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, 1998

                                       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 19, 1999, was approximately  $27,400,000.  On such date, the
closing  price of  registrant's  common  stock was $9.50 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 19, 1999, was 7,851,510 shares.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE
<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
SwissTool , Victorinox  SwissCard , Victorinox  Cutlery and Victorinox  Watches.
SABI also markets its own line of Swiss Army  Brand  Watches,  Swiss Army  Brand
Sunglasses 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.  

     The  Company  is  engaged  principally  in  one  line  of  business  -  the
importation and distribution of cutlery, pocketknives,  multi-tools, watches and
other  consumer  products.  Sales of  Victorinox  Original  Swiss  Army  Knives,
Victorinox SwissTools and Victorinox SwissCards, accounted for approximately 36%
of SABI's 1998 sales while watches and other Swiss Army Brand products accounted
for approximately  48%. Sales of professional and consumer cutlery accounted for
approximately 16% of SABI's 1998 sales.  Total SABI sales for the calendar years
1998,  1997  and  1996  were  $127,851,000,   $118,744,000,   and  $130,030,000,
respectively.  No customer  accounted  for more than 10% of net sales during any
year in the  three-year  period  ended  December  31,  1998.  See Note 15 to the
Company's Financial Statements included herein for further information regarding
segment  information  for the  Company.  At December  31, 1998 SABI had an order
backlog of  approximately  $2,383,000,  compared to  $5,746,000  at December 31,
1997.

     During the years ended  December  31, 1997 and 1996,  the Company  recorded
special  charges,  primarily  related  to  discontinued  inventory,   investment
write-downs and  restructuring  costs.  In 1997, the Company  recorded a special
charge of $1.3 million  related to  discontinued  inventory  and $0.8 million in
restructuring  costs. These restructuring costs primarily consisted of severance
and related  expenses.  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  recorded  an  additional   special  charge  of
approximately  $2.5  million.  The  special  charge  consisted  of $1.6  million
write-down  related to  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, 1998,  SABI and its  subsidiaries  had 219 full-time  employees,
including 10 in Canada and 6 in Switzerland.

                                       2
<PAGE>

                Victorinox Products and Swiss Army Brand Products
                -------------------------------------------------

     SABI is the exclusive United States, Canadian (with one minor exception for
cutlery) and Caribbean  distributor  of Victorinox  Original  Swiss Army Knives,
Victorinox SwissTools,  Victorinox cutlery, Victorinox SwissCards 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.

     Victorinox   Original  Swiss  Army  Knives  are   multiblade   pocketknives
containing implements capable of more functions than standard pocketknives.  For
example,  SABI's most popular  Victorinox  Original Swiss Army Knife model,  the
Classic, with a suggested retail price of $16, features a blade, scissors,  nail
file with  screwdriver  tip,  toothpick and tweezers.  SABI markets more than 70
different  models of Victorinox  Original Swiss Army Knives  containing up to 35
different  implements  (with up to 45 separate  features),  ranging from a basic
knife  with a  suggested  retail  price of $10 to the  highest  priced  model at
approximately  $70 as well as a  SwissChamp   Deluxe  SOS kit  with a  suggested
retail price of  approximately  $160. SABI also sells  multi-function  lockblade
knives designed for the hunting and outdoor  market.  In 1997, the Company added
to its  product  line  the  SwissCard ,  a  credit  card  shaped,  ten  function
instrument, and the SwissTool , a multi-tool with 23 features,  including   full
size pliers.  The Company's line of Victorinox  watches  currently  includes ten
models with approximately 30 SKUs, with suggested retail prices ranging from $60
to $175.

     The Company sells professional  cutlery products,  made of stainless steel,
primarily   manufactured   by  Victorinox.   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.  Professional
cutlery  imported from  Switzerland  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.

     SABI's line of Swiss Army Brand  products  includes 25 models of Swiss Army
Brand  Watches  with over 70 SKUs  ranging  from the Renegade , with a suggested
retail price of $85 to the Titanium  Two-Tone  with a suggested  retail price of
$595. In the first quarter of 1997,  the Company added to its product line newly
designed Swiss Army Brand  Sunglasses.  The Company's  sunglass line includes 22
models with over 50 SKUs with suggested  retail prices ranging from $60 to $120.
In addition, SABI sells Swiss Army Brand writing instruments.  Also in 1997, the
Company  entered into an  arrangement  pursuant to which it distributes in North
America,  and  serves  as sales and  marketing  agent in most of the rest of the
world,  a line of watches under the Swiss Air Force  trademark.  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.

     The Company distributes its products  throughout the United States,  Canada
and the Caribbean through independent sales representatives and its direct sales
force to over 3,800  wholesalers  and retailers,  including  department  stores,
high-end  jewelers,  sporting goods stores, specialty retailers, cutlery shops,
catalog   showrooms,   mass   merchandisers  and  mail  order  houses,   through
distributors to corporations and other  organizations for promotional  purposes,
premium,  employee gift award  programs and corporate  identity  catalogs.  SABI
imprints  its  products  primarily  at its own  facilities  with the  customer's
corporate  name or logo.  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.
                                       3
<PAGE>

     Sales of  Victorinox  Original  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 knives to the Swiss
armed forces.  Precise imports a substantially smaller number of knives into the
United  States  than  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.

                                License Agreement
                                -----------------

     On May 15, 1997,  SABI entered into an agreement with St. John Knits,  Inc.
("St. John") providing for the grant of an exclusive license, subject to certain
terms and conditions, to SABI to market watches bearing the St. John  trademark.
St.  John is a leading  designer,  manufacturer  and  marketer  of fine  woman's
apparel. SABI introduced the St. John Timepiece Collection in November 1998.

                              Trademark Agreements
                              --------------------

     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 timepieces,
sunglasses and compasses.  Under this  agreement,  Precise  acknowledges  SABI's
exclusive  rights to the Swiss Army trademark for non-knife  products  including
timepieces,  compasses  and  sunglasses.  See  Item 3 for  discussion  of  legal
proceedings between SABI and Precise.

     The  Company is the owner of United  States and certain  foreign  trademark
registrations  for  "Swiss  Army",  as applied to  watches  and  sunglasses  and
actively  defends its trademarks  throughout  the world.  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.
                                       4
<PAGE>

     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  pocketknives  to 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  multi-bladed  knives,  which
application has been opposed by various third parties.

     The Company is actively  considering  marketing  other  products  under the
"Swiss Army" trademark or under other trademarks.  However, no assurances can be
given that the  Company  will ever enter into these  additional  markets,  or if
entered into, that such activities will be profitable.

     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.

                         Swiss Confederation Trademarks
                         ------------------------------  

     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.
                              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,  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 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 Victorinox along with 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").






                                        6
<PAGE>
     The U.S.  Distribution  Agreement was renewed in 1998 through  December 12,
     2003 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.  Effective April 1999,
     the distribution  rights for Canada will automatically  renew and expire in
     2004.  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. The Company met this  requirement in 1997.
     In 1998,  Victorinox  agreed to reduce the  minimum  for 1998 to a purchase
     plan of  approximately  $31,400,000.  The Company met this  requirement for
     1998.

     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.

     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.

                                        7
<PAGE>

     In consideration of the grant of the Canadian  distribution 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.

                                   Investments
                                   -----------

     In 1994, 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
$2,000,209,  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 the time of the  distribution  at $1.23 per unit,  currently
representing approximately 1.3% 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  2,327,382  of Hudson  River's
Series  B  Preferred   Units   (currently   representing,   in  the   aggregate,
approximately  28.7% of  Hudson  River's  outstanding  equity)  are held by Brae
Capital  Corporation  ("Brae Capital"),  a wholly-owned  subsidiary of Brae. Mr.
Marx is the owner of 700,000  plan  units  (representing  approximately  7.1% of
Hudson  River's  outstanding  equity)  issued by Hudson  River  under its Equity
Incentive Plan, which entitle Mr. Marx to voting rights and to receive a portion
of the  appreciation  of Hudson  River's  assets after the date of grant of such
units under certain circumstances.

     490,000  of  Victory  Ventures'  common  units and  12,440,088  of  Victory
Ventures'  Series A Preferred  Units  (currently  representing in the aggregate,
approximately  18.2% of Victory Ventures'  outstanding  equity) are held by Brae
Capital.  In  addition,  Brae  Capital  is the  owner of  2,911,613  plan  units
(representing approximately 4.1% of Victory Ventures' outstanding equity) issued
by Victory  Ventures under its Equity Incentive Plan, which entitle Brae Capital
to voting  rights  and to  receive  a portion  of the  appreciation  of  Victory
Ventures'  assets  after  the  date  of  grant  of  such  units,  under  certain
circumstances.  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.
                                       8
<PAGE>

     Mr. Marx, a Director of SABI, is a Co-Chairman of the Board, a director and
an equity holder of each of Hudson River and Victory Ventures,  and a consultant
to Victory Ventures.  Mr. Clarke H. Bailey, a Director of SABI, is a Co-Chairman
of the Board,  a Director and an  equityholder  of Hudson River.  Mr. Stanley R.
Rawn, Jr.,  Senior Managing  Director and a Director of SABI, and Mr. Herbert M.
Friedman, Vice President and General Counsel and Director of SABI, also serve as
directors and are  equityholders  of each of Hudson River and Victory  Ventures.
Mr.  Robert S.  Prather,  Jr., a director of SABI,  also serves as a director of
Victory Ventures, LLC.

Item 2.Properties.
------------------

     The  executive  and  administrative  offices of SABI  occupy  approximately
42,500  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 expired in
December,  1997.  The Company has extended the term on this lease until December
31, 1999.

     In 1996, SABI entered into a four-year lease for 7,000 square feet of space
in  a  30,000  square  foot  building  in  Bienne,  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.

     K-Swiss filed on December 30, 1996  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".  The Company  believes it has  meritorious  defenses to these
petitions although their outcome cannot be predicted at this time.


                                        9
<PAGE>


     On  July  14,  1997,  the  Company  filed  with  the  American  Arbitration
Association  in New York,  New York a demand  for  arbitration  against  Precise
Imports  Corporation,  the United States and Canadian  distributor of Swiss Army
Knives  manufactured  by Wenger  S.A.,  the only company  other than  Victorinox
supplying pocketknives to the Swiss Armed Forces. In the demand for arbitration,
the Company  charged that Precise had violated the license  agreement dated June
30, 1992 between  Precise and the Company by utilizing the trademark  Swiss Army
in ways  prohibited  by the  agreement.  In response,  Precise  alleged  certain
counterclaims,  including  violations of the 1992 license agreement,  anti-trust
laws, unfair competition under state and federal law, tortious interference with
prospective business relations and federal anti-trust  violations.  On September
29, 1998,  Precise withdrew its  counterclaim  that the Company violated federal
anti-trust  law. On November 7, 1998,  Precise and the Company agreed to suspend
the  arbitration to allow the parties 180 days to settle their dispute,  subject
to reactivation  of the  arbitration by either company.  After the expiration of
the  stipulated  period,  if the  arbitration  has been neither  reactivated  or
voluntarily  dismissed by the parties,  all claims and counterclaims  alleged in
the  arbitration  will be deemed to have been dismissed with  prejudice.  In the
event that the  arbitration is  reactivated,  the Company  intends to vigorously
pursue  its  claims  and  believes  it has  meritorious  defenses  to  Precise's
counterclaims.  However,  the Company  cannot predict the outcome of any resumed
arbitration.  In a separate  document,  Precise  agreed  tentatively  to certain
limitations on the marketing of its products  including  discontinuation  of the
use of "S.A.K." and "The Genuine Swiss Army Knife  Company" in  connection  with
certain products,  and changing the name of its internet site, all of which were
sought by the Company in the arbitration.

     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.







                                       10
<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 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 1997 were as follows:
<TABLE>
<CAPTION>

                       Fiscal 1997           Fiscal 1998         Fiscal 1999*
                      High     Low          High      Low        High     Low
<S>                 <C>      <C>          <C>       <C>         <C>      <C>

First Quarter       $14 1/8  $11 3/4      $12 1/16   $9 3/16    $10      $8 5/8
Second Quarter       13       11 1/8       12 1/2    10 1/4
Third Quarter        13 1/2    9 1/8       11 1/4     8 3/4
Fourth Quarter       11 1/2    9 5/8       10 3/8     8 7/8
</TABLE>


*Through March 19, 1999.

     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 19, 1999,  shares of Common Stock were held by 315 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 expires on June 30, 1999, 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.


                                       11
<PAGE>

Item 6.Selected Financial Data
------------------------------

     The following selected financial data for the five years ended December 31,
1998,  was derived from the  consolidated  financial  statements of the Company.
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,
                                                  -----------------------     
<S>                                              <C>         <C>         <C>         <C>         <C>

                                                    1998       1997(1)     1996(2)     1995        1994
                                                    ----       -------     -------     ----        ----
Net sales                                         $127,851   $118,744    $130,030    $126,695    $144,437
Gross profit                                        49,982     42,724      40,836      44,264      55,804
Selling, general and administrative expenses        49,005     49,639      46,241      40,265      40,293
Operating income (loss)                                977     (6,915)     (5,405)      3,999      15,511
Gain (loss) on sale (write-down) of investments      1,651        398      (2,382)      1,771          37
Other income (expense), net                             55        116         179        (134)        445
Income (loss) before income taxes                    2,683     (6,401)     (7,608)      5,636      15,993
Income tax provision (benefit)                       1,220     (2,376)     (2,343)      2,523       6,633
                                                   --------   --------    --------   ---------    --------
Net income (loss)                                   $1,463    ($4,025)    ($5,265)     $3,113    $  9,360
                                                   --------   --------    --------   ---------    --------
Earnings per share:
     Basic                                          $ 0.18     ($0.49)     ($0.64)      $0.38       $1.20
     Diluted                                        $ 0.18     ($0.49)     ($0.64)      $0.38       $1.16
Other Financial Data:  
Current assets                                    $ 70,383    $64,144     $70,933     $74,355     $78,641
Total assets                                       100,404     94,051      98,643     101,230     105,708
Current liabilities                                 25,806     18,343      18,787      16,291      23,932
Long-term debt                                         -          -           -           -           -
Stockholders' equity                                74,598     75,708      79,856      84,939      81,775
Cash dividends per common share                   $    -      $   -           -      $    -       $   -
Weighted average number of shares outstanding:          
      Basic                                          8,138      8,209       8,202       8,185       7,832
      Diluted                                        8,236      8,209       8,202       8,236       8,062
</TABLE>


     (1) The  financial  results for 1997  include a $1.3  million  write-off of
discontinued  inventory  (included  in  cost  of  sales)  and  $0.8  million  of
restructuring costs (included in selling, general and administrative  expenses).
See Note 3 to the Company's Consolidated Financial Statements.

     (2) The financial results for 1996 include special charges of approximately
$9.9  million.  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. See Note 3 to the Company's Consolidated Financial Statements.



                                       12
<PAGE>


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

                           FORWARD LOOKING STATEMENTS
                           --------------------------

     The following  discussion,  as well as other portions of this Annual Report
on Form 10-K, contains, in addition to historical  information,  forward looking
statements. The forward looking statements were prepared on the basis of certain
assumptions  which  relate,  among other  things,  to the demand for and cost of
purchasing  and  marketing  the  Company's  products;  the  prices at which such
products may be sold; new product  development;  seasonal  selling  trends;  the
Swiss franc-U.S.  dollar exchange rates; the extent to which the Company is able
to  successfully  hedge against  foreign  currency  fluctuations;  the Company's
anticipated  credit needs and ability to obtain such credit;  and the  Company's
review of its computer  systems and  operations as it relates to the "Year 2000"
issue.  Even if the  assumptions  upon  which the  projections  are based  prove
accurate and appropriate,  the actual results of the Company's operations in the
future may vary widely from financial projections due to increased  competition,
changes in  consumer  tastes  and other  factors  not yet known or  anticipated.
Accordingly,  the actual  results of the Company's  operations in the future may
vary widely from the forward looking statements included herein.

Results of Operations
---------------------

     In 1998, net sales totaled $127.9  million,  a 7.7% increase from 1997. The
financial  results  for 1997 and 1996  were  negatively  impacted  by  inventory
write-offs and  restructuring  costs. The 1997 financial  results include a $1.3
million  inventory  write-off  of  discontinued  inventory  (included in cost of
sales) and $0.8 million of restructuring costs (included in selling, general and
administrative  expenses).  These  restructuring  costs  primarily  consisted of
severance and related  expenses.  The 1996  financial  results  include  special
charges of approximately $9.9 million, which resulted from an extensive analysis
of the Company's  operations.  The special  charges in 1996  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
total  selling,  general  and  administrative  expenses),  and  a  $2.4  million
write-down of non-strategic investments.






                                       13
<PAGE>

     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, 1998:
<TABLE>
<CAPTION>

                                             Year Ended December 31,
                                         1998           1997           1996

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

Net sales                               100.0%         100.0%         100.0%
Cost of sales                            60.9           64.0           68.6
                                       -------        -------        ------- 
Gross profit                             39.1           36.0           31.4

Selling, general and administrative                             
  expenses before special charges        38.3           41.8           33.6
Special charges                            -              -             2.0
                                       -------        -------        ------
Total selling, general and                                           
  administrative expenses                38.3           41.8           35.6
Operating income (loss)                   0.8           (5.8)          (4.2)
Interest expense                           -              -             (.1)
Interest income                            -              .1             .1

Gain (loss) on sale (write-down) of                              
   investments                            1.3             .3           (1.8)
Other income, net                          -              -              .2
                                       -------        -------        --------
Income (loss) before income taxes         2.1           (5.4)          (5.8)
Income tax provision (benefit)            1.0           (2.0)          (1.8)
                                       -------        -------        --------
Net income (loss)                         1.1%          (3.4)%         (4.0)%
                                       =======        =======        ========
</TABLE>

Comparison of the Years Ended December 31, 1998 and December 31, 1997
---------------------------------------------------------------------

     Net sales for the year ended December 31, 1998 were $127.9 million compared
with $118.7  million for the same  period in 1997,  representing  an increase of
$9.1 million or 7.7%.  The sales  increase was due primarily to a 14.2% increase
in sales of  Victorinox   products,  primarily the  Victorinox   SwissTool   and
SwissCard ,  and an increase in sales of Swiss Army  Brand   Sunglasses  and the
introduction of watches marketed under the St. John Timepiece Collection.

     Gross profit for the year ended December 31, 1998 was $50.0 million,  17.0%
higher than in 1997.  The  increase  in gross  profit was  primarily  due to the
increase  in the value of the U.S.  dollar  versus  the  Swiss  franc and a $1.3
million  inventory  write-off in 1997.  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 1999.  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, the extent to which such hedging transactions will reduce
the effect of adverse currency fluctuations is uncertain.

                                       14
<PAGE>

     Selling,  general and  administrative  expenses for the year ended December
31,  1998 were $49.0  million,  $0.6  million  or 1.3%  lower than in 1997.  The
expense decrease resulted primarily from decreased advertising expense offset by
increased expenditures in the areas of product development and merchandising and
promotion.  As a percentage of net sales,  selling,  general and  administrative
expenses decreased from 41.8% in 1997 to 38.3% in 1998.

     As a result of the above,  the Company  recorded  operating  income of $1.0
million for the year ended  December 31, 1998, as compared to an operating  loss
of $6.9 million in 1997.

     Interest  expense of  $133,000  for the year ended  December  31,  1998 was
$93,000 higher than interest  expense in 1997,  due to the higher  borrowings in
1998 related to the Company's repurchase of $3.1 million of its common stock.

     Interest  income of  $188,000  for the year  ended  December  31,  1998 was
$33,000  higher than  interest  income in 1997,  due to increased  invested cash
balances during the first half of 1998 as compared to 1997.

     The gain on the sale of  investments  for the year ended  December 31, 1998
was $1.7 million, as compared to $398,000 in 1997. In 1998, the Company recorded
a $1.5  million  gain due to a cash and stock  distribution  from the  Company's
investment  in Hudson  River  Capital  LLC. In  addition,  the Company  received
distributions  from  Victory  Ventures  LLC  consisting  of common  stock in two
publicly traded entities,  which were sold by the Company resulting in a $57,000
gain, and sold its investment in SWWT, Inc. and realized a gain of $94,000.  The
gain in 1997 was due to a distribution from the Company's  investment in Victory
Ventures LLC, which resulted in a gain of $286,000 and a $112,000  recovery of a
privately held startup entity that was written-off in 1996.

     As a result of the above, the income before income taxes for the year ended
December 31, 1998 was $2.7 million compared to $6.4 million loss in 1997.

     Income tax expense (benefit) was provided at an effective rate of 45.5% for
the year  ended  December  31,  1998 as  compared  to 37.1%  for the year  ended
December 31, 1997.  The change in the  effective tax rate was due to foreign and
state income taxes.

     As a result of the above,  the net income for the year ended  December  31,
1998 was $1.5 million  ($0.18 per share) as compared to $4.0 million loss ($0.49
per share) in 1997.

Comparison of the Years Ended December 31, 1997 and December 31, 1996
---------------------------------------------------------------------

     Net sales for the year ended December 31, 1997 were $118.7 million compared
with  $130.0  million for the same  period in 1996,  representing  a decrease of
$11.3 million or 8.7% lower.  Approximately $3.6 million of the decrease was due
to the sale of substantially all the assets of Cuisine de France Limited ("CDF")
in January  1997,  with the  remaining  sales  decrease  due  primarily to a 17%
decrease in sales of Victorinox  Original  Swiss Army Knive sales, a 6% decrease
in watch sales,  a 6% decrease in cutlery sales offset in part by an increase in
sales of Swiss Army  Brand  Sunglasses,  Victorinox  SwissCards  and  Victorinox
SwissTools.

                                       15
<PAGE>

     Gross profit for the year ended December 31, 1997 was $42.7  million,  4.6%
higher than in 1996.  This is due  primarily to an  inventory  write-off of $4.9
million in 1996,  and the  increase in the value of the U.S.  dollar  versus the
Swiss  franc,  offset in part by lower net  sales and a $1.3  million  inventory
write-off in 1997.

     The inventory  write-off in 1997, was primarily the result of discontinuing
certain watch styles.  The  inventory  write-off in 1996,  was the result of the
Company discontinuing certain products,  including certain cutlery products sold
by CDF.  Excluding the inventory  write-offs in 1997 and 1996,  the gross profit
margin  percentage  increased from 35.2% in 1996 to 37.1% in 1997. 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.  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,
the extent to which such hedging  transactions will reduce the effect of adverse
currency fluctuations is uncertain.

     Selling, general and administrative expenses (excluding the special charges
described  below) for the year ended December 31, 1997 were $49.6 million,  $6.0
million or 13.6% higher than in 1996. The expense  increase  resulted  primarily
from  increased  selling  expenses and  increased  expenditures  in the areas of
merchandising and promotion and approximately  $0.8 million related to continued
restructuring  costs.  As a  percentage  of  net  sales,  selling,  general  and
administrative   expenses   (excluding  the  special  charges  described  below)
increased from 33.6% in 1996 to 41.8% in 1997.

     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 CDF,  and  was  taken  due to the  lack of
recoverability  of the asset.  Substantially  all 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 $6.9
million for the year ended December 31, 1997 as compared to an operating loss of
$5.4  million  in 1996.  Excluding  the  effects  of the  inventory  write-offs,
restructuring  costs and the special charges,  the Company recorded an operating
loss of $4.8 million in 1997, as compared to operating income of $2.1 million in
1996.

     Interest  expense  of  $40,000  for the year ended  December  31,  1997 was
$107,000 lower than interest expense in 1996, due to lower borrowings in 1997 as
compared to 1996.

     Interest  income of  $155,000  for the year  ended  December  31,  1997 was
$35,000  higher than  interest  income in 1996,  due to increased  invested cash
balances during 1997 as compared to 1996.

     The gain on the sale of  investments  for the year ended  December 31, 1997
was  $398,000,  as compared to a loss of $2.4 million in 1996.  The gain in 1997
was due to a distribution from the Company's investment in Victory Ventures LLC,
which resulted in a gain of $286,000 and a $112,000 recovery of a privately held
startup entity that was  written-off in 1996. The loss in 1996 was primarily due
to the $1.6 million  write-down of the Company's  investment in the common stock
of SWWT,  Inc., a publicly  traded  entity,  and an $800,000  write-down  of the
Company's investment in the aforementioned privately held start-up entity.

                                       16
<PAGE>

     As a result of the above,  the loss before  income taxes for the year ended
December 31, 1997 was $6.4 million compared to $7.6 million in 1996.

     Income tax expense (benefit) was provided at an effective rate of 37.1% for
the year  ended  December  31,  1997 as  compared  to 30.8%  for the year  ended
December 31, 1996.  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, 1997
was $4.0 million ($0.49 per share) as compared to $5.3 million ($0.64 per share)
in 1996.

Liquidity and Capital Resources
-------------------------------

     As of December 31, 1998,  the Company had working  capital of $44.6 million
compared with $45.8 million as of December 31, 1997, a decrease of $1.2 million.
Significant  uses of working  capital  consisted of additions to other assets of
$2.7 million,  capital  expenditures  of $1.3 million and  repurchases of common
stock of $3.1 million.  Significant sources of working capital included sales of
long term  investments  of $1.9 million.  The Company  currently has no material
commitments for capital expenditures.

     Cash provided from operating  activities was approximately  $0.2 million in
the year ended  December 31, 1998 compared  with cash  provided  from  operating
activities  of $2.7  million in the year ended  December  31,  1997.  The change
primarily  resulted  from an  increase  in  inventory  in 1998 as  compared to a
decrease in 1997,  an increase in accounts  receivable  in 1998 as compared to a
decrease  in 1997,  a decrease  in accrued  liabilities  in 1998  compared  to a
decrease  in 1997  offset in part by an  increase  in  accounts  payable in 1998
versus a decrease in 1997.

     The Company meets its short-term  liquidity  needs with cash generated from
operations,  and, when necessary,  bank borrowings under its bank agreements. As
of December 31, 1998, the Company had $5,140,000 of outstanding borrowings under
its bank agreement.  The Company  currently has a $10.0 million revolving credit
agreement,  which expires in June 1999.  The Company is currently  reviewing its
options to establish a new credit agreement, and believes it can establish a new
credit agreement at the appropriate date. 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 continue to be sufficient to meet its operating needs.

Year 2000
---------

     The  Company  has been  conducting  a review of its  computer  systems  and
operations  to  identify  those  areas that could be affected by the "Year 2000"
issue and has  developed  an  implementation  plan to minimize  disruption.  The
Company has completed the assessment phase of its internal  information computer
systems. Based upon the assessment,  certain computer systems were vulnerable to
the Year 2000 issues. The Company presently believes that, with modifications to
existing software and hardware, and investment in new software and hardware, the
Year 2000  problem  as it  relates  to its own  computer  systems  will not pose
significant  operational concerns.  The Company has made significant progress in
completing  its Year  2000  projects.  The costs  associated  with the Year 2000
compliance for the Company's computer systems primarily include costs to upgrade
computer systems not currently  compliant.  The majority of these costs have and
will be incurred in the normal course of business as the Company has continually
upgraded its  hardware  and software to keep pace with  technological  advances.
Based  upon the  Company's  assessments  to  date,  the  costs of the Year  2000
initiative are estimated to be no more than $200,000,  of which $50,000 has been
spent to date. The Company expects that all of the material internal information
computer systems to be Year 2000 compliant by June 30, 1999.

                                       17
<PAGE>


     The Company is working with its significant suppliers and service providers
to ensure  that those  parties  have  appropriate  plans to manage the Year 2000
issue as it relates to the Company's  operations.  The Company has commenced the
communication  process with its significant  suppliers and service providers and
expects this process to be complete by April 30, 1999.

     The  Company's  Year 2000  initiative  is well under way,  and based on the
results of its  assessment to date, is expected to be complete by June 30, 1999.
While the Company believes its planning efforts are adequate to address its Year
2000 concerns,  there can be no assurance that the systems of other companies on
which the  Company's  systems and  operations  rely upon will be  converted on a
timely  basis  and will not  have a  material  adverse  effect  on the  Company.
However,  based on the progress the Company has made on its internal  initiative
and the information available from third parties, the Company has not identified
a need to develop an extensive  contingency  plan for  non-compliance  issues at
this time.  The need for such plan is evaluated  on an ongoing  basis as part of
the Company's overall Year 2000 initiative.

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

Foreign Exchange Risk
---------------------

     The  Company  is exposed to market  risk from  changes in foreign  exchange
rates as the Company  imports  virtually all its products from  Switzerland.  To
minimize the risks associated with  fluctuations in the value of the Swiss franc
versus the U.S. dollar,  the Company enters into foreign currency  contracts and
options.  Pursuant to guidelines approved by its Board of Directors, the Company
is to engage in these  activities  only as a hedging  mechanism  against foreign
exchange  rate  fluctuations   associated  with  specific   inventory   purchase
commitments to protect gross margin and is not to engage in speculative trading.
Gains or losses on these  contracts  and options are deferred and  recognized in
cost of sales when the related  inventory is sold.  At December  31,  1998,  the
Company  entered  into  foreign  currency  contracts  and  options  to  purchase
approximately  55,000,000 Swiss francs in 1999 at a weighted average rate $1.414
Swiss franc/dollar. At December 31, 1998, the unrealized gain on these contracts
and options was approximately $1.0 million.  The Company's  ultimate  unrealized
gain or loss on  these  contracts  and  options  will  primarily  depend  on the
currency  exchange rates in effect at the time the contracts and options mature.
As of December 31, 1998, the Company has reviewed its foreign exchange risks and
based upon its foreign  currency  hedging  program and review of its outstanding
foreign exchange  contracts,  it believes that a near-term increase in the value
of the Swiss franc versus the U.S.  dollar  would not have a material  effect on
the  Company's  results  of  operations  or  financial  condition.  See Notes to
Consolidated  Financial  Statements  for  further  discussion  of the  Company's
accounting  policies  and other  information  related  to its  foreign  exchange
instruments.

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.




                                       18

<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          48      President, Chief Executive Officer and
                                    Director1                                     1995
Peter W. Gilson             59      Chairman of the Board, Chairman
                                    of the Executive Committee and
                                    Director2                                     1994
Louis Marx, Jr.             67      Chairman of the Management
                                    Committee and Director3                       1990
Stanley R. Rawn, Jr.        71      Senior Managing Director
                                    and Director4                                 1990
Herbert M. Friedman         67      Vice President and General Counsel
                                    and Director5                                 1981
Harry R. Thompson           69      Managing Director                             1994
Thomas M. Lupinski          46      Senior Vice President, Chief
                                    Financial Officer, Secretary
                                    and Treasurer                                 1986
Michael J. Belleveau        42      Senior Vice President and
                                    Group Division Head                           1994
A. Jeffery Turner           41      Senior Vice President - Marketing
                                    and Product Development               Nov.    1998
James R. Cary               48      Vice President - Operations           Nov.    1998
Marc A. Gold                33      Vice President and Controller         Nov.    1998
Jerald J. Rinder            52      Vice President and
                                    General Manager - Retail Division             1996
Douglas M. Rumbough         42      Vice President and
                                    General Manager - Corporate
                                    Markets Division                              1992
Robert L. Topazio           50      Vice President and General Manager -
                                    R.H. Forschner Division                       1996
A. Clinton Allen            55      Director6                                     1993
Clarke H. Bailey            44      Director7                                     1997
Thomas A. Barron            47      Director                                      1983
Vincent D. Farrell, Jr.     52      Director8                                     1992
Keith R. Lively             47      Director9                                     1994
Robert S. Prather, Jr.      54      Director                              Aug.    1998
Eric M. Reynolds            46      Director                                      1994
John Spencer                69      Director10                                    1990
John V. Tunney              64      Director11                                    1992
</TABLE>

                                       19
<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 Board,  Chairman of the  Executive  Committee
     and a member of the Nominating Committee.

3.   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.

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

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

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

7.   Mr. Bailey is a member of the Company's Executive Committee.

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

9.   Mr.  Lively is a member of the  Company's  Stock  Option  and  Compensation
     Committee.

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

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

Biographical Information
------------------------

     J. Merrick Taggart,  President, Chief Executive Officer and Director of the
Company,  was elected Chief Executive Officer on February 18, 1999 and 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.  Mr.  Taggart is also a
director of SWWT,  Inc.("SWWT"),  a holding company  formerly in the business of
manufacturing and marketing portable water filtration systems.

     Peter W.  Gilson,  Chairman  of the Board  and  Chairman  of the  Executive
Committee  and a Director of the  Company,  also served as  President  and Chief
Executive Officer of Physician Support Systems,  Inc., a company specializing in
the management of physicians'  health care practices,  from 1991 through January
1998.  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  Chairman  of the Board and a director of SWWT and  Glenayre  Technologies,
Inc. ("Glenayre Technologies"), a paging and messaging infrastructure technology
firm.

                                       20
<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,  he  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 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 prior to its
adoption in 1996 of a Plan of Complete  Liquidation and  Dissolution,  conducted
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"),  a
Co-Chairman,  director and consultant of Victory  Ventures LLC, a private equity
firm  specializing  in  small  market  venture  capital  investments   ("Victory
Ventures"),  and the Chairman,  President and  controlling  stockholder  of Brae
Capital  Corporation,  a venture capital firm. 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.

     Stanley  R. Rawn,  Jr.,  Senior  Managing  Director  and a Director  of the
Company,  actively  participates with Messrs. Marx and Taggart 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 Hudson
River, Victory Ventures, Career Blazers, Inc., a temporary help corporation, and
Victorinox  - Swiss  Army  Knife  Foundation;  and a Trustee  of the  California
Institute of Technology.

     Herbert M. Friedman,  has served as Vice  President and General  Counsel of
the Company since May 1998 and is also a Director of the Company.  Mr.  Friedman
was  partner in the law firm of Zimet,  Haines,  Friedman & Kaplan  until  April
1998,  where he had been a member since 1967. Mr. Friedman is also a director of
Noel, Hudson River, Victory Ventures,  Connectivity  Technologies,  Victorinox -
Swiss Army Knife Foundation and Carlyle Industries, Inc.

                                       21
<PAGE>

     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.  Mr.
Thompson  currently  serves as a director of Amnex,  Inc., a  telecommunications
company,  and Schwin/GT Corp. a designer,  marketer and  manufacturer of bicycle
equipment.

     Thomas  M.  Lupinski,  Senior  Vice  President,  Chief  Financial  Officer,
Secretary and Treasurer of the Company,  has been a Senior 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.

     Michael J.  Belleveau,  Senior Vice  President and Group Division Head, has
been a Vice  President  of for more than five years and was  promoted  to Senior
Vice  President and Group  Division Head in 1998.  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.

     A. Jeffrey Turner, Senior Vice President- Marketing and Product Development
was  elected to the office of Senior  Vice  President  -  Marketing  and Product
Development  in  November  1998.  Mr.  Turner  had served as Vice  President  of
Marketing for the company from March 1997.  From 1995 through  1997,  Mr. Turner
was Executive Vice President of Silhouette Optical Limited and from 1991 through
1995 he was General Manager/Eyewear Division of Nikon, Inc.

     James R. Cary,  Vice  President - Operations,  was elected to the office of
Vice President of Operations in  November  1998. Mr. Cary had served as Director
of Sales  Administration  for the Company from May 1996 through  November  1998.
From  1994  through   1996,   Mr.  Cary  served  as  Vice   President  of  Sales
Administration for Duofold,  Inc. From May 1994 through September 1994, Mr. Cary
was an  independent  consultant  and from  1991  through  1994 he was a  General
Manager with Johnson Camping.

     Marc A. Gold, Vice President and  Controller,  was elected to the office of
Vice  President and Controller in November 1998. Mr. Gold has served the Company
as  Controller  from  February  1997.  Prior  to that Mr.  Gold was with  Arthur
Andersen LLP from 1987 to January 1997 and served as an Audit Manager.

     Jerald J. Rinder, Vice President and General Manager - Retail 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.

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

                                       22
<PAGE>

     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.

     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, Dewolfe Companies, Inc., a real estate company, Response U.S.A., a
company in the home alarm business,  DCRI, a temporary  staffing company,  Image
Guided Technologies, a manufacturer of surgical equipment, and The Legal Club of
America, a company which provides legal services.

     Clarke H. Bailey was elected a director of the Company in January  1997. 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 and served as  Chairman of the  Executive
Committee until  September  1998.  Since February 1995, Mr. Bailey has served as
Co-Chairman  of the Board and a director of Hudson River.  He is also  currently
Chairman, Chief Executive Officer and Director of National Fulfillment,  Inc., a
provider of integrated  marketing services,  Chairman of the Executive Committee
and a director of Connectivity  Technologies,  Inc., an acquisition company with
interests  in  the  wire  and  cable  industry,  a  director  of  Iron  Mountain
Incorporated,  and as a director of SWWT. He served as Chairman, Chief Executive
Officer and a director of Arcus Group  Inc.,  the leading  national  provider of
secure off-site  computer data storage and related disaster recovery services as
well as information technology staffing solutions, from February 1995 to January
1998.

     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 of SWWT.  Mr.  Barron has served as a Trustee of  Princeton
University.

     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  also a  director  of
HealthPlan  Services  Corporation,  a provider of marketing  and  administrative
services for health and benefit programs.

     Keith R.  Lively,  a Director  of the Company is a private  investor.  From
January 1995 through  December,  1995, he 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.

     Robert S. Prather,  Jr., a Director of the Company, has served as President
and Chief  Executive  Officer of Bull Run  Corporation,  since 1990. Mr. Prather
also  serves as a  director  of Gray  Communications,  Inc.,  a  company  in the
television  broadcasting business,  Host Communications,  Inc., a company in the
collegiate marketing and publishing  ventures,  Morgan Group,  Inc., and Victory
Ventures, LLC.
                                       23
<PAGE>

     Eric M. Reynolds,  a Director of the Company, is a private investor and was
President, Chief Executive Officer and a director of SWWT, from  January 1993 to
February 1998.  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,  held  the  African  Studies
Professorship at Middlebury  College where was a member of the faculty from 1974
to 1998.  He also  served as Dean of  Middlebury  College  and  Chairman  of its
History  Department.  Dr.  Spencer is  co-Vice-Chairman  of the Africa  American
Institute,  and a Trustee of the Cape of Good Hope Foundation,  the Institute of
Current  World  Affairs and  Middlebury  College 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., a general partner of Sun Valley  Ventures,  a
partnership  engaged in venture  capital and leveraged  buyout  activities and a
consultant to Trace  International,  Inc. an investment  firm. 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 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  Forms  5 were
required for those persons,  the Company  believes  that,  except for a purchase
transaction  effected by Mr. A. Clinton Allen in 1998 and a purchase transaction
effected by Mr. John V. Tunney in 1998,  neither of which have been  reported to
date, all filing requirements  applicable to the Company's officers,  directors,
and greater than  ten-percent  beneficial  owners were  compiled with during the
year ended December 31, 1998.

















                                       24
<PAGE>



Item 11.Executive Compensation
------------------------------

                           Summary Compensation Table
                           --------------------------

     The Summary  Compensation  Table below sets forth  individual  compensation
information  of the  President  and the four other most  highly  paid  executive
officers of the  Company for  services  rendered  in all  capacities  during the
fiscal years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>


                                     Annual Compensation             Long-Term Compensation
                                                                     Awards            Payouts
(a)                      (b)       (c)       (d)         (e)        (f)          (g)          (h)         (i)
<S>                      <C>       <C>       <C>         <C>        <C>          <C>          <C>         <C>

                                                          Other
                                                          Annual     Restricted                            All Other
Name and                                                  Compen-      Stock      Options/      LTIP       Compen-
Principal Position        Year      Salary    Bonus       sation       Award        SARS       Payouts      sation
------------------        ----     --------   ------     --------    ----------   ---------    -------     ---------
J. Merrick Taggart        1998     $300,000   $30,000        -         26,250(1    70,000         -         $5,000(2
President and Chief       1997     $300,000       -          -            -           -           -         $4,750(3
Executive Officer         1996     $250,000   $40,000    $50,809(4        -        40,000         -         $3,353(5
Peter W. Gilson           1998     $210,000       -          -            -        25,000         -            -
Chairman of the Board     1997     $210,000       -          -            -           -           -            -
                          1996     $200,000       -          -            -        20,000         -            -
Harry R. Thompson         1998     $210,000    $8,000        -            -           -           -         $4,200(6  
Managing Director         1997     $210,000       -          -            -           -           -         $2,410(7  
                          1996     $200,000   $20,000        -            -        25,000         -         $2,392(8  
Michael J. Belleveau      1998     $176,667   $12,000        -         21,875(9    30,000         -         $3,600(10
Senior Vice President and 1997     $160,000       -          -            -           -           -         $3,145(11
Group Division Head       1996     $150,000   $17,500        -            -        10,000         -         $2,740(12
Jerald J. Rinder          1998     $170,000   $27,000        -         21,875(13   30,000         -         $3,400(14
Vice President - Retail   1997     $170,000   $15,000    $103,737(15      -           -           -         $2,779(16
Division                  1996     $153,546   $25,000     $44,797(17      -        10,000         -            -
</TABLE>

     1 Consists of the dollar value of a restricted  stock grant of 3,000 shares
to Mr.  Taggart.  The dollar  value of the award was  calculated  based upon the
value of the stock on the date (September 16, 1998) of the grant. The restricted
stock vests in four equal  installments over three years starting with the grant
date.

     2 Consists of $5,000  contributed by the Company to Mr.  Taggart's  account
under the Company's 401K savings plan.

     3 Consists of $4,750  contributed by the Company to Mr.  Taggart's  account
under the Company's 401K savings plan.

     4 Includes relocation benefits of $45,109.

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

                                       25
<PAGE>


     6 Consists of $4,200  contributed by the Company to Mr. Thompson's  account
under the Company's 401K savings plan.

     7 Consists of $2,410  contributed by the Company to Mr. Thompson's  account
under the Company's 401K savings plan.

     8 Consists of $2,392  contributed by the Company to Mr. Thompson's  account
under the Company's 401K savings plan.

     9 Consists of the dollar value of a restricted  stock grant of 2,500 shares
to Mr.  Belleveau.  The dollar value of the award was calculated  based upon the
value of the stock on the date (September 16, 1998) of the grant. The restricted
stock  vests in four equal installments over three years starting with the grant
date.

     10 Consists of $3,600 contributed by the Company to Mr. Belleveau's account
under the Company's 401K savings plan.

     11 Consists of $3,145 contributed by the Company to Mr. Belleveau's account
under the Company's 401K savings plan.

     12 Consists of $2,740 contributed by the Company to Mr. Belleveau's account
under the Company's 401K savings plan.

     13 Consists of the dollar value of a restricted stock grant of 2,500 shares
to Mr. Rinder. The dollar value of the award was calculated based upon the value
of the stock on the date  (September  16,  1998) of the  grant.  The  restricted
stock  vests in four equal installments over three years starting with the grant
date.

     14 Consists of $3,400  contributed by the Company to Mr.  Rinder's  account
under the Company's 401K savings.

     15 Includes relocation benefits of $102,297.

     16 Consists of $2,779  contributed by the Company to Mr.  Rinder's  account
under the Company's 401K savings.

     17 Includes relocation benefits of $40,693.




                                       26
<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        ($/Sh)           Date       5% ($)      10% ($)
----                   -------   ---------------     -----------   ----------    --------    --------
<S>                    <C>           <C>               <C>         <C>           <C>          <C>

J. Merrick Taggart      70,000        12.6%             $8.75       9/16/2008    $385,198     $976,167
Peter W. Gilson         25,000         4.5%             10.125      11/12/2008     N/A          N/A
Harry R. Thompson         N/A          N/A               N/A           N/A       $159,185     $403,416
Michael J. Belleveau    30,000         5.4%              8.75       9/16/2008    $165,085     $418,357
Jerald J. Rinder        30,000         5.4%              8.75       9/16/2008    $165,085     $418,357
</TABLE>


                    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.

Aggregated Options Exercises in Last Fiscal year, and FY End Option/SAR Value
------------------------------------------------------------------------------
<TABLE>
<CAPTION>

(a)                  (b)                     (c)                (d)               (e)

                                                                                    Value of
                                                                   Number of       Unexercised 
                                                                  Unexercised      In-the-Money
                                                                  Options/SARs    Options/SARs at 
                                                                   at FY-End #        FY-End($)

                      Shares Acquired on        Value            Exercisable/       Exercisable/
Name                     Exercise (#)         Realized ($)      Unexercisable      Unexercisable
----                  ------------------      ------------      --------------     -------------
<S>                        <C>                  <C>             <C>               <C>

J. Merrick Taggart            -                     -            144,500/62,500   $15,313/$45,938
Peter W. Gilson               -                     -            170,250/23,750         -/-
Harry R. Thompson           8,250               $42,281           43,750/6,250          -/-
Michael J. Belleveau        1,250               $ 4,844           35,000/25,000     6,563/19,688
Jerald J. Rinder              -                     -             15,000/62,500     6,563/19,688
</TABLE>






                                       27

<PAGE>

                            Compensation of Directors
                            -------------------------

     The Company compensates those of its directors who are 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".

                                  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.  Pre-retirement  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,  1998
of each of the individuals  named in the Cash  Compensation  table herein are as
follows:
<TABLE>
<CAPTION>
        <S>                                                    <C>

         J. Merrick Taggart                                     3 years
         Peter W. Gilson                                        3 years
         Harry R. Thompson                                      3 years
         Michael J. Belleveau                                   7 years
         Jerald J. Rinder                                       3 years
</TABLE>



     The following  table shows annual pension  benefits under the Pension Trust
assuming  retirement at age  sixty-five in 1998,  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.





                                       28
<PAGE>

                  Pension Benefits for 1998 Retirees at Age 65
                  --------------------------------------------

                                Years of Service
                                ---------------- 
<TABLE>
<CAPTION>

Remuneration       15         20          25          30           35
------------       --         --          --          --           --
<S>            <C>         <C>         <C>         <C>          <C> 

$50,000       $  6,529    $  8,705     $10,881     $13,057      $15,233
 75,000         11,404      15,205      19,006      22,807       26,608
100,000         16,279      21,705      27,131      32,557       37,983
125,000         21,154      28,205      35,256      42,307       49,358
150,000         26,029      34,705      43,381      52,057       60,733
</TABLE>



           Compensation Committee Interlocks and Insider Participation
           -----------------------------------------------------------  

     In 1998,  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 19,  1999,  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.
<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               3,141,922(2                 37.6%

Brae Group, Inc.
15710 John F. Kennedy Blvd.
Houston, TX  77032                3,117,900(3                 37.3%

Victorinox A.G.
CH-6438
Ibach-Schwyz
Switzerland                       2,152,700                   27.4%

David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142                 538,100(4                  6.9%

Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA 90401              480,724(5                  6.1%
</TABLE>

                                       29
<PAGE>



     1Based on  7,851,510,  shares of Common Stock  outstanding,  not  including
1,006,708,  shares  held as  Treasury  stock.  Treated  as  outstanding  for the
purposes of computing  percentage  ownership of each holder are 1,272,250 shares
issuable to such holder upon exercise of options and warrants.

     2Consists of 19,730 shares held directly by Mr. Marx,  4,292 shares held by
a trust for the benefit of Mr. Marx,  2,617,900 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.

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

     4According  to a Schedule  13G dated  February 1, 1999,  consists of shares
which  David L.  Babson & Co.,  Inc.  beneficially  owns by virtue of serving as
investment advisor.

     5According to a Schedule 13G dated February 12, 1999, consists of shares as
to which  Dimensional Fund Advisors,  Inc. shares power of disposition by virtue
of serving as investment advisor to its clients.

     The  following  table  sets  forth  certain   information   concerning  the
beneficial  ownership of Common Stock on March 19, 1999, 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                   148,250 2                 1.9%
Harry R. Thompson                     43,750 3                  *
Michael J. Belleveau                  35,725 4                  *
Jerald J. Rinder                      15,625 5                  *
A. Clinton Allen                      36,000 6                  *
Clarke H. Bailey                       9,250 7                  *
Thomas A. Barron                      85,000 8                 1.1%
Vincent D. Farrell, Jr.               40,000 9                  *
Herbert M. Friedman                   15,868 10                 *
Peter W. Gilson                      171,250 11                2.1%
Keith R. Lively                        1,000                    *
Louis Marx, Jr.                    3,141,922 12               37.6%
Robert S. Prather                     45,823                    *
Stanley R. Rawn, Jr.                 142,711 13                1.8
Eric M. Reynolds                      26,000 14                 *
John Spencer                           1,000                    *
John V. Tunney                         1,000                    *
All officers and directors         4,085,511 15               44.8%
  as a group (23 persons)
*Less than 1% of the Class.

</TABLE>


     1Based on  7,851,510  shares of Common  Stock  outstanding,  not  including
1,006,708 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  1,272,250  shares  issuable to such  individuals  upon
exercise of options and warrants.

                                       30
<PAGE>

     2Includes  97,000 shares of Common Stock issuable upon exercise of warrants
held by Mr.  Taggart and 47,500 shares of Common Stock issuable upon exercise of
Options held by Mr. Taggart.

     3Consists  of 43,750  shares of Common  Stock  issuable  upon  exercise  of
Options held by Mr. Thompson.

     4Consists  of 35,000  shares of Common  Stock  issuable  upon  exercise  of
Options held by Mr. Belleveau.

     5Consists  of 15,000  shares of Common  Stock  issuable  upon  exercise  of
Options held by Mr. Rinder.

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

     7Includes  6,250 shares of Common Stock  issuable  upon exercise of Options
held by Mr. Bailey.

     8Includes  50,000 shares of Common Stock  issuable upon exercise of Options
held by Mr. Barron.

     9Includes  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.

     10Includes  12,500 shares of Common Stock issuable upon exercise of Options
held by Mr. Friedman.

     11Includes 170,250 shares of Common Stock issuable upon exercise of options
held by Mr. Gilson.

     12Consists  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,  2,617,900 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.

     13Includes 100,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Rawn.

     14Includes  25,000 shares of Common Stock issuable upon exercise of Options
held by Mr. Reynolds.

     15Includes  1,175,250  shares of Common  Stock  issuable to  directors  and
officers  upon  exercise of Options and 97,000  shares of Common Stock  issuable
upon exercise of warrants.

                                       31
<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  1998.  During 1998  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  $3,200,000 over the course of
the next 15 years as premiums under the policies for Mr. Marx and  approximately
$2,400,000  over the course of the next 11 years  under the policy for Mr.  Rawn
(in each case  including any amounts paid in the first fiscal  quarter of 1999),
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 1998,  the  Company  paid an  aggregate  of $567,139 in
premiums on the policies  pertaining to Mr. Marx and $315,150 in premiums on the
policy pertaining to Mr. Rawn. There will be an insignificant earnings impact in
1999 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 37.6% 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 27.4% of the outstanding Common Stock, has
a  non-controlling  stock  interest.  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.

     In 1998, the Company paid $234,000 for legal  services  rendered by the law
firm of Zimet, Haines, Friedman & Kaplan, of which Mr. Herbert M. Friedman, Vice
President-General  Counsel and a Director of the  Company,  was a partner  until
April 30, 1998.
                                       32
<PAGE>

     Effective  May 1, 1999,  the Company  entered into an  agreement  with Brae
Capital Corporation ("Brae Capital"), an affiliate of Brae, whereby Brae Capital
would supply the Company with legal  services.  The fees for these  services are
expected to be approximately  $12,500 per month. The fees incurred for 1998 were
approximately  $103,000.  This  agreement can be terminated by either party upon
thirty days written notice.

     Victorinox  Cutlery  Company owns  approximately  27.4% of the  outstanding
Common  Stock  and  is the  supplier  to  the  Company  of  Swiss  Army  Knives,
SwissCards,  SwissTools,  the majority of its professional  cutlery products and
certain Victorinox watches. During the year ended December 31, 1998, the Company
purchased Victorinox products in aggregate amount of approximately $31,400,000.

              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  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.
                                       33
<PAGE>


     Generally,  there will be a small, negative impact on earnings in 1999, and
an  increasingly  positive  impact on earnings  after 1999 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 1998 with respect to directors who resigned
from the Company in 1999 was 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.

















                                       34
<PAGE>

                                     PART IV
                                     -------

Item 14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K
------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>      <C>                                                          <C>

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

(1)
          Financial Statements:

          Report of Independent Public Accountants                           F-1

          Consolidated Balance Sheets - December 31, 1998 and 1997    F-2 to F-3

          Consolidated Statements of Operations for the Years Ended 
          December 31, 1998, 1997 and 1996                                   F-4

          Consolidated Statements of Stockholders' Equity and 
          Comprehensive Income for the Years Ended December 31, 1998, 
          1997 and 1996                                                      F-5

          Consolidated Statements of Cash Flows for the Years
          Ended December 31, 1998, 1997 and 1996                             F-6

          Notes to Consolidated Financial Statements                 F-7 to F-26
(2)
          Schedule --

          Schedule II -- Valuation and Qualifying Accounts for the
          Years Ended December 31, 1998, 1997 and 1996                      F-27
</TABLE>


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.

















                                       35

<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To Swiss Army Brands, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets of Swiss Army
Brands,  Inc. (a Delaware  corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated  statements of operations,  stockholders'
equity and comprehensive  income,  and cash flows for each of the three years in
the  period  ended  December  31,  1998.  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,  1998  and  1997,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998, 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 10, 1999






                                       F-1

<PAGE>
<TABLE>
<CAPTION>

                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS

                                                                December 31,

                                                             1998          1997

<S>                                                        <C>           <C>
Current assets
   Cash and cash equivalents                                $1,309       $1,078

   Accounts receivable, less
    allowance for doubtful accounts
    of  $975 for both periods                               31,321       28,224

   Inventories                                              28,890       27,438

   Deferred income taxes                                     2,205        3,519

   Prepaid and other                                         6,658        3,885
                                                            -------     -------
      Total current assets                                  70,383       64,144


Deferred income taxes                                        1,069        2,407

Property, plant and equipment, net                           3,735        3,751

Investments in preferred units                               7,164        8,793

Investments in common stock                                  2,303          369

Foreign distribution rights, net                             2,875        3,551

Other assets, net                                           12,875       11,036
                                                            -------      ------
Total assets                                              $100,404      $94,051
                                                          =========     =======

</TABLE>

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

                                       F-2

<PAGE>
<TABLE>
<CAPTION>


                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                December 31,

                                                             1998          1997

<S>                                                        <C>           <C>
Current liabilities

   Short-term debt                                         $5,140         $ -

   Accounts payable                                        12,439         8,478

   Accrued liabilities                                      8,227         9,865
                                                           -------        ------
 Total current liabilities                                 25,806        18,343
                                                           -------       -------

Commitments and contingencies (Note 14)

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 -
      18,000,000; shares issued - 8,858,218
      and 8,823,718, respectively                             885           882

   Additional paid-in capital                              46,472        46,186

   Accumulated other comprehensive income (loss)              177          (240)

   Retained earnings                                       35,456        33,993
                                                          -------        ------
                                                           82,990        80,821

   Less: Treasury stock; 958,108 and 614,108 shares,       (8,194)       (5,113)
              respectively

            Deferred compensation                            (198)          -
                                                          --------       -------
  Total stockholders' equity                               74,598        75,708
                                                          --------       -------
Total liabilities and stockholders' equity               $100,404       $94,051
                                                         =========      ========
</TABLE>

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

                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)



                                                   Year Ended December 31,
                                                1998        1997         1996
                                                ----        ----         ----
      <S>                                    <C>         <C>          <C>

       Net sales                              $127,851    $118,744     $130,030
       Cost of sales                            77,869      76,020       89,194
                                              --------    --------     --------
       Gross profit                             49,982      42,724       40,836
       Selling, general, administrative
          expenses before special charges       49,005      49,639       43,679
       Special charges                             -           -          2,562
                                              --------    --------     --------
       Total selling, general and
          administrative expenses               49,005      49,639       46,241
                                              --------    --------     --------
       Operating income (loss)                     977      (6,915)      (5,405)
       Interest expense                           (133)        (40)        (147)
       Interest income                             188         155          120
       Gain (loss) on sale (write-down) 
          of investments                         1,651         398       (2,382)
       Other income, net                           -             1          206
                                              --------    --------     --------
       Total interest and other income 
          (expense), net                         1,706         514       (2,203)
                                              --------    --------     --------
       Income (loss) before income taxes         2,683      (6,401)      (7,608)

       Income tax provision (benefit)            1,220      (2,376)      (2,343)
                                              --------    --------     --------
       Net income (loss)                        $1,463     ($4,025)     ($5,265)
                                              ========    ========     ========
       Earnings per share:
          Basic                                  $0.18      ($0.49)      ($0.64)
                                              ========    ========     ======== 
          Diluted                                $0.18      ($0.49)      ($0.64)
                                              ========    ========     ========

       Weighted average number of shares
          outstanding:
          Basic                                  8,138       8,209        8,202
                                              ========    ========     ======== 
          Diluted                                8,236       8,209        8,202
                                              ========    ========     ========
</TABLE>




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




                                       F-4
<PAGE>
<TABLE>
<CAPTION>

                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
                              COMPREHENSIVE INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                        (in thousands, except share data)

                                                                     Accumulated
                                   Common Stock       Additional        Other
                                  Par Value $.10       Paid-In      Comprehensive    Retained    Treasury    Comprehensive
                               Shares        Amount    Capital      Income (Loss)    Earnings      Stock      Income(Loss)
<S>                          <C>             <C>       <C>            <C>            <C>           <C>           <C>

BALANCE
December 31, 1995             8,800,718      $880      $45,898           ($9)         $43,283      ($5,113)

Comprehensive Loss:                                                                                          
  Net loss                         -           -           -               -           (5,265)         -         ($5,265)
  Foreign currency                      
     translation adjustment        -           -           -            (104)             -            -            (104)
                                                                                                                  ------- 
Comprehensive Loss                                                                                               ($5,369) 
                                                                                                                  =======
Stock options and                                        
  warrants exercised             22,250         2          284             -              -            -             
                              ---------      -----     --------         ------         -------      -------    
BALANCE
December 31, 1996             8,822,968       882       46,182          (113)          38,018       (5,113)  


Comprehensive Loss:         
  Net loss                         -           -           -               -           (4,025)         -          (4,025)  
  Foreign currency                                                        
     translation adjustment        -           -           -            (127)             -            -            (127)   
                                                                                                                 --------- 
Comprehensive Loss                                                                                                
Stock options exercised             750        -             4             -              -            -          (4,152)
                              ---------      -----     --------         ------         -------      -------      =========   
BALANCE                                          
December 31, 1997             8,823,718       882       46,186          (240)          33,993       (5,113)  

Comprehensive Income:    
  Net income                       -           -           -               -            1,463          -           1,463  
  Unrealized gain on          
     marketable securities         -           -           -             603              -            -             603
  Foreign currency                    
     translation adjustment        -           -           -            (186)             -            -            (186)
                                                                                                                   ------
Comprehensive Income                                                                                               1,880
                                                                                                                   ======
Stock options exercised           9,500        -            70             -              -            -  
Stock grant                      25,000         3          216             -              -            -
Repurchase of common  
 stock                             -           -           -               -              -         (3,081)     
                             ----------     ------     --------         ------         --------     --------  
BALANCE                    
December 31, 1998             8,858,218    $  885      $46,472         $ 177          $35,456      ($8,194)   
                             ==========     ======     ========         ======         ========     ========   
</TABLE>


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


                                       F-5
<PAGE>
<TABLE>
<CAPTION>

                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

                                                    Year Ended December 31,
                                                 1998         1997         1996
                                                 ----         ----         ----
<S>                                           <C>          <C>          <C>

Cash flows from operating activities:
   Net income (loss)                           $1,463      ($4,025)     ($5,265)
   Adjustments to reconcile net income 
   (loss) to cash provided from 
   operating activities:
      Depreciation and amortization             2,834        2,709        4,035
      Stock compensation expense                   21          -            -
      Deferred income taxes                     2,652       (1,034)      (1,725)
      (Gain) loss on (sale) write-down of 
      investments                              (1,651)        (398)       2,382
                                              -------        ------      -------
                                                5,319       (2,748)        (573)

Changes in other current assets and liabilities:
   Accounts receivable                         (3,167)       4,745       (1,091)
   Inventories                                 (1,433)       2,204        6,966
   Prepaid and other                           (2,814)        (967)        (270)
   Accounts payable                             3,937       (2,462)       4,509
   Accrued liabilities                         (1,661)       1,880       (1,937)
                                              -------        ------       ------
    Net cash provided from operating activities   181        2,652        7,604

Cash flows from investing activities:
   Capital expenditures                        (1,302)      (1,056)      (1,462)
   Additions to other assets                   (2,701)      (3,070)      (3,021)
   Investment in preferred units                  -            -         (2,000)
   Proceeds from sales of investments           1,949          550           60
                                               -------       ------      ------- 
   Net cash used for investing activities      (2,054)      (3,576)      (6,423)
                                               -------       ------      -------

Cash flows from financing activities:
   Borrowings under bank agreements            32,914        1,930       10,246
   Repayments under bank agreements           (27,774)      (1,930)     (10,246)
   Repurchase of common stock                  (3,081)         -            -
   Proceeds from exercise of stock options
    and warrants                                   70            4          286
                                               -------       ------     --------
   Net cash provided from financing activities  2,129            4          286
                                               -------       ------     --------

 Effect of exchange rate changes on cash          (25)         (69)          (9)
 Net increase (decrease) in cash and cash                               
    equivalents                                   231         (989)       1,458
   Cash and cash equivalents, beginning 
    of period                                   1,078        2,067          609
                                               -------      -------     --------
   Cash and cash equivalents, end of period   $ 1,309      $ 1,078        2,067
                                               =======      =======     ========

Cash paid during the period:
   Interest                                  $    102        $  34        $ 147
                                               =======      =======     ========
   Income taxes                              $  1,752        $ 321        $ 233
                                               =======      =======     ========
</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") 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  SwissTool,   Victorinox   SwissCard,   Victorinox  Cutlery  and
     Victorinox  Watches.  Swiss  Army also  markets  its own line of Swiss Army
     Brand Watches,  Sunglasses and other high quality Swiss made products under
     its Swiss Army Brand worldwide.  Swiss Army has only one business segment -
     the importation and distribution of cutlery, knives,  multi-tools,  watches
     and other consumer products.  No customer accounted for greater than 10% of
     net sales in the three years ended December 31,1998.

(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   inter-company
     transactions have been eliminated.

              Revenue recognition
              ------------------- 
     The Company  recognizes  revenue  upon  shipment  of product.  Net sales is
     comprised of gross  revenues less  expected  returns,  trade  discounts and
     customer allowances.

              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 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




                                       F-7
<PAGE>

     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.  Gains and losses on these  contracts  are  deferred  and
     recognized  in cost of sales  when the  related  inventory  is sold.  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 the extent to which
     such  hedging  transactions  will  reduce the  effect of  adverse  currency
     fluctuations.

              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,
     1998 and 1997, the balance at which  inventories are stated would have been
     $3,076,000 and $2,993,000  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 materials.

              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,
                                                         1998           1997
                                                            (in thousands)
                                                         -------------------
              <S>                                        <C>            <C>


               Leasehold improvements                    $1,115         $1,090
               Equipment                                  5,966          7,945
               Furniture and fixtures                     1,290          1,923
                                                         ------         ------
                                                          8,371         10,958
               Accumulated depreciation                  (4,636)        (7,207)
                                                         ------         ------
                                                         $3,735         $3,751
                                                         ======         ======
</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                    3 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, 1998,
     1997, and 1996,  depreciation and amortization  expense of property,  plant
     and equipment was  approximately  $1,300,000,  $1,260,000  and  $1,599,000,
     respectively.


                                       F-8
<PAGE>


              Long-lived assets
              -----------------  
     The Company adopted 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" 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.

              Investments
              -----------
     Investments in preferred units 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 permanent
     impairment.  Changes  between  cost  and  fair  value  are  reflected  as a
     component  of  stockholders'  equity.  Any  write-down  of the  cost due to
     impairment is reflected in income.

              Earnings per share
              ------------------
     In 1997, the Company  adopted SFAS No. 128,  "Earnings per Share",  and the
     Company's reported earnings per share were restated. There was no effect on
     diluted  earnings  per share in the two years ended  December  31, 1997 and
     1996.

     Basic  earnings per share is computed by dividing net income  (loss) by the
     number of weighted  average  number of common shares  outstanding.  Diluted
     earnings  per  share is  computed  by  dividing  net  income  (loss) by the
     weighted  average  number  of  common  shares  and  dilutive  common  share
     equivalents outstanding during the period. No common share equivalents have
     been included in the years ended  December 31, 1997 and 1996, as they would
     have had an anti-dilutive  effect.  Common share equivalents are calculated
     using the treasury stock method.

              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 13 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.

              Recent Accounting Pronouncements
              --------------------------------
     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 133  "Accounting for Derivative  Instruments  and Hedging  Activities."
     This statement  standardizes  the  accounting  and reporting  standards for
     derivatives and hedging activities.  This statement is effective for fiscal
     years  beginning after June 15, 1999. The Company will adopt this statement
     effective  January 1, 2000. The Company is currently  evaluating the impact
     of  SFAS  No.  133 on the  Company's  financial  position  and  results  of
     operations.

                                       F-9
<PAGE>

(3)      SPECIAL CHARGES
     In 1997, the Company recorded $0.8 million of restructuring costs (included
     in selling,  general and  administrative  expenses) and a special charge of
     $1.3 million (included in cost of sales) related to discontinued inventory.
     The  restructuring  costs  primarily  consisted  of  severance  and related
     expenses.

     In 1996, the Company recorded  special charges of approximately  $9,887,000
     related  to  an  extensive   analysis  of  the  Company's   operations  and
     non-strategic assets. The special charges consisted of:
<TABLE>
<CAPTION>
                                                          (in thousands)
            <S>                                             <C>

             Write-off of inventory                          $4,932 (A)
             Selling, general and administrative charges      2,562 (B)
             Write-down of investments                        2,393 (C)
                                                             ------
                                                             $9,887
                                                             ======
</TABLE>

     (A) Represents the write-off of discontinued  inventory,  including certain
     cutlery products sold by Cuisine de France Limited ("CDF").

     (B) Consists of an $870,000  write-off of goodwill and other assets related
     to CDF,  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 SWWT,  Inc.,  and an  $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,  SwissTools,
     SwissCards  and  most  of its  other  cutlery  products  from  a  principal
     supplier,  Victorinox  Cutlery  Company  ("Victorinox"),  a Swiss  company.
     Effective December 12, 1998, Swiss Army renewed a five-year  agreement with
     Victorinox which appoints Swiss Army as exclusive distributor of Victorinox
     Original Swiss Army Knives,  Victorinox  SwissTools,  Victorinox SwissCards
     and Victorinox Cutlery,  and which gives Swiss Army exclusive rights to use
     Victorinox  trademarks and trade names in the United States with respect to
     those products.  The agreement is subject to renewal at five year intervals
     at the  Company's  option  and  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  year.  The  Company
     purchased  the  required  minimums  in 1997 and 1996.  In 1998,  Victorinox
     agreed to reduce the minimum for 1998 to a purchase  plan of  approximately
     $31,400,000.  The Company met this  requirement  in 1998.  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>
<CAPTION>

                                               December 31,         Amortization
                                            1998         1997          Period
                                            -----------------       ------------
                                              (in thousands)                    
        <S>                              <C>         <C>             <C>

        Canadian distribution
           rights (A)                    $3,483      $3,483           10 years
        Caribbean and Victorinox Watch
           distribution rights (B)        3,261       3,261           10 years
                                         -------     -------
                                          6,744       6,744
        Accumulated amortization         (3,869)     (3,193)
                                         -------     -------
                                         $2,875      $3,551
                                         =======     ======= 
</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 seven-year term with a continuous  five-year renewal
     arrangement upon expiration of the fixed term. Victorinox has the right not
     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.,  ($488,856).  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 pays  Victorinox a royalty of 1% of net sales of
     Victorinox  Watches.  The  Caribbean  distribution  rights  are for a fixed
     seven-year 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 for Victorinox cutlery products in that territory.



                                      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
     exclusive  distributorship   agreements  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.  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  probably  would 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 68%, or $16,800,000,  of total payments for watches
     and  watch  parts in 1998 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 was a partner in a law firm,  which provided
     legal services to the Company.  For the years ended December 31, 1998, 1997
     and 1996,  Swiss Army  incurred  fees of $174,000,  $629,000 and  $598,000,
     respectively, relating to these services.

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

     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
     non-controlling stock interest, respectively. Under the Services Agreement,
     Brae agreed 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.

     On May 1, 1998,  the Company  entered into an agreement  with an affiliated
     company  whereby this company would supply Swiss Army with legal  services.
     The fees for these  services are expected to be  approximately  $12,500 per
     month.  The  fees  incurred  for 1998  were  approximately  $103,000.  This
     agreement  can be  terminated  by either  party upon  thirty  days  written
     notice.



                                      F-13
<PAGE>

        (6)   INVESTMENTS
<TABLE>
<CAPTION>

              Investments consist of the following:

                                                          1998            1997
                                                              (in thousands)
              <S>                                         <C>           <C>

               Preferred units of Hudson
                  River Capital LLC (A)                   $6,313        $7,907
               Preferred units of
                  Victory Ventures LLC (B)                   851           886
                                                           -----         -----
                  Total investments in preferred units    $7,164        $8,793
                                                           =====         =====

              Common stock of Iron Mountain, Inc. (C)     $2,273        $  -   
              Common stock of Chaparral Resources, Inc. (D)   30           219
              Common stock of SWWT, Inc. (E)                 -             150              
                                                           -----         -----
                 Total investments in common stock        $2,303           369
                                                           =====         =====
</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,  re-capitalization  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.  See (B) for
     further  discussion  of Victory  Ventures.  In January  1998,  Hudson River
     distributed   to  the  Company   $1,613,000  in  cash  and  authorized  the
     distribution  of 63,019  shares of common stock (as adjusted for a three to
     two stock split which occurred in July 1998), valued at $1,481,000, of Iron
     Mountain  Incorporated  ("Iron Mountain").  The Company received the common
     stock in June 1998. In the first quarter of 1998, the Company  recognized a
     $1.5  million  gain on the  cash and  common  stock  distribution  which is
     included  in  gain on sale of  investments  in the  accompanying  financial
     statements.  See (C) for further discussion. At December 31, 1998 and 1997,
     the Company owns 890,776 preferred units of Hudson River,  which represents
     approximately 9.1% of the outstanding equity of Hudson River, respectively.
     The preferred units in Hudson River owned by the Company carry a preference
     on  liquidation  equal  to  their  per unit  cost as well  as,  in  certain
     instances,  an annual preferred return.  The Company is accounting for this
     investment on the cost basis,  subject to review for permanent  impairment.
     Since these investments do not have a readily  determinable fair value, the
     valuation of these investments is subject to uncertainty.

                                      F-14
<PAGE>

     (B) Victory Ventures is a private equity firm  specializing in small market
     venture capital  investments.  As a result of the distribution  from Hudson
     River,  the Company  received  890,776  preferred units of Victory Ventures
     valued at $1.23 per unit.  The Company owns 890,776  preferred  units as of
     December  31,  1998 and 1997,  which  represent  approximately  1.3% of the
     outstanding equity of Victory Ventures,  respectively. In the third quarter
     of 1997, the Company received a cash  distribution from Victory Ventures of
     $438,000, of which $286,000 was recorded as a gain and has been included in
     gain  (loss) on sale  (write-down)  of  investments.  On  December 3, 1997,
     Victory  Ventures  distributed  to its members its  investment in Chaparral
     Resources, Inc. ("Chaparral").  See (D) for further discussion. In November
     1998,  Victory  distributed  3,053 shares of common stock of  Micromuse,  a
     publicly  traded  entity,  and 4,178  shares of common  stock of FaxSav,  a
     publicly  traded  entity.  The  Company  liquidated  these  investments  in
     November  1998  and  realized  a gain of  approximately  $57,000  on  these
     investments.  The preferred units in Victory  Ventures owned by the Company
     carry a preference on liquidation  equal to their per unit cost as well as,
     in certain instances, an annual preferred return. The Company is accounting
     for this  investment  on the cost  basis,  subject to review for  permanent
     impairment. Since these investments do not have a readily determinable fair
     value, the valuation of these investments is subject to uncertainty.

     (C) Iron Mountain, a publicly traded company, is a full service provider of
     records management and related services.  At December 31, 1998, the Company
     owns 63,019  shares of Iron  Mountain  stock  valued at $30 per share.  The
     Company  accounts for this  investment at fair value,  with changes between
     cost and fair value reflected as a component of  stockholders'  equity.  In
     January 1999,  the Company sold its entire  investment in Iron Mountain and
     recorded a gain of approximately $400,000.

     (D) Chaparral,  a publicly  traded  company,  is an independent oil and gas
     exploration and production  company.  As a result of the distribution  from
     Victory  Ventures,  at December 31, 1998, the Company owns 87,634 shares of
     common stock of Chaparral valued at $0.34 per share.

     (E) SWWT, Inc.  ("SWWT") is a holding  company  formerly in the business of
     manufacturing  and marketing  portable  water  purification  and filtration
     systems to the sporting goods, recreational,  travel and tourist, emergency
     preparedness and military markets. In December 1996, the investment in SWWT
     was written down to $150,000,  its estimated fair value,  due to 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.  In
     December  31,  1998,  the Company  sold its entire  investment  in SWWT for
     approximately $244,000 and recorded a gain of $94,000.

     In 1995,  the  Company  purchased  5,160  shares of common  stock and an 8%
     convertible note in a privately held affiliated start-up entity for a total
     investment of $800,000.  In 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.  During 1997, the Company  recovered  $112,000 related to this
     investment  which  is  included  in gain  (loss)  on sale  (write-down)  of
     investments.












                                      F-15

<PAGE>

(7)      OTHER ASSETS
<TABLE>
<CAPTION>
              Other assets consist of the following :


                                                                  Amortization
                                          1998         1997          Period    
                                          ----         ----       ------------
                                            (in thousands)
   <S>                                  <C>          <C>             <C>

    Cash surrender value of
      life insurance (see Note 14)       $12,044      $9,804          N/A
              
    Other                                  2,808       2,455          1-5 years
                                          ------       -----
    Accumulated amortization              (1,977)     (1,223)
                                          ------       -----     
                                         $12,875     $11,036
                                          ======      ======
</TABLE>


     For the years ended December 31, 1998, 1997 and 1996,  amortization expense
     was approximately $1,534,000, $1,449,000 and $2,436,000, respectively.

(8)      ACCRUED LIABILITIES

              Accrued liabilities consist of the following:
<TABLE>
<CAPTION>


                                                        1998              1997  
                                                             (in thousands)
               <S>                                     <C>               <C>

                Sales, marketing and promotional       $3,106            $4,435
                Payroll related                         2,111             2,314
                Other                                   3,010             3,116
                                                       ------            ------
                                                       $8,227            $9,865
                                                       ======            ======
</TABLE>
 

(9)      DEBT AGREEMENTS
     Swiss Army has a revolving  credit  agreement,  which  among other  things,
     states that the Company can borrow up to  $10,000,000  for working  capital
     purposes at one of three  interest rate options  available;  (i) LIBOR plus
     1.1%; (ii) Base Rate, as defined;  or (iii) Cost of Funds rate, as defined.
     The line of credit is unsecured and contains  certain  financial  covenants
     including,  but not limited to, minimum  tangible net worth,  interest rate
     coverage,   current   ratio,   and  the   continuation   of  the  exclusive
     distributorship arrangement with Victorinox Cutlery Company. This agreement
     expires in June 1999.  The Company is  currently  reviewing  its options to
     establish  a new credit  agreement,  and  believes  it can  establish a new
     credit  agreement at the  appropriate  date.  As of December 31, 1998,  the
     Company  had  $5,140,000  outstanding  under the line of  credit  and is in
     compliance with the covenants contained in the agreement. The fair value of
     the amount outstanding under the line of credit approximates book value due
     to the short maturity of the debt.






                                      F-16

<PAGE>


 (10)    INCOME TAXES
     The income tax provision  (benefit) for the years ended  December 31, 1998,
     1997 and 1996, consists of the following:
<TABLE>
<CAPTION>

                                          Year Ended December 31,

                               1998                1997                1996
                                               (in thousands)
  <S>                         <C>                 <C>                 <C>     
   Current                                            
       Federal               ($1,662)            ($1,276)            ($1,140)
       Foreign                   -                  (280)                292
       State                     230                 214                 230
                              ------              ------              -------
       Total current          (1,432)             (1,342)               (618)
   Deferred                               
       Federal                 2,294                (700)             (1,332)
       State                     358                (334)               (393)
                              ------              -------              ------  
       Total deferred          2,652              (1,034)             (1,725)
                              ------              -------              ------
   Provision (benefit) for              
   income taxes               $1,220             ($2,376)            ($2,343)
                              ======              =======             =======
                                                                 
</TABLE>


     The  significant  components  of the  deferred tax asset as of December 31,
     1998 and 1997 are as follows:
<TABLE>
<CAPTION>

                                                        1998            1997
                                                        ----            ---- 
                                                           (in thousands)
             <S>                                      <C>             <C>

              Sales and marketing reserves              $888          $1,608
              Inventory related reserves                 843           1,400
              Depreciation and amortization              561             666
              Loss carryforwards                         411           1,622
              Accrued employee benefits                  363             471
              Other, net                                 208             159
                                                      ------          ------
                                                      $3,274          $5,926
                                                      ======          ======
</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.

     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 1998, 1997 and 1996 is as follows:





                                      F-17
<PAGE>

<TABLE>
<CAPTION>

  
                                              1998          1997          1996
                                              ----          ----          ----
      <S>                                    <C>           <C>           <C>

       Statutory federal income tax rate      34.0%        (34.0%)       (34.0%) 
       State income taxes, net of                                       
         federal income tax benefit            5.7          (0.8)         (4.1)
       Foreign taxes                           2.1          (4.0)          3.8
       Other                                   3.7           1.7           3.5
                                              -----         -----         -----
       Effective income tax rate              45.5%        (37.1%)       (30.8%)
                                              =====         =====         =====
</TABLE>



(11)    COMPREHENSIVE INCOME

     Effective  January 1, 1998,  the Company  adopted SFAS No. 130,  "Reporting
     Comprehensive  Income"  which  establishes  standards for the reporting and
     display of comprehensive income and its components.

     Accumulated other comprehensive  income (loss) activity for the three years
     ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>

                                  Foreign    Unrealized Gain   Accumulated Other
                                  Currency    On Marketable      Comprehensive
                                Translation    Securities        Income (Loss)
                                -----------  ---------------   -----------------
                                             (In thousands)  
      <S>                          <C>             <C>               <C>
       January 1, 1996              ($9)            $ -                ($9)
       1996 Activity               (104)              -               (104)
                                   -----           -----              ----- 
       December 31, 1996           (113)              -               (113)
       1997 Activity               (127)              -               (127)
                                   -----           -----              -----
       December 31, 1997           (240)              -               (240)
       1998 Activity               (186)             603               417
                                   -----           -----              -----
       December 31, 1998          ($426)            $603              $177
                                   =====           =====              =====
</TABLE>


     For comparative  purposes,  the financial statements for 1997 and 1996 have
     been  reclassified  to conform to the  requirements  of SFAS No.  130.  The
     adoption of SFAS No. 130 had no impact on the Company's  financial position
     or cash flows.

(12)     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
     $285,000,  $336,000,  and $232,000,  for the years ended December 31, 1998,
     1997 and 1996, respectively.  The net periodic pension cost of Swiss Army's
     pension plan in 1998, 1997 and 1996 includes the following components:







                                      F-18

<PAGE>

<TABLE>
<CAPTION>

                                             1998           1997          1996
                                             ----           ----          ----
                                                       (in thousands)
        <S>                                 <C>            <C>           <C>
         Service cost - benefits
           earned during the period          $286           $339          $240
         Interest cost on projected
           benefit obligation                 166            189           156
         Expected return on assets           (143)          (171)         (144)
         Amortization of net                                                   
           transition asset                   (14)           (14)          (14)
         Amortization of unrecognized
           prior service cost                 (13)           (13)          (13)
         Amortization of net loss               3              6             7
                                             -----           -----        -----
         Net periodic pension cost           $285           $336          $232
                                             =====           =====        =====     
</TABLE>

     
<TABLE>
<CAPTION>

                                                          1998            1997
                                                             (in thousands)
             <S>                                       <C>              <C>

              Change in Benefit Obligation
              Benefit obligation, January 1             $3,211           $2,629
              Service Cost                                 286              339
              Interest Cost                                166              189
              Actuarial (gain) loss                       (750)              81
              Benefits paid - expected                    (171)             (27)
                                                        -------          ------- 
              Benefit obligation, December 31           $2,742           $3,211
                                                        =======          =======
                                                                 
              Change in Plan Assets                                                         
              Fair value of plan assets, January 1      $1,791           $2,111             
              Actual return on plan assets                 143              288
              Company Contributions                        140              165
              Benefits paid - actual                      (339)            (773)
                                                        -------          -------
              Fair value of plan assets, December 31    $1,735           $1,791
                                                        =======          ======= 


              Funded Status Reconcilation                
              Funded status, December 31                 ($839)         ($1,419)
              Unrecognized (gains) losses, net             283            1,035
              Unrecognized prior service cost             (243)            (256)
              Unrecognized transition asset                (56)             (70)
                                                        -------          -------  
              Accrued pension cost                       ($855)           ($710)
                                                        =======          =======
                                                                         
</TABLE>


     Rates used in  determining  the  actuarial  present  value of the projected
     benefit obligation are as follows:
<TABLE>
<CAPTION>
                                                                December 31,
                                                             1998          1997
                                                             ----          ----
     <S>                                                    <C>           <C>
    

      Discount rate                                          6.25%         7.00%
      Rate of increase in future compensation levels         4.50%         5.00%
      Expected long-term rate of return on plan assets       8.00%         8.00%
</TABLE>

                                      F-19
<PAGE>

     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 1998, 1997 and 1996, the Company incurred  expenses
     of approximately $161,000, $175,000, and $135,000 related to this plan.

     The Company offers no other post retirement benefits.

(13)     STOCKHOLDERS' EQUITY
     During 1996, the stockholders  approved adoption of Swiss Army Brands, Inc.
     1996 Stock  Option Plan  providing  for the grant of options to  employees,
     including  officers of the Company,  and members of the Board of Directors.
     Under this plan and previous  stock option plans,  578,593 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 of the Board of Directors,  which  administers  the plan, and for
     options   outstanding  as  of  December  31,  1998,   vesting  ranges  from
     immediately upon grant to three years.

     The following table  summarizes  stock option plan and warrant activity for
     the three years ended December 31, 1998:
<TABLE>
<CAPTION>

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

        Outstanding at December 31, 1995         2,008,125     $  5.25 - $14.50
                                                                                            
        Granted (A)                                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

        Exercised                                     (750)    $  5.25
        Canceled                                   (70,219)    $ 12.25 - $14.00
                                                 ----------
        Outstanding at December 31, 1997         2,241,031     $  5.25 - $14.50

        Granted  (B)                               555,000     $  8.75 - $10.125
        Exercised                                   (9,500)    $  5.25 - $ 8.62
        Canceled                                  (270,780)    $  8.75 - $14.00
                                                 ----------  
        Outstanding at December 31, 1998         2,515,751     $  5.25 - $14.50
                                                 ==========
</TABLE>


     Of the options and warrants outstanding at December 31, 1998, 2,055,125 are
     exercisable at a weighted average option price of $11.94 per share.
 
     (A) 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.

     (B) In  September  1998,  the Company  issued  505,000  options to purchase
     common stock at $8.75 per share to various  employees and  officers.  These
     options  are  exercisable  in four  equal  installments  over  three  years
     starting with the grant date. In November  1998,  the Company issued 50,000
     options to purchase  common  stock at $10.125  per share to two  directors.
     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  granted in 1998 and
     1996 was approximately $3.51 and $5.45, respectively.  The weighted-average
     fair  value  of  the  options  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  4.91%  in 1998  and  6.04% in 1996,
     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 the three  years  ending  December  31,  1998,  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>

                                           1998            1997            1996
                                           ----            ----            ----
                                           (in thousands, except per share data)
      <S>                                <C>             <C>             <C>

       Net income (loss)   As reported:  $1,463         ($4,025)        ($5,265)
                           Pro forma:    $  812         ($5,320)        ($6,386)

       Earnings per share  As reported:
                           Basic          $0.18          ($0.49)         ($0.64)
                           Diluted        $0.18          ($0.49)         ($0.64)

                           Pro forma:
                           Basic          $0.10          ($0.65)         ($0.78)
                           Diluted        $0.10          ($0.65)         ($0.78)
</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.

     In September  1998, the Company issued 25,000 shares of its common stock to
     certain  employees  and  officers.  The  common  stock  vests in four equal
     installments  over three years  beginning  with the grant date. The Company
     recognized $21,000 in stock compensation expense related to this grant.

     On  September  16, 1998,  the  Company's  Board of  Directors  authorized a
     repurchase  of up to 400,000  shares of its common  stock.  At December 31,
     1998, the Company had repurchased 344,000 shares for a total purchase price
     of approximately $3,081,000.

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






                                      F-21
<PAGE>
 
     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.

     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, 1998,  minimum  rental payment  commitments  for office and
     warehouse space leased by Swiss Army under operating leases are, as follows
     (in thousands):
<TABLE>
<CAPTION>
                                   <S>               <C>
                                    1999             $1,345
                                    2000              1,296
                                    2001                828
</TABLE>


     During the years ended December 31, 1998,  1997 and 1996,  rent expense was
     approximately $1,374,000, $1,390,000 and $1,313,000, respectively.


                                      F-22
<PAGE>


     At  December  31,  1998,   the  Company  has  open  contracts  to  purchase
     approximately  55 million  Swiss francs in 1999 as a hedge  against  future
     purchase of inventories. The unrealized gain on these contracts at December
     31, 1998, was approximately $1,00,000.

     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, 1998,  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 $5,360,000. Under the terms of these life insurance policies,
     the Company will make approximate future premium payments,  if the policies
     remain in force, as follows (in thousands):

<TABLE>
<CAPTION>
                                   <S>                  <C>
                                    1999               $   843
                                    2000                   858
                                    2001                   788
                                    2002                   493
                                    2003 and thereafter  2,659
</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 certain 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
     (in thousands):

<TABLE>
<CAPTION>
                                   <S>                        <C>

                                    1999                      $1,115
                                    2000                       1,115
                                    2001                       1,102
                                    2002                       1,102
                                    2003 and thereafter        6,000
</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.






                                      F-23
<PAGE>

     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 deduction in that year
     will depend upon Swiss Army's taxable income,  since Swiss Army is 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.

     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.

     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 court
     found that the  Company  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 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.

     On  July  14,  1997,  the  Company  filed  with  the  American  Arbitration
     Association in New York, New York a demand for arbitration  against Precise
     Imports  Corporation,  the United States and Canadian  distributor of Swiss
     Army  Knives  manufactured  by Wenger  S.A.,  the only  company  other than
     Victorinox supplying  pocketknives to the Swiss Armed Forces. In the demand
     for arbitration,  the Company charged that Precise had violated the license
     agreement  dated June 30, 1992 between Precise and the Company by utilizing
     the trademark Swiss Army in ways prohibited by the agreement.  In response,
     Precise alleged  certain  counterclaims,  including  violations of the 1992
     license  agreement,  anti-trust laws,  unfair  competition  under state and
     federal law, tortious  interference with prospective business relations and
     federal anti-trust violations.  On September 29, 1998, Precise withdrew its
     counterclaim that the Company violated federal  anti-trust law. On November
     7, 1998, Precise and the Company agreed to suspend the arbitration to allow
     the parties 180 days to settle their dispute,  subject to  reactivation  of
     the arbitration by either  company.  After the expiration of the stipulated
     period,  if the  arbitration  has been neither  reactivated  or voluntarily
     dismissed  by the  parties,  all  claims and  counterclaims  alleged in the
     arbitration will be deemed to have been dismissed  with prejudice.   In the
     event  that  the  arbitration  is  reactivated,   the  Company  intends  to
     vigorously  pursue its claims and believes it has  meritorious  defenses to
     Precise's counterclaims. However, the Company cannot predict the outcome of
     any resumed arbitration. In a separate document, Precise agreed tentatively
     to  certain   limitations  on  the  marketing  of  its  products  including
     discontinuation  of the use of "S.A.K." and "The  Genuine  Swiss Army Knife
     Company" in connection with certain products,  and changing the name of its
     internet site, all of which were sought by the Company in the arbitration.

                                      F-24
<PAGE>

     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.

(15)  SEGMENT REPORTING
     The Company  has adopted  SFAS No. 131  "Disclosures  About  Segments of an
     Enterprise and Related  Information." This statement  establishes standards
     for the reporting of information about operating segments.  The information
     for 1997 and 1996 has been restated from the prior year's  presentation  in
     order to conform to the 1998 presentation.

     The  Company  is  engaged  principally  in  one  line  of  business  -  the
     importation and distribution of cutlery, knives,  multi-tools,  watches and
     other  consumer  products.  There  were no  material  amounts  of  sales or
     transactions  among  geographic  areas.  Summarized  financial  information
     concerning the Company's  reportable  segment and geographic areas is shown
     in the following table. The "Other" column includes corporate related items
     and results of insignificant operations.
<TABLE>
<CAPTION>


                United                          
                States          Canada     International      Other       Total
                ------          ------     -------------     -------      ------
<S>           <C>             <C>           <C>           <C>         <C>

1998
----
Sales          $111,107        $8,483        $7,811        $   450     $127,851
Operating
 Income          22,674         1,435           338        (23,470)         977
Identifiable
 Assets          52,998         3,512         4,832         39,062      100,404

1997
----
Sales          $102,413        $8,029        $8,093        $   209     $118,744
Operating
 Income          15,640         1,067           551        (24,173)      (6,915)
Identifiable
 Assets          49,260         3,490         3,905         37,396       94,051

1996
----
Sales          $112,751        $7,405           $9,834     $    40     $130,030
Operating
 Income          17,374           654           1,001      (24,434)      (5,405)
Identifiable
 Assets          56,197         5,193            5,641      31,612       98,643

</TABLE>



                                      F-25

<PAGE>


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

                                                  Quarter Ended
                                        (in thousands, except per share data)
                                        -------------------------------------
                                 March 31    June 30  September 30  December 31
                                 --------    -------  ------------  -----------
 <S>                             <C>        <C>           <C>          <C>

  1998
  ----
  Net sales                       $24,610    $30,187       $31,370      $41,684
  Gross profit                      9,235     11,637        12,690       16,420
  Income before income                 
    taxes                             480        173           806        1,224
  Net income                          286        103           465          609
  Net income per share              $0.03      $0.01         $0.06        $0.08

                                                      
  1997                                 
  Net sales                       $24,215    $28,862       $27,866      $37,801
  Gross profit                      9,020     10,308        10,596       12,800
  Loss before income                   
    taxes                          (1,762)    (1,624)       (1,250)      (1,765)
  Net  loss                        (1,048)      (966)         (775)      (1,236)
  Net loss per share               ($0.13)    ($0.12)       ($0.09)      ($0.15)
</TABLE>

             
     Results for the  quarter  ended June 30,  1997 and  December  31, 1997 were
     impacted by an inventory  write-off and restructuring costs of $300,000 and
     $1,800,000, respectively. See Note 3 for further discussion.

     There was no difference  between basic and fully diluted earnings per share
     for the periods presented above.
















                                      F-26
<PAGE>
<TABLE>
<CAPTION>


                    SWISS ARMY BRANDS, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (in thousands)


        Column A                        Column B      Column C      Column D     Column E

                                                      Additions                         
                                        Balance At    Charged to                Balance At
                                        Beginning     Costs and                   End of 
      Classification                     of Year       Expenses    Deductions      Year
      --------------                    ----------    ----------   ----------   ----------
<S>                                    <C>            <C>           <C>         <C>
Year Ended December 31, 1998:

   Allowance for Doubtful Accounts        $ 975        $ -           $   -         $ 975
                                                                                    
   Inventory Reserve                    $ 2,852        $ -          ($1,689)     $ 1,163
                                                                                
Year Ended December 31, 1997:

   Allowance for Doubtful Accounts      $ 1,032        $ (57)        $   -         $ 975
                                                                   
   Inventory Reserve                    $ 1,950        $ 1,310         (408)      $2,852
                                                                          
Year Ended December 31, 1996:

   Allowance for Doubtful Accounts        $ 975        $ 57          $   -        $1,032
                                                                           
   Inventory Reserve                      $ 918        $ 4,932      ($3,900)      $1,950
                                                                            

</TABLE>


















                                      F-27
<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, 1997.                                        *

     (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 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.                   *

     (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.                                     *


                                       35

<PAGE>


     (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  Forschner  Group, Inc. and Pefran Trap Falls  Associates,  
incorporated  by reference to the Exhibits to Annual Report 
on Form 10-K for the fiscal year ended  December 31, 1990.                   *

     (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
Exhibits 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.                                                           *

                                       36
<PAGE>


     (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.                   *

     (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.            *




                                       37
<PAGE>



     (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.                     *

     (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.                                                    *



                                       38
<PAGE>


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

     (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  toAnnual  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  incorporated  by reference to the 
Exhibits on Form 10-K for the fiscal year ended December 31, 1996.         *

     (XX) Employment  and  Severance Agreement  dated  as  
November 15, 1996 between Thomas D. Cunningham and Swiss Army Brands, 
Inc.  incorporated by reference to the Exhibits on Form 10-K for the 
fiscal year ended December 31, 1996.                                       *


                                       39
<PAGE>


     (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 granted for certain portions of this exhibit)
incorporated  by  reference  to the Exhibits on Form 10-K for the 
fiscal year ended December 31, 1996.                                      *

     (ZZ) Asset  Purchase  Agreement  dated  January 31,  1997 among  
Cuisine de France  Limited,  Sabatier  USA,  LLC,  Robert P. Wolff 
and Robert  Candler incorporated  by reference on Form 10-K for the 
fiscal year ended  December 31, 1996.                                     *

     (AAA) Agreement  dated July 1, 1997 by and between Swiss Army 
Brands,  Inc. and Stanley G. Mortimer III,  incorporated  by 
reference to the Exhibits on Form 10-Q for the fiscal quarter 
ended June 30, 1997.                                                      *

     (BBB)  License  Agreement  dated May 15,  1997 by and  between  
Swiss  Army Brands,  Inc. and St. John Knits,  Inc.,  incorporated  
by reference to the Exhibits on Form 10-Q for the fiscal quarter 
ended June 30, 1997.                                                      *

     (CCC) Letter  Agreement dated September 27, 1996 between Swiss 
Army Brands, Inc. and Victorinox Cutlery Company.                         *

     (DDD)  Agreement  dated December  12,1997 by and between Swiss 
Army Brands, Inc. and Leslie H. Green.                                    *

     (EEE)  Commercial Promissory Note Agreement dated 
December 4, 1997 between Swiss Army Brands, Inc. and Fleet 
National Bank.                                                            *

     (FFF) 1998 Amended and Restated  Commercial  Loan Agreement 
dated September 30, 1998 between Fleet N.A. and Swiss Army, 
incorporated by reference for the fiscal quarter ended 
September 30, 1998.                                                       * 





                                       40
<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.                       

(22) Not Applicable.

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

(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, 1998.




















                                       41

<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 and Chief Executive Officer
 
 
                  By/s/ Thomas M. Lupinski                  
                  Thomas M. Lupinski
                  Senior Vice President, Chief Financial Officer, Secretary, and
                  Treasurer

                  By/s/ Marc A. Gold                                 
                  Marc A. Gold
                  Vice President and Controller
























                                       42
<PAGE>



Date:  March 26,1998


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 26, 1998
J. Merrick Taggart
President, Chief Executive Officer and Director

/s/ A. Clinton Allen                                       March 26, 1998
A. Clinton Allen
Director

/s/ Clarke H. Bailey                                       March 26, 1998
Clarke H. Bailey
Director

/s/ Thomas A. Barron                                       March 26, 1998
Thomas A. Barron
Director

/s/ Vincent D. Farrell, Jr.                                March 26, 1998
Vincent D. Farrell, Jr.
Director

/s/ Herbert M. Friedman                                    March 26, 1998
Herbert M. Friedman
Director

/s/ Peter W. Gilson                                        March 26, 1998
Peter W. Gilson
Director

/s/ Keith R. Lively                                        March 26, 1998
Keith R. Lively
Director

/s/ Louis Marx, Jr.                                        March 26, 1998
Louis Marx, Jr.
Director


/s/ Robert S. Prather, Jr.                                 March 26, 1998
Robert S. Prather, Jr.
Director


                                       43
<PAGE>

/s/ Stanley R. Rawn, Jr.                                   March 26, 1998
Stanley R. Rawn, Jr.
Director

/s/ Eric M. Reynolds                                       March 26, 1998
Eric M. Reynolds
Director

/s/ John Spencer                                           March 26, 1998
John Spencer
Director

/s/ John V. Tunney                                         March 26, 1998
John V. Tunney
Director



































                                       44


<PAGE>