ----------           ----------        ----------
               Total deferred (1,725,566)            (643,155)       (1,644,567)
                               ----------           ----------        ----------
          Provision (benefit)
            for income taxes ($2,343,664)          $2,522,645        $6,632,895
                              ===========           ==========        ==========
</TABLE>

          The significant components of the deferred tax asset (liability) as of
          December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>

                                                  1996            1995
         <S>                                  <C>               <C>

          Loss on write-down of investments   $1,211,493        $651,195
          Inventory related reserves           1,151,593         994,807
          Sales and marketing reserves         1,074,376         654,856
          Depreciation and amortization          552,300        (150,750)
          Accrued employee benefits              540,913         755,003
          Net operating loss carryforward
            for state purposes                   196,931             -
          Other                                  165,189         262,118
                                              -----------       ----------
                                              $4,892,795       $3,167,229
                                              ===========       ==========
</TABLE>

          No  valuation  allowance  has  been  recorded  against  the  Company's
          deferred tax assets as the Company believes it is more likely than not
          that the Company will realize the deferred tax assets.



                                      F-17
<PAGE>


          A reconciliation of the income tax provision  (benefit)  calculated at
          the federal  income tax  statutory  rate and the  Company's  effective
          income tax rate for 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
                                                1996        1995       1994
         <S>                                   <C>         <C>        <C>

          Statutory federal income tax rate    (34.0%)      34.0%      35.0%
          State income taxes, net of
            federal income tax benefit          (4.1)        6.8        2.9
          Foreign tax rate differences           3.8         0.8        1.4
          Other                                  3.5         3.2        2.2
                                               -------     -------    ------
          Effective income tax rate            (30.8%)      44.8%      41.5%
                                               =======     =======    ======
</TABLE>


          At  December   31,   1996,   the  Company  has  net   operating   loss
          carryforwards,   subject  to  Internal  Revenue  Service  review,   of
          approximately  $3.1  million.  The  Company  plans  utilize  the  loss
          carryfowards by carrying them back to previous years.

(11)   EMPLOYEE BENEFITS
          Substantially   all   employees  of  the  Company  are  covered  by  a
          noncontributory  defined benefit  pension plan.  Benefits are based on
          years of  service  and the  employee's  compensation  during  the five
          highest  consecutive  compensation  years.  Costs  under  the plan are
          accrued and funded on the basis of accepted actuarial  methods.  Total
          pension expense approximated $232,000,  $324,000 and $218,000, for the
          years ended December 31, 1996, 1995 and 1994, respectively.

          The net periodic  pension  cost of Swiss Army's  pension plan in 1996,
          1995 and 1994 includes the following components:
<TABLE>
<CAPTION>


                                               1996        1995        1994
         <S>                                 <C>         <C>         <C>

          Service cost - benefits
            earned during the period         $239,607    $256,331    $196,795
          Interest cost on projected
            benefit obligation                156,335     159,618     123,590
          Return on assets                   (144,010)   (110,233)    (94,726)
          Amortization of net
            transition asset                  (14,188)    (14,188)    (14,188)
          Amortization of unrecognized
            prior service cost                (13,253)    (13,529)    (13,818)
          Amortization of net loss              7,424      46,021      19,939
                                              --------   ---------   ---------
          Net periodic pension cost          $231,915    $324,020    $217,592
                                              ========   =========   =========
</TABLE>

                                      F-18
<PAGE>

          The funded  status of the Company's  defined  benefit plan at December
          31, 1996 and 1995 follows:
<TABLE>
<CAPTION>

                                                  1996              1995
         <S>                                   <C>               <C>


          Actuarial present value of:
            Vested benefit obligation          $2,072,841        $1,903,390
                                                =========         =========
            Accumulated benefit obligation     $2,072,841        $1,903,390
                                                =========         =========
          Projected benefit obligation         $2,629,302        $2,694,164
          Market value of plan assets           2,110,602         1,565,095
                                                ---------         ---------
          Plan assets less than projected
            benefit obligation                   (518,700)       (1,129,069)
          Unrecognized net loss                   332,905           896,032
          Unrecognized prior service cost        (268,515)         (281,768)
          Unrecognized net transition asset       (85,134)          (99,322)
                                                ----------        ----------
          Accrued pension cost                  ($539,444)        ($614,127)
                                                ==========        ==========
</TABLE>

          Rates used in determining the actuarial present value of the projected
          benefit obligation were as follows:
<TABLE>
<CAPTION>

                                                                  December 31,
                                                                  1996   1995
         <S>                                                     <C>    <C>

          Discount rate                                           7.00%  7.00%
          Rate of increase in future compensation levels          5.00%  5.00%
          Expected long-term rate of return on plan assets        8.00%  8.00%
</TABLE>

          Plan  assets  consist  principally  of  investments  in  fixed  income
          securities, short-term investments and common stock.

          The Company maintains a 401(k) employee benefit plan pursuant to which
          participants can defer a certain percent of their annual  compensation
          in  order  to  receive  certain  benefits  upon   retirement,   death,
          disability or termination of employment. The Company can elect to make
          a matching  contribution of up to 6% of annual  eligible  compensation
          per employee.  The  determination  to make a matching  contribution is
          made at the beginning of each fiscal year.  During 1996, 1995 and 1994
          the Company incurred expenses of approximately $135,000,  $129,000 and
          $88,000 related to this plan.

          The Company offers no other post retirement benefits.

(12)   STOCKHOLDERS' EQUITY
          During  1996 and  1994,  the  stockholders  approved  adoption  of The
          Forschner Group,  Inc. 1996 Stock Option Plan and The Forschner Group,
          Inc. 1994 Stock Option Plan, respectively,  providing for the grant of
          options to employees,  including officers of the Company,  and members
          of the Board of Directors. Under these plans and previous stock option
          plans,  805,094  shares of common stock are reserved and available for
          issuance.  Options  expire no later  than ten years  after the date of
          grant.  Option  prices equal at least 100% of the fair market value of
          Swiss Army's common stock on the date of grant. The vesting of options
          is determined by the Stock Option and  Compensation  Committee,  which
          administers  the plan, and for options  outstanding as of December 31,
          1996, vesting ranges from immediately upon grant to three years.

                                      F-19
<PAGE>

          The following table  summarizes stock option plan and warrant activity
          for the three years ended December 31, 1996:
<TABLE>
<CAPTION>



                                                   Number
                                                  of Shares       Option Price
         <S>                                    <C>            <C>

          Outstanding at December 31, 1993         669,533     $  3.32 - $17.50
           Granted                               1,325,000      $10.75 - $15.25
           Exercised                              (111,000)    $  5.25 - $11.50
           Canceled                               (535,000)     $14.50 - $17.50
                                                 ----------
           Outstanding at December 31, 1994      1,348,533      $ 3.32 - $17.50

           Granted (A) (B)(C) (D)                  912,000      $11.75 - $12.88
           Exercised                                (3,750)     $ 6.50
           Canceled (B) (D)                       (248,658)     $ 3.32 - $17.50
                                                 ----------
           Outstanding at December 31, 1995      2,008,125      $ 5.25 - $14.50

           Granted (E)                             348,750      $13.63
           Exercised                               (22,250)      $5.25 - $12.88
           Canceled                                (22,625)     $12.25 - $12.88
                                                 ----------
           Outstanding at December 31, 1996      2,312,000       $5.25 - $14.50
                                                 ==========
</TABLE>


          Of  the  options  and  warrants  outstanding  at  December  31,  1996,
          1,697,688 are exercisable at a weighted average option price of $11.79
          per share.

          (A) In January 1995, the Company  issued  637,000  options to purchase
          common  stock at  $12.88  per  share  to  various  Company  employees,
          officers and  directors.  These options are  exercisable in four equal
          installments over three years starting with the grant date.

          (B)  Included  as granted are  options to  purchase  25,000  shares of
          common stock at $11.75 per share to a former director,  which replaced
          the same number of options  granted in 1993 at $17.50 per share,  that
          were canceled  concurrently.  The newly issued  options retain vesting
          rights of the options they replaced.

          (C) In December 1995, the Company issued a warrant to purchase 100,000
          shares  of  common  stock at $12.50  per  share to an  officer  of the
          Company.  The warrant is exercisable in four equal  installments  over
          three years starting with the grant date.

          (D) Included as canceled are 150,000  options to purchase common stock
          at $12.88 per share which were issued to a director. In December 1995,
          options  covering  150,000 shares were granted to another  director at
          $12.50  per  share.  These  options  are  exercisable  in  four  equal
          installments over three years starting with the grant date.

          (E) In November 1996,  the Company issued 348,750  options to purchase
          common  stock at $13.63 per share to  various  Company  employees  and
          officers.  These options are  exercisable  in four equal  installments
          over three years starting with the grant date.


                                      F-20
<PAGE>

          The  weighted-average  fair value of the stock  options  and  warrants
          granted  in  1996  and  1995  was   approximately   $5.45  and  $5.80,
          respectively.  The  weighted-average  fair  value of the  options  and
          warrants was estimated using the  Black-Scholes  option-pricing  model
          with the following  assumptions:  expected volatility of 30%; expected
          life of options  and  warrants of 6 years;  dividend  yield of 0%; and
          risk  free  interest  rate  of  6.04%  in  1996  and  6.70%  in  1995,
          respectively.

          The Company  accounts for stock options and warrants under  Accounting
          Principles  Board  Opinion  No. 25,  "Accounting  for Stock  Issued to
          Employees",  under which no compensation cost has been recognized. Had
          compensation  cost  for  1996  and  1995  been  determined  under  the
          principles  of SFAS No.  123,  the  Company's  net  income  (loss) and
          earnings per share would have been the following:
<TABLE>
<CAPTION>



                                                  1996                1995
         <S>                                   <C>                 <C>

          Pro forma net income (loss)         ($6,386,000)         $2,343,000
          Pro forma earnings per share             ($0.78)              $0.28
</TABLE>



          The effects of applying SFAS No. 123 in this pro forma  disclosure are
          not  indicative  of future  amounts  as SFAS No. 123 does not apply to
          stock  options and  warrants  granted  prior to 1995,  and  additional
          options and warrants may be granted in future years.

(13)   COMMITMENTS AND CONTINGENCIES
          The Company has minimum purchase  requirements under an agreement with
          its principal Swiss Army Knife and cutlery supplier (see Note 4).

          On December 18, 1996, the Swiss Military  Department  representing the
          Swiss  Confederation  ("Swiss  Confederation") and the Company entered
          into a trademark  agreement (the  "Trademark  Agreement")  pursuant to
          which the Company was granted certain  worldwide use and  sublicensing
          rights in connection with trademarks containing the words "Swiss Army"
          registered  by the Swiss  Confederation  in  Switzerland  (the  "Swiss
          Confederation  Trademarks").  The Swiss Confederation acknowledged the
          Company's  exclusive  right  to use the  Company's  trademarks  in the
          countries of their  registration  or application  and agreed to assist
          the Company in  enforcing  the  Company's  rights with  respect to its
          trademarks.  In addition, the Swiss Confederation stated its intention
          to  assist  Victorinox,   the  Company  and  two  other  companies  in
          safeguarding  their  rights with respect to "Swiss Army" as applied to
          knives  and in  preventing  the use of "Swiss  Army"  with  respect to
          multi-blade pocketknives, multi-tools and other products which are not
          Swiss products.

          The Trademark  Agreement  grants the Company the right to an exclusive
          royalty free license of the Swiss Confederation  Trademarks as applied
          to  watches  and  sunglasses  in the  United  States,  Canada  and the
          Caribbean.  The Company is also  granted  such rights with  respect to
          certain  designated  products that either it or its licensees  sell in
          commercial  quantities in the United States,  Canada and the Caribbean
          within  designated  time  periods.  In the  event the  Company  or its
          licensees  do not sell  commercial  quantities  of product  categories
          within the time periods set by the agreement,  the Swiss Confederation
          shall have the right,  subject to certain  conditions,  to license the
          Swiss  Confederation  Trademarks  to a third party and, in such event,
          the Company  shall be obligated to offer such third party a license of
          the Company's appropriate trademark.

                                      F-21
<PAGE>
          Outside of the United States, Canada and the Caribbean,  the Trademark
          Agreement  provides  for the grant to the  Company  of the right to an
          exclusive license, subject to the existing legal rights of others, for
          watches  and  sunglasses  at a royalty  equal to 3% of net  sales.  In
          addition,  the  Company  has  the  right  to  a  license  for  certain
          designated  products  outside  of the  United  States,  Canada and the
          Caribbean also at a royalty equal to 3% of net sales, to use the Swiss
          Confederation  Trademarks provided that the Company commences the sale
          of  commercial   quantities  of  such  products  within  time  periods
          prescribed by the Trademark Agreement.

          The Trademark Agreement also provides that all products sold under the
          license  must be of a  quality  at  least  equal  in  workmanship  and
          materials to the products currently sold by the Company, Victorinox or
          one other company and that in the event the Company discontinues sales
          of goods in  commercial  quantities in any category of goods for three
          consecutive  years,  the Swiss  Confederation  shall have the right to
          terminate  the license as to that  category  after  giving the Company
          notice and an  opportunity  to resume sales.  Except for the foregoing
          limitation,  the rights of the Company  with respect to the use of the
          Swiss  Confederation  Trademarks  under the  Trademark  Agreement  are
          perpetual.  It is  anticipated  that the  right to  utilize  the Swiss
          Confederation Trademarks on certain products other than timepieces and
          sunglasses  will be made available to one other company by the Company
          on terms yet to be discussed.

          At December 31, 1996,  minimum rental payment  commitments  for office
          and warehouse space leased by Swiss Army under operating leases are:
<TABLE>

                      <S>                  <C>

                       1997             $1,322,000
                       1998              1,344,000
                       1999              1,337,000
                       2000              1,283,000
                       2001                819,000
</TABLE>

          During the years ended December 31, 1996,  1995 and 1994, rent expense
          was approximately $1,313,000, $1,390,000 and $945,000, respectively.

          As of February 1, 1997,  the  Company has open  contracts  to purchase
          approximately  64,000,000  Swiss  francs  in 1997  as a hedge  against
          future purchase of inventories.


                                      F-22
<PAGE>

          The Company maintains split dollar life insurance  agreements covering
          two members of the Board of Directors.  Primarily,  these policies can
          only be  canceled  upon the mutual  agreement  of the  Company and the
          insured.  However,  if these  policies  were  canceled at December 31,
          1996,  the Company would receive in cash an amount equal to the lesser
          of the cash  surrender  value or  cumulative  premiums paid to date on
          these policies which was approximately $3,283,000.  Under the terms of
          these life  insurance  policies,  the  Company  will make  approximate
          future premium payments, if the policies remain in force, as follows:

<TABLE>
                        <S>                     <C>

                         1997                   $812,000
                         1998                    827,000
                         1999                    843,000
                         2000                    858,000
                         2001 and thereafter   3,940,000
</TABLE>

          In  1993,  Swiss  Army's  Board  of  Directors  adopted  a  charitable
          insurance  program that will enable Swiss Army to make a commitment to
          the  Victorinox-Swiss  Army Knife  Foundation  (the  "Foundation"),  a
          foundation which engages in various  charitable  activities  including
          the promotion of athletic events for  underprivileged  urban youth, as
          well as a broad range of charities. In 1994, Swiss Army made a special
          $1.5 million  contribution in the form of cash and common stock to the
          Foundation. Under the program, Swiss Army owns, is the beneficiary of,
          and pays all the premiums for life insurance  policies on the lives of
          cerain Board members.  Pursuant to the program, upon the death of each
          Director,  the Company will retain a share of the  insurance  proceeds
          equal to the cumulative premiums paid by the Company for the policy on
          that Director's  life. One half of any additional  insurance  proceeds
          received upon the death of an insured Director will be used to fulfill
          charitable pledges made to the Victorinox-Swiss Army Knife Foundation.
          The remaining half of the additional  proceeds will be used to fulfill
          charitable pledges recommended by the individual Directors. Swiss Army
          is generally bound to continue to pay all premiums on the policies for
          the lives of the insured  Directors or, in the case of the Chairman of
          the  Management  Committee,  as  long as he is an  officer  or a board
          member or agrees to serve as a consultant  to the Company.  Swiss Army
          will  make  approximate  future  premium  payments  related  to  these
          programs as follows:
<TABLE>
                        <S>                    <C>


                         1997                  $1,115,000
                         1998                   1,115,000
                         1999                   1,115,000
                         2000                   1,115,000
                         2001 and thereafter    8,205,000
</TABLE>


          Under  existing  federal  tax laws,  the  receipt by Swiss Army of the
          proceeds from an insurance  policy upon the death of a director  would
          not result in regular  taxable income to the Company;  however,  Swiss
          Army may be subject  to  alternative  minimum  tax on a portion of the
          receipts.  When Swiss Army makes cash  contributions  to a  designated
          charity, it will be entitled to a tax deduction  equivalent to the sum
          of  those  contributions.  The  extent  of  the  utilization  of  this
          deductSwiss  Army isear will depend upon Swiss Army's taxable  income,
          since  entitled  to claim  as  charitable  deductions  only 10% of its
          taxable income in any year.  However,  these deductions may be carried
          forward for tax purposes for a period of five years.

                                      F-23
<PAGE>

          Based upon estimates  prepared by the Company's  insurance  agent, the
          anticipated  earnings  impact  related  to the  policies  for both the
          Foundation  and the two members of the Board of  Directors is expected
          to be insignificant.

          Swiss Army entered into an employment agreement dated as of January 2,
          1996 with a director of the Company who,  until December 13, 1995, was
          Co-Chairman  of the Board and Chief  Executive  Officer of Swiss Army.
          The agreement  provides that the former Co- Chairman shall be employed
          in an  executive  capacity  with the Company and shall be available to
          consult  with and  advise  the  Company  on such  matters  as might be
          requested by senior management of the Company for at least eighty-five
          hours per month on issues  dealing with the  maintenance  of corporate
          trademarks, corporate legal matters, and strategic support relative to
          strategic relations with Victorinox,  the Company's key supplier.  The
          former Co-  Chairman is being paid a salary of $140,000 per annum and,
          during 1996  received a one-time  bonus of  $300,000.  The  agreement,
          which has a term of five  years,  also  provides  that  following  the
          termination of the agreement, this individual would be prohibited from
          competing,  with certain exceptions,  with the business of the Company
          for a period of three years.

          In 1994,  in a case  originally  brought by the Company  against Arrow
          Trading Co., Inc.  ("Arrow") in September  1992 in the District  Court
          for the Southern  District of New York,  the U.S. Court of Appeals for
          the  Second  Circuit  reversed  a  judgment  originally  issued in the
          Company's  favor and held that the use of "Swiss Army" on Chinese-made
          knives   could   not   be   enjoined   on   grounds   of    geographic
          misdescriptiveness. On remand, the District Court ruled that Arrow had
          violated  Section  43(a) of the Lanham Act and New York  common law in
          connection  with its sale of  Chinese-made  multi-bladed  pocketknives
          which Arrow  called  "Swiss  Army  Knives".  The Arrow  engaged in the
          Company had proved its  contention  that unfair  competition  and held
          that  Arrow,  although  free to use the phrase  "Swiss  Army Knife" to
          designate  its  product,  must amply  distinguish  it from the Company
          product  and   prohibited   Arrow  from  selling  any   multi-function
          pocketknives  as "Swiss  Army  Knives"  unless the phrase  "Swiss Army
          Knife" is  immediately  preceded or followed by Arrow's name in such a
          way as to clearly  designate  its origin and that the size of the type
          designating  origin be no smaller or less prominent than the type used
          in the phrase  "Swiss Army Knife". The Company  intends to utilize all
          reasonable means to safeguard the public from being misled by inferior
          imitation products. Management and legal counsel are unable to predict
          at this time, what impact, if any, the outcome of this litigation will
          have on the Company's financial position and results of operations.

          In addition, the Company is involved in certain legal matters relating
          to trademark,  patent, and other general business matters.  Management
          believes  that the  outcome  of these  legal  matters  will not have a
          material  adverse  effect on the  financial  position  and  results of
          operations of the Company.


                                      F-24

<PAGE>


(14)   INTERNATIONAL OPERATIONS
          A  summary  of  selected   financial   information  for  international
          operations is as follows:
<TABLE>
<CAPTION>

                                              1996                   1995
         <S>                              <C>                    <C>


          Net sales                       $17,239,000            $14,164,000
          Operating income (loss)           1,674,000               (185,000)
          Identifiable assets              12,204,000             12,801,000
</TABLE>


          No  selected  financial  information  has been  presented  for 1994 as
          international  operations  were less than 10% of net sales,  operating
          income and identifiable assets.

(15)   QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>


                                                                Quarter Ended
                                       March 31      June 30       September 30   December 31
         <S>                         <C>            <C>            <C>            <C>   <C>

          1996
         Net sales                   $26,079,513    $28,676,650    $34,616,208    $40,657,526
         Gross profit                  8,592,757      5,388,921     11,996,389     14,858,073
         Income (loss) before income
           taxes                        (414,974)    (6,997,867)     1,140,071     (1,335,597)
         Net income (loss)              (244,974)    (4,056,867)       642,071     (1,604,933)
         Net income (loss) per share      ($0.03)        ($0.49)         $0.08         ($0.20)

         1995
         Net sales                  $ 29,369,721     25,925,259   $ 30,186,155   $ 41,213,651
         Gross profit                 10,700,594      8,715,449     10,466,106     14,382,202
         Income before income taxes    2,194,832        538,773        540,331      2,361,925
         Net income                    1,270,782        218,183        196,290      1,427,961
         Net income per share       $       0.15     $     0.03   $       0.02   $       0.18
</TABLE>


          Results for June 30, 1996 and December 31,1996 as compared to the same
          periods for 1995 were  impacted by  inventory  write-offs,  investment
          write-downs   and  special   charges  of  $7,394,000  and  $2,493,000,
          respectively. See Note 3 for further discussion.


                                      F-25
<PAGE>


                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>



                 Column A                        Column B   Column C     Column D      Column E
                                                            Additions
                                                 Balance    Charged to                Balance At
                                                   At       Costs and                   End of
              Classification                    Beginning    Expenses    Deductions      Year
                                                 of Year
         <S>                                    <C>        <C>           <C>          <C>

          Year Ended December 31, 1996:

            Allowance for Doubtful Accounts     $975,000      $57,000     $      -    $1,032,000
                                                ========    =========    ==========    =========

            Inventory Reserve                   $918,000   $4,932,000   ($3,900,000)  $1,950,000
                                                ========    =========    ==========    =========

          Year Ended December 31, 1995:

            Allowance for Doubtful Accounts  $   755,000     $220,000     $      -      $975,000
                                                 =======     ========    ===========    =========

            Inventory Reserve                $   750,000     $168,000     $      -      $918,000
                                                 =======     ========    ===========    =========
          Year Ended December 31, 1994:

           Allowance for Doubtful Accounts   $   710,000    $  45,000             -     $755,000
                                                 =======     ========    ===========    =========

            Inventory Reserve                $   201,000     $549,000            -      $750,000
                                                 =======     ========    ===========    =========
</TABLE>


                                      F-26
<PAGE>




    (3)    Exhibits.

           Exhibit Title                                             Exhibit No.

(2)        Not Applicable

(3)       (A)    Articles of Incorporation, as amended, incorporated
                 by reference to the  Exhibits  to  Quarterly  Report
                 on Form 10-Q for the fiscal year ended June 30, 1996.       *

          (B)    By-laws, as amended,  incorporated by reference to
                 the Exhibits to Annual  Report on Form 10-K for the
                 fiscal  year ended  December  31, 1995.                     *

(4)        Instruments  defining  the  rights  of security   holders, including
           indentures:

          (A)    Excerpts  from  Certificate  of  Incorporation,
                 as amended, incorporated by reference to Exhibit
                 3(a) hereto.                                                *

          (B)    Excerpts from By-Laws, as amended, incorporated
                 by reference to the Exhibits from Annual Report
                 on Form 10-K for the fiscal year ended
                 December 31, 1992.                                          *

(9)        Not Applicable.

(10)       Material Contracts

          (A)    Employment Agreement dated as of September 15, 1983
                 between SABI and Michael M. Weatherly, incorporated
                 by reference to the Exhibits to Registration Statement
                 on Form S-18, No. 2-87357-B.                                *

          (B)    1983 Stock Option Plan, incorporated by reference to
                 the Exhibits to Annual Report on Form 10-K for the
                 fiscal year ended December 31, 1990.                        *

          (C)    Letter Agreement dated December 12, 1983 between
                 Victorinox Cutlery Company and R.H. SABI Co., Inc.,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1994.                                          *

          (D)    Mutual Agreement dated as of October 20, 1986
                 between Victorinox Cutlery Company and The
                 Forschner Group, Inc., incorporated by reference
                 to the Exhibits to Annual Report on Form 10-K for the
                 fiscal year ended December 31, 1994.                        *

          (E)    Letter Agreement dated as of October 20, 1986 between
                 Victorinox Cutlery Company and The Forschner Group, Inc.,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1994.                                          *

          (F)    Letter Agreement dated August 24, 1988 between The
                 Forschner Group, Inc. and Recta S.A., incorporated
                 by reference to the Exhibits to Annual Report on Form
                 10-K for the fiscal year ended December 31, 1994.           *

          (G)    Mutual Agreement dated October 25, 1988 between
                 Victorinox Cutlery Co. and The Forschner Group, Inc.,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1994.                                          *

          (H)    Letter Agreement dated June 12, 1989 between
                 Victorinox Cutlery Co. and The Forschner Group, Inc.,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1989.                                          *

          (I)    Agreement to Lease dated June 14, 1990 between The
                 SABI Group, Inc. and Petran Trap Falls Associates,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1990.                                          *


                                       35
<PAGE>


          (J)    Security agreement dated January 31, 1991 between
                 The Forschner Group, Inc. and Connecticut National
                 Bank, incorporated by reference to the Exhibits to
                 Annual Report on Form 10-K for the fiscal year ended
                 December 31, 1989.                                          *

          (K)    Security agreement dated January 31, 1991 between
                 Swiss Army Brands Ltd. and Connecticut National Bank,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1989.                                          *

          (L)    Security agreement dated January 31, 1991 between
                 Victorinox of Switzerland, Ltd. and Connecticut
                 National Bank, incorporated by reference to the
                 Exhibits to Annual Report on Form 10-K for the
                 fiscal year ended December 31, 1989.                        *

          (M)    Security agreement dated January 31, 1991 between
                 Excelsior Advertising, Inc. and Connecticut National
                 Bank, incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1989.                                          *

          (N)    Agreement of guarantee and suretyship dated
                 January 31, 1991 by Swiss Army Brands Ltd. in favor
                 of Connecticut National Bank, incorporated by reference
                 to the Exhibit to Annual Report on Form 10-K for the
                 fiscal year ended December 31, 1989.                        *

          (O)    Agreement of guarantee and suretyship dated
                 January 31, 1991 by Victorinox of Switzerland, Ltd.
                 in favor of Connecticut National Bank, incorporated
                 by reference to the Exhibits to Annual Report on
                 Form 10-K for the fiscal year ended
                 December 31, 1989.                                          *

          (P)    Agreement of guarantee and suretyship dated
                 January 31, 1991 by Excelsior Advertising Inc. in
                 favor of Connecticut National Bank, incorporated
                 by reference to the Exhibits to Annual Report on
                 Form 10-K for the fiscal year ended
                 December 31, 1989.                                          *

          (Q)    Life insurance agreement dated as of December 7, 1991
                 between The Forschner Group, Inc. and Stanley R. Rawn,
                 Jr., as Trustee u/a dtd. December 9, 1986 between
                 Louis Marx, Jr. and Stanley R. Rawn, Jr., incorporated
                 by reference to the Exhibits to Annual Report on
                 Form 10-K for the fiscal year ended December 31, 1992.      *

          (R)    Amended and Restated Loan Agreement dated June 18, 1992
                 between The Forschner Group, Inc. and The Connecticut
                 National Bank (now known as Shawmut Bank Connecticut,
                 N.A.), incorporated by reference to the Exhibits to
                 Annual Report on Form 10-K for the fiscal year
                 ended December 31, 1992.                                    *

          (S)    Letter agreement dated June 18, 1992 between
                 The Forschner Group, Inc. and The Connecticut National
                 Bank, incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1992.                                          *

          (T)    License Agreement dated June 30, 1992 between The
                 Forschner Group, Inc. and Precise Imports Corporation,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1992.                                          *

          (U)    Letter agreement dated November 11, 1992 between
                 The Forschner Group, Inc. and Michael M. Weatherly,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1992.                                          *


                                       36
<PAGE>



          (V)    Life insurance agreement dated December 24, 1992
                 between The Forschner Group, Inc. and Louis Marx, Jr.,
                 as Trustee u/a dtd. as of October 24, 1988 between
                 Stanley R. Rawn, Jr. and Barbara Rawn and Louis Marx, Jr.,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1992.                                         *

          (W)    License Agreement dated as of January 1, 1993 between
                 Cuisine de France Limited and Coutel 'Innov, incorporated
                 by reference to the Exhibits to Annual Report on
                 Form 10-K for the fiscal year ended December 31, 1992.     *

          (X)    Mutual Agreement dated April 6, 1992 between The
                 Forschner Group, Inc. and Victorinox Cutlery Company,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1992.                                         *


          (Y)    1993 Stock Option Plan, incorporated by reference
                 to the Exhibits to Annual Report on Form 10-K for
                 the fiscal year ended December 31, 1993.                   *

          (Z)    First Modification to Amended and Restated Loan
                 Agreement dated as of August 13, 1993 between The
                 Forschner Group, Inc. and Shawmut Bank Connecticut,
                 N.A., incorporated by reference to the Exhibits to
                 Annual Report on Form 10-K for the fiscal year ended
                 December 31, 1993.                                         *

          (AA)   Second Modification to Amended and Restated Loan
                 Agreement dated as of February 17, 1994 between The
                 Forschner Group, Inc., and Shawmut Bank Connecticut,
                 N.A., incorporated by reference to the Exhibits to
                 Annual Report on Form 10-K for the fiscal year
                 ended December 31, 1993.                                   *

          (BB)   Commercial Promissory Note dated February 17, 1994
                 of The Forschner Group, Inc. in the principal amount
                 of $15,000,000, incorporated by reference to the
                 Exhibits to Annual Report on Form 10-K for the fiscal
                 year ended December 31, 1993.                              *

          (CC)   Lease dated May 3, 1993 between One Research Drive
                 Associates Limited Partnership and The Forschner
                 Group, Inc., incorporated by reference to the Exhibits
                 to Annual Report on Form 10-K for the fiscal year
                 ended December 31, 1993.                                   *

          (DD)   License Agreement dated as of July 1, 1993 between
                 Cuisine de France Limited and Coutel 'Innov,
                 incorporated by reference to the Exhibits to Annual
                 Report on Form 10-K for the fiscal year ended
                 December 31, 1993.                                         *

          (EE)   Life insurance agreement dated as of December 24,
                 1992 between The Forschner Group, Inc. and Louis
                 Marx, Jr., incorporated by reference to the Exhibits
                 to Annual Report on Form 10-K for the fiscal year
                 ended December 31, 1993.                                   *

                                       37
<PAGE>



          (FF)  Life insurance agreement dated as of September 24,
                1993 between The Forschner Group, Inc. and Louis
                Marx, Jr., incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1993.                                    *

          (GG)  Life insurance agreement dated as of September 24,
                1993 between The Forschner Group, Inc. and James D.
                Rawn, as Trustee u/a dtd. as of June 4, 1992 between
                Louis Marx, Jr., Grantor and James D. Rawn, Trustee,
                incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended
                December 31, 1993.                                          *

          (HH)  Mutual Agreement dated December 21, 1993 between
                The Forschner Group, Inc. and Victorinox Cutlery
                Company, incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1993.                        *

          (II)  1994 Stock Option Plan, incorporated by reference
                to the Exhibits to Registration Statement on Form
                S-8, No. 33-87078 filed by The Forschner Group, Inc.        *

          (JJ)  Services Agreement dated as of July 29, 1994 between
                The Forschner Group, Inc. and Brae Group, Inc.,
                incorporated by reference to the Exhibits to
                Quarterly Report on Form 10-Q for the
                fiscal quarter ended September 30, 1994.                    *

          (KK)  Non-Incentive Stock Option Agreement dated as of
                July 29, 1994 between The Forschner Group, Inc.
                and Brae Group, Inc., incorporated by reference
                to the Exhibits to Quarterly Report on Form 10-Q
                for the fiscal quarter ended September 30, 1994.            *

          (LL)  Consulting Agreement dated as of December 7, 1991
                by and between The Forschner Group, Inc. and Louis
                Marx, Jr., incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1994.                                    *

          (MM)  Third Modification to Amended and Restated Loan
                Agreement dated as of September 30, 1994 between
                The Forschner Group, Inc. and Shawmut Bank Connecticut,
                N.A., incorporated by reference to the Exhibits to
                Annual Report on Form 10-K for the fiscal year ended
                December 31, 1994.                                          *

          (NN)  First Amendment to Lease dated June 16, 1994 between
                The  SABI Group, Inc. and Petran Trap Falls Associates,
                incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended
                December 31, 1994.                                          *

                                       38
<PAGE>



          (OO)  Life insurance agreement dated as of April 15, 1994
                between The Forschner Group, Inc. and Lawrence T.
                Warble, as Trustee u/a dtd. as of March 21, 1994
                between Stanley R. Rawn, Jr., Grantor and Lawrence
                T. Warble, Trustee, incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1994.                        *


          (PP)  Agreement dated June 30, 1995 between The Forschner
                Group, Inc. and Bill-Mar Specialty Company, Inc.,
                incorporated by reference to the Exhibits to Quarterly
                Report on Form 10-Q for the fiscal quarter ended
                June 30, 1995.                                              *

          (QQ)  Letter agreement dated February 15, 1995 between The
                Forschner Group, Inc. and Harry Thompson, incorporated
                by reference to the Exhibits to Quarterly Report on
                Form 10-Q for the fiscal quarter ended
                September 30, 1995.                                         *

          (RR)  Letter agreement dated October 25, 1995 between The
                Forschner Group, Inc. and Harry Thompson, incorporated
                by reference to the Exhibits to Quarterly Report on
                Form 10-Q for the fiscal quarter ended
                September 30, 1995.                                         *

          (SS)  Employment agreement dated as of January 2, 1996
                between The Forschner Group, Inc. and James W. Kennedy,
                incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended
                December 31, 1995.                                          *

          (TT)  Warrant dated as of December 13, 1995 between The
                Forschner Group, Inc. and J. Merrick Taggart,
                incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended
                December 31, 1995.                                          *

          (UU)  Letter Agreement dated December 18, 1995 between
                The Forschner Group, Inc. and Victorinox Cutlery
                Company, incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1995.                                    *

          (VV)  Watch design and Consulting Agreement dated as
                January 2, 1995 between The Forschner Group, Inc.,
                Polenberg, Inc. and Myron Polenberg Incorporated by
                reference to the Exhibits to quarterly report on
                Form 10-Q for the fiscal quarter ended
                March 31, 1996.                                             *

          (WW)  1996 Stock Option Plan.                                (10)-1

          (XX)  Employment and Severance Agreement dated as
                November 15, 1996 between Thomas D. Cunningham
                and Swiss Army Brands, Inc.                            (10)-2

          (YY)  Trademark Agreement dated as of December 18, 1996
                by and between the Swiss Confederation represented
                by the Federal Military Department represented by the
                Federal Defense Production Group and Swiss Army
                Brands, Inc. ( confidential treatment has been requested
                for certain portions of this exhibit).                 (10)-3

          (ZZ)  Asset Purchase Agreement dated January 31, 1997
                among Cuisine de France Limited, Sabatier USA, LLC,
                Robert P. Wolff and Robert Candler.                    (10)-4


                                       39
<PAGE>


(11)      Statement re computation of per share earnings is not required because
          the relevant  computations can be clearly determined from the material
          contained  in the  financial  statements  included  herein.

(12)      Not applicable.

(13)      Not applicable.

(16)      Not Applicable.

(18)      Not Applicable.

(21)      Subsidiaries of Registrant.                                       21

(22)      Not Applicable.

(23)      Consents of experts and counsel: Consent of Arthur Andersen LLP.  23

(27)      Financial Data Schedule.

(28)      Not Applicable.

(99)      Not Applicable.



*          Incorporated by reference

No  Current  Reports on Form 8-K were filed  during  the fiscal  quarter  ending
December 31, 1996.

                                       40
<PAGE>





                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.

                                                SWISS ARMY BRANDS, INC.
                                               (Registrant)


                                                By  /s/ J. Merrick Taggart
                                                J. Merrick Taggart
                                                President




Date:  March  27 , 1997


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


 /s/ J. Merrick Taggart                                  March   27, 1997
J. Merrick Taggart
President and Director



 /s/ Thomas M. Lupinski                                  March  27, 1997
Thomas M. Lupinski
Chief Financial Officer and
Chief Accounting Officer



 /s/ A. Clinton Allen                                    March   27, 1997
A. Clinton Allen
Director



 /s/ Clarke H. Bailey                                    March   27, 1997
Clarke H. Bailey
Director
<PAGE>



                                                         March   27, 1997
Thomas A. Barron
Director



 /s/ Vincent D. Farrell, Jr.                             March   27, 1997
Vincent D. Farrell, Jr.
Director



 /s/ Herbert M. Friedman                                 March   27, 1997
Herbert M. Friedman
Director



 /s/ Peter W. Gilson                                     March   27, 1997
Peter W. Gilson
Director



/s/ M. Leo Hart                                          March  27, 1997
M. Leo Hart
Director



 /s/ James W. Kennedy                                    March   27, 1997
James W. Kennedy
Director



 /s/ Keith R. Lively                                     March   27, 1997
Keith R. Lively
Director



                                                         March   27, 1997
Lindsay Marx
Director

<PAGE>


 /s/ Louis Marx, Jr.                                     March   27, 1997
Louis Marx, Jr.
Director



                                                         March   27, 1997
Stanley G. Mortimer III
Director



 /s/ Stanley R. Rawn, Jr.                                March   27, 1997
Stanley R. Rawn, Jr.
Director



                                                         March   27, 1997
Eric M. Reynolds
Director



 /s/ John Spencer                                        March   27, 1997
John Spencer
Director



                                                         March   27, 1997
John V. Tunney
Director




<PAGE>