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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-K

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

For the fiscal year ended December 31, 1996       Commission file number 0-19596

                             SLM INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

                                   ----------

       DELAWARE                                          13-36-32297
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

C/O MASKA U.S., INC., 77 ROUTE 25, PIERSON INDUSTRIAL PARK, BRADFORD VT   05033
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (518) 773-4401

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

                                                           NONE

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

                                                          COMMON STOCK,
                                                          PAR VALUE $.01

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 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 statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [  ]

Aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 14, 1997 was $1,168,908.

As of April 14, 1997, 6,500,000 shares of the Registrant's Common Stock, $.01
par value per share, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12 and 13 are incorporated by reference to the SLM International,
Inc. Proxy Statement for the 1997 Annual Meeting of Stockholders to be held on
June 18, 1997 into Part III of this Form 10-K. (A definitive proxy statement
will be filed with the Securities and Exchange Commission within 120 days after
the close of the fiscal year covered by this Form 10-K.)

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<PAGE>


                                 TABLE OF CONTENTS
                                                                            PAGE
                                                                            ----
                                     PART I

Item  1. Business ..........................................................   1

Item  2. Properties ........................................................   9

Item  3. Legal Proceedings .................................................  10

Item  4. Submission of Matters to a Vote of Security Holders ...............  11


                                     PART II

Item  5. Market for Registrant's Common Equity and Related Stockholder 
         Matters ...........................................................  11

Item  6. Selected Financial Data ...........................................  13

Item  7. Management's Discussion and Analysis of Financial Condition and 
         Results of Operations .............................................  14

Item  8. Financial Statements and Supplementary Data .......................  19


Item  9. Changes in and Disagreements With Accountants on Accounting and 
         Financial Disclosure ..............................................  53


                                    PART III

Item 10. Directors and Executive Officers of the Registrant ................  53

Item 11. Executive Compensation ............................................  53

Item 12. Security Ownership of Certain Beneficial Owners and Management ....  53

Item 13. Certain Relationships and Related Transactions ....................  53


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ...  54
<PAGE>


                                     PART I

ITEM 1.     BUSINESS
OVERVIEW

The continuing operations of SLM International, Inc. ("SLM") and its
subsidiaries (collectively, the "Company") include the design, development,
manufacturing and marketing of a wide range of sporting goods products. The
Company is a leading manufacturer of hockey and inline skating products marketed
under the CCM brand name, and licensed sports apparel under the CCM and #1
Apparel names. The Company maintains a diversified mix of products to avoid
dependence upon the success of a single product, product category, theme or fad.
The Company has expanded its business since its inception in 1976 through
internal new product development, strategic acquisitions and licensing
arrangements.

The Company believes that it is one of the world's leading manufacturers of
hockey and hockey related products, including hockey uniforms, protective
equipment, hockey, figure and inline skates, street hockey products and licensed
sports apparel. 

The Company sells its products to more than 4,000 customers in North America,
including mass merchandisers, department stores, warehouse clubs, catalogue
retailers, wholesalers, cooperative buying groups, sporting goods shops and
specialty retailers. Outside North America, the Company sells its products in
approximately 30 countries worldwide through a network of international
distributors.

The Company's growth has included acquisitions of stock or certain assets of
companies, often with recognized trademarks, including those of CCM Inc.,
acquired in 1983 (hockey skates and equipment), St. Lawrence Manufacturing
Company Inc., acquired in 1985 (ice skate blades), and #1 Apparel, Inc. and #1
Apparel Canada ("#1 Apparel"), acquired in 1994 (licensed sports apparel).

REORGANIZATION CASE

SLM and six of its subsidiaries (collectively, the "Debtors") filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code (the
"Filing") in the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court") on October 24, 1995 (the "Petition Date"). Since the
Filing, the Debtors operated their businesses in the ordinary course as
debtors-in-possession subject to the jurisdiction of the Bankruptcy Court. The
Bankruptcy Court entered an order authorizing the joint administration of the
Debtors' Chapter 11 cases (the "Chapter 11 Cases"). On September 12, 1996, the
Debtors filed a Chapter 11 Plan of Reorganization and on November 13, 1996, the
Debtors filed a First Amended Chapter 11 Plan of Reorganization as amended from
time to time (the "Reorganization Plan") with the Bankruptcy Court. On January
23, 1997, the Bankruptcy Court confirmed the Reorganization Plan which became
effective on April 11, 1997 (the "Effective Date"). 

In the Chapter 11 Cases, substantially all liabilities as of the Petition Date
are subject to resolution under the Reorganization Plan which was voted upon by
the Company's creditors and stockholders and confirmed by the Bankruptcy Court.
Schedules have been filed by the Company with the Bankruptcy Court setting forth
its assets and liabilities as of the Petition Date as shown by its accounting
records. Creditors holding pre-petition date claims ("Pre-petition Claims")
against the Company were required to file proofs of claim on or before a date
fixed by the Bankruptcy Court (the "Bar Date"). Differences between amounts
shown by the Company and claims filed by its creditors, including claims in
excess of what the Company has previously accrued, have been or will be
investigated and resolved consensually or by order of the Bankruptcy Court. The
ultimate amount and settlement terms for such liabilities are subject to the
Reorganization Plan.

Under the Bankruptcy Code pursuant to the Reorganization Plan, the Company has
elected to assume or reject leases, employment contracts, service contracts and
other executory pre-Petition Date contracts, with Bankruptcy Court approval. The
Company has estimated the ultimate liability which may result from the filing of
claims for any rejected contracts, and provisions have been made for these items
upon the Effective Date of the Reorganization Plan.

Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and with the holders of the Company's 6.76% senior notes
(the "Senior Noteholders") which would have allowed these lenders to accelerate
repayment of these loans.

The Bankrupcty Court authorized the Company to use the cash generated by its
operations to continue to fund its business obligations, and to pay pre-Petition
Date wages, salaries, sales commissions, employee benefits and customs duties,
honor manufacturer's warranties and pay certain non-U.S. pre-Petition Date
liabilities. These various Bankruptcy Court authorizations provided the Company
with cash and liquidity so that it could conduct its operations. Until a
reorganization plan was effective, the Company funded its working capital and
capital expenditure requirements through cash generated by its operations. The
reorganized company (the "Reorganized


                                       1
<PAGE>


Company") expects to meet its working capital and capital expenditure
requirements through secured credit facilities from The Chase Manhattan Bank and
The Chase Manhattan Bank of Canada.

On June 26, 1996, the Debtors announced that they entered into an agreement with
representatives of the Debtors' Senior Noteholders and trade and other unsecured
creditors (the "Unsecured Creditors Committee") on a term sheet (the "Term
Sheet") setting forth the material provisions of a Reorganization Plan.
Thereafter, the Debtors and Unsecured Creditors Committee reached an agreement
in principle with assignees of the Debtors' former lenders (the "Secured
Creditor Group") on the terms of the Reorganization Plan. On September 12, 1996,
the Debtors filed with the Bankruptcy Court a proposed Chapter 11 Plan of
Reorganization (the "Proposed Plan"). On September 19, 1996, the Debtors filed
with the Bankruptcy Court a Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code incident to the Proposed Plan. After further negotiations and
term modifications among the Debtors and their creditor constituencies, on
November 13, 1996, the Debtors filed with the Court the Reorganization Plan and
the First Amended Disclosure Statement Pursuant to Section 1125 of the
Bankrupcty Code incident to the Reorganization Plan. On November 19, 1996, the
Bankruptcy Court approved the adequacy of the First Amended Disclosure Statement
as modified in open court (the "Disclosure Statement"). On January 23, 1997, the
Bankruptcy Court entered an order confirming the Reorganization Plan as
modified, the effectiveness of which was contingent upon, among other things,
the completion of a secured credit facility. The Reorganization Plan represents
the culmination of management analyses and negotiation amongst representatives
of principal parties in interest regarding the best means to maximize and to
allocate value to the Debtors' creditors and stockholders in accordance with
their legal and contractual rights and priorities with due regard to the
potential causes of action and claims that could be asserted against and by
certain creditors. Upon the satisfaction of all conditions precedent to the
occurrence of the Effective Date, the Reorganization Plan was declared effective
on April 11, 1997.

Under the Reorganization Plan, among other things:

o    The Debtors' secured creditors received $44.2 million in cash, $29.5
     million principal in new senior notes (the "New Senior Notes") and
     2,470,000 shares of new common stock (the "New Common Stock") of the
     Reorganized Company, in exchange for approximately $108.0 million of
     secured and unsecured indebtedness (which amount includes the secured
     creditors estimate of post-filing interest and expenses). The 2,470,000
     shares of New Common Stock represented (before dilution) 38.0% of the
     ownership of the Reorganized Company. The lenders sold such shares to
     Wellspring Associates L.L.C. on the Effective Date. The New Senior Notes
     have a term of seven years with principal payments beginning in the fifth
     year. Interest thereon is due and payable semi-annually at 14.0% (including
     4.0% payable in kind ("PIK"), with such PIK interest reduced permanently if
     the Company achieves certain earnings levels established in the
     Reorganization Plan). The New Senior Notes are pre-payable at 101% of
     principal plus accrued interest, are collateralized by a lien on
     substantially all of the Reorganized Company's assets, subordinate only to
     the Company's new secured credit facilities, and have covenants,
     representations and other terms customary in instruments of this nature.

o    The Debtors' unsecured creditors received: 4,030,000 shares of New Common
     Stock representing, at the time of issuance, 62.0% of the distributed
     equity in the Reorganized Company, subject to dilution upon the exercise of
     warrants distributed to equity security holders and stock options which may
     be issued to the Company's officers and key personnel (up to 15.0% of the
     New Common Stock at varying exercise prices), in exchange for approximately
     $120.0 million of unsecured indebtedness. For purposes of the
     Reorganization Plan, the New Common Stock was valued at approximately
     $10.16 per share.

o    The Company's equity security holders (who held 18,859,679 shares of Common
     Stock plus the 1,000,000 shares to have been issued pursuant to the
     settlement of a securities litigation lawsuit) received a total of 300,000
     5-year warrants to purchase an aggregate of 300,000 shares of New Common
     Stock at an exercise price of $16.92 per share. In addition, the warrant
     holders have the option to receive an aggregate payment of $0.5 million
     upon cancellation of such warrants in connection with a sale of the
     Reorganized Company for more than $140.0 million.

The Reorganization Plan also provides for other terms including: structured
settlements with Fleet Credit Corporation (in connection with its claims arising
from equipment financing), NHL Enterprises, Inc. and its affiliates (in
connection with their claims arising from royalty obligations under licenses
with the Company and alleged infringement of their property) and with the
lessors under certain leases of real property (which lessors were former
officers and directors of the Company); and the incorporated consent decree
entered in Vermont Superior Court by agreement with Maska U.S., Inc. ("Maska");
and an overall structured settlement among and between all of the creditor
classes which results in, among other things, the recoveries described above for
the secured creditors and unsecured creditors collectively as well as an
intra-creditor structured recovery resulting (depending on the ultimate
resolution of disputed claims) in the Company's former Senior Noteholders
realizing approximately


                                       2
<PAGE>


40.9% on their claims, Maska's unsecured creditors realizing approximately 56.6%
on their claims and the unsecured creditors of the other Debtors realizing
approximately 31.9% on their claims.

FRESH-START ACCOUNTING (UNAUDITED)

The Company's financial statements following its emergence from bankruptcy will
not be comparable to the historical financial statements presented herein, which
do not reflect the Reorganization Plan. The Company has set forth below
unaudited pro forma condensed consolidated financial statements that reflect the
Reorganization Plan as if it has occurred on the dates specified therein.

The Company's unaudited pro forma condensed consolidated financial statements
have been prepared in accordance with the requirements of Statement of Position
90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code ("SOP 90-7"). Following emergence from bankruptcy, the Reorganized Company
will apply fresh-start reporting in accordance with SOP 90-7.

When the Reorganized Company implements fresh-start reporting, the value of the
Reorganized Company will be allocated to the entity's net assets in conformity
with the procedures specified by Accounting Principles Board Opinion No. 16
Business Combinations. As a result, it is anticipated that adjustments to the
carrying values of the Company's assets and liabilities will be required to
reflect the terms of the Reorganization Plan. SOP 90-7 requires a determination
of the Company's reorganizational value, which represents the fair value of all
of the Company's assets and liabilities, and an allocation of such values to the
assets and liabilities (excluding deferred taxes) based on their relative fair
values with the excess in reorganizational value over market values recorded as
an intangible asset. The application of SOP 90-7 results in the creation of a
new reporting entity having no retained earnings or accumulated deficit. The
Company will implement fresh-start reporting as of April 11, 1997. Accordingly,
the estimated effects of fresh-start reporting reflected in the unaudited pro
forma information are subject to change.

For the purpose of the Reorganization Plan, the reorganizational equity value
was estimated to be $65.6 million, based in part on management's estimates of
future operating results. Reorganizational value necessarily assumes that the
Reorganized Company will achieve its estimated future operating results in all
material respects. If such results are not achieved, the value of the
Reorganized Company could be materially different.

The unaudited pro forma condensed consolidated financial information and
accompanying notes should be read in conjunction with the Company's historical
financial statements and the notes thereto apearing elsewhere herein. The
unaudited pro forma condensed consolidated financial statements are presented
for informational purposes only and do not purport to represent what the
Reorganized Company's financial position or results of operations would actually
have been if the consummation of the Reorganization Plan had occurred on such
dates, or to project the Reorganized Company's financial position or results of
operations at any future date or for any future period. The unaudited pro forma
condensed consolidated financial statements contain, in the opinion of
management, all adjustments necessary for a fair presentation thereof.


                                       3
<PAGE>


                 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                                December 31, 1996
                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>

ASSETS                                            ACTUAL      ADJUSTMENTS     PRO FORMA
                                              ------------------------------------------
<S>                                              <C>            <C>          <C>
    Cash                                         $ 35,589       $(34,949) a  $    640
    Other  current assets                          76,438            144  b    76,582
                                              ------------------------------------------
           Total current assets                   112,027        (34,805)      77,222
         Property, plant and equipment             12,817         (1,924) c    10,893
         Intangible and other assets, net              81         41,804  d    41,885
                                              ------------------------------------------
           Total assets                          $124,925       $  5,075     $130,000
                                              ==========================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
   Short term debt                               $              $  5,100  e  $  5,100
   Accounts payable and accrued liabilities        15,945          8,246  f    24,191
   Long term debt, current portion                    369          1,127  g     1,496
   Current portion of liabilities subject to
     compromise under reorganization               
     proceedings                                   45,035        (45,035) h

                                              ------------------------------------------
      Total current liabilities                    61,349        (30,562)      30,787
    Long-term debt                                                33,010  g    33,010
    Other liabilities                                 601                         601
    Liabilities subject to compromise             
      under reorganization proceedings            160,164       (160,164) h
                                             
                                              ------------------------------------------
           Total liabilities                      222,114       (157,716)      64,398
                                              ------------------------------------------

    Stockholders' equity (deficit)                (97,189)       162,791  i    65,602
                                              ------------------------------------------
           Total liabilities and
             stockholders' equity (deficit)      $124,925       $  5,075     $130,000
                                              ==========================================
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma condensed
consolidated financial statements.

The following is a brief description of the adjustments made in preparing the
Pro Forma Condensed Consolidated Balance Sheet (unaudited). 

a. To reflect $44,049 paid out in accordance with the Reorganization Plan, net
of $9,100 borrowed under new credit facilities.

b. To reflect primarily the distribution of Net assets of discontinued
operations pursuant to the Reorganization Plan.

c. To reflect decrease resulting from facility reorganizations.

d. To record excess of identifiable asset value as a result of fresh-start
reporting, including principally a valuation associated with the Company's
trademarks.

e. To record borrowings under new credit facilities.

f. To record accounts payable and accrued liabilities incurred pursuant to the
Reorganization Plan.

g. To record current portion of long-term debt under new credit facilities, New
Senior Notes and other long-term debt incurred pursuant to the Reorganization
Plan. 

h. To eliminate liabilities in accordance with the Reorganization Plan. The
Reorganization Plan will result in an extraordinary gain on debt forgiveness of
approximately $57,000. 

i. To reflect fresh-start reporting and the new equity structure of the
Reorganized Company pursuant to the Reorganization Plan.


                                       4
<PAGE>


          PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      For the year ended December 31, 1996
                                   (Unaudited)
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                ACTUAL     ADJUSTMENTS     PRO FORMA
                                              ------------------------------------------
<S>                                             <C>         <C>            <C>
Net sales                                       $ 140,321   $              $ 140,321
                                              ------------------------------------------

Operating (loss) income                            (2,156)      1,533   a       (623)

Debt related fees                                   7,432      (7,432)  b

Other expense (income), net                            27                         27

Interest expense                                    9,555      (3,825)  c      5,730
                                              ------------------------------------------

(Loss) income from continuing operations          
   before income taxes                            (19,170)     12,790         (6,380)

Income taxes                                         (448)        299           (149)

Net (loss) from continuing operations           $ (18,722)  $  12,491      $  (6,231)
                                              ==========================================

Net (loss) per share from continuing
   operations                                   $  (0.99)                  $   (0.96)
                                              ==========================================

Weighted average common and common
   equivalent shares outstanding              18,859,679                   6,500,000  d
                                              ==========================================
</TABLE>

The accompanying notes are an integral part of the unaudited pro forma condensed
consolidated financial statements.

The Pro Forma Condensed Consolidated Statement of Operations (unaudited)
adjustments have been computed assuming the Effective Date was January 1, 1996
and includes adjustments which give effect to the events that are directly
attributable and expected to have a continuing impact on the Reorganized
Company.

The following is a brief description of the adjustments made in preparing the
Pro Forma Condensed Consolidated Statement of Operations (unaudited).

a. To reflect amortization of the intangibles associated with fresh-start
reporting of $2,633, net of $4,166 of costs related to restructuring. 

b. To reflect adjustments for costs incurred by the Company outside of its
continuing operations. 

c. To reflect incremental interest expense associated with the Company's new
credit facilities and New Senior Notes of $5,730, offset in part by reduced
interest resulting from the debt forgiveness in accordance with the
Reorganization Plan. 

d. To reflect the equity structure of the Reorganized Company pursuant to the
Reorganization Plan.


                                       5
<PAGE>


DISCONTINUED OPERATIONS

In December 1994, the Company determined that it would hold its investments in
its toy and fitness businesses operated primarily by its Buddy L Inc. and Buddy
L Canada Inc. subsidiaries (collectively "Buddy L") for sale. Accordingly, the
results of operations of these businesses have been accounted for as
discontinued operations for all periods in the accompanying consolidated
financial statements. On March 2, 1995, Buddy L Inc., a wholly-owned subsidiary
of the Company, filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the District of Delaware. On May 9, 1995,
the Company accepted the bid to sell certain assets and liabilities of the Buddy
L toy business to Empire of Carolina, Inc. The bid was approved by the
Bankruptcy Court on May 19, 1995 and the transaction closed on July 7, 1995. The
Bankruptcy Court also approved the sale of Buddy L's fitness business which was
completed on June 30, 1995. At December 31, 1994, the Company recorded a loss of
$11.3 million, net of income taxes, for the disposition of its discontinued
operations, including the estimated 1995 operating loss through the disposition
date. As a result of the finalization of the sale of the Buddy L toy and fitness
businesses, the terms of which changed substantially from those previously
proposed; a change in the anticipated allocation of the sale proceeds amongst
the various creditors (see Settlement Agreement below) and the liquidation of
the remaining Buddy L assets (primarily accounts receivable and real property);
and an increase in estimated phase out costs, an additional loss from
disposition of discontinued operations of $25.6 million was recorded during the
year ended December 31, 1995.

On December 19, 1995, the Bankruptcy Court approved a settlement agreement (the
"Settlement Agreement") in the Smedley Industries, Inc. (f/k/a Buddy L Inc.)
("Smedley") Chapter 11 case among the Company, Smedley, its creditors and the
Company's banks and Senior Noteholders, resolving the allocation of the proceeds
and expenses from the disposition of the Buddy L toy and fitness businesses. A
Chapter 11 plan and a disclosure statement for Smedley were filed and
subsequently amended with the Bankruptcy Court embodying the terms of the
Settlement Agreement. The Chapter 11 plan, as amended, was confirmed by the
Bankruptcy Court on October 3, 1996 and became effective on October 17, 1996.

CONTINUING OPERATIONS

Industry Background

In its annual survey of sports participation, the National Sporting Goods
Association ("NSGA") included among the Top 10 Growth Sports (by percentage
increase) in the U.S. for 1994, inline skating (57.2%) as No. 1, roller hockey
(50.3%) as No. 2 and ice hockey (14.5%) as No. 10. In 1995, inline skating had
grown by 22.6% to 23.9 million participants (No. 3), roller hockey had grown by
43.0% to 3.2 million participants (No. 1), and ice hockey had grown by 29.2% to
2.5 million participants (No. 2). For 1996, although the relevent information is
not yet available, the Company believes that these trends will continue for both
ice and roller hockey, while inline skating will grow at a more moderate rate.
In Canada, a mature hockey market, the World Federation of Sporting Goods
International ("WFSGI") has identified the top 10 growth sports for 1996 - youth
hockey was ranked 8th and old timer hockey 9th.

The Company estimates the worldwide market for ice hockey products at
approximately $750 million in 1996. The Company believes that the popularity of
ice hockey will grow as the National Hockey League ("NHL") continues to expand
into new markets in the U.S., with recent expansions in both California and
Florida and the relocation of existing teams to Texas, Colorado and Arizona. The
U.S. Team victory at the 1996 World Cup Championship and the participation of
NHL players at the 1998 Winter Olympics (for the first time in history) will
also influence the growth of hockey in North America and around the world.

The Sports Marketing Research Group, Inc., an independent market research
company, estimates the worldwide inline, street and roller hockey markets at
approximately $2.0 billion in 1996. This rapidly growing segment is expected to
continue to grow because (i) inline roller skates have a strong appeal to health
and fitness conscious consumers who use the product for physical conditioning
and recreation; (ii) hockey players and alpine and cross-country skiers are
increasingly using the product for off-season training; and (iii) sports such as
inline roller and street hockey as well as long distance and inline speed racing
are becoming increasingly popular. 

The Team Licensing Business Organization estimates the licensed sports products
market in the U.S. and Canada at approximately $10.9 billion in 1996. The market
is divided primarily among five sports leagues: the National Football League
("NFL") ($3.3 billion), Major League Baseball ("MLB") ($1.8 billion), the
National Basketball Association ("NBA") ($2.7 billion), the National Collegiate
Athletic Association ("NCAA") ($2.1 billion) and the NHL ($1 billion).

Strategy

The Company's strategy with respect to hockey products is to maximize the
visibility of the CCM trademark in the NHL and other professional and amateur
hockey leagues. This strategy is based upon the Company's belief that the high
visibility of the CCM trademark leads to greater retail sales of its hockey
products. The CCM trademark


                                       6
<PAGE>


appears on players' helmets, jerseys, pants, gloves and skates. Unlike some of
its competitors, the Company has not generally pursued a strategy of multiple
player endorsements, but rather has concentrated on enhancing its relationships
with the major hockey leagues. The Company has licenses for certain hockey
jerseys with the NHL, the American and Canadian Hockey Leagues and most major
NCAA hockey teams. To complement this strategy, the Company provides both
professional and amateur hockey players with a high level of service and
attention.

The Company's existing sourcing and manufacturing capabilities has allowed it to
launch in January 1997 products such as the new 952 Tacks hockey skates. The 952
Tacks hockey skate features technology such as the new Dynamic Sidewall
Technology outsole which incorporates forefoot and heel wrapping to provide
unmatched support and stability. In addition, the Company has introduced
materials such as Kevlar reinforced nylon, developed with Dupont, new moulded
graphic applications in conjunction with Flex Systems USA and lightweight
composite reinforcement plates with the help of bio mechanical composites. These
partnerships are only a small example of the Company's capabilities to develop
and market the most advanced products. 

Hockey and Figure Skates 

The Company markets a range of hockey and figure skates from professional
caliber premium hockey skates to popular priced figure and recreational hockey
skates. All of these products, including the Tacks line of premium hockey
skates, are sold under the CCM trademark. The Company estimates that during the
1996-1997 season, approximately 38% of NHL players wore its skates. The Company
also manufactures private label skates using specific retailers' brand names, as
well as the CCM trademark. The Company believes that it was the second largest
manufacturer of hockey and figure skates in North America in 1996, based on
units sold. The Company also markets premium hockey skates incorporating
Reebok's Instapump fitting system and technology which is sold using the CCM,
Tacks, Reebok and Instapump trademarks. This technology consists of an air
bladder strategically placed inside the skates which, when inflated, provides a
customized fit. 

The Company believes that it is one of the world's largest manufacturers of
hockey and figure skate blades (based on units sold) with sales of more than one
million pairs per year. The Company's hockey skate blades, which are sold under
the SLM and CCM trademarks, are used by players of all skill levels from novice
to professional. Using its MK trademark the Company manufactures premium quality
figure skate blades, including skate blades for many of the world's most
prominent Olympic and professional figure skaters. 

Hockey Equipment 

The Company manufactures and markets a complete range of hockey helmets, pants,
shin pads, shoulder pads, elbow pads and gloves. All of the Company's protective
equipment is marketed under the CCM trademark. Sub-brands Supra, Ultra and
Powerline, which accompany the CCM trademark, differentiate the product by
quality and price point. The Company estimates that during the 1996-1997 hockey
season approximately 50% of NHL players used its hockey pants, gloves or
helmets. 

Sports Apparel 

Hockey Apparel. Using the CCM trademark, the Company markets a
broad range of hockey apparel, including authentic and replica NHL hockey
jerseys which are sold pursuant to certain license agreements with the NHL. The
Company also manufactures the authentic jerseys that are used by all of the
players in the Canadian Hockey League and most major NCAA hockey teams, as well
as many amateur hockey teams in North America. These authentic and replica
jerseys are sold primarily through retailers. The Company believes that it is
among the world's largest manufacturer of hockey jerseys (authentic, replica and
amateur gamewear) based on total dollars and units sold. 

#1 Apparel. In January 1994, the Company acquired #1 Apparel, the licensed
sports apparel division of K-Products, Inc., an Iowa-based apparel manufacturer.
#1 Apparel manufactures a high quality line of baseball style caps and jackets
using its own unique designs and graphics under licenses from the MLB, NHL,
major colleges and universities and the NCAA. The acquisition included a
manufacturing facility in Ontario, Canada, and all rights to the #1 Apparel
name, trademarks, copyrights and designs. 

Sales and Marketing 

The Company's sporting goods products are sold throughout the world. In North
America, the Company sells to more than 4,000 customers, including independent
sporting goods stores, cooperative buying groups, mass merchandisers, sporting
goods chains, department stores and wholesalers. Internationally, the Company
has exclusive distributors in 30 countries in Europe, South America, Central
America, Africa, Australia and the Far East. Sporting goods products are sold to
certain large customers by the Company's in-house sales staff, while other
accounts are serviced by an extensive network of approximately 55 independent
sales representatives. In 1996, no single account represented more than 10% of
the Company's consolidated net sales of sporting goods. The Company distributes
its sporting goods products from distribution centers in the United States and
Canada.


                                       7
<PAGE>


Retail sales of hockey products are seasonal, with the majority of retail sales
occurring in the third and fourth calendar quarters. The Company believes that
first and second quarter sales of inline roller skate products and #1 Apparel
licensed products reduces the Company's reliance on third and fourth quarter
sales of hockey products.

GENERAL

Backlog

The timing of orders is largely influenced by the degree of consumer demand for
product lines, inventory levels of retailers, marketing strategies, seasonality
and overall economic conditions. The Company's consolidated order backlog for
continuing operations at December 31, 1996 decreased 40% to approximately $11.9
million as compared to December 31, 1995. Product shortages, cancellations,
returns and allowances may reduce the amount of sales ultimately realized from
the fulfillment of backlog orders.

Trademarks, Patents and Licenses 

The principal trademarks used by the Company are listed in the table set forth
below. All are owned by the Company except for the "CCM" trademarks which are
owned by CCM Holdings (1983) Inc., which in turn is 50% owned by the Company
through certain of its subsidiaries, the remaining 50% is owned by an
unaffiliated Canadian bicycle manufacturer. All of the trademarks, including the
"CCM" trademarks, are exclusive and perpetual for the product categories
indicated. All of the trademarks, excluding the "CCM" trademarks, are also
royalty free; the "CCM" trademarks carry a nominal annual fixed fee due to CCM
Holdings (1983) Inc. which is not based on sales.

    ------------------------------------------------------------------------
            Trademarks                           Category
    ------------------------------------------------------------------------
    CCM                        Hockey apparel, hockey equipment, hockey,
                               figure and inline skates and roller hockey
                               equipment

    Tacks, VAKUTACKS           Hockey and inline skates

    Supra, Ultra, Powerline    Hockey pants and protective equipment

    Ultrafil, Airknit,         Hockey apparel
    Suprafil

    # 1 Apparel                Apparel

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

The Company's principal license agreements are listed in the table set forth
below. In general, the license agreements have terms of one to five years and
the Company has usually been able to renew its licenses upon expiration. License
fees and royalties typically range from 5% to 11% of net sales of the licensed
product.

The Company's hockey jersey license with the NHL expires on June 30, 1999. Under
this agreement, the Company has exclusivity for authentic game jerseys for
thirteen teams through June 30, 1997 and for ten teams for the remainder of the
license. The Company is also required to provide to each NHL team a certain
quantity of jerseys free of charge. The cost of these goods, approximately $0.6
million in 1996, is expensed by the Company and recorded in selling, general and
administrative expenses. In addition, the Company has an exclusive license with
the NHL for authentic All Star Game jerseys and authentic and replica practice
jerseys, and non-exclusive licenses for replica jerseys for all teams through
the entire term of the agreement.

The Company has entered into a non-exclusive license agreement with the National
Hockey League Players Association under which the Company may sell authentic
game and replica hockey jerseys bearing the names and numbers of NHL players.

--------------------------------------------------------------------------------
      Licensor                Subject of License                 Categories
--------------------------------------------------------------------------------
National Hockey       NHL team logos and names            Hockey jerseys and
League Enterprises                                        headwear

NHL Players           Players' names and numbers          Hockey jerseys
Association
--------------------------------------------------------------------------------
Manufacturing and Sourcing

North America. The Company manufactures and distributes most of its products in
nine facilities located in Vermont, New Hampshire, Ontario, Quebec and Europe.
Collectively these facilities have capabilities for knitting, cutting, sewing,
embroidery, silk screening, injection and vacuum molding, metal stamping and
plating, and skate and equipment manufacturing. 

During 1997 the Company intends to shut down two of its manufacturing facilities
as part of its on-going effort to streamline manufacturing and distribution
operations. In addition, the Company intends to relocate its U.S. distribution
operations to the Burlington, Vermont area. A disruption resulting in the
shutdown or impairment of 


                                       8
<PAGE>


any of the Company's other manufacturing facilities could adversely affect the
Company. The Company maintains insurance coverage which might mitigate any such
adverse effect.

Foreign. The Company sources products from China, Hong Kong, Korea, Taiwan,
Thailand and the Philippines. The Company's manufacturing facility in Slough,
England manufactures its premium MK figure skate blades. 

No single supplier is responsible for products representing more than 10% of the
Company's consolidated net sales. 

Research and Product Development 

The majority of the Company's sporting goods products are conceived of and
developed at its own facilities, or are developed jointly with third party
inventors. The Company operates research and development facilities in Quebec.
The employees at these facilities include designers, engineers and model makers.
These facilities include woodworking, spray painting, molding and sculpting
capabilities, and have creative services departments which are responsible for
apparel, packaging and catalog design and development. 

Competition 

The sporting goods industry is highly fragmented. The Company competes with
numerous companies in team related sporting goods, equipment and sports apparel.
While the Company is renowned for its high quality and innovative products and
provides high levels of service to its customers, some of its competitors may
have greater financial resources. The Company's major competitors include (i)
with respect to licensed apparel, Russell Corporation, Champion Products Inc.,
VF Corp., Nike, Inc. and Starter Inc., (ii) with respect to hockey equipment,
Bauer Inc. (acquired by Nike Inc. in February 1995) and Karhu Corp., (iii) with
respect to hockey and figure skates, Bauer and Nike, and (iv) with respect to
the inline roller skates market, Rollerblade Inc., First Team Sports Inc.,
Bauer, Variflex Inc. K2, Mission and Nike.

Employees

As of December 31, 1996, the Company's continuing operations employed
approximately 1,190 persons. Approximately 995 are employed in Canada, 150 are
employed in the United States and the balance are employed abroad. None of the
Company's employees in the United States are unionized, while approximately 269
of its employees in Canada are unionized. The Company's current three year
collective bargaining agreement with the union at its St. Jean, Quebec plant
expires in late 1997 and the collective bargaining agreement with the union at
the Company's skate blade manufacturing plant in Beauport, Quebec expires in
April 2000. The Company maintains good relations with these unions.

ITEM 2.        PROPERTIES

The Company believes that its existing manufacturing and distribution facilities
have sufficient capacity to support the Company's business without the need for
significant additional or upgraded equipment or capital expenditures. The
following table summarizes each of the Company's principal facilities for its
operations.

<TABLE>
<CAPTION>
=====================================================================================
                                                                APPROXIMATE   LEASE/
LOCATION                USE                                       SQUARE       OWN
                                                                   FEET
-------------------------------------------------------------------------------------
<S>                     <C>                                       <C>           <C>
UNITED STATES
Bradford, Vermont       Hockey jersey finishing and                55,000       Own
Peterborough, New       distribution                              
Hampshire*              U.S. distribution center and              144,000       Lease
                        administrative offices

CANADA
Beauport, Quebec*       Skate blade manufacturing                 155,000       Lease
St. Jean, Quebec        Hockey equipment and skate manufacturing  138,000       Lease
St. Jean, Quebec        Helmet manufacturing                       53,000       Lease
St. Hyacinthe, Quebec   Hockey apparel knitting                    78,000       Lease
St. Hyacinthe, Quebec   Canadian distribution center and          
                        administrative offices                    180,000       Lease
St. Hyacinthe, Quebec*  Hockey socks knitting                      12,000       Lease
Cap de la Madeleine,
Quebec                  Hockey apparel sewing                      12,000       Lease
Montreal, Quebec        Executive and marketing offices and         
                        showroom                                    8,000       Lease
Mt. Forest, Ontario     Apparel manufacturing                     115,200       Own

EUROPE
Slough, England         Premium figure skate blade                 20,000       Lease
                        manufacturing and distribution              
Paris, France           European sales office                       2,000       Lease
=====================================================================================
</TABLE>
* During 1997 the Company intends to shutdown these facilities as part of its
  on-going effort to streamline manufacturing and distribution operations.


                                       9
<PAGE>


ITEM 3.        LEGAL PROCEEDINGS

A.    ENVIRONMENTAL LITIGATION:

In 1991, the Vermont Department of Environmental Conservation ("VTDEC") notified
the Company that the Bradford, Vermont property operated by its wholly-owned
subsidiary, Maska U.S., Inc. ("Maska"), had been included on the U.S.
Environmental Protection Agency's Comprehensive Environmental Response,
Compensation and Liability Information System and the Vermont Hazardous Sites
List was being evaluated for possible remedial action. Under relevant
environmental laws, Maska, as an owner of the property, was potentially liable
for the entire cost of investigating and remediating the contamination allegedly
emanating from its Bradford property and certain civil penalties.

Maska undertook its own investigation to determine the extent of contamination,
the rate of movement and the concentration of the contaminants, the appropriate
action required for site remediation and the identification of other parties who
should bear a share of the costs of remediation. The Company is seeking recovery
against the former owners and affiliates of the Bradford property and facility
and the owner of an adjacent parcel for the costs of such investigation and
remediation and are currently in negotiations to settle these claims. During
April 1996, Maska and the State of Vermont entered into a consent decree (the
"Consent Decree") setting forth the terms under which Maska has agreed to
remediate specified hazardous materials if, and to the extent, found on the
contaminated property or caused by Maska. The Consent Decree was approved by the
Bankruptcy Court on May 14, 1996 and approved and entered in Vermont Superior
Court on June 20, 1996. The Consent Decree is subject to several conditions,
including ongoing payment by the Company of certain State of Vermont oversight
fees up to a maximum of $0.06 million per year. In addition, the Company paid to
the State of Vermont a civil fine stipulated penalty of $0.25 million. While the
total cost of investigation and remediation cannot be determined until the
investigation required by VTDEC is complete and the extent of the Company's
remedial obligations have been determined, the Company believes that the
remaining costs will be approximately $1.4 million in the aggregate, payable
over the next several years. 

Maska commenced an action in the United States District Court for the District
of Vermont (the "Vermont District Court") entitled Maska U.S. Inc. V. Kansa, et
al., Doc. No. 5:93-CV-309 (the "Insurance Litigation") against nine of its
liability insurers seeking coverage for environmental cleanup costs arising out
of claims brought by the State of Vermont and an adjoining landowner for their
failure to defend or to indemnify Maska with respect to these claims. 

On September 30, 1996, United States Magistrate Judge Jerome J. Neidermeier
issued that certain Magistrate Judge's Report and Recommendation (the
"Magistrate Report"), which analyzes legal issues and recommends that the
Vermont District Court grant Maska's motion for partial summary judgment on the
issue of the duty to defend. The report also recommends that all the insurers'
motions for summary judgment be denied, except for two on certain individual
policies which Maska conceded provide no coverage for its claims. On December 2,
1996, Chief Judge J. Garvin Murtha adopted the Magistrate Report in its
entirety. Various motions for reconsideration of that order and for
certification of the issue for immediate appeal have since been denied. After
the completion of limited pre-trial discovery, the case will be scheduled for
trial. 

Two holders of Maska's unsecured claims have asserted an equitable lien on
Maska's recovery, if any, in the Insurance Litigation and also have commenced an
independent action against the defendant insurance companies pursuant to
Vermont's direct action statute. The Company believes that the asserted
equitable lien is without merit and that the independent direct action violated
the automatic stay pursuant to Section 362 of the Bankruptcy Code. The Company
currently is evaluating its options for legal recourse in these matters. 

In 1992, the owner of a property adjacent to Maska's manufacturing facility in
Bradford, Vermont, filed an action in Vermont Superior Court alleging that its
property has been contaminated as a result of the Company's manufacturing
activities and seeking compensatory and punitive damages under the Vermont
Groundwater Protection Law and various common law theories. During June 1995,
Maska reached a settlement of all claims with the adjacent landowner consisting
of $1.0 million cash (which was paid during July 1995) and a $6.0 million note
bearing interest at 10% payable over five years based on a twenty year
amortization with the balance of principal payable in June 2000. The Company
recorded a provision of $7.0 million for this settlement during the year ended
December 31, 1995.

B.    SECURITIES LITIGATION:

On February 14, 1996, the Company, together with certain of its former officers
and directors, reached a settlement with the plaintiffs in a class action
securities litigation. The settlement provides for the cash payment by the
Company's insurer of $8.8 million on behalf of certain former officers and
directors of the Company who are defendants. In addition, the Company agreed to
issue 1,000,000 shares of its Common Stock which was converted into warrants in
the Reorganization Plan. As a result of the settlement, the Company recorded a
provision of approximately $1.6 million (the market value of 1,000,000 shares of
common stock on the date the 


                                       10
<PAGE>


settlement was agreed to) in the year ended December 31, 1995. During July 1996,
the settlement was approved by the Bankruptcy Court and the U.S. District Court
for the Southern District of New York. Additionally, during August 1996 certain
of the Company's creditors filed an appeal with the Bankruptcy Court with
respect to the Bankruptcy Court's approval of the settlement which has not yet
been resolved but will be dismissed with prejudice in connection with the
Reorganization Plan.

C.    PRODUCT LIABILITY LITIGATION:

A pre-petition personal injury claim involving a spinal injury which was filed
in 1989 has been asserted against the Company for which the Company did not have
sufficient insurance coverage. That claim and its attendant litigation has been
settled and is being submitted to the Bankruptcy Court for approval. The claim
will be treated under the Reorganization Plan pursuant to the terms of the
settlement. The Company is unaware of any other personal injury claims for which
there is not adequate insurance coverage. 

In connection with the claim, American Home Assurance Company ("American Home"),
has commenced a declaratory judgment action against the Company in Massachusetts
District Court in respect of its duty to defend and to indemnify the Company and
an action in Montreal Superior Court in Quebec, Canada to recover defense costs.
The Company filed a response to the declaratory judgment action and a
counterclaim in Montreal Superior Court alleging American Home failed to fulfill
its duty to defend the Company. American Home has alleged that it is entitled to
payment in full for any amounts it recovers against the Company. The Company
believes that American Home's claims and contentions are without merit and, in
any event, would be treated under the Reorganization Plan. In the event that the
Company is required to make such a payment, it anticipates having funds
sufficient to meet any Court-ordered obligation. American Home's
misrepresentation claim against the Company is in the amount of approximately
$0.6 million. 

Other than certain legal proceedings arising from the ordinary course of
business, which the Company believes will not have a material adverse impact on
the financial position, results of operations, or cash flows, there is no other
litigation pending or threatened against the Company.

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

                                      NONE

                                     PART II

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

(A) PRICE RANGE OF COMMON STOCK 

Between May 24, 1995 and April 11, 1997, the Company's old common stock ("Old
Common Stock") traded on the NASD Exchange Bulletin Board ("EBB") under the
symbol "SLMI" (through October 1996) and "SLMIQ" (thereafter), respectively.
Prior to that date, the Company's Old Common Stock was traded on the NASDAQ
Stock Market ("NASDAQ"). The following chart sets forth, for the calendar
periods indicated, the range of closing prices for the Old Common Stock as
reported on NASDAQ and EBB:

                                                HIGH            LOW
                                                ----            ---

             1995  First Quarter                $ 6.50         $ 2.75
                   Second Quarter               $ 3.88         $ 0.94
                   Third Quarter                $ 3.75         $ 1.69
                   Fourth Quarter               $ 3.63         $ 1.00
             1996  First Quarter                $ 2.13         $ 1.06
                   Second Quarter               $ 1.81         $ 0.50
                   Third Quarter                $ 0.88         $ 0.20
                   Fourth Quarter               $ 0.43         $ 0.11
             1997  First Quarter                $ 0.47         $ 0.11

On April 11, 1997, the Effective Date of the Company's Plan of Reorganization,
the Company's Old Common Stock was extinguished and the holders of the Old
Common Stock received a total of 300,000 five year warrants (the "Warrants") to
purchase an aggregate of 300,000 shares of new common stock ("New Common Stock")
at an exercise price of $16.92 per share (subject to adjustments for stock
splits, stock dividends, recapitalization and similar transactions). Each holder
of 67 shares of Common Stock received one Warrant to purchase, for cash, one
share of New Common Stock , with no fractional Warrants issued. On the Effective
Date, the Company issued an aggregate of 6,500,000 shares of newly authorized
common stock, $0.01 par value (as adjusted to take 


                                       11
<PAGE>

account of fractional interest pursuant to the Plan). The Company does not
intend to list the New Common Stock or the Warrants on NASDAQ or a stock
exchange.

(B)   APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

The approximate number of record holders of the Company's Old Common Stock as of
March 31, 1997 was 450. The Company expects that there will be approximately 20
to 30 holders of New Common Stock once all claims have been settled. The Company
did not pay dividends on its Old Common Stock and has no current plans to pay
cash dividends on its New Common Stock in the foreseeable future.


                                       12
<PAGE>


ITEM 6.        SELECTED FINANCIAL DATA

The selected consolidated financial data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes thereto included elsewhere in this Form 10-K. The selected consolidated
financial data as of and for the years ended December 31, 1996, 1995, 1994, 1993
and 1992 are derived from the consolidated financial statements of the Company.

The Company's financial statements following its emergence from bankruptcy will
not be comparable to the historical financial statements contained herein, which
do not reflect the Reorganization Plan. Following emergence from bankruptcy the
Company will apply fresh-start reporting in accordance with Statement of
Position 90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code (" SOP 90-7"). 

In December 1994, the Company determined that it would hold its investment in
its toy and fitness businesses operated by its Buddy L Inc. and Buddy L Canada
Inc. subsidiaries for sale. Accordingly, these businesses have been reported as
discontinued operations for all income statement data presented below. However,
balance sheet data prior to December 31, 1994 has not been restated for these
discontinued operations.

                              SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION(1))
                              YEARS ENDED DECEMBER 31,
                       (in thousands, except per share data)
<TABLE>
<CAPTION>
                                    1996      1995      1994       1993       1992
                                 ----------------------------------------------------
<S>                               <C>       <C>        <C>       <C>         <C>     
INCOME STATEMENT DATA:
Net sales                         $140,321  $160,973   $180,806  $126,034    $ 88,569
Cost of goods sold                  92,613   107,266    113,577    75,104      53,481
                                 ----------------------------------------------------
Gross profit                        47,708    53,707     67,229    50,930      35,088
Gross profit margin (%)               34.0%     33.4%      37.2%     40.4%       39.6%
Selling, general and
   administrative expenses          45,831    59,753     67,031    38,600      25,456
Unusual charges                      4,033    15,471
                                 ----------------------------------------------------
Operating (loss) income             (2,156)  (21,517)       198    12,330       9,632
Debt related fees                    7,432    11,195
Other expense (income), net             27     1,484       (260)     (499)       (450)
Interest expense                     9,555    17,078      6,713     3,356       1,854
                                 ----------------------------------------------------
(Loss) income from continuing
   operations before income
   taxes                           (19,170)  (51,274)    (6,255)    9,473       8,228
Income taxes                          (448)      605        (11)    3,779       2,760
                                 ----------------------------------------------------
(Loss) income from continuing     
   operations                     $(18,722) $(51,879)  $ (6,244) $  5,694    $  5,468
                                 ====================================================
(Loss) income per share from
   continuing operations(2)       $  (0.99) $  (2.75)  $  (0.33) $   0.30    $   0.32
                                 ====================================================
BALANCE SHEET DATA:
Working capital (deficit)          $50,678  $110,088   $(38,360) $ 78,623    $ 83,568
Total assets                       124,925   138,028    192,838   254,283     173,625
Short-term debt, including
   current portion, long-term
   debt and current portion of
   liabilities subject to           
   compromise under
   reorganization proceedings       45,404       702    173,471    79,700      32,376
Long-term debt                                                     16,113      19,452
Liabilities subject to
   compromise under                
   reorganization proceedings      160,164   201,814
Stockholders' (deficit) equity     (97,189)  (78,642)    (6,284)   106,878     97,643
Total shares outstanding at         
   year end(2)                      18,860    18,860     18,860     18,805     18,545
</TABLE>


                                       13
<PAGE>


(1)  On October 24, 1995, SLM International, Inc. and six of its subsidiaries
     filed for relief under Chapter 11 of the United States Bankruptcy Code in
     the United States Bankruptcy Court for the District of Delaware. On January
     23, 1997, the Bankruptcy Court confirmed the Reorganization Plan and the
     Reorganization Plan became effective on April 11, 1997.

(2)  Adjusted for the effect of a three for two stock split in December 1993.

ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
               RESULTS OF OPERATIONS

INTRODUCTION 

On October 24, 1995, SLM International, Inc. and six of its subsidiaries filed
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. The Company and those
subsidiaries chose to seek court protection from creditors in order to conduct
their operations while preparing a reorganization plan. Since the filing, the
Company and those subsidiaries operated their businesses in the ordinary course
as debtors-in-possession subject to the jurisdiction of the Bankruptcy Court.
The Bankruptcy Court also entered an order authorizing the joint administration
of the Debtors' Chapter 11 Cases. On September 12, 1996 the Debtors filed a
Chapter 11 Plan of Reorganization and on November 13, 1996, the Debtors filed a
First Amended Chapter 11 Plan of Reorganization, as amended from time to time
(the "Reorganization Plan"), with the Bankruptcy Court. On January 23, 1997, the
Bankruptcy Court confirmed the Reorganization Plan and the Plan became effective
on April 11, 1997. Disruptions that occurred prior to and which may have been or
may be caused by the Filing will affect the Company's operating performance for
a given period and could continue to affect the Company's results in 1997.

As a result of significant operating losses in its toy and fitness businesses
during 1994, the Company decided in December 1994 that it would hold its
investment in Buddy L for sale. Consequently, these businesses have been
accounted for as discontinued operations. On March 2, 1995, the Company's
wholly-owned subsidiary Buddy L Inc. filed for reorganization under Chapter 11
of the United States Bankruptcy Code. On May 9, 1995, the Company accepted the
bid to sell certain assets and liabilities of the Buddy L toy business to Empire
of Carolina, Inc. The bid was approved by the Bankruptcy Court on May 19, 1995
and the transaction closed on July 7, 1995. The court approved sale of the
fitness business was completed on June 30, 1995. For further information
concerning discontinued operations, see Note 5 to the Consolidated Financial
Statements presented elsewhere herein. 

The following discussion provides an assessment of the Company's results of
continuing operations, financial condition and liquidity and capital resources,
and should be read in conjunction with the Consolidated Financial Statements of
the Company and Notes thereto included elsewhere herein. (All references to
"Note(s)" refer to the Notes to the Consolidated Financial Statements.) 

RESULTS OF OPERATIONS 
CONTINUING OPERATIONS 

The Company's results of operations as a percentage of net sales for the periods
indicated were as follows:

                                           1996        1995        1994
                                        ------------------------------------
    Net Sales                              100.0%      100.0%      100.0%
    Gross profit                            34.0%       33.4%       37.2%
    Selling, general and                    32.7%       37.1%       37.1%
       administrative expenses
    Unusual charges                          2.9%        9.6%
    Operating (loss) income                 (1.6%)     (13.3%)       0.1%
    Debt related fees                        5.3%        7.0%
    Other expense (income), net                          0.9%       (0.1%)
    Interest expense                         6.8%       10.6%        3.7%
    (Loss) from continuing operations
       before income taxes                 (13.7%)     (31.8%)      (3.5%)
    Income taxes                            (0.4%)       0.4%        0.0%
    (Loss) from continuing operations      (13.3%)     (32.2%)      (3.5%)

1996 COMPARED TO 1995

Net sales decreased 12.8% to $140.3 million for the year ended December 31, 1996
as compared to $161.0 million in the year ended December 31, 1995. The decline
in sales included decreases of 36.2% in inline roller skates, 11.6% in hockey
and figure skates, 6.0% in licensed sports apparel and 3.5% in protective
equipment. Compared to 1995, sales in 1996 were negatively affected by the
Company's Chapter 11 status, a generally weak retail environment in the sports
and leisure products industry, particularly in the recreational inline skate
market, increased amounts of deeply discounted merchandise offered by other
manufacturers and poor weather in the U.S. and Canada. Furthermore, the Company
has reduced the levels of business it conducts with certain


                                       14
<PAGE>


specialty retailers and mass merchandisers to whom previous sales were made at
low margins and high credit risk, and has reduced or eliminated certain
incentives to customers. 

Gross profit was $47.7 million in 1996 compared to $53.7 million in 1995, a
decrease of 11.2%. Measured as a percentage of net sales, gross profit margins
increased to 34.0% in 1996 from 33.4% in 1995. These higher gross profit margins
are principally a result of favorable customer and product mixes as compared to
1995. In addition, 1995 was adversely affected by aggressive sales of excess,
obsolete and slow moving inventories to generate cash needed to support the
Company's operations during the period of its financial difficulties. 

For the year ended December 31, 1996, selling, general and administrative
expenses decreased 23.3% to $45.8 million compared to $59.8 million in the prior
year period. Measured as a percentage of net sales, these expenses were 32.7% in
1996 versus 37.1% in 1995. Expenses decreased as a result of generally lower
operating expenses due to the Company's continued efforts to aggressively reduce
costs, reduced variable selling costs, principally royalties and commissions,
decreased bad debt expense, and lower administrative expenses including legal
expenses associated with certain cases that were either settled or delayed due
to the Company's financial difficulties. 

During 1996, the Company recorded significant unusual charges in continuing
operations totaling $4.0 million to reflect the impact of strategically
reorganizing management to position itself for a definitive restructuring plan.
These costs consist primarily of severance pay ($3.4 million), including that of
the Company's former Chief Executive and Chief Financial Officers, and the
impairment of long lived assets ($0.7 million), primarily machinery and
equipment at one of its Canadian facilities. During 1995, the Company recorded
significant unusual charges in continuing operations totaling $15.5 million due
principally to litigation settlements ($8.8 million) and reassessment, during
the fourth quarter of 1995, of the intangible assets associated with the
acquisition of #1 Apparel ($6.4 million). Litigation settlements include
settlements of environmental litigation ($7.0 million, recorded in the second
quarter and $0.25 million, recorded in the fourth quarter 1995) and securities
litigation ($1.6 million recorded in the fourth quarter 1995). The unusual
charges represent 21.5% and 29.8% of the Company's loss from continuing
operations for the years ended December 31, 1996 and 1995, respectively.

Excluding the unusual charges, operating income for the year ended December 31,
1996 was $1.9 million compared to an operating loss of $6.0 million in 1995. The
1996 operating income was primarily the result of increased gross profit margins
and lower selling, general and administrative expenses discussed above.
Including the unusual charges, the operating loss for 1996 was $2.2 million and
$21.5 million for 1995. 

As a result of the Company's significant losses in the year ended December 31,
1994, the resultant non-compliance with covenants in its various financing
agreements, the involuntary bankruptcy action initiated by its senior
noteholders, the Standstill Agreements with its lenders and the Filing, the
Company's continuing operations incurred significant legal and professional fees
totaling $7.4 million and $11.2 million for the years ended December 31, 1996
and 1995, respectively. These fees include the cost of the Company's legal
counselors, financial advisors and consultants, as well as those of its bankers,
senior noteholders and creditors and, additionally, 1995 included certain
payments made directly to these lenders. The debt related fees for the year
ended December 31, 1996 is net of $0.7 million of interest earned on accumulated
cash resulting from the Filing. These costs are included as Debt Related Fees in
the Consolidated Statement of Operations for the periods then ended. 

Interest expense approximated $9.6 million and $17.1 million for 1996 and 1995,
respectively. During the reorganization proceedings the Company was generally
not permitted to pay interest. Therefore, the Company recorded interest expense
only to the extent paid or earned during the proceedings and to the extent it
was probable that the Bankruptcy Court would allow interest on pre-Petition Date
debt as a priority, secured or unsecured claim. Interest expense in 1995
resulted from working capital borrowings at higher short-term interest rates as
well as default interest rates being charged on the Company's bank debt and
Senior Notes due to defaults, offset in part by the allocation of interest
expense to discontinued operations. 

The Company's loss from continuing operations for the year ended December 31,
1996 was $18.7 million ($0.99 per share) compared to a loss of $51.9 million in
the year ended December 31, 1995 ($2.75 per share). Excluding unusual charges,
and debt related fees, the Company's net loss was $7.3 million and $25.2 million
for 1996 and 1995, respectively. The unusual charges and debt related fees
represented 61.2% and 51.4% of the Company's losses from continuing operations
for the year ended December 31, 1996 and 1995, respectively. 

For the year ended December 31, 1995, the Company recognized a loss on
discontinued operations of $25.6 million ($1.36 per share) due to the
finalization of the terms of sale of these operations.


                                       15
<PAGE>


1995 COMPARED TO 1994

Net sales of the Company's continuing operations decreased 11.0% to $161.0
million in the year ended December 31, 1995 as compared to $180.8 million in the
year ended December 31, 1994. The decline in sales included decreases of 10.1%
in protective equipment and 30.0% in licensed sports apparel, offset in part by
increases of 6.8% in hockey, figure and inline roller skates. Sales were
adversely affected by inadequate cash availability resulting in inventory
shortages versus customer orders. The sales growth in inline roller skates
resulted primarily from new and expanded product offerings in the inline roller
skate category in response to the continued growth in popularity of both
recreational skating and roller hockey. The decline in sales of licensed sports
apparel in 1995 from 1994 was due to the lingering effects of the NHL and MLB
labor problems which resulted in canceled orders, lost sales, product returns
and high retailer and manufacturer inventory levels. 

Gross profit was $53.7 million in 1995 compared to $67.2 million in 1994, a
decrease of 20.1%. Measured as a percentage of net sales, gross profit margins
decreased to 33.4% in 1995 from 37.2% in 1994. Gross profit margin was adversely
affected by sales of excess, obsolete and slow moving inventories caused by
streamlining of product lines and more aggressive disposal of such items in
order to generate cash needed to support the Company's operations during the
period of its financial difficulties (see "Liquidity and Capital Resources"
below). These sales generated low profit margins as provisions for these excess,
obsolete and slow moving inventories were recorded to reduce them to net
realizable value. Provisions for excess, obsolete and slow moving inventories in
1995 were $5.7 million compared to $4.3 million in 1994. 

Selling, general and administrative expenses in the year ended December 31, 1995
were $59.8 million compared to $67.0 million in the prior year, a decrease of
10.9%. Measured as a percentage of net sales, these expenses were 37.1% in 1995
and 1994. Expenses decreased primarily as a result of reduced variable selling
and distribution costs and certain legal and professional expenses, offset in
part by an increase in bad debt expense. Legal and professional fees related to
certain of the Company's environmental and product liability matters decreased
during 1995, as these cases were either settled or delayed due to the Company's
financial difficulties. Bad debt expense increased to $4.6 million in 1995 from
$3.4 million in 1994 due primarily to the financial difficulties of several
large U.S. and Canadian sporting goods and discount chain customers. 

During 1995, the Company recorded significant unusual charges in continuing
operations totaling $15.5 million (see Note 6) due principally to litigation
settlements totaling $8.8 million and reassessment of the intangible assets
associated with the acquisition of #1 Apparel of $6.4 million. 

Excluding the unusual charges, the operating loss for the year ended December
31, 1995 was $6.0 million compared to income of $0.2 million in 1994. Including
the unusual charges, the operating loss for 1995 was $21.5 million. 

As a result of the Company's significant losses in the year ended December 31,
1994, the resultant non-compliance with covenants in its various financing
agreements, the involuntary bankruptcy action initiated by its Senior
Noteholders, the Standstill Agreements with its lenders and the Chapter 11
Cases, the Company's continuing operations incurred significant legal and
professional fees totaling $11.2 million for the year ended December 31, 1995.
These fees include the cost of the Company's legal counselors, financial
advisors and consultants, as well as those of its bankers and Senior Noteholders
and certain payments made directly to these lenders. In addition, the Company
recorded $0.8 million for the intrinsic value of warrants provided to these
lenders. These costs are included as Debt Related Fees in the Consolidated
Statements of Operations. It is anticipated that additional significant
reorganization related fees will be incurred in future periods. 

Interest expense increased in 1995 to $17.1 million from $6.7 million in 1994 as
a result of both increased working capital borrowings and higher interest rates
due to the Company's defaults under its financing agreements. These default
interest rates resulted in incremental interest expense of $5.7 million for the
year ended December 31, 1995. Of the 1995 interest expense, $10.1 million was
paid and $7.0 million was accrued and is still due. 

The Company's loss from continuing operations for the year ended December 31,
1995 was $51.9 million ($2.75 per share) compared to a loss of $6.2 million in
the year ended December 31, 1994 ($0.33 per share). Excluding unusual charges,
default interest and debt related fees, the Company's 1995 net loss was $19.5
million. The unusual charges, default interest and debt related fees represented
62.2% of the Company's losses from continuing operations for the year ended
December 31, 1995. 

For the year ended December 31, 1995, the Company recognized a loss on
discontinued operations of $25.6 million ($1.36 per share) due to the
finalization of the terms of sale of these operations. In 1994, discontinued
operations incurred a loss of $105.7 million ($5.61 per share).


                                       16
<PAGE>


INCOME TAXES

The Company's income tax provision is comprised of both United States and
foreign tax components. Due to changes in the relative contribution of income or
loss by country, differences in the effective tax rates between countries
(principally the U.S., Canada and Hong Kong) and permanent differences in
effective tax rates between income for financial statement purposes, the
consolidated effective tax rates may vary significantly from period to period.
The Company and its U.S. subsidiaries consolidate their income for U.S. federal
income tax purposes. However, gains and losses of certain subsidiaries may not
be available to other subsidiaries for tax purposes. 

Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. A full valuation
allowance was provided in 1995 and 1996.

LIQUIDITY AND CAPITAL RESOURCES

On October 24, 1995, SLM International, Inc. and six of its subsidiaries filed
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. Since the filing, the
Company and those subsidiaries operated their businesses in the ordinary course
as debtors-in-possession subject to the jurisdiction of the Bankruptcy Court.
The Bankruptcy Court entered an order authorizing the joint administration of
the Debtors' Chapter 11 Cases. On September 12, 1996 the Debtors filed a Chapter
11 Plan of Reorganization and on November 13, 1996, the Debtors filed a First
Amended Chapter 11 Plan of Reorganization, as amended from time to time (the
"Reorganization Plan"), with the Bankruptcy Court. On January 23, 1997, the
Bankruptcy Court confirmed the Reorganization Plan and the Plan became effective
on April 11, 1997 (the "Effective Date"). 

The Filing enabled the Company to stabilize its liquidity position because the
cash requirements for the payment of accrued interest, accounts payable and
other liabilities, which arose prior to the Filing, were in most cases deferred
until the Reorganization Plan was approved by the Bankruptcy Court. 

Management expects to finance the Company's short-term working capital and
capital expenditures requirements through cash generated by its operations and
through its new credit facilities. On the Effective Date of the Reorganization
Plan, the Company and two of its U.S. subsidiaries, Maska U.S., Inc. and #1
Apparel, Inc., entered into a Credit Agreement (the "US Credit Agreement") with
the lenders referred to therein (the "Lenders") and The Chase Manhattan Bank, as
Agent ("Chase"). Simultaneously, one of the Company's Canadian subsidiaries,
Sport Maska Inc., entered into a Credit Agreement (the "Canadian Credit
Agreement" and, together with the US Credit Agreement, the "Credit Agreements")
with The Chase Manhattan Bank of Canada ("Chase Canada"). The maximum amount of
loans and letters of credit that may be outstanding under the Credit Agreements
is $74.0 million, consisting of $35.0 million revolving credit loans under the
US Credit Agreement, $35.0 million of revolving credit loans under the Canadian
Credit Agreement and a $4.0 million term loan under the US Credit Agreement.
Borrowings under the Credit Agreements are guaranteed by certain subsidiaries
and are secured by substantially all of the assets (including, without
limitation, accounts receivable, inventory and the stock of certain
subsidiaries) of the Company. Total amounts outstanding under the Credit
Agreements were $14.2 million at April 14, 1997. 

Borrowings under the US Credit Agreement bear interest at the alternate base
rate plus 1% per annum or at an interest rate based on LIBOR plus 2 3/4% per
annum. Borrowings under the Canadian Credit Agreement bear interest at Chase
Canada's prime rate. In addition, the Company is charged a quarterly commitment
fee of 3/8 of 1% on the unused portion of the revolving credit facilities under
the Credit Agreements and certain other fees. 

The Credit Agreements include customary affirmative and negative covenants,
including those relating to capital expenditures, interest coverage and the
incurrence of additional indebtedness. 

On April 11, 1997 the Company issued $29.5 million principal amount of 14%
Senior Secured Notes due April 1, 2004 (the "New Senior Notes"), pursuant to an
Indenture with The Bank of New York, as trustee. The New Senior Notes were
issued by the Company under the Reorganization Plan as partial satisfaction of
the Company's obligations to its former senior lenders under a Loan and Security
Agreement ("Bank Agreement") with a syndicate of banks led by Fleet Credit
Corporation. Under the Plan, the lenders under the Bank Agreement also received
(i) $44.2 million in cash; and (ii) 2,470,000 shares of New Common Stock,
representing approximately 38.0% of the outstanding New Common Stock. The
lenders sold such shares to Wellspring Associates L.L.C. on the Effective Date.

Interest is payable on the New Senior Notes semi-annually at the rate of 14% per
annum, with such interest rate being permanently reduced if the Company meets
certain earnings tests. Further, of the initial 14% interest rate, 


                                       17
<PAGE>


10% is payable in cash and 4% is payable by the issuance of additional New
Senior Notes. The New Senior Notes have a term of seven years with principal
payments beginning in the fifth year. 

The New Senior Notes are guaranteed by certain subsidiaries and are
collateralized by substantially all of the assets (including, without
limitation, accounts receivable, inventory and the stock of certain
subsidiaries) of the Company, the two U.S. Subsidiaries referred to above and
the Company's other subsidiaries which are guarantors. The lien of the trustee
for the benefit of itself and the New Senior Noteholders is junior to the liens
of Chase and Chase Canada. The Indenture also includes customary affirmative and
negative covenants. 

The Company's financing requirements for long-term growth, future capital
expenditures and debt service are expected to be met through cash generated by
its operations and through its new credit facilities. During the year ended
December 31, 1996, the Company's continuing operations provided $18.9 million of
cash from its operations as compared to the use of $3.7 million from its
operations and discontinued operations use of $4.9 million, in the year ended
December 31, 1995. The Company's continuing operations incurred a loss of $18.7
million compared to a loss of $51.9 million in 1995, however, the 1995 cash
impact was mitigated due to non-cash charges for receivables, inventory,
intangibles and litigation. 

Cash flows provided by investing activities during 1996 of $3.5 million,
included $5.9 million from the proceeds from the disposal of discontinued
operations, offset by $2.8 million of purchases of fixed assets. Cash provided
by investing activities of $15.6 million during 1995 consisted primarily of
$18.8 million from the disposal of discontinued operations, offset by $3.4
million of fixed asset purchases. 

Net cash flows (used in) provided by financing activities during 1996 and 1995
were approximately $(5.4) million and $3.1 million, respectively. The use of
cash during 1996 consisted primarily of cash from discontinued operations for
principal payments on the Company's secured debt as allowed by the Bankruptcy
Court. Net cash flows provided by financing activities during 1995 resulted
primarily from the proceeds of short-term bank borrowings. 

The Company follows the customary practice in the sporting goods industry of
offering extended payment terms to credit worthy customers on qualified orders.
The Company's working capital requirements generally peak in the third and
fourth quarters as it builds inventory and makes shipments under these extended
payment terms.


                                       18
<PAGE>


ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                          Page
--------------------------------------------------------------------------------
      Reports of Independent Accountants
            Coopers & Lybrand L.L.P.                                      20
            Raymond, Chabot, Martin, Pare                                 21

      Consolidated Financial Statements
            Consolidated Balance Sheets at December 31, 1996 and 1995     30

            Consolidated Statements of Operations
               for the years ended December 31, 1996, 1995 and 1994       31

            Consolidated Statements of Stockholders' (Deficit) Equity
               for the years ended December 31, 1996, 1995 and 1994       32

            Consolidated Statements of Cash Flows
               for the years ended December 31, 1996, 1995 and 1994       33

            Notes to Consolidated Financial Statements                    34


                                       19
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
SLM International, Inc.

We have audited the accompanying consolidated balance sheets of SLM
International, Inc. and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of operations, stockholders' (deficit) equity
and cash flows for each of the the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audit. We did not
audit the 1996, 1995 and 1994 financial statements of certain companies, whose
financial statements include total assets of $70,147,000 and $71,570,000 as of
December 31, 1996 and 1995, respectively, and total net sales of $67,182,000,
$68,101,000 and $70,645,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it related to the
amounts included for those companies, is based solely on the reports of the
other auditors.

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

As discussed in Note 1, SLM International, Inc. and certain of its subsidiaries
filed for relief under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court on October 24, 1995. On April 11, 1997, the First
Amended, as amended, Plan of Reorganization (the "Reorganization") was declared
effective for the subsidiaries by the Bankruptcy Court. The Reorganization
significantly altered, compromised or modified the Company's historical capital
structure as reflected in the accompanying consolidated balance sheet as of
December 31, 1996. The Company will account for the Reorganization on April 11,
1997 and will, at that date, adopt fresh-start reporting as described in Note 4.
No effects of accounting for the Reorganization are reflected in the
accompanying consolidated financial statements.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of SLM International, Inc. and Subsidiaries
as of December 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.
Albany, New York
April 14, 1997


                                       20
<PAGE>


AUDITORS' REPORT

To the Shareholder of
#1 Apparel Canada Inc.

We have audited the balance sheet of #1 Apparel Canada Inc. as at December 31,
1996 and the statements of earnings and deficit and changes in cash resources
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1996 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

As discussed in Note 3, the Company filed for relief under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court on October
24, 1995. On April 11, 1997, the First Amended, as amended, Plan of
Reorganization (the "Reorganization") was declared to be effective for the
Company by the Bankruptcy Court. The Reorganization significantly altered,
compromised, or modified the Company's historical capital structure as reflected
in the accompanying balance sheet as of December 31, 1996.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1997


                                       21
<PAGE>


AUDITORS' REPORT

To the Shareholder of
Sport Maska Inc.

We have audited the consolidated balance sheet of Sport Maska Inc. as at
December 31, 1996 and the consolidated statements of earnings and deficit and
changes in cash resources for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1996
and the results of its operations and the changes in its financial position for
the year then ended in accordance with generally accepted accounting principles
in Canada.

As discussed in Note 3, the Company filed for relief under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court on October
24, 1995. On April 11, 1997, the First Amended, as amended, Plan of
Reorganization (the "Reorganization") was declared to be effective for the
Company by the Bankruptcy Court. The Reorganization significantly altered,
compromised, or modified the Company's historical capital structure as reflected
in the accompanying consolidated balance sheet as of December 31, 1996. The
Company will account for the Reorganization on April 11, 1997 and will, at that
date, adopt fresh-start reporting as described in Note 4. No effects of
accounting for the Reorganization are reflected in the accompanying consolidated
financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1997


                                       22
<PAGE>


AUDITORS' REPORT

To the Shareholder of
St. Lawrence Manufacturing Canada  Inc.

We have audited the balance sheet of St. Lawrence Manufacturing Canada Inc. as
at December 31, 1996 and the statements of earnings and deficit and changes in
cash resources for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1996
and the results of its operations and the changes in its financial position for
the year then ended in accordance with generally accepted accounting principles
in Canada.

As discussed in Note 3, the Company filed for relief under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court on October
24, 1995. On April 11, 1997, the First Amended, as amended, Plan of
Reorganization (the "Reorganization") was declared to be effective for the
Company by the Bankruptcy Court. The Reorganization significantly altered,
compromised, or modified the Company's historical capital structure as reflected
in the accompanying consolidated balance sheet as of December 31, 1996.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1997


                                       23
<PAGE>


AUDITORS' REPORT

To the Shareholder of
#1 Apparel Canada Inc.

We have audited the balance sheet of #1 Apparel Canada Inc. as at December 31,
1995 and the statements of earnings and deficit and changes in cash resources
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 25, 1996

           COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
                 ON CANADA - UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1995. Our report to the
shareholder dated April 25, 1996 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 25, 1996


                                       24
<PAGE>


AUDITORS' REPORT

To the Shareholder of
St. Lawrence Manufacturing Canada Inc.

We have audited the balance sheet of St. Lawrence Manufacturing Canada Inc. as
at December 31, 1995 and the statements of earnings and deficit and changes in
cash resources for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 25, 1996

           COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
                 ON CANADA - UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1995. Our report to the
shareholder dated April 25, 1996 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 25, 1996


                                       25
<PAGE>


AUDITORS' REPORT

To the Shareholder of
Sport Maska  Inc.

We have audited the consolidated balance sheet of Sport Maska Inc. as at
December 31, 1995 and the consolidated statements of earnings and retained
earnings and changes in cash resources for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1995
and the results of its operations and the changes in its financial position for
the year then ended in accordance with generally accepted accounting principles
in Canada.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 25, 1996

           COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
                 ON CANADA - UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1995. Our report to the
shareholder dated April 25, 1996 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 25, 1996


                                       26
<PAGE>


AUDITORS' REPORT

To the Shareholder of
#1 Apparel Canada Inc.

We have audited the balance sheet of #1 Apparel Canada Inc. as at December 31,
1994 and the statements of earnings and deficit and changes in cash resources
for the initial year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1994 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1995

           COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
                 ON CANADA - UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1994. Our report to the
shareholder dated April 14, 1995 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1995


                                       27
<PAGE>


AUDITORS' REPORT

To the Shareholder of
Buddy L Canada Inc.

We have audited the balance sheet of Buddy L Canada Inc. as at December 31, 1994
and the statements of earnings and deficit and changes in cash resources for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1994 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1995

           COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
                 ON CANADA - UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1994. Our report to the
shareholder dated April 14, 1995 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1995


                                       28
<PAGE>


AUDITORS' REPORT

To the Shareholder of
Sport Maska  Inc.

We have audited the consolidated balance sheet of Sport Maska Inc. as at
December 31, 1994 and the consolidated statements of earnings and retained
earnings and changes in cash resources for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1994 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1995

           COMMENTS BY INDEPENDENT AUDITORS FOR UNITED STATES READERS
                 ON CANADA - UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by going concern considerations as described in Note 2
of the financial statements as at December 31, 1994. Our report to the
shareholder dated April 14, 1995 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such considerations in
the auditors' report when the going concern considerations are adequately
disclosed in the financial statements.

/s/ Raymond, Chabot, Martin, Pare
Chartered Accountants

Montreal, Canada
April 14, 1995


                                       29

<PAGE>


                              SLM INTERNATIONAL, INC.
                               (DEBTOR-IN-POSSESSION)
                            CONSOLIDATED BALANCE SHEETS
                             December 31, 1996 and 1995
                         (In thousands, except share data)
ASSETS                                                      1996           1995
                                                       -------------------------

Current assets
   Cash and cash equivalents                           $  35,589       $ 18,605
   Accounts receivable, net                               33,313         41,346
   Inventories                                            37,179         50,898
   Prepaid expenses                                        4,069          1,918
   Income taxes receivable                                   418            256
   Net assets of discontinued operations                     189          9,856
   Other receivables                                       1,270          1,530
                                                       -------------------------
   Total current assets                                  112,027        124,409
Property, plant and equipment, net                        12,817         13,496
Intangible and other assets, net                              81            123
                                                       -------------------------
   Total assets                                        $ 124,925       $138,028
                                                       =========================

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Liabilities
   Accounts payable                                    $   2,938       $  3,690
   Accrued liabilities                                     9,499          7,328
   Accrued professional fees                               2,860          2,065
   Long-term debt, current portion                           369            702
   Income taxes payable                                      648            536
   Current portion of liabilities subject to
     compromise under reorganization proceedings          45,035
                                                       -------------------------
   Total current liabilities                              61,349         14,321
Deferred income taxes                                        601            535
Liabilities subject to compromise under                  
  reorganization proceedings                             160,164        201,814
                                                       -------------------------
   Total liabilities                                     222,114        216,670
                                                      --------------------------

Commitments and contingencies

Stockholders' (deficit)
Preferred stock, no par, 100,000 shares authorized,
  none issued or outstanding
Common stock, par value $0.01 per share, 50,000,000
  shares authorized, 18,859,679 shares issued and 
  outstanding at December 31, 1996 and 1995                  189            189
Additional paid-in capital                                88,564         88,564
Retained (deficit)                                      (182,291)      (163,569)
Foreign currency translation adjustments                  (3,651)        (3,826)
                                                       -------------------------
   Total stockholders' (deficit)                         (97,189)       (78,642)
                                                       -------------------------
   Total liabilities and stockholders'(deficit)        $ 124,925       $138,028
                                                       =========================

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


                                       30
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the years ended December 31, 1996, 1995 and 1994
                        (In thousands, except share data)
<TABLE>
<CAPTION>

                                                 1996         1995          1994
                                             ----------------------------------------
<S>                                            <C>          <C>           <C>      
Net sales                                      $ 140,321    $ 160,973     $ 180,806

Cost of goods sold                                92,613      107,266       113,577
                                             ----------------------------------------
Gross profit                                      47,708       53,707        67,229

Selling, general and administrative expenses      45,831       59,753        67,031

Unusual charges (see Note 6)                       4,033       15,471
                                             ----------------------------------------
Operating (loss) income                           (2,156)     (21,517)          198

Debt related fees (see Note 7)                     7,432       11,195

Other expense (income), net                           27        1,484          (260)

Interest expense (see Note 7)                      9,555       17,078         6,713
                                             ----------------------------------------
(Loss) from continuing operations before
   income taxes                                  (19,170)     (51,274)       (6,255)

Income taxes                                        (448)         605           (11)
                                             ----------------------------------------
(Loss) from continuing operations                (18,722)     (51,879)       (6,244)

(Loss) from discontinued operations, net of
   income taxes                                                             (94,390)

(Loss) from disposition of discontinued
   operations, net of income taxes                            (25,569)      (11,335)
                                             ----------------------------------------
Net (loss)                                     $ (18,722)   $ (77,448)    $(111,969)
                                             ========================================

(Loss) per share from continuing operations    $   (0.99)   $   (2.75)    $   (0.33)

(Loss) per share from discontinued                                            
   operations                                                                 (5.01)

(Loss) per share from disposition of
   discontinued operations                                      (1.36)        (0.60)
                                             ----------------------------------------
Net (loss) per share                           $   (0.99)   $   (4.11)    $   (5.94)
                                             ========================================
Weighted average common and common
   equivalent shares outstanding              18,859,679   18,859,679    18,844,097
                                             ========================================
</TABLE>

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


                                       31
<PAGE>

                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
              For the years ended December 31, 1996, 1995 and 1994
                                   (In thousands)
<TABLE>
<CAPTION>
                                                         Additional    Retained      Currency
                                    Common Stock           Paid-in    (Deficit)    Translation
                              # of Shares      Amount      Capital     Earnings    Adjustments     Total
                              -----------------------------------------------------------------------------
<S>                               <C>          <C>        <C>          <C>           <C>          <C>
Balance at December 31, 1993      18,805       $  188     $  87,259    $  25,848     $ (6,417)    $106,878

Net (loss)                                                              (111,969)                 (111,969)

Exercise of stock options             55            1           403                                    404

Tax benefit from exercise of 
  stock options                                                 102                                    102

Foreign currency translation
  adjustments                                                                          (1,699)      (1,699)
                              -----------------------------------------------------------------------------
Balance at December 31, 1994      18,860          189        87,764      (86,121)      (8,116)      (6,284)

Net (loss)                                                               (77,448)                  (77,448)

Issuance of stock warrants                                      800                                    800

Foreign currency translation
  adjustments                                                                           4,290        4,290
                              -----------------------------------------------------------------------------
Balance at December 31, 1995      18,860          189        88,564     (163,569)      (3,826)     (78,642)

Net (loss)                                                               (18,722)                  (18,722)

Foreign currency translation                                                              
  adjustments                                                                             175          175
                              -----------------------------------------------------------------------------
Balance at December 31, 1996      18,860       $  189     $  88,564    $(182,291)    $ (3,651)    $(97,189)
                              =============================================================================
</TABLE>

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


                                       32
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the years ended December 31, 1996, 1995 and 1994
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                          1996           1995         1994    
                                                                      ----------------------------------------
<S>                                                                    <C>            <C>           <C>       
OPERATING ACTIVITIES:                                                 
Net (loss)                                                             $ (18,722)     $ (77,448)    $(111,969)
Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities:
  Loss from discontinued operations, including loss on
  disposal                                                                               25,569       105,725
  Loss on impairment of long-lived and intangible assets                     662          6,416
  Litigation settlements                                                                  7,813
  Stock warrants                                                                            800
  Depreciation and amortization                                            2,565          2,870         3,134
  Provisions for inventory, doubtful accounts and other                                               
  deductions                                                              13,969         22,726        21,576
  Deferred income taxes                                                       66            496         1,143
  (Gain) loss on sale and disposal of fixed assets                           (45)           266           113
  Loss on foreign exchange                                                   222          1,029           286
Change in operating assets and liabilities:                                                          
  Accounts receivable                                                     (1,552)        (4,073)      (30,265)
  Inventories                                                              9,303          2,447       (20,810)
  Prepaid expenses                                                        (2,137)          (257)          665
  Income taxes receivable                                                   (162)         1,365         3,028
  Other receivables                                                          256             24         2,228
  Accounts payable and accrued liabilities                                 5,002          1,473        10,340
  Interest payable                                                         9,408          4,402         2,139
  Income taxes payable                                                       112            549        (1,819)
  Other                                                                        1           (136)          (69)
  Net effect of discontinued operations                                                  (4,902)      (41,177)
                                                                      ----------------------------------------
Net cash provided by (used in) operating activities                       18,948         (8,571)      (55,732)
                                                                      ----------------------------------------
INVESTING ACTIVITIES:                                                 
Purchase of businesses, net of cash acquired                                                          (15,150)
Purchases of fixed assets                                                 (2,776)        (3,354)       (6,053)
Additions to deferred costs                                                                              (228)
Proceeds from sales of fixed assets                                          307            119            86
Proceeds from disposal of discontinued operations                          5,947         18,841
                                                                      ----------------------------------------
Net cash provided by (used in) investing activities                        3,478         15,606       (21,345)
                                                                      ----------------------------------------
FINANCING ACTIVITIES:
Proceeds from borrowings                                                     323          4,168        92,880
Principal payments of debt                                                (5,737)        (1,061)      (10,321)
Exercise of stock options                                                                                 404
                                                                      ----------------------------------------
Net cash (used in) provided by financing activities                       (5,414)         3,107        82,963
                                                                      ----------------------------------------
Effects of foreign exchange rate changes on cash and cash 
equivalents                                                                  (28)           119          (122)
                                                                      ----------------------------------------
Increase in cash                                                          16,984         10,261         5,764
Cash and cash equivalents at beginning of period                          18,605          8,344         2,580
                                                                      ----------------------------------------
Cash and cash equivalents at end of period                             $  35,589      $  18,605     $   8,344
                                                                      ========================================
</TABLE>

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


                                       33
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. PRINCIPLES OF CONSOLIDATION:

SLM International, Inc. ("SLM") was incorporated in September 1991. The
consolidated financial statements include the accounts of SLM and its
wholly-owned subsidiaries (collectively, the "Company"). All significant
intercompany transactions and accounts are eliminated. The Company's investment
in its toy and fitness businesses are classified as discontinued operations (see
Note 5).

B. BASIS OF PRESENTATION:

SLM and six of its subsidiaries (collectively, the "Debtors") filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code (the
"Filing") in the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court") on October 24, 1995 (the "Petition Date"). Since the
Filing, the Debtors operated their businesses in the ordinary course as
debtors-in-possession subject to the jurisdiction of the Bankruptcy Court. The
Bankruptcy Court entered an order authorizing the joint administration of the
Debtors' Chapter 11 cases (the "Chapter 11 Cases"). On September 12, 1996, the
Debtors filed a Chapter 11 Plan of Reorganization and on November 13, 1996, the
Debtors filed a First Amended Chapter 11 Plan of Reorganization as amended from
time to time (the "Reorganization Plan") with the Bankruptcy Court. On January
23, 1997, the Bankruptcy Court confirmed the Reorganization Plan which became
effective on April 11, 1997 (the "Effective Date") (see Notes 2 and 4).

The Reorganization Plan has a significant impact on the financial statements of
the reorganized Company (the "Reorganized Company"). The Company is required to
account for such Reorganization Plan using "fresh-start" reporting (see Note 4).

Certain prior-year amounts have been reclassified to conform to the 1996
presentation. 

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.

C. CASH AND CASH EQUIVALENTS:

Cash and cash equivalents consists of cash and highly liquid short-term
investments with original maturities of three months or less. The Company
invests excess funds in reverse-repurchase agreements with Fleet Credit
Corporation ("Fleet") and in U.S. Treasury bills. At December 31, 1996, the
Company had $5,425 invested in U.S. Government backed securities under
agreements to resell on dates through January 23, 1997. Due to the short-term
nature of these investments, the Company did not take physical possession of the
securities, which were instead held in Fleet's safe keeping account at the
Federal Reserve, the Trust Department or vault. Also, included in cash
equivalents at December 31, 1996 is $18,241 in U.S. Treasury bills. The Company
believes it is not exposed to any significant credit risk on cash equivalents.

D. CONCENTRATION OF CREDIT RISK:

Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of temporary cash investments and accounts
receivable. The Company restricts its cash investments to temporary investments
in institutions with high credit standing and to short-term securities backed by
the full faith and credit of the United States Government. The Company sells its
products principally to retailers and distributors and, in accordance with
industry practice, grants extended payment terms to qualified customers.
Concentration of accounts receivable credit risk is mitigated due to the
performance of credit reviews which are considered in determining credit
policies and allowances for doubtful accounts. The Company provides allowances
for expected sales returns, net of related inventory cost recoveries, discounts,
rebates and cooperative advertising. The Company does not collateralize its
receivables.

E. REVENUE RECOGNITION:

Revenue is recognized when products are shipped to customers.

F. INVENTORIES:

Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method. The Company provides allowances for excess,
obsolete and slow moving inventories.


                                       34
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


G. RESEARCH & DEVELOPMENT EXPENSES:

Costs for new product research and development as well as changes to existing
products are expensed as incurred and totaled $1,410, $1,692, and $1,738 for the
years ended December 31, 1996, 1995 and 1994, respectively.

H. PREPAID EXPENSES:

The Company expenses advertising and promotion costs in the first fiscal year in
which the advertising takes place. Royalty payments are deferred to the extent
that the related sales have not yet been recorded. Such costs are included in
prepaid expenses.

I. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are stated at cost. Depreciation and amortization
are provided for in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives using principally the
straight-line method of depreciation.

The estimated service lives of the respective assets are as follows:

                                      Years
                    --------------------------------------------
                       Buildings and improvements       5- 40
                       Machinery and equipment          3- 10
                       Tools, dies and molds            3 - 5
                       Office furniture and equipment   3- 10
                    --------------------------------------------

Accelerated methods of depreciation are used where permitted for tax reporting
purposes. Significant additions or major improvements are capitalized, while
normal maintenance and repair costs are expensed. When assets are sold, retired
or otherwise disposed of, the applicable costs and accumulated depreciation are
removed from the accounts, and the resulting gain or loss is recognized. 

The Company periodically reviews property, plant and equipment for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. When such circumstances occur, the Company estimates
future cash flows expected to result from the use and eventual disposition of
the assets. If the expected future cash flows are less than the carrying amount,
the Company recognizes an impairment loss (see Note 6).

J. INCOME TAXES:

Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
consists of both the tax payable for the period and the change during the period
in deferred tax assets and liabilities. 

The Company does not provide for deferred income taxes on the undistributed
earnings of its non-U.S. subsidiaries, since such earnings are not expected to
be remitted to the Company in the foreseeable future.

K. FOREIGN CURRENCY TRANSLATION:

The balance sheets of the Company's non-U.S. subsidiaries are translated into
U.S. dollars at the exchange rates in effect at the end of each year. Revenues,
expenses and cash flows are translated at weighted average rates of exchange.
Gains or losses resulting from foreign currency transactions are included in
earnings, while those resulting from translation of financial statements are
shown as a separate component of stockholders' equity.

L. INTANGIBLE ASSETS:

Intangible assets are recorded at cost and are amortized on a straight-line
basis. These amounts include the excess purchase prices over fair values
assigned to net assets acquired (which are amortized on a straight-line basis
over periods from three to twenty years), and costs related to obtaining patents
and trademarks (which are amortized on a straight-line basis over three years).
The Company periodically reviews intangible assets for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. When such circumstances occur, the Company estimates future cash
flows expected to result from the use and eventual disposition of the
intangibles. If the expected future cash flows are less than the carrying
amount, the Company recognizes an impairment loss (see Note 6). 


                                       35
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


Certain costs related to packaging for products that will be introduced
subsequent to year end are deferred and amortized over a three- or five-year
period. Provisions are made to write these costs off when the products are no
longer sold. 

Accumulated amortization of intangible assets was $61 and $142 at December 31,
1996 and 1995, respectively.

M. EARNINGS PER SHARE:

Earnings per share of common stock are computed based on the average number of
shares of common stock assumed to be outstanding during each year. Common stock
equivalents are included when material and dilutive (See Notes 2, 8 and 18).

2.  REORGANIZATION CASE

In the Chapter 11 Cases, substantially all liabilities as of the Petition Date
are subject to resolution under the Reorganization Plan which was voted upon by
the Company's creditors and stockholders and confirmed by the Bankruptcy Court.
Schedules have been filed by the Company with the Bankruptcy Court setting forth
its assets and liabilities as of the Petition Date as shown by its accounting
records. Creditors holding pre-petition date claims ("Pre-petition Claims")
against the Company were required to file proofs of claim on or before a date
fixed by the Bankruptcy Court (the "Bar Date"). Differences between amounts
shown by the Company and claims filed by its creditors, including claims in
excess of what the Company has previously accrued, have been or will be
investigated and resolved consensually or by order of the Bankruptcy Court. The
ultimate amount and settlement terms for such liabilities are subject to the
Reorganization Plan. 

Under the Bankruptcy Code pursuant to the Reorganization Plan, the Company has
elected to assume or reject leases, employment contracts, service contracts and
other executory pre-Petition Date contracts, with Bankruptcy Court approval. The
Company has estimated the ultimate liability which may result from the filing of
claims for any rejected contracts, and provisions have been made for these items
upon the Effective Date of the Reorganization Plan (see Note 4). 

Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and with the holders of the Company's 6.76% senior notes
(the "Senior Noteholders") which would have allowed these lenders to accelerate
repayment of these loans. 

The Bankrupcty Court authorized the Company to use the cash generated by its
operations to continue to fund its business obligations, and to pay pre-Petition
Date wages, salaries, sales commissions, employee benefits and customs duties,
honor manufacturer's warranties and pay certain non-U.S. pre-Petition Date
liabilities. These various Bankruptcy Court authorizations provided the Company
with cash and liquidity so that it could conduct its operations. Until a
reorganization plan was effective, the Company funded its working capital and
capital expenditure requirements through cash generated by its operations. The
Reorganized Company expects to meet its working capital and capital expenditure
requirements through secured credit facilities from The Chase Manhattan Bank and
The Chase Manhattan Bank of Canada (see Note 13). 

On June 26, 1996, the Debtors announced that they entered into an agreement with
representatives of the Debtors' Noteholders and trade and other unsecured
creditors (the "Unsecured Creditors Committee") on a term sheet (the "Term
Sheet") setting forth the material provisions of a Reorganization Plan.
Thereafter, the Debtors and Unsecured Creditors Committee reached an agreement
in principle with assignees of the Debtors' former lenders (the "Secured
Creditor Group") on the terms of the Reorganization Plan. On September 12, 1996,
the Debtors filed with the Bankruptcy Court a proposed Chapter 11 Plan of
Reorganization (the "Proposed Plan"). On September 19, 1996, the Debtors filed
with the Bankruptcy Court a Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code incident to the Proposed Plan. After further negotiations and
term modifications among the Debtors and their creditor constituencies, on
November 13, 1996, the Debtors filed with the Court the Reorganization Plan and
the First Amended Disclosure Statement Pursuant to Section 1125 of the
Bankrupcty Code incident to the Reorganization Plan. On November 19, 1996, the
Bankruptcy Court approved the adequacy of the First Amended Disclosure Statement
as modified in open court (the "Disclosure Statement"). On January 23, 1997, the
Bankruptcy Court entered an order confirming the Reorganization Plan as
modified, the effectiveness of which was contingent upon, among other things,
the completion of a secured credit facility. The Reorganization Plan represents
the culmination of management analyses and negotiation amongst representatives
of principal parties in interest regarding the best means to maximize and to
allocate value to the Debtors' creditors and stockholders in accordance with
their legal and contractual rights and priorities with due regard to the
potential causes of action and claims that could be asserted against and by
certain creditors. Upon 


                                       36
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


the satisfaction of all conditions precedent to the occurrence of the Effective
Date, the Reorganization Plan was declared effective on April 11, 1997.

Under the Reorganization Plan, among other things: 

o    The Debtors' secured creditors received $44,213 in cash, $29,500 principal
     in new senior notes (the "New Senior Notes") and 2,470,000 shares of new
     common stock (the "New Common Stock") of the Reorganized Company, in
     exchange for approximately $108,000 of secured and unsecured indebtedness
     (which amount includes the secured creditors estimate of post-filing
     interest and expenses). The 2,470,000 shares of New Common Stock
     represented (before dilution) 38.0% of the ownership of the Reorganized
     Company. The lenders sold such shares to Wellspring Associates L.L.C. on
     the Effective Date. The New Senior Notes have a term of seven years with
     principal payments beginning in the fifth year. Interest thereon is due and
     payable semi-annually at 14.0% (including 4.0% payable in kind ("PIK"),
     with such PIK interest reduced permanently if the Company achieves certain
     earnings levels established in the Reorganization Plan). The New Senior
     Notes are pre-payable at 101% of principal plus accrued interest, are
     secured by a lien on substantially all of the Reorganized Company's assets,
     subordinate only to the Company's new secured credit facilities, and have
     covenants, representations and other terms customary in instruments of this
     nature.

o    The Debtors' unsecured creditors received: 4,030,000 shares of New Common
     Stock representing, at the time of issuance, 62.0% of the distributed
     equity in the Reorganized Company, subject to dilution upon the exercise of
     warrants distributed to equity security holders and stock options which may
     be issued to the Company's officers and key personnel (up to 15.0% of the
     New Common Stock at varying exercise prices), in exchange for approximately
     $120,000 of unsecured indebtedness. For purposes of the Reorganization
     Plan, the New Common Stock was valued at approximately $10.16 per share.

o    The Company's equity security holders (who held 18,859,679 shares of Common
     Stock plus the 1,000,000 shares to have been issued pursuant to the
     settlement of a securities litigation lawsuit (see Note 19)) received a
     total of 300,000 5-year warrants to purchase an aggregate of 300,000 shares
     of New Common Stock at an exercise price of $16.92 per share. In addition,
     the warrant holders have the option to receive an aggregate payment of $500
     upon cancellation of such warrants in connection with a sale of the
     Reorganized Company for more than $140,000.

The Reorganization Plan also provides for other terms including: structured
settlements with Fleet Credit Corporation (in connection with its claims arising
from equipment financing), NHL Enterprises, Inc. and its affiliates (in
connection with their claims arising from royalty obligations under licenses
with the Company and alleged infringement of their property) and with the
lessors under certain leases of real property (which lessors were former
officers and directors of the Company); the incorporated Consent Decree entered
in Vermont Superior Court by agreement with Maska U.S., Inc. ("Maska); and an
overall structured settlement among and between all of the creditor classes
which results in, among other things, the recoveries described above for the
secured creditors and unsecured creditors collectively as well as an
intra-creditor structured recovery resulting (depending on the ultimate
resolution of disputed claims) in the Company's former Senior Noteholders
realizing approximately 40.9% on their claims, Maska's unsecured creditors
realizing approximately 56.6% on their claims and the unsecured creditors of the
other Debtors realizing approximately 31.9% on their claims.

3. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS

Substantially all the Company's liabilities as of the Petition Date are subject
to settlement under a plan of reorganization, except as otherwise provided by
order of the Bankruptcy Court. The Company was not permitted to make payments
with respect to its pre-Petition Date liabilities (except as noted in Note 2)
until a plan of reorganization was confirmed by the Bankruptcy Court and
consummated. 

Liabilities subject to compromise under reorganization proceedings consisted of:

                                                 1996        1995
                                                 ----        ----

          Priority Claims                     $     661   $     605
          Secured Debt
               Principal                         92,045     100,876
               Interest                          12,838       3,513
          General Unsecured Claims               14,990      12,155
          Unsecured Debt, Principal and          
            Interest                             84,665      84,665
          ------------------------------------------------------------
                                              $ 205,199   $ 201,814
          ============================================================

Priority claims, the repayment of which the Company is required to prioritize
under bankruptcy law, are comprised principally of income and property tax
claims. Unsecured debt includes amounts which may ultimately be deemed 


                                       37
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


secured. It is not practicable to estimate the fair value of the Company's
liabilities subject to compromise under Reorganization cases until all of the
pre-petition claims have been resolved. 

The Company has recorded interest expense only to the extent paid or earned
during the proceedings and to the extent it is probable that the Bankruptcy
Court will allow interest on pre-Petition Date debt as a priority, secured or
unsecured claim. The excess contractual interest expense over recorded interest
expense for the years ended December 31, 1996 and 1995 was approximately $18,134
and $2,100 respectively.

4. FRESH-START ACCOUNTING (UNAUDITED)

The Company's financial statements following its emergence from bankruptcy will
not be comparable to the historical financial statements presented herein, which
do not reflect the Reorganization Plan. The Company has set forth below
unaudited pro forma condensed consolidated financial statements that reflect the
Reorganization Plan as if it has occurred on the dates specified therein. 

The Company's unaudited pro forma condensed consolidated financial statements
have been prepared in accordance with the requirements of Statement of Position
90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code ("SOP 90-7"). Following emergence from bankruptcy, the Reorganized Company
will apply fresh-start reporting in accordance with SOP 90-7. 

When the Reorganized Company implements fresh-start reporting, the value of the
Reorganized Company will be allocated to the entity's net assets in conformity
with the procedures specified by Accounting Principles Board Opinion No. 16
Business Combinations. As a result, it is anticipated that adjustments to the
carrying values of the Company's assets and liabilities will be required to
reflect the terms of the Reorganization Plan. SOP 90-7 requires a determination
of the Company's reorganizational value, which represents the fair value of all
of the Company's assets and liabilities, and an allocation of such values to the
assets and liabilities (excluding deferred taxes) based on their relative fair
values with the excess in reorganizational value over market values recorded as
an intangible asset. The application of SOP 90-7 results in the creation of a
new reporting entity having no retained earnings or accumulated deficit. The
Company will implement fresh-start reporting as of April 11, 1997. Accordingly,
the estimated effects of fresh-start reporting reflected in the unaudited pro
forma information are subject to change. 

For the purpose of the Reorganization Plan, the reorganizational equity value
was estimated to be $65,602, based in part on management's estimates of future
operating results. Reorganizational value necessarily assumes that the
Reorganized Company will achieve its estimated future operating results in all
material respects. If such results are not achieved, the value of the
Reorganized Company could be materially different. 

The unaudited pro forma condensed consolidated financial information and
accompanying notes should be read in conjunction with the Company's historical
financial statements and the notes thereto appearing elsewhere herein. The
unaudited pro forma condensed consolidated financial statements are presented
for informational purposes only and do not purport to represent what the
Reorganized Company's financial position or results of operations would actually
have been if the consummation of the Reorganization Plan had occurred on such
dates, or to project the Reorganized Company's financial position or results of
operations at any future date or for any future period. The unaudited pro forma
condensed consolidated financial statements contain, in the opinion of
management, all adjustments necessary for a fair presentation thereof.


                                       38
<PAGE>

                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

                 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                                December 31, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>

ASSETS                                            ACTUAL      ADJUSTMENTS     PRO FORMA
                                              --------------------------------------------
<S>                                             <C>            <C>             <C>     
    Cash                                        $  35,589      $ (34,949)   a  $    640
    Other  current assets                          76,438            144    b    76,582
                                              --------------------------------------------
           Total current assets                   112,027        (34,805)        77,222
         Property, plant and equipment             12,817         (1,924)   c    10,893
         Intangible and other assets, net              81         41,804    d    41,885
                                              --------------------------------------------
           Total assets                          $124,925       $  5,075       $130,000
                                              ============================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

   Short term debt                               $              $  5,100    e  $  5,100
   Accounts payable and accrued liabilities        15,945          8,246    f    24,191
   Long term debt, current portion                    369          1,127    g     1,496
   Current portion of liabilities subject to
      compromise under reorganization              
      proceedings                                  45,035        (45,035)   h
                                              --------------------------------------------
      Total current liabilities                    61,349        (30,562)        30,787
        Long-term debt                                            33,010    g    33,010
        Other liabilities                             601                           601
        Liabilities subject to compromise         
          under reorganization                        
          proceedings                             160,164       (160,164)   h
                                              --------------------------------------------
           Total liabilities                      222,114       (157,716)        64,398
                                              --------------------------------------------

         Stockholders' equity (deficit)           (97,189)       162,791    i    65,602
                                              --------------------------------------------
           Total liabilities and                 
             stockholders' equity (deficit)      $124,925       $  5,075       $130,000
                                              ============================================
</TABLE>

                 The accompanying notes are an integral part of
      the unaudited pro forma condensed consolidated financial statements.

The following is a brief description of the adjustments made in preparing the
Pro Forma Condensed Consolidated Balance Sheet (unaudited).

a. To reflect $44,049 paid out in accordance with the Reorganization Plan, net
of $9,100 borrowed under new credit facilities.

b. To reflect primarily the distribution of Net assets of discontinued
operations pursuant to the Reorganization Plan.

c. To reflect decrease resulting from facility reorganizations.

d. To record excess of identifiable asset value as a result of fresh-start
reporting, including principally a valuation associated with the Company's
trademarks.

e. To record borrowings under new credit facilities.

f. To record accounts payable and accrued liabilities incurred pursuant to the
Reorganization Plan.

g. To record current portion of long-term debt under new credit facilities, New
Senior Notes and other long-term debt incurred pursuant to the Reorganization
Plan. 

h. To eliminate liabilities in accordance with the Reorganization Plan. The
Reorganization Plan will result in an extraordinary gain on debt forgiveness of
approximately $57,000.

i. To reflect fresh-start reporting and the new equity structure of the
Reorganized Company pursuant to the Reorganization Plan.


                                       39
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

            PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      For the year ended December 31, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                ACTUAL     ADJUSTMENTS     PRO FORMA
                                              ------------------------------------------
<S>                                             <C>         <C>                     
Net sales                                       $ 140,321   $              $ 140,321
                                              ------------------------------------------

Operating (loss) income                            (2,156)      1,533   a       (623)

Debt related fees                                   7,432      (7,432)  b

Other expense (income), net                            27                         27

Interest expense                                    9,555      (3,825)  c      5,730
                                              ------------------------------------------
(Loss) income from continuing operations          
   before income taxes                            (19,170)     12,790         (6,380)

Income taxes                                         (448)        299           (149)

Net (loss) from continuing operations           $ (18,722)  $  12,491      $  (6,231)
                                              ==========================================

Net (loss) per share from continuing
   operations                                   $   (0.99)                 $   (0.96)
                                              ==========================================
Weighted average common and common                                         
   equivalent shares outstanding               18,859,679                  6,500,000  d
                                              ==========================================
</TABLE>


                 The accompanying notes are an integral part of
      the unaudited pro forma condensed consolidated financial statements.

The Pro Forma Condensed Consolidated Statement of Operations (unaudited)
adjustments have been computed assuming the Effective Date was January 1, 1996
and includes adjustments which give effect to the events that are directly
attributable and expected to have a continuing impact on the Reorganized
Company.

The following is a brief description of the adjustments made in preparing the
Pro Forma Condensed Consolidated Statement of Operations (unaudited).

a. To reflect amortization of the intangibles associated with fresh-start
reporting of $2,633, net of $4,166 of costs related to restructuring.

b. To reflect adjustments for costs incurred by the Company outside of its
continuing operations.

c. To reflect incremental interest expense associated with the Company's new
credit facilities and New Senior Notes of $5,730, offset in part by reduced
interest resulting from the debt forgiveness in accordance with the
Reorganization Plan.

d. To reflect the equity structure of the Reorganized Company pursuant to the
Reorganization Plan.

5.  DISCONTINUED OPERATIONS

During the quarter ended October 1, 1994, the Company initiated significant
management changes in its toy and fitness businesses operated primarily by its
Buddy L Inc. and Buddy L Canada Inc. subsidiaries (collectively, "Buddy L")
and, as a result, began evaluating Buddy L's strategic direction and cost
structure. The initial phase of this evaluation included changes in management
responsibility, re-focused attention on established products and product lines,
minimizing the use of television and infomercial advertising and the assessment
of potential productivity improvements.


                                       40
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


In connection with this strategic and cost evaluation, the Company recorded
charges totaling $44,055 in the third quarter and nine months ended October 1,
1994. The charges included provisions for product returns and markdown
allowances ($5,342), certain inventory valuation adjustments ($3,353), the
reassessment of the carrying values of tooling ($4,201) and excess and obsolete
inventories ($12,600) due to the strategic decision not to continue support of
certain products, deferred product development costs ($4,600), television
commercial and infomercial production costs ($1,455) and prepaid barter credits
($2,974) related to the decision to no longer support certain products and
minimize the use of advertising. Charges were also provided for defective
product allowances ($2,607), minimum royalty guarantees ($2,926), allowances for
uncollectible multi-installment receivables due from consumers on infomercial
generated sales ($1,300), employee severance expenses ($1,672), office and
showroom lease termination costs ($605) and other miscellaneous items ($420).

During the fourth quarter of 1994, the Company recorded additional charges
totaling $24,548. The charges included provisions for product returns and
markdown allowances ($1,777), certain inventory valuation adjustments ($7,101),
the reassessment of the carrying values of tooling ($2,135) and excess and
obsolete inventories ($5,140), deferred product development costs ($821),
prepaid barter credits ($1,007), defective product allowances ($1,392), employee
severance expenses ($1,377), fixed asset write-offs ($1,575) and other
miscellaneous items ($2,223). 

In December 1994, the Company determined that it would hold its investments in
its Buddy L toy and fitness businesses for sale. Accordingly, the results of
operations of these businesses have been accounted for as discontinued
operations for all periods in the accompanying consolidated financial
statements. On March 2, 1995, Buddy L Inc. filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware. On May 9, 1995, the Company accepted the bid to sell
certain assets and liabilities of the Buddy L toy business to Empire of
Carolina, Inc. The bid was approved by the Bankruptcy Court on May 19, 1995 and
the transaction closed on July 7, 1995. The Bankruptcy Court also approved the
sale of the fitness business which was completed on June 30, 1995. At December
31, 1994, the Company recorded a loss of $11,335, net of income taxes, for the
disposition of its discontinued operations, including the estimated 1995
operating loss through the disposition date. As a result of the finalization of
the sale of the Buddy L toy and fitness businesses, the terms of which changed
substantially from those previously proposed; a change in the anticipated
distribution of the sale proceeds amongst the various creditors and the
liquidation of the remaining Buddy L assets (primarily accounts receivable and
real property); and an increase in estimated phase out costs, an additional loss
from disposition of discontinued operations of $25,569 was recorded during the
year ended December 31, 1995.

On December 19, 1995, the Bankruptcy Court approved a settlement agreement (the
"Settlement Agreement") in the Smedley Industries, Inc. (f/k/a Buddy L Inc.)
("Smedley") Chapter 11 case among the Company, Smedley, its creditors and the
Company's banks and Senior Noteholders, resolving the allocation of the proceeds
and expenses from the disposition of the Buddy L toy and fitness businesses. A
Chapter 11 plan and a disclosure statement for Smedley were filed and
subsequently amended with the Bankruptcy Court embodying the terms of the
Settlement Agreement. The Chapter 11 plan, as amended, was confirmed by the
Court on October 3, 1996 and became effective on October 17, 1996.

Net sales of discontinued operations were $181,514 for the year ended December
31, 1994. One customer aggregated more than 10% of net sales for the year. The
(loss) from discontinued operations for the year ended December 31, 1994
included income tax expense of $309. The Company allocated interest expense to
discontinued operations based upon interest on debt of the discontinued
operation estimated to be assumed by the buyer plus that portion of interest not
directly attributable to other operations allocated based upon a ratio of net
assets discontinued to total consolidated net assets plus debt other than debt
of the discontinued operation to be assumed and debt that can be directly
attributable to other operations. Interest allocated in determining the (loss)
from discontinued operations in 1994 was $5,547 and the interest in the 1994
loss from the disposition of discontinued operations was $4,300. Net assets of
discontinued operations of $9,856 at December 31, 1995, consisted primarily of
accounts receivable and real property.

6.  UNUSUAL CHARGES

During 1996, the Company recorded significant unusual charges in continuing
operations totaling $4,033 to reflect the impact of strategically reorganizing
management to position itself for a definitive restructuring plan. These costs
consist primarily of severance pay ($3,371), including that of the Company's
former Chief Executive and Chief Financial Officers, and the impairment of long
lived assets ($662), primarily machinery and equipment at one of its Canadian
facilities. 


                                       41
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


During 1995, the Company recorded significant unusual charges in continuing
operations totaling $15,471 due principally to litigation settlements ($8,813)
and reassessment, during the fourth quarter of 1995, of the intangible assets
associated with the acquisition of #1 Apparel (see Note 9) ($6,416). Litigation
settlements (see Note 19) include settlements of environmental litigation
($7,000, recorded in the second quarter and $250, recorded in the fourth quarter
of 1995) and securities litigation ($1,563 recorded in the fourth quarter of
1995). The unusual charges represent 21.5% and 29.8% of the Company's loss from
continuing operations for the years ended December 31, 1996 and 1995,
respectively.

7. DEBT RELATED FEES AND DEFAULT INTEREST

As a result of the Company's significant losses in the year ended December 31,
1994, the resultant non-compliance with covenants in its various financing
agreements, the involuntary bankruptcy action initiated by its senior
noteholders, the Standstill Agreements with its lenders and the Filing, the
Company's continuing operations incurred significant legal and professional fees
totaling $7,432 and $11,195 for the years ended December 31, 1996 and 1995,
respectively. These fees include the cost of the Company's legal counselors,
financial advisors and consultants, as well as those of its bankers, senior
noteholders and creditors and, additionally, 1995 included certain payments made
directly to these lenders. The debt related fees for the year ended December 31,
1996 is net of $705 of interest earned on accumulated cash resulting from the
Filing. These costs are included as Debt Related Fees in the Consolidated
Statement of Operations for the periods then ended. 

Additionally, as a result of the Company's defaults under its financing
agreements, its financial condition and the terms of the Standstill Agreements,
since February 1995 the Company was charged an additional 3.0% interest on its
bank debt and the interest rate on its 6.76% senior notes was increased to 15%.
These higher interest rates resulted in incremental interest expense of $2,350
and $5,679 for the years ended December 31, 1996 and 1995, respectively, which
is included in interest expense in the Consolidated Statements of Operations.

The debt related fees and default interest costs represent 52.2% and 32.5% of
the Company's loss from continuing operations for the years ended December 31,
1996 and 1995. 

8. EQUITY TRANSACTIONS

In January 1995, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of common stock of the
Company to stockholders of record at the close of business on March 1, 1995.
Each Right entitled the registered holder to purchase from the Company a unit
consisting of one one-thousandth of a share of the Series A Junior Participating
Preferred Shares, par value $0.01 per share, of the Company, at a purchase price
of $32.00 per Unit, subject to adjustment. The Rights were not exercisable until
the Distribution Date, as defined, and no longer exist under the Reorganized
Company.

9. ACQUISITION

In January 1994, the Company acquired the licensed sports apparel division of
K-Products, Inc., a premium apparel manufacturer, through newly created
subsidiaries #1 Apparel, Inc. and #1 Apparel Canada Inc. ("#1 Apparel"). #1
Apparel manufactures a high quality line of baseball style caps and jackets
using its own unique designs and graphics under licenses from various
professional and college sports leagues and teams. The acquisition included a
manufacturing facility in Ontario, Canada, and all rights to the #1 Apparel
name, trademarks, copyrights and designs, as well as accounts receivable and
inventory. The price paid by the Company for this acquisition was $15,150 in
cash. This acquisition was accounted for using the purchase method of
accounting. The operating results of #1 Apparel are recorded in the Company's
consolidated financial statements from the date of acquisition.

10. ACCOUNTS RECEIVABLE
Net accounts receivable include:

                                                        1996        1995
   ------------------------------------------------------------------------
        Allowance for doubtful accounts               $ 3,596     $ 5,337
        Allowance for returns, discounts, rebates
            and cooperative advertising                 5,112       7,301
   ------------------------------------------------------------------------
                                                      $ 8,708     $12,638
   ========================================================================

Bad debt expense for the years ended December 31, 1996, 1995 and 1994 was $621,
$4,679, and $3,403, respectively.


                                       42
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


11. INVENTORIES
Net inventories consist of:

                                                          1996        1995
    ------------------------------------------------------------------------
         Finished products                             $26,592     $38,948
         Work in process                                 2,669       4,143
         Raw materials and supplies                      7,918       7,807
    ------------------------------------------------------------------------
                                                       $37,179     $50,898
    ========================================================================

Allowances for excess, obsolete and slow moving inventories were $4,791 and
$6,536 at December 31, 1996 and 1995, respectively.

12. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of:

                                                          1996        1995
    ------------------------------------------------------------------------
         Land and improvements                         $    79     $    79
         Buildings and improvements                      5,418       5,543
         Machinery and equipment                        14,352      14,280
         Tools, dies and molds                           2,958       2,568
         Office furniture and equipment                  7,182       6,037
    ------------------------------------------------------------------------
                                                        29,989      28,507

         Less accumulated depreciation and              
             amortization                               17,172      15,011
    ------------------------------------------------------------------------
                                                       $12,817     $13,496
    ========================================================================

Property, plant and equipment under capital leases, primarily machinery and
equipment, included above totaled $2,020 and $2,493 at December 31, 1996 and
1995, respectively. Accumulated amortization for the same periods was $1,200 and
$1,277, respectively. 

Depreciation and amortization expense for the years ended December 31, 1996,
1995 and 1994 was $2,524, $2,407, and $1,811, respectively.

13.  INDEBTEDNESS

A. NEW INDEBTEDNESS

(1.) BANK AGREEMENTS

On the Effective Date of the Reorganization Plan, the Company and two of its
U.S. subsidiaries, Maska U.S., Inc. and #1 Apparel, Inc. (the "U.S.
subsidiaries"), entered into a Credit Agreement (the "US Credit Agreement") with
the lenders referred to therein (the "Lenders") and The Chase Manhattan Bank, as
Agent ("Chase"). Simultaneously, one of the Company's Canadian subsidiaries,
Sport Maska Inc., entered into a Credit Agreement (the "Canadian Credit
Agreement" and, together with the US Credit Agreement, the "Credit Agreements")
with The Chase Manhattan Bank of Canada ("Chase Canada"). The maximum amount of
loans and letters of credit that may be outstanding under the Credit Agreements
is $74,000, consisting of $35,000 revolving credit loans under the US Credit
Agreement, $35,000 of revolving credit loans under the Canadian Credit Agreement
and a $4,000 term loan under the US Credit Agreement. Borrowings under the
Credit Agreements are guaranteed by certain subsidiaries and are secured by
substantially all of the assets (including, without limitation, accounts
receivable, inventory and the stock of certain subsidiaries) of the Company, the
two U.S. Subsidiaries referred to above and the Company's other subsidiaries
which are guarantors. Total amounts outstanding under the Credit Agreements were
$14,200 at April 14, 1997. 

Borrowings under the US Credit Agreement bear interest at the alternate base
rate plus 1% per annum or at an interest rate based on LIBOR plus 2 3/4% per
annum. Borrowings under the Canadian Credit Agreement bear interest at Chase
Canada's prime rate. In addition, the Company is charged a quarterly commitment
fee of 3/8 of 1% on the unused portion of the revolving credit facilities under
the Credit Agreements and certain other fees. 

The Credit Agreements include customary affirmative and negative covenants,
including those relating to capital expenditures, interest coverage and the
incurrence of additional indebtedness.

(2.) NEW SENIOR NOTES

On April 11, 1997 the Company issued $29,500 principal amount of 14% Senior
Secured Notes due April 1, 2004 (the "New Senior Notes"), pursuant to an
Indenture with The Bank of New York, as trustee. The New Senior 


                                       43
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


Notes were issued by the Company under the Reorganization Plan as partial
satisfaction of the Company's obligations to its former secured lenders under
the Bank Agreement referred to below. 

Interest is payable on the New Senior Notes semi-annually at the rate of 14% per
annum, with such interest rate being permanently reduced if the Company meets
certain earnings tests. Further, of the initial 14% interest rate, 10% is
payable in cash and 4% is payable by the issuance of additional New Senior
Notes. 

The New Senior Notes are guaranteed by certain subsidiaries and are
collateralized by substantially all of the assets of the Company (including,
without limitation, accounts receivable, inventory and the stock of certain
subsidiaries) of the Company. The lien of the trustee for the benefit of itself
and the New Senior Noteholders is junior to the liens of Chase and Chase Canada.
The Indenture also includes customary affirmative and negative covenants. 

B. OLD INDEBTEDNESS

As a result of the Filing, certain of the Company's indebtedness has been
classified as liabilities subject to compromise under reorganization
proceedings, at December 31, 1996 and 1995. The Reorganization Plan
substantially altered the rights of most pre-petition unsecured creditors by
liquidating their allowed claims at less than 100% of their face value (see Note
2). Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and Senior Noteholders. On June 5, 1995, the Company and
its bank lenders and Senior Noteholders entered into Standstill Agreements that
provided a period of continued financing of the Company by its lenders, a
sharing of collateral by its bank lenders and Senior Noteholders and provided
the Company with a period in which to restructure its debt without further
judicial proceedings. Under the terms of the Standstill Agreements, the interest
rate on the 6.76% Senior Notes was increased to 15% effective February 15, 1995
and, subject to certain adjustments, would have increased to a maximum of 19%
during the agreement period and the interest was payable at 9% with the
remaining interest payable at the end of the Standstill Agreement period. The
Standstill Agreements provided the Company's lenders with warrants for an
aggregate of 2,000,000 shares of the Company's common stock, with an exercise
price of $2.45 per share and 500,000 shares with an exercise price of $2.27 per
share.

(1.) BANK AGREEMENTS 

In December 1992, the Company entered into a Loan and Security Agreement ("Bank
Agreement") with a syndicate of banks led by Fleet Credit Corporation.
Borrowings under the Bank Agreement were collateralized by certain of the
Company's accounts receivable and inventory, and the common stock of certain
subsidiaries and were cross collateralized and guaranteed by such subsidiaries.
Total amounts outstanding under the Bank Agreement were $91,219 and $96,330 at
December 31, 1996 and 1995, respectively. As a result of the Filing, the amounts
are classified as liabilities subject to compromise under reorganization
proceedings. 

Borrowings under the Bank Agreement bear interest at the bank's U.S. prime rate
(8.25% at December 31, 1996 and 8.5% at December 31, 1995) plus 1.0% payable
monthly. In addition, the Company was charged a monthly commitment fee of 0.25%
to 0.375% of the unused portion of the facility. However, since February 23,
1995, the Company has been charged a default rate of interest at the U.S. prime
rate plus 4.0% payable monthly. The weighted average interest rate on short term
debt outstanding at December 31, 1996 and 1995 was 10.1% and 13.0%,
respectively. 

Under the Plan, the lenders under the Bank Agreement received (i) $44,178 in
cash; (ii) $29,500 principal in New Senior Notes; and (iii) 2,470,000 shares of
New Common Stock, representing approximately 38.0% of the outstanding New Common
Stock. The lenders sold such shares to Wellspring Associates L.L.C. on the
Effective Date.


                                       44
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


(2.)  LONG-TERM DEBT

The Company's long-term debt is as follows:

                                                        1996        1995
  ------------------------------------------------------------------------
     6.76% Senior Notes (see Note (3.))               $75,000     $75,000
     Note payable (see Note (4.))                       6,000       6,000
     Industrial Development Revenue Bonds (see                      
       Note (5.))                                                   3,720
     Capital leases                                       369         702
     Other long-term debt                                 826         826
   ------------------------------------------------------------------------
                                                       82,195      86,248
     Less amounts contractually due within one         
       year                                            (1,277)     (1,285)
   ------------------------------------------------------------------------
     Total long-term debt, excluding current          
       portion                                        $80,918     $84,963
   ========================================================================

(3.) In March 1994, the Company completed a private placement of $75,000 of its
6.76% Senior Notes due February 15, 2004 ("Senior Notes") with a group of eight
insurance companies.

Under the Reorganization Plan, the holders of the Senior Notes received a
distribution of 3,173,414 shares of the Company's New Common Stock (see Note 2).

(4.) During June 1995, the Company entered into an agreement to settle certain
litigation for $7,000, including a note in the principal amount of $6,000
bearing interest at 10% payable over five years based on a twenty year
amortization with the balance of principal payable in June 2000.

(5.) During 1992, Smedley borrowed $4,000 under a bond indenture agreement with
Fulton County, New York to purchase a building, land and machinery and
equipment. The bonds consisted of a $2,000 tax-exempt issue and a $2,000 taxable
issue with variable interest. The principal balance at December 31, 1995
was $3,720. Interest was payable quarterly and principal payable in annual
installments through 2012. The bonds are collateralized by the building, land
and machinery and equipment. The bonds were further collateralized by letters of
credit amounting to $3,775 at December 31, 1995, under which the Company, in
addition to Smedley, was a direct obligor. Accordingly, the amounts outstanding
under these bonds are classified as an obligation of the Company's continuing
operations. As a result of Smedley's Chapter 11 Plan effectiveness in October
1996 the mortgagor is to receive title to the land and building in full
satisfaction of amounts due.

(6.) Capital leases on molds, machinery and equipment, with variable interest
rates to 14% and maturing on various dates through 1998. By authorization of the
Bankruptcy Court, the Company may continue to pay these, therefore these are
classified as current at December 31, 1996 and 1995.

(7.) Cash payments for interest were $109, $17,337, and $9,465 for the years
ended December 31, 1996, 1995 and 1994, respectively. During the reorganization
proceedings the Company was generally not permitted to pay interest. During such
time, the Company recorded interest expense only to the extent paid or earned
during the proceedings and to the extent that it was probable that the
Bankruptcy Court would allow interest on pre-Petition Date debt as a priority,
secured or unsecured claim. The excess of contractual interest expense over
recorded interest expense for the years ended December 31, 1996 and 1995 was
approximately $18,134 and $2,100, respectively.

14.  RELATED PARTY TRANSACTIONS

The Company (including discontinued operations) leases property from companies
controlled by certain former officers and directors of the Company. Related
party rent expense for the years ended December 31, 1996, 1995 and 1994 was
$2,160, $1,791, and $1,095, respectively. 

The Company was charged $350 in management fees by companies controlled by
certain former officers and directors of the Company for the years ended
December 31, 1995 and 1994.

Additionally, during 1994, the Company was charged $1,053 for construction
project management at certain of the Company's facilities (of which $950 related
to discontinued operations) by a company controlled by certain former officers
and directors of the Company.

15.  LEASES

Certain of the Company's subsidiaries lease office and warehouse facilities and
equipment under operating lease agreements. Some lease agreements provide for
annual rent increases based upon certain factors including the consumer price
index.


                                       45
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


As Debtors-in-Possession, the Company had the right, subject to Bankruptcy Court
approval, to assume or reject executory contracts and unexpired leases. In this
context, "assumption" means that the Company agrees to perform its obligations
and cure all existing defaults under the contract or lease agreement, and
"rejection" means that the Company is relieved from its obligations to perform
further under the contract or lease, but is subject to a claim of damages for
the breach thereof.

As of March 31, 1997, the Company determined which executory contracts and
unexpired leases to assume (in modified form) or reject (see Note 2). 

The following is a schedule of future minimum lease payments under continuing
noncancelable operating leases with initial terms in excess of one year at
December 31, 1996:

                      Operating Leases
                   ---------------------------------------------
                      1997                             $ 2,577
                      1998                               1,985
                      1999                               1,704
                      2000                               1,665
                      2001                               1,631
                      Thereafter                         4,100
                   ---------------------------------------------
                                                       $13,662
                   =============================================

Rental payments, including those to related parties, for the years ended
December 31, 1996, 1995 and 1994 were approximately $4,188, $7,686, and $6,477,
respectively.

16. ROYALTIES

Certain of the Company's subsidiaries have entered into agreements which call
for royalty payments generally based on net sales of certain products and
product lines. These agreements were executory contracts under the Bankruptcy
Code. Certain agreements require guaranteed minimum payments over the royalty
term. As Debtors-in-Possession, the Company had the right, subject to Bankruptcy
Court approval, to assume or reject executory contracts and unexpired leases
(see Note 15). As of March 31, 1997, the Company determined which executory
contracts and unexpired leases to assume or reject (see Notes 2 and 15). Future
minimum payments under the agreements which have been assumed, for the years
ended December 31, are as follows:

                      Royalties
                   ---------------------------------------------
                      1997                             $ 3,315
                      1998                               3,531
                      1999                               3,527
                      2000                                   0
                      2001                                   0
                      Thereafter                             0
                   ---------------------------------------------
                                                       $10,373
                   =============================================

Royalty expense for the years ended December 31, 1996, 1995 and 1994, including
guaranteed minimum payments, was approximately $3,878, $4,190, and $7,532,
respectively.


                                       46
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


17.  INCOME TAXES
The components of income taxes are:

                                               1996        1995        1994
       ------------------------------------------------------------------------
       Current:    U.S.                       $   151     $   205     $(1,872)
                   Non-U.S.                      (665)        (96)        446
       ------------------------------------------------------------------------
                                                 (514)        109      (1,426)
       ------------------------------------------------------------------------
       Deferred:   U.S.                             0           0       1,765
                   Non-U.S.                        66         496        (622)
       ------------------------------------------------------------------------
                                                   66         496       1,143
       ------------------------------------------------------------------------
                                              $  (448)    $   605     $  (283)
       ========================================================================

The income tax (benefit) expense is reflected in the accompanying Consolidated
Statements of Operations as follows:

                                               1996        1995        1994
       ------------------------------------------------------------------------
          Continuing operations               $  (448)    $   605     $   (11)
          Discontinued operations                   0           0        (272)
       ------------------------------------------------------------------------
                                              $  (448)    $   605     $  (283)
       ========================================================================

U.S. (loss) before taxes from continuing operations was $(11,518), $(47,401),
and $(7,100) for the years ended December 31, 1996, 1995 and 1994, respectively.

The Company's effective income tax rate from continuing operations differed from
the federal statutory rate as follows:

                                              1996        1995        1994
       ------------------------------------------------------------------------
          Income taxes based on U.S.             
            federal tax rate                     34%         34%         34%
          Non-U.S. and state tax rates           (1%)        (1%)         1%
          Valuation Allowance                   (29%)       (33%)       (33%)
          Other, net                             (2%)        (1%)        (2%)
       ------------------------------------------------------------------------
          Effective income tax rate               2%         (1%)         0%
       ========================================================================

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 1996 and 1995 are as
follows:

<TABLE>
<CAPTION>
                                                   1996                        1995
                                              U.S.    Non-U.S.              U.S.    Non-U.S.
-----------------------------------------------------------------------------------------------
<S>                                        <C>          <C>             <C>          <C>      
Disposal of discontinued operations        $       0    $       0       $   3,570    $       0
Accounts receivable, principally due to                                              
   allowance for doubtful accounts             1,539            0           2,350            0
Inventories, principally due to                                                      
   additional costs inventoried for tax                                              
   purposes                                    1,156            0           2,092            0
Other, net                                       401            0             (58)           0
-----------------------------------------------------------------------------------------------
                                               3,096            0           7,954            0
Valuation allowance                           (3,096)           0          (7,954)           0
-----------------------------------------------------------------------------------------------
Total current deferred tax assets                                                    
   (liabilities)                           $       0    $       0       $       0    $       0
===============================================================================================
Net operating loss carryforwards           $  49,709    $   3,152       $  42,747    $   1,833
Plant, equipment and depreciation               (180)        (900)           (156)        (882)
Other, net                                     7,850        1,020           5,495        1,327
-----------------------------------------------------------------------------------------------
                                              57,379        3,272          48,086        2,278
Valuation allowance                          (57,379)      (3,873)        (48,086)      (2,813)
-----------------------------------------------------------------------------------------------
Total non-current deferred tax assets                                                
   (liabilities)                           $       0    $    (601)      $       0    $    (535)
===============================================================================================
</TABLE>

During the year ended December 31, 1996, the valuation allowance increased by
$5,495.


                                       47
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


Net cash payments (refunds) for income taxes for the years ended December 31,
1996, 1995 and 1994 were $389, $(2,726), and $(1,838), respectively.

Undistributed earnings from continuing operations of subsidiaries outside the
U.S., for which no provision for U.S. taxes has been made, amounted to
approximately $1,640 at December 31, 1996. In the event earnings of these
subsidiaries are remitted, foreign tax credits may be available to offset U.S.
taxes. 

At December 31, 1996, the Company has net operating loss carryforwards related
to U.S. operations for income tax purposes of approximately $125,000, and net
operating loss carryforwards related to foreign operations for income tax
purposes of approximately $8,500. These carryforwards, arising primarily from
discontinued operations, begin to expire in 2001 and have been fully reserved by
a valuation allowance. These carryforwards may be substantially reduced as a
result of debt forgiveness in connection with the Reorganization Plan. The
Company's ability to use remaining carryforwards after reduction may be limited
in use on an annual basis as a result of a change in control of the Company on
April 11, 1997 in connection with the Reorganization Plan.

18.  STOCK OPTION PLAN

As a result of the Reorganization Plan, all outstanding shares of Common Stock
on the Effective Date were converted into warrants to purchase shares of New
Common Stock. Therefore, stock options not exercised prior to the Effective Date
may no longer be exercised. 

During 1996 the Company granted, phantom stock options to purchase 840,000
shares of New Common Stock in the Company at a weighted average exercise price
of $11.55, to certain key employees. The exercise price of the phantom stock
options are not less than the estimated fair market value of the shares at the
time the options were granted. Generally, these phantom stock options become
exercisable over a five-year vesting period and expire 10 years from the date of
the grant. 

The fair value of each phantom option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996: dividend yields of zero percent;
weighted-average expected volatility of 61.39 percent; weighted-average risk
free interest rate of 6.65 percent and weighted-average expected lives of 3.5
years. The weighted-average fair value of phantom options granted was $4.44 for
the year ended December 31, 1996. Phantom stock options granted during 1996 and
outstanding at December 31, 1996 were 840,000 shares with weighted-average
exercise price of $11.55, ($10.00 - $16.00 range of exercise prices)
weighted-average remaining contractual life of 9.8 years and none exercisable at
December 31, 1996.

The Company applies APB Opinion No. 25 and related Interpretations in accounting
for stock options. Accordingly, no compensation cost has been recognized. Had
compensation cost for the stock options been determined based on the fair value
at the grant dates for awards, consistent with the alternative method set forth
under Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
Accounting for Stock-Based Compensation, the Company's net loss and net loss per
share would have been reduced. The initial impact of SFAS 123 may not be
representative of the effect on income in the future years because options vest
over several years and additional option grants may be made each year.

The pro forma amounts are indicated below:

                Year Ended December 31,      1996         1995
                ---------------------------------------------------
                Net Loss
                     As reported         $ (18,722)   $ (77,448)
                     Pro forma           $ (19,186)   $ (77,448)

                Net Loss per share
                     As reported         $    (0.99)  $    (4.11)
                     Pro forma           $    (1.01)  $    (4.11)


                                       48
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


19. CONTINGENCIES AND LITIGATION

A. ENVIRONMENTAL LITIGATION:

In 1991, the Vermont Department of Environmental Conservation ("VTDEC") notified
the Company that the Bradford, Vermont property operated by its wholly-owned
subsidiary, Maska U.S., Inc. ("Maska"), had been included on the U.S.
Environmental Protection Agency's Comprehensive Environmental Response,
Compensation and Liability Information System and the Vermont Hazardous Sites
List was being evaluated for possible remedial action. Under relevant
environmental laws, Maska, as an owner of the property, was potentially liable
for the entire cost of investigating and remediating the contamination allegedly
emanating from its Bradford property and certain civil penalties. 

Maska undertook its own investigation to determine the extent of contamination,
the rate of movement and the concentration of the contaminants, the appropriate
action required for site remediation and the identification of other parties who
should bear a share of the costs of remediation. The Company is seeking recovery
against the former owners and affiliates of the Bradford property and facility
and the owner of an adjacent parcel for the costs of such investigation and
remediation and are currently in negotiations to settle these claims. During
April 1996, Maska and the State of Vermont entered into a consent decree
("Consent Decree") setting forth the terms under which Maska has agreed to
remediate specified hazardous materials if, and to the extent, found on the
contaminated property or caused by Maska. The Consent Decree was approved by the
Bankruptcy Court on May 14, 1996 and approved and entered in Vermont Superior
Court on June 20, 1996. The Consent Decree is subject to several conditions,
including ongoing payment by the Company of certain State of Vermont oversight
fees up to a maximum of $60 per year. In addition, the Company paid to Vermont a
civil fine stipulated penalty of $250. While the total cost of investigation and
remediation cannot be determined until the investigation required by VTDEC is
complete and the extent of the Company's remedial obligations have been
determined, the Company believes that the remaining costs will be approximately
$1,400 in the aggregate, payable over the next several years. 

Maska commenced an action in the United States District Court for the District
of Vermont (the "Vermont District Court") entitled Maska U.S. Inc. V. Kansa, et
al., Doc. No. 5:93-CV-309 (the "Insurance Litigation") against nine of its
liability insurers seeking coverage for environmental cleanup costs arising out
of claims brought by the State of Vermont and an adjoining landowner for their
failure to defend or to indemnify Maska with respect to these claims. 

On September 30, 1996, United States Magistrate Judge Jerome J. Neidermeier
issued that certain Magistrate Judge's Report and Recommendation (the
"Magistrate Report"), which analyzes legal issues and recommends that the
Vermont District Court grant Maska's motion for partial summary judgment on the
issue of the duty to defend. The report also recommends that all the insurers'
motions for summary judgment be denied, except for two on certain individual
policies which Maska conceded provide no coverage for its claims. On December 2,
1996, Chief Judge J. Garvin Murtha adopted the Magistrate Report in its
entirety. Various motions for reconsideration of that order and for
certification of the issue for immediate appeal have since been denied. After
the completion of limited pre-trial discovery, the case will be scheduled for
trial. 

Two holders of Maska's unsecured claims have asserted an equitable lien on
Maska's recovery, if any, in the Insurance Litigation and also have commenced an
independent action against the defendant insurance companies pursuant to
Vermont's direct action statute. The Company believes that the asserted
equitable lien is without merit and that the independent direct action violated
the automatic stay pursuant to Section 362 of the Bankruptcy Code. The Company
currently is evaluating its options for legal recourse in these matters. 

In 1992, the owner of a property adjacent to Maska's manufacturing facility in
Bradford, Vermont, filed an action in Vermont Superior Court alleging that its
property has been contaminated as a result of the Company's manufacturing
activities and seeking compensatory and punitive damages under the Vermont
Groundwater Protection Law and various common law theories. During June 1995,
Maska reached a settlement of all claims with the adjacent landowner consisting
of $1,000 cash (which was paid during July 1995) and a $6,000 note bearing
interest at 10% payable over five years based on a twenty year amortization with
the balance of principal payable in June 2000. The Company recorded a provision
of $7,000 for this settlement during the year ended December 31, 1995.


                                       49
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


B. SECURITIES LITIGATION:

On February 14, 1996, the Company, together with certain of its former officers
and directors, reached a settlement with the plaintiffs in a class action
securities litigation. The settlement provides for the cash payment by the
Company's insurer of $8,750, on behalf of certain former officers and directors
of the Company who are defendants. In addition, the Company agreed to issue
1,000,000 shares of its Common Stock which was converted into warrants in the
Reorganization Plan. As a result of the settlement, the Company recorded a
provision of approximately $1,563 (the market value of 1,000,000 shares of
Common Stock on the date the settlement was agreed to) in the year ended
December 31, 1995. During July 1996, the settlement was approved by the
Bankruptcy Court and the U.S. District Court for the Southern District of New
York. Additionally, during August 1996 certain of the Company's creditors filed
an appeal with the Bankruptcy Court with respect to the Bankruptcy Court's
approval of the settlement which has not yet been resolved but which will be
dismissed with prejudice in connection with the Reorganization Plan.

C. PRODUCT LIABILITY LITIGATION:

A pre-petition personal injury claim involving a spinal injury which was filed
in 1989 has been asserted against the Company for which the Company did not have
sufficient insurance coverage. That claim and its attendant litigation has been
settled and is being submitted to the Bankruptcy Court for approval. The claim
will be treated under the Reorganization Plan pursuant to the terms of the
settlement. The Company is unaware of any other personal injury claims for which
there is not adequate insurance coverage.

In connection with the claim, American Home Assurance Company ("American Home"),
has commenced a declaratory judgment action against the Company in Massachusetts
District Court in respect of its duty to defend and to indemnify the Company and
an action in Montreal Superior Court in Quebec, Canada to recover defense costs.
The Company filed a response to the declaratory judgment action and a
counterclaim in Montreal Superior Court alleging American Home failed to fulfill
its duty to defend the Company. American Home has alleged that it is entitled to
payment in full for any amounts it recovers against the Company. The Company
believes that American Home's claims and contentions are without merit and, in
any event, would be treated under the Reorganization Plan. In the event that the
Company is required to make such a payment, it anticipates having funds
sufficient to meet any Court-ordered obligation. American Home's claim in
respect of the recovery of defense costs against the Company is in the amount of
approximately $575.

Other than certain legal proceedings arising from the ordinary course of
business, which the Company believes will not have a material adverse impact on
the financial position, results of operations, or cash flows, there is no other
litigation pending or threatened against the Company.


                                       50
<PAGE>


                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


20.  GEOGRAPHICAL INFORMATION

The Company designs, develops, manufactures and markets a broad range of
sporting goods. The Company manufactures hockey and hockey related products,
including hockey uniforms, protective equipment, hockey figure and inline skates
and inline skates and street hockey products, marketing under the CCM brand
name, and private label brands and licensed sports apparel under the CCM and #1
Apparel names. The Company sells its products worldwide, primarily in North
America, to a diverse customer base consisting of mass merchandisers, retailers,
wholesalers, sporting goods shops and international distributors. The Company
manufactures and distributes most of its products at facilities in North America
and sources products internationally. 

The following table shows data by geographic area for the periods noted below:

                                           1996        1995        1994
   -----------------------------------------------------------------------
   Net sales to unaffiliated customers 
   from operations within:
      United States                      $ 70,269    $ 89,631     $106,911
      Canada                               67,183      68,101       70,645
      Other (A)                             2,869       3,241        3,250
   ------------------------------------------------------------------------
                                          140,321     160,973      180,806

   Intercompany sales to other geographic
   areas from operations within:
      United States                         2,155       3,123           26
      Canada                               22,136      30,141       34,435
      Intercompany transfers between
         geographic areas                 (24,291)    (33,264)     (34,461)
   ------------------------------------------------------------------------
   Net sales                              $140,321   $160,973     $180,806
   ========================================================================

   Operating (loss) income within:
      United States                       $   (17)   $(23,415)    $ (1,232)
      Canada                               (1,772)        219        1,147
      Other (A)                               187         490          463
      Intercompany adjustments               (554)      1,189         (180)
   ------------------------------------------------------------------------
   Operating (loss) income                $(2,156)   $(21,517)    $    198
   ========================================================================

   Identifiable assets at year end:
      United States                       $242,441   $235,213     $351,295
      Canada                               72,589      71,570       81,317
      Other (A) (B)                         3,062      12,273       61,563
      Intercompany balances              (193,167)   (181,028)    (301,337)
   ------------------------------------------------------------------------
   Identifiable assets                   $124,925    $138,028     $192,838
   ========================================================================

(A) Other includes Hong Kong and the United Kingdom.

(B) Other identifiable assets include net assets of discontinued operations.

Foreign currency transaction (losses) amounted to $(222), $(1,029) and $(286)
for the years ended December 31, 1996, 1995 and 1994, respectively.

21. NEW ACCOUNTING PRONOUNCEMENTS

Effective December 31, 1997 the Company will be required to implement Statement
of Financial Accounting Standard No. 128 (SFAS 128) "Earnings Per Share" (EPS).
SFAS 128 replaces the presentation of primarily earning per share with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Management has not yet made a
determination of the impact that the adoption of EPS, if any, would have on the
financial statements.


                                       51
<PAGE>

                                                                     Schedule II

                              SLM INTERNATIONAL, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                 Years ended December 31, 1996, 1995, and 1994
                                 (In thousands)
<TABLE>
<CAPTION>

                                                ADDITIONS
                                            -------------------                                   BALANCE
                               BALANCE AT   CHARGED TO  CHARGED                                      AT
                                DECEMBER     COSTS AND  TO OTHER    TRANSLATION                   DECEMBER
     DESCRIPTION                31, 1995     EXPENSES   ACCOUNTS    ADJUSTMENTS   DEDUCTIONS      31, 1996
-----------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>          <C>           <C>        <C>             <C>
Allowance for doubtful           $5,337        621         0             (6)         2,356         $3,596
    accounts                                                                           (A)
Allowance for returns,           $7,301      8,968         0             (7)        11,150         $5,112
   discounts, rebates and                                                              (B)
   cooperative advertising
Allowance for excess,            $6,536      4,380         0            (11)         6,114         $4,791
   obsolete and slow
   moving inventories


<CAPTION>
                                                ADDITIONS
                                            -------------------                                   BALANCE
                               BALANCE AT   CHARGED TO  CHARGED                                      AT
                                DECEMBER     COSTS AND  TO OTHER    TRANSLATION                   DECEMBER
     DESCRIPTION                31, 1994     EXPENSES   ACCOUNTS    ADJUSTMENTS   DEDUCTIONS      31, 1995
-----------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>          <C>           <C>        <C>             <C>
Allowance for doubtful           $3,398      4,679         0              7         2,747          $5,337
   accounts                                                                           (A)
Allowance for returns,           $5,438     12,301         0             41        10,479          $7,301
   discounts, rebates and                                                             (B)
   cooperative advertising
Allowance for excess,            $5,226      5,746        47             57         4,540          $6,536
   obsolete and slow
   moving inventories


<CAPTION>
                                                ADDITIONS
                                            -------------------                                   BALANCE
                               BALANCE AT   CHARGED TO  CHARGED                                      AT
                                DECEMBER     COSTS AND  TO OTHER    TRANSLATION                   DECEMBER
     DESCRIPTION                31, 1993     EXPENSES   ACCOUNTS    ADJUSTMENTS   DEDUCTIONS      31, 1994
-----------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>          <C>           <C>        <C>             <C>
Allowance for doubtful           $2,275       3,403        15           (26)        2,269          $3,398
   accounts                                                                        (A)(C)
Allowance for returns,           $5,495      13,893       100           (79)       13,971          $5,438
   discounts, rebates and                                                          (B)(C)
   cooperative advertising
Allowance for excess,            $1,507       4,280       240           (92)          709          $5,226
    obsolete and slow                                                                 (C)
   moving inventories
</TABLE>

----------
(A) Accounts written off as uncollectible

(B) Deductions taken by customers.

(C) Deductions for discontinued operations.


                                       52
<PAGE>


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

                                      NONE

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by Item 10 will be set forth under "Election of Directors"
in the Company's 1997 Proxy Statement, which is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by Item 11 will be set forth under "Executive Compensation"
in the Company's 1997 Proxy Statement, which is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by Item 12 will be set forth under "Security Ownership of
Beneficial Holders" in the Company's 1997 Proxy Statement, which is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by Item 13 will be set forth under "Certain Transactions"
in the Company's 1997 Proxy Statement, which is incorporated herein by
reference.


                                       53
<PAGE>


                                     PART IV

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

(a)(1) Financial Statements required by Item 14 are included and indexed in
       Part II, Item 8.

(a)(2) The financial statement schedules filed as part of this report include
       the following:

                 SCHEDULE                                       PAGE
                 --------                                       ----

            II   Valuation and Qualifying Accounts and Reserves  52

(a)(3) The following is a list of all Exhibits filed as part of this Report:

       The exhibits designated by an asterisk will be filed by amendment.

Exhibit No.  Description
-----------  -----------

     2.1     First Amended Joint Chapter 11 Plan, dated November 12, 1996, filed
             with the United States Bankruptcy Court for the District of
             Delaware. Filed as Exhibit 1 to the Company's Current Report on
             Form 8-K dated December 6, 1996, incorporated herein by reference.

     2.2     First Modification to First Amended Joint Chapter 11 Plan (filed
             herewith).

     2.3     Second Modification to First Amended Joint Chapter 11 Plan (filed
             herewith).

     2.4     Third Modification to First Amended Joint Chapter 11 Plan (filed
             herewith).

     3.1     Amended and Restated Certificate of Incorporation of the Company
             dated March 31, 1997 (filed herewith).

     3.2     Amended and Restated By-Laws of the Company (filed herewith).

     4.1     Form of Senior Secured Note Indenture, dated as of April 1, 1997,
             among the Company, as Issuer, the Guarantors named therein and The
             Bank of New York, as Trustee (filed herewith).

    10.1     Cash Option Agreement, dated January 6, 1997, between the Company
             and Wellspring Associates L.L.C. (filed herewith).

    10.2     Amendment to Cash Option Agreement, dated April 8, 1997, between
             the Company and Wellspring Associates L.L.C. (filed herewith).

    10.3     Stockholders Agreement, dated as of April 11, 1997, between the
             Company and the persons set forth on Schedule A thereto (filed
             herewith).

    10.4     Warrant Agreement, dated as of April 11, 1997, between the Company
             and American Stock Transfer & Trust Company, as Warrant Agent
             (filed herewith).

    10.5     Form of Credit Agreement, dated as of April 1, 1997, among the
             Company, Maska U.S., Inc., #1 Apparel, Inc., the Lenders referred
             to therein and The Chase Manhattan Bank, as Agent (filed herewith).

    10.6     Credit Agreement, dated April 1, 1997, between Sport Maska Inc. and
             The Chase Manhattan Bank of Canada (filed herewith).

    10.7     Form of Security Agreement, dated as of April 1, 1997, among the
             Company, certain subsidiaries of the Company and The Chase
             Manhattan Bank, as Agent (filed herewith).

    10.8     Form of Security Agreement and Mortgage - Trademarks and Patents,
             dated as of April 1, 1997, among the Company, certain subsidiaries
             of the Company and The Chase Manhattan Bank, as Agent (filed
             herewith).

    10.9     Security Agreement (Intellectual Property), dated as of April 1,
             1997, between the Company and The Chase Manhattan Bank, as Agent.*

    10.10    Form of Pledge Agreement and Irrevocable Proxy, dated as of
             April 1, 1997, among the Company, certain subsidiaries of the
             Company and The Chase Manhattan Bank, as Agent (filed herewith).

    10.11    Form of Charge Over Shares and Irrevocable Proxy, dated as of
             April 1, 1997, among the Company and The Chase Manhattan Bank, as
             Agent (filed herewith).


                                       54
<PAGE>


    10.12    Quebec Pledge Agreement, dated April 1, 1997, between SLM
             Trademark Acquisition Canada Corporation and The Chase Manhattan
             Bank, as Agent.*

    10.13    Form of U.S. Guaranty, dated as of April 1, 1997, from SLM
             Trademark Acquisition Corporation.*

    10.14    Form of Canadian Guaranty, dated April 1, 1997, from each Canadian
             subsidiary of the Company.*

    10.15    Form of Debenture, dated April 1, 1997, between each of the
             Company, Maska U.S., Inc., #1 Apparel, Inc., SLM Trademark
             Acquisition Corporation, Sport Maska Inc., #1 Apparel Canada Inc.,
             and SLM Trademark Acquisition Canada Corporation and The Chase
             Manhattan Bank.*

    10.16    Form of Deed of Hypothec, dated as of April 1, 1997, between each
             of the Company, Maska U.S., Inc., #1 Apparel, Inc., SLM Trademark
             Acquisition Corporation, Sport Maska Inc., #1 Apparel Canada Inc.,
             and SLM Trademark Acquisition Canada Corporation and The Chase
             Manhattan Bank, as Agent.*

    10.17    Form of Debenture, dated as of April 1, 1997, between each of Sport
             Maska Inc., #1 Apparel Canada Inc. and SLM Trademark Acquisition
             Canada Corporation and The Chase Manhattan Bank of Canada.*

    10.18    Form of Deed of Hypothec, dated as of April 1, 1997, between each
             of Sport Maska Inc., #1 Apparel Canada Inc. and SLM Trademark
             Acquisition Canada Corporation and The Chase Manhattan Bank of
             Canada.*

    10.19    Form of Mortgage, Security Agreement, and Assignment of Leases and
             Rents, dated as of April 1, 1997, from Maska U.S., Inc. to The
             Chase Manhattan Bank, as Agent (filed herewith).

    10.20    Form of Inter-Creditor Agreement, dated as of April 1, 1997, among
             The Chase Manhattan Bank, The Chase Manhattan Bank of Canada and
             The Bank of New York (filed herewith).

    10.21    Form of Senior Secured Note (filed  herewith).

    10.22    Form of Security Agreement, dated as of April 1, 1997, among the
             Company, certain subsidiaries of the Company and The Bank of New
             York, as Trustee (filed herewith).

    10.23    Form of Security Agreement and Mortgage - Trademarks and Patents,
             dated as of April 1, 1997, among the Company, certain subsidiaries
             of the Company and The Bank of New York, as Trustee (filed
             herewith).

    10.24    Form of Pledge Agreement and Irrevocable Proxy, dated as of April
             1, 1997, among the Company, certain subsidiaries of the Company and
             The Bank of New York, as Trustee (filed herewith).

    10.25    Form of Charge Over Shares and Irrevocable Proxy, dated as of April
             1, 1997, between the Company and The Bank of New York, as Trustee
             (filed herewith).

    10.26    Quebec Pledge Agreement, dated April 1, 1997, between SLM
             Trademark Acquisition Canada Corporation and The Bank of New York,
             as Trustee.*

    10.27    Form of Deed of Hypothec, dated as of April 1, 1997, between each
             of SLM Trademark Acquisition Canada Corporation and Maska U.S.,
             Inc., #1 Apparel, Inc., Sport Maska Inc., #1 Apparel Canada Inc.,
             and Mitchel & King Skates Limited and The Bank of New York, as
             Trustee (filed herewith).

    10.28    Form of Security Agreement (Intellectual Property), dated as of
             April 1, 1997, between each of Sport Maska Inc., #1 Apparel Canada
             Inc. and SLM Trademark Acquisition Canada Corporation and The Bank
             of New York, as Trustee (filed herewith).

    10.29    Form of Debenture, dated as of April 1, 1997, between each of SLM
             Trademark Acquisition Canada Corporation and Maska U.S., Inc., #1
             Apparel, Inc., Sport Maska Inc., #1 Apparel Canada Inc. and Mitchel
             & King Skates Limited and The Bank of New York (filed herewith).

    10.30    Form of Mortgage, Security Agreement, and Assignment of Leases and
             Rents, dated as of April 1, 1997, from Maska U.S., Inc. to The Bank
             of New York, as Trustee (filed herewith).

    10.31    Debenture, dated as of April 1, 1997, between the Company and
             The Bank of New York (filed herewith).

    10.32    Deed of Hypothec, dated as of April 1, 1997, between the Company
             and The Bank of New York (filed herewith).

    10.33    Retail License Agreement, dated March 8, 1995, between Maska U.S.
             Inc. and NHL Enterprises Inc. Filed as Exhibit 10.30 to the
             Company's Annual Report on Form 10-K for the year ended December
             31, 1994 and incorporated herein by reference.

    10.34    Retail License Agreement, dated March 8, 1995, between Sport Maska,
             Inc. and NHL Enterprises Canada Inc. Filed as Exhibit 10.31 to the
             Company's Annual Report on Form 10-K for the year ended December
             31, 1994 and incorporated herein by reference.


                                       55
<PAGE>


    10.35    Retail License Agreement, dated October 6, 1995, between NHL
             Enterprises and Maska U.S., Inc. Filed as Exhibit 10.31 to the
             Company's Annual Report on Form 10-K for the year ended December
             31, 1995 and incorporated herein by reference.

    10.36    Retail License Agreement, dated October 6, 1995, between NHL
             Enterprises and Sport Maska Inc. Filed as Exhibit 10.32 to the
             Company's Annual Report on Form 10-K for the year ended December
             31, 1995 and incorporated herein by reference.

    10.37    Lease, dated January 18, 1994, between Secretariat Realty Corp. and
             Maska U.S., Inc. Filed as Exhibit 10.34 to the Company's Annual
             Report on Form 10-K for the year ended December 31, 1995 and
             incorporated herein by reference.

    10.38    Deed of Lease, dated April 11, 1997, between ZMD Sports Investments
             Inc. and Sport Maska Inc.*

    10.39    Deed of Lease, dated January 27, 1995, between Doulka Investments
             Inc. and Buddy L Canada Inc. Filed as Exhibit 10.36 to the
             Company's Annual Report on Form 10-K for the year ended December
             31, 1995 and incorporated herein by reference.

    10.40    Deed of Lease, dated April 11, 1997, between ZMD Sports Investments
             Inc. and Sport Maska Inc.*

    10.41    Deed of Lease, dated April 11, 1997, between ZMD Sports Investments
             Inc. and Sport Maska Inc.*

    10.42    Deed of Lease, dated April 11, 1997, between 2938201 Canada Inc.
             and Sport Maska Inc.*

    10.43    Settlement Agreement, dated November 21, 1995, among the Company,
             certain subsidiaries, the Buddy L Creditors Committee and certain
             Lenders. Filed as Exhibit 10.40 to the Company's Annual Report on
             Form 10-K for the year ended December 31, 1995 and incorporated
             herein by reference.

    21       Subsidiaries of the Company.*

    23.1     Consent of Coopers & Lybrand L.L.P. (filed herewith).

    23.2     Consent of Raymond, Chabot, Martin Pare (filed herewith).

    27.1     Financial Data Schedule

(b)   Reports on Form 8-K.

      1. On March 19, 1996, the Company filed a current report on Form 8-K. This
         report was filed in compliance with Items 5 and 7 of Form 8-K.

      2. On June 27, 1996, the Company filed a current report on Form 8-K. This
         report was filed in compliance with Items 5 and 7 of Form 8-K.

      3. On October 1, 1996, the Company filed a current report on Form 8-K.
         This report was filed in compliance with Item 5 of Form 8-K.

      4. On December 6, 1996, the Company filed a current report on Form 8-K.
         This report was filed in compliance with Items 5 and 7 of Form 8-K.

      5. On March 5, 1997, the Company filed a current report on Form 8-K. This
         report was filed in compliance with Items 5 and 7 of Form 8-K.


                                       56
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Bradford, State of
Vermont, on the 14th day of April, 1997.

                                    SLM INTERNATIONAL, INC.

                                    By:    /s/ RUSSELL J. DAVID
                                           -----------------------------
                                    Name:  Russell J. David
                                    Title: Vice President, Finance

Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has
been signed by the following persons in the capacities and on the dates
indicated. Each person whose signature to this Form 10-K appears below hereby
appoints Russell J. David as his attorney-in-fact to sign on his behalf
individually and in the capacity stated below and to file all amendments and
post-effective amendments to this Form 10-K, and any and all instruments or
documents filed as part of or in connection with this Form 10-K or the
amendments thereto, and any such attorney-in-fact may make such changes and
additions in this Form 10-K as such attorney-in-fact may deem necessary or
appropriate.

<TABLE>
<CAPTION>

Signature                       Title                                               Date
---------                       -----                                               ----
<S>                             <C>                                                 <C>
/s/ GERALD B. WASSERMAN         Chief Executive Officer, Chairman of the Board,     April 14, 1997
---------------------------     and Director (Principal Executive Officer)
    Gerald B. Wasserman         


/s/ RUSSELL J. DAVID            Vice President , Finance                            April 14, 1997
---------------------------     (Principal Financial and Accounting Officer)
    Russell J. David            


                                Director                                            April   , 1997
---------------------------
    Paul M. Chute


/s/ MARTIN S. DAVIS             Director                                            April 14, 1997
---------------------------
    Martin S. Davis


/s/ DOUGLAS W. ROTATORI         Director                                            April 14, 1997
---------------------------
    Douglas W. Rotatori


/s/ JAMES C. PENDERGAST         Director                                            April  14, 1997
---------------------------
    James C. Pendergast
</TABLE>