UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549
                                ----------------

                                 FORM 10-Q/A (1)

  (Mark One)

      X        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934
      For the quarterly period ended              June 30, 1996
                                      --------------------------------

                                       OR

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

For the transition period from  _________________ to ___________________

Commission File Number     0-2127

                             GARMENT GRAPHICS, INC.
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Minnesota                                  41-1270170
-----------------------------------------------    -----------------------------
(State or other jurisdiction of incorporation              (IRS Employer
              or organization)                          Identification No.)

2260 Woodale Drive, Mounds View, MN                          55112-4978
-----------------------------------------------    -----------------------------
(Address of principal executive offices)                     (Zip Code)

                                 (612) 786-6220
                 ---------------------------------------------
              (Registrant's telephone number, including area code)

         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  the  number  of  shares  outstanding  of each of the  issuers
classes of common stock, as of the latest practicable date: 3,081,128 shares of
common stock, $.001 par value, outstanding as of July 26, 1996.

<PAGE>

     Garment  Graphics,  Inc. (the  "Company")  hereby amends Item 2 of its Form
10-Q for the quarter ended June 30, 1996.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations

     Net Sales.  Net sales for the first  quarter of Fiscal  1997 ended June 30,
1996, increased 10.7% to $8,103,471 from $7,321,340 for the comparable period in
Fiscal 1996. The increase in net sales resulted  primarily from a shift in sales
mix to higher priced garments.  For the three months ended June 30, 1996, actual
unit sales increased 1.0% compared with the same period in Fiscal 1996.

     Gross Profit.  Gross profit increased 35.1% to $2,160,323,  or 26.7% of net
sales, for the first quarter of Fiscal 1997 compared to $1,599,327,  or 21.8% of
net sales for the  comparable  period in Fiscal  1996.  The dollar  increase  is
related to higher sales volume as  described  in Net Sales  above.  Also,  while
labor costs increased 2.8% as a percentage of net sales for the first quarter of
Fiscal 1997,  raw material  costs  decreased  6.5% as a percentage  of net sales
compared with the same period in Fiscal 1996.  Labor costs increased and product
costs decreased due to higher cost value  processes  added to the garment.  This
includes more  sophisticated  graphic  prints,  multi-location  prints and other
mixed media  applications.  In addition,  shorter  production  runs  resulted in
overtime requirements and higher per unit costs. Inventory levels in fiscal 1996
were  abnormally  high as discussed in the Form 10-K.  During the quarter  ended
June 30, 1996 the Company decreased  historical  balances by only minor amounts.
Inventories  in total during the quarter  actually  increased by $454,038 due to
seasonal  increases for higher forecast sales levels in the second quarter.  The
seasonal  increase  was less than  prior  years due to the  carryover  of fleece
product  from  the  last  fleece  ("sweatshirt")  season.  It is  the  Company's
intention  to continue to reduce  balances  from the prior year  throughout  the
remainder  of the  current  fiscal  year.  This  reduction  may result in margin
reductions in future periods.

     Selling and Administrative  Expenses.  Selling and Administrative  expenses
increased  13.8% to  $1,777,376  for the  first  quarter  of  Fiscal  1997  from
$1,561,480  for the first quarter of Fiscal 1996.  The dollar  increase  relates
primarily to a 23.3%  increase in royalty and  commission  expense for the first
quarter  of  Fiscal  1997  from the  comparable  period  in  Fiscal  1996 due to
increased sales levels. As a percent of sales,  total Selling and Administrative
expenses for the first  quarter of 1997  increased  0.6%  compared with the same
period in Fiscal  1996.  Commission  and  royalty  expense  increased  1.3% as a
percentage  of Net  Sales  compared  with the same  period in 1996  relating  to
changes in product  mix and related  commission  and  royalty  rates.  Excluding
commissions  and  royalties,   Selling  and  Administrative   expenses  actually
decreased 0.7% for the quarter compared with the same period in Fiscal 1996.

     Interest  Expense.  Interest  expense  decreased  21.1% to $130,043 for the
first quarter of fiscal 1997, from $164,915 in the first quarter of fiscal 1996,
due to: i) lower  outstanding loan balances (average  outstanding  borrowings of
$5,846,575  during the first quarter of fiscal 1997  compared to $6,434,750  for
the first  quarter of fiscal  1996)  which were  related to lower  asset  levels
during the first quarter of fiscal 1997;  and ii) lower  interest rates (average
rate of 8.15% for the first  quarter of fiscal  1997  compared  to 9.53% for the
first quarter of fiscal 1996).

     The Company has an asset based loan and has traditionally needed to utilize
the  full  amount  available  under  the  loan.   Receivable  balances  averaged
$1,034,238 higher in fiscal 1997 than fiscal 1996, offset by inventory  balances
which averaged $3,242,755 lower in fiscal 1997 than fiscal 1996.  Receivable and
inventory combined average balances for the quarters  decreased  $2,208,517 and,
as a result,  the Company was able to reduce its average loan  balance  $524,273
for the related quarters.

     Net Income (Loss).  Net Income  increased  $247,313 to a profit of $165,666
for the first quarter of Fiscal 1997 compared with a net loss of $81,647 for the
same period in Fiscal 1996. This increase in net income is directly attributable
to the increase in gross profit and selling and administrative expense decreases
discussed above.

Liquidity and Capital Resources

     Current  assets  decreased  21.4% to $9,556,700  as of June 30, 1996,  from
$12,160,527  as of June  30,  1995.  The  change  relates  primarily  to a 75.2%
decrease  in  Accounts  Receivable  to  $1,161,743  as of June  30,  1996,  from
$4,682,398 as of June 30, 1995. This decrease is due to advances received by the
Company pursuant to the factoring agreement entered into on April 12, 1996, with
Heller Financial,  Inc. The decrease in accounts receivable was partially offset
by a  $454,038  increase  in  inventories  due to  planned  build-up  of certain
products in  anticipation  of  increased  sales as the  Company  enters the fall
selling season.

     Current liabilities decreased 27.0% to $7,688,894 as of June 30, 1996, from
$10,524,953  at June 30, 1995. The decrease  relates  primarily to a decrease in
Notes Payable-Bank to $2,539,874 as of June 30, 1996, from $5,637,020 as of June
30, 1995. This decrease is due to the  classification  of advances received from
Heller Financial, Inc. pursuant to the factoring agreement entered into on April
12, 1996, as a reduction to accounts receivable.

     The Company  maintains  substantial blank garment inventory levels in order
to be able to deliver products promptly to its customers. The seasonal nature of
the business and growth in the Company's  sales has  increased its  requirements
for working capital resources to support ongoing inventory levels. Net cash used
by operating  activities  for the quarter ended June 30, 1996,  was $236,691 and
for the quarter ended June 30, 1995, was $682,554.

     The Company's  business has historically been somewhat  seasonal,  with the
bulk of sales  generally  occurring in the second fiscal  quarter as a result of
back-to-school  sales.  The next  highest  level  generally  occurs in the third
fiscal  quarter due to sales  reorders for  back-to-school  merchandise  and the
holiday season. Working capital requirements reflect this seasonality.

     The  Company  recently  entered  into a new  facilities  lease with R. Neil
Hamlin,  Chairman of the Board and Chief Executive Officer of the Company, on an
arms' length  basis.  The decision to effect a lease with Mr. Hamlin was made by
the  non-interested  directors.  The lease is for a term of 8.5  years.  Rent is
$3.41 per square foot and taxes currently are $1.50 per square foot, for a total
of $39,633 per month,  net of a monthly credit of $4,350  relating to a sublease
which  terminates  in one  year.  The new  lease  rates  are  lower  than  other
comparable  current lease rates,  and the Board believes that the new lease rate
is competitive.  The Company  expects to receive  operational  efficiencies  and
additional  cost savings from having the warehouse and production  operations at
one facility.

     On August 2, 1994,  the Company  issued  60,000  shares of common  stock in
exchange for all the outstanding  common stock of Signet. The Company has agreed
to pay the  difference in cash between the market price of the Company's  common
stock and $3.375 if the market  price should be less than $3.375 on December 31,
1996.  Under the agreement,  market price is defined as the average  between the
bid and ask prices of the Company's common stock.  Assuming the market price, as
defined,  is $0.75 per share on December 31, 1996, the Company would be required
to make a payment of  $157,500  by January 15,  1997.  The Company is  currently
exploring  alternatives to fund this payment or negotiate a payment plan.  There
is no assurance that such efforts will be successful.

     The Company believes that its borrowings under existing credit  facilities,
supplier  support  and  internally  generated  funds  will be  adequate  for its
liquidity and capital needs.

Cautionary Statement Regarding Forward Looking  Information

     The foregoing  contains "forward looking  statements" within the meaning of
federal  securities  laws which represent  management's  expectations or beliefs
concerning future events. These and other forward looking statements made by the
Company  must be evaluated in the context of a number of factors that may affect
the Company's financial condition and results of operations,  such as the recent
losses experienced by the Company,  uncertain sales,  dependency on new licenses
and others,  including  those set forth in the  Company's  annual and  quarterly
reports filed with the Securities and Exchange Commission.



<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  amendment  to be signed on its behalf by the
undersigned thereunto duly authorized.


                                GARMENT GRAPHICS, INC.
                                         (Registrant)


Date:  November 15, 1996        By:    /s/ R. Neil Hamlin
                                       R. Neil Hamlin
                                       Chairman and Chief Executive Officer

                                By:    /s/ Barbara S. Remley
                                       Barbara S. Remley
                                       President, Chief Operating and Financial
                                       Officer (Principal Financial Officer and
                                       Chief Accounting Officer)