<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

     (Mark One)         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
       ( X )               OF THE SECURITIES EXCHANGE ACT OF 1934
                                       (Fee Required)
                                             or
       (   )             TRANSITION REPORT PURSUANT TO SECTION 13 OR
                        15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                                    (No Fee Requirement)

                 For the Fiscal Year Ended               Commission file number
                     December 28, 1996                          0-19616

                             UTOPIA MARKETING, INC.
                          (FORMERLY SAM & LIBBY, INC.)
                                  (Registrant)

                         CALIFORNIA                            94-3060101
              (State or other jurisdiction of               (I.R.S. Employer
               incorporation or organization)              Identification No.)

                     58 WEST 40TH STREET
                      New York, New York                          10018
          (Address of principal executive offices)              (Zip Code)

                  Registrant's telephone number: (212) 944-4830

           Securities Registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 Par Value

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

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


       The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the average of the closing price of the Common Stock on
March 1, 1997, as reported on the NASDAQ National Market System, was
approximately $180,000. Shares of Common Stock held by each officer and director
and by each person who owns 5% or more of the outstanding Common Stock have been
excluded from this computation in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

       As of March 1, 1997, the registrant has 13,741,367 shares of Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

       Parts of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 7, 1997 are incorporated by reference into PART
III of this Form 10-K Report.
<PAGE>   2
                                     PART I

ITEM 1.      BUSINESS

SALE OF TRADEMARK

         On July 2, 1996, Utopia Marketing, Inc. (formerly Sam & Libby, Inc.)
(the "Company") entered into an agreement with Maxwell Shoe Company Inc. (the
"Purchaser" or "Maxwell") to sell all worldwide rights to the Company's
trademarks, trade names and intellectual property rights free and clear of all
liens, mortgages, encumbrances and security interests. The Purchaser will not
assume any of the Company's liabilities or obligations. In August 1996, the
Company received cash of $5.3 million. The balance of $0.2 million is being held
in escrow until April 1997.

         On September 11, 1996, the Company changed its name to Utopia
Marketing, Inc. The Company is undecided as to the nature of its future
operations, however, management is considering various investment alternatives.

PRODUCTS

         Utopia Marketing, Inc. has sold all of its trademarks, etc. and
currently has no products under development. Prior to the sale of its
trademarks, the Company marketed the following products.

         SAM & LIBBY Women's Footwear. The Company offered more than 100
different styles of women's casual shoes, dress shoes, boots, sandals and
espadrilles in a broad range of colorful and creative designs. SAM & LIBBY brand
women's footwear sold at retail prices ranging from $15 to $60 per pair. The
Company introduced new shoes in each of the four footwear selling seasons -
spring, summer, fall and holiday/resort.

         SAM & LIBBY Children's Footwear. The children's line primarily
consisted of infants and girls footwear. The children's line included both
adaptations from the women's line and stand alone fashion developed exclusively
for the children's line. The line encompassed all aspects of girls and infants
footwear from dress to casual.

         The Company introduced a new line of girls' fashion athletic shoes for
Fall 1996 delivery.

         JUST LIBBY Footwear. JUST LIBBY was an upscale women's footwear line
with higher price points than the SAM & LIBBY line and targeted a more
sophisticated fashion-conscious customer. JUST LIBBY brand women's footwear sold
at retail prices ranging from $60 to $100 per pair.

         Handbags. In March 1994, the Company initiated its handbag division.
The product line was directed at two different customer bases. The higher priced
line was marketed under the JUST LIBBY brand, whereas the lower price points
were marketed under the SAM & LIBBY brand. In 1995, the Company discontinued the
division. Revenue for 1995 and 1994 was not significant.

         Private Label Products. In connection with its private label business,
the Company arranged for the manufacture of women's and children's footwear for
selected retailers primarily under the retailer's private label. Under this
arrangement, the Company received a fee for providing design expertise, acting
as a sourcing agent for the retailer, managing the manufacturing process,
inspecting the finished goods and

                                      -1-
<PAGE>   3
arranging the sale of the finished goods by the manufacturer to the retailer.
The retailer paid the manufacturer directly for the products.

         The private label business provided the Company with several
competitive advantages, including the retention of revenues that might otherwise
have been lost due to copying, increased manufacturing volume (which reduced
manufacturing costs of the Company's other footwear products) and the
strengthening of business relationships between the Company and its contract
manufacturers. The private label business provided revenue to the Company
without the inventory risk, warehousing and other carrying costs involved in the
sale of its branded products.

         Apparel. In the first quarter of 1993, the Company signed an agreement,
effective May 1, 1993, to transfer its apparel division to AMG Apparel Ltd.
("AMG Apparel"), an apparel and licensing company located in Los Angeles. The
Company received no royalty revenue in 1994 and a minimal amount of royalty
revenue in 1993. During 1993, AMG Apparel stopped paying its royalty
obligations. The Company has commenced legal action to regain the rights to its
apparel merchandise.

DESIGN AND DEVELOPMENT

         The Company no longer designs or develops any products. Prior to the
sale of its trademarks, the design process typically began about nine months
before the start of a season. The major influences upon the process included the
design team's impression of current worldwide lifestyle and clothing trends and
shoe fashions, as well as the history of a particular shoe or fashion style in
the United States. Other factors included the availability of raw materials, the
capabilities of the factories that will manufacture the products and the target
retail cost of the product. The design team traveled extensively in Europe to
discover and confirm the latest fashion trends and subscribed to various fashion
and color information services to keep abreast of trends emerging in the fashion
industry. Senior management was actively involved in the analysis of fashion
trends and the design process for the Company's products.

         After the design team arrived at a consensus regarding the fashion
themes for the coming season, the group manufactured designs that translated
these themes into SAM & LIBBY or JUST LIBBY products. These interpretations
included variations in product color, material, structure and decoration.
Drawings and prototypes of the products were sent to the Company's foreign
manufacturing agents, where samples were created. The Company attempted to
minimize the risks relating to changing fashion trends and product acceptance by
producing a large number of styles before each selling season, evaluating trade
acceptance before volume manufacture, and closely monitoring retail sales trends
after retail introduction.

MARKETING AND PROMOTION

         The Company no longer markets or promotes any products. Prior to the
sale of its trademarks, the Company advertised, marketed and promoted the SAM &
LIBBY brand name through a variety of means, including nationwide print media,
product packaging, in-store visual support and other point-of-sale materials.
The Company's in-house advertising department oversaw the conception,
development and implementation of most aspects of the packaging, advertising,
marketing and sales promotion for the Company's products. Senior management was
directly involved in shaping the Company's image and its advertising and
promotional activities.

         The Company marketed its products in approximately 2,000 retail
locations in the United States through a broad network of department and
specialty retail stores. Certain of the Company's high volume accounts feature
"shop-in-shop" formats in which floor space was dedicated exclusively to SAM &
LIBBY products. The Company's ten largest customers represented approximately
50% and 49% of gross sales in

                                      -2-
<PAGE>   4
1996 and 1995, respectively. In 1995 Kinney Corporation (a division of
Woolworth) accounted for approximately 11% of gross sales. In addition, certain
of the Company's customers are under common ownership. During 1996 and 1995, the
department store groups owned by the Federated Department Stores Company
("Federated"), as a group, accounted for approximately 9% and 11% of the
Company's gross revenues. No single department store unit of either group
accounted for more than 6% and 3% of gross sales in 1996 and 1995, respectively.
While the Company believes that purchasing decisions were made independently by
each department store unit (including stores that are part of the May and
Federated groups), in some cases the trend may have been towards more
centralized purchasing decisions.

         During 1993, the Company changed from a sales force primarily composed
of Company employees to a sales force primarily composed of independent sales
representatives whose compensation was based upon commissions earned. Senior
management was actively involved in selling to major accounts. Sales to foreign
customers were nominal.

         The Company operated one outlet store in Vacaville, California since
September 1991. This store was located in a factory outlet shopping mall to
avoid substantial competition with the Company's major retailing customers and
sold factory seconds as well as excess stock merchandise. This store was closed
in June 1996.

         In July 1992, the Company opened one retail footwear store in the
Beverly Center mall in Beverly Hills, California. This store enabled the Company
to display substantially all of its footwear offerings in one retail location as
well as test market new footwear styles. This store was also closed in June
1996.

         In connection with the closing of the retail stores, the Company
incurred certain expenses for the year ended December 31, 1996, representing
principally the write-off of property assets no longer being used.

MANUFACTURING

         The Company no longer manufactures any products. From inception to July
2, 1996 (the date the Company sold its trademarks), the Company's footwear
products were manufactured to its specifications by independent contractors
located in Brazil, Taiwan, the People's Republic of China ("China"), Spain and
Italy. In 1996, most of the Company's leather footwear was manufactured in
Brazil and most of its canvas and synthetic footwear was manufactured in Taiwan
and China. The percentage of footwear products manufactured in each country
varies from time to time depending on the particular material emphasized in the
Company's product lines from season to season. The 1994 change in the Brazilian
currency, which is no longer considered inflationary and has lost some of its
competitive pricing, created additional opportunities in the Far East, which in
1996 was the primary source for the Company's footwear.

         The Company sought to develop long-term relationships with factories
that met the Company's requirements for quality, volume and price. In most
cases, the Company attempted to have one line within each factory dedicated
solely to the manufacture of the Company's products in order to improve
productivity on the line and simplify quality control procedures.

         Sanders-Importacao E Exportacao Ltd. ("Sam & Libby Brazil"), the
Company's wholly-owned subsidiary and exclusive agent in Brazil, produced
prototypes of new footwear styles, placed orders with Brazilian factories,
monitored manufacturing quality on a daily basis, inspected finished goods and
coordinated shipment of finished goods to the United States. In the last quarter
of 1995, the Company sold the building and closed its Brazilian office
operation. Sam & Libby used independent agents in the Far East to perform
similar services for the Company.

                                      -3-
<PAGE>   5
IMPORTS AND IMPORT RESTRICTIONS

         The Company no longer imports any products. In 1996, substantially all
of the Company's products were manufactured in Brazil, Taiwan, China, Italy and
Hong Kong. Although the Company had no long-term manufacturing agreements with
its producers and competed with other companies for production facilities
(including companies that are much larger than the Company), management believed
that the Company's relationships with its footwear producers were satisfactory
and that it had the ability to develop, over time, alternative sources in
various countries for the footwear obtained from its current producers.

         The Company's arrangements with its manufacturers and suppliers were
subject to the usual risks of doing business abroad, including revaluation of
currencies, export duties, import controls and trade barriers, tariffs, quotas,
restrictions on the transfer of funds and, in certain parts of the world,
political instability. The Company's products were also subject to United States
customs duties. United States customs duties currently are 10% of factory cost
on footwear made principally of leather, 6% of factory cost on synthetic
footwear and up to 48% of factory cost on canvas and fabric shoes.

DISTRIBUTION

         The Company no longer distributes any products other than products
remaining in inventory in accordance with its contract with Maxwell (Purchaser
of its trademarks).

         The Company has a contract (the "RML Agreement") with RML Limited
("RML"), an independent warehouse facility located in Harrisburg, Pennsylvania
pursuant to which RML provides the Company with warehouse, distribution,
inspection and other services for a fee based upon gross shipping dollars, which
is calculated on a declining percentage as various sales plateaus are achieved.
The agreement expired by its term in April 1995 but was renewed until February
1997. The Company believes that it will have minimal inventory at that date. The
RML Agreement will terminate on February 28, 1997.

BACKLOG

         At the end of 1996, the Company had no unfilled customer orders.

EMPLOYEES

         As of March 29, 1997, the Company had 3 full-time employees. The
employees were executives engaged in evaluating possible investment
opportunities.

ITEM 2.      PROPERTIES

         The Company's design, sales, marketing and executive offices and its
showroom are located in the same building in New York City. The lease for the
fourth floor of the executive offices covers approximately 6,500 square feet and
expires in April 1998. The lease for the showroom space covers approximately
6,500 square feet and expires in April 1998. In January of 1996, the Company
sublet the fourth floor and gave a concession for seven months free rent. All
employees are now situated on one floor. In 1996, the Company canceled its lease
for approximately 1,200 square feet in a showroom in Dallas. The Company
forfeited its security deposit in connection with the cancellation of this
lease. The Company had two lease agreements for terms not exceeding five years
for an outlet store in Vacaville, California (approximately 2,200 square feet)
and a full price retail footwear store located in Beverly Hills, California

                                      -4-
<PAGE>   6
(approximately 1,000 square feet). During 1996 these leaseholds were canceled.
Sam & Libby Brazil sold the office building in Novo Hamburgo, Brazil during the
fourth quarter of 1995.

ITEM 3.      LEGAL PROCEEDINGS

         On April 27, 1992, a class action lawsuit was filed against the Company
and certain of its directors and officers and the managing underwriters of the
Company's initial public offering for alleged violations of federal securities
laws and state common law. The complaint sought unspecified actual and punitive
damages, costs and attorney's fees on behalf of purchasers of the Company's
Common Stock during the period from December 4, 1991 through April 24, 1992.
Similar follow-on suits, containing virtually identical allegations, were filed
by six other plaintiffs. The district court ordered consolidation of all of the
complaints into one class action.

         On August 1, 1994, the district court entered final judgment approving
the settlement and dismissing the lawsuit. Under the terms of the settlement,
the claims against the Company and other defendants were dismissed without any
admission or presumption of liability or wrongdoing. A settlement fund
consisting of $6.25 million in cash and 595,000 shares of the Company's Common
Stock was established. The Company contributed $2.15 million in cash into the
fund in March 1994 and the Company's director's and officer's liability
insurance carrier contributed $4.1 million into the fund in August 1994. In
October 1995 the Company contributed the 595,000 shares of Common Stock into the
fund and the escrow agent distributed the shares to the claimants.

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

         Not applicable

                                      -5-
<PAGE>   7
                                     PART II

ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
             MATTERS

         Prior to the sale of its trademarks, the Company's Common Stock was
traded on the Nasdaq National Market under the symbol "SAML". On September 11,
1996, the Company changed its name to Utopia Marketing, Inc. Its stock is traded
over-the-counter under the symbol "UTPM."

         The following table sets forth the high and low closing sales prices of
the Company's Common Stock for the years ended December 28, 1996 ("1996") and
December 30, 1995 ("1995"), as reported by the Nasdaq National Market and other
independent quotation services:


                                              HIGH             LOW
                                              ----             ---
            1995
            ----
            First Quarter                     2-1/2            7/8
            Second Quarter                    3-1/4            1-3/4
            Third Quarter                     2-15/16          1-7/16
            Fourth Quarter                    1-15/16          13/16

            1996
            ----
            First Quarter                     1-5/8            3/4
            Second Quarter                    2-1/16           1/4
            Third Quarter                     7/8              1/8
            Fourth Quarter                    3/16             .05


         As of February 19, 1997, the Company had 1,073 shareholders of record.
The Company has no shares of any other class of capital stock outstanding other
than its Common Stock. The Company has not paid any cash dividends on its Common
Stock since its inception, other than distributions to Samuel L. Edelman, Louise
B. Edelman and Stuart L. Kreisler (the "Principal Shareholders") during the
period that the Company was an S Corporation and in connection with the
termination of the Company's status as an S Corporation. The Company currently
anticipates that any future earnings will be retained for development of its
business and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future.

                                      -6-
<PAGE>   8
ITEM 6.      SELECTED FINANCIAL DATA

         The selected financial data set forth below for the years ended
December 31, 1992, January 1, 1994, December 31, 1994, December 30, 1995 and
December 28, 1996 has been derived from the Company's Consolidated Financial
Statements, and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto and with Management's Discussion and
Analysis of Financial Condition and Results of Operations. See Notes 1, 12 and
13 of Notes to Consolidated Financial Statements regarding change in fiscal
year, discontinued operations and extraordinary gain, respectively.
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED
                                           ------------------------------------------------------------------------------
                                           DECEMBER 28,    DECEMBER 30,     DECEMBER 31,   JANUARY 1,      DECEMBER 31,
                                              1996           1995             1994           1994             1992
                                           ------------------------------------------------------------------------------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>             <C>             <C>            <C>               <C>
INCOME STATEMENT DATA:
Net revenue                                 $ 23,637       $ 38,755        $ 36,540        $  33,217         $ 63,583
Gross profit                                   2,771          9,269           7,654            3,132           18,716
Net loss from continuing
   operations                                 (2,675)        (3,773)         (3,789)         (16,174)          (1,925)
Net loss from discontinued
   operations including applicable
   tax effect                                      -              -               -             (648)            (915)
Extraordinary gain                             1,288
Net loss                                    $ (1,387)      $ (3,773)       $ (3,789)       $ (16,822)        $ (2,840)
                                            ========       ========        ========        =========         ========

Net loss per share from
   continuing operations                     $  (.22)      $  (0.35)       $  (0.35)       $   (1.60)        $  (0.19)
Net loss per share from
   discontinued operations                         -              -               -            (0.06)           (0.09)
Extraordinary income per share                   .11
Net loss per share                          $   (.11)      $  (0.35)       $  (0.35)       $   (1.66)        $  (0.28)
                                            ========       ========        ========        =========         ========

Weighted average shares
   outstanding                                12,136         10,878          10,800           10,163           10,075
                                            ========       ========        ========        =========         ========

BALANCE SHEET DATA
   (AT PERIOD END):
Working capital                             $  3,162       $    989        $  3,391        $   6,558         $ 21,065
Total assets                                   3,344          9,475           7,849           14,836           29,087
Long-term obligations                              7             91              99              195              227
Shareholders' equity                           3,180          1,746           5,019            8,454           23,844
Shareholders' equity per share                   .23            .16            0.46             0.78             2.37
</TABLE>

                                      -7-
<PAGE>   9
ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS

GENERAL

         The following discussion of the Company's consolidated results of
operations for the years ended December 28, 1996, December 30, 1995 and December
31, 1994 includes the results of operations of Sam & Libby Brazil, Sam & Libby
Hong Kong and Sam & Libby Outlets, Inc. ("Sam & Libby Outlets"), wholly-owned
subsidiaries of the Company.

Sale of Trademark

         On July 2, 1996, the Company entered into an agreement (the
"Agreement") with Maxwell Shoe Company Inc. (the "Purchaser" or "Maxwell") to
sell all worldwide rights to the Company's trademarks, trade names and
intellectual property rights free and clear of all liens, mortgages,
encumbrances and security interests for $5.5 million in cash. In August 1996,
the Company received $5.3 million. The balance of $.2 million is being held in
escrow until April 1997. The Purchaser will not assume any of the Company's
liabilities or obligations.

RESULTS OF OPERATIONS

Net Revenue

         Net revenue for 1996 decreased approximately 36% from 1995. Under the
terms of the Agreement, the Company was precluded from designing, selling or
producing any products using the name SAM & LIBBY and associated trademarks,
trade names, etc. other than products in production or in inventory as of July
2, 1996 (date of agreement).

         In attempting to collect the amounts due to the Company, the Company
was forced to grant greater than normal markdowns. Also, due to the time
pressures imposed by the Agreement, the Company sold the remaining inventory at
close-out prices.

         Net revenue for 1995 increased approximately 6% from 1994. Before
returns and allowances, sales actually were higher by approximately 9% but
significant returns and allowances especially in the fourth quarter of 1995
negatively impacted the net sales line for 1995. One of the reasons for the
excessive returns in the fourth quarter of 1995 was related to quality problems
for certain styles of Fall 1995 shoes.

         In an attempt to remedy the traditional low sales volume in the 1995
fourth quarter, the Company planned a fourth quarter business based on a suede
sneaker program which would be a natural evolution of its strong canvas sneaker
program during the preceding nine months. The very soft retail market for
back-to-school reduced the department stores' ability to buy fourth quarter
merchandise which resulted in a poor selling fourth quarter and a higher than
anticipated inventory level (see Gross Profit discussion). Further adversely
impacting net revenue were additional markdowns in the fourth quarter given to
customers because of the weak sales at retail during for the fall selling
season.

         Net revenue for 1994 increased approximately 10.0% from 1993. Sales of
branded footwear increased 14.7% while private label commission revenue
decreased 82.6%. The increase in sales of branded footwear is principally
attributable to increased sales of units closer to the list price of SAM & LIBBY
brand women's and children's footwear due to better end customer acceptance of
the Company's products and

                                      -8-
<PAGE>   10
decreased returns and customer allowances. The reduction in private label
revenue was a result of management's decision to focus its energies towards the
branded label business.

         Despite the improved performance of 1994 compared to 1993, fourth
quarter 1994 revenue was negatively affected by the Company's decision to not
design and produce a holiday/resort line of shoes, additional customer
allowances given in the fourth quarter of 1994 as well as the decision by the
Company to curtail buying inventory without significant customer orders. In
addition, the loss of fourth quarter revenue reflected the continued weak
economic and retailing environment and competitive pressures.

Gross Profit

         Gross profit as a percentage of net revenue ("Profit Margin") declined
to 11.7% in 1996 from 23.9% in 1995.

         The same causes that impacted net revenue affected the gross profit,
namely, higher than normal markdown allowances and disposal of inventory at
close-out prices due to the sale of the SAM & LIBBY trademarks (see Net Revenue
discussion).

         The Profit Margin improved to 23.9% in 1995 from 20.9% in 1994. Profit
margin before customer allowances and markdowns improved approximately 6% from
1994 since the Company was able to sell more of its merchandise closer to the
list price. Negatively impacting the Profit Margin were additional allowances
given to customers as well as higher inventory markdowns necessitated by the
excessive level of Fall 1995 inventory as stated above. The effect of customer
allowances as well as inventory markdown was especially affected in the fourth
quarter of 1995 which resulted in a negative gross margin for the reasons
stated.

         The Profit Margin improved to 20.9% in 1994 from 9.4% in 1993. The
increase is principally a result of the factors mentioned above (reduced
allowances and a greater proportion of units sold closer to the list price)
combined with lower 1994 inventory reserves which are a function of a reduced
level of prior season inventory. In addition, during the third quarter of 1994,
the Company recovered approximately $500,000 of chargebacks (net of expenses)
fully reserved in prior periods. The negative profit margin in the fourth
quarter of 1994 is a function of the items mentioned above. The decline in
private label revenue negatively affected the Profit Margin in 1994 when
compared to 1993.

Selling, General and Administrative Expenses

         Selling general and administrative expenses ("SG&A") increased as a
percentage of net revenues from 29.8% in 1995 to 37.1% in 1996. The percent
increase was the result of the substantial decrease in net revenue discussed
above. The expenses decreased from $11,539 in 1995 to $8,773 in 1996. The
decrease in expenses was the result of the Company's ending of its design,
production and sales efforts, all as a result of the sales of its trademark,
partially offset by certain termination expenses.

         SG&A as a percentage of net revenue slightly increased from $10,978
(30.0% of net revenues) in 1994 to $11,539 (29.8% of net revenues) in 1995. The
increase is principally a result of additional advertising expenses in 1995.

         SG&A as a percentage of net revenue decreased from $13,946 (42.0% of
net revenues) in 1993 to $10,978 (30.0% of net revenues) in 1994. The reduction
in both percentage and absolute dollars is principally due to reductions in
advertising, staffing, commissions and overall administrative expense control.

                                      -9-
<PAGE>   11
Composition and Conversion Agreement

         At June 26, 1996, the Company had approximately $4.9 million of
accounts payable with two of its major vendors. On that date, the Company
entered into an agreement with those vendors whereby the vendors agreed to
forgive approximately $1.3 million of indebtedness and convert approximately
$2.0 million of indebtedness to 2.6 million shares of common stock, $.001 par
value, at a conversion debt purchase price of $.75 per share. The forgiveness of
the debt is shown as an extraordinary item in the accompanying consolidated
statement of operations.

Settlement of Shareholder Lawsuit

         On April 27, 1992, a class action lawsuit was filed against the Company
and certain of its directors and officers and the managing underwriters of the
Company's initial public offering for alleged violations of federal securities
laws and state common law. The complaint sought unspecified actual and punitive
damages, costs and attorney's fees on behalf of purchasers of the Company's
Common Stock during the period from December 4, 1991 to April 24, 1992. Similar
follow-on suits, containing virtually identical allegations, were filed by six
other plaintiffs. The district court ordered consolidation of the complaints
into one class action lawsuit.

         On August 1, 1994, the district court entered final judgment approving
the settlement and dismissing the lawsuit. Under the terms of the settlement,
the claims against the Company and other defendants were dismissed without any
admission or presumption of liability or wrongdoing. A settlement fund
consisting of $6.25 million in cash and 595,000 shares of the Company's Common
Stock was established. The Company contributed $2.15 million in cash into the
fund in March 1994 and the Company's director's and officer's liability
insurance carrier contributed $4.1 million into the fund in August 1994. In
October 1995 the Company contributed the 595,000 shares of Common Stock into the
fund and the escrow agent distributed the shares to the claimants.

RML Agreement

         The Company has a contract (the "RML Agreement") with RML Limited
("RML"), an independent warehouse facility located in Harrisburg, Pennsylvania
pursuant to which RML provides the Company with warehouse, distribution,
inspection and other services for a fee based upon gross shipping dollars, which
is calculated on a declining percentage as various sales plateaus are achieved.
The agreement expired by its term in April 1995 but is automatically renewable
from year to year unless either party gives notice of non-renewal. The Agreement
is now scheduled to end in February 1997.

Interest Expense

         Interest decreased from $1,045,000 in 1995 to $641,000 in 1996.
Interest expense increased from $500,000 in 1994 to $1,045,000 in 1995.

         The decrease from 1995 to 1996 was the result of the receipt of $5.3
million in August 1996 on account of the sale of the trademarks, discussed
above. Subsequent to the sale of the trademarks, the requirements for cash
advances and overadvances from its factor against unmatured factored receivables
decreased. The increase from 1994 to 1995 was the result of increasing needs of
cash advances from its factor. Conversely, the decrease in interest expense
observed in 1996 is principally the reflection of positive cash positions with
the Factor during the last quarter of 1996.

                                      -10-
<PAGE>   12
Interest and Other Income/(Expense)

         In the fourth quarter of 1995, management made the decision to close
the Company's operations in Brazil, as the Company's buying strategy shifted
from Brazil to China. As a result, the Company took a charge of $427,000 for
closing the operations.

         Other expense in 1995 includes the loss in the sale of the building in
Brazil and certain expenses related to the liquidation of the Company's Hong
Kong subsidiary.

Liquidity and Capital Resources

         The Company assigned all of its trade receivables to its factor and
lender in accordance with a factoring and financing arrangement (the
"Agreement"), as discussed in Note 2 in the notes to the financial statements.
Approximately 85% of trade receivables were sold on a nonrecourse basis. For
those amounts assigned on a recourse basis, the Company either obtained credit
insurance, requires cash deposits, or receives letters of credit payable to the
Company.

         In June 1996, two major creditors of the Company were owed
approximately $4,900,000. Such creditors agreed to restructure the debt by
forgiving approximately $1,288,000 (reflected as an extraordinary item on the
accompanying consolidated statement of operations), the acceptance of 2,698,000
shares of the Company's common stock valued at $.75 a share ($2,027,000). The
balance of the debt (approximately $1,600,000) was paid in August 1996.

         During 1996, the Company experienced continuing losses from operations.
The ability to funds its operating losses and cash required for operations was
uncertain. An opportunity to sell its trademarks to Maxwell Shoe Co. Inc. for a
total of $5,500,000 plus certain other expenses was offered in conjunction with
the restructuring of its debt to two major creditors. The Company accepted the
offer in July 1996 and ceased designing, producing and selling of its product
under the terms of such agreement.

         During 1995, the Company was able to fund its operating losses and cash
used in operations through advances from its factor based on the collateral
borrowing formula as well as an overadvance line. In order for the Company to
avail itself of this overadvance line, a principal shareholder and executive
officer of the Company, executed a personal guarantee up to $500,000 of the
overadvance facility in the form of collateral assigned to the factor. In
January 1997 the collateral was returned.

         During 1996, the Company was able to repay its overadvance facility
with the factor as a result of the normal collection process of factored
receivables and the sale of the trademarks discussed above.

         The Company also had a letter of credit agreement from its factor.
Letter of credit financing, which reduces the advance availability under the
borrowing base formula, was insignificant in 1996 and in 1995. There were no
outstanding letters of credit on December 28, 1996.

         The Company's business does not require significant capital
expenditures. There were no capital expenditures for 1996.

         The main activities of the Company since July 1996 have been the
collecting of the amount due to the Company or its factor and the sale of the
merchandise inventory under the terms of the agreement with Maxwell. As of
December 28, 1996, these activities were substantially complete.

                                      -11-
<PAGE>   13
ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's consolidated financial statements as of December 28, 1996
and December 30, 1995 and for each of the three years in the period ended
December 28, 1996 are included in this report as listed on the Index to
Financial Statements appearing in Item 14.

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

         Not applicable.

                                      -12-
<PAGE>   14
                                    PART III

         Certain information required by Part III is incorporated by reference
to the registrant's definitive proxy statement that will be filed pursuant to
Regulation 14A (the "Proxy Statement") no later than 120 days after the end of
the fiscal year covered by this report.


ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information concerning the Company's directors required by this
Item is incorporated by reference to the Proxy Statement under the caption
"Election of Directors - Nominees."

         The executive officers of the Company, who are elected by and serve at
the discretion of the Board of Directors, and their ages as of March , 1997, are
as follows:
<TABLE>
<CAPTION>
              NAME              AGE                    POSITION                                  SINCE
----------------------          ---    --------------------------------------------------        -----

<S>                             <C>   <C>                                                        <C>
Samuel L. Edelman               45    Chairman of the Board, President and Chief                 1987
                                      Executive Officer
Louise B. Edelman               43    Executive Vice President, Corporate Development            1987
Kenneth M. Sitomer              50    Chief Operating Officer and Chief Financial Officer        1993
</TABLE>

         Samuel L. (Sam) Edelman co-founded the Company with his wife, Louise B.
Edelman, in October 1987. Since the Company's inception, Mr. Edelman has served
as the Chairman of the Board, President and Chief Executive Officer. From April
1983 to July 1987, Mr. Edelman served as the President of the Esprit Footwear
Division of Esprit De Corp., an apparel and footwear company ("Esprit"). Prior
to April 1983, Mr. Edelman occupied various executive positions, including
Executive Vice President of Kenneth Cole Productions, a footwear company.

         Louise B. (Libby) Edelman, a co-founder of the Company, served as
Senior Vice President - Image from the Company's founding until the second
quarter of 1992. At the time, Ms. Edelman was promoted to Executive Vice
President - Corporate Development. Prior to October 1987, Ms. Edelman held
various positions, including National Sales Manager for Esprit Kids Shoes,
Director of Public Relations for Calvin Klein Ltd., a fashion company, and
Senior Fashion Editor of Seventeen, Mademoiselle and Harper's Bazaar magazines.
Ms. Edelman has served as a Director of the Company since its founding.

         Kenneth M. Sitomer has been the Chief Operating Officer and Chief
Financial Officer of the Company since May 1993. Prior to May 1993, Mr. Sitomer
served as President and Chief Executive Officer of Russ Togs, a publicly-held
women's apparel company ("Russ Togs"), from September 1989 to January 1992. Mr.
Sitomer was employed as President and Chief Executive Officer of Bidermann
Industries USA, Inc., ("Bidermann") from 1986 to 1989, as Executive Vice
President and Chief Operating Officer from 1977 to 1986 and as Executive Vice
President and Chief Financial Officer from 1974 to 1977.

         With the exception of Sam Edelman and Libby Edelman, who are married to
each other, there is no family relationship among directors or executive
officers of the Company.

                                      -13-
<PAGE>   15
ITEM 11.     EXECUTIVE COMPENSATION

         SUMMARY COMPENSATION

         The information required by this item is incorporated by reference to
the proxy statement under the caption Executive Compensation.

                                      -14-
<PAGE>   16
ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is incorporated by reference to
the proxy statement under the caption Security Ownership of Certain Beneficial
Owners and Management.

                                      -15-
<PAGE>   17
ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated by reference to
the proxy statement under the caption Certain Relationships and Related
Transactions.


                                      -16-
<PAGE>   18
                                     PART IV


ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

       (a)   The following documents are filed as a part of this Report:

             1.   Financial Statements.  The following Consolidated Financial
Statements of the Company and Independent Auditors' Report are filed as a part
of this Report:
<TABLE>
<CAPTION>
                                                                                    Page
                                                                                    ----
<S>                                                                             <C>
        Independent Auditors' Report                                                F-1
        Consolidated Balance Sheets - December 28, 1996 and December 30, 1995       F-2
        Consolidated Statements of Operations - Years Ended
          December 28, 1996, December 30, 1995 and December 31, 1994                F-3
        Consolidated Statements of Shareholders' Equity - Years Ended
          December 28, 1996, December 30, 1995 and December 31, 1994                F-4
        Consolidated Statements of Cash Flows - Years Ended
          December 28, 1996, December 30, 1995 and December 31, 1994                F-5
        Notes to Consolidated Financial Statements                              F-6 to F-15
</TABLE>

             2.   Financial Statement Schedules. The following financial
statement schedules of the Company for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 are filed as part of this Report and
should be read in conjunction with the Consolidated Financial Statements of the
Company and Notes thereto:

                                                                            Page
                                                                            ----
         Schedule II  -   Valuation and Qualifying Accounts                 S-1


         Schedules other than those listed above have been omitted because they
are not applicable, not required, or the required information has been given in
the Consolidated Financial Statements of the Company and Notes thereto.

                                      -17-
<PAGE>   19


3.   Exhibits.  The following Exhibits are filed as part of, or incorporated by
     ---------
reference into, this Report:

       3.1    Restated Articles of Incorporation.(1)
       3.2    Restated Bylaws.(1)
       4.1    Article III of Restated Articles of Incorporation (see Exhibit
              3.1).(1)
       4.2    Form of Common Stock Certificate.(1)
      10.1    1991 Stock Plan and forms of Incentive Stock Option agreement and
              Nonstatutory Stock Option Agreement.(1)
      10.2    1991 Employee Stock Purchase Plan.(1)
      10.3    Shareholders Agreement, as amended and restated.(1)
      10.4    Factoring Agreement between Registrant and Republic Factors Corp.
              (1)
      10.5    Form of Indemnification Agreement.(1)
      10.6    S Corporation Termination, Tax Allocation and Indemnification
              Agreement.(1)
      10.7    Merchandise License Agreement between Sam & Libby, Inc. and AMG
              Apparel Ltd. dated as of May 1, 1993.*
      10.8    Facilities and Service Contract dated April 22, 1993 between Sam &
              Libby, Inc. and RML Limited.(2)
      10.9    Employment Agreement dated as of May 3, 1993 between Kenneth
              Sitomer and Sam & Libby, Inc.(3)
      10.10   Agreement, dated as of August 12, 1993, between Lane
              International Trading, Inc., Sam & Libby Taiwan and
              Sam & Libby, Inc.*
      10.11   Promissory Note dated August 12, 1993 from Sam & Libby, Inc. to
              Sam & Libby Taiwan.*
      11.1    Calculation of Earnings Per Share.
      22.1    List of Subsidiaries.
      24.1    Independent Auditors' Consent and Report on Schedules.
      25.0    Power of Attorney (included on page 20).

----------
(1)    Exhibits 3.1, 3.2, 4.1, 4.2, 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 are
       incorporated by reference to exhibits filed with the Company's
       Registration Statement on Form S-1 (No. 33-43424) filed October 18, 1991,
       Amendment No. 1 thereto filed November 7, 1991, Amendment No. 2 thereto
       filed November 25, 1991 and Amendment No. 3 thereto filed December 4,
       1991, which Registration Statement became effective December 4, 1991.
(2)    Exhibit 10.8 is incorporated by reference to Exhibit 10.9 of the
       Company's Quarterly Report on Form 10-Q for the quarter ended July 3,
       1993.
(3)    Exhibit 10.9 is incorporated by reference to Exhibit 10.10 of the
       Company's Quarterly Report on Form 10-Q for the quarter ended July 3,
       1993.
*      Previously filed.

                                      -18-
<PAGE>   20
         (b)  Reports on Form 8-K.  There were no Reports on Form 8-K during the
quarter ended December 28, 1996.

         For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933
(the "Act"), the Company hereby undertakes as follows, which undertaking shall
be incorporated by reference into the Company's Registration Statement on Form
S-8 No. 33-45671.

         Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                      -19-
<PAGE>   21
                                   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 on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.


                                   UTOPIA MARKETING, INC.
                                   (formerly SAM & LIBBY, INC.)

                                   By:  /s/ Kenneth M. Sitomer
                                      -----------------------------------------
                                   Kenneth M. Sitomer
March 31, 1997                     Chief Operating Officer and Financial Officer
---------------


                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth M. Sitomer his attorney-in-fact,
with the power of substitution, for him in any and all capacities, to sign any
and all amendments to this Report on Form 10-K and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue thereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report of Form 10-K has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
                 SIGNATURE                                          TITLE                            DATE
   -------------------------------------        -------------------------------------------    -----------------
<S>                                             <C>                                             <C>
          /s/ Samuel L. Edelman                 President and Chief Executive Officer           March 31 , 1997
   -------------------------------------        (Principal Executive Officer), and
             (Samuel L. Edelman)                Chairman of the Board


          /s/ Kenneth M. Sitomer                Chief Operating Officer                         March 31 , 1997
   -------------------------------------        Chief Financial Officer
             (Kenneth M. Sitomer)               (Principal Financial Officer)

          /s/ Louise B. Edelman                 Executive Vice President - Corporate            March 31 , 1997
   -------------------------------------        Development and Director
             (Louise B. Edelman)
</TABLE>

                                      -20-
<PAGE>   22
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders
    Utopia Marketing, Inc. (formerly Sam & Libby, Inc.):

We have audited the accompanying consolidated balance sheets of Utopia
Marketing, Inc. (formerly Sam & Libby, Inc.) and its subsidiaries (the
"Company") as of December 28, 1996 and December 30, 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 28, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence to support
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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 28, 1996
and December 30, 1995, and the results of its operations and its cash flows of
each of the three years in the period ended December 28, 1996 in conformity with
generally accepted accounting principles.




New York, New York
February 7, 1997

                                      F-1
<PAGE>   23
<TABLE>
<CAPTION>
                             UTOPIA MARKETING, INC.
                           FORMERLY SAM & LIBBY, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS EXCEPT SHARE DATA)

                                                          DECEMBER 28, 1996       DECEMBER 30, 1995
                                                          -----------------       -----------------
<S>                                                            <C>                   <C>
ASSETS
Current assets:
     Cash and cash equivalents                                 $   2,852             $     128
     Due from factor, less allowance of $75 as
      of December 28, 1996                                           107                     -
     Accounts receivable, less allowance of $157 as
      of December 30, 1995                                           293                 2,427
     Due from shareholders                                             -                   168
     Merchandise inventories                                          36                 5,692
     Prepaid expenses                                                 31                   212
                                                               ---------             ---------
         Total current assets                                      3,319                 8,627

Property and equipment, net                                            -                   581

Other assets                                                          25                   267
                                                               ---------             ---------
     Total assets                                              $   3,344             $   9,475
                                                               =========             =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Due to factor                                             $       -             $   1,684
     Accounts payable                                                 58                 4,985
     Accrued expenses                                                 99                   967
     Current portion of long-term obligations                          -                     2
                                                               ---------             ---------
         Total current liabilities                                   157                 7,638
                                                               ---------             ---------
Long-term obligations                                                  7                    91
                                                               ---------             ---------

Shareholders' equity:
     Preferred stock, $.001 par value; 5,000,000 shares
      authorized, none issued                                                                -
     Common stock, $.001 par value; 45,000,000 shares
      authorized, 13,741,367 and 10,936,429 shares
      outstanding                                                     14                    11
     Additional paid-in capital                                   32,943                30,780
     Accumulated deficit                                         (29,777)              (28,390)
     Deferred compensation                                             -                  (655)
                                                               ---------             ---------
         Total shareholders' equity                                3,180                 1,746
                                                               ---------             ---------
     Total liabilities and shareholders' equity                $   3,344             $   9,475
                                                               =========             =========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                      F-2
<PAGE>   24
<TABLE>
<CAPTION>
                             UTOPIA MARKETING, INC.
                           FORMERLY SAM & LIBBY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)


                                                                                        YEAR ENDED
                                                                     --------------------------------------------------
                                                                     DECEMBER 28,       DECEMBER 30,       DECEMBER 31,
                                                                         1996               1995               1994
                                                                     ------------       ------------       ------------

<S>                                                                   <C>               <C>                 <C>
 Net revenue                                                          $   23,637        $  38,755           $  36,540

 Cost of sales                                                            20,866           29,486              28,886
                                                                      ----------        ---------           ---------

     Gross profit                                                          2,771            9,269               7,654

 Selling, general and administrative expenses                             (8,833)         (11,539)            (10,978)

 Gain on sale of trademark                                                 4,100                -                   -

 Operating loss before extraordinary item,
     interest and taxes                                                   (1,952)          (2,270)             (3,324)

 Interest expense - net                                                     (723)           (1503)               (465)
                                                                      ----------        ---------           ---------

 Loss before extraordinary item                                           (2,675)          (3,773)             (3,789)

 Extraordinary gain                                                        1,288                -                   -
                                                                      ----------        ---------           ---------

 Net income$                                                          $   (1,387)       $   3,773)          $  (3,789)
                                                                      ==========        =========           =========

 Loss per share before extraordinary income                           $     (.22)       $   (0.35)          $   (0.35)
 Extraordinary income per share                                              .11                -                   -
                                                                      ----------        ---------           ---------

 Net loss per share                                                   $     (.11)       $   (0.35)          $   (0.35)
                                                                      ==========        =========           =========

 Weighted average shares outstanding                                      12,136           10,878              10,800
                                                                      ==========        =========           =========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-3
<PAGE>   25
<TABLE>
<CAPTION>
                             UTOPIA MARKETING, INC.
                           FORMERLY SAM & LIBBY, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

                                                                                      RETAINED
                                                                       ADDITIONAL     EARNINGS
                                                     COMMON STOCK        PAID-IN    (ACCUMULATED       DEFERRED
                                                 SHARES      AMOUNT      CAPITAL      DEFICIT)       COMPENSATION        TOTAL

<S>                                             <C>           <C>       <C>           <C>               <C>            <C>
Balance at January 1, 1994                      10,794        $11       $  30,154     $ (20,828)        $  (883)       $  8,454

Common stock issued under stock plans                8          -              12             -               -              12
Grants of compensatory stock options                 -          -             576             -            (563)             13
Amortization of deferred compensation                -          -               -             -             329             329
Net loss                                             -          -               -        (3,789)              -          (3,789)
                                                ------        ---       ---------     ---------         -------        --------

Balance at December 31, 1994                    10,802         11          30,742       (24,617)         (1,117)          5,019

Common stock issued under stock plans               34          -              13             -              -               13
Exercise of employee stock options                 100          -              25             -              -               25
Amortization of deferred compensation                -          -               -             -            462              462
Net loss                                             -          -               -        (3,773)             -           (3,773)
                                                ------        ---       ---------     ---------          -----         --------

Balance at December 30, 1995                    10,936         11          30,780       (28,390)          (655)           1,746

Common stock issued under stock plans               18          -              32             -              -               32
Exercise of employee stock options                  78          -              80             -              -               80
Common stock issued in connection with
  debt forgiveness                               2,698          3           2,024             -              -            2,027
Common stock issued in exchange of
  services                                          11          -              27             -              -               27
Amortization of deferred compensation                -          -               -             -            655              655
Net loss                                             -          -               -        (1,387)             -           (1,387)
                                                ------        ---       ---------     ---------          -----         --------

Balance at December 28, 1996                    13,741        $14       $  32,943     $ (29,777)         $   -         $  3,180
                                                ======        ===       =========     =========          =====         ========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-4
<PAGE>   26
<TABLE>
<CAPTION>
                             UTOPIA MARKETING, INC.
                           FORMERLY SAM & LIBBY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                                                        YEAR ENDED
                                                                     -------------------------------------------------
                                                                     DECEMBER 28,      DECEMBER 30,        DECEMBER 31
                                                                         1996             1995               1994
                                                                     ------------      ------------        -----------
<S>                                                                   <C>               <C>                 <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                             $   (1,387)       $  (3,773)          $   (3,789)
 Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
    Depreciation and amortization                                            302              461                  457
    Loss on disposal of fixed assets                                         279                -                    -
    Gain on debt forgiveness                                              (1,288)               -                    -
    Deferred compensation expense                                            655              462                  342
    Gain on sale of assets                                                     -              246                    -
    Gain on settlement of note payable                                         -                -                 (190)
    Provision for allowances against accounts receivable                    (157)               7                 (328)
    Settlement of shareholder lawsuit                                          -                -               (2,150)
    Changes in operating assets and liabilities:
      Accounts receivable                                                  2,291             (747)                 202
      Due (from) to factor                                                (1,791)           1,168                   16
      Due from shareholders                                                  168                -                 (168)
      Merchandise inventories                                              5,656           (2,545)               2,779
      Refundable income taxes                                                                   -                  275
      Prepaid expenses and other assets                                      423              217                 (389)
      Notes payable                                                                             -                 (999)
      Accounts payable, accrued expenses and
        other current liabilities                                         (2,455)           3,739                 (133)
                                                                      ----------        ---------           ----------

 Net cash provided by (used in) operating activities                       2,696             (765)              (4,075)
                                                                      ----------        ----------          ----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                         -             (182)                 (20)
    Proceeds from sale of property and equipment                               -              362                    -
                                                                      ----------        ---------           ----------

 Net cash provided by (used in) investing activities                           -              180                  (20)
                                                                      ----------        ---------           ----------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayment of long-term obligations                                       (84)              (8)                 (96)
    Proceeds from issuance of common stock, net                              112               38                   12
                                                                      ----------        ---------           ----------

 Net cash provided by (used in) financing  activities                         28               30                  (84)
                                                                      ----------        ---------           ----------

 Net increase (decrease) in cash and cash equivalents                      2,724             (555)              (4,179)

 Cash and cash equivalents:
    Beginning of period                                                      128              683                4,862
                                                                      ----------        ---------           ----------

    End of period                                                     $    2,852        $     128           $      683
                                                                      ==========        =========           ==========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-5
<PAGE>   27
                             UTOPIA MARKETING, INC.
                           FORMERLY SAM & LIBBY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994


NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Business. The Company no longer designs, develops and markets women's
and children's footwear. On July 2, 1996, the Company entered into an agreement
(the "Agreement") with Maxwell Shoe Company Inc. (the "Purchaser" or "Maxwell")
to sell all worldwide rights to the Company's trademarks, trade names and
intellectual property rights free and clear of all liens, mortgages,
encumbrances and security interests for $5.5 million in cash. In August 1996,
the Company received cash of $5.3 million. The balance of $0.2 million is being
held in escrow until April 1997. The Purchaser will not assume any of the
Company's liabilities or obligations. In connection with such sale, the Company
changed its name to Utopia Marketing, Inc.

         The Company has a contract (the "RML Agreement") with RML Limited
("RML"), an independent warehouse facility located in Harrisburg, Pennsylvania
pursuant to which RML provides the Company with warehouse, distribution,
inspection and other services for a fee based upon gross shipping dollars, which
is calculated on a declining percentage as various sales plateaus are achieved.
The agreement expires by its term in April 1995 but is automatically renewable
from year to year unless either party gives notice of non-renewal. The agreement
will terminate on February 28, 1997.

         Principles of Consolidation.  The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
Sanders-Importacao E Exportacao Ltd. ("Sam & Libby Brazil"), Sam & Libby (HK)
Limited ("Sam & Libby Hong Kong") and Sam & Libby Outlets, Inc. ("Sam & Libby
Outlets"). All material intercompany transactions and balances have been
eliminated.

         In the fourth quarter of 1995, the Company closed the operations in
Brazil. As a result, the Company took a charge of $427,000 for the closing of
those operations.

         Fiscal Year. The Company has a 52/53-week fiscal year ending on the
Saturday closest to December 31. The fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994 contained 52 weeks.

         Cash Equivalents. Cash equivalents are highly liquid investments with
an original maturity of three months or less. They include funds of
approximately $2,808,000 held by the factor as of December 28, 1996.

         Merchandise Inventories.  Merchandise inventories are stated at the
lower of cost (first-in, first-out method) or market. Inventory cost includes
applicable design and development costs as of December 30, 1995.

         Property and Equipment. Property and equipment is stated at cost.
Depreciation is calculated using the straight line method over the estimated
useful life of the respective assets, which range from five to seven years. The
cost of leasehold improvements is amortized over the estimated useful life of
the asset or the applicable lease term, whichever is less. (See Note 3).

                                      F-6
<PAGE>   28
         Revenue Recognition.  Revenue from the sale of merchandise and private
label commissions is recognized upon shipment to the customer, sales are
recognized net of returns and allowances.

         Net Income (Loss) Per Share. Net income (loss) per share is based on
the weighted average number of shares of common stock and common stock
equivalents outstanding during the year as calculated under the treasury stock
method.

         Financial Instruments.  The fair value of the Company's financial
instruments approximates their carrying values.

         Reclassifications.  Certain 1995 financial statement amounts have been
reclassified to conform with the 1996 presentation.

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

         Long-Lived Assets - In March 1995, the Financial Accounting Standards
Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement is effective
for fiscal years beginning after December 15, 1995. The adoption by the Company
of such standard in 1996 had no material effect on the financial statements.

         Stock-Based Compensation - In October 1995, the FASB issued SFAS No.
123, "Accounting for Stock-Based Compensation," which is effective for the
Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures in
annual financial statements of stock-based compensation arrangements with
employees and encourages (but does not require) compensation cost to be measured
based on the fair value of the equity instrument awarded. Companies are
permitted, however, to continue to apply Accounting Principles Board (APB)
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock based compensation awards to employees and will make the
required disclosure of the pro forma effect on net income and earnings per share
in its notes to the annual consolidated financial statements. The Company has
not granted any stock options during 1996 and 1995 and the pro forma disclosure
is not required at December 31, 1996.

NOTE 2 - FACTORING AGREEMENT

         In March 1994, the Company entered into a new factoring and financing
arrangement (the "Agreement") with a bank (the "factor") which provides
factoring services, advances and letters of credit to support on-going
operations. Under the terms of the Agreement, the Company can borrow up to the
lesser of $10 million or the sum of (i) up to 80% of eligible credit approved
receivables plus (ii) the lesser of (a) the sum of (1) up to 30% of eligible
inventory in the United States plus (2) 30% of the first cost of eligible
finished goods being imported under letters of credit and eligible in transit
finished goods inventory imported on open account and consigned to the financial
corporation or (b) $9.5 million, less certain reserves. Subsequent to December
31, 1994, the percentage of eligible credit approved receivables against which
the Company can borrow was reduced from 80% to 75% subject to a monthly
valuation of a three month moving average computation whereby the percentage
could be increased to 80%. In addition, eligible recourse receivables added to
the borrowing base formula. The Company assigned all of its trade

                                      F-7
<PAGE>   29
receivables under the Agreement. Approximately 85% of trade receivables are sold
on a non-recourse basis. For those receivables sold on recourse basis, the
Company either obtains credit insurance, requires cash deposits or receives
letters of credit payable to the Company. The borrowing rate is prime plus 1.25%
unless the Company is in an overadvance position, when the borrowing rate is
prime plus 2.25% (prime rate at December 28, 1996 was 8%. The factor commission
rate is 0.75%. Overadvances under the Agreement are available at the sole
discretion of the factor. In order to enable the Company to use such overadvance
availability, a principal shareholder and executive officer executed a personal
guaranty for up to $500,000 of the overadvance facility in the form of
collateral assigned to the factor. If the Company is not in an overadvance
position for 90 consecutive days commencing March 13, 1995, the factor will
cancel and return the guaranty and collateral at the request of such principal
shareholder and executive officer. In January 1997, the personal collateral was
returned to this executive officer. The factor has a security interest in
substantially all of the Company's tangible and intangible assets. The Agreement
which is payable on demand expires March 7, 1997.

NOTE 3 - PROPERTY AND EQUIPMENT

         Property and equipment consists of the following:
<TABLE>
<CAPTION>
                                                                DECEMBER 30,
                                                                    1995
                                                                ------------
                                                               (IN THOUSANDS)

<S>                                                              <C>
         Furniture, fixtures and equipment                       $    926
         Leasehold improvements                                     1,172
                                                                 --------

                    Total                                           2,098

         Accumulated depreciation and amortization                 (1,517)
                                                                 --------
                    Property and equipment, net                  $    581
                                                                 ========
</TABLE>

         As the property and equipment is no longer producing revenue (See Note
1), all property and equipment has been written off at December 28, 1996. A
charge of approximately $280,000 has been recorded.

NOTE 4 - LONG-TERM OBLIGATIONS AND COMMITMENTS

         The Company is committed under long-term noncancelable operating leases
for the use of its office, showroom, retail locations and equipment. Certain
leases require payment of various expenses incidental to the use of the property
and contain escalation clauses and/or provisions for additional rent based on
percentages of sales. Rent expense under these operating leases was $256,000,
$435,000 and $452,000 for 1996, 1995 and 1994, respectively.

                                      F-8
<PAGE>   30
         The aggregate minimum annual payments under noncancelable leases in
effect at December 28, 1996 were as follows:
<TABLE>
<CAPTION>
                                                          OPERATING
                                                           LEASES
                                                           ------
                                                       (IN THOUSANDS)
<S>                                                        <C>
         1997                                              $ 248
         1998                                                 84
                                                           -----

         Total minimum lease commitments                   $ 332
                                                           =====
</TABLE>

         On May 3, 1993, the Company entered into an employment agreement with
an executive officer through April 30, 1997. Under such agreement, the Company
issued 100,000 shares of restricted stock which vest 33,333 shares on each of
April 30, 1994, 1995 and 1996. The restricted shares were included in the
calculation of weighted average shares outstanding for the years ended December
28, 1996, December 30, 1995 and December 31, 1994.

         The employment agreement also granted the executive the option to
purchase 500,000 shares of common stock under the Company's 1991 Stock Option
Plan (Note 7) at $1.50 per share. The difference between the fair market value
at the date of the grant and the exercise price of $1.50 per share plus the fair
market value of the restricted shares was recognized as deferred compensation
over the term of the employment agreement. On November 9, 1994, the Company
canceled the option to purchase 500,000 shares of common stock and granted a new
option to purchase 500,000 shares of common stock under the Company's 1991 Stock
Option Plan at $.25 per share. The difference between the fair market value at
the date of the new grant and the exercise price of $.25 per share was also
recognized as deferred compensation over the remaining term of the employment
agreement. The employment agreement provides for an acceleration of the exercise
dates under certain conditions. These conditions were met and the total value of
the deferred compensation associated with the options were charged to income.
The aggregate commitment for future salaries under the employment agreement was
approximately $96,000 at December 28, 1996.

NOTE 5 - OTHER INCOME (EXPENSE)

         Other income (expense) consists of the following:
<TABLE>
<CAPTION>
                                              DECEMBER 28,      DECEMBER 30,        DECEMBER 31,
                                                  1996              1995                1994
                                                  ----              ----                ----
                                                               (IN THOUSANDS)

<S>                                             <C>               <C>                 <C>
           Interest income                      $      -          $      -            $   55
           Interest expense                         (641)           (1,045)             (497)
           Other                                     (82)             (458)              (23)
                                                --------          --------            ------

                      Other expense             $   (723)         $ (1,503)           $ (465)
                                                ========          ========            ======
</TABLE>


                                      F-9
<PAGE>   31
NOTE 6 - INCOME TAXES

         The provision (benefit) for income taxes for financial reporting
purposes differs from the tax provision (benefit) computed by applying the
statutory Federal income tax rate of 34% as follows:
<TABLE>
<CAPTION>
                                                                                       YEAR ENDED
                                                                    -------------------------------------------------
                                                                    DECEMBER 28,     DECEMBER 30,        DECEMBER 31,
                                                                        1996             1995                1994
                                                                        ----             ----                ----
                                                                                                        (IN THOUSANDS)

<S>                                                                  <C>               <C>                 <C>
           Federal income tax benefit at
             the statutory rate                                      $   (472)         $  (1,283)          $ (1,288)
           State income taxes, net of federal benefit                     (83)              (302)              (227)
           Foreign subsidiary activity                                     22                117             (1,062)
           Settlement of shareholder lawsuit not
             subject to tax benefit                                         -                  -              1,440
           Deferred tax assets not utilized                               533              1,468              1,137
                                                                     --------          ---------           --------
           Provision (benefit) for income taxes                      $      -          $       -           $      -
                                                                     ========          =========           ========
</TABLE>

         The components of the net deferred tax benefit are as follows:

<TABLE>
<CAPTION>
                                                                    DECEMBER 28,      DECEMBER 30,        DECEMBER 31,
                                                                        1996              1995                1994
                                                                        ----              ----                ----
                                                                            (IN THOUSANDS)

<S>                                                                  <C>               <C>                 <C>
           Fixed assets                                              $    418          $     393           $    260
           Inventory                                                       91                658                257
           Allowance for doubtful accounts                                455                401                180
           Net operating loss carryforwards                             8,267              7,442              5,763
           Accrued expenses                                                 -                 10                  -
           Other                                                            2                336                221
                                                                     --------          ---------           --------
                                                                        9,233              9,240              6,681
           Valuation allowance                                         (9,233)            (9,240)            (6,681)
                                                                     --------          ---------           --------
           Net deferred tax benefit                                  $      -          $       -           $      -
                                                                     ========          =========           ========
</TABLE>

         The Company has net operating loss carryforwards of approximately $20.5
million for Federal income tax purposes expiring between 2007 and 2011.

         As a result of an examination by the Internal Revenue Service (the
"Service"), the Company was assessed an additional federal income tax liability
for the 1989 fiscal year relating to the reclassification of certain executive
compensation as a non-deductible dividend. In 1996, the Company has paid
approximately $168,000 for federal and state income taxes plus interest and
penalties. This amount was previously accrued.

NOTE 7 - SHAREHOLDERS' EQUITY

         1991 Stock Option Plan. In September 1991, the Board of Directors
approved the 1991 Stock Option Plan (the "1991 Plan"), which allows for the
grant of incentive stock options (as defined in Section 422 of the Internal
Revenue Code) to employees and nonstatutory stock options to both employees and

                                      F-10
<PAGE>   32
outside Directors. The Board of Directors had reserved 500,000 shares of Common
Stock for issuance under the 1991 Plan. In May 1993, the Board of Directors
reserved an additional 1,000,000 for issuances of shares under the 1991 Plan.
Stock options intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code are granted to employees at prices not less than
the fair market value of the common stock on the date of grant. As discussed in
Note 4 above, the 1991 Plan permits and the Company has granted, from time to
time, non-statutory stock options at exercise prices less than the fair market
value of the common stock on the date of grant. The 1991 Plan specifies that the
Company's outside Directors are to receive a stock option grant of 5,000 shares
on the date first elected to the Board and an additional 5,000 shares each year
thereafter. Such options are granted at the fair market value of the common
stock on the date of grant, vest over four years, and are exercisable only while
the outside Director remains a Director. The 1991 Plan also permits the Company
to grant rights to purchase common stock at a price which is at least 50% of the
fair market value of the common stock on the date of grant. The offer of a right
must be accepted within six months of its grant by the execution of a restricted
stock purchase agreement between the Company and the offeree and the payment of
the purchase price of the shares. As of December 28, 1996, no rights have been
granted. On February 24, 1993, the Compensation Committee of the Board of
Directors (the "Committee") authorized a stock option exchange program covering
224,000 stock options with exercise prices of $5.25 to $9.375 per share. Under
the terms of the stock option exchange program, 224,000 new options were issued
at an exercise price of $3.25 per share, the fair market value of the Company's
shares on the date of the grant. On November 9, 1994, the Committee authorized a
stock option exchange program covering 215,000 stock options with exercise
prices of $2.63 per share. Under the terms of the stock option exchange program,
215,000 new stock options were issued at an exercise price of $1.00 per share,
the fair market value of the Company's shares on the date of the grant. Total
activity for the 1991 Stock Option Plan for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 was as follows:
<TABLE>
<CAPTION>
                                                     SHARES              PRICES
                                                     ------              ------

<S>                                                 <C>            <C>
     Outstanding, January 1, 1994                    840,000       $ 1.50  -  22.50

     Options granted                                 747,500       $  .25  -   2.65
     Options canceled                               (815,000)      $ 1.50  -   2.63
                                                   ---------
     Outstanding, December 31, 1994                  772,500       $  .25  -  22.50

     Options exercised                              (100,000)      $  .25  -   2.65
                                                   ---------
     Outstanding, December 30, 1995                  672,500       $  .25  -  22.25

     Options exercised                               (78,000)      $ 1.00  -   2.42
                                                   ---------
     Outstanding, December 28, 1996                  594,500       $  .25  -  22.25
                                                   =========       ================
</TABLE>

         Employee Stock Purchase Plan. In September 1991, the Board of Directors
approved the 1991 Employee Stock Purchase Plan and reserved 150,000 shares of
common stock for issuance under this plan. During 1996, 1995 and 1994, employees
purchased 17,686, 34,654 and 7,998 shares, respectively, of common stock through
payroll deductions. Through December 28, 1996, 88,915 shares had been issued
under this plan.

NOTE 8 - MAJOR CUSTOMERS

         One customer accounted for approximately 11% of gross sales during 1996
and 11% of gross sales during 1995 (a different customer than 1996). In
addition, certain of the Company's customers are under

                                      F-11
<PAGE>   33
common ownership. During 1996 and 1995, one department store group accounted for
approximately 9% and 11% of the Company's net revenue.

NOTE 9 - RELATED PARTY TRANSACTIONS

         In August 1993, the Company signed a one-year promissory note to its
former joint venture partner in the amount of $1.8 million, plus interest at six
percent, for payment of such obligation. At January 1, 1994, the balance of the
note payable was $1.189 million. During 1994, the Company repaid $999,000 of the
note payable and recognized income related to forgiveness of the remaining of
$190,000.

         During 1995, a principal shareholder and executive officer guaranteed a
portion of the Company's overadvance facility with its factor (Notes 1 and 2).

         On December 30, 1995, the Company had a receivable from certain
shareholders related to the reimbursement of a liability for certain federal and
state income taxes plus interest and penalties (Note 6). Such debt was fully
reserved during 1996.

NOTE 10 - ADDITIONAL STATEMENTS OF CASH FLOWS INFORMATION

         Total cash paid for interest is as follows:
<TABLE>
<CAPTION>
                                                                                        YEAR ENDED
                                                                    -------------------------------------------------
                                                                    DECEMBER 28,       DECEMBER 30,      DECEMBER 31,
                                                                        1996               1995              1994
                                                                        ----               ----              ----
                                                                                      (IN THOUSANDS)

<S>                                                                   <C>              <C>                <C>
           Interest                                                   $   641          $    945           $    465
                                                                      =======          ========           ========
</TABLE>

         Noncash financing activities:

         Conversion of indebtedness of $2,000 into shares of common stock (see
Note 13).

NOTE 11 - SETTLEMENT OF SHAREHOLDER LAWSUIT

         On April 27, 1992, a class action lawsuit was filed against the Company
and certain of its present directors and officers and the managing underwriters
of the Company's initial public offering for alleged violations of federal
securities laws and state common law. The complaint sought unspecified actual
and punitive damages, costs and attorney's fees on behalf of purchasers of the
Company's common stock during the period from December 4, 1991 through April 24,
1992. Similar follow-on suits, containing virtually identical allegations, were
filed by six other plaintiffs. The district court ordered consolidation of all
of the complaints into one class action.

         On August 1, 1994, the district court entered final judgment approving
the settlement and dismissing the lawsuit. Under the terms of the settlement,
the claims against the Company and other defendants were dismissed without any
admission or presumption of liability or wrongdoing. A settlement fund
consisting of $6.25 million in cash and 595,000 shares of the Company's Common
Stock was established. The Company contributed $2.15 million in cash into the
fund in March 1994 and the Company's director's and officer's liability
insurance carrier contributed $4.1 million into the fund in August 1994. In
October 1995, the Company contributed 595,000 shares of Common Stock into the
fund and the escrow agent distributed the shares to the claimants.

                                      F-12
<PAGE>   34
NOTE 12 - DISCONTINUED OPERATIONS

         In the first quarter of 1993, the Company signed an agreement,
effective May 1, 1993, to transfer its apparel division to AMG Apparel Ltd.
("AMG"), an apparel and licensing company located in Los Angeles. In exchange
for the use of the SAM & LIBBY name, the Company was to receive a royalty based
on AMG's sales of Sam & Libby apparel. The Company received no royalty revenue
in 1994. During 1994, AMG stopped paying its royalty obligations. The Company
has commenced legal action to regain the rights to its apparel merchandise. In
connection with the transfer of the apparel division to AMG, the Company closed
its Hong Kong office in 1993. The Company incurred certain personnel and other
expenses in connection with the discontinuance of the apparel business.

NOTE 13 - COMPOSITION AND CONVERSION AGREEMENT

         As of June 26, 1996, the Company had approximately $4.9 million of
accounts payable with two of its major vendors. On that date, the Company
entered into an agreement with those vendors whereby the vendors agreed to
forgive approximately $1.3 million of indebtedness and convert approximately
$2.0 million of indebtedness to 2.6 million shares of common stock, $.001 par
value, at a conversion debt purchase price of $.75 per share. The remaining
aggregate debt due to these vendors of approximately $1.6 million was paid in
the quarter ended September 28, 1996.


                                      F-13
<PAGE>   35
NOTE 14 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                        ------------------------------------------------------------
                                                           MARCH 30,     JUNE 29,      SEPTEMBER 28,    DECEMBER 28,
                                                             1996          1996            1996             1996
                                                             ----          ----            ----             ----
                                                                                (IN THOUSANDS)

<S>                                                     <C>             <C>            <C>               <C>
           Net revenue                                  $   11,957      $   5,353      $   7,034         $    (707)
           Gross profit (loss)                               3,643           (111)            24              (785)
           Net income (loss) from continuing
             operations before income taxes                    606         (2,767)         2,448(3)         (1,674)(1)
           Net income (loss)                            $      606      $  (2,767)     $   2,948(3)      $  (1,674)
                                                        ==========      =========      =========         =========
           Net income (loss) per share                  $     0.05      $   (0.24)     $    0.18         $   (0.10)
                                                        ==========      =========      =========         =========

                                                                              THREE MONTHS ENDED
                                                        ------------------------------------------------------------
                                                           APRIL 1,       JULY 1,      SEPTEMBER 30,    DECEMBER 30,
                                                             1995          1995            1995             1995
                                                             ----          ----            ----             ----
                                                                                (IN THOUSANDS)

           Net revenue                                  $   10,459      $  11,772      $  12,688         $   3,836
           Gross profit (loss)                               3,132          3,562          4,675            (2,100)(1)
           Net income (loss) from continuing
             operations before income taxes                    356            505            662            (5,296)(1)
           Net income (loss)                            $      356      $     505      $     632         $  (4,966)
                                                        ==========      =========      =========         =========
           Net income (loss) per share                  $     0.03      $    0.04      $    0.06         $   (0.46)
                                                        ==========      =========      =========         =========

                                                                              THREE MONTHS ENDED
                                                        ------------------------------------------------------------
                                                          APRIL 2,       JULY 2,       OCTOBER 1,       DECEMBER 31,
                                                            1994          1994            1994              1994
                                                            ----          ----            ----              ----
                                                                                  (IN THOUSANDS)

           Net revenue                                  $   10,087      $   9,514      $  12,628(2)      $   4,312
           Gross profit (loss)                               2,888          1,619          3,587(2)           (440)(1)
           Net income (loss) from continuing
             operations before income taxes                    303         (1,209)           304            (3,187)(1)
           Net income (loss)                            $      303      $  (1,209)     $     304         $  (3,187)
                                                        ==========      =========      =========         =========
           Net income (loss) per share                  $     0.03      $   (0.11)     $    0.03         $   (0.30)
                                                        ==========      =========      =========         =========
</TABLE>
--------
(1) Negative gross profit and net loss in the fourth quarter was primarily due
    to low sales volume, significant allowances that were granted to customers
    and substantial inventory markdowns for unsold inventory.
(2) Included in sales and gross profit is approximately $500, or $.05 per share,
    resulting from the recovery (net of expenses) of chargebacks fully reserved
    in prior periods.
(3) Included in net income is an extraordinary gain of $1,288 related to
    forgiveness of debt and a net gain of $4,100 related to the sale of the
    trademarks.

                                      F-14
<PAGE>   36
                                   SCHEDULE II

                             UTOPIA MARKETING, INC.
                          (FORMERLY SAM & LIBBY, INC.)


                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                       ADDITIONS
                                                      BALANCE AT      CHARGED TO
                                                       BEGINNING       COSTS AND                         BALANCE AT
YEAR ENDED                                             OF PERIOD       EXPENSES      DEDUCTIONS(1)      END OF PERIOD
----------                                             ---------       --------      ----------         -------------
<S>                                                    <C>              <C>            <C>                <C>
YEAR ENDED JANUARY 1, 1995:
   Provision for doubtful accounts                     $ 693            $ 2,176        $ 2,088            $ 781

YEAR ENDED DECEMBER 30, 1995:
   Provision for doubtful accounts                     $ 781            $ 2,825        $ 3,065            $ 541

YEAR ENDED DECEMBER 28, 1996:
   Provision for doubtful accounts                     $ 541            $ 2,250        $ 2,716            $  75
</TABLE>

----------
(1) Write-off of doubtful accounts against reserve.

                                      S-1
<PAGE>   37
                                EXHIBIT INDEX
                                -------------
     Exhibit
       No.                      Description
     -------                    -----------

       3.1    Restated Articles of Incorporation.(1)
       3.2    Restated Bylaws.(1)
       4.1    Article III of Restated Articles of Incorporation (see Exhibit
              3.1).(1)
       4.2    Form of Common Stock Certificate.(1)
      10.1    1991 Stock Plan and forms of Incentive Stock Option agreement and
              Nonstatutory Stock Option Agreement.(1)
      10.2    1991 Employee Stock Purchase Plan.(1)
      10.3    Shareholders Agreement, as amended and restated.(1)
      10.4    Factoring Agreement between Registrant and Republic Factors Corp.
              (1)
      10.5    Form of Indemnification Agreement.(1)
      10.6    S Corporation Termination, Tax Allocation and Indemnification
              Agreement.(1)
      10.7    Merchandise License Agreement between Sam & Libby, Inc. and AMG
              Apparel Ltd. dated as of May 1, 1993.*
      10.8    Facilities and Service Contract dated April 22, 1993 between Sam &
              Libby, Inc. and RML Limited.(2)
      10.9    Employment Agreement dated as of May 3, 1993 between Kenneth
              Sitomer and Sam & Libby, Inc.(3)
      10.10   Agreement, dated as of August 12, 1993, between Lane
              International Trading, Inc., Sam & Libby Taiwan and
              Sam & Libby, Inc.*
      10.11   Promissory Note dated August 12, 1993 from Sam & Libby, Inc. to
              Sam & Libby Taiwan.*
      11.1    Calculation of Earnings Per Share.
      22.1    List of Subsidiaries.
      24.1    Independent Auditors' Consent and Report on Schedules.
      25.0    Power of Attorney (included on page 20).

----------
(1)    Exhibits 3.1, 3.2, 4.1, 4.2, 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 are
       incorporated by reference to exhibits filed with the Company's
       Registration Statement on Form S-1 (No. 33-43424) filed October 18, 1991,
       Amendment No. 1 thereto filed November 7, 1991, Amendment No. 2 thereto
       filed November 25, 1991 and Amendment No. 3 thereto filed December 4,
       1991, which Registration Statement became effective December 4, 1991.
(2)    Exhibit 10.8 is incorporated by reference to Exhibit 10.9 of the
       Company's Quarterly Report on Form 10-Q for the quarter ended July 3,
       1993.
(3)    Exhibit 10.9 is incorporated by reference to Exhibit 10.10 of the
       Company's Quarterly Report on Form 10-Q for the quarter ended July 3,
       1993.
*      Previously filed.