SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

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

       For the fiscal year ended December 31, 1996

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

       For the transition period from ______________  to ______________

                         Commission File Number 0-20769

                           CABLE & CO. WORLDWIDE, INC.
                 (Name of small business issuer in its charter)

        Delaware                                          22-3341195
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                   724 Fifth Avenue, New York, New York 10019
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (212) 489-9686

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

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                          Common Stock, $.01 par value
                                (Title of Class)

                                    Warrants
                                (Title of Class)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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





<PAGE>



Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will 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-KSB or any  amendment to
this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year.   $13,522,166.


The number of shares of Common Stock held by nonaffiliates of the registrant (as
determined for the purpose of this Form 10-KSB only) as of February 28, 1997 was
5,406,468,  with an approximate aggregate market value of $3,125,614 (based upon
the average of the bid and asked  prices of such  shares as of such  date).  The
number of shares of the Common  Stock of the issuer  outstanding  as of February
28, 1997 was 6,618,658.




<PAGE>



                                TABLE OF CONTENTS

                                      Page
                         Item Number and Caption Number

PART I


           Item 1.   Description of Business..................................4
           Item 2.   Description of Properties...............................11
           Item 3.   Legal Proceedings.......................................11
           Item 4.   Submission of Matters to a Vote of Securityholders......11

PART II

           Item 5.   Market for Registrant's Common Equity
                                  and Related Stockholder Matters............12
           Item 6.   Management's Discussion and Analysis of Financial
                                  Condition and Results of Operation.........13
           Item 7.   Financial Statements....................................17
           Item 8.   Changes in and Disagreements with Accountants on
                                  Accounting and Financial Disclosure........17

PART III

           Item 9.   Directors,  Executive Officers,  Promoters and
                                 Control Persons; Compliance with
                                 Section 16(a) of the Exchange Act...........17
           Item 10.  Executive Compensation .................................19
           Item 11.  Security Ownership of Certain Beneficial
                                  Owners and Management......................21
           Item 12.  Certain Relationships and Related Transactions..........22
           Item 13.   Exhibits and Reports on Form 8-K.......................23





                                       -3-

<PAGE>



Item 1.         Description of Business

          Cable & Co.  Worldwide,  Inc.  (the  "Company")  designs,  imports and
markets on a wholesale basis a broad range of men's footwear bearing the Cable &
Co.(R) trademark and Bacco Bucci(R) trademark.  The Company markets its products
to  approximately  1,500  department and specialty store locations in the United
States.  The  Company's  products  are  designed to appeal to fashion  conscious
consumers.  The Company's footwear consists of men's casual and dress shoes. The
Company has licensed the right to use the Bacco Bucci  trademark from D&D Design
and Details Limited ("D&D Design"),  an entity controlled by Alberto Salvucci, a
principal  stockholder of the Company.  In January 1997 Mr. Salvucci was elected
to the board of  directors of the Company and named  Chairman of the Board.  The
retail price of the men's shoes sold under the Cable & Co. trademark ranges from
$150 to $175 for casual shoes and from $190 to $230 for dress shoes.  The retail
price of the men's casual shoes sold under the Bacco Bucci trademark ranges from
$120 to $140.

          The Company believes that its footwear is comfortable, fashionable and
practical. The Company incorporates  technically  sophisticated designs into the
construction  of its  footwear,  which is  intended  to be worn  with  casual or
business  attire.  The Company's  footwear,  consistent  with men's  footwear in
general,  is  less  style-driven  than  women's  footwear.   The  Company  sells
approximately  35 styles of men's  shoes  each  season  bearing  the Cable & Co.
trademark and approximately 20 styles under the Bacco Bucci brand name.

          The Company plans to increase revenues by increasing sales to existing
accounts,  establishing new accounts, developing high quality shoes with styling
and design  detail to sell at  competitive  prices and  expanding  the Company's
marketing  programs and to globalize the brands Cable & Co. and Bacco Bucci. The
Company  intends to increase its marketing to include  direct mail, but does not
intend to do so prior to fiscal 1998.  However,  there can be no assurance  that
the  Company  will do so.  The  Company  intends to  globalize  the sales of its
products  and to lease or acquire  manufacturing  facilities.  The Company  also
intends to explore  opportunities  to license rights to related products such as
belts,  wallets,  accessories  and other small leather goods.  In addition,  the
Company may seek to grant license rights to the Cable & Co. trademark. There can
be no assurance that the Company will be able to achieve such objectives.

          The  Company was formed on  November  10, 1994 to acquire  certain net
assets of Hongson,  Inc. used in the sale and marketing of footwear  bearing the
Cable & Co.  trademark  (the "Acquired Net Assets").  The Company  purchased the
Acquired  Net Assets  effective as of the close of business on December 31, 1994
for a net purchase price of $1,401,787 (the "Acquisition"). The Company acquired
all of the  rights of  Hongson,  Inc.  to use the Cable & Co.  trademark  in the
Western  Hemisphere.  Cable  & Co.  S.R.L.,  an  entity  controlled  by  Alberto
Salvucci,  Chairman  of Board,  a director  and a principal  stockholder  of the
Company,  owns the  rights to use the Cable & Co.  trademark  in Europe  and the
Company  believes  that  International  Hongson,  Inc., an affiliate of Hongson,
Inc., owns the rights to use the Cable & Co. trademark in Asia and that Hongson,
Inc. is no longer doing business. See "- Acquisition."


                                       -4-

<PAGE>




          Prior to the Acquisition,  Alberto Salvucci,  Chairman of the Board, a
director and a principal stockholder of the Company, through Cable & Co. S.R.L.,
identified  raw materials and provided  design and  production  services for the
Cable & Co.  product line of Hongson,  Inc. Mr.  Salvucci,  through  Cable & Co.
S.R.L. and D&D Design,  continues to provide  substantially the same services to
the Company. In addition, Alan Kandall, Chief Operating Officer,  Executive Vice
President,  Treasurer,  Chief  Financial  Officer,  a director  and a  principal
stockholder of the Company, was the chief financial officer of Hongson, Inc. and
David Albahari,  President,  Chief Executive Officer, a director and a principal
stockholder of the Company, was the president of the Cable & Co. product line of
Hongson,   Inc.  See  "-  Acquisition,"   "CERTAIN   RELATIONSHIPS  AND  RELATED
TRANSACTIONS"  and  "SECURITY   OWNERSHIP  OF  CERTAIN   BENEFICIAL  OWNERS  AND
MANAGEMENT."

          The  Company's  principal  executive  office is  located  at 724 Fifth
Avenue, New York, New York 10019, and its telephone number is (212) 489-9686.

Distribution and Wholesale Operations

          The Company's  products are distributed to approximately 700 customers
for  sale  in  approximately   1,500  store  locations  in  the  United  States.
Approximately 42% of the Company's sales were made to four customers,  including
18% to one customer during the year ended December 31, 1996. The Company markets
its  products  to (i) major  department  stores and  specialty  stores,  such as
Bloomingdales,  Dillard Department Stores, Inc., Nordstrom, Inc. and R.H. Macy &
Co., Inc., (ii) upscale specialty  retailers,  such as Saks Fifth Avenue, Lord &
Taylor and Parisian, and (iii) upscale shoe and apparel merchants. Out-of-season
products are sold only through a select channel of distribution.

          The Company's  strategy has been to provide  marketing and  management
support to its  customers by  producing  what  management  believes to be strong
image advertising campaigns. The Company markets its product line and introduces
new styles at industry-wide  footwear shows,  which occur during the year in Las
Vegas and New York,  and at  regional  shows  throughout  the year.  These shows
afford the Company an opportunity to assess demand for its products.  After each
show, the Company's agents and corporate account  specialists visit customers to
review the  Company's  product  lines and to secure  purchase  commitments.  The
Company  also  facilitates  sales  by  offering  what  management  believes  are
creative,  quality  products and maintaining  adequate  inventory  levels of new
products as well as products included in the Company's "open stock" program. The
Company's "open stock" program enables  customers to order  individual  pairs of
shoes  from the  Company's  inventory,  primarily  through  an  electronic  data
interchange system. See "- Management Information Systems."

Design

          The Company  believes that its success will depend in substantial part
on its ability to originate and define  fashion  trends as well as to anticipate
and  react to  changing  consumer  demands  in a  timely  manner.  To meet  this
objective, the Company retains Cable & Co. S.R.L.


                                       -5-

<PAGE>



and D&D Design,  both of which are controlled by Alberto  Salvucci,  Chairman of
the Board,  a director and a principal  stockholder  of the Company,  to provide
design, production and production control services. The process of designing and
introducing  a new  product  takes  approximately  three  to  four  months.  The
Company's  management  works with Cable & Co. S.R.L.  and D&D Design to create a
design  which  they  believe  fits the  Company's  image,  reflects  current  or
approaching  trends and can be manufactured  cost-effectively.  Once the initial
design is complete,  a prototype is developed,  fit trials are conducted and the
prototype is reviewed  and refined  prior to  commencement  of  production.  See
"CERTAIN  RELATIONSHIPS AND RELATED  TRANSACTIONS,"  and "SECURITY  OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."

Manufacturing

          The Company does not own or operate any  manufacturing  facilities and
purchases  its  products  through   independently  owned  manufacturers  located
primarily in Italy. However, the Company plans to lease a manufacturing facility
in  Montegranaro,  Italy  in the  second  quarter  of 1997.  Cable & Co.  S.R.L.
maintains an office in Montegranaro,  Italy and monitors the production, quality
and timely distribution of the Company's products.

          The  footwear  marketed by the Company is produced  primarily in Italy
because management believes that Italian manufacturers can satisfy the Company's
quality  control  requirements.  Approximately  89% of the  dollar  value of its
footwear purchases in 1996 were purchased from three manufacturers in Italy. The
Company  is  generally  the  largest  customer  of these  manufacturers  and has
established long-standing relationships with most of them.

          In advance  of the Fall and  Spring  selling  seasons,  the  Company's
management  works with Cable & Co.  S.R.L.  to develop new products for industry
trade shows and with  manufacturers to determine  production  costs,  materials,
minimum  quantities  and  component   requirements  for  new  styles.  Based  on
indications  of  interest  obtained  at  trade  shows  and  initial   purchasing
commitments  from  retailers,  the  Company  places  production  orders with its
manufacturers. To maintain inventory positions, the Company places manufacturing
orders  prior to  receiving  firm  commitments.  Once an order has been  placed,
delivery  time ranges  from 10 weeks to three  months  depending  on whether the
construction  is new or is  currently  in  production.  The  Company,  primarily
through Cable & Co., S.R.L., monitors product quality through inspections at the
factories throughout the production process and upon receipt. To reduce the risk
of inventory overstocking, the Company monitors sales data on a weekly basis.

Advertising and Marketing

          The  Company  markets  its  products  based on the design and  quality
specifications  of such  products.  The Company  believes  that its  advertising
campaigns  have  resulted  in  increased  sales and  consumer  awareness  of its
products. The Company's  advertisements appear in men's fashion publications and
related general interest  publications,  including GQ, Esquire,  Details,  Cigar
Aficianado, Smoke and Men's Journal. The Company spent approximately $1,352,000


                                       -6-

<PAGE>



on advertising in 1996. In order to strengthen  brand  awareness of its products
and increase sales,  the Company intends to continue to be actively  involved in
the development of marketing and merchandising programs. As part of this effort,
the Company provides cooperative marketing programs,  sales incentives and sales
promotions.

          The Company has an in-house direct "teleservicing" department which is
responsible for maintaining and servicing the Company's  present  customer list,
referring  retail  customers to local retail stores to purchase  advertised  and
non-advertised  products and to provide  product  information.  Currently,  this
function is performed by the Company  during normal  business hours using a toll
free telephone number.

          Substantially  all of the  Company's  footwear  is sold in the  United
States and, to a lesser extent,  in Canada.  In consultation with U.K. Hyde Park
Consultants,  Ltd., the Company  intends to explore the feasibility of marketing
its  footwear  to  countries  in  Central  and  South  America.  See  "EXECUTIVE
COMPENSATION -Employment and Consulting Agreements."

Product Delivery

          Once manufacturing is completed  overseas,  the Company's products are
inspected,  packed and shipped by air and boat to the United States. Thereafter,
the products  are  transported  by truck to an  independent  warehouse  facility
utilized  by the  Company.  The  products  are  then  shipped  to the  Company's
customers. By maintaining  significant inventory positions,  the Company strives
to fill "open stock" customer orders within 72 hours.  While the Company's "open
stock"  program  requires an increased  investment  in  inventories,  management
believes  that it is an important  service for its  customers,  allowing them to
manage inventory levels more effectively.

Management Information Systems

          Information systems are essential to the Company's ability to maintain
its  competitive  position  and  to  support  continued  growth.  The  Company's
management  information  system was  designed  to provide,  among other  things,
comprehensive   order   processing,   production,   accounting   and  management
information  for  the  importing,  distribution  and  marketing  aspects  of the
Company's  business.  The Company has installed an electronic  data  interchange
system  which  provides a computer  link  between the Company and certain of its
wholesale  customers  that enable both the  customer  and the Company to monitor
purchases, shipments and invoicing.

Trademarks

          Cable & Co.(R) is a registered  trademark of the Company in the United
States, Canada and several Central and South American countries.  The registered
trademark includes footwear and related products.  The Company believes that the
Cable  & Co.  trademark  contributes  significantly  in  the  marketing  of  its
products.  In  addition,  a trademark  application  has been filed in the United
States by Alberto Salvucci for Bacco Bucci. However, the trademark registration


                                       -7-

<PAGE>



has not been granted,  and there can be no assurance  concerning when or if such
registration will be effected.

Competition

          Competition  in  the  footwear  industry  is  intense.  The  Company's
products  compete with other branded products within their product category sold
by retailers. In varying degrees depending on the product category involved, the
Company  competes  on the  basis of style,  price,  quality,  comfort  and brand
prestige and recognition, among other considerations.  The Company competes with
numerous  manufacturers,  importers and distributors of footwear and accessories
for the  limited  shelf-space  available  for  displaying  such  products to the
consumer.  Moreover, the general availability of contract manufacturing capacity
allows access by new market  entrants.  The Company believes that its ability to
deliver quality merchandise in a timely manner is a critical competitive factor,
particularly  in connection  with the  introduction  of new product  lines.  The
Company's   ability  to  maintain   existing   relationships   and  develop  new
relationships  with foreign  manufacturers is another  important  element in its
ability to compete.  Some of the Company's competitors are larger, have achieved
greater  recognition for their brand names,  have captured  greater market share
and have  substantially  greater  financial,  distribution,  marketing and other
resources than the Company.

Government Regulation

          Although  the goods sold by the Company are not  currently  subject to
quotas,  countries in which the Company's  products are  manufactured  may, from
time to time, impose new or adjust  prevailing  quotas or other  restrictions on
exported products and the United States may impose new duties, tariffs and other
restrictions  on  imported  products,  any of which could  adversely  affect the
Company's operations and its ability to import its products.  In accordance with
the 1993 Harmonized Tariff Schedule, a fixed duty structure is in effect for the
United  States.  The Company  pays import  duties on its  products  ranging from
approximately 8.5% to 10%, depending on the principal  component and whether the
product is men's or women's footwear.  Other  restrictions on the importation of
footwear  are  periodically  considered  by the United  States  Congress  and no
assurances can be given that tariffs or duties on the Company's goods may not be
raised,  resulting  in  higher  costs  to the  Company,  or that  import  quotas
respecting such goods may not be imposed or made more restrictive.

          The Company imports a large portion of its products from Italy.  Italy
is on the "watch list"  maintained  by the United  States  Trade  Representative
("USTR") for purposes of monitoring  protection of intellectual property rights.
According  to the USTR,  its  consultations  with Italy have  contributed  to an
improved  and  stronger  legal  framework  for the  protection  of  intellectual
property rights.  If the USTR were to determine that Italy's actions,  policies,
or  practices  with  respect to  intellectual  property  rights are  actionable,
sanctions against imports from Italy, including higher duties, could be imposed.



                                       -8-

<PAGE>



Seasonality

          The Company's business is subject to seasonal variations. Historically
in the footwear  industry,  a  significant  portion of the  Company's  sales are
realized  during the spring and fall fashion  seasons,  the Company's  first and
third quarters, respectively, and levels of sales are generally lower during the
winter and summer fashion  seasons,  the Company's  second and fourth  quarters,
respectively.  If the Company's  sales were to be  substantially  below seasonal
norms during the spring and fall fashion  seasons,  the Company's annual results
could be materially  and  adversely  affected.  The Company must make  decisions
regarding  how  much  inventory  to buy well in  advance  of  anticipated  sale.
Deviations in actual from  projected  demand for products  could have an adverse
affect on the Company's sales and profitability.

Backlog

          As of December 31, 1996, the Company had unfilled  customers orders of
approximately  $3,927,000.  The  Company's  backlog is  affected  by a number of
factors,  including  seasonality and customer  purchases of its products through
the Company's  "open stock"  program.  To date, the Company has not  experienced
material returns of its products or material cancellations of orders.

Employees

          As of December  31, 1996,  the Company had 30  full-time  employees of
which 13 were involved in sales and 17 in general management and administration.
In addition,  the Company utilizes the services of 6 independent exclusive sales
agents on a regular  basis.  The Company  believes its success  depends upon its
ability to identify,  hire and retain capable personnel. As there is significant
competition for qualified personnel,  there can be no assurance that the Company
will succeed in recruiting or retaining  suitable staff.  The Company  considers
its  relations  with its  employees,  none of whom  are  covered  by  collective
bargaining agreements, to be excellent.

Insurance

          The  Company   maintains   insurance   coverage   including   workers'
compensation  coverage,  and  liability  insurance  in respect of hazards on the
Company's  business  premises.  The Company carries a general  liability  policy
which  provides for coverage of $1,000,000  per occurrence and $2,000,000 in the
aggregate.

Acquisition

          On January  16,  1995,  the  Company  entered  into an asset  purchase
agreement  (the "Asset  Purchase  Agreement")  providing  for the purchase  from
Hongson,  Inc. of the Acquired Net Assets. The Company  consummated the purchase
of the  Acquired  Net Assets on  February  16,  1995.  However,  the Company was
entitled to all of the income, and responsible for all of


                                       -9-

<PAGE>



the  expenses,  in  connection  with the  Acquired Net Assets as of the close of
business on December  31,  1994.  The net  purchase  price for the  Acquired Net
Assets was  $1,401,787.  The Company  believes that the assets of Hongson,  Inc.
have been  liquidated  and that Hongson,  Inc. is no longer doing  business.  In
connection with the Acquisition, Harry Chen, a principal stockholder of Hongson,
Inc., was issued 266,880 shares of Common Stock for an aggregate  purchase price
of $100.

          As a condition of the Asset Purchase Agreement,  David Albahari,  Alan
Kandall,   Alberto  Salvucci,   Harry  Chen  and  the  Company  entered  into  a
stockholders  agreement  (the  "Stockholders  Agreement")  with respect to their
shares of Common Stock.  Pursuant to the Stockholders  Agreement,  Mr. Salvucci,
Mr. Kandall and Mr. Albahari (the  "Management  Group") agreed not to sell their
shares of Common  Stock for nine  months if the  Company  either  merged with an
entity having a publicly  traded class of  securities  or registered  its shares
under the Securities Act without the consent of the Company's investment advisor
or underwriter,  respectively.  The Management Group also placed an aggregate of
320,256  shares of Common  Stock in escrow  which were not to be released to the
Management Group unless the Company satisfied certain performance  criteria (the
"Escrow Shares").  The Stockholders  Agreement was to expire on the earlier of a
merger of the Company,  the date upon which the Company  consummated the sale of
its securities  pursuant to a registration  statement filed under the Securities
Act or on the fifteenth  anniversary of the Stockholders  Agreement.  In January
1996, the Company terminated the Stockholders  Agreement and released all of the
Escrow Shares to the Management Group, although the terms for the release of the
Escrow Shares had not yet been satisfied.

          In October 1995,  the Company  purchased  all of Mr. Chen's  remaining
interest in the Company,  namely,  266,880  shares of Common  Stock,  and 21,660
shares of  Preferred  Stock which Mr. Chen  purchased  for $250,000 in 1995 as a
part of a private placement of the Company's Series A Preferred Stock (the "1995
Financing").  Of the $400,000  purchase price,  $132,500 was attributable to the
266,880  shares of Common  Stock and  $267,500  was  attributable  to the 21,660
shares of  Preferred  Stock  and the  accrued  dividends  thereon.  The  Company
allocated the $132,500 it paid for Mr. Chen's  266,880 shares of Common Stock to
the net purchase price paid for the Acquired Net Assets in the Acquisition.  See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."




                                      -10-

<PAGE>



Item 2.         Description of Properties

          The  Company,  through  its  wholly-owned  subsidiary  Cable & Company
Enterprises,  Ltd., leases  approximately 4,500 square feet at 724 Fifth Avenue,
New York,  New York at a monthly  base  rental of  $9,750,  which  increases  to
$10,500 per month commencing in May 2000. The lease expires on July 31, 2005 and
the space is  utilized  as the  Company's  executive  office  and  showroom.  In
addition,  the  Company,  through  Cable &  Company  Enterprises,  Ltd.,  leases
approximately  2,800  square  feet of office  space in  Edison,  New Jersey at a
monthly base rental of $4,086,  which amount increases each year of the lease to
a maximum of $4,981 in September 1999. The lease expires on September 30, 2000.


Item 3.         Legal Proceedings

          The Company is not a party to any material pending litigation.


Item 4.         Submission of Matters to a Vote of Securityholders

                None




                                      -11-

<PAGE>



                                     PART II

Item 5.         Market for Common Equity and Related Stockholder Matters.

Market Information

          The Common Stock and Warrants are quoted on the NASDAQ SmallCap Market
under the symbols "CCWW" and "CCWWW," respectively and commenced trading in June
1996. The following table sets forth the range of high and low bid quotations as
reported by The NASDAQ  SmallCap  Market for the Common Stock,  for the quarters
indicated.  The quotations reflect  inter-dealer  prices without retail mark-up,
mark-down or commissions and may not represent actual transactions.

                                  Common Stock
                                                 High                      Low
1996
Second Quarter                                 10 1/2                     8 1/2
Third Quarter                                  11 1/4                     2 1/4
Fourth Quarter                                2 15/16                       3/4
1997
First Quarter                                 1 11/32                      5/16
(through February 28, 1997)



Holders

          As of December  31,  1996,  the Company  had  approximately  58 record
holders of its Common Stock.

Dividends

          The Company has not paid any  dividends  on its Common Stock since its
inception.  The Company has no  intention  of paying any cash  dividends  on its
Common  Stock in the  foreseeable  future,  as it intends to use any earnings to
generate increased growth. The payment by the Company of cash dividends, if any,
in the future rests within the  discretion of its Board of Directors  and, among
other things, will depend upon the Company's earnings,  capital requirements and
financial  condition,  as well as other  relevant  factors.  The Company's  loan
agreements  with Heller  Financial,  Inc.,  prohibit the payment of dividends if
such payment would cause the Company to violate any of the  Company's  financial
covenants.




                                      -12-

<PAGE>



Item 6.         Management's Discussion and Analysis of Financial Condition and
                Results of Operation.

Forward-Looking Statements

          When used in the Form 10-KSB and in future filings by the Company with
the  Securities  and  Exchange  Commission,  the words or phrases  "will  likely
result"  and  "the  Company   expects"  "will   continue,"   "is   anticipated,"
"estimated,"  "project,"  or  "outlook" or similar  expressions  are intended to
identify  "forward-looking   statements"  within  the  meaning  of  the  Private
Securities  Litigation Reform Act of 1995. The Company wishes to caution readers
not to place undue  reliance  on any such  forward-looking  statements,  each of
which  speak only as of the date made.  Such  statements  are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from  historical  earnings and those  presently  anticipated  or projected.  The
Company has no obligation to publicly  release the result of any revisions which
may  be  made  to any  forward-looking  statements  to  reflect  anticipated  or
unanticipated  events  or  circumstances   occurring  after  the  date  of  such
statements.

Net Sales

          The  Company's  net sales for the year ended  December  31,  1996 were
$13,522,166 as compared to net sales of $10,432,926  for the year ended December
31, 1995,  an increase of 29.6%.  The Company  believes that the increase in net
sales for the year ended  December  31, 1996 is  primarily  attributable  to the
increase of net sales of men's  footwear  bearing the Bacco Bucci  trademark and
women's  footwear  bearing  the  Cable & Co.  trademark.  Net sales of the men's
footwear bearing the Bacco Bucci trademark, for the year ended December 31, 1996
was  $3,580,722 as compared to net sales of $524,830 for the year ended December
31, 1995,  an increase of 582.3%,  which is  primarily  due to the fact that the
men's footwear bearing the Bacco Bucci trademark was first introduced during the
fourth  quarter of the year ended  December 31,  1995.  Net sales of the women's
footwear  bearing the Cable and Co.  trademark  for the year ended  December 31,
1996 was $401,081,  which represents the liquidation of the remaining  inventory
of women's footwear,  as compared to net sales of $289,550 for the year December
31, 1995, an increase of 38.5%.  The increase in net sales is also  attributable
to net sales of $64,454 of women's  footwear  bearing the Bacco Bucci trademark.
Net sales of the men's footwear bearing the Cable & Co. trademark was $9,475,909
for the year ended  December 31, 1996,  as compared to  $9,618,546  for the year
ended  December  31,  1995,  a  decrease  of 1.5%.  The  decrease  is  primarily
attributable  to markdowns taken on some styles that were not performing well at
retail.  For the year  ended  December  31,  1996  markdown  sales for the men's
footwear bearing the Cable & Co. trademark was 14.7% of net sales as compared to
10.2% of net sales for the year ended December 31, 1995.

          During the year ended  December  31,  1996,  the  Company  temporarily
suspended the production and marketing of the women's footwear bearing the Cable
& Co. trademark and redirected the Company's production and marketing of women's
footwear into the Bacco Bucci trademark. As of December 31, 1996 the Company has
temporarily suspended the production


                                      -13-

<PAGE>



          and  marketing  of  the  women's  footwear  bearing  the  Bacco  Bucci
trademark. The Company does not plan to reintroduce the women's footwear bearing
either the Cable & Co.  trademark or the Bacco Bucci  trademark  prior to fiscal
1998 in order to focus the Company's  resources on the continued  development of
the Bacco Bucci product line.

Cost of Goods Sold

          The Company's  cost of goods sold for the year ended December 31, 1996
was  $10,211,283 as compared to $6,397,568 for the year ended December 31, 1995,
an  increase of 59.6%.  The Company  believes  that such  increase is  primarily
attributable  to the increase in net sales for the year ended December 31, 1996.
The  Company's  gross profit as a percentage of net sales was 24.5% for the year
ended  December  31, 1996 as compared to 38.7% for the year ended  December  31,
1995. The Company believes that such a decrease is primarily attributable to the
lower  initial  gross  profit  margins on the Bacco Bucci and women's  footwear,
increased freight and manufacturing costs, a decline in the exchange rate of the
lira to the dollar,  an increase in the quantity and size of the markdowns taken
on men's  footwear  bearing  the Cable & Co.  trademark  as well as  substantial
markdowns  in  relation to the  temporary  suspension  of the  women's  footwear
bearing the Cable & Co. trademark.  The decline in the exchange rate of the lira
to the  dollar  created a foreign  currency  transaction  loss of  approximately
$217,000 for the year ended December 31, 1996, as compared to a foreign currency
transaction gain of approximately  $57,000 for the year ended December 31, 1995.
Markdown sales for the men's footwear  bearing the Cable & Co. trademark for the
year ended  December 31, 1996 was 14.7% of net sales as compared to 10.2% of net
sales for the year  December 31, 1995,  yielding a gross profit margin of (5.9%)
and 10.9% respectively.  Markdown sales for the men's footwear bearing the Bacco
Bucci  trademark  for the year ended  December 31, 1996 was 4.0% of net sales as
compared to no markdown sales for the year ended  December 31, 1995,  yielding a
gross margin of 12.7% for the year ended  December 31, 1996.  For the year ended
December 31, 1996,  markdown sales for the women's  footwear bearing the Cable &
Co.  trademark  was 52.0% of net sales as compared to no markdown  sales for the
year ended  December 31,  1995,  yielding a gross margin of (19.8%) for the year
ended  December 31, 1996.  The Company also  believes that the decrease in gross
profit  margin  is  attributable  to a major  pre-season  promotion,  in May and
September 1996, of Cable & Co. men's footwear with a customer at a reduced gross
profit.

Noncash Compensatory Charges

          For the year ended  December  31, 1996 the Company  incurred  non-cash
compensatory charges of $2,811,481.  Of such amount (i) $522,410 is attributable
to  shares  of Common  Stock  issued  pursuant  to an  international  consulting
agreement,  (ii) $1,345,075 is attributable to an aggregate of 320,256 shares of
Common Stock held by Alberto Salvucci, the Company's Chairman of the Board, Alan
Kandall,  the Company's  Chief  Operating  Officer,  Executive  Vice  President,
Treasurer  and Chief  Financial  Officer,  and  David  Albahari,  the  Company's
President and Chief  Executive  Officer,  which shares were released from escrow
pursuant to the Stockholders Agreement, and (iii) $943,996 is attributable to an
aggregate of 224,761 shares of Common Stock issued to Mr. Salvucci,  Mr. Kandall
and Mr. Albahari.


                                      -14-

<PAGE>




Operating Expenses

          The Company's selling and general and administrative  expenses for the
year ended  December  31, 1996 were  $6,617,228,  48.9% as a  percentage  of net
sales,  as compared to selling and general and  administrative  expenses for the
year ended December 31, 1995 of $3,665,370,  35.1% as a percentage of net sales.
The Company believes that the increase in selling and general and administrative
expenses is  primarily  attributable  to  increases  in expenses  related to the
increase in net sales,  including  commissions,  shipping expenses and factoring
costs.  Commissions,  shipping expenses,  and factoring costs for the year ended
December  31,  1996  were  $1,492,212,  11.0%  of  net  sales,  as  compared  to
commissions,  shipping  expenses and factoring costs for the year ended December
31, 1995 of $837,142,  8.0% of net sales. The increase in commissions,  shipping
expenses,  and  factoring  costs  as a  percentage  of net  sales  is  primarily
attributable to an increase in shipping  expenses during the year ended December
31, 1996, which resulted from the termination of the Company's  warehouse lease.
The shipping costs for the year ended December 31, 1996 include higher warehouse
rates in conjunction  with the new warehouse  lease, as well as additional costs
of  approximately  $43,000 for moving the Company's  inventory.  The increase in
commissions, shipping expenses, and factoring costs as a percentage of net sales
is also attributable to increased  commission costs as a result of the launching
of the Bacco Bucci line and the suspension of the women's  footwear  bearing the
Cable & Co.  trademark.  In addition,  management  believes that the increase in
selling and  general and  administrative  expenses is also  attributable  to the
increase in advertising costs. Advertising costs for the year ended December 31,
1996 were  $1,351,976,  10.0% of net sales,  as compared to $629,058,  6% of net
sales for the year ended December 31, 1995. The increase in advertising costs is
attributable  to an  increase  in the  advertising  budget  for the  year  ended
December 31, 1996.  Management  also  believes  that the increase in selling and
general and administrative expenses is also attributable to expenses incurred in
connection  with  severing the Company's  business  with Hongson,  Inc. in 1995,
increased  depreciation  charges of approximately  $119,000 and additional costs
attributable to launching the Bacco Bucci line and the women's  footwear line in
1996,  including  increased  selling expenses and sampling costs, show expenses,
additional  marketing  and  advertising  expenses,   higher  rent  expenses  and
increased factoring costs.

Interest Expense and Bridge Note Discount

          The Company's  interest  expense for the year ended  December 31, 1996
was  $577,579 as compared to interest  expense for the year ended  December  31,
1995 of $429,197,  an increase of 34.6%.  The Company believes that the increase
is primarily  attributable  to an increase in  borrowing  relating to the higher
sales and inventory  levels for the year ended December 31, 1996,  together with
additional  borrowing  attributable  to the  purchase in October 1995 of 266,880
shares of Common  Stock and  21,660  shares  of  Preferred  Stock  from a former
shareholder.  Additionally,  the Company incurred interest expense on the Bridge
Notes payable in the amount of $69,585.

          For the year ended December 31, 1996, the Company incurred a charge of
$738,000 relating to the discount on the Bridge Notes payable.  A total discount
of $738,000 was recorded


                                      -15-

<PAGE>



in February 1996 and was being  amortized  over a 12 month  period.  The Company
repaid the Bridge Notes in June 1996.  Upon  repayment of the Bridge Notes,  the
Company fully amortized the remaining discount.

Liquidity and Capital Resources

          The Company has funded its requirements  for the Acquisition,  working
capital,   capital  expenditures  and  the  purchase  of  stock  from  a  former
shareholder  from  net  cash  provided  through  various  borrowings,  including
borrowings under its credit facility with Heller Financial,  Inc. ("Heller"),  a
$1,800,000 private placement (the "Bridge Financing'),  a public offering of the
Company's  securities  which  resulted  in  gross  proceeds  to the  Company  of
$6,846,950  and an  off-shore  financing  which  resulted  in gross  proceeds of
$2,739,750. As of December 31, 1996, the Company had working capital of $821,292
and a debt to equity ratio of 1.3 to 1.

          The Company's  obligations to Heller include a collateral  installment
note in the  original  principal  amount of  $1,000,000  of which  $500,000  was
outstanding as of December 31, 1996. The collateral  installment note is payable
in 36 monthly installments of $27,777 and bears interest at 3.0% above the prime
rate of Chase  Manhattan  Bank,  N.A.  ("Chase)".  In addition,  the Company may
borrow  from Heller the lesser of 50% of the  Company's  eligible  inventory  or
$2,000,000  (the  "Inventory  Loan").  The Inventory Loan bears interest at 1.5%
above  Chase's  prime rate.  The Company also  finances its accounts  receivable
under a factoring  agreement  with  Heller.  Pre-approved  accounts are factored
without  recourse to the Company and  non-approved  accounts are  factored  with
recourse.  At December 31, 1996,  $690,850 of the $2,034,375 (24.5%) of factored
accounts  receivable,  were factored with recourse.  Heller is entitled to a fee
equal to 1.0% of all accounts receivable purchased. Moreover, advances by Heller
bear interest at rates equal to Chase's prime rate plus 1.0% to 1.5%.  Under the
credit  facility,  all of the  Company's  obligations  to Heller  may not exceed
$6,000,000.

          In March,  1996, the Company  consummated  the Bridge  Financing of 36
units (the  "Units") at a purchase  price of $50,000 per Unit,  $1,800,00 in the
aggregate.  Each  Unit  consisted  of the  Company's  11.0%  Bridge  Note in the
original  principal  amount of $49,000,  5,000  shares of Common Stock and 5,000
Common Stock purchase  warrants (the "Bridge  Warrants").  The Bridge Notes were
repaid in June 1996, with accrued interest, in the amount of $1,833,585 from the
net  proceeds  from the sale of 1,119,500  shares of Common Stock and  1,299,500
Common Stock  purchase  warrants  (the  "Initial  Public  Offering").  The gross
proceeds to the Company from the Initial Public  Offering were  $6,846,950.  The
proceeds  were also  used to redeem  43,327  shares  of the  Company's  Series A
preferred  stock  at a  redemption  price  of  $580,396,  inclusive  of  accrued
dividends.  In conjunction  with the redemption of the Series A preferred stock,
462,531 shares of Common Stock has been issued to the preferred shareholders.

          In November  1996,  the Company  completed an offshore  financing (the
"Offshore  Financing")  offering  whereby the Company issued 3,653 shares of the
Company's  Series B  preferred  stock for a price of $750 per  share.  The gross
proceeds received in such offering was $2,739,750.


                                      -16-

<PAGE>




          During  the  second  quarter  of 1997  the  Company  plans  to lease a
manufacturing  facility  in  Montegranaro,  Italy.  It is  anticipated  that the
Company will expend approximately $200,000 of working capital in connection with
the commencement of operations of the manufacturing facility.

          The Company anticipates acquiring the balance of the worldwide rights,
except for the United  Kingdom and Taiwan,  to the "Cable & Co."  trademark from
Cable & Co. S.R.L.,  in fiscal 1997. It is anticipated  that the cash portion of
the purchase price will be approximately  $1,250,000,  of which $250,000 will be
paid in fiscal 1997. The Company also plans to purchase the rights to the "Bacco
Bucci"  trademark for a purchase  price of $3,000,000 of which  $200,000 will be
paid in fiscal  1997.  The  Company  anticipates  that the cash  portion  of the
purchase  price will be offset by the savings from projected  royalty  payments.
However,  there is not yet a definitive agreement and there can be no assurances
that the Company will acquire such rights.

                The Company  believes that net cash  provided by operations  and
available  borrowings under the Company's credit facility,  should be sufficient
to meet its  anticipated  operating cash  requirements  for at least the next 12
months. However, additional funds may be required for expansion.


Item 7.         Financial Statements.

          See Index immediately following the signature page.


Item 8.         Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure.


          None.


                                    PART III

Item 9.         Directors, Executive Officers, Promoters and Control Persons

Directors and Executive Officers

          The following  table sets forth  certain  information  concerning  the
directors and executive officers of the Company.




                                      -17-

<PAGE>



Name                   Age    Position

Alberto Salvucci       42     Chairman of the Board and Director
Alan Kandall           53     Chief Operating Officer, Executive Vice President,
                              Chief Financial Officer, Treasurer and Director
David Albahari         41     President, Chief Executive Officer and Director
Martin C. Licht        55     Secretary and Director


          The Company's  officers are elected to serve in such capacities  until
the  earlier to occur of the  election  and  qualification  of their  respective
successors or until their  respective  deaths,  resignations  or removals by the
Company's  Board of Directors from such positions.  The Company's  directors are
elected to serve in such  capacities  until the earlier to occur of the election
and  qualification  of their respective  successors or their respective  deaths,
resignations or removals by the Company's stockholders from such positions.  The
Company intends to establish an Audit Committee,  a Stock Option Committee and a
Compensation Committee .

          The following is a brief summary of the  background of each  executive
officer and director:

          Alberto  Salvucci  has been the  Chairman of the Board  since  January
1997. Mr.  Salvucci has been the President of Cable & Co. S.R.L.  since 1988. He
has provided design,  production and production  control services to the Company
since its inception and provided similar services to Hongson, Inc. commencing in
1989 through February 1995.

          Alan  Kandall  has  served  as the  Executive  Vice  President,  Chief
Financial  Officer,  and  Treasurer  of the Company and a member of the Board of
Directors  since its  inception.  In January  1997 Mr.  Kandall  was named Chief
Operating  Officer of the Company.  From April 1993 through  February  1995, Mr.
Kandall  was the Chief  Financial  Officer of Hongson,  Inc.,  which the Company
believes has been liquidated and is no longer doing business.  From June 1992 to
March 1993, Mr.  Kandall was the Chief  Financial  Officer of Publix Corp.  From
January 1992 through May 1992,  Mr. Kandall was the Chief  Financial  Officer of
Orle, Inc. From 1988 through 1991, Mr. Kandall was the Chief  Financial  Officer
of Barbizon Corporation.

          David Albahari has been the President and Chief  Executive  Officer of
the  Company and a member of the Board of  Directors  since its  inception.  Mr.
Albahari  was the  Chairman  of the Board  through  January  1997 at which  time
Alberto  Salvucci  became a director  and  Chairman of the Board.  From May 1989
until February  1995, Mr.  Albahari was the President of the Cable & Co. product
line of Hongson,  Inc., which the Company believes has been liquidated and is no
longer doing business. From 1986 through 1989, Mr. Albahari was President of the
men's footwear division of Kenneth Cole Productions Inc. From 1985 through 1986,
Mr. Albahari served as Vice President Men's of Mark Alpert, a footwear  company.
From 1978  through  1985,  Mr.  Albahari  was employed by Saks Fifth Avenue as a
buyer for men's  footwear,  men's  furnishings and women's  footwear.  From 1976
through 1978 Mr. Albahari was a junior executive at R.H. Macy & Co. and attended
their executive training program.


                                      -18-

<PAGE>




          Martin C. Licht has served as Secretary  and a member of the Company's
Board of Directors since its inception.  He has been a practicing attorney since
1967  and has been a  partner  of the law firm of Lane &  Mittendorf  LLP  since
January 1997. Mr. Licht is also a director of two companies traded on the NASDAQ
SmallCap  Market,  Natural Health Trends Corp., a company that owns and operates
three  vocational  schools  in  Florida  and  is  engaged  in  the  business  of
complementary  medicine,  and Gaylord  Companies,  Inc., a company that operates
retail bookstores and retail stores selling cookware and serving equipment.

Compliance with Section 16(a) of the Exchange Act

          Based solely upon a review of (i) Forms 3 and 4 and amendments thereto
furnished  to the  Company  pursuant  to Rule  16a-3(e),  promulgated  under the
Securities  Exchange  Act of 1934 (the  "Exchange  Act"),  during the  Company's
fiscal year ended  December 31, 1996,  and (ii) Forms 5 and  amendments  thereto
and/or written representations furnished to the Company by any director, officer
or ten percent security holder of the Company (collectively "Reporting Persons")
stating  that he or she was not  required to file a Form 5 during the  Company's
fiscal year ended  December 31, 1996, it has been  determined  that no Reporting
Person is delinquent with respect to his or her reporting  obligations set forth
in Section 16(a) of the Exchange Act, except that no filings were made by U.K.
Midland Group, Ltd.


Item 10.        Executive Compensation

Directors' Compensation

          Directors  of the Company do not receive  any fixed  compensation  for
their services as directors.  However,  the Board of Directors may authorize the
payment of a fixed sum to non-employee directors for their attendance at regular
and  special  meetings  of the  Board as is  customary  for  similar  companies.
Directors  will  be  reimbursed  for  their  reasonable  out-of-pocket  expenses
incurred in  connection  with their duties to the  Company.  For the fiscal year
ended December 31, 1996, the Company did not pay its directors any cash or other
form of  compensation  for acting in such  capacity.  For the fiscal  year ended
December 31, 1996,  directors  who were also  executive  officers of the Company
received cash compensation for acting in the capacity of executive officers. See
" - Executive  Compensation," " - Stock Options" and "CERTAIN  RELATIONSHIPS AND
RELATED TRANSACTIONS."



                                      -19-

<PAGE>



Executive Compensation

                Summary Compensation Table

          The  following   table   provides  a  summary  of  cash  and  non-cash
compensation  for the years ended December 31, 1995 and 1996 with respect to the
following officers of the Company:
 <TABLE>

                                                    Annual Compensation                    Long-Term Compensation
                                          --------------------------------------   ----------------------------------
                                                                                             Awards
                                                                                    ------------------------
                                                                    Other Annual                  Securities
                                                                                    Restricted    Underlying
                                                                                       Stock       Options     LTIP      All Other
   Name and Principal Positions    Year  Salary($)   Bonus($)   Compensation($)(1)    Award(s)($)   SARs(#)  Payouts($) Compensation
<S>                                <C>     <C>      <C>                  <C>            <C>          <C>          <C>           <C>
David Albahari.................... 1996    $200,000 $763,026(2)          --             --           --           --            --
President and Chief Executive      1995     200,000     --               --             --           --           --            --
Officer

Alan Kandall...................... 1996    $150,000 $763,022(2)          --             --           --           --            --
Executive Vice President, Chief    1995     150,000     --               --             --           --           --            --
Financial Officer and Treasurer

</TABLE>

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

(1)       Excludes perquisites and other personal benefits that in the aggregate
          do not exceed 10% of each of such individual's total annual salary and
          bonus.

(2)       Represents  74,921  shares of Common Stock and 74,920 shares of Common
          Stock issued to Mr. Albahari and Mr. Kandall,  respectively,  together
          with 106,752  shares of Common Stock  released from escrow for each of
          Mr. Kandall and Mr. Albahari,  based upon a fair market value of $4.20
          per share which was  ascribed to such shares for  financial  statement
          purposes  on the date of  issuance  and the date of the  release  from
          escrow. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."


Employment and Consulting Agreements

          The Company has entered into employment agreements with David Albahari
and Alan Kandall expiring in December 1997, under which they will receive annual
salaries of $200,000 and $150,000, respectively. The agreements provide that the
executive will be eligible to receive short-term  incentive bonus  compensation,
the amount of which,  if any, will be determined by the Board of Directors based
on the employee's performance, contributions to the Company's success and on the
Company's ability to pay such incentive compensation.  The employment agreements
also provide for termination based on death,  disability,  voluntary resignation
or material failure in performance. The employment agreements do not provide for
severance  payments upon termination  unless the executive is terminated without
cause,  in which case the executive  will receive  severance  payments until the
later of two and a half years from the date of termination or December 31, 1997.
The agreements contain non-competition provisions that preclude Mr. Albahari and
Mr.  Kandall  from  competing  with the Company for a period of one year and two
years from the date of termination of employment, respectively.


                                      -20-

<PAGE>




Stock Options

          No stock  options were  granted to, held or  exercised  by, any of the
Company's  officers  during the fiscal year ended December 31, 1996. The Company
has  adopted the 1996 Stock  Option  Plan under  which up to 280,000  options to
purchase shares of Common Stock may be granted to key employees, consultants and
members of the Board of  Directors of the  Company.  The  exercise  price of the
options will be determined by the Stock Option  Committee  selected by the Board
of  Directors,  but the  exercise  price  will not be less  than 85% of the fair
market  value of the Common  Stock on the date of grant.  No  options  have been
granted to date.


Item 11.          Security Ownership of Certain Beneficial Owners and Management

          The following  table sets forth certain  information  as to the Common
Stock  ownership of each of the Company's  directors,  executive  officers,  all
executive officers and directors as a group and all persons known by the Company
to be the  beneficial  owners of more than five percent of the Company's  Common
Stock.

                                                                     Approximate
Name and Address of                               Number of        Percentage of
Beneficial Owner                                  Shares(1)         Common Stock

David Albahari                                     404,064                6.1%
c/o Cable & Co. Worldwide, Inc.
724 Fifth Avenue
New York, New York  10019

Alan Kandall                                       404,063                6.1%
c/o Cable & Co. Worldwide, Inc.
724 Fifth Avenue
New York, New York  10019

Alberto Salvucci                                   404,063                6.1%
c/o Cable & Co. Worldwide, Inc.
724 Fifth Avenue
New York, New York  10019

Martin C. Licht(2)                                       0                 *
c/o Lane & Mittendorf LLP
320 Park Avenue
New York, New York  10022

All present officers(3)
and directors as a group
  (4 persons)                                    1,212,190               18.3%




                                      -21-

<PAGE>




(1)       Unless  otherwise  noted,  all  persons  named in the table  have sole
          voting  and  dispositive  power  with  respect to all shares of Common
          Stock beneficially owned by them and such persons disclaim  beneficial
          ownership of the securities owned by any other persons.

(2)       Does not include  shares of Common  Stock owned by Mr.  Licht's  three
          adult children. Mr. Licht's three adult children each have sole voting
          and dispositive power with respect to their securities.

*         Represents  less than 1% of the applicable  number of shares of Common
          Stock outstanding.


Item 12.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Alberto Salvucci, a principal  stockholder and recently named director
and Chairman of the Board of the Company,  controls  Cable & Co.  S.R.L.,  which
identifies  raw  material  and sourcing  opportunities  and provides  design and
production services to the Company. The company licenses the right to sell Bacco
Bucci footwear from D&D Design,  which is also controlled by Mr.  Salvucci.  For
fiscal  1995,  the Company  paid D&D Design  $13,000 for the  licensing  fee for
footwear  bearing  the  Bacco  Bucci  trademark,  which  represents  3%  of  the
production cost of Bacco Bucci footwear. Commencing January 1, 1996, the Company
has  agreed  to pay D&D  Design a  licensing  fee of 3% of the net  sales of the
footwear  bearing the Bacco Bucci trademark.  In consideration  for this change,
Cable & Co. S.R.L.  and D&D Design agreed to reduce the rate the Company pays to
Cable & Co. S.R.L. and D&D Design for design and production services. D&D Design
received  $112,000  as  licensing  fees  for  fiscal  1996.  Cable & Co.  S.R.L.
identifies raw material and sourcing  opportunities for the Company and provides
design and production  services.  For such services,  Cable & Co. S.R.L. and D&D
Design received a fee of $436,000 and $556,000, for fiscal 1995 and fiscal 1996,
respectively.  For fiscal  1995,  these fees  represented  7% of the cost of the
goods shipped to the Company.  For fiscal 1996 these fees  represented 8% of the
cost of the goods  shipped to the Company for  footwear  bearing the Cable & Co.
trademark  and 6% of the cost of the goods  shipped to the Company for  footwear
bearing the Bacco Bucci trademark. In addition,  commencing January 1, 1996, the
Company agreed to pay D&D Design a fee for fashion trend  advisory  services for
footwear  bearing  both the Bacco  Bucci and Cable & Co.  trademark.  D&D Design
received a fee of approximately $86,000 for these services for fiscal 1996.

          In February 1995,  Mr.  Albahari,  Mr.  Kandall and Mr.  Salvucci each
purchased  329,143  shares of Common  Stock from the Company  for $50,000  each.
Concurrently,  each entered into a certain Stockholders Agreement which provided
that  106,752 of such shares of Common  Stock were to be held in escrow for each
of Mr.  Albahari,  Mr. Kandall and Mr. Salvucci,  subject to satisfying  certain
performance  criteria.  In January 1996, the Company terminated the Stockholders
Agreement and released such shares of Common Stock to such individuals, although
the  performance  criteria had not yet been  satisfied.  In February  1996,  the
Company  issued an  aggregate  of  224,761  shares of  Common  Stock to  Messrs.
Kandall, Albahari and


                                      -22-

<PAGE>



Salvucci, of which 74,921 shares of Common Stock were issued to Mr. Albahari and
74,920 shares of Common Stock were each issued to Mr. Kandall and Mr. Salvucci.

          Mr. Albahari and Mr. Kandall have guaranteed  certain of the Company's
obligations aggregating  approximately $92,000 for leasing computer hardware and
telephone equipment.

          In February 1995, in connection  with the  Acquisition,  Harry Chen, a
principal  stockholder  of Hongson,  Inc.,  purchased  from the Company  266,880
shares of Common Stock for $100 and 21,660 shares of Preferred Stock in the 1995
Financing for $250,000. In October 1995, the Company purchased all of Mr. Chen's
shares  of  Common  Stock  and  Preferred   Stock  for  $132,500  and  $267,500,
respectively.  In addition,  the Company paid $226,000 to Hongson, Inc. pursuant
to  subleases  for office and  warehouse  space in 1995.  The  Company no longer
leases such space from Hongson, Inc.

          On February 14,  1995,  the Company  entered  into an  agreement  with
Gruntal & Co., Inc. ("Gruntal") pursuant to which Gruntal was to receive $50,000
of financial  advisory  fees in  connection  with the  Acquisition  and the 1995
Financing  and $2,000 per month for rendering  financial  advice for a period of
twelve  months.  Douglas  Kleinberg  was a director  of the  Company  and a Vice
President of Gruntal.  In February 1995,  Gruntal converted $50,000 of financial
advisory  fees in  connection  with the 1995  Financing  into  4,332  shares  of
Preferred  Stock and in February 1996 Gruntal  converted  $26,000 of commissions
received in a 1996  private  placement  into a note in the amount of $25,480 and
2,600 shares of Common Stock and 2,600 warrants.

          The three  adult  children  of Martin C.  Licht,  a partner  of Lane &
Mittendorf LLP, which is the Company's counsel,  the Secretary and a director of
the Company,  purchased  an aggregate of 4,332 shares of Preferred  Stock in the
1995  Financing.  The Company has paid law firms of which Mr. Licht was a member
legal fees of $116,015 for 1995 and $428,408 in 1996.

          Mr.  Salvucci,  Mr. Kandall and Mr.  Albahari may be deemed parents of
the Company as a result of their executive  positions,  service as directors and
ownership  of  approximately  18.3% of the  Common  Stock of the  Company in the
aggregate  and  Messrs.  Salvucci,  Kandall and  Albahari  may be  deemed  to be
promoters.

Item 13.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)    Index to Financial Statements

       1.  Financial Statements

           See Index immediately following the signature page.



                                      -23-

<PAGE>



       2.  Exhibits Included Herein

          See Exhibit Index on page 24 hereof for the exhibits  filed as part of
          this Form 10-KSB.

(b)    Reports on Form 8-K

          The  Company  did not file any  reports on Form 8-K during the quarter
ended December 31, 1996.

(c)    Exhibit Index

Number     Description of Exhibit

2.1   --   Asset Purchase Agreement dated January 16, 1995 between Hongson,
           Inc., as seller and Cable & Co. Worldwide, Inc., as buyer.*
3.1   --   Certificate of Incorporation of the Company, as amended.*
3.2   --   By-Laws of the Company.*
4.1   --   Form of Warrant Agreement between the Company and American Stock
           Transfer & Trust, as warrant agent.*
4.2   --   Specimen Certificate of the Company's Common Stock.*
4.3   --   1996 Stock Option Plan.*
4.4   --   Specimen Certificate of the Company's Warrant.*
4.5   --   Form of Underwriter's Warrants.*
10.1  --   Employment Agreement dated as of January 1, 1995 between the Company
           and David Albahari.*
10.2  --   Employment Agreement dated as of January 1, 1995 between the Company
           and Alan Kandall.*
10.3  --   Agreements between the Company and Heller Financial, Inc.*
10.5  --   Agreement dated as of the 26th day of January 1996 between U.K. Hyde
           Park Consultants, Ltd. and the Company.*
10.6       -- Lease  dated July 28, 1995  between  Raritan  Plaza I  Associates,
           L.P., as landlord, and Cable & Company Enterprises, Ltd., as tenant.*
10.7  --   Lease dated May 16, 1995 between 724 Fifth Avenue Realty Co., as
           landlord, and Cable & Co. Enterprises Ltd., as tenant.*
10.9  --   Agreements between Gruntal & Co., Inc. and the Company.*
10.10 --   Agreement dated May 15, 1996 among D&D Design and Details Limited,
           Pio Alberto Salvucci and Cable & Co. Worldwide, Inc.
21.1  --   List of Subsidiaries.*
27.1  --   Financial Data Schedule.
99.1  --   Cable & Co. Trademark Registration from the United States Patent
           and Trademark Office.*
-------------
* Previously filed with Registration Statement No. 333-3000.



                                      -24-

<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.

Dated: April 14, 1997              CABLE & CO. WORLDWIDE, INC.

                         By:       /s/ David Albahari
                                   --------------------------------------------
                                   David Albahari President and Chief Executive
                                      Officer

                         By:       /s/ Alan Kandall
                                   --------------------------------------------
                                   Alan Kandall  Executive Vice President and
                                   Treasurer, Chief Financial Officer, Chief
                                   Operating Officer


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

         Name                          Title                        Date

/s/ Alberto Salvucci    Chairman of the Board and Director       April 14, 1997
-------------------- 
Alberto Salvucci


/s/ David Albahari      President, Chief Executive Officer       April 14, 1997
--------------------    and Director
David Albahari          


/s/ Alan Kandall        Chief Operating Officer,  Chief          April 14, 1997
--------------------    Financial  Officer, Executive Vice
Alan Kandall            President , Treasurer and Director
                        

/s/ Martin C. Licht     Secretary and Director                   April 14, 1997
-------------------- 
Martin C. Licht





<PAGE>


CABLE & CO. WORLDWIDE, INC.
 AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996




<PAGE>
                                                                             
                                      CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY


                                                   INDEX TO FINANCIAL STATEMENTS
================================================================================









Independent Auditor's Report                                           F-2


Consolidated Financial Statements:

   Balance Sheet                                                       F-3
   Statement of Operations                                             F-4
   Statement of Stockholders' Equity                                   F-5
   Statement of Cash Flows                                             F-6
   Notes to Consolidated Financial Statements                       F-7 - F-16

                                      F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT



To the Board of Directors of
Cable & Co. Worldwide, Inc.


We have  audited  the  accompanying  consolidated  balance  sheet of Cable & Co.
Worldwide,  Inc.  and  Subsidiary  as of  December  31,  1996,  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the two years in the period then ended.  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 consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Cable  & Co.
Worldwide, Inc. and Subsidiary as of December 31, 1996, and the results of their
operations  and their cash  flows for each of the two years in the  period  then
ended in conformity with generally accepted accounting principles.


GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York

February 17, 1997, except for the fourth paragraph of Note 5,
as to which the date is March 18, 1997

                                       F-2


<PAGE>
================================================================================
                                      CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY

                                                      CONSOLIDATED BALANCE SHEET
================================================================================

December 31, 1996
--------------------------------------------------------------------------------

ASSETS (Note 5)
Current Assets:
  Cash                                                              $   153,023
  Accounts receivable, less allowances for doubtful accounts
 and sales discounts of $585,000                                        100,131
  Inventory (Notes 1 and 2)                                           2,741,615
  Prepaid expenses and other current assets                             472,233
  Deferred income tax asset, net of valuation allowance of
 $2,122,000 (Note 13)                                                        --

--------------------------------------------------------------------------------
      Total current assets                                            3,467,002

Property and Equipment, net (Notes 1, 3 and 9)                          979,148
Trademark and Trade Name, net of accumulated amortization
 of $117,193 (Note 1)                                                 1,054,744
Other Intangible Assets, net of accumulated amortization
of $25,701(Note 1)                                                       17,608
Other Assets                                                              7,015

================================================================================
      Total Assets                                                  $ 5,525,517
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Due to factor (Note 5)                                            $   728,925
  Accounts payable                                                      898,662
  Accrued expenses and other current liabilities (Notes 4 and 12)       652,814
  Current portion of note payable (Note 6)                              333,336
  Current portion of capital lease obligations (Notes 3 and 7)           31,973

--------------------------------------------------------------------------------
      Total current liabilities                                       2,645,710

Note Payable - net of current portion (Note 6)                          166,664
Capital Lease Obligations - net of current portion (Notes 3 and 7)      100,906

Deferred Rent (Note 8)                                                   75,472
Deferred Income Tax Liability (Note 13)                                  53,000

--------------------------------------------------------------------------------
      Total liabilities                                               3,041,752
--------------------------------------------------------------------------------

Commitments and Contingencies (Note 8)

Stockholders' Equity (Note 10):
  Preferred  stock - Series B - $.01 par  value; authorized 
   1,500,000 shares, issued 3,653 shares (liquidation
   preference $3,653,000)                                                    37
  Common stock - $.01 par value; authorized 10,000,000
   shares, issued and outstanding 3,394,237 shares                       33,942
  Additional paid-in capital                                         10,109,649
  Treasury stock - 20,000 common shares, at cost                        (18,053)
  Accumulated deficit                                                (7,641,810)

--------------------------------------------------------------------------------
      Stockholders' equity                                            2,483,765
--------------------------------------------------------------------------------

      Total Liabilities and Stockholders' Equity                    $ 5,525,517
================================================================================
                                  See Notes to Consolidated Financial Statements
                                       F-3
<PAGE>
                                                          
===============================================================================
                                      CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY

                                            CONSOLIDATED STATEMENT OF OPERATIONS
================================================================================

Year ended December 31,                                1996                 1995
--------------------------------------------------------------------------------

Net sales                                      $13,522,166          $10,432,926

Cost of goods sold (Note 12)                    10,211,283            6,397,568
--------------------------------------------------------------------------------

Gross profit                                     3,310,883            4,035,358

Noncash compensatory charges (Notes 1 and 10)   (2,811,481)                  --

Selling expenses (Note 1)                       (4,217,605)          (2,255,874)

General and administrative expenses (Note 1)    (2,441,082)          (1,443,798)

Commission income                                   41,459               34,302
--------------------------------------------------------------------------------

Income (loss) from operations                   (6,117,826)             369,988

Interest expense (Notes 5, 6 and 7)                577,579              429,197

Bridge note discount (Note 10)                     738,000                   --
--------------------------------------------------------------------------------

Loss before provision for income taxes          (7,433,405)             (59,209)

Provision for income taxes (Note 13)                24,900               43,900
--------------------------------------------------------------------------------

Net loss                                        (7,458,305)            (103,109)

Dividends on preferred stock (Note 10)              27,248               53,148

================================================================================
Net loss applicable to common stock            $(7,485,553)         $  (156,257)
===============================================================================

Net loss per common share (Note 1)             $     (2.79)         $      (.08)
===============================================================================

Weighted average number of common
 shares outstanding (Note 1)                     2,682,820            2,023,486
================================================================================
                                  See Notes to Consolidated Financial Statements

                                      F-4
<PAGE>
<TABLE>
====================================================================================================================================
                                      CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY

                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
====================================================================================================================================

Years ended December 31, 1996 and 1995
------------------------------------------------------------------------------------------------------------------------------------

                                                     Preferred Stock                Common Stock              Additional
                                                     Number                     Number                         Paid-in
                                                   of Shares      Amount       of Shares       Amount          Capital
----------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>           <C>        <C>          <C>             <C>
Issuance of common stock ................           --             --        1,254,309    $     12,543    $    137,557

Purchase and retirement of common stock
 and preferred stock dividends (Note 10)            --             --         (266,880)         (2,669)       (147,331)

Issuance of common stock in connection
 with term loan payable .................           --             --           20,016             200           9,808

Net loss ................................           --             --             --              --              --

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

Balance at December 31, 1995 ............           --             --        1,007,445          10,074              34

Issuance of common stock and warrants
 to purchase common stock (Note 10) .....           --             --          400,000           4,000       1,721,000

Deferred consulting costs (Note 10) .....           --             --             --              --        (1,685,000)

Amortization of deferred consulting costs
 (Note 10) ..............................           --             --             --              --           522,410

Release of escrow shares (Note 10) ......           --             --             --              --         1,345,075

Issuance of common stock (Note 10) ......           --             --          224,761           2,248         941,748

Issuance of common stock and warrants in
 private placement (Note 10) ............           --             --          180,000           1,800        (192,800)

Discount on bridge notes (Note 10) ......           --             --             --              --           738,000

Issuance of common stock and warrants in
 initial public offering (Note 10) ......           --             --        1,119,500          11,195       4,673,318

Issuance of common stock upon redemption
 of preferred stock - Series A ..........           --             --          462,531           4,625          (4,625)

Issuance of preferred stock - Series B ..          3,653         $   37           --              --         2,050,489

Purchase of treasury stock ..............           --             --             --              --              --

Cash dividend preferred stock - Series A            --             --             --              --              --

Net loss ................................           --             --             --              --              --

------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 ............          3,653         $   37      3,394,237    $     33,942    $ 10,109,649

====================================================================================================================================
                                  See Notes to Consolidated Financial Statements
<PAGE>

                                                       Treasury Stock                            Stock-
                                                Number                         Accumulated       holders'
                                              of Shares          Amount         Deficit          Equity
                                              -------------------------------------------------------------

<S>                                                <C>            <C>             <C>          <C>
Issuance of common stock ................           --             --              --      $    150,100

Purchase and retirement of common stock
 and preferred stock dividends (Note 10)            --             --              --          (150,000)

Issuance of common stock in connection
 with term loan payable .................           --             --              --            10,008

Net loss ................................           --             --      $   (103,109)       (103,109)

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

Balance at December 31, 1995 ............           --             --          (103,109)        (93,001)

Issuance of common stock and warrants
 to purchase common stock (Note 10) .....           --             --              --         1,725,000

Deferred consulting costs (Note 10) .....           --             --              --        (1,685,000)

Amortization of deferred consulting costs
 (Note 10) ..............................           --             --              --           522,410

Release of escrow shares (Note 10) ......           --             --              --         1,345,075

Issuance of common stock (Note 10) ......           --             --              --           943,996

Issuance of common stock and warrants in
 private placement (Note 10) ............           --             --              --          (191,000)

Discount on bridge notes (Note 10) ......           --             --              --           738,000

Issuance of common stock and warrants in
 initial public offering (Note 10) ......           --             --              --         4,684,513

Issuance of common stock upon redemption
 of preferred stock - Series A ..........           --             --              --              --

Issuance of preferred stock - Series B ..           --             --              --         2,050,526

Purchase of treasury stock ..............         20,000   $    (18,053)           --           (18,053)

Cash dividend preferred stock - Series A            --             --           (80,396)        (80,396)

Net loss ................................           --             --        (7,458,305)     (7,458,305)

-----------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 ............         20,000   $    (18,053)   $ (7,641,810)   $  2,483,765

===========================================================================================================
</TABLE>
                                  See Notes to Consolidated Financial Statements

                                       F-5
<PAGE>
<TABLE>
====================================================================================================================================
                                      CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY

                                            CONSOLIDATED STATEMENT OF CASH FLOWS
====================================================================================================================================
Year ended December 31,                                                                      1996                 1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                 <C>
Cash flows from operating activities:
  Net loss                                                                            $(7,458,305)        $   (103,109)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                         225,403              106,062
    Provision for doubtful accounts and sales discounts                                   484,875              100,125
    Provision for deferred income taxes                                                    24,900               28,100
    Noncash compensatory charges                                                        2,811,481                   --
    Noncash interest expense                                                                   --               10,008
    Amortization of discount on bridge notes                                              738,000                   --
    Changes in operating  assets and  liabilities,  net of effect of purchase of
     the Cable & Company product line (Note 1):
      (Increase) decrease in accounts receivable                                           65,534             (744,285)
      (Increase) decrease in inventory                                                    136,467           (1,208,200)
      (Increase) decrease in prepaid expenses and other current assets                    171,213             (615,446)
      Increase in intangibles                                                                (963)             (42,345)
      Increase in other assets                                                                 --               (7,015)
      Increase (decrease) in accounts payable                                            (367,461)             117,814
      Increase (decrease) in accrued expenses and other current liabilities              (118,712)             771,526
      Increase (decrease) in income taxes payable                                         (14,300)              14,300
      Increase in deferred rent                                                            30,090               45,382
------------------------------------------------------------------------------------------------------------------------------------
        Net cash used in operating activities                                          (3,271,778)          (1,527,083)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Purchase of property and equipment                                                     (281,103)            (716,462)
  Purchase of Cable & Company product line                                                     --           (1,401,787)
------------------------------------------------------------------------------------------------------------------------------------
        Cash used in investing activities                                                (281,103)          (2,118,249)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Advances from (payments to) factor, net                                              (1,796,746)           2,199,568
  Net proceeds from issuance (repayment) of short-term note                              (130,000)             130,000
  Principal payments under capital lease obligations                                      (27,617)              (9,659)
  Net proceeds from issuance of (principal payments on) long-term note payable           (333,333)             833,333
  Net proceeds from issuance (redemption) of redeemable
   preferred stock Series A                                                              (500,000)             750,000
  Net repayment on bridge notes financing                                                (227,000)                  --
  Proceeds from issuance of common stock and warrants                                      36,000                   --
  Net proceeds from issuance of common stock                                            4,724,513                   --
  Net proceeds from issuance of preferred stock                                         2,050,526              150,100
  Purchase and retirement of stock                                                             --             (400,000)
  Purchase of treasury stock                                                              (18,053)                  --
  Cash dividend paid - preferred stock Series A                                           (80,396)                  --
------------------------------------------------------------------------------------------------------------------------------------
        Net cash provided by financing activities                                       3,697,894            3,653,342
------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash                                                                      145,013                8,010
Cash at beginning of year                                                                   8,010               - 0 -
====================================================================================================================================
Cash at end of year                                                                   $   153,023         $      8,010
====================================================================================================================================

Supplemental  disclosures  of cash flow  information: 
  Cash paid during the year for:
    Interest                                                                          $   580,174         $    419,189
====================================================================================================================================
    Income taxes                                                                      $    27,036         $      1,400
====================================================================================================================================

Supplemental schedule of noncash investing and financing activities:
  Equipment purchased under capital lease obligations                                 $        --         $    170,155
====================================================================================================================================
</TABLE>
                                  See Notes to Consolidated Financial Statements

                                       F-6
<PAGE>
===============================================================================
                                     CABLE & CO. WORLDWIDE, INC. AND SUBSIDIARY

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================

  1.  SUMMARY OF SIGNIFICANT  Cable & Co. Worldwide, Inc. ("Cable"),  which was 
      ACCOUNTING POLICIES AND incorporated November 10, 1994, is an importer and
      PRINCIPAL BUSINESS      wholesaler of men's shoes.  Sales are made primar-
      ACTIVITY:               ily to  major  department and  specialty  stores  
                              located in  the United  States.  The Company was 
                              inactive  until January 1, 1995.
                              
                              The accompanying consolidated financial statements
                              include the accounts of Cable and its wholly owned
                              subsidiary,  Cable  &  Company  Enterprises,  Ltd.
                              (collectively  referred to as the "Company").  All
                              intercompany  accounts and transactions  have been
                              eliminated in consolidation.

                              The  financial  statements  have been  prepared in
                              conformity  with  generally  accepted   accounting
                              principles  which  require the use of estimates by
                              management.

                              Effective January 1, 1995,  pursuant to a purchase
                              agreement  dated  January  16,  1995,  the Company
                              acquired  the  Cable  &  Company  product  line of
                              Hongson,    Inc.   ("Hongson")   in   a   business
                              combination  accounted  for  as  a  purchase.  The
                              Company  acquired  assets  with  a fair  value  of
                              $3,187,714 and assumed liabilities of $2,957,864.

                              The assets acquired and liabilities assumed are as
                              follows:

                              Assets acquired:
                                Accounts receivable                   $1,489,832
                                Inventory                              1,669,882
                                Miscellaneous receivables                 28,000

--------------------------------------------------------------------------------
                                                                       3,187,714
--------------------------------------------------------------------------------

                              Liabilities assumed:
                                Accounts payable                       1,148,309
                                Amount due to factor                   1,809,555

--------------------------------------------------------------------------------
                                                                       2,957,864
--------------------------------------------------------------------------------

                                     Net operating assets acquired    $  229,850
================================================================================

                              The total purchase price was $1,401,787  including
                              $151,787 of acquisition  costs. The cost in excess
                              of the  fair  value  of the net  operating  assets
                              acquired   amounting   to   $1,171,937   has  been
                              allocated entirely to trademark and trade name and
                              is being  amortized  by the  straight-line  method
                              over 20 years.  The fair value of the other assets
                              acquired  such  as  promotional   and  advertising
                              materials  along  with the  original  artwork  and
                              plates,  customer list,  dies and molds,  software
                              and programs,  and trade show booth was de minimis
                              and  consequently  no value has been  assigned  to
                              them.

                              At the  time  of  the  acquisition  of  the  Cable
                              product  line of Hongson the  stockholders  of the
                              Company,   including  the  Company's   management,
                              entered    into    a    stockholders'    agreement
                              ("Stockholders'  Agreement") with respect to their
                              shares   of   common   stock.   Pursuant   to  the
                              Stockholders'  Agreement, the Company's management
                              placed an  aggregate  of 320,256  shares of common
                              stock in escrow.  In  January  1996,  the  Company
                              terminated   the   Stockholders'   Agreement   and
                              released  all of the shares  held in escrow.  As a
                              result of this release, the Company 
                                      F-7
<PAGE>

                              has recorded a noncash  compensatory charge in the
                              amount of $1,345,075.

                              At each balance  sheet date the Company  evaluates
                              the period of amortization  of intangible  assets.
                              The  factors  used in  evaluating  the  period  of
                              amortization   include:   (i)  current   operating
                              results,  (ii) projected future operating results,
                              and (iii) any other  material  factors that effect
                              the continuity of the business.

                              Revenue is recognized when merchandise is shipped.

                              Inventory   is   stated   at  the  lower  of  cost
                              (first-in, first-out method) or market.

                              Depreciation of property and equipment is provided
                              for by the straight-line method over the estimated
                              useful  lives  of  the  assets.   Amortization  of
                              leasehold  improvements  is  provided  for  by the
                              straight-line   method   over  the  terms  of  the
                              respective leases.

                              Intangible  assets consisting of debt issue costs,
                              trademarks,  at cost, and  organization  costs are
                              amortized using the straight-line method over 3 to
                              15 years.

                              Foreign currency transaction (losses) and gains of
                              approximately $(217,000) and $57,000 for the years
                              ended  December  31, 1996 and 1995,  respectively,
                              are included in cost of goods sold.

                              Advertising  costs are  charged to  operations  as
                              incurred.  Total advertising expense for the years
                              ended December 31, 1996 and 1995 was approximately
                              $1,352,000  and  $629,000,  respectively,  and  is
                              included in selling expenses.

                              Included in general and administrative expenses is
                              moving  expense of  approximately  $84,000 for the
                              year ended  December  31, 1995,  which  relates to
                              expenses   incurred  to  relocate  the   Company's
                              office, showroom and warehouse.

                              Net  loss  per  common  share  is   calculated  by
                              dividing net loss by the weighted  average  number
                              of shares of common stock outstanding. Pursuant to
                              Securities   and   Exchange    Commission    Staff
                              Accounting Bulletin No. 83, shares of common stock
                              issued  during the 12-month  period  preceding the
                              date of the filing of a Registration Statement for
                              an initial public offering ("IPO") at prices below
                              the IPO price,  including the shares released from
                              escrow as discussed  above,  have been included in
                              the weighted average number of shares  outstanding
                              since inception.

                              Management  does not  believe  that  any  recently
                              issued,   but   not  yet   effective,   accounting
                              standards  if  currently   adopted  would  have  a
                              material  effect  on  the  accompanying  financial
                              statements.


  2.  INVENTORY:              Inventory consists of the following:

                              Raw materials                     $   35,683
                              Finished goods                     2,705,932
================================================================================
                                                                $2,741,615
================================================================================
                                      F-8
<PAGE>

   3.  PROPERTY AND EQUIPMENT:  Property and equipment, at cost, consists of the
                                following:
                                                                     Estimated
                                                                    Useful Life
-------------------------------------------------------------------------------

             Leasehold improvements               $  292,100       Term of lease
             Furniture and fixtures                   70,659            10 years
             Computer and office equipment           559,282       4 to 10 years
             Display booth                           227,550            10 years
             Shoe molds                               18,129             3 years
--------------------------------------------------------------------------------
                                                   1,167,720
             Less accumulated depreciation
              and amortization                      (188,572)
================================================================================
                                                  $  979,148
================================================================================


                              Depreciation and amortization  expense amounted to
                              $153,927 and $34,645 for the years ended  December
                              31, 1996 and 1995, respectively.

                              Property and equipment  includes  assets  acquired
                              under  capital  leases  amounting  to $170,155 and
                              related accumulated depreciation of $26,466.


  4.  ACCRUED                 Accrued expenses and other current liabilities 
      EXPENSES AND            consist of the following:
      OTHER                   
      CURRENT                 Accrued inventory purchases          $433,987
      LIABILITIES:            Accrued professional fees              94,830
                              Other current liabilities             123,997
                              
================================================================================
                                                                   $652,814
================================================================================


  5.  DUE TO FACTOR:          The Company finances all accounts receivable under
                              an agreement  with a factor.  Certain  preapproved
                              accounts  receivable are factored on a nonrecourse
                              basis.  Nonapproved  accounts  are  factored  with
                              recourse.  Under the terms of this agreement,  the
                              Company  is  advanced  funds  against  receivables
                              assigned to the factor and additional  funds which
                              are  collateralized by inventory and substantially
                              all other  assets.  These  advances may not exceed
                              $6,000,000.   The   factor  is   responsible   for
                              servicing the factored receivables and charges the
                              Company  a fee on the net cash  advances  equal to
                              the prime rate (8.25% at December  31,  1996) plus
                              1% to 1.5%  per  annum,  plus  additional  fees of
                              1.00% of the gross amount of receivables  serviced
                              by the factor.

                              The factoring  agreement  contains  covenants that
                              require  the  Company  to meet  certain  financial
                              ratios  and  maintain  certain  levels of  working
                              capital and net worth.

                              The  fair  value  of  the  amount  due  to  factor
                              approximates   the  carrying  amount  due  to  the
                              short-term nature of the instrument.

                              At  December  31,  1996,  the  Company  was not in
                              compliance  with certain  covenants.  On March 18,
                              1997, the factor amended and/or waived  compliance
                              with these covenants.  Compliance with the amended
                              covenants  will be  measured  at various  dates in
                              1997  commencing  September 30, 1997.  The Company
                              anticipates that it will be in compliance with the
                              amended  covenants at the  respective  measurement
                              dates.
                                      F-9
<PAGE>


                              Due to factor consists of:

                              Outstanding accounts receivables assigned to
                               factor without recourse              $ 1,343,523
                              Cash advances from factor              (2,072,448)

================================================================================
                                                                    $   728,925
================================================================================


  6.  NOTE PAYABLE:           The note payable  represents an  installment  note
                              payable to the factor  with  interest at the prime
                              rate plus 3% and is subject to the same collateral
                              and covenants as the factoring agreement.

                              Maturities are as follows:

                              Year ending December 31,

                                          1997                          $333,336
                                          1998                           166,664
--------------------------------------------------------------------------------
                                                                  
                                                                         500,000
                              Less current portion                       333,336
                                                                  
================================================================================
                                    Long-term portion                   $166,664
================================================================================
                                                           

                              Because the  interest  rate adjusts with the prime
rate, the fair value of the note payable approximates the carrying amount.


  7.  CAPITAL LEASE           The Company  acquired  equipment under leases that
      OBLIGATIONS:            have been  accounted for as capital leases.

                              Minimum future lease payments are as follows:

                              Year ending December 31,

                                          1997                          $ 50,159
                                          1998                            49,314
                                          1999                            45,096
                                          2000                            27,522
--------------------------------------------------------------------------------
                                                                         172,091
                              Less amount representing interest           39,212
--------------------------------------------------------------------------------

                              Present value of minimum lease payments    132,879
                              Current portion                             31,973

================================================================================
                                    Long-term portion                   $100,906
================================================================================


                              Certain leases are guaranteed by two stockholders.
At December 31, 1996, guarantees approximated $92,000.
                                      F-10
<PAGE>


   8.  COMMITMENTS AND        The  Company  leases  office  and  showroom facil-
       CONTINGENCIES:         ities  under  noncancelable operating leases.  The
                              leases provide for  escalation  based on increases
                              in  real   estate   taxes  and   other   expenses.
                              Additionally,  the Company leases  equipment under
                              noncancelable  operating  leases.  Future  minimum
                              aggregate annual rental payments are as follows:

                              Year ending December 31,

                                          1997                   $  173,903
                                          1998                      181,782
                                          1999                      181,782
                                          2000                      171,704
                                          2001                      126,000
                                       Thereafter                   451,500

================================================================================
                                                                 $1,286,671
================================================================================


                              Rent  expense  charged to  operations  under these
                              leases  amounted  to  approximately  $187,000  and
                              $67,000 for the years ended  December 31, 1996 and
                              1995, respectively.

                              Rent expense recognized annually differs from rent
                              paid  as  a  result  of  free  rent   periods  and
                              scheduled  rent  increases  provided  for  in  the
                              office  and  showroom  leases.  Accordingly,   the
                              Company has recorded  deferred  rent of $75,472 at
                              December  31,  1996,  which  will  be  charged  to
                              operations over the term of the leases.

                              The  Company  has a letter of credit line with the
                              factor up to a maximum of  $750,000.  At  December
                              31, 1996, the Company has  outstanding  letters of
                              credit in the  amount  of  $342,000,  $200,000  of
                              which  is  serving  as   collateral   for  foreign
                              currency  contracts  and  $142,000  is  serving as
                              collateral for lease security deposits. Management
                              does not expect any material losses to result from
                              the    off-balance-sheet    instruments    because
                              performance is not expected to be required.

                              The Company enters into foreign  currency  forward
                              contracts to manage foreign currency exchange risk
                              associated with inventory purchases denominated in
                              Italian lira. The contracts are recorded at market
                              value and any gains and  losses  are  included  in
                              operations.  At December 31, 1996, the Company has
                              open  foreign   currency   contracts  to  purchase
                              5,783,718,216 Italian lira for $3,761,375 expiring
                              at various  dates from January 2, 1997 to June 30,
                              1997. These financial instruments may give rise to
                              off-balance-sheet risk. Risks arise from potential
                              counterparty  nonperformance  and from  changes in
                              the market value of the underlying currency.

                              The Company has entered into employment agreements
                              with its president and  executive  vice  president
                              through December 31, 1997 that provide for minimum
                              annual salaries and incentive  bonus  compensation
                              based upon the performance of the employee and the
                              Company. The agreements also provide for severance
                              due to termination  without  cause,  in which case
                              the employee will receive severance payments until
                              December 31, 1997. At December 31, 1996, the total
                              commitment, excluding incentives, was $350,000.

                                   F-11<PAGE>


   9.  RETIREMENT             The Company has a defined  contribution plan under
       PLAN:                  Section  401(k)  of  the  Internal  Revenue  Code,
                              wherein  qualified   employees  may  contribute  a
                              percentage of their pretax  eligible  compensation
                              to  the  plan.   The  Company  may  make  matching
                              contributions  at the  discretion  of the board of
                              directors.  No Company  contributions were made to
                              the plan for the years ended December 31, 1996 and
                              1995.                                             
                              
                              An officer and the corporate  controller  serve as
                              trustees of the plan.


10.   STOCKHOLDERS' EQUITY:   In October 1995, the Company  repurchased  266,880
                              shares of its  common  stock for  $132,500.  These
                              shares were then retired. In addition, the Company
                              repurchased  and  retired  21,660  shares  of  its
                              redeemable   preferred  stock  for  $250,000  plus
                              $17,500 of accrued dividends.

                              In October 1995,  the Company issued 20,016 shares
                              of common  stock  valued at $10,008 in  connection
                              with  receipt of  $130,000  for  signing a 9% term
                              note  payable  to  a  stockholder.  The  note  and
                              interest of $3,900 were paid in February 1996 (see
                              below).

                              In  January  1996,  the  Company  entered  into  a
                              three-year international consulting agreement with
                              U.K. Hyde Park Consultants, Ltd. ("Hyde Park"). In
                              addition,  Hyde Park  purchased  400,000 shares of
                              common  stock  and  warrants  to  purchase  up  to
                              450,000  shares of common  stock for a note in the
                              amount of $40,000,  which was subsequently paid in
                              March 1996.  The  warrants  are  identical  to the
                              warrants issued in conjunction  with the March 28,
                              1996 private placement (see below).

                              The  Company  has  valued  these  shares of common
                              stock and  warrants to  purchase  shares of common
                              stock at $1,725,000.  The difference  between this
                              amount and the repurchase price of $40,000 will be
                              recognized  ratably  as  a  noncash   compensatory
                              charge over the life of the agreement.

                              On  January  26,  1996,  the  board  of  directors
                              increased  the number of  authorized  shares  from
                              80,000 to 1,500,000 for  preferred  stock and from
                              120,000  to  10,000,000   for  common  stock.   In
                              conjunction   with  the   increase,   the  Company
                              effected  a  26.688-for-1  stock  split  effective
                              January   26,   1996.   All   references   in  the
                              consolidated  financial  statements  to  number of
                              shares   and   per   share   amounts   have   been
                              retroactively  restated to reflect  the  increased
                              number of shares of  preferred  and  common  stock
                              authorized, issued and outstanding.

                              In  February  1996,  the  Company  issued  224,761
                              shares of common  stock to existing  stockholders.
                              In connection  with the issuance,  a  compensation
                              charge of $943,966 ($4.20 per share) was recorded.

                              On March 28, 1996, the Company completed a private
                              placement,  whereby  it issued 36 units at a price
                              of  $50,000  per unit.  Each unit  consisted  of a
                              $49,000  promissory  note,  5,000 shares of common
                              stock and a warrant to purchase up to 5,000 shares
                              of common stock, subject to adjustment, as defined
                              at an  exercise  price of  $7.20  per  share.  The
                              promissory  notes,  aggregating  $1,764,000,  bore
                              interest  at an  annual  rate of 11% and  were due
                              upon  the  earlier  of  12  months  from  date  of
                              issuance  or  the   Company's   receipt  of  gross
                              proceeds of at least  $4,080,000  from the sale of
                              its debt and/or  equity  securities in a public or
                              private  financing.  The warrants are  exercisable
                              over a 3-year  period,  commencing  13 months from
                              date  of   issuance.   Upon  the  closing  of  the
                              Company's  IPO,  the  terms of the
                                      F-12
<PAGE>

                              warrants  were  adjusted  to be  identical  to the
                              terms of the warrants  issued in conjunction  with
                              the IPO (see  below).  Net  proceeds  received  of
                              approximately     $1,573,000    after    deducting
                              underwriting    discounts    and    expenses    of
                              approximately  $227,000  were used to repay a term
                              loan and reduce the amount due to factor.

                              In  connection  with  the  private  placement,   a
                              discount of $738,000 was  recorded  based upon the
                              allocation  of the  proceeds  between  the  bridge
                              notes  payable and the common  stock and  warrants
                              issued.  This amount was calculated by attributing
                              a value of $4.20  per  share of  common  stock and
                              $.10 per warrant,  less cash  received of $36,000.
                              The discount has been fully amortized.

                              On June 5, 1996, 1,130,000 shares of the Company's
                              common  stock and common stock  purchase  warrants
                              were sold to the public,  of which 950,000  shares
                              of the Company's common stock and 1,130,000 common
                              stock  purchase  warrants were sold by the Company
                              and 180,000  shares of the Company's  common stock
                              were sold by the March 28, 1996 private  placement
                              investors. The purchase price was $6.00 per common
                              share and $.10 per warrant.  Each warrant entitles
                              the holder to  purchase  a share of the  Company's
                              common  stock of  $7.20  for a  three-year  period
                              beginning   July  5,  1997.   The   warrants   are
                              redeemable at the Company's discretion at $.10 per
                              warrant,  subject to the  closing bid price of the
                              common  stock.  Net  proceeds  to the  Company  of
                              approximately    $3,785,000,    after    deducting
                              underwriting    discounts    and    expenses    of
                              approximately   $2,028,000,  were  used  to  repay
                              $1,764,000 in promissory notes and related accrued
                              interest  of  approximately   $70,000,  to  redeem
                              43,327  shares  of Series A  redeemable  preferred
                              stock,  and to pay related  accrued  dividends  of
                              approximately $80,000.

                              On  July  10,  1996,  the  Underwriter   purchased
                              169,500  shares of the Company's  common stock and
                              169,500  warrants  at a price of $6.00  and  $.10,
                              respectively.  Net  proceeds  to  the  Company  of
                              approximately     $900,000,     after    deducting
                              underwriting    discounts    and    expenses    of
                              approximately  $134,000,  were used to reduce  the
                              amount due to the factor.

                              On November  20,  1996,  the  Company  completed a
                              Regulation  S  offering  whereby  it issued  3,653
                              shares of the Company's  preferred  stock Series B
                              for a price of $750 per share. Net proceeds to the
                              Company   of   approximately   $2,051,000,   after
                              deducting  underwriting  discounts and expenses of
                              approximately  $689,000,  were used to reduce  the
                              amount due to the factor. In addition, the Company
                              issued  warrants  to  purchase  200,000  shares of
                              common   stock   at  a  price   of  $3.00  to  the
                              underwriter  of the  Regulation  S  offering.  The
                              warrants expire October 31, 2001.

                              The  non-dividend  paying Preferred Stock Series B
                              has a stated value and  liquidation  preference of
                              $1,000 per share with a 4% annual  accretion  rate
                              and is  convertible  into shares of the  Company's
                              common  stock.  Conversion is based upon a formula
                              utilizing the lower of $2.50 or the average of the
                              closing bid price of the  Company's  common  stock
                              for the five  trading  days  prior to  conversion.
                              Conversion  is at the  option  of the  stockholder
                              commencing  January 4, 1997,  through  October 31,
                              2000,   at   which   time  the   shares   will  be
                              automatically   converted   into   shares  of  the
                              Company's common stock.

                              During January and February 1997,  1,400 shares of
                              preferred  stock  Series  B  were  converted  into
                              3,224,421 shares of the Company's common stock.
                                      F-13
<PAGE>

                              During January 1996, the Company  adopted the 1996
                              Stock  Option Plan (the  "Plan").  Under the Plan,
                              options to purchase shares of the Company's common
                              stock are  granted to key  employees,  consultants
                              and  members  of the  Board  of  Directors  at the
                              discretion of the Stock Option Committee. The Plan
                              provides for the granting of options to purchase a
                              maximum of 280,000  shares at an exercise price to
                              be  determined by the Stock Option  Committee.  At
                              December 31, 1996, the Company had not granted any
                              options under the Plan.


 11.   MAJOR CUSTOMER:        One customer  accounted for  approximately  20% of
                              gross  sales (18% of net sales) for the year ended
                              December  31,  1996 and 28% of gross sales for the
                              year ended December 31, 1995.


12.   RELATED PARTY           Until June 1995, the Company had operating  leases
      TRANSACTIONS:           with Hongson for office,  showroom  and  warehouse
                              space.  Rent  expense and  warehouse  fees paid to
                              Hongson amounted to approximately $226,000 for the
                              year ended December 31, 1995.                     
                              
                              Included  in costs of goods  sold are  commissions
                              charged from Cable & Co. S.R.L.,  and D&D Design
                              and Details Limited,  companies whose  controlling
                              stockholder is a stockholder of the Company. These
                              companies   provide  the  Company   with   design,
                              production   and  production   control   services.
                              Commissions  are a  percentage  of  purchases  and
                              amounted to  approximately  $556,000  and $436,000
                              for the years  ended  December  31, 1996 and 1995,
                              respectively.  The amount  due to these  companies
                              for commissions earned was $17,576 at December 31,
                              1996 and is included in accrued expenses and other
                              current liabilities. In addition, the Company owes
                              Cable S.R.L. $2,420 for promotional inventory. The
                              Company owes D&D Design $34,587 for royalty fees
                              for the use of the Bacco  Bucci  trademark.  As of
                              December 31, 1996,  Cable S.R.L.  owed the Company
                              $59,707 for advertising fees.

                              D&D Design  charged  the  Company  $113,000  and
                              $13,000  for  licensing  fees for the  year  ended
                              December   31,   1996  and   1995,   respectively.
                              Additionally,  D&D Design  charged  the  company
                              $86,000 for fashion advisory services during 1996.
                              These fees are included in selling expenses.


 13.   INCOME TAXES:          The components of deferred income taxes, resulting
                              from the  differences  in the bases of assets  and
                              liabilities for income tax and financial reporting
                              purposes, and other items are as follows:

                                                      Current         Noncurrent
--------------------------------------------------------------------------------

          Allowance for doubtful accounts
           and sales discounts                     $      6,800              --
          Charitable contribution carryforward            7,200              --
          Net operating loss carryforward             2,108,000              --
          Property and equipment                             --        $(53,000)
          Goodwill                                           --         (15,000)
          Deferred rent                                      --          15,000
          Valuation allowance                        (2,122,000)             --

================================================================================
                                                   $     - 0 -         $(53,000)
================================================================================
                                      F-14
<PAGE>

          The provision for income taxes consists of the following:

          Year ended December 31,                     1996                1995
--------------------------------------------------------------------------------

          Current:
            Federal                                     --             $ 8,700
            State and local                             --               7,100

--------------------------------------------------------------------------------
                                                        --              15,800
--------------------------------------------------------------------------------

          Deferred:
            Federal                                $21,000              21,000
            State and local                          3,900               7,100

--------------------------------------------------------------------------------
                                                    24,900              28,100
--------------------------------------------------------------------------------

                                                   $24,900             $43,900
================================================================================


          The  difference  between  the income  tax  provision  computed  at the
          federal  statutory  rate  and  the  actual  income  tax  provision  is
          accounted for as follows:

          Year ended                                        1996           1995
--------------------------------------------------------------------------------

          Income tax benefit computed using
           statutory rate of 34%                   $ (2,527,000)      $(20,100)
          Effect of nondeductible expenses              488,700         64,000
          Change in valuation allowance               2,063,200             --

================================================================================
                                                   $     24,900       $ 43,900
================================================================================


 14.   INSURANCE:             At  December   31,   1996,   the  Company  is  the
                              beneficiary  of  term  insurance  policies  on the
                              lives  of  its  president   and   executive   vice
                              president in the aggregate amount of $1,000,000.

                              These policies  expire during 1997 and will not be
                              renewed.




                                      F-15