<PAGE>
 
                                   FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                  For the fiscal year ended December 31, 1996
                          Commission File No. 0-16913

                             THE SCORE BOARD, INC.
            (Exact name of registrant as specified in its charter)

New Jersey                                        22-2766077
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)                  Identification No.)

             1951 Old Cuthbert Road, Cherry Hill, New Jersey  08034
           (Address of principal executive offices)      (Zip Code)

Registrant's telephone number, including area code:   (609) 354-9000

Securities registered pursuant to Section 12(b) of the Act:  Not Applicable

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

                          Common Stock, $.01 par value
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.   [_]

The aggregate market value, as of March 31, 1997, of voting stock of the
registrant held by non-affiliates was approximately $19,445,891.

The number of outstanding shares of registrant's Common Stock, $.01 par value,
on March 31, 1997 was 14,687,566.

                  Documents Incorporated By Reference:      None
<PAGE>
 
                             THE SCORE BOARD, INC.
                             ---------------------
                                        
                                     INDEX
                                     -----
<TABLE>
<CAPTION>
 
              Item                                                        Page
              ----                                                        ----
<S>       <C>                                                             <C> 
 
PART I    1.  Business                                                      3
 
          2.  Properties                                                   10
 
          3.  Legal Proceedings                                            10
 
          4.  Submission of Matters to Vote of
              Security Holders                                             11
 
PART II   5.  Market for Registrant's Common Equity
              and Related Stockholder Matters                              11
 
          6.  Selected Financial Data                                      12
 
          7.  Management's Discussion and Analysis
              of Financial Condition and Results
              of Operations                                                13
 
          8.  Financial Statements and Supplementary
              Data                                                         16
 
          9.  Changes in and Disagreements with
              Accountants on Accounting and
              Financial Disclosure                                         16
 
PART III  10. Directors and Executive Officers of the
              Registrant                                                   17
 
          11. Executive Compensation                                       18
                                                         
          12. Security Ownership of Certain Beneficial   
              Owners and Management                                        21
                                                         
          13. Certain Relationships and Related          
              Transactions                                                 23
                                                         
PART IV   14. Exhibits, Financial Statement Schedules,   
              and Reports on Form 8-K                                      24
</TABLE>


                                       2
<PAGE>
 
                                     PART I
                                     ------

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

Introduction
------------

  The Score Board, Inc. ("Company" or "Registrant") designs, manufactures,
markets and distributes sports and entertainment related products.  Its primary
activities are the marketing and sale of sports trading cards, sports and
entertainment memorabilia and prepaid telephone calling cards.  The Company's
products are sold primarily through cable television shopping networks,
retailers, wholesalers and distributors, hobby stores, and premium and
promotional programs.

  The Company's trading card activities focus on the sale of Company designed
sports trading cards.  The Company's memorabilia operations consist of
designing, manufacturing and selling autographed and non-autographed sports and
entertainment memorabilia.  The memorabilia product lines include baseballs,
baseball bats, footballs, basketballs, hockey sticks, uniform jerseys and
trading cards autographed by athletes, as well as autographed and non-
autographed plaques and limited edition lithographs.  Each item of memorabilia
features the name, likeness or similar indicia of an athlete or entertainer, or
certain characters and trademarks associated with a television show or motion
picture. The Company also designs and sells prepaid telephone calling card
products in sets or packaged with its trading card products, and licenses third
parties to manufacture and sell trading cards and other non-autographed
products.

  The Company produces its products based upon personal service contracts with
celebrities and other license agreements.  Under the personal service contracts,
the celebrities agree to autograph memorabilia, for which they are generally
paid on a per signature basis with a specific guaranteed minimum. The
celebrities may also grant the Company a license to manufacture and sell, and to
sublicense third parties to manufacture and sell, various non-autographed
products such as prepaid telephone calling cards, watches, greeting cards, party
accessories and ornaments.   They may also be paid additional fees for
performing other services, such as personal appearances, on behalf of the
Company.

  The Company was incorporated in the State of New Jersey on November 25, 1986.
References to the Company include Registrant and its wholly-owned, but inactive,
subsidiaries, Americana Memorabilia, Inc., Classic Games, Inc., Classic
Marketing, Inc. and SB Acquisition Corp., as well as Score Board Holding
Corporation.  The Company recently changed its fiscal year end from January 31st
to December 31st.  See Item 1. "Business - Recent Developments."  Accordingly,
this Form 10-K relates to the eleven month period commencing February 1, 1996
and ending December 31, 1996.

Trading Cards
-------------

  The Company produces various trading card products based upon its personal
service contracts with athletes and other license agreements.  Pursuant to its
contracts with athletes, the Company produces trading card products of top
baseball, basketball, football and hockey prospects.  These products have been
marketed in different configurations, including complete sets and foil packs of
six, ten or twelve cards, and are distributed through the Company's various
channels of distribution.  The Company also produces a multi-sport trading card
product featuring race car drivers and prospects from each of the four major
sports, as well as various auto racing trading card products featuring drivers,
members of their crews, race cars and car owners. In addition, the Company
produces its Pro-Line and NFL Rookies trading card products under its license
agreements with the National Football League Properties, Inc. ("NFLP") and
National Football League Players, Inc. ("NFLPA").

  The Company's trading card products are manufactured, printed and packaged for
the Company by unrelated third parties.


                                       3
<PAGE>
 
Memorabilia
-----------

  The Company's memorabilia line consists of sports memorabilia and
entertainment memorabilia.  Sports memorabilia products are based upon personal
service contracts with athletes, as well as non-exclusive licenses obtained from
entities such as NFLP, Major League Baseball Properties, Inc. ("MLBP") and the
Major League Baseball Players Association ("MLBPA").  The products currently
include items such as baseballs, baseball bats, footballs, basketballs, hockey
sticks, uniform jerseys, plaques, limited edition lithographs and trading cards
autographed by athletes.  The sports memorabilia line also includes non-
autographed plaques, limited edition lithographs, gold trading cards and other
collectibles.

  As of December 31, 1996, the Company had personal service contracts with
approximately 150 athletes, including Cal Ripken, Jr., Scottie Pippen, Hank
Aaron, Hakeem Olajuwon, Barry Bonds, Ken Griffey, Jr., Frank Thomas, Alonzo
Mourning, Troy Aikman, Emmitt Smith, Steve Young and Dale Earnhardt.  The
contracts typically have a term of one to two years. The Company generally has
not experienced difficulty in renewing these contracts.  Many of the contracts
prohibit the celebrity from autographing memorabilia for sale through mass
merchandising channels, such as television shopping networks and retail
catalogs, unless the sales are arranged by the Company.

  The Company has license agreements with MLBP and MLBPA, pursuant to which the
Company may utilize the names and logos of MLBP (and its member teams) and MLBPA
in connection with the manufacture and distribution of autographed and non-
autographed memorabilia.  During the past year, products sold by the Company
under these licenses included baseballs, baseball bats, photographs and
collector plaques autographed by athletes.  In addition, the Company has
acquired a license from NFLP to utilize the names, logos and other identifying
symbols of NFLP and its member teams on a variety of autographed and non-
autographed memorabilia.

  The Company's entertainment memorabilia is based upon exclusive and non-
exclusive licenses obtained, and personal service contracts entered into, by the
Company involving celebrities and certain characters and trademarks associated
with motion pictures and television shows.  The products currently include
limited edition lithographs, gold record plaques, ceramic items, jewelry, stamp
plaques, photo plaques, framed and matted photographs, posters and similar
products.

  As of December 31, 1996, the Company had personal service contracts with
approximately six entertainment celebrities.  The contracts typically have a
term of one to three years, and the Company generally has not had difficulty in
renewing these contracts. The Company also has a non-exclusive license from
Paramount Pictures, Inc. to market certain Star Trek memorabilia through direct
                                           ---------
mail/catalog outlets, retail outlets and certain television shopping networks.

  The Company provides certificates of authenticity with its autographed
memorabilia pursuant to which it unconditionally guarantees the authenticity of
the product.  Sports memorabilia is marketed primarily through cable shopping
television networks, retailers, hobby stores and premium and promotional
programs. Entertainment memorabilia is marketed primarily through cable shopping
television networks.

Prepaid Telephone Calling Cards
-------------------------------

  The Company produces various prepaid telephone calling card products based
upon its personal service contracts with athletes and other license agreements.
These cards may be either "collectible" or "utility-based" (i.e., designed for
use of the telecommunication services). These products have been marketed in
different configurations, including individually, in sets and as inserts in
trading card products.  The Company has license agreements with NFLPA, MLBPA and
MLBP, pursuant to which it may picture the athletes represented by these
entities, and the names and logos of NFLPA, MLBPA and MLBP on calling cards. The
Company recently entered into a strategic distribution agreement with Frontier
Communications International, Inc. relating to the development and marketing of
calling cards.  See Item 1. "Business - Recent Developments."


                                       4
<PAGE>
 
Sublicensing
------------

  The Company's sublicensing business is based upon its personal service
contracts with certain well-known athletes.  Under these contracts, the Company
acquires the right to sublicense third parties to manufacture and sell various
non-autographed products.  The Company receives royalties from the sale of
products by the third parties with which it enters into sublicensing agreements.
The Company has sublicensed to Hallmark Cards, Inc. the right to manufacture and
sell a line of personal communication and celebration specialty products (e.g.,
greeting cards and party accessories) and holiday ornaments featuring various
athletes. The Company has also sublicensed numerous other companies to produce
items such as trading cards, gold trading cards, collector plates and watches.

Recent Developments
-------------------

  In December 1996, the Company changed its fiscal year-end from January 31st to
December 31st.  Accordingly, this Form 10-K relates to an eleven month period
commencing February 1, 1996 and ending December 31, 1996.

  In December 1996, the Company and Frontier Communications International, Inc.
("Frontier"), a subsidiary of Frontier Corporation, entered into a five-year
strategic distribution agreement relating to the development and marketing of
prepaid telephone calling cards for the domestic and international markets.
Under this agreement, Frontier has guaranteed certain minimum payments to the
Company which total $10 million over the first three years of the agreement and
would reach a minimum of $20 million over the full five-year term.  Either party
may terminate the relationship after the completion of years three or four,
subject to payment of a $2.5 million early termination fee.  The Company has
granted Frontier a license to use the names and images of various athletes under
contract with the Company in Frontier's calling card programs.  Frontier will
distribute the Company's calling card products into retail outlets and other
avenues of distribution and provide telecommunications services in support of
the Company's calling card programs.  The Company issued Frontier warrants to
acquire 125,000 shares of its Common Stock (25,000 at $3.00 per share, 50,000 at
$5.00 per share and 50,000 at $10.00 per share).  The Company also agreed to
nominate a representative of Frontier to its Board of Directors.  James G. Dole
was selected by Frontier for this position.  See Item 13. "Certain Relationships
and Related Transactions."

  In November 1996, Technology Leaders II, L.P., Technology Leaders II Offshore,
C.V. and others led a $4 million private equity placement in the Company.
Pursuant to the private placement agreement, the Company issued 1,600,000 shares
of Common Stock to the investors at $2.49 per share and warrants to acquire
2,720,000 shares of Common Stock at $3.07 per share.  Proceeds of the private
placement were used for working capital purposes.  The Company also agreed to
nominate a representative of the investors to its Board of Directors.  Ira M.
Lubert was selected by the investors for this position.  See Item 13. "Certain
Relationships and Related Transactions."

  The Company also completed the exchange of $3.5 million and $3.0 million in
principal amount of its 9% subordinated debentures, due September 1, 2002 and
February 1, 2003, respectively, for 912,000 shares of Common Stock in May 1996.
The early retirement of the debentures resulted in a one-time extraordinary pre-
tax gain of $954,000, a $6.1 million increase in shareholder equity and a $6.5
million reduction in long-term debt.

  The Company has recently experienced changes in senior management, including
its Chief Operating Officer, Vice President of Licensing and Vice President of
Marketing.  The Company has hired a new President and Chief Operating Officer,
and is in the process of replacing the other individuals.  The Company does not
anticipate any adverse impact to its operations as the result of these changes.

Marketing and Distribution
--------------------------

  The Company markets its products primarily through in-house sales employees
and independent sales representatives.  Channels of distribution include cable
television shopping networks such as QVC and Shop At Home, Inc., retailers
(including toy stores, convenience stores, mass market retailers, warehouse
clubs and distributors of periodical publications), wholesalers and
distributors, hobby stores, and  premium and promotional programs.


                                       5
<PAGE>
 
  The Company has utilized various sales representatives and distributors who
are generally paid commissions of varying rates based on net sales with respect
to certain specified accounts. Commissions are customarily paid pursuant to oral
agreements, although the Company has written agreements with certain sales
representatives.  The Company primarily ships its memorabilia products from its
warehouse in Cherry Hill, New Jersey, and has its trading card products shipped
to customers by unrelated manufacturers.

License Agreements, Personal Service Contracts and Trademarks
-------------------------------------------------------------

  In general, the production or distribution of products depicting the image of
any celebrity, athlete, team, league, organization logo or trademark requires a
license from such celebrity, athlete, team, league, organization or owner of the
trademark. The Company is constantly seeking to sign athletes to personal
services contracts and to acquire licenses from other licensing entities in
connection with the production of its product lines.

  The Company acquires the components it utilizes to produce its sports and
entertainment memorabilia pursuant to license agreements it has obtained or from
manufacturers the Company believes to be duly licensed. The Company obtains the
autographs for its memorabilia products pursuant to personal service contracts.
The Company's business is largely dependent upon its ability to maintain
existing licenses and personal service contracts and to obtain additional
licenses and personal service contracts necessary to offer new products.

  To enable the Company to produce its trading cards of prospective professional
athletes (draft picks), the Company enters into personal services contracts with
these players.  Because the players are shown in their high school or college
uniforms, rather than in the uniforms of their future professional teams, and
are not yet members of the players' associations, the Company believes that no
licenses are needed from either the leagues or the players' associations to
produce these trading cards.  The Company has, however, obtained licenses from
the NFLP and NFLPA to use certain identifying marks of these entities on the
Company's NFL Rookies trading card product.

  The Company has also acquired licenses from the NFLP, MLBP and MLBPA in
connection with the manufacture and distribution of telephone calling cards and
football, basketball and baseball memorabilia. The Company has several other
exclusive and non-exclusive licenses which grant the Company the right to
produce and distribute trading cards and sports and entertainment-related
memorabilia.

  The Company considers its trademarks to be of material importance to its
business.  The principal trademarks, including Score Board(R) and Classic(R),
have been registered in the United States and Canada.

Employees
---------

  As of December 31, 1996, the Company employed approximately 150 full-time
employees and 3 part-time employees. No employees of the Company are subject to
collective bargaining agreements. The Company considers its relations with its
employees to be satisfactory.

Risk Factors
------------

  In addition to the other information contained in this Form 10-K, the
following risk factors should be considered carefully in evaluating the Company
and its business.  This Form 10-K contains forward-looking statements which
involve risks and uncertainties.  The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in this Form 10-K.


                                       6
<PAGE>
 
  Dependence Upon License Agreements
  ----------------------------------

  In general, the production or distribution of products depicting the image of
any athlete, entertainer, team, league, organization, logo or trademark requires
a personal service contract or license from such athlete, entertainer, team,
league, organization or owner of the trademark.   The Company's business is
highly dependent upon its ability to obtain and maintain existing licenses and
personal service contracts and to obtain additional licenses and personal
service contracts necessary to offer new products.  Although the Company
believes it will be able to renew its licenses and personal service contracts
upon their expiration, there can be no assurance that such renewals can be
obtained on terms acceptable to the Company.  The inability of the Company to
renew existing licenses and personal services contracts and/or to acquire
additional licenses and personal service contracts with sports and entertainment
celebrities could have a material adverse impact on the Company's sales and
earnings.

  Competition
  -----------

  The Company believes that no single entity competes against the Company in all
of its product offerings. In each of its product lines, however, the Company has
significant existing and potential competition.

  With respect to the manufacture and sale of draft pick/prospects trading
cards, the Company believes that it is the dominant source of these cards.  The
competitive factors in this market are principally based upon quality, ability
to make prompt delivery and ability to obtain premier players. With respect to
the manufacture and sale of other trading cards, the Company competes directly
with other manufacturers, some of whom have far greater experience and finances
devoted to these products. The Company encounters competition principally based
upon product pricing, creativity, quality and ability to make delivery.

  With respect to memorabilia, the Company's sports products compete with
several other sports memorabilia companies, including a company which is an
affiliate of a major trading card manufacturer, as well as individual dealers.
The Company believes that its sports memorabilia competitors generally sell
their products primarily through television shopping networks, retail stores,
card shows and catalogs, and that the dealers generally sell their products only
through hobby magazines and sports card shows.  The Company's entertainment
memorabilia product line competes with certain licensors who have developed
their own entertainment memorabilia product lines which are sold in stores and
in catalogs, as well as with dealers, fan clubs, entertainment memorabilia
conventions and concert hall concessions.  The Company faces competition for the
sale of sports and entertainment memorabilia based upon reputation for
authenticity of product, product quality and pricing, athlete/celebrity
selection and ability to deliver product in volume. The Company also competes
with other sports and entertainment memorabilia companies for the engagement of
sports and entertainment celebrities under personal services contracts.

  With respect to prepaid telephone calling cards, the Company competes with
various telecommunication companies and other entities that have developed
calling card product lines.  The competitive factors in this market are
principally card design and the quality and price of telecommunication services.
The inability of the Company to adequately address any of these competitive
factors in its product offerings could have a material adverse impact on its
sales and earnings.

  Reliance on Television Shopping Networks
  ----------------------------------------

  For the Company's period ended December 31, 1996 and fiscal year ended January
31, 1996, sales to national and regional cable television networks accounted for
approximately 31% and 22%, respectively, of net sales.  Sales to one of these
television shopping networks, QVC Network, Inc. ("QVC"), accounted for
approximately 19% and 17%, respectively, of net sales for these periods.  The
Company has no written agreement with QVC or any other cable television network,
and cannot give any assurance that it will attain its current level of sales to
QVC or to cable television networks.  The loss of QVC as a customer, or cable
television as a sales outlet for the Company's products, could have a material
adverse impact on the Company.


                                       7
<PAGE>
 
  Factors Affecting Sales and Earnings
  ------------------------------------

  The market for sports trading cards, prepaid telephone calling cards and
sports and entertainment memorabilia is affected by many factors, including
seasonality, consumer interest and general economic conditions.  In recent
years, the market for sports trading cards has experienced a contraction, which
has resulted in diminished sales of trading cards by the Company and certain of
its competitors.

  As part of its marketing efforts, the Company has sports and entertainment
celebrities under contract to sign autographs and make appearances.  If the
Company were not able to respond to changes in consumer demand and tastes
quickly enough, or if the celebrities under contract with the Company were to
become ill or injured, or to fall into public disfavor, the Company's sales and
earnings could be materially adversely effected.  The Company's sales and
earnings could also be materially adversely effected if the Company were unable
to retain the services of the celebrities or if an overabundance of the
celebrities' autographs were to become available for sale.

  During 1996, the Company distributed trading card products that were
advertised to contain so-called "vintage" cards, thereby creating the impression
that these cards were in actuality printed in prior years.  A small percentage
of these products contained reprints of cards previously published by the
Company rather than originals of these "vintage" cards.  The sale of the
products, which had been approved by the Company's Chief Executive Officer,
ceased in February 1997, and internal procedures were reinforced to ensure that
such activity does not recur.  Although the Company believes the incident has
been handled in a professional and thorough manner, the inclusion of the
reprinted cards could be deemed to be in violation of certain laws or to be in
breach of certain contractual obligations and, accordingly, there is no
assurance that it will not result in a material adverse effect on the Company.
The Company incurred approximately $300,000 of charges related to this incident
in the quarter ended December 31, 1996.

  Source of Materials
  -------------------

  The Company obtains the standard items to be autographed, such as baseballs,
footballs, basketballs and uniform jerseys, and components for its memorabilia
products from licensed dealers and unrelated third party manufacturers.  The
sources for many of these items are limited to several or, in certain cases, one
manufacturer or supplier.  Although the Company does not have formal written
agreements with any such supplier, it generally has not experienced difficulty
in obtaining these items. The majority of the Company's trading card products
are manufactured by a single manufacturer pursuant to a manufacturing services
agreement expiring in June 1999.  No assurance can be given, however, that the
Company will not experience any significant difficulty in obtaining these items
in the future.

  Dependence on Key Personnel
  ---------------------------

  The Company's future success depends upon its ability to attract and retain
its key managerial personnel.  The loss of services of certain of the Company's
executive officers or the inability of the Company to attract additional
management personnel could have a material adverse effect upon the Company's
business, financial condition and results of operations.

  Potential for Significant Fluctuations in Quarterly Operating Results
  ---------------------------------------------------------------------

  The Company has experienced, and may in the future experience, significant
quarter to quarter fluctuations in its results of operations.  Such fluctuations
may result in volatility in the price of its Common Stock.  Quarterly results of
operations may fluctuate as a result of a variety of factors, including demand
for products, the timing of the introduction of new trading card products or
other products by the Company or its competitors, market acceptance of new
products, competitive conditions in the industry and general economic
conditions.  As a result, revenues are difficult to forecast, and the Company
believes that period to period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as an indication of future
results of operations.  Due to the


                                       8
<PAGE>
 
foregoing factors, it is possible that in future quarters operating results will
be below the expectations of public market analysts and investors.  Such an
event could have a material adverse effect on the price of the Common Stock.

  Potential Volatility of Stock Price
  -----------------------------------

  The market price of the Company's Common Stock has been, and may in the future
be, highly volatile.  Factors such as announcements with respect to new products
or licenses by the Company or its competitors, fluctuations in the Company's
operating results and general market and economic conditions could cause the
market price of the Common Stock to fluctuate substantially.  These or other
factors may adversely effect the market price of the Common Stock.  See Item 5.
"Market for the Registrant's Common Equity and Stockholder Matters."

  Distribution
  ------------

  The Company's channels of distribution include cable television shopping
networks, retailers, wholesalers and distributors, hobby stores, and premium and
promotional programs.  The loss of one or more of these channels of distribution
could have a material adverse impact on the Company.

  The Company has limited written agreements with its customers and
distributors.  In light of this, no assurance can be given that the Company will
not experience a diminution or cessation of sales to any of its customers or
distributors.

  Pledge of Company's Assets
  --------------------------

  The Company has a revolving credit facility from Congress Financial
Corporation whereby borrowings are available up to $12,000,000.  This facility
is secured by a pledge of essentially all of the Company's assets.  The credit
facility restricts, among other things, the ability of the Company to obtain
additional borrowings.  In the event of default, the lender would be entitled to
foreclose and take title to these assets.

  Lack of Dividends
  -----------------

  The Company has not paid any dividends on its Common Stock since inception and
does not intend to pay any dividends to its shareholders in the foreseeable
future.  The Company currently intends to reinvest its earnings, if any, in the
development and expansion of its business.

  Litigation
  ----------

  On February 14, 1995, Upper Deck Authenticated, Ltd. filed suit against the
Company and three unaffiliated entities in the United States District Court for
the Southern District of California alleging, among other things, that the
Company had engaged in unfair competition and violated its right to use the
indicia of certain athletes on sports memorabilia and collectibles.  The Company
plans to vigorously defend these actions.  See Item 3. "Legal Proceedings."

  In August 1996, a purported class action was filed against the Company
alleging, among other things, that the practice of randomly inserting chase
cards in packages of trading cards constitutes illegal gambling activity in
violation of state and federal law, including the Racketeer Influenced and
Corrupt Organization Act.  See Item 3. "Legal Proceedings."

  Shares Eligible for Future Sale
  -------------------------------

  Sales of the Company's Common Stock in the public market could adversely
effect the market price of the Common Stock and could impair the Company's
future ability to raise capital through the sale of equity securities.


                                       9
<PAGE>
 
  Personal Service Contracts
  --------------------------

  The Company routinely enters into personal service contracts with celebrities.
These contracts provide primarily for the celebrities to autograph various items
of memorabilia and may include personal appearances.  These contracts typically
have a term of one to two years, but some may extend for much greater periods.
As of December 31, 1996, the Company had approximately $10,000,000 of
commitments under these contracts.  There is no assurance that the Company will
fully utilize the services for which it is committed to pay under these personal
service contracts.

  Recent Financial Developments
  -----------------------------

  The Company has incurred significant losses (a net loss of $17,436,000 for the
eleven months ended December 31, 1996) during the past three years.  During the
eleven months ended December 31, 1996, total stockholders' equity decreased from
$6,193,000 to a deficit of $1,292,000, and working capital decreased from
$13,033,000 to $315,000.

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

  The Company leases office and warehouse space at the locations set forth in
the following table:

<TABLE>
<CAPTION>
 
                        Approx.         Lease
                        Square          Expiration          Type of
Location                Footage         (mos./yr.)          Space
--------                -------         -----------         -----
<S>                    <C>             <C>                <C>
Cherry Hill, NJ         56,000          12/01               Office and warehouse
Cherry Hill, NJ         13,150          10/97               Office and assembly
Cherry Hill, NJ          8,925          12/96               Office and assembly
Cherry Hill, NJ         22,500          10/98               Warehouse
Austell, GA             37,340          03/99               Office and warehouse
Austell, GA             50,636          03/99               Warehouse
</TABLE>

  All of the Company's properties are suitable for the intended activities.  In
July 1996, the Company extended the lease term on its Cherry Hill, New Jersey
corporate headquarters (56,000 square feet) for a sixty-five month term ending
December 31, 2001.

  All operations of Classic Games, Inc. were relocated from Austell, Georgia to
New Jersey during 1994.  The Company has sublet all of its space in Austell,
Georgia for the remainder of the lease terms.  The Company has also sublet two
Cherry Hill spaces (13,150 square feet and 8,925 square feet) for the remainder
of the lease terms.

Item 3. Legal Proceedings
-------------------------

  On February 14, 1995, Upper Deck Authenticated, Ltd. (`UDA") filed suit
against the Company and three unaffiliated entities in the United States
District Court for the Southern District of California alleging, among other
things, that the Company had engaged in unfair competition and violated UDA's
right to use the indicia of certain athletes on sports memorabilia and
collectibles.  The Company responded to UDA's suit by denying all wrongdoing and
filing its own claims against UDA, Upper Deck Company and their president,
charging them with unfair competition, defamation and tortious interference with
current and prospective contractual relations.  Substantial discovery has been
taken in the case, and trial is scheduled for June 1997.  The court has granted
the Company partial summary judgment with respect to several of UDA's claims.

  In August 1996, a purported class action was filed against the Company in the
United States District Court for the District of New Jersey. The suit alleges,
among other things, that the practice of randomly inserting chase cards in
packages of trading cards constitutes illegal gambling activity in violation of
state and federal law, including the Racketeer Influenced and Corrupt
Organization Act. Plaintiffs seek certification of a class of persons who,
within the applicable statute of limitations, purchased packages of the
Company's trading cards that might contain randomly


                                      10
<PAGE>
 
inserted chase cards. The Company has filed a motion to dismiss the suit that is
currently pending before the court. No discovery has commenced.

  The Company is involved in various other legal proceedings and claims incident
to the conduct of its business.

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

  The Company's 1996 Annual Meeting of Shareholders was held on January 28, 1997
for the purposes of electing five members of the Board of Directors for a one-
year term, acting on an amendment to the Company's 1992 Stock Incentive Plan to
increase the number of shares issuable under the plan from 1,200,000 to
1,850,000, and acting on an amendment to the Company's 1992 Directors Stock
Option Plan to increase the number of shares issuable under the plan from
400,000 to 800,000.  The Board of Directors nominated Kenneth Goldin, Ira M.
Lubert, Allan R. Lyons, Gerald B. Shreiber and Richard C. Yancey for election as
directors.  The results of the votes taken at the Annual Meeting were as
follows:

<TABLE>
<CAPTION>
 
                                    Number of Votes:
        Matter                  For                 Withheld 
        ------                  --                  -------- 
        <S>                    <C>                  <C>      
                                                             
        Directors:                                           
         Kenneth Goldin......   7,842,279             142,041
         Ira M. Lubert.......   7,858,577             125,743
         Allan R. Lyons......   7,859,077             125,243
         Gerald B. Shreiber..   7,859,077             125,243
         Richard C. Yancey...   7,859,077             125,243
        Amendment to Stock                                   
         Incentive Plan......   6,211,034           1,042,486
        Amendment to                                         
         Directors Plan......   6,852,917             402,306 
</TABLE>

                                 PART II
                                 -------

Item 5. Market for the Registrant's Common Equity and Stockholder Matters
-------------------------------------------------------------------------

  The Company's Common Stock is traded on the NASDAQ-NMS under the symbol
"BSBL." The following table sets forth the range of high and low sale prices for
the Company's Common Stock for each of the periods indicated.

<TABLE>
<CAPTION>
 
                                                  High    Low
                                                 ------  ------
<S>                                              <C>     <C>
February 1, 1995 - January 31, 1996
-----------------------------------
2/1/95 - 4/30/95......................           $ 6.25   $ 3.50
5/1/95 - 7/31/95......................           $ 6.63   $ 3.50
8/1/95 - 10/31/95.....................           $ 6.75   $ 4.50
11/1/95 - 1/31/96.....................           $ 6.25   $ 4.13
February 1, 1996 - December 31, 1996
------------------------------------
2/1/96 - 4/30/96......................           $ 6.13   $ 3.13
5/1/96 - 7/31/96......................           $ 6.25   $ 2.63
8/1/96 - 10/31/96.....................           $ 3.81   $ 1.38
11/1/96 - 12/31/96....................           $ 3.44   $ 1.81
</TABLE>

  On March 31, 1997, the last sale price for the shares of Common Stock as
reported by NASDAQ was $1.44. There were approximately 3,957 record-holders of
the Company's Common Stock as of March 31, 1997.

  The Company has never paid cash dividends and does not anticipate paying
cash dividends in the foreseeable future. In addition, the Company's current
credit facility with Congress Financial Corporation prohibits the payment of



                                      11
<PAGE>
 
    dividends. See Item 7. "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."

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

        This information should be read in conjunction with the consolidated
    financial statements and the related notes appearing elsewhere herein.

Consolidated Statement of Operations Data (thousands of dollars, except share
-----------------------------------------------------------------------------
data):
------

<TABLE>
<CAPTION>
                                                                        Years Ended January 31,:
                                                                        -----------------------------------------------------
                                                     11 Months Ended
                                                         12/31/96           1996          1995          1994          1993
                                                      -----------       -----------   -----------   -----------   -----------
<S>                                                   <C>               <C>           <C>           <C>           <C>
Net sales...........................................  $    42,593       $    74,953   $    72,799   $   108,595   $    75,362
Cost of Goods Sold..................................       39,201            45,211        57,885        59,193        41,503
Gross Profit........................................        3,392            29,742        14,914        49,402        33,859
Selling, General and                         
   Administrative Expenses..........................       20,444            28,126        30,082        32,380        20,525
Realignment, restructuring                   
and product line costs..............................           --             5,675      22,700**            --            --
Securities Litigation Settlement....................           --             2,175            --            --            --
                                                     
Income (loss) from                           
   Operations.......................................      (17,052)           (6,234)      (37,868)       17,022        13,334
Interest Expense, Net...............................      ( 1,338)           (1,970)       (2,388)       (1,346)         (788)
                                                     
Net Income (loss)                            
   before extraordinary item........................      (18,390)           (8,204)      (33,816)       10,514         8,051
Extraordinary Gain..................................          954                --            --            --            --
Net Income (loss)...................................      (17,436)           (8,204)      (33,816)       10,514         8,051 
                                                       
                                             
Net Income (loss) per share.........................      (  1.35)            (0.71)        (3.01)         0.95          0.76
                                                     
Weighted Average Shares                      
    Outstanding.....................................   12,919,000        11,558,000    11,243,258    11,094,219    10,624,562
                                                     
Fully-Diluted Net Income                     
per share...........................................            *                 *             *          0.92          0.75
Weighted Number of Shares                    
    Outstanding.....................................            *                 *             *    12,180,096    10,994,346
</TABLE> 

-------------------------
*  Earnings per share information on a fully diluted basis would reflect a
   smaller loss per share.
** Net of insurance proceeds of $1,100,000 on death of former Chairman, CEO and
   President.
 
Consolidated Balance Sheet Data (thousands of dollars):
-------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                               As of:
                                                                               ------
                                                      12/31/96           1/31/96       1/31/95       1/31/94       1/31/93
                                                    -----------       -----------   -----------   -----------   -----------
<S>                                                 <C>               <C>           <C>           <C>           <C>
Working Capital...................................  $       315       $    13,033   $    17,246   $    48,923   $    33,780
Total Assets......................................       20,280            40,118        53,687        86,750        62,603
Bank Indebtedness.................................        6,743             9,884        14,096        16,030         4,000
Long-Term                                 
   Obligations....................................        4,000            10,500        10,737        10,980        11,250
Total Liabilities.................................       21,572            33,925        41,782        41,197        33,979
Stockholders' Equity (Deficit)....................       (1,292)            6,193        11,905        45,553        28,624
</TABLE>

                                       12
<PAGE>
 
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations
        -------------

Eleven Months Ended December 31, 1996 and Twelve Months Ended January 31, 1996
------------------------------------------------------------------------------

   The Company reported net sales of $42,593,000 for the eleven months ended
December 31, 1996, compared to $74,953,000 for the twelve months ended January
31, 1996.  Following is a comparison of sales by major product category:

<TABLE>
<CAPTION>
                                       Eleven Months Ended        Year Ended
                                        December 31, 1996      January 31, 1996
                                       -------------------     ----------------
        <S>                            <C>                     <C>
        Trading Cards                     $13,374,000             $32,887,000
        Memorabilia                        18,710,000              28,037,000
        Prepaid Calling Cards               8,190,000               9,906,000
        Other                               2,319,000               4,123,000
                                          -----------             -----------
                                          $42,593,000             $74,953,000
                                          ===========             ===========
</TABLE>

   Net sales decreased in each of the Company's major product categories.
Memorabilia sales were lower primarily due to the loss of a significant retail
account and a decline in sales of entertainment memorabilia. Trading card sales
decreased due to the Company's strategy of decreasing production quantities and
product offerings in response to the overall weakness in the trading card
industry and higher than anticipated returns. Sales of prepaid telephone calling
cards were down due to a decrease in demand for collectible calling cards,
which was partially offset by an increase in sales of utility-based calling
cards. Other sales were down due to reduced sales of non-autographed products,
such as pogs, which the Company no longer produces.

   The decrease in gross margins were due to several factors, including an
increase in reserves for obsolescence and player contracts in response to
reduced sales volume, an increase in the reserve for returns (primarily for
trading card products) and a decrease in sales of trading card products, which
traditionally sell at higher margins. In addition, margins were impacted by a
decrease in sales of collectible calling cards, which sell at higher margins,
and an increase in sales of utility-based calling cards, which sell at lower
margins.

   The Company experienced decreases in selling expenses primarily due to
decreases in variable selling expenses, such as commissions and royalties,
resulting from the reduced sales volumes. General and administrative expenses
decreased primarily due to cost control efforts by the Company.
 
   No income tax benefit was recorded by the Company.

Fiscal Years Ended January 31, 1996 and 1995
--------------------------------------------

   Fiscal 1996 was a year of transition, following a major restructuring in
fiscal 1995. Excluding realignment, restructuring and discontinuance of product
line costs and the securities litigation settlement, the Company reported sales
of $74,953,000 in fiscal 1996, compared to $72,799,000 in fiscal 1995, and a 
pre-tax loss of $354,000 in fiscal 1996, compared to $17,556,000 in fiscal 1995.

   Following is a comparison of sales by major product category and distribution
channels:

<TABLE>
<CAPTION>
                                           Fiscal 1996            Fiscal 1995
                                           -----------            -----------
<S>                                        <C>                    <C>
Classic(R) Draft Pick Cards                $19,183,000            $22,618,000
NFL Pro-Line Trading Cards                   9,592,000              7,731,000
Other Trading Cards                         14,018,000              8,493,000
Memorabilia                                 28,037,000             29,944,000
Other                                        4,123,000              4,013,000
                                           -----------            -----------
                                           $74,953,000            $72,799,000
                                           ===========            ===========
</TABLE>
                        [chart continued on next page]

                                       13
<PAGE>
 
<TABLE>
<CAPTION>
                                        Fiscal 1996             Fiscal 1995
                                        -----------             -----------
<S>                                     <C>                     <C>
Cable Television                        $16,235,000             $13,465,000
Retail                                   26,956,000              30,375,000
Hobby                                    25,611,000              21,748,000
Other                                     6,151,000               7,211,000
                                        -----------             -----------
                                        $74,953,000             $72,799,000
                                        ===========             ===========
</TABLE>

     The increase in net sales was primarily due to increases in the sale of NFL
Pro-Line trading cards and other trading cards. The increase in sales of NFL 
Pro-Line trading cards was primarily due to new product releases as well as
increased marketing efforts by the Company. The increase in sales of other
trading cards was primarily due to increased sales of trading card sets which
included prepaid telephone calling cards. Such increases were offset by
decreased sales of Classic Draft Pick trading cards, which declined due to a
reduction in production quantities in response to market conditions, and
decreased sales of memorabilia products, which declined due to the
discontinuation of several entertainment related product categories.

     The increase in gross profit margins, which has been a major focus of
management, is a result of the Company's development of new trading card
products and marketing strategies which have enabled the Company to increase its
selling prices. In addition, prior year's results reflect the disposition of
slow moving items at low margins, as well as additional reserves for product
returns and inventories.
 
     The Company experienced decreases in both selling and general
administrative expenses. Variable selling expenses such as royalties and
commissions were down substantially due to significantly lower sales volumes.
General and administrative expenses were lower primarily due to reductions in
payroll and related expenses. These items decreased due to the restructuring of
the Company which significantly reduced the number of employees required to
operate the business.

     On June 27, 1995, the Company reached an agreement for the full settlement
and dismissal of its shareholder litigation, and on November 6, 1995, the
settlement received final court approval. The settlement required the Company to
pay $3,000,000 in cash (paid by insurance) and $2,000,000 in the Company's
Common Stock (430,394 shares). Accordingly, in the quarter ended July 31, 1995,
the Company recorded a one-time, $2,000,000 pre-tax, noncash charge of
$2,000,000 to reflect the fair value of Common Stock on the settlement date. In
addition, the Company incurred legal and other fees of approximately $175,000
associated with the shareholder litigation.

     In fiscal 1996, the Company recorded pre-tax charges of $5,675,000 for the
costs associated with a strategic realignment program designed to reduce costs,
improve operating efficiencies and to concentrate the Company's efforts on its
core product lines. This realignment included the discontinuance of the hockey
draft pick trading card products, the write-down of certain license agreements,
elimination of small lot inventories and employee termination costs. In
addition, the charge also includes a $500,000 litigation reserve.

     No income tax benefit was recorded by the Company.

                                       14
<PAGE>

Seasonality
-----------

     Sales of the Company's trading card products are somewhat seasonal, with
sales peaks typically following the draft for the sport to which the product
relates. The Company has been working to reduce seasonality, to the extent
possible, by having more trading card issues in more limited quantities
throughout the year. Sales of sports-related memorabilia products tend to be
more constant, with sales peaks during holiday seasons and the then current
sport season. Sales of entertainment-related products tend to be less seasonal
and are planned, where possible, to counterbalance the seasonality of sport
trading card products.

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

     The Company generated $934,000 in cash flow from operations primarily due
to decreases in accounts receivable, inventories and prepaid expenses, partially
offset by a decrease in accounts payable. Accounts receivable decreased
primarily due to lower sales. Inventories decreased due to management's
concentrated effort to generate cash. Prepaid expenses and prepaid contracts
decreased due to a reduction in contract obligations. Accounts payable decreased
due to reduction in purchasing.

     On July 31, 1995, the Company obtained a three year revolving credit
facility from Congress Financial Corporation (the "Bank"). Borrowings under the
facility are available up to $12,000,000, subject to availability, based on
eligible inventory and accounts receivable, as defined. Interest is charged at
prime rate plus 2%. The facility is secured by essentially all of the Company's
assets. At April 14, 1997, the outstanding balance was $6,855,000, which was the
maximum credit available. At December 31, 1996, the Company was in violation of
certain loan covenants under the loan agreement with its bank. Effective March
31, 1997, the violations were waived and the covenants modified. The Company
expects to be in compliance with the revised covenants during 1997; however,
such compliance cannot be assured.

     On May 28, 1996, one of the holders of the Company's convertible
subordinated debentures exchanged $3,500,000 and $3,000,000 in principal amount
of the subordinated debentures, due September 1, 2002 and February 1, 2003,
respectively, for 912,000 shares of Common Stock. The early retirement of the
debentures resulted in a one-time extraordinary pre-tax gain of approximately
$954,000, or $0.07 per share.

     On November 4, 1996, Technology Leaders II L.P., Technology Leaders
Offshore II C.V. and others (collectively, the "Investors") led a $4 million
private equity placement in the Company. Pursuant to the private placement
agreement, the Company issued 1,600,000 shares of its Common Stock at $2.49 per
share and warrants to acquire 2,720,000 shares of Common Stock at $3.07 per
share to the Investors. Proceeds of the private placement were used for working
capital purposes.

     In December 1996, the Company and Frontier entered a five-year strategic
distribution agreement relating to the development and marketing of prepaid
calling cards for the domestic and international markets. Under the agreement,
Frontier has guaranteed certain monthly minimum payments to the Company which
total $10 million over the first three years of the agreement and would reach a
minimum of $20 million over the full five-year term. Either party may terminate
the relationship after the completion of years three or four, subject to payment
of a $2.5 million early termination fee. The Company issued Frontier warrants to
acquire 125,000 shares of its Common Stock (25,000

                                       15
<PAGE>
 
at $3.00 per share, 50,000 at $5.00 per share and 50,000 at $10.00 per share).

     The Company has incurred significant losses during each of the past three
fiscal years. During the eleven months ended December 31, 1996, total
stockholders equity decreased from $6,193,000 to a deficit of $1,292,000 and
working capital decreased from $13,033,000 to $315,000. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's continued existence is dependent upon its ability to attain
satisfactory levels of future cash flows from profitable operations, to obtain
concessions from its debt holders and the ability to meet the new covenant
requirements of the Bank.

     At December 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $35,000,000 for which no benefit has been
reflected in the consolidated financial statements. These carryforwards, in
addition to other fully reserved deferred tax assets, may offset future taxable
income.

Recent FASB Pronouncements
--------------------------

     The Financial Accounting Standards Board issued two Standards in fiscal
1996 which would apply to the Company. SFAS No. 121 is effective for the current
year and requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Implementation of
this Standard did not have a material impact on the Company's financial position
or results of operations. SFAS No. 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. In the current
year the Company adopted the disclosure requirements of this statement.

Inflation
---------

     In recent years, the Company has not experienced any material adverse
effects due to inflation.

Item 8. Financial Statements and Supplemental Data
--------------------------------------------------

     All financial information required by this Item is attached to this Report
beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
     Financial Disclosure
     --------------------

     On November 8, 1995, the Company dismissed BDO Seidman, LLP ("BDO") as the
Company's independent public accountants and auditors, a capacity in which that
firm had served for several years, and selected Arthur Andersen LLP ("Arthur
Andersen") to replace BDO in this role. The decision to change the Company's
accountants and auditors was approved by the Company's full Board of Directors.

     During the fiscal years 1994 and 1995 and the subsequent period through
November 8, 1995, the date on which BDO was dismissed as the Company's
independent public accountants and auditors, there were no disagreements between
the Company and BDO on any matter relating to accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to BDO's satisfaction, would have caused
them to make reference in connection with their reports to the subject matter of
the disagreement. In addition, BDO's reports on the Company's financial
statements for fiscal years 1994 and 1995 contained no adverse opinions or
disclaimers of opinion, nor were such reports qualified as to uncertainty, audit
scope or accounting principles.

     The Company authorized BDO to respond fully to the inquiries of Arthur
Andersen. The Company also provided BDO with a copy of the disclosures contained
in the Form 8-K filed with the Securities and Exchange Commission on November
15, 1995 in connection with BDO's dismissal, and BDO furnished the Company with
a letter addressed to the Securities and Exchange Commission stating that it
agreed with the statements made by the Company therein.

     On November 10, 1995, the Company appointed the accounting firm of Arthur
Andersen as the Company's independent public accounts and auditors.

                                       16
<PAGE>
 
                                   PART III
                                   --------

Item 10. Directors and Executive Officers of the Company
--------------------------------------------------------

     The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
 
Name                              Age           Position
--------                          ---           ----------------                
<S>                               <C>           <C>
Kenneth Goldin                     31           Chairman of the Board and
                                                Chief Executive Officer     
John F. White                      50           President and Chief
                                                Operating Officer   
Michael D. Hoppman                 35           Chief Financial Officer,
                                                Vice President - Finance and 
                                                Treasurer
Patrick J. Wujcik                  34           Vice President - Administration,
                                                Secretary and General Counsel
James G. Dole                      38           Director
Ira M. Lubert                      46           Director
Allan R. Lyons                     56           Director
Gerald B. Shreiber                 55           Director
Richard C. Yancey                  70           Director
</TABLE>

   Kenneth Goldin has been employed by the Company in various capacities since
1987 and has been a Director since July 1989. Mr. Goldin has served as Chairman
of the Board and Chief Executive officer since May 1994. He served as President
from May 1994 to January 1997 and as Executive Vice President from July 1989 to
May 1994.
 
   John F. White has served as the Company's President and Chief Operating
Officer since February 1997. From 1994 to January 1997, Mr. White served as
Chairman, President and Chief Executive Officer at The Outsourcing Partnership,
L.L.C., a firm specializing in the outsourcing of internal auditing, due
diligence, information technology and human resources. Prior to 1994, Mr. White
was a partner at Coopers & Lybrand LLP, where he was responsible for the firm's
financial services division and served clients in the wholesale, retail and
distribution industries.

   Michael D. Hoppman has been employed by the Company in various capacities
since March 1990. Mr. Hoppman has served as Chief Financial Officer since March
1996 and Vice President of Finance since April 1994. Prior to joining the
Company, Mr. Hoppman was an accountant with Ernst and Young from 1984 to 1990,
holding various positions, including audit manager from 1988 to 1990.

   Patrick J. Wujcik has been employed in the Company's legal department since
February 1994. Mr. Wujcik has served as General Counsel since June 1995, as
corporate secretary since March 1995, and as Vice President of Administration
since March 1996. From May 1992 through February 1994, Mr. Wujcik was an
associate in the corporate department of Pepper, Hamilton & Scheetz, a law firm
based in Philadelphia, PA. He was an associate at the law firm of Braemer
Abelson & Hitchner prior thereto.

   James G. Dole was first elected as director in February 1997. He is Vice
President for long distance business development for Frontier Corporation, a
telecommunications services provider. He has been employed in various capacities
by Frontier Corporation since 1986. His nomination to the Board of Directors is
pursuant to an agreement between the Company and Frontier Communications
International, Inc. See Item 1. "Business - Recent Developments" and Item 13.
"Certain Relationships and Related Transactions."

   Ira M. Lubert was first elected a director in November, 1996. See Item 1.
"Business - Recent Developments" 

                                       17
<PAGE>
 
and Item 13. "Certain Relationships and Related Transactions." Since 1991, he
has been a managing director of Technology Leaders Management L.P., a venture
capital management company which is affiliated with Safeguard Scientifics, Inc.
This Company manages Technology Leaders II L.P. and Technology Leaders II
Offshore C.V. See Item 12. "Security Ownership of Certain Beneficial Owners and
Management." Mr. Lubert also serves as a director of National Media Corporation,
CompuCom Systems, Inc., and Sanchez Computer Associates, Inc.

   Allan R. Lyons has served as a director since June 1990. Since November 1993,
Mr. Lyons has been the Chairman of the Board and Chief Executive Officer of
Piaker & Lyons, P.C., Certified Public Accountants, and he served as Executive
Vice President prior thereto. Mr. Lyons also serves as a director of Franklin
Credit Management Corporation.
 
   Gerald B. Shreiber has served as a director since December 1994. Mr. Shreiber
is the founder of J & J Snack Foods Corp. and has served as its Chairman of the
Board, President and Chief Executive Officer since its inception in 1971.

   Richard C. Yancey has served as a director since November 1992. Mr. Yancey
had been an investment banker with Dillon, Read & Co. Inc. from 1952 through
1992, holding various positions, including managing director from 1975 to 1990,
director from 1990 to 1991, and senior advisor from 1991 through 1992. In
addition, Mr. Yancey currently serves as a director of CapMac Holdings, Inc. and
eight mutual fund companies of The Composite Group.

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

   The following table sets forth certain summary information concerning the
compensation paid to the Company's Chief Executive Officer and other highly
compensated executive officers whose total annual salary and bonus were in
excess of $100,000 (collectively, the "Named Executive Officers") for services
rendered in all capacities to the Company and its subsidiaries for the period
ended December 31, 1996 and years ended January 31, 1996 and January 31, 1995:

<TABLE>
<CAPTION>
                          Summary Compensation Table
                          --------------------------

                                                    Long-Term
                                                    Compensation
                 Annual Compensation                Awards
--------------------------------------------------------------------------------
 
Name &                                             Securities    All Other
Principal              Period     Salary   Bonus   Underlying    Compensation
Position              Ended (1)    ($)      ($)    Options (#)   ($) (2)
---------             --------   -------   -----   ------------  ------------
<S>                   <C>        <C>       <C>     <C>           <C>

Kenneth Goldin        12/31/96   324,857       0       176,000         33,450
C.E.O.                01/31/96   362,407       0        70,000         67,003
                      01/31/95   375,822       0       150,000         39,499
 
Barry Bookman         12/31/96   122,917       0        75,000              0
 C.O.O.(3)
 
Michael D. Hoppman    12/31/96   103,347       0        15,000          8,861
V.P. - Finance        01/31/96   104,429       0        10,000         10,314
                      01/31/95   103,608       0        10,000          8,983
-------------
</TABLE>
                       [see footnotes on following page]

                                       18
<PAGE>
 
(1)  Compensation and awards for the period ended December 31, 1996 reflect an
     eleven month period commencing February 1, 1996 and ending December 31,
     1996. Compensation and awards for the prior years reflect a twelve month
     fiscal year commencing February 1st and ending January 31st.
(2)  Includes: (a) Company contributions under its profit sharing plan for
     certain of the Named Executive Officers (Messrs. Goldin $8,346 and Hoppman
     $4,461); (b) Company payments of certain life insurance premiums (Mr.
     Goldin $10,884); and (c) car allowances for certain of the Named Executive
     Officers (Messrs. Goldin $14,220 and Hoppman $4,400).
(3)  As of January 1997, Mr. Bookman was no longer an officer or employee of the
     Company. See Item 11. "Executive Compensation - Employment Agreements,
     Compensatory Arrangements." 


      No individual named above received perquisites or non-cash compensation
exceeding the lesser of $50,000 or an amount equal to 10% of such person's
salary and bonus during the period ended December 31, 1996 or years ended
January 31, 1996 or January 31, 1995.

      The following table sets forth information concerning individual grants of
stock options made during the period ended December 31, 1996 to each of the
Named Executive Officers:

<TABLE> 
<CAPTION> 
                                    Option Grants in Period Ended December 31, 1996
                                    -----------------------------------------------
                                                                                Potential Realizable
                                                                                Value at Assumed
                                                                                Annual Rates of
                                                                                Stock Price Appreciation
                   Individual Grants                                            for Option Term
-------------------------------------------------                               ------------------------
                         Number of
                         Securities      % of
                         Underlying      Total Options  Exercise
                         Options         Granted to     or Base
                         Granted         Employees in   Price       Expiration                   
    Name                 (#)(1)          Fiscal Year    ($/Sh)      Date            5%($)(2)        10%($)(2)
    ----               ----------        -----------    -------     ----------      --------        --------
<S>                    <C>               <C>            <C>         <C>             <C>             <C>
Kenneth Goldin          26,000(3)           7.0%        $3.63       3/11/01         $120,455        $152,000
Kenneth Goldin         100,000(3)          26.0%        $1.82       8/29/01         $232,283        $293,113
Kenneth Goldin          50,000(3)          13.0%        $3.00       10/2/01         $191,442        $241,577
Barry Bookman           45,000(4)          12.0%        $4.88        5/1/97         $230,868        $242,164
Barry Bookman           30,000(4)           8.0%        $1.82        5/1/97         $ 56,429        $58,258
Michael Hoppman         15,000(5)           4.0%        $2.50       8/21/01         $ 47,861        $60,394
----------------
</TABLE>
 
(1)  The options granted to Messrs. Goldin, Bookman and  Hoppman were granted
     under the Company's 1992 Stock Incentive Plan, with exercise prices equal
     to the fair market value on the date of grant and a term of five years.

(2)  The five percent and ten percent assumed rates of appreciation are mandated
     by the rules of the Securities and Exchange Commission and do not represent
     the Company's estimate or projection of future stock price or performance.

(3)  The option to purchase 26,000 shares is currently exercisable.  One-third
     of the option to purchase 100,000 shares will become exercisable on August
     30, 1997, 1998 and 1999, respectively.   One-third of the option to
     purchase 50,000 will become exercisable on October 3, 1997, 1998 and 1999,
     respectively, if certain conditions are met.  Effective November 5, 1996,
     the following options previously granted to Mr. Goldin were cancelled: (i)
     option to purchase 20,000 shares of Common Stock at an exercise price of
     $9.13 per share; (ii) option to purchase 41,250 shares of Common Stock at
     an exercise price of $8.38 per share; and (iii) option to purchase 25,000
     shares of Common Stock at an exercise price of $5.00 per share.

                                       19
<PAGE>
 
(4)  Mr. Bookman's employment was terminated in January 1997. The option to
     purchase 45,000 shares became exercisable with respect to 10,000 shares
     upon Mr. Bookman's termination; the remainder was cancelled.  The option to
     purchase 30,000 shares will not become exercisable before its expiration
     date.

(5)  One-third of the option will become exercisable on April 22, 1997, 1998 and
     1999, respectively.

    The following table sets forth information concerning exercise of stock
options during the period ended December 31, 1996 by each of the Named Executive
Officers and the value of unexercised options held by each of them as of
December 31, 1996:

         Aggregated Option Exercises in Period Ended December 31, 1996
         -------------------------------------------------------------
                          and Period End Option Values
                          ----------------------------
<TABLE>
<CAPTION>
 
                                                                               Value of
                                                         Number of             Unexercised
                                                         Unexercised           In-the-Money
                                                         Options at            Options at
                                                         12/31/96 (#)          12/31/96($)
 
                      Shares Acquired   Value Realized   Exercisable/          Exercisable/
Name                  on Exercise (#)        ($)         Unexercisable         Unexercisable (1)
----                  ---------------   --------------   ---------------       -----------------
<S>                   <C>               <C>              <C>                   <C> 
Kenneth Goldin              0                  0         249,750/185,000       $0/$12,000
Barry Bookman               0                  0         0/75,000              $0/$3,600
Michael D. Hoppman          0                  0         31,333/21,667         $0/$0
</TABLE>

--------------
(1) This amount represents the market value of the underlying securities
    relating to "in-the-money" options at January 31, 1996 minus the exercise
    price of such options.

    Employment Agreements, Compensatory Arrangements
    ------------------------------------------------

      Effective November 1, 1996, the Company entered into a new employment
    agreement with Kenneth Goldin which provides for his employment until
    October 31, 1998. Under this agreement, Mr. Goldin was to receive an annual
    base salary of $375,000 and various benefits, including life and health
    insurance. However, Mr. Goldin has agreed to amend the agreement to provide
    for a reduced base salary of $250,000. In addition, the agreement provides
    for an annual bonus commencing with the end of 1998 based upon the
    achievement of certain milestones as determined by the officers of the
    Company and approved by the Board of Directors. The Board of Directors will
    also determine Mr. Goldin's eligibility for special bonuses based on share
    price targets set prior to December 31, 1996 and December 31, 1997.

      On April 22, 1996, the Company entered into a two-year employment
    agreement with Barry Bookman, pursuant to which Mr. Bookman was to receive
    an annual salary of $200,000. As of January 1997, the employment agreement
    was terminated and Mr. Bookman is no longer an officer or employee of the
    Company. The option to purchase 45,000 shares was cancelled with respect to
    35,000 shares and will expire on May 1, 1997 with respect to the remaining
    10,000 shares.

    Director Compensation
    ---------------------

      The members of the Company's Compensation Committee for the year ended
    December 31, 1996 were Allan R. Lyons, Fred A. Shabel, Gerald B. Shreiber
    and Richard C. Yancey. Messrs. Lyons, Shreiber and Yancey, each an outside
    director, were paid $2,000 for attending audit committee meetings during
    1996.

      Under the Company's 1992 Directors Stock Option Plan (the "Directors
    Plan"), each outside director receives an option to purchase 30,000 shares
    of Common Stock when he first becomes a director. Each September 1st
    thereafter, each outside director receives an option to purchase 15,000
    shares of Common Stock at fair market

                                       20
<PAGE>
 
value and an option to purchase 15,000 shares of Common Stock at 120% of fair
market value. The options all expire upon the earlier of ten years from the date
of grant or three months from the date the recipient ceases to be a director. At
September 1, 1996, no shares were available for grant under the Directors Plan.
On January 28, 1997, the shareholders approved an amendment to the Directors
Plan increasing the number of shares issuable from 400,000 to 800,000. The
options that would have been issued to Messrs. Dole and Lubert upon their
election to the Board, and to Messrs. Lyons, Shabel, Shreiber and Yancey on
September 1, 1996, were issued after the amendment to the plan.

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

     The following table sets forth, as of March 31, 1997, information
concerning beneficial ownership of shares of the Company's Common Stock with
respect to (i) each person known to the Company to own 5% or more of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the Named Executive Officers and (iv) all directors and officers of the
Company as a group.
<TABLE>
<CAPTION>
 
                                                        Shares
Name and Address                                        Beneficially    Percent of
of Beneficial Owner                                     Owned (1)       Class    
------------------------                                -------------   ---------- 
<S>                                                     <C>             <C>
Directors and Named Executive Officers*
 
Kenneth Goldin......................................    1,076,650(2)       7.3%    
Barry Bookman.......................................       15,000(3)               
Michael D. Hoppman..................................       40,196(4)        **     
James G. Dole.......................................       30,000(5)        **     
Ira M. Lubert.......................................      257,500(6)       1.8%    
Allan R. Lyons......................................      231,500(7)       1.6%    
Gerald B. Shreiber..................................       90,000(8)        **     
Richard C. Yancey...................................      190,000(9)       1.3%    
                                                                                   
Five Percent Shareholders                                                          
Carole Goldin*......................................    1,274,500(10)      8.7%    
McCullough Andrews & Cappeillo, Inc.***                                            
  101 California Street, Suite 4250                                                
  San Francisco, CA  94111..........................    1,259,150          8.6%    
T. Rowe Price Associates, Inc.***                                                  
  100 East Pratt Street                                                            
  Baltimore, Maryland  21202........................      700,000          5.0%    
Technology Leaders II Offshore C.V. ("TLO II")                                     
  8000 The Safeguard Building                                                      
  435 Dover Park Drive                                                             
  Wayne, PA.  19087.................................    1,487,472(11)     10.1%    
Technology Leaders II L.P. ("TL II")                                               
  8000 The Safeguard Building                                                      
  435 Dover Park Drive                                                             
  Wayne, PA  19087..................................    1,872,528(12)     12.7%    
Technology Leaders II Management L.P.                                              
   8000 The Safeguard Building                                                     
   435 Dover Park Drive                                                            
   Wayne, PA  19087.................................    3,360,000(13)     22.9%    
                                                                                   
All Directors and Officers as a Group (12 persons)..    1,946,641(14)     13.2%    

---------------
</TABLE>


                       [see footnotes on following page]

                                       21
<PAGE>
 
*   The address for each such person is c/o The Score Board, Inc., 1951 Old
    Cuthbert Road, Cherry Hill, New Jersey 08034.
**  Less than one percent.
*** Reflects information set forth on Forms 13F and 13G filed by the holder with
    the Securities and Exchange Commission.

(1) The securities "beneficially owned" by a person are determined in accordance
    with the definition of "beneficial ownership" set forth in the regulations
    of the Securities and Exchange Commission and, accordingly, may include
    securities owned by or for, among others, the spouse, children or certain
    other relatives of such person as well as other securities as to which the
    person has or shares voting or investment power or has the right to acquire
    within sixty days after March 31, 1997. The same shares may be beneficially
    owned by more than one person. Beneficial ownership may be disclaimed as to
    certain of the securities. Shares beneficially owned by Messrs. Dole,
    Lubert, Lyons, Shreiber and Yancey include 30,000 shares of Common Stock
    issuable upon exercise of stock options issued subsequent to the amendment
    of the Directors Plan. See Item 11. "Executive Compensation- Director
    Compensation."

(2) Includes 249,750 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(3) Includes 10,000 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(4) Includes 34,666 shares of Common Stock issuable upon exercise of currently
    exercisable stock options and 5,000 shares of Common Stock under an option
    exercisable within sixty days from the date of this Form 10-K.

(5) Includes 30,000 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(6) Includes 30,000 shares of common stock issuable upon exercise of currently
    exercisable stock options. Mr. Lubert is one of the general partners of
    Technology Leaders II Management L.P. (see note 13).

(7) Includes 150,000 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(8) Includes 90,000 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(9) Includes 150,000 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(10)Includes 96,000 shares of Common Stock issuable upon exercise of currently
    exercisable stock options.

(11)Includes 956,230 shares of Common Stock issuable upon exercise of currently
    exercisable warrants to purchase Common Stock.

(12)Includes 1,203,758 shares of Common Stock issuable upon exercise of
    currently exercisable warrants to purchase Common Stock.

(13)Includes 2,159,988 shares of Common Stock issuable upon exercise of
    currently exercisable warrants to purchase Common Stock. Technology Leaders
    II Management L.P. ("TLM II") is the sole general partner of TL II and co-
    general partner of TLO II. TL II and TLO II are venture capital funds which
    are required by their governing documents to make all investment, voting and
    disposition actions in tandem. TLM II has sole authority and responsibility
    for all investment, voting and disposition decisions for TL II and TLO II,
    which powers are exercised through its eleven-person executive committee, by
    whose decisions the general partner has agreed to be bound. As a result of
    TLM II's investment control over all of the Company's Common Stock held by
    TL II and TLO II, TLM II may be deemed to beneficially own all of the shares
    beneficially owned by TL II and TLO II. TLM II disclaims beneficial
    ownership of all such shares except to the extent of its proportionate
    pecuniary interest therein.

(14)Includes 763,166 shares of Common Stock issuable upon exercise of stock
    options.

                                       22
<PAGE>
 
Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

   In June 1994, the Company received proceeds of approximately $2,000,000 from
a key man life insurance policy on the life of Paul Goldin, the Company's former
Chairman of the Board, Chief Executive Officer and President. In accordance with
Mr. Goldin's employment agreement, the Company is required to pay approximately
$900,000 to Mr. Goldin's estate. During 1996, $220,000 was paid, and the amount
payable to Mr. Goldin's estate as of December 31, 1996 was $248,000.

   On November 6, 1996, the Company issued 1,600,000 shares of its Common Stock
at $2.49 per share and warrants to acquire 2,720,000 shares of its Common Stock
at $3.07 per share to purchasers led by TL II and TLO II. Pursuant to the
securities purchase agreement, TL II and TLO II have the right to name a
director of the Company and have designated Ira M. Lubert as their nominee.

   In December 1996, the Company entered into a five-year strategic distribution
agreement with Frontier relating to the development and marketing of prepaid
phone cards for the domestic and international markets. As part of that
transaction, Frontier was issued 125,000 warrants to purchase the Company's
stock at prices ranging from $3.00 to $10.00 per share. Also, the Company agreed
to nominate a representative of Frontier to the Company's Board of Directors.
James G. Dole was selected by Frontier for this position.

                                       23
<PAGE>
 
                                    PART IV
                                    -------

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

(a)(1)  The following financial statements are filed as part of this Report:

               (i)     Reports of Independent Public Accountants;
               (ii)    Consolidated Balance Sheets as of December 31, 1996 and
                       January 31, 1996;
               (iii)   Consolidated Statements of Operations for the eleven
                       months ended December 31, 1996 and years ended 
                       January 31, 1996 and January 31, 1995;
               (iv)    Consolidated Statements of Stockholders' Equity for the
                       period from January 31, 1995 to December 31, 1996; and
               (v)     Consolidated Statements of Cash Flow for the eleven
                       months ended December 31, 1996 and years ended January
                       31, 1996 and January 31, 1995.

        (2)    The following financial statement schedule is filed as part of
               this report:

               Schedule II. Valuation and Qualifying Accounts
 
        All other schedules are omitted, as the required information is either
inapplicable or presented in the financial statements or related notes.

        (3)    The following Exhibits are filed as part of this Report.

        3.1    Certificate of Incorporation, including certain amendments
               thereto (1)

        3.2    Amendment to Certificate of Incorporation, filed on January 14,
               1991 (2)

        3.3    Amendment to Certificate of Incorporation, filed on October 26,
               1993 (10)

        3.4    By-Laws (10)

        3.5    Amendment to By-Laws, dated June 21, 1990 (3)

        10.1   Employment Agreement with Kenneth Goldin* (10)

        10.2   401(k) Plan* (2)

        10.3   Lease Agreement with Woodlands Joint Venture for office and
               warehouse space at Troon Circle, Austell, Georgia (5), and
               amendment thereto, dated June 30, 1992 (8)

        10.4   Lease Agreement with Woodlands Joint Venture for warehouse space
               at Troon Circle, Austell, Georgia (10)

        10.5   Lease Agreement with Cherry Hill Commerce Center for office and
               warehouse space at Cuthbert Road, Cherry Hill, New Jersey (4)

        10.6   Lease Agreement with Cherry Hill Commerce Center for office and
               warehouse space at Cuthbert Road, Cherry Hill, New Jersey (10)

                                       24
<PAGE>
 
        10.7   Lease Agreement with Cherry Hill Commerce Center for office and
               warehouse space at Cuthbert Road, Cherry Hill, New Jersey (10)

        10.8   Sales Representation Agreement with Howard Kay, dated August 31,
               1992 and amendments thereto, dated July 20, 1993 and November 4,
               1993 (10)

        10.9   Form of Indenture, dated September 1, 1992, between The Score
               Board, Inc. and Bank America Trust Company of New York, as
               Trustee (6)

        10.10  Form of 9% Convertible Subordinated Debenture (6)

        10.11  Loan and Security Agreement by and between Congress Financial
               Corporation and The Score Board, Inc. dated July 31, 1995 (12)

        10.12  The Score Board, Inc. 1992 Stock Incentive Plan* (7)

        10.13  The Score Board, Inc. 1992 Directors Stock Option Plan* (7)

        10.14  The Score Board, Inc. 1993 Non-Employee Stock Option Plan* (9)

        10.15  Merchandise License Agreement between Paramount Pictures and The
               Score Board, Inc., dated June 25, 1991, and Amendments thereto
               dated October 30, 1991, June 1, 1992, August 13, 1992, August 1,
               1993, September 15, 1993 (10) and November 10, 1994 (11) re: Star
               Trek memorabilia.

        10.16  License Agreement No. ML-2483D with Major League Baseball
               Properties, Inc. re: autographed and unautographed memorabilia,
               dated May 16, 1994 (11)**

        10.17  License Agreement with Major League Baseball Players Association
               re: autographed and unautographed memorabilia, dated May 16, 1994
               (11)**

        10.18  Securities Purchase Agreement, dated November 5, 1996, by and
               among The Score Board, Inc. and certain investors (13)

        21.1   Subsidiaries (13)

        23.1   Consent of Arthur Andersen (13)

        27.    Financial Data Schedule (13)

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

                                       25
<PAGE>
 
*   Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Annual Report on Form 10-K.
**  Confidential Treatment was requested for portions of this document.

(1)   Reference is made to the Company's report on Form 10-K for the year ended
      January 31, 1989, as filed on May 1, 1989, which is hereby incorporated by
      reference.

(2)   Reference is made to the Company's Form S-8 Registration Statement, as
      filed on February 5, 1991, which is hereby incorporated by reference.

(3)   Reference is made to the Company's Form S-1 Registration Statement (File
      No. 33-36741) as filed on September 10, 1990, which is hereby incorporated
      by reference.

(4)   Reference is made to the Company's report on Form 10-K for the year ended
      January 31, 1991, as filed on May 1, 1991, which is hereby incorporated by
      reference.

(5)   Reference is hereby made to the Company's report on Form 10-K, for the
      year ended January 31, 1992, as filed on April 1, 1992, which is hereby
      incorporated by reference.

(6)   Reference is hereby made to the Company's report on Form 8-K, as filed on
      August 13, 1992, which is hereby incorporated by reference.

(7)   Reference is made to the Company's report on Form 10-Q, for the quarter
      ended October 31, 1992, as filed on December 15, 1992, which is hereby
      incorporated by reference.

(8)   Reference is hereby made to the Company's report on Form 10-K for the year
      ended January 31, 1993, as filed on May 3, 1993, which is hereby
      incorporated by reference.

(9)   Reference is hereby made to the Company's Form S-3 Registration Statement,
      as filed on September 2, 1993, which is hereby incorporated by reference.

(10)  Reference is hereby made to the Company's report on Form 10-K, for the
      fiscal year ended January 31, 1994, as filed on May 2, 1994 which is
      hereby incorporated by reference.

(11)  Reference is hereby made to the Company's report on Form 10-K/A-1, as
      filed on May 31, 1995, which is hereby incorporated by reference.

(12)  Reference is hereby made to the Company's report on Form 8-K, as filed on
      August 25, 1995, which is hereby incorporated by reference.

(13)  Filed herewith.

(b) Reports on Form 8-K during the fourth quarter of the period covered by this
Report: On December 19, 1996, the Company filed a report on Form 8-K reporting
upon Item 8.

                                       26
<PAGE>
 
                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                    --------------------------------------

                        REPORT ON FINANCIAL STATEMENTS

                   ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND

                     YEARS ENDED JANUARY 31, 1996 AND 1995

                                        
                                        


                                      27
<PAGE>
 
                     THE SCORE BOARD, INC AND SUBSIDIARIES
                     -------------------------------------

                       CONSOLIDATED FINANCIAL STATEMENTS
                       ---------------------------------

                   ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
                   -----------------------------------------

                     YEARS ENDED JANUARY 31, 1996 AND 1995
                     -------------------------------------



                                     INDEX
                                     -----



REPORTS OF THE INDEPENDENT PUBLIC ACCOUNTANTS                          F-1

CONSOLIDATED BALANCE SHEETS                                            F-3

CONSOLIDATED STATEMENTS OF OPERATIONS                                  F-4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)              F-5

CONSOLIDATED STATEMENTS OF CASH FLOW                                   F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                             F-8




                                      28
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To The Score Board, Inc.:

We have audited the accompanying consolidated balance sheets of The Score Board,
Inc. and subsidiaries as of December 31, 1996 and January 31, 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the eleven months ended December 31, 1996 and the year ended
January 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Score Board, Inc. and
subsidiaries as of December 31, 1996 and January 31, 1996, and the results of
their operations and their cash flows for the eleven months ended December 31,
1996 and for the year ended January 31, 1996, in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 2 to the
financial statements, the Company (i) has suffered recurring losses from
operations, (ii) has a stockholders' deficit of $1,292,000 at December 31, 1996,
(iii) has experienced and continues to experience limitations on its ability to
borrow, and (iv) is subject to certain litigation and other contingencies.
These matters raise substantial doubt about the Company's ability to continue as
a going concern.  Management's plans in regard to these matters are also
described in Note 2.  The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.


                                    Arthur Andersen LLP
Philadelphia, Pa.,
April 10, 1997



                                      F-1
<PAGE>
 
              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Stockholder and Directors
The Score Board, Inc.

We have audited the consolidated statements of operations, stockholders' equity
and cash flows of The Score Board, Inc. for the period ended January 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Score Board,
Inc. as of January 31, 1995 and the results of its operations and cash flows for
the period ended January 31, 1995 in conformity with generally accepted
accounting principles.

                                    BDO SEIDMAN

Philadelphia, Pa.,
April 12, 1995



                                      F-2
<PAGE>


                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


<TABLE> 
<CAPTION> 

                                           ASSETS

                                                                         DECEMBER 31,      JANUARY 31,
                                                                            1996             1996
                                                                       -------------    -------------
<S>                                                                    <C>              <C> 
CURRENT ASSETS:
  Cash                                                                 $     470,000    $     142,000
  Accounts receivable, net of reserve for returns and doubtful
    accounts of $3,200,000 and $1,925,000                                  6,157,000       14,895,000
  Inventories                                                             10,250,000       16,449,000
  Prepaid expenses and other                                                 741,000        2,784,000
  Prepaid contracts                                                          269,000        1,674,000
  Income tax receivable                                                     --                514,000
                                                                       -------------    -------------

     Total current assets                                                 17,887,000       36,458,000

  FIXED ASSETS,  net                                                       1,578,000        1,616,000
  INTANGIBLE AND OTHER ASSETS,  net                                          815,000        2,044,000
                                                                       -------------    -------------
                                                                       $  20,280,000    $  40,118,000
                                                                       =============    =============

                           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Bank indebtedness                                                    $   6,743,000    $   9,884,000
  Accounts payable                                                         6,749,000        9,122,000
  Accrued liabilities                                                      4,080,000        4,419,000
                                                                       -------------    -------------

     Total current liabilities                                            17,572,000       23,425,000
                                                                       -------------    -------------

SUBORDINATED DEBENTURES                                                    4,000,000       10,500,000
                                                                       -------------    -------------

COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)

STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred stock - $.01 par value, authorized
    10,000,000 shares; none issued                                          --               --
  Common stock - $.01 par value, authorized
    30,000,000 shares; issued 14,689,142 shares at
    December 31, 1996 and 11,822,642 at January 31, 1996                     147,000          118,000
  Additional paid-in capital                                              29,427,000       19,505,000
  Accumulated deficit                                                    (30,866,000)     (13,430,000)
                                                                       -------------    -------------

     Total stockholders' equity (deficit)                                 (1,292,000)       6,193,000
                                                                       -------------    -------------

                                                                       $  20,280,000    $  40,118,000
                                                                       =============    =============
</TABLE> 


       The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>

                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE> 
<CAPTION> 

                                                    ELEVEN 
                                                 MONTHS ENDED
                                                 DECEMBER 31,             YEAR ENDED JANUARY 31,
                                                                          ----------------------
                                                     1996                 1996              1995
                                                 --------------      -------------     --------------
<S>                                              <C>                 <C>               <C> 
NET SALES                                        $  42,593,000       $ 74,953,000      $  72,799,000
                                                                
COST OF GOODS SOLD                                  39,201,000         45,211,000         57,885,000
                                                 --------------      -------------     --------------

GROSS PROFIT                                         3,392,000         29,742,000         14,914,000
                                                 --------------      -------------     --------------
SELLING, GENERAL AND ADMINISTRATIVE                             
  EXPENSES                                          20,444,000         28,126,000         30,082,000
                                                                
REALIGNMENT, RESTRUCTURING AND DISCONTINUANCE                   
 OF PRODUCT LINES                                    --                 5,675,000         23,800,000
                                                                
SECURITIES LITIGATION SETTLEMENT                     --                 2,175,000            --
                                                                
NET PROCEEDS FROM INSURANCE                          --                   --              (1,100,000)
                                                 --------------      -------------     --------------
                                                                
NET LOSS FROM OPERATIONS                           (17,052,000)        (6,234,000)       (37,868,000)
                                                                
INTEREST EXPENSE                                     1,338,000          1,970,000          2,388,000
                                                 --------------      -------------     --------------
NET LOSS BEFORE INCOME TAXES                                    
 AND EXTRAORDINARY GAIN                            (18,390,000)        (8,204,000)       (40,256,000)
                                                                
INCOME TAX BENEFIT                                   --                   --              (6,440,000)
                                                 --------------      -------------     --------------
                                                                
NET LOSS BEFORE EXTRAORDINARY GAIN                 (18,390,000)        (8,204,000)       (33,816,000)
                                                                
EXTRAORDINARY GAIN RESULTING                                    
 FROM EARLY EXTINGUISHMENT OF                                   
 DEBT                                                  954,000            --                 --
                                                 --------------      -------------     --------------

NET LOSS                                         $ (17,436,000)      $ (8,204,000)     $ (33,816,000)
                                                 ==============      =============     ==============
NET LOSS PER SHARE BEFORE                                       
 EXTRAORDINARY GAIN                              $       (1.42)      $      (0.71)     $       (3.01)
                                                 ==============      =============     ==============
                                                                                               
NET LOSS PER SHARE                               $       (1.35)      $      (0.71)     $       (3.01)
                                                 ==============      =============     ==============
                                                                
WEIGHTED AVERAGE SHARES                                         
 OUTSTANDING                                        12,919,000         11,558,000         11,243,000
                                                 ==============      =============     ==============
</TABLE> 



       The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>

                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF
                        STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE> 
<CAPTION> 
                                                     COMMON STOCK                 ADDITIONAL         RETAINED
                                            --------------------------------       PAID-IN           EARNINGS
                                                   SHARES           AMOUNT         CAPITAL           (DEFICIT)
                                            --------------------------------    --------------    --------------
<S>                                         <C>               <C>               <C>               <C> 
BALANCE, JANUARY 31, 1994                      11,205,748      $    112,000      $ 16,851,000      $ 28,590,000

Exercise of stock options                          44,000           --                168,000           --
Net loss                                          --                --              --              (33,816,000)
                                            --------------    --------------    --------------    --------------

BALANCE, JANUARY 31, 1995                      11,249,748           112,000        17,019,000        (5,226,000)

Exercise of stock options                         142,500             2,000           490,000           --
Issuance of shares in settlement of
  securities litigation                           430,394             4,000         1,996,000           --
Net loss                                          --                --              --               (8,204,000)
                                            --------------    --------------    --------------    --------------

BALANCE, JANUARY 31, 1996                      11,822,642           118,000        19,505,000       (13,430,000)  
                                                                                                                   
Exercise of stock options                         154,500             2,000           312,000           --         
Issuance of shares related                                                                                         
  to early extinguishment of                                                                                       
  debt                                            912,000             9,000         5,225,000           --         
Issuance of shares related to                                                                                      
  private placement                             1,600,000            16,000         3,833,000           --         
Options granted in lieu of compensation           --                    --            214,000           --      
Stock issued in lieu of compensation              200,000             2,000           338,000           --
Net loss                                          --                --                --            (17,436,000)
                                            --------------    --------------    --------------    --------------

BALANCE, DECEMBER 31, 1996                     14,689,142      $    147,000      $ 29,427,000      $(30,866,000)
                                            ==============    ==============    ==============    ==============
</TABLE> 


       The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>

                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE> 
<CAPTION> 
                                                                                  ELEVEN
                                                                               MONTHS ENDED
                                                                               DECEMBER 31,         YEAR ENDED JANUARY 31,
                                                                                                    ----------------------
                                                                                   1996              1996              1995
OPERATING ACTIVITIES:                                                          ------------      -------------     ------------- 
  <S>                                                                          <C>               <C>               <C> 
     Net loss                                                                  $(17,436,000)     $ (8,204,000)     $(33,816,000)
     Adjustments to reconcile net loss to
      net cash provided by (used in) operating activities:          
      Realignment,restructuring and discontinuance of product lines                 --              5,675,000        23,800,000
      Cash used in restructuring                                                   (405,000)       (1,425,000)       (4,514,000)
      Depreciation                                                                1,299,000         1,477,000         1,406,000
      Provision for doubtful accounts and returns                                 2,456,000         1,092,000         5,522,000
      Amortization of intangible assets                                             714,000           919,000           968,000
      Settlement of lawsuit                                                         --              2,000,000           --
      Gain on early extinguishment of debt                                         (954,000)          --                --
      Options granted in lieu of cash                                               214,000           --                --
      Stock issued in lieu of cash                                                  340,000           --                -- 
      Deferred taxes                                                                --                --              1,168,000
     Changes in operating assets and liabilities:                                            
      Accounts receivable                                                         6,282,000        (2,073,000)        7,967,000
      Inventories                                                                 6,199,000          (498,000)        2,209,000
      Prepaid expenses and contracts                                              3,438,000           943,000         1,594,000
      Other assets                                                                  132,000          (179,000)          (97,000)
      Accounts payable                                                           (2,373,000)       (2,339,000)        1,883,000
      Accrued liabilities                                                           514,000          (443,000)       (1,002,000)
      Income tax receivable                                                         514,000         7,660,000        (8,089,000)
                                                                               ------------      -------------     ------------
           Net cash provided by (used in)                                                    
            operating activities                                                    934,000         4,605,000        (1,001,000)
                                                                               ------------      -------------     ------------
INVESTING ACTIVITIES:                                                                        
     Purchases of fixed assets                                                   (1,261,000)         (152,000)         (367,000)
                                                                               ------------      -------------     ------------
</TABLE> 




       The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>

                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (CONTINUED)
<TABLE> 
<CAPTION> 
                                                                  ELEVEN
                                                               MONTHS ENDED
                                                               DECEMBER 31,         YEAR ENDED JANUARY 31,
                                                                                    ----------------------
                                                                   1996             1996              1995
                                                               ------------     -------------      ------------
<S>                                                            <C>                  <C>             <C> 
FINANCING ACTIVITIES:
 Net borrowings (repayments) of bank indebtedness               (3,141,000)       (4,212,000)       (1,934,000)
 Proceeds from the exercise of stock options                       314,000           492,000           168,000
 Net proceeds from private placement of equity                   3,849,000           --                --
 Payments of capital lease obligations                            (367,000)         (312,000)         (372,000)
 Deferred financing costs                                          --               (380,000)         (116,000)
                                                               ------------     -------------      ------------
    Net cash provided by (used in)                                                            
     financing activities                                          655,000        (4,412,000)       (2,254,000)
                                                               ------------     -------------      ------------

NET INCREASE (DECREASE) IN CASH                                    328,000            41,000        (3,622,000)
                                                                                              
CASH, BEGINNING OF PERIOD                                          142,000           101,000         3,723,000
                                                               ------------     -------------      ------------
                           
CASH, END OF PERIOD                                            $   470,000      $    142,000       $   101,000
                                                               ============     =============      ============
SUPPLEMENTARY DISCLOSURE OF                                                                   
 CASH FLOW INFORMATION:                                                                       
                                                                                              
 Cash paid for interest                                        $ 1,401,000      $  2,218,000       $ 2,369,000
                                                               ============     =============      ============
                                                                                              
 Cash (received) paid for income taxes                         $  (602,000)     $ (7,660,000)      $   481,000
                                                               ============     =============      ============
                                                                                              
 New capital leases                                            $   --           $    --            $   354,000
                                                               ============     =============      ============
</TABLE> 







        The accompanying notes are an integral part of these statments

                                      F-7
<PAGE>
 
                    THE SCORE BOARD, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BUSINESS DESCRIPTION AND SUMMARY OF ACCOUNTING POLICIES:

Business Description

The Company designs, manufactures, markets, and distributes sports trading cards
and sports and entertainment related memorabilia products in the United States.
The Company sells on credit to many of its customers which include television
shopping programs, large national retail chain stores, distributors, and hobby
stores.

Change in Reporting Period

In December 1996, the Company changed its fiscal year-end from January 31 to
December 31, making the fourth quarter ended December 31, 1996, a two month
period and the year ended December 31, 1996 an eleven-month period.

Principles of Consolidation

The consolidated financial statements include the accounts of The Score Board,
Inc. and its wholly-owned subsidiaries.  All significant intercompany accounts
and transactions have been eliminated.

Use of Estimates

The preparation of financial statements 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.

Financial Instruments

The carrying value of the Company's outstanding bank indebtedness is considered
to approximate fair value on December 31, 1996.  The fair value of the Company's
$4,000,000 convertible subordinated debentures is estimated at $800,000 based on
discussions with investment advisors.

Revenue Recognition

The Company recognizes revenue when merchandise is shipped to customers.
Allowances for estimated returns are provided when sales are recorded.

Inventories

Inventories are stated at the lower of cost or market.  Cost is determined on
the first-in, first-out method.

Prepaid Contracts

The Company has personal service contracts with athletes and entertainers which
provide for autograph services.  The contracts generally require the Company to
make up-front payments, which are recorded as prepaid contracts, and upon
receipt of the services the autograph cost is included in inventory.  Future
contract commitments generally require future autograph services and, therefore,
are not recorded as a liability until the services are performed.  The Company
continually evaluates whether events or circumstances have occurred that
indicate that prepaid contract balances or future contract payments will not be
recoverable.  When factors indicate that contract amounts may not be realizable,
the Company 


                                      F-8
<PAGE>
 
makes an estimate of the unrecoverable amounts and records such amounts in cost
of goods sold.

Fixed Assets and Depreciation

Fixed assets, which include assets leased under capital lease obligations, are
stated at cost.  Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets, which range from three to five years.

Intangible Assets

Intangible assets are amortized on a straight-line basis over the term of the
related agreements.  Goodwill is amortized over the expected period of benefit,
not to exceed five years.  Subsequent to its acquisitions, the Company
continually evaluates whether later events and circumstances have occurred that
indicate the remaining estimated useful lives may warrant revision or that the
remaining intangible asset balances may not be recoverable.  When factors
indicate that intangible assets should be evaluated for possible impairment, the
Company uses an estimate of the related undiscounted cash flow over the
remaining life in measuring whether intangible assets are recoverable.

Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109).  SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns.  Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.

Net Loss Per Share

Loss per share is based on the weighted average number of common shares and
common stock equivalents outstanding during the respective periods. Common stock
equivalents are not considered in the calculation of net loss per share since
they would be antidilutive.

New Accounting Pronouncements

          In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS No. 121), SFAS No. 121 established accounting standards for the impairment
of long-lived assets, certain identifiable intangibles and goodwill.  The
Company adopted SFAS No. 121 effective February 1, 1996.  The adoption did not
have an effect on the Company's financial condition or results of operations.

          In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS No. 123).  SFAS No. 123 established financial accounting and
reporting standards for stock-based employee compensation plans.  This statement
also applied to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees.  The Company has adopted the
disclosure requirement of this statement (see Note 10).

Reclassifications

Certain reclassifications have been made to the prior year financial statements
to conform to the current year presentation.


                                      F-9
<PAGE>
 
2.  GOING CONCERN

The Company has incurred significant operating losses during each of the past
three years, including a net loss of $17,436,000 for the eleven months ended
December 31, 1996.  In addition, stockholders equity has decreased from
$6,193,000 at January 31, 1996 to a deficit of $1,292,000 at December 31, 1996
and working capital has decreased from $13,033,000 at January 31, 1996 to
$315,000 at December 31, 1996. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.

As discussed in Note 8, at December 31, 1996, the Company was in violation of
certain loan covenants under the loan agreement with its bank.  Effective March
31, 1997, the violations were waived and the covenants modified.  The Company
expects to be in compliance with the revised covenants during 1997; however,
such compliance cannot be assured. Further, as discussed in Note 11, the Company
became aware of an incident that could be deemed to be in violation of certain
laws or in breach of certain contractual obligations.   There is no assurance
that this incident will not result in a material adverse effect on the Company.

The Company's continued existence is dependent upon its ability to attain
satisfactory levels of future cash flows from operations and its ability to meet
the new bank covenants.

The Company has started a plan to increase working capital by entering into a
strategic distribution agreement with a telecommunication services company for
the development and marketing of telephone calling cards.  In addition, the
Company is implementing various cost cutting measures.  The Company has also
added new directors to its Board and has hired a new President and Chief
Operating Officer.  Although the results of these actions cannot be predicted,
the Company believes these steps are appropriate and will help the Company
reorganize its operations.

The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

3.  REALIGNMENT, RESTRUCTURING AND PRODUCT LINE ADJUSTMENT COSTS

In fiscal 1996, the Company recorded pre-tax charges of $5,675,000 for the costs
associated with a strategic realignment program designed to reduce costs,
improve operating efficiencies and to concentrate the Company's efforts on its
core product lines.  This realignment included the discontinuance of the Hockey
Draft card products, the write-down of certain license agreements, elimination
of small lot inventories and employee termination costs.  In addition, the
charge also includes a $500,000 litigation reserve.  (See Note 11)

In fiscal 1995, the Company recorded pre-tax charges of $23,800,000 for the
costs associated with a major restructuring of the business, including the
closing of its Classic Games subsidiary, discontinuance of several product
lines, acceleration of inventory dispositions of those product lines through
alternate distribution channels and personnel reductions.  The costs associated
with these actions are summarized, as follows:
<TABLE>
<CAPTION>
                                   Year Ended January 31,
                                   -----------------------
                                      1996        1995
                                   ----------  -----------
<S>                                <C>         <C>
 
Closing of subsidiary              $  265,000  $ 7,100,000
Severance costs                       160,000    1,700,000
Discontinuance of Product Lines     4,750,000   15,000,000
Litigation                            500,000           --
                                   ----------  -----------
 
                                   $5,675,000  $23,800,000
                                   ==========  ===========
</TABLE>


                                     F-10
<PAGE>
 
At December 31, 1996 and January 31, 1996, approximately $446,000 and
$850,000, respectively, remains in accrued liabilities for costs
primarily associated with the closing of the subsidiary and severance.

4.  NET PROCEEDS FROM OFFICER'S LIFE INSURANCE

In May 1994, the Company's President and Chief Executive Officer passed away.
The Company received proceeds from the key man life insurance policy of
approximately $2,000,000 in June 1994.  In accordance with the officer's
employment agreement, the Company is required to pay approximately $900,000 to a
named beneficiary.  The liability outstanding at December 31, 1996 is $248,000,
which is due to a relative of the Company's current President and Chief
Executive Officer.
 
5.   INVENTORIES

<TABLE> 
<CAPTION> 



 
                                  December 31,   January 31,
                                     1996           1996
                                 -------------   ------------
<S>                              <C>             <C>  
Raw materials                    $  2,865,000     $ 1,940,000
Work-in-process                       579,000       1,616,000
Finished goods                     10,881,000      17,516,000
Valuation reserve                  (4,075,000)     (4,623,000)
                                 ------------     -----------
 
                                 $ 10,250,000     $16,449,000
                                 ============     ===========

</TABLE> 
 
6.  FIXED ASSETS

<TABLE> 
<CAPTION> 

                                  December 31,   January 31,
                                      1996          1996
                                  ------------   -----------
<S>                               <C>            <C> 
Computer equipment and
  software                       $  3,681,000    $ 3,069,000
Equipment                             893,000        965,000
Furniture and fixtures                565,000        833,000
Automobiles                                --         78,000
Leasehold improvements              1,115,000      1,134,000
                                 ------------    -----------
                                    6,254,000      6,079,000
Less accumulated depreciation
 and amortization                 ( 4,676,000)    (4,463,000)
                                 ------------    -----------
 
                                 $  1,578,000    $ 1,616,000
                                 ============    ===========
</TABLE>

Computer equipment and software includes amounts under capital leases of
$934,000 at December 31, 1996 and $1,367,000 at January 31, 1996.  Accumulated
amortization of leased property is approximately $768,000 at December 31, 1996
and $1,032,000 at January 31, 1996.



                                     F-11
<PAGE>
 
7.  INTANGIBLE AND OTHER ASSETS
<TABLE>
<CAPTION>
 
                                 December 31,    January 31,
                                     1996           1996
                                 -------------  -------------
<S>                              <C>            <C>
 
License agreements and other       $       --   $  2,342,000
Deferred financing costs            1,087,000      1,568,000
Goodwill                                   --        595,000
                                   ----------   ------------
                                    1,087,000      4,505,000
Less accumulated amortization        (620,000)   ( 2,959,000)
                                   ----------   ------------
Net intangible assets                 467,000      1,546,000
Other assets                          348,000        498,000
                                   ----------   ------------
 
                                   $  815,000   $  2,044,000
                                   ==========   ============
</TABLE>
8.  BANK INDEBTEDNESS AND SUBORDINATED DEBENTURES

In July 1995, the Company obtained a three-year revolving credit facility with
Congress Financial Corporation.  This facility replaced the previous financial
arrangement with Mellon Bank, N.A.  Borrowings under the facility are available
up to $12,000,000, subject to availability, based on eligible accounts
receivable and inventories, as defined.  Interest is charged at prime plus 2%.
The facility is secured by essentially all of the Company's assets and subject
to financial and non-financial covenants.  The available credit, based on
collateral at December 31,1996, was $6,925,000, of which $6,743,000 was
outstanding.

At December 31, 1996, the Company was in violation of certain loan covenants
under the loan agreement with its bank.  Effective March 31, 1997, the
violations were waived and the covenants modified.  The Company expects to be in
compliance with the revised covenants during 1997; however, such compliance
cannot be assured.

The weighted average interest rate on bank debt was 10.3%, 11.5%, and 8.31% for
the eleven months ended December 31, 1996 and fiscal 1996 and 1995 respectively.
Year-end interest rates were 10.3%, 10.5% and 10.0% -10.5% ; maximum outstanding
bank debt during the eleven months ended December 31, 1996 and fiscal years 1996
and 1995 was $10,538,000, $14,096,000 and $18,380,000; average outstandings were
$8,186,000, $8,544,000 and $15,580,000.

In fiscal 1993, the Company completed two private placements for a total of
$10,500,000 principal amount of 9% convertible, subordinated debentures and
received $9,429,000, net of expenses. On May 28, 1996, one of the holders of the
Company's convertible subordinated debentures exchanged $3,500,000 and
$3,000,000 in principal amount of debentures due September 1, 2002 and February
1, 2003, respectively for 912,000 shares of the Company's Common Stock. The
early retirement of the debentures resulted in a one time extraordinary pretax
gain of $954,000. The remaining $4,000,000 are due February 1, 2003 and are
convertible at $11.37 per share. They became callable in 1996 starting at 106%
and declining pro-rata over the respective lives of the obligations.


                                     F-12
<PAGE>
 
9.  INCOME TAXES
 
Income tax benefit consists of the following:

<TABLE> 
<CAPTION> 
                                                              Eleven 
                                                           Months Ended
                                                           December 31,      Year Ended January 31,
                                                                             ----------------------
                                                              1996            1996          1995
                                                           -------------   -----------   -----------
<S>                                                       <C>              <C>           <C> 
Current:                                                                   
   Federal                                                 $    --         $     --     $( 7,624,000)
   State                                                        --               --         (550,000)
                                                           -----------     -----------   ------------
                                                                                 --      ( 8,174,000)
                                                           -----------     -----------   ------------
Deferred:                                                                  
   Federal                                                 (5,928,000)     (2,720,000)    (4,523,000)
   State                                                   (1,046,000)     (  480,000)    (  265,000)
                                                           -----------     -----------   ------------
                                                            6,947,000       3,200,000      4,788,000
                                                           -----------     -----------   ------------
                                                                           
Increase in valuation allowance                             6,947,000      (3,200,000)    (6,522,000)
                                                           -----------     ------------  ------------
                                                           $    --         $     --      $(6,440,000)
                                                           ============    ===========   ============
</TABLE> 

A reconciliation of the effective income tax rate with the statutory Federal
 income tax rate is as follows:
<TABLE> 
<CAPTION> 

                                                                Eleven 
                                                             Months Ended
                                                             December 31,    Year Ended January 31,
                                                                             ----------------------
                                                                1996           1996           1995
                                                            -----------    ------------   ------------
     <S>                                                    <C>            <C>             <C> 
     Statutory rate                                            (34%)           (34)%           (34)%
                                                                           
     State income taxes, net                                               
      of Federal benefit                                       ( 6%)            (6)%           ( 1)%
     Other                                                       1%               1%              2%
     Increase in valuation allowance                            39%              39%             17%
                                                            -----------    ------------   ------------
                                                                --%              --%           (16)%
                                                            ===========    ============   ============
</TABLE> 

The major components of the net deferred tax asset as of December 31, 1996 are
as follows:


<TABLE>
<S>                                       <C>
Inventory valuation                        $ 1,630,000
Property                                       360,000
Accounts receivable reserve                    120,000
Other reserves and accrued expenses            204,000
Net operating loss carry forwards           14,000,000
                                           -----------
                                            16,314,000
Valuation allowance                        (16,314,000)
                                          ------------
                                          $     - -
                                          ============    
</TABLE> 

                                     F-13
<PAGE>
 
Management has established a full valuation allowance for the net deferred asset
due to the uncertainty of its realization.  At  December 31, 1996, the Company
has approximately $ 35,000,000 of net operating loss carry forwards that begin
to expire in 2010 for federal tax purposes and in varying years for state tax
purposes.

10.  STOCKHOLDERS' EQUITY

Stock Option Plans

The Company maintains four stock option plans that permit the grant of options
to purchase shares of common stock. Under the plans, Incentive Stock Options may
be granted to key employees, including officers and directors who are also
employees, and Non-Qualified Options may be granted to key employees,  officers,
directors, athletes, advisors and consultants. The maximum term of any option
under the plans is ten years and the option price per share may not be less than
100% of the fair market value of the Company's common stock on the date the
option is granted (110% in the case of incentive stock options granted to
persons owning more than 10% of the voting stock of the Company and 120% in the
case of certain non-qualified stock options granted under the Director's Plan).

Aggregate option activity is as follows:
<TABLE>
<CAPTION>
 
                                     Number        Price
                                   of shares       Range
                                  ------------  -----------
<S>                               <C>           <C>
Outstanding, January 31, 1994       1,623,200     .67-17.00
 Granted                              340,000    2.50- 2.75
 Exercised                            (44,000)    .67- 9.13
 Canceled                           ( 307,800)   8.13-17.00
                                    ---------   -----------
Outstanding, January 31, 1995       1,611,400    1.54-17.00
 Granted                              905,750    3.875-7.20
 Exercised                          ( 142,500)   2.75- 4.25
 Canceled                           ( 329,710)   1.54-17.00
                                    ---------   -----------
Outstanding, January 31, 1996       2,044,940    1.75-17.00
 Granted                              874,750    1.625-5.13
 Exercised                          ( 154,500)   1.625-4.31
 Canceled                           ( 621,440)  2.50 -17.00
                                    ---------   -----------
Outstanding, December 31, 1996      2,143,750   1.625-13.95
                                    =========   ===========
</TABLE>

At December 31, 1996, 50,100 options were available for grant under the
plans and 1,381,948 outstanding options, with an average exercise price of 
$6.69 per share, were exercisable.

          The Company applies Accounting Principal Board Opinion No. 25,
"Accounting for stock Issued to Employees", and the related interpretations in
accounting for its stock option plans. The disclosure requirement of SFAJ 123
was adopted by the Company in 1996. Had compensation cost for the Company's
stock option plans been determined based upon the fair value of the options at
the date of grant, as prescribed under SFAS 123, the Company's net loss would
have been increased to the following pro forma amounts:


<TABLE> 
<CAPTION> 

                                      Eleven 
                                   Months Ended            Year Ended
                                   December 31,            January 31,     
                                      1996                    1996  
                                   -------------           -----------
<S>                                <C>                     <C> 

Net loss, as reported              $(17,436,000)           $(8,204,000)

Pro forma loss                     $(18,053,000)           $(9,405,000)

</TABLE> 



                                     F-14
<PAGE>
 
The fair value of the options granted during the period ranges from $1.82 to 
$7.20 per share on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: dividend yield - 0%, volatility - 87%, 
weighted average risk-free interest rate - 7%, and an expected life ranging 
from 3 to 5 years.

Private Equity Placement

On November 4, 1996, the Company completed a private placement of $4,000,000 of
its Common Stock and received $3,849,000, net of expenses.  Pursuant to the
private placement agreement, the Company issued 1,600,000 shares of its Common
Stock at $2.49 per share and warrants to acquire 2,720,000 shares of Common
Stock at $3.07 per share to the Investors.  The expiration date of the warrants
are as follows:
<TABLE> 
<CAPTION> 
                                Number of Warrants    Expiration Date
                                ------------------    ---------------
        <S>                      <C>                  <C>
        Series A                 1,925,000            November 5, 2006
        Series B                   233,333            November 5, 2001
        Series C                   233,333            November 5, 2002
        Series D                   128,334            November 5, 2006
        Series E                   200,000            November 5, 2001
</TABLE>

The series B, C and D have earlier expiration dates in the event stock price is
greater than $6.00, $7.25 and $9.00 per share, respectively for any 30 day
period during the term.

Other Warrants

In December 1996, the Company signed a five-year distribution agreement with
Frontier Communications International, Inc. ("Frontier") relating to the
development and marketing at prepaid phone cards for the domestic and
international markets.  As part of the agreement, the Company issued warrants to
acquire 125,000 shares of its common stock, 25,000 at $3.00 per share, 50,000 at
$5.00  per share and 50,000 at $10.00 per share.  The warrants expire on
December 2001.

11.  COMMITMENTS AND CONTINGENCIES

Personal Service Contracts

The Company has entered into personal service contracts with current and former
professional athletes and entertainers to purchase autographs on a per signature
basis, and also, in some cases, for performing other services, including
personal appearances and licensed product rights on behalf of the Company.
Minimum future commitments as of December 31, 1996, under these contracts are
as follows:

<TABLE>
<CAPTION>
 
              <S>           <C>
 
              1997           $3,967,000
              1998            1,015,000
              1999              525,000
              2000              526,000
              2001              526,000
              Thereafter      3,217,000
</TABLE>

The Company is often required to make initial cash payments on personal service
contracts.  As of December 31, 1996 and January 31, 1996, the Company has
prepaid $269,000 and $1,674,000, respectively, under these contracts.


                                     F-15
<PAGE>
 
Lease Agreements

The Company leases office and warehouse space under leases accounted for as
operating leases.  At December 31, 1996, future minimum annual rentals for
leases with remaining lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
 
                        <S>           <C>
 
                        1997          $ 924,000
                        1998            907,037
                        1999            487,117
                        2000            417,433
                        2001            425,600
</TABLE>

Rent expense for the eleven months ended December 31, 1996 and years ended
January 31, 1996 and 1995 was $555,000, $701,000 and $1,008,000 respectively.
Subleasing income of $343,000, $337,000 and $70,000 is expected to be received
in 1997, 1998 and 1999 respectively.

Litigation

During 1996, the Company distributed trading card products that were advertised
to contain so-called "vintage" cards, thereby creating the impression that these
cards were in actuality printed in prior years.  A small percentage of these
products contained reprints of cards previously published by the Company rather
than originals of these "vintage" cards.  The sale of the products, which had
been approved by the Company's Chief Executive officer, ceased in February 1997,
and internal procedures were reinforced to ensure that such activity does not
recur.  Although the Company believes the incident has been handled in a
professional and thorough manner, the inclusion of the reprinted cards could be
deemed to be in violation of certain laws or to be in breach of certain
contractual obligations and, accordingly, there is no assurance that it will not
result in a material adverse effect on the Company.  The Company incurred
approximately $300,000 of charges related to this incident in the quarter ended
December 31, 1996.

In August 1996, a purported class action was filed against the Company in the
United States District Court for the District of New Jersey.  The suit alleges,
among other things, that the practice of randomly inserting chase cards in
packages of trading cards constitutes illegal gambling activity in violation of
state and federal law, including the Racketeer influenced and Corrupt
Organization Act.  Plaintiffs seek certification of a class of persons who,
within the applicable statute of limitations, purchased packages of the
Company's trading cards that might contain randomly inserted chase cards.  The
Company's motion to dismiss the suit is currently pending.  No discovery has
commenced.

On February 14, 1995, Upper Deck Authenticated, Ltd. ("UDA") filed suit against
the Company and three unaffiliated entities in the United States District Court
for the Southern District of California alleging, inter alia, that the Company
had engaged in unfair competition and violated UDA's right to use the indicia of
certain athletes on sports memorabilia and collectibles.  The Company has
responded to UDA's suit by denying all wrongdoing and filing its own claims
against UDA, Upper Deck Company and their President, charging them with unfair
competition, defamation and tortious interference with current and prospective
contractual relations.  Discovery in this matter is ongoing and the Company
provided a $500,000 reserve in fiscal 1996 for estimated legal fees related to
this suit, as management plans to vigorously defend these actions.  The Company
does not expect the outcome of these actions to have a material adverse effect
on its financial position or results of operations.

In August 1994, eight separate proposed class action lawsuits were filed against
the Company and individual defendants alleging, inter alia, securities fraud
under the federal securities laws.  On November 17, 1994, the plaintiffs in
these lawsuits filed a consolidated amended class action complaint. On June 27,
1995, the Company reached an agreement for the full settlement and dismissal of
shareholder litigation, 


                                     F-16
<PAGE>
 
and on November 6, 1995 the settlement received final court approval. The
settlement required the Company to pay $300,000 in cash (paid by insurance) and
$2,000,000 in the Company's Common Stock (430,394 shares). Accordingly, the
Company recorded a one-time pre-tax, non cash charge of $2,000,000 to reflect
the fair value of Common Stock on the settlement date. In addition, the Company
incurred legal and other fees of approximately $175,000 associated with the
shareholder litigation.

The Company is involved in various other legal proceedings and claims incident
to the conduct of its business which management believes will not have a
significant adverse impact on the financial position or results of operations.

12.  ROYALTY AGREEMENTS

The Company has signed various royalty agreements which permit the Company to
produce and market products utilizing licensed names, logos, likenesses and
trademarks.  Most royalty agreements require the Company to pay a royalty equal
to a percentage of specified net sales ranging from 3.75% to 20% subject to
minimum guarantees aggregating $4,817,000 of which the Company has paid
$3,921,000 as of December 31, 1996.  The royalty agreements expire at various
dates through October 30, 2002.  Royalty expense under the agreements for the
eleven months ended December 31, 1996 and years ended January 31, 1996 and 1995
was $4,146,000, $6,167,000 and $4,165,000 respectively.

13.  SIGNIFICANT CUSTOMER AND SUPPLIER CONCENTRATIONS

During the eleven months ended December 31, 1996 and the years ended January
31, 1996 and 1995 sales to national and regional cable television networks
accounted for approximately 31%, 22% and 18% of the Company's net sales. Sales
to one of these television shopping networks during the eleven months ended
December 31, 1996 and fiscal 1996 and 1995 were approximately $7,981,000,
$12,872,000 and $11,289,000,  respectively.   The Company has no written
agreement with this customer.  The loss of this customer, or cable television as
a sales outlet for the Company's products, could have a material adverse impact
on the Company's results of operations.

At January 31, 1996, the Company had accounts receivable totaling $4,378,000, or
27% of gross receivables due from another major customer who is in the retail
business.  Sales to that customer in fiscal 1996 were $7,097,000.

The Company relies on one key vendor as the sole supplier of its trading card
products. Although management believes that other vendors could provide similar
products on relatively comparable terms, an unanticipated change in this
vendor's supply to the Company could have a material adverse impact on the
Company's results of operations.  At December 31, 1996 and January 31, 1996, the
Company had payables to this vendor totaling $1,584,000 and 
$1,661,000, respectively.

14.  BENEFIT PLAN

The Company has a defined contribution (401K) plan under which participation is
available to all employees meeting minimum service and age requirements.
Participants may contribute a percentage of their compensation limited to a
dollar amount set by law.  The Company may contribute a discretionary matching
contribution up to 4% of the employees salary, and an additional discretionary
amount determined each year by the Company.  Employer contributions for the
eleven months ended December 31, 1996 and the years ended January 31, 1996 and
1995 were $32,000, $100,000 and $120,000, respectively.



                                     F-17
<PAGE>
 
15.  UNAUDITED QUARTERLY DATA - ( IN THOUSANDS, EXCEPT PER SHARE DATA)

The following is a summary of unaudited quarterly data for the eleven months
ended December 31, 1996 and the year ended January 31, 1996:
<TABLE>
<CAPTION>
                                                                 Two   
Eleven Months                    First      Second    Third     Months
Ended December 31, 1996          Quarter    Quarter   Quarter   Ended
                                 -------    -------   -------   -----
<S>                              <C>        <C>       <C>       <C>
Net sales                        $14,167    $ 9,543   $14,567   $  4,316
Gross profit (loss)                3,555    ( 4,799)    5,713    ( 1,077)
Income (loss) from operations     (1,543)   (11,637)      907    ( 4,779)
Net income (loss)                 (2,062)   (11,964)      600    ( 4,964)
Net income (loss) per share       ( 0.17)   (  0.94)     0.05    (   .34)
 
<CAPTION>  
Year Ended                       First      Second    Third     Fourth
January 31, 1996                 Quarter    Quarter   Quarter   Quarter
                                 -------    -------   -------   -------
<S>                              <C>        <C>       <C>       <C>  
Net sales                        $15,562    $16,499   $23,947   $18,945
Gross profit                       6,853      7,881     9,533     5,475   
Income (loss) from operations        990     (1,080)    2,277   ( 8,421)  
Net income (loss)                    526     (1,538)    1,768   ( 8,960)  
Net income (loss) per share         0.05     ( 0.14)     0.16     (0.76)  
 
</TABLE>





                                     F-18
<PAGE>
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Score Board, Inc.:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of The Score Board, Inc. and subsidiaries
included in this Form 10-K and have issued our report thereon dated April 10,
1997.  Our report on the financial statements includes an explanatory paragraph
with respect to the Company's ability to continue as a going concern as
discussed in Note 2 to the financial statements. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole.  The schedule listed in Item 14a(2) is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements.  This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.


                                Arthur Andersen LLP

Philadelphia, Pa.,
April 10, 1997





                                     F-19
<PAGE>
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Stockholders and Directors
The Score Board, Inc.

The audits referred to in our report dated April 12, 1995 relating to the
consolidated financial statements of The Score Board, Inc., which is contained
in Item 8 of this Form 10-K, included in the audit of the financial statement
schedule listed in the accompanying index.  This financial statement schedule is
the responsibility of the Company's management.  Our responsibility is to
express an opinion on this financial statement schedule based upon our audits.

In our opinion, such financial statement schedule presents fairly in all
material respects, the information set forth therein.


                                        BDO SEIDMAN

Philadelphia, Pa.,
April 12, 1995






                                     F-20
<PAGE>
 
                             THE SCORE BOARD, INC.
                             ---------------------
                         FINANCIAL STATEMENT SCHEDULES
                         -----------------------------
ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND YEARS ENDED JANUARY 31, 1996 AND 1995
-------------------------------------------------------------------------------


                                     INDEX


II.  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES









All other financial statement schedules are omitted because the conditions
requiring their filing do not exist or because the required information is
disclosed in the financial statements filed, including the notes thereof.







                                     F-21
<PAGE>
 
                             THE SCORE BOARD, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                  SCHEDULE II

<TABLE>
<CAPTION>
 
 
                          Balance at    Additions     Deduction      Balance at
                          Beginning     Charged to    from           End of
Description               of Period     Expense       Reserves(a)    Period
-----------               ---------     ---------     -----------    ------  
<S>                       <C>           <C>           <C>            <C>
Allowance for doubtful
accounts and returns:
 
Eleven months ended       
12/31/96                  $1,925,000    $ 2,456,000   $(1,181,000)   $3,200,000
 
Year ended 1/31/96        $2,258,000    $ 1,092,000   $(1,425,000)   $1,925,000
                                                                 
Year ended 1/31/95        $1,203,000    $ 5,522,000   $(4,467,000)   $2,258,000
                                                                 
Inventory valuation                                              
allowance:                                                       
                                                                 
Eleven months ended       $4,623,000    $ 5,190,000   $(5,738,000)   $4,075,000
12/31/96                                                         
                                                                 
Year ended 1/31/96        $9,690,000    $(  823,000)  $(4,244,000)   $4,623,000
                                                                 
Year ended 1/31/95        $1,219,000    $13,939,000   $(5,468,000)   $9,690,000
</TABLE>

(a)  Uncollectible accounts charged against the reserve, net of recoveries.






                                     F-22
<PAGE>
 
                                    SIGNATURES
                                    ----------


   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized on April 15, 1997.

                                THE SCORE BOARD, INC.


                           By:  /s/ Kenneth Goldin
                                --------------------------------------
                                Kenneth Goldin, Chairman of the Board
                                and Chief Executive Officer


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

<TABLE> 
<CAPTION> 

Signatures                         Title                               Date
----------                         -----                               ----
<S>                         <C>                               <C> 
                                                           
/s/ Kenneth Goldin          Chairman of the Board and         April 15, 1997
----------------------      Chief Executive Officer        
Kenneth Goldin                                             
                                                           
                                                           
/s/ Michael D. Hoppman      Vice President - Finance,         April 15, 1997
----------------------      Principal Financial Officer and
Michael D. Hoppman          Principal Accounting Officer


/s/ James G. Dole           Director                          April 15, 1997
----------------------    
James G. Dole


/s/ Ira M. Lubert           Director                          April 15, 1997
----------------------
Ira M. Lubert


/s/ Allan R. Lyons          Director                          April 15, 1997
----------------------
Allan R. Lyons


/s/ Gerald B. Shreiber      Director                          April 15, 1997
----------------------                                                     
Gerald B. Shreiber                                                         
                                                                           
                                                                           
/s/ Richard C. Yancey       Director                          April 15, 1997
----------------------
Richard C. Yancey
</TABLE> 

                                      47