SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

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

                   For the Fiscal Year Ended January 31, 1997

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

               For the transition period from ________ to _______

                         Commission File Number 33-12755

                            SHARPER IMAGE CORPORATION
             (Exact name of registrant as specified in its charter)

          Delaware                                              94-2493558
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)
                                    
                650 Davis Street, San Francisco, California 94111
               (Address of principal executive offices) (Zip Code)

               Registrant's telephone number including area code:
                                 (415) 445-6000

           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
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.
                                  Yes XX 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  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. ( X )

  The aggregate market value of the voting stock held by non-affiliates of the
                 Registrant as of April 14,1997 was $10,057,621

    The number of shares of Common Stock, with $.01 par value, outstanding on
                      April 14, 1997 was 8,266,940 shares.

Documents incorporated by reference:
Portions of Registrant's Annual Report to Stockholders for the fiscal year ended
January  31, 1997 are  incorporated  by  reference  into Parts II and IV of this
Report.  Portions of  Registrant's  Proxy  Statement  for the Annual  Meeting of
Stockholders to be held June 9, 1997 are incorporated by reference into Part III
of this report.

                                                                               1
<PAGE>

                                     PART 1

         This Annual Report on Form 10-K and the documents  incorporated  herein
by reference of Sharper Image Corporation  (referred to as the "Company" or "The
Sharper Image") contain forward-looking  statements that have been made pursuant
to the provisions of the Private Securities  Litigation Reform Act of 1995. Such
forward-looking  statements  are based on current  expectations,  estimates  and
projections  about the  Company's  industry,  management's  beliefs  and certain
assumptions  made by the  Company's  management.  Words  such as  "anticipates,"
"expects,"  "intends," "plans," "believes," "seeks,"  "estimates," or variations
of  such  words  and  similar   expressions,   are  intended  to  identify  such
forward-looking  statements.  These  statements  are not  guarantees  of  future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict.  Therefore,  actual results may differ materially from
those expressed or forecasted in any such forward-looking statements. Such risks
and uncertainties include those set forth herein under "Factors Affecting Future
Operating  Results"  on  pages 12  through  14,  as well as  those  noted in the
documents incorporated herein by reference.  Unless required by law, the Company
undertakes  no  obligation to update  publicly any  forward-looking  statements,
whether as a result of new  information,  future events or  otherwise.  However,
readers  should  carefully  review the  statements set forth in other reports or
documents the Company files from time to time with the  Securities  and Exchange
Commission,  particularly  the  Quarterly  Reports on Form 10-Q and any  Current
Reports on Form 8-K.

Item 1. Business

Overview

         Sharper Image Corporation is a specialty  retailer which introduces and
sells quality,  innovative and  entertaining  products through The Sharper Image
stores and monthly mail-order catalog, and other marketing channels. In the past
year, the Company also marketed through two new concepts. The Sharper Image Home
Collection  had its initial  mail-order  test in January  1996,  and the Sharper
Image SPA Collection  concept was marketed  through  mail-order  and stores.  As
discussed below,  after critical  evaluation of the operating results and future
prospects of the SPA Collection division,  management made the decision to close
the SPA Collection division.

         The Company was founded in 1977 by Richard Thalheimer, who continues as
Chairman and Chief  Executive  Officer.  First mailed in 1981, The Sharper Image
Catalog found success in the growing field of mail-order shopping.  Expansion of
The Sharper Image concept to retail stores began in 1984,  and as of January 31,
1997, the Company  operated 82 The Sharper Image stores in the United States and
licensees  operate 5 stores  internationally  and 2 airport stores in the United
States. The Company's  aggregate sales from its stores have grown  substantially
since the beginning of fiscal 1984 and have  increased from 3% of total revenues
in fiscal 1983 to 71% of total  revenues  for the fiscal year ended  January 31,
1997 (fiscal 1996).  The typical  Sharper Image stores range from  approximately
2,200 to 2,500 selling square feet in size, with several larger size stores that
have 3,000 to 5,000  selling  square feet.  The Company also has two  additional
retail formats, Sharper Image Design stores and airport shops. These formats are
discussed under "Store Operations" and "Licensed Operations".

         During  fiscal  1996,  the  Company  opened 3 new stores of The Sharper
Image  concept  and  format  and  3  new  Sharper  Image  Design   stores.   Two
under-performing  Sharper  Image stores were closed.  The Company is planning to
open one to three new stores  during the fiscal  year  ending  January  31, 1998
(fiscal 1997).  Management's  goal is to grow the number of stores by 10% to 15%
during the next two fiscal years.  However,  there can be no assurances that the
Company will meet this goal. See "Factors  Affecting Future Operating  Results."
Lease terms for certain of the existing The Sharper Image store  locations  will
be maturing  during

                                                                               2
<PAGE>

fiscal 1997 and such locations may be relocated or closed.  The Company  employs
over 1,200 employees in twenty-eight states.

         In  addition  to serving as the  primary  advertising  vehicle  for the
Company's  stores,  The Sharper Image Catalog  generated  about 80% of its total
mail-order  sales  (approximately  26% of total  revenues) in fiscal  1996.  The
monthly  color  catalog  which  ranged from 68 to 124 pages in fiscal  1996,  is
recognized for creative excellence within the catalog industry.  Worldwide,  the
Company mailed  approximately 35 million of The Sharper Image Catalogs in fiscal
1996. The Company launched the test mailing of the Sharper Image Home Collection
catalog in January 1996.  Management  plans to focus its efforts in growing this
concept in fiscal 1997 and will continue to evaluate the  operating  results and
potential of this concept.

         The  Company is known for its varied  product  mix and a  merchandising
philosophy   focusing  on  quality   products  which  are  unique,   innovative,
entertaining,  and useful that are developed by The Sharper Image,  exclusive to
The  Sharper  Image,  or in limited  distribution.  In product  lines  where the
Company  competes  directly  with other  retailers,  it chooses to sell the best
version of the product--maximizing features,  uniqueness, and value. The Company
is   frequently   sought  after  by   manufacturers   and  inventors  to  launch
technologically-advanced and fun products.

         The  Company's  business  is highly  seasonal,  with sales peaks at the
holiday periods of Father's Day and Christmas. See "Seasonality".  Historically,
the typical Sharper Image  demographic mix has been upper income,  approximately
65% male, 35% female.

         In addition to its primary businesses,  The Sharper Image leverages its
name and reputation through a corporate  marketing  program,  wholesale sales of
Sharper Image brand products,  which included  Sharper Image Design  proprietary
products and  private-labeled  products,  and a product  licensing  program with
selected  businesses.  Wholesale  sales are made  primarily  to fine  department
stores  and  to  international   retailers.   The  most  leading-edge  marketing
opportunity  for the Company is the  Internet.  The  Company's The Sharper Image
Catalog  is  on  the  World  Wide  Web  at  http://www.sharperimage.com.   Other
electronic  medium  include  America  Online's   Marketplace  and  Time-Warner's
Dreamshop at  http://www.dreamshop.com.  Although it is too early to predict the
potential of this sales medium and there is no guarantee of the  possibility  of
success,  the Company is at the  forefront of this  electronic  marketplace  and
hopes to be a leader  when this  market  begins to reach  full  acceptance.  See
"Factors Affecting Future Operating Results".

         During  fiscal  1996,  the  Company  continued  the  development  of an
in-house new product development  function along with a wholesale sales group to
market its  proprietary  Sharper  Image  Design and other  Sharper  Image  brand
products to fine department  stores nationwide and  internationally.  While this
sales  channel is still in its early  stage and a small part of total  revenues,
the wholesale  sales group made sales gains in fiscal 1996.  The  development of
the proprietary and private-labeled products, and wholesales sales opportunities
will continue to be an integral part of the Company's growth.

         The  Company  launched  the test  mailings  of the  Sharper  Image  SPA
Collection  (SPA)  catalog in  February  1995.  During the second half of fiscal
1995,  the Company  also  opened  four SPA stores to test this  retail  concept.
During fiscal 1996, in its second year of  operations,  the Company  mailed more
than 7 million SPA catalogs and opened two additional SPA stores. In late fiscal
1996, management reviewed the operating results for the two-year period, and the
future  potential of this concept,  and determined  that it would be prudent for
the Company to re-direct  resources to the higher  growth  opportunities  of the
core business of The Sharper Image. As a result,  the decision was made to close
the operations of the SPA catalog and the six SPA stores. See "Factors Affecting
Future Operating Results".
                                                                               3
<PAGE>

The Sharper Image Catalog/Retail Advertising

         The Sharper Image Catalog is a full-color  catalog that is mailed to an
average of approximately 2.5 million individuals each month. The catalog is also
the primary source of advertising for the Company's retail stores. During fiscal
1996, the Company mailed  approximately 35 million of The Sharper Image Catalogs
to over 5 million different individuals.  Circulation and number of pages of The
Sharper Image Catalog is under continual  review to balance the costs of mailing
the catalogs with the revenues generated.  The mailings increase at Father's Day
and Christmas reflecting the seasonal nature of the Company's business.

         In fiscal  1995,  the Company  experienced  a  significant  increase in
advertising  and  promotion  expenses  due to the  increased  cost of paper  and
postage resulting from the industry-wide  rate increases in paper and a one-time
postal rate increase in January 1995. Although paper costs have started to level
off from the highest point experienced during fiscal 1995, the rate increases in
paper  that took  place in fiscal  1995  continued  to have an upward  impact on
advertising  expense  for the  first  half  of  fiscal  1996.  The  Company  has
experienced  lower paper  prices  since July 1996.  The Company has  implemented
certain  actions  designed to lower the costs of producing the catalog to lessen
the impact of the paper and postage increases,  including reducing the number of
pages per catalog,  trimming the  dimensions of the catalogs and using a lighter
weight  of  paper.  As a result  of these  changes,  advertising  and  promotion
expenses for fiscal 1996 were  substantially  lower than for fiscal 1995.  There
have been two moderate paper price increases since the beginning of fiscal 1997.
The Company  continually  reviews the cost and  effectiveness of its advertising
efforts. See "Factors Affecting Future Operating Results".

         The  Sharper  Image  Catalog is created and  produced by the  Company's
in-house  staff  of  writers  and  production  artists.   The  Company  utilizes
free-lance  photographers on an as needed basis.  The catalog is  electronically
produced in-house on a network of computers using the latest desktop  publishing
software.  This enables the Company to maintain  quality control and shorten the
lead time needed to produce the catalog. The monthly production and distribution
schedule permits frequent changes in the product selection.  During fiscal 1996,
The Sharper Image Catalog  typically  contained from 68 to 76 pages for non-peak
months and  between 84 and 124 pages for the peak  seasons of  Father's  Day and
Christmas. The catalogs typically feature between 300 and 700 products, of which
approximately  10% to 25% are new each  month.  In  October  1996,  the  Company
re-designed  The  Sharper  Image  catalog to update  the look of the  catalog to
distinguish the Company from other specialty  retailers.  The new catalog design
uses  dramatic  visuals and humorous and clever  product  descriptions.  The new
catalog design features products more  prominently,  but includes a fewer number
of products,  which ranged  between 200 to 350 products in the fourth quarter of
fiscal 1996.

         During  fiscal 1996,  the Company also  utilized  newspaper and airline
magazine  inserts to advertise  specific  products.  The Company  believes these
advertisements  generate  store sales as well as mail-order  sales.  The Company
plans to continue  them in fiscal  1997.  In  addition,  from time to time,  the
Company  has also  produced  certain  specialty  catalogs  to test  new  catalog
concepts.  To enhance the effectiveness of the catalog,  the Company's  in-house
staff  utilizes  statistical  evaluation  and selection  techniques to determine
which  segments  of the  in-house  mailing  list are  likely to  contribute  the
greatest revenue per mailing.  This evaluation has provided the Company with the
ability to quickly increase circulation to responsive segments and to scale back
circulation  to  non-responsive  segments thus  reducing the  effective  cost of
advertising.

         In January  1996,  the Company  mailed its initial test catalog for The
Sharper  Image Home  Collection  concept.  This catalog  features  high quality,
luxury home  furnishings and  accessories.  The responses to this mailing during
its first year is encouraging and the Company plans to continue to invest in the
development of this concept.

         The  Company   collects   customer   names   through   the   electronic
point-of-sale  registers in its retail stores.  The names and  associated  sales
information are merged daily into the Company's customer master file. This

                                                                               4
<PAGE>

daily merge process provides a constant source of current  information useful to
assess  the  effectiveness  of the  catalog  as a form  of  retail  advertising,
identify what new  customers  can be added to the in-house  mailing list without
the  traditional  list  rental  "prospecting"  costs,  and  identify  the  "best
customers."  The  Company's  addition  of names  to the  in-house  mailing  list
enhances its value for list rental  purposes.  Periodically,  the Company  mails
promotional  material  to these  best  customers  which is  designed  to produce
incremental sales.

Store Operations

         The Sharper  Image  stores are  located  throughout  the United  States
generally in downtown financial districts and business centers, upscale shopping
malls or drive-up suburban locations, all of which are areas that typically have
a high population density.

         Each store is generally  staffed with  approximately  6 to 8 employees,
including a manager,  an  assistant  manager,  a senior sales  associate,  sales
associates,  and other support  staff. A few of the Company's high volume stores
are  staffed  with  11 to 15  associates.  The  Company's  President  and  Chief
Administrative  Officer  currently  oversees store  operations.  Store personnel
compensation  structure is based largely on commission and is closely  monitored
in relation to sales. The Company expends considerable effort to train its sales
associates on the many new and frequently technically oriented items in order to
maintain a high customer service level.

         The Sharper Image stores are designed by the Company's  design staff at
the Company's  headquarters  in San Francisco to  standardize,  where  possible,
layout so as to simplify their operations.  The stores are operated according to
standardized procedures for customer relations, merchandise display and pricing,
product demonstration, inventory maintenance, personnel training, administration
and security.  The Company's  original Sharper Image stores typically have 2,200
to 2,500 square feet of selling  space and  approximately  1,300 to 2,200 square
feet of storage and  administrative  space. The cost of leasehold  improvements,
fixtures and other equipment  associated with the opening of a new Sharper Image
store has averaged approximately  $300,000 to $500,000.  Initial inventory for a
new Sharper Image store has generally cost approximately $250,000. Outlet stores
are  approximately  half the cost of the  original  Sharper  Image  stores.  The
Company also  operates a second  retail  format of Sharper  Image Design  stores
which are  approximately  half the size of the original store with between 1,000
to 1,200 of selling square feet, and features higher margin proprietary products
in addition to other top selling  merchandise.  At the end of fiscal  1996,  the
Company had 70 The Sharper Image stores,  8 Sharper Image Design  stores,  and 4
outlet locations.

         The  Company's  retail  stores'  product  presentation   includes  bold
eye-catching displays designed to draw customers to new or top-selling products.
Product  presentations are organized into distinct categories such as health and
massage,  travel,  home and safety,  recreation  and fitness,  and the newest in
electronics.


Merchandising, Product Selection and Development

         The Company's  merchandise mix emphasizes  innovative products that are
new to market, and unique products which are proprietary,  available exclusively
through The Sharper  Image,  or are not  available  in broad  distribution.  The
Company's  sales  are  driven  by  individual  products,  focusing  on  offering
pre-selected items which represent quality,  innovation,  and entertainment,  as
distinguished  from offering broad assortments of categories of merchandise.  As
individual items come to market or are developed internally by the Company which
fit the criteria for new products, the Company's buying and merchandise mix will
change to emphasize those products.  As a result of such shifting emphasis among
individual  items,  the mix of sales by category  changes from time to time. The
effect,  from year to year, can be to increase or decrease the merchandise gross
margin rates since some categories of merchandise sustain  traditionally  higher
margins and some traditionally sustain lower margin rates.

                                                                               5
<PAGE>

        The  Company's  current  merchandise  strategy  is to offer a  narrower
assortment  in its stores and  catalogs.  The Company  offers  products at price
levels  ranging from $10 to over $5,000.  The Company  intends to keep expanding
the  offering  of  products  in the $50 to $500  price  range to  appeal  to the
Company's customer base. The Company also intends to continue to develop Sharper
Image Design proprietary and  private-labeled  products to utilize its marketing
knowledge built from 20 years of retailing  experience.  While these proprietary
and  private-labeled  products  offer  important  sales and gross margin  growth
opportunities  for all the revenue  generating  areas of the Company,  there are
certain risks  associated  with these  internally  developed  products,  such as
possible manufacturing constraints,  delays in bringing these products to market
and cost  increases.  Products  may also be  subject  to other  imitations.  See
"Factors Affecting Future Operating Results".

         The process of finding  new  products  involves  the  Company's  buyers
reviewing voluminous product literature,  traveling  extensively  throughout the
United  States,  Europe and the Far East to attend trade shows and  exhibitions,
and meeting with manufacturers. The Company enjoys relationships with many major
manufacturers  who use The Sharper  Image  regularly to  introduce  their newest
products in the United States. See "Factors Affecting Future Operating Results".

         In addition to finding new products from outside sources, the Company's
new product  development  group  develops  and  produces  Sharper  Image  Design
proprietary products. The new product development group meets regularly with the
merchandising staff to review new product  opportunities,  product quality , and
customer  feedback.  From these  creative  sessions  product  ideas are put into
development,  design and productivity.  Successful product  introductions during
the  past two  years  include  the Memo  Manager  Executive,  KeySeeker,  Shower
Companion, Keycorder, and the Heart & Sound Soother.

         The Company  believes that this new product  development  function,  in
addition  to  increasing  its sales and gross  margins  and  adding  incremental
wholesale  sales,  will  favorably  impact the Company by increasing the flow of
unique and  exclusive  products  in The  Sharper  Image  stores and  catalog and
enhancing  its brand name  extension.  However,  there is no assurance  that the
Company   will  be  able  to  continue  the  growth  of  gross  margin  and  the
proportionate  sales  related  to  these  proprietary  products.   See  "Factors
Affecting Future Operating Results".

         The Company  purchases  merchandise  from numerous foreign and domestic
manufacturers and importers.  None of the suppliers  accounted for more than 10%
of the dollar  amount of the  Company's  purchases  during  fiscal 1996.  Of the
products  offered by the  Company  in recent  catalogs,  approximately  69% were
manufactured in the Far East,  approximately  18% were  manufactured  within the
United States,  approximately 10% were manufactured in Europe, and approximately
3% were manufactured in Mexico and Canada. The Company expects these percentages
to vary as new products are introduced.  See "Factors Affecting Future Operating
Results".

         Sharper Image Design proprietary  products are produced for the Company
on a contract basis by  manufacturers  in the Far East. The Company provides all
product  specifications  to the contract  manufacturers.  Delivery  lead time is
generally  in  the  range  of  6  to  12  months.   However,   certain  products
introductions may require longer lead time.

         The Company generates  information on merchandise orders and inventory,
which is reviewed daily by the Company's buyers, its senior  merchandising staff
and top management. Each month, the Company generally replaces approximately 10%
to 25% of its product  offerings  each month.  The Company  carefully  considers
which products will not be offered in future months based upon numerous factors,
including revenues generated, gross margins, the cost of catalog and store space
devoted to each product, product availability and quality.

                                                                               6

<PAGE>

         The Company has developed a proprietary automatic  replenishment system
(ARS) which is based on the "just-in-time"  inventory management concept.  Under
ARS,  information on merchandise  inventory and sales by each store location are
generated  and reviewed  daily.  Sales  information  by product and location are
systematically compared daily to each product's "model stock" to determine store
shipment quantities and frequency. The ARS computes any adjustments to the model
stock  level based on factors  such as sales  history by location in relation to
total  Company  sales of each  product.  Under this  system,  the model stock is
continually  revised based on this  analysis.  Recommended  adjustments to model
stock  levels  and  recommended  shipment  amounts  are  reviewed  daily  by the
Company's group of store planners and merchandising managers who are responsible
for allocating inventory to stores.

Corporate Marketing

         During fiscal 1996,  the  Company's  Corporate  Marketing  continued to
grow. The incentive and gifting programs are designed by the Corporate Marketing
unit to be used by client  companies to increase their sales, or to motivate and
reward their high achievers and customers utilizing The Sharper Image stores and
catalog as the primary  means of offering  and  delivering  the  incentives  and
gifts. The Company sells the incentive and gift merchandise  certificates to the
client  companies  who  in  turn  distribute  them  under  their  programs.  The
certificates  are  redeemable for Sharper Image  merchandise  through its retail
stores, by mail, or over the telephone through the catalog  telemarketing group.
The Company will continue to grow this area of its business.

Wholesale Operations

          The  Company's  Business  Development  department is the primary group
responsible for marketing to other retailers,  including fine department  stores
domestically  as well as retailers in other  countries.  This group's sales grew
from about $3.1  million in fiscal  1995 to about $4.0  million in fiscal  1996.
Plans  for this  group are to  continue  to  increase  the  number of  wholesale
customers in the U.S. and abroad, and the number of Sharper Image brand products
offered to these customers.  Negotiations to add other major  department  stores
are on-going.  By choosing to feature Sharper Image brand  products,  these fine
department stores can sell proven products with positive sales appeal.

Licensed Operations

          The Company has exclusive licensing agreements in Japan,  Switzerland,
South Korea,  Australia  and Saudi  Arabia,  as well as in the United States for
non-duty  free airport  locations.  In fiscal 1996,  the Company  entered into a
licensing  agreement  with its  Saudi  Arabia  licensee.  The new  Saudi  Arabia
licensee  opened its first The Sharper  Image store in Riyadh in December  1996.
Under the international license agreements, the licensee is granted the right to
use the  trademarked  name,  "The Sharper Image," in their country in connection
with The Sharper  Image  retail store and catalog  operations.  The Company will
assist the licensee by producing a foreign language edition of The Sharper Image
catalog,  typically quarterly, with economies of scale but at the expense of the
licensees  who then  print and  distribute  locally.  There are  currently  five
Sharper  Image  retail  stores  operated by the foreign  licensees,  one each in
Japan,  Switzerland,  Australia,  Korea and Saudi Arabia.  The Company  receives
royalties  on sales  by the  licensees.  Licensees  purchase  products  from the
Company or directly from manufacturers,  maintain their own supply of inventory,
and  establish  their own  product  prices The  airport  licensee is entitled to
utilize The  Sharper  Image  trademark  and trade  dress in  designated  airport
locations,  the design of which is subject to the approval of the Company. There
are two locations -- one at  Dallas-Fort  Worth which opened in July 1994, and a
second  location at Detroit  Metropolitan  which opened in May 1995. The Company
continues to pursue additional licensing and wholesale  opportunities in foreign
countries.

                                                                               7

<PAGE>

Product Licensing/The Sharper Image Trademark

          The  Company  also  has  product   license   agreements  with  various
businesses.  The Company  controls  the  selection of the  licensees  and retail
distribution  channels  for the  products  in  order  to  maintain  the  quality
associated  with The Sharper  Image name.  Under each of these  agreements,  the
licensee is granted the right to use the trademarked  name, "The Sharper Image,"
in  connection  with  the  manufacture   and  sale  of  certain   products.   In
consideration  for the rights  granted to the  licensee,  the  Company  receives
royalties on the licensees' net sales,  subject, in certain cases, to a periodic
minimum  royalty.   The  Company  believes  that  product   licensing   presents
opportunities  to further  leverage  the value of The  Sharper  Image as a brand
name.

Customer Service

          The  Company  seeks to hire and retain  qualified  sales and  customer
service  representatives in both its mail-order catalog and store operations and
to train them thoroughly.  Each new store manager undergoes an intensive program
during  which the manager is trained in all aspects of the  Company's  business.
Sales personnel are trained during the first two weeks of employment,  or during
the weeks before a new store opens.  Training  focuses  primarily on acquiring a
working knowledge of the Company's products and on developing selling skills and
an understanding of the Company's high customer  service  standards.  Each sales
associate is trained to adhere to the Company's philosophy of "taking ownership"
of every customer  service issue that may arise.  The Company has also developed
ongoing  programs  conducted  at each  store  that  are  designed  to keep  each
salesperson up to date on each new product offered.

          The Company's  Customer  Service  group at the corporate  headquarters
provides personal attention to customers who call toll free to request a catalog
subscription, place an order, or inquire about a product. The Company's Customer
Service group is also responsible for resolving  customer  problems promptly and
to the  customer's  complete  satisfaction.  The Company is committed to provide
courteous, knowledgeable, and prompt service to its customers.

Catalog Order Fulfillment and Distribution

          The  Company  has a  single  distribution  facility  in  Little  Rock,
Arkansas.  This facility was expanded  during fiscal 1995,  increasing the space
from  approximately  50,000  square  feet to  about  110,000  square  feet.  The
Company's  merchandise generally is delivered to the catalog customer and to The
Sharper Image stores directly from the Company's distribution facility. A number
of  products  are  shipped  directly  from the vendor to the  customer or to the
stores.  The  shipment  of  products  directly  from  vendors  to the stores and
customers  reduces  the  level  of  inventory  required  to be  carried  at  the
distribution  center,  freight costs,  and the lead time required to receive the
products. Each catalog order is received via remote terminal at the distribution
facility  after the order has been approved for shipment.  The Company's goal is
to ship catalog orders within 48 hours after the order is received.  The Company
generally  delivers  products by second day air service to its customers.  Store
customers take their purchase with them. In fiscal 1996, the Company established
a  telemarketing  center  located at the Littler Rock  distribution  facility to
augment the telemarketing team at the corporate offices.

          Sales and inventory  information about catalog and store operations is
provided on an ongoing  basis to the  Company's  merchandising  staff and to top
management  for  review.  The  Company's  stores are  equipped  with  electronic
point-of-sale  registers that communicate daily with the main computer system at
corporate headquarters,  transmitting sales, inventory and customer data as well
as receiving data from the Company's  headquarters.  The sales,  inventory,  and
customer data enables sales and corporate  personnel to monitor sales by item on
a daily  basis,  provides  the  information  utilized  by the ARS for  inventory
allocations,   provides   management  with  current  inventory  and  merchandise
information,  and enables our in-house mailing list to be updated regularly with
customer names and activity.

                                                                               8

<PAGE>

         The Company continually  evaluates its computer systems and information
technology in connection with providing  additional and improved  management and
financial information.

Competition

         The Company operates in a highly competitive  environment.  The Company
principally competes with a variety of department stores, sporting goods stores,
discount  stores,  specialty  retailers and other  catalogs that offer  products
similar  to or the same as some of those  offered  by the  Company.  Many of the
Company's  competitors are larger companies with greater financial resources,  a
wider selection of merchandise and a greater  inventory  availability.  Although
the Company  attempts to market products not generally  available  elsewhere and
has emphasized  exclusive  products in its merchandising  strategy,  many of its
products or similar products can also be found in other retail stores or through
other  catalogs.  The Company offers  competitive  pricing where other retailers
market certain products similar to the Company's at lower prices. In addition, a
number of other companies have attempted to imitate the  presentation and method
of operation of the Company's catalog and stores, and the Company's  proprietary
designed  products.  The Company  competes  principally  on the basis of product
exclusivity,   selection,  quality  and  price  of  its  products,   merchandise
presentation   in  both  the  catalog  and  stores,   its  customer  list,  name
recognition,  and the quality of its customer service. The Company is committing
additional  resources to its internal  product  development  group to create and
produce proprietary products exclusively available from the Company. The Company
is also testing  additional retail concepts in it's efforts to grow revenues and
net earnings in the long-term.

Trademark Licenses

          In the opinion of management,  the Company's  registered  service mark
and  trademark,  "The  Sharper  Image,"  and the  name  recognition  that it has
developed,  is of significant  value. The Company currently  licenses the use of
its  trademarked  name in connection  with the  production  and  circulation  of
foreign language  editions of The Sharper Image catalog in Japan and Switzerland
and  in  connection  with  The  Sharper  Image  stores  in  Japan,  Switzerland,
Australia, Korea and Saudi Arabia in consideration for royalties and other fees.
In addition to these international  licensees, the Company has also entered into
a license for the right to operate  Sharper  Image  stores in domestic  non-duty
free airport locations as well as various product license agreements which grant
the right to licensees to  manufacture  and sell products  bearing the Company's
trademark.

Seasonality

          The  Company's  business is highly  seasonal,  reflecting  the general
pattern  associated  with the retail  industry of peak sales and earnings during
the Christmas season. In addition,  as the proportion of the Company's  revenues
derived from store sales has grown,  the impact of seasonal  fluctuations on the
Company's  sales  and  earnings  has  increased.  As  a  result,  a  substantial
percentage of the Company's  total revenues and all or most of the Company's net
earnings  occur in its fourth  fiscal  quarter  ending  January  31. The Company
generally  experiences  lower  revenues  during the other  quarters  and,  as is
typical in the retail industry, has incurred and may continue to incur losses in
these quarters.  The results of these interim quarters may not be representative
of the results for the full fiscal year. In addition,  like many retailers,  the
Company makes  merchandising  and inventory  decisions for the Christmas  season
well in advance of the Holiday selling season. Accordingly, unfavorable economic
conditions  and/or  deviations  from  projected  demand for products  during the
fourth quarter could have a material  adverse  affect on the Company  results of
operations  for the entire  fiscal year.  During the fiscal years 1996 and 1995,
the Company's total revenues for the fourth quarter  accounted for more than 40%
of total revenues.

                                                                               9

<PAGE>

Employees

          As  of  January  31,  1997,  the  Company  employed  more  than  1,200
associates,  approximately 62% of whom were full-time. The Company considers its
employee relations to be good.

Executive Officers

          Set forth below is a list of the  executive  officers of the  Company,
together with brief biographical descriptions.

Name                                Position                            Age
----                                --------                            ---

Richard Thalheimer                  Founder,                             49
                                      Chairman of the Board, and
                                      Chief Executive Officer

Barry Gilbert                       Vice Chairman,                       46
                                      Chief Operating Officer

Craig Womack                        President,                           46
                                      Chief Administrative Officer

Vincent Barriero                    Senior Vice President,               48
                                      Chief Information Officer, and
                                      Assistant Corporate Secretary


Shannon King                        Senior Vice President,               41
                                      Merchandising

Sydney Klevatt                      Senior Vice President,               61
                                      Marketing

Tracy Wan                           Senior Vice President,               37
                                      Chief Financial Officer,
                                      and Corporate Secretary

         Richard  Thalheimer is the founder of the Company and has served as the
Chief  Executive  Officer  and as a Director  of the  Company  since 1978 and as
Chairman of the Board of Directors since 1985. Mr. Thalheimer also served as the
Company's President from 1977 through July 1993.

         Barry Gilbert has been the Company's Vice Chairman and Chief  Operating
Officer since December 1996. Prior to joining the Company,  Mr. Gilbert was with
Warner  Bros.  Studio  Stores,  where he  served  as Senior  Vice  President  of
International  Franchise  Operations  from  1994 to  1996,  and as  Senior  Vice
President of Stores from 1990 to 1994.

         Craig Womack has been the Company's President and Chief  Administrative
Officer since December  1996.  Mr. Womack served as the Company's  President and
Chief  Operating  Officer from July 1993 to December  1996, and as the Company's
Executive Vice President and Chief Operating  Officer from December 1989 to July
1993.

                                                                              10

<PAGE>

         Vincent  Barriero has been the Company's  Senior Vice President,  Chief
Information  Officer since February 1995. Mr.  Barriero  served as the Company's
Senior Vice President,  Management  Information Systems from August 1992 through
February 1995 and as Vice President,  Management Information Systems from August
1989 through August 1992.

         Shannon   King  has  been  the   Company's   Senior   Vice   President,
Merchandising,  since  February  1995.  Ms.  King served as the  Company's  Vice
President,  Merchandising from March 1993 through February 1995, and as Director
of Merchandising from July 1988 through March 1993.

         Sydney Klevatt has been the Company's Senior Vice President,  Marketing
since January 1991. From April 1982 through  September 1990, Mr. Klevatt was the
Executive Vice President of Hanover Direct,  Inc., with  responsibilities in the
general  corporate  management  and direction of the company  including  catalog
merchandising, marketing, creative and public and legal relations.

         Tracy Wan has been the Company's Senior Vice President, Chief Financial
Officer since February 1995. Ms. Wan served as Vice  President,  Chief Financial
Officer from September 1994 through February 1995, as Vice President, Controller
from  November 1991 through  September  1994,  and as Controller  from July 1989
through November 1991. Ms. Wan is a certified public accountant.

Factors Affecting Future Operating Results

         The provisions of the Private Securities  Litigation Reform Act of 1995
(the "Act"),  which became law in late December 1995,  provide  companies with a
"safe  harbor"  when  making  forward-looking  statements.  This  "safe  harbor"
encourages  companies to provide  prospective  information about their companies
without  fear of  litigation.  The Company  wishes to take  advantage of the new
"safe harbor"  provisions of the Act and is including this section in its Annual
Report on Form 10-K in order to do so. Statements that are not historical facts,
including  statements about  management's  expectations for fiscal year 1997 and
beyond,   are   forward-looking   statements  and  involve   various  risks  and
uncertainties.  Factors that could cause the Company's  actual results to differ
materially from management's projections,  forecasts, estimates and expectations
include, but are not limited to, the following:

(a)      The ability to offer an attractive selection of merchandise,  including
         the  ability  to locate  and offer new,  innovative,  and high  quality
         products that satisfy its customers' demands and to acquire merchandise
         in sufficient quantities and on a timely basis.

(b)      The ability to design and develop proprietary products that satisfy its
         customers'   demands   and   to   have   such   products   manufactured
         cost-effectively  and in  sufficient  quantities  and  delivered to the
         Company on a timely basis.

(c)      The ability to successfully open new stores, which depends on a variety
         of factors,  including,  without limitation,  the identification of new
         markets with sufficient customer demand, the selection and availability
         of suitable locations,  the negotiation of acceptable store leases, the
         ability  to hire  and  train  additional  store  management  and  sales
         associates,  and the  availability  of adequate  capital  resources  on
         acceptable terms.

(d)      The ability to successfully and  cost-effectively  advertise and market
         its products  through The Sharper Image  catalog and other  advertising
         vehicles,  including new media such as television shopping services and
         the Internet.

                                                                              11
<PAGE>

(e)      Future increases in postage,  paper or shipping costs that increase the
         cost  of  producing  and   distributing   the  Company's   catalogs  or
         merchandise.

(f)      The success of new  businesses  that the Company may either  develop or
         acquire from time to time.  In late fiscal  1996,  the Company made the
         decision to close its SPA  Collection  division as a result of its lack
         of profitability and anticipated future performance.

(g)      The  highly   seasonal   nature  of  the   Company's   business  -  See
         "Seasonality".

(h)      Changes in merchandise mix.

(i)      The ability to maintain  sufficient  inventory  levels of its products,
         particularly during peak selling seasons.

(j)      The ability to compete  effectively in the Company's highly competitive
         industry with existing and  potential  competitors,  many of which have
         substantially greater financial and other resources than the Company.

(k)      Changes in consumer  preferences  and customer demand for the Company's
         products,  which fluctuates  based on a variety of factors,  including,
         without  limitation,  general  or  local  economic  conditions,  buying
         trends, and the retail sales environment.

(l)      Changes in general or local economic  conditions,  including conditions
         affecting the level of consumer spending on merchandise  offered by the
         Company and the general demand for products of stores located  adjacent
         to the Company's stores, particularly in malls.

(m)      The political,  social,  legal and economic risks in foreign  countries
         where the Company  purchases a significant  amount of merchandise  from
         foreign vendors.

(n)      Fluctuations in comparable  store sales results,  which have fluctuated
         significantly and have decreased in the past from period to period.

(o)      The ability to hire and retain the services of management and other key
         employees,  particularly  its  senior  management,  including,  without
         limitation,  Richard  Thalheimer,  the Company's Founder,  Chairman and
         Chief Executive Officer.

(p)      Any significant increase in merchandise returns.

(q)      The quality of merchandise purchased by the Company.

(r)      The ability of the Company's  single  distribution  facility located in
         Little Rock, Arkansas to distribute the Company's inventory merchandise
         to its stores and customers on a  cost-effective  and timely basis, and
         the  ability to  provide  superior  customer  service  and  efficiently
         fulfill customer orders. A disruption in operations of the distribution
         facility may significantly increase the Company's distribution costs.

(s)      The ability to have its merchandise  manufactured  and delivered by the
         Company's vendors and  manufacturers in sufficient  quantities and on a
         cost-effective and timely basis.

(t)      Changes in the availability of capital  expenditure and working capital
         financing, including the availability of long-term financing to support
         development of retail stores.

                                                                              12

<PAGE>

(u)      The imposition of new restrictions or regulations regarding the sale of
         the  Company's  products  or  changes  in  tax  rules  and  regulations
         applicable to the Company,  particularly with regard to state sales and
         use taxes.

(v)      Adverse results in significant litigation matters.

         The United States retail industry, and the specialty retail industry in
particular,  are dynamic by nature and have undergone  significant  changes over
the past several years.  The Company's  ability to anticipate  and  successfully
respond to continuing challenges is critical to achieving its expectations.

Item 2.  Properties

         The Company occupies  approximately  50,000 square feet of office space
for its corporate headquarters in San Francisco,  CA, under a lease scheduled to
expire  on  January  31,  2001,  with an option  to  extend  for two  additional
five-year periods.

         The Company currently operates 82 The Sharper Image stores under leases
covering a total of approximately 185,000 square feet of net selling space.

         The  Company's   distribution  facility  is  located  in  Little  Rock,
Arkansas. The Company completed the addition of the 60,000-square-foot phase one
expansion of the distribution center in October 1995. The expanded  distribution
center  now has about  110,000  square  feet of  space.  The costs for phase one
expansion  were  approximately  $3.2 million.  During  fiscal 1996,  the Company
completed  phase two of the expansion  which involve the  installation of pallet
racking and the mail-order  conveying system. All of the Company's  distribution
functions are through this facility and other  seasonally  occupied space rented
by the Company in close  proximity  thereto.  With the  expanded  building,  the
Company reduced its usage of seasonal overflow storage facility.

Item 3.  Legal Proceedings

          The Company is party to various legal  proceeding  arising from normal
business activities.  In the opinion of management,  resolution of these matters
will not have a material adverse effect on the Company's financial condition.

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

          The  information  set forth under "Note D -- Revolving  Loan and Notes
Payable" in the Notes to Financial Statements on page 22 and the information set
forth under the caption "Common Stock Market Prices and Dividend Policy" on page
27 of the Sharper  Image  Corporation  1996  Annual  Report to  Stockholders  is
incorporated herein by reference. As of April 14, 1997 there were 530 holders of
record of the Registrant's Common Stock.

                                                                              13

<PAGE>

Item 6.  Selected Financial Data

         The information set forth under the caption  "Financial  Highlights" on
page 3 of the Sharper Image  Corporation  1996 Annual Report to  Stockholders is
incorporated herein by reference.

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

         The  information set forth under the caption  "Management's  Discussion
and Analysis of Results of Operations and Financial Condition" on pages 11 to 15
of  the  Sharper  Image  Corporation  1996  Annual  Report  to  Stockholders  is
incorporated herein by reference.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         None.

Item 8.  Financial Statements and Supplementary Data

         The financial statements and independent  auditors' report set forth on
pages 16 through 26 of the  Sharper  Image  Corporation  1996  Annual  Report to
Stockholders are incorporated herein by reference.

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  with  respect  to  the  directors  of  the  Registrant  is
incorporated  herein by reference to the  Registrant's  1997 Proxy  Statement to
Stockholders,  pages 2 through 3.  Information  with  respect  to the  executive
officers of the  Registrant is contained in Part I of this Annual Report on Form
10-K.

Item 11. Executive Compensation

         Information  with respect to  executive  compensation  is  incorporated
herein by reference to the Registrant's 1997 Proxy Statement, pages 6 to 7.



Item 12. Security Ownership of Certain Beneficial Owners and Management

         Information with respect to security ownership of beneficial owners and
management is incorporated  herein by reference to the  Registrant's  1997 Proxy
Statement, pages 4 to 5.

Item 13. Certain Relationships and Related Transactions

          None.
                                                                              14

<PAGE>

                                     PART IV

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

(a)1.    List of Financial Statements.

The  following  Financial  Statements  and Notes  thereto  set forth on pages 17
through 27 of the Sharper Image  Corporation  1996 Annual Report to Stockholders
are incorporated by reference as Exhibit 13.1 to this Report on Form 10-K:

Statements of Operations for the years ended January 31, 1997, 1996 and 1995.

Balance sheets at January 31, 1997 and 1996.

Statements of  Stockholders'  Equity for the years ended January 31, 1997,  1996
and 1995.

Statements of Cash Flows for the years ended January 31, 1997, 1996 and 1995.

Notes to Financial Statements.

(a)2.     List of Financial Statement Schedule.

The following are filed as part of this Report:

Independent Auditors' Report on Financial Statement Schedule.

Schedule II - Valuation and Qualifying Accounts

Financial Data Schedule

         Schedules  other than those listed are omitted for the reason that they
         are not required or are not applicable,  or the required information is
         shown in the financial  statements or notes  thereto,  contained in, or
         incorporated by reference into, this Report.

(a)3.    List of Exhibits.

Incorporated  herein by  reference  is a list of the  Exhibits  contained in the
Exhibit Index which begins on page 21 of this report.

(b)      Reports on Form 8-K.

No reports on Form 8-K were filed with the  Securities  and Exchange  Commission
during the last quarter of the period covered by this Report.

For the purposes of complying  with the  amendments to the rules  governing Form
S-8 (effective  July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows:

         Insofar as indemnification for liabilities arising under the Securities
         Act of 1933 may be  permitted  to  directors,  officers or  controlling
         persons of the  registrant  pursuant to the  foregoing  provisions,  or
         otherwise,  the  registrant has been advised that in the opinion of the
         Securities  and Exchange  Commission  such  indemnification  is against
         public  policy  as  expressed  in  the  1933  Act  and  is,  therefore,
         unenforceable.  In the event that a claim for  indemnification  against
         such  liabilities  (other

                                                                              15

<PAGE>

         than the payment by the registrant of the expenses  incurred or paid by
         a director,  officer or  controlling  person of the  registrant  in the
         successful  defense of any action,  suit or  proceeding) is asserted by
         such  director,  officer or controlling  person in connection  with the
         securities  being  registered  on the Form S-8  identified  below,  the
         registrant  will,  unless in the  opinion of its counsel the matter has
         been settled by controlling precedent, submit to a court of appropriate
         jurisdiction the question whether such indemnification by it is against
         public  policy as expressed in the 1933 Act and will be governed by the
         final adjudication of such issue.

The preceding  undertaking  shall be incorporated by reference into registrant's
Registration Statement on Form S-8 (Registration No. 33-12755).

                                                                              16
<PAGE>



                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SHARPER IMAGE CORPORATION                   SHARPER IMAGE CORPORATION

By:  /s/ Richard J. Thalheimer              By:  /s/ Tracy Y. Wan
     ---------------------------                 ----------------------
  Richard J. Thalheimer                       Tracy Y. Wan
  Chief Executive                             Senior Vice President,
  Officer, Chairman                             Chief Financial Officer
  (Principal Executive Officer)               (Principal Financial and
                                                 Accounting Officer)

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below  constitutes  and appoints  Richard  Thalheimer and Tracy Wan, and each of
them, as such person's true and lawful  attorneys-in-fact  and agents, with full
power of substitution and  resubstitution,  for such person and in such person's
name,  place,  and  stead,  in any  and  all  capacities,  to  sign  any and all
amendments to this report, and to file the same, with all exhibits thereto,  and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission,  granting unto said  attorneys-in-fact and agents, and each of them,
full  power  and  authority  to do and  perform  each and  every  act and  thing
requisite  and  necessary to be done in  connection  therewith,  as fully to all
intents and  purposes as he might or could do in person,  hereby  ratifying  and
confirming all that said  attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes,  may lawfully do or cause to be done by virtue
hereof.

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

Signature                       Title                                 Date
---------                       -----                                 ----

/s/ Richard J. Thalheimer       Chief Executive                 April  30, 1997
---------------------------       Officer, Chairman
Richard J. Thalheimer             (Principal Executive Officer)
                                  
/s/ Tracy Y. Wan                Senior Vice President,          April  30, 1997
---------------------------       Chief Financial Officer
Tracy Y. Wan                      Corporate Secretary
                                  (Principal Financial and
                                  Accounting Officer)

/s/ Elyse Eng Thalheimer        Director                        April  30, 1997
---------------------------
Elyse Eng Thalheimer

                                                                              17
<PAGE>


/s/ Alan Thalheimer             Director                        April  30, 1997
---------------------------
Alan Thalheimer


/s/ Lawrence Feldman            Director                        April  30, 1997
---------------------------
Lawrence Feldman


/s/ Maurice Gregg               Director                        April  30, 1997
---------------------------
Maurice Gregg


/s/ Gerald Napier               Director                        April  30, 1997
---------------------------
Gerald Napier


/s/ J. Gary Shansby             Director                        April  30, 1997
---------------------------
J. Gary Shansby

                                                                              18


<PAGE>



                                                       SHARPER IMAGE CORPORATION

<TABLE>
                                            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                                --------------------------------------
                                                                ($000)
<CAPTION>
            COLUMN                                 COLUMN             COLUMN                 COLUMN             COLUMN
              A                                      B                  C                      D                  E
-------------------------------------------------------------------------------------------------------------------------
                                                   Balance at           Additions                              Balance
                                                   Beginning           Charged to                             at End of
DESCRIPTION                                        of Period          Costs & Exp.        Deductions           Period
-------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                  <C>                <C>                <C>   
INVENTORY

YEAR ENDED JANUARY 31, 1997:
Inventory Obsolescence                              $1,449               $1,681             $1,621             $1,509
                                                                 
YEAR ENDED JANUARY 31, 1996:                                     
Inventory Obsolescence                              $  891               $2,109             $1,551             $1,449
                                                                 
YEAR ENDED JANUARY 31, 1995:                                     
Inventory Obsolescence                              $1,140               $1,630             $1,879             $  891
                                                                 
OTHER                                                            
                                                                 
YEAR ENDED JANUARY 31, 1997:                                     
Other                                               $  461               $  351             $  307             $  505
                                                                 
YEAR ENDED JANUARY 31, 1996:                                     
Other                                               $  291               $  462             $  292             $  461
                                                                 
YEAR ENDED JANUARY 31, 1995:                                     
Other                                               $  196               $  371             $  276             $  291
                                                               
</TABLE>

                                                                              19
<PAGE>

                                  EXHIBIT INDEX


 3.1     Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1
         to Registration Statement on Form S-1 (Registration No. 33-12755).)

 3.2     Bylaws.  (Incorporated  by  reference  to Exhibit  3.2 to  Registration
         Statement on Form S-1 (Registration No. 33-12755).)

10.1     Amended and Restated Stock Option Plan.  (Incorporated  by reference to
         Registration   Statement   on  Form  S-8  filed  on  January  19,  1996
         (Registration No. 33-3327).)

10.2     1994  Non-Employee  Director  Stock Option Plan dated  October 7, 1994.
         (Incorporated by reference to Registration  Statement on Form S-8 filed
         on January 19, 1996 (Registration No. 33-3327).)

10.3     Cash or Deferred  Profit  Sharing  Plan, as amended.  (Incorporated  by
         reference  to  Exhibit  10.2 to  Registration  Statement  on  Form  S-1
         (Registration No. 33-12755).)

10.4     Cash or Deferred Profit Sharing Plan Amendment No. 3.  (Incorporated by
         reference to Exhibit  10.15 to Form 10-K for fiscal year ended  January
         31, 1988.)

10.5     Cash or Deferred Profit Sharing Plan Amendment No. 4.  (Incorporated by
         reference to Exhibit  10.16 to Form 10-K for fiscal year ended  January
         31, 1988.)

10.6     Form of Stock Purchase Agreement dated July 26, 1985 relating to shares
         of Common  Stock  purchased  pursuant to  exercise  of  employee  stock
         options.  (Incorporated  by reference  to Exhibit 10.3 to  Registration
         Statement on Form S-1 (Registration No. 33-12755).)

10.7     Form of Stock  Purchase  Agreement  dated December 13, 1985 relating to
         shares of Common Stock purchase  pursuant to exercise of employee stock
         options.  (Incorporated  by reference  to Exhibit 10.4 to  Registration
         Statement on Form S-1 (Registration No. 33-12755).)

10.8     Form of Stock  Purchase  Agreement  dated November 10, 1986 relating to
         shares of Common Stock purchased pursuant to exercise of employee stock
         options.  (Incorporated  by reference  to Exhibit 10.5 to  Registration
         Statement on Form S-1 (Registration No. 33-12755).)

10.9     Form of Director Indemnification Agreement.  (Incorporated by reference
         to Exhibit 10.42 to  Registration  Statement on Form S-1  (Registration
         No. 33-12755).)

10.10    Real Estate  Installment  Note and Mortgage dated October 4, 1993 among
         the Company and Lee Thalheimer,  Trustee for the Alan Thalheimer Trust.
         (Incorporated  by  reference  to Exhibit  10.20 to Form 10-K for fiscal
         year ended January 31, 1994)

10.11    Financing  Agreement  dated  September 21, 1994 between the Company and
         CIT  Group/Business  Credit Inc.  (Incorporated by reference to Exhibit
         10.12 to Form 10-Q for the quarter ended October 31, 1994)

10.12    The Sharper  Image  401(K)Savings  Plan  (Incorporated  by reference to
         Exhibit 10.21 to Registration  Statement of Form S-8  (Registration No.
         33-80504) dated June 21, 1994))

10.13    Chief  Executive  Officer  Compensation  Plan dated  February  3, 1995.
         (Incorporated  by reference  to Exhibit  10.24 to the Form 10-K for the
         fiscal year ended January 31, 1995.)

                                                                              20
<PAGE>

10.14    Annual Report for the Sharper Image 401(K)  Savings Plan  (Incorporated
         by reference to Form 11-K (Registration No. 33-80504) for the plan year
         ended December 31, 1995.)

10.15    Split-Dollar  Agreement between the Company and Mr. R. Thalheimer,  its
         Chief Executive Officer dated October 13, 1995, effective as of May 17,
         1995  (Incorporated  by reference to Exhibit 10.17 to Form 10-K for the
         fiscal year ended January 31, 1996).

10.16    Assignments of Life Insurance Policy as Collateral,  both dated October
         13, 1995,  effective May 17, 1995 (Incorporated by reference to Exhibit
         10.18 to Form 10-K for the fiscal year ended January 31, 1996).

10.17    Amendment  to the  Financing  Agreement  dated May 15, 1996 between the
         Company  and  The  CIT  Group/Business  Credit  Inc.  (Incorporated  by
         reference to Exhibit 10.19 to the Form 10-Q for the quarter ended April
         30, 1996).

10.18    Warrant to Purchase  Common Stock  Agreement dated May 15, 1996 between
         the Company and The CIT  Group/Business  Credit Inc.  (Incorporated  by
         reference to Exhibit  10.20 to the Form 10Q for the quarter ended April
         30, 1996).

10.19    CAPEX Term Loan  Promissory  note dated  October 15,  1996  between the
         Company  and  The  CIT  Group/Business  Credit  Inc.  (Incorporated  by
         reference  to  Exhibit  10.21 to the Form  10-Q for the  quarter  ended
         October 31, 1996).

10.20    Employment  Agreement  between the Company and Mr. Barry  Gilbert,  its
         Vice Chairman and Chief Operating Officer dated and effective  December
         2, 1996.

10.21    Amendment to the Financing  Agreement  dated  February 13, 1997 between
         the Company and The CIT Group/Business Credit Inc.

10.22    Warrant to Purchase  Common  Stock  Agreement  dated  February 13, 1997
         between the Company and The CIT Group/Business Credit Inc.

10.23    Amendment to the Financing  Agreement  dated March 24, 1997 between the
         Company and The CIT Group/Business Credit Inc.

11.1     Statement Re:  Computation of Earnings per Share.

13.1     1996 Annual Report to Stockholders.

23.1     Independent Auditor's Report.

23.2     Independent Auditor's Consent.

27.0     Financial Data Schedule.

                                                                              21