<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                   -----------------------------------------
                                F O R M  1 0 - K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996        COMMISSION FILE NUMBER 1-8176

                                       OR

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

FOR THE TRANSITION PERIOD FROM _____ TO _____.

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

                          LITTLEFIELD, ADAMS & COMPANY
             (Exact name of Registrant as specified in its charter)

          NEW JERSEY                                 22-1469846
(State or other jurisdiction               (I.R.S. Employer Identification No.)
of incorporation or organization)

6262 EXECUTIVE BLVD., HUBER HEIGHTS, OHIO                45424
(Address or principal executive offices)               (Zip Code)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (937) 236-0660

      SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

       TITLE OF EACH CLASS             NAME OF EXCHANGE ON WHICH REGISTERED
  ------------------------------       ------------------------------------
  COMMON STOCK, $1.00 PAR VALUE             AMERICAN STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  NONE
                           __________________________
     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. YesX No

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

     The aggregate market value of  voting stock held by non-affiliates of the
registrant at March 26, 1997, was approximately $5,601,000.  On such date, the
last sale price of registrant's common stock was $2.6250 per share.  Solely for
the purposes of this calculation, shares beneficially owned by directors and
officers of registrant have been excluded, except shares with respect to which
such directors and officers disclaim beneficial ownership.  Such exclusion
should not be deemed a determination or admission by registrant that such
individuals are, in fact, affiliates of registrant.


<TABLE>
<S>                                               <C>
Indicate number of shares outstanding of each of the registrant's classes of common stock, as of
March 26, 1997.
CLASS                                             OUTSTANDING ON MARCH 26, 1997
------------------------------------------------  ------------------------------------------------
Common Stock, par value $1.00 per share           2,277,981
</TABLE>

                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                                              PART OF THE FORM 10-K INTO WHICH
 <S>                                         <C>
               DOCUMENT                      THE DOCUMENT IS INCORPORATED
 ------------------------------------------  ----------------------------------
 Definitive Proxy Statement to Shareholders  Part III, Items 10, 11, 12, and 13
</TABLE>

<PAGE>   2

                         LITTLEFIELD, ADAMS & COMPANY

                              INDEX TO FORM 10-K



<TABLE>
<CAPTION>
PART I                                                                            PAGE
                                                                                  ----
<S>          <C>                                                                    <C>
Item 1.      Business                                                                1
Item 2.      Properties                                                              3
Item 3.      Legal Proceedings                                                       4
Item 4.      Submission of Matters to a Vote of Security Holders                     4

PART II

Item 5.      Market for Registrant's Common Equity & Related Stockholder Matters     4
Item 6.      Selected Financial Data                                                 5
Item 7.      Management's Discussion and Analysis of Financial Condition and
                Results of Operations                                                6
Item 8.      Financial Statements                                                   10
Item 9.      Change in Registrant's Certifying Accountant                           10

PART III

Item 10.     Directors and Executive Officers of the Registrant                     11
Item 11.     Executive Compensation                                                 11
Item 12.     Security Ownership of Certain Beneficial Owners & Management           11
Item 13.     Certain Relationships and Related Party Transactions                   11

PART IV

Item 14.     Financial Statements, Exhibits and Reports on Form 8-K                 11

ADDITIONAL INFORMATION                                                              14

EXHIBITS

Item 601.    Exhibit Index Required by Item 601 of Regulation S-K
</TABLE>



     This document incorporates into a single document the requirements of the
Securities and Exchange Commission for the Annual Report to Shareholders and
the Form 10-K.

<PAGE>   3

                                     PART I

ITEM 1:         BUSINESS

GENERAL INFORMATION

     Littlefield, Adams & Company (the "Registrant", the "Company" and "LFA")
is a New Jersey corporation which was organized in 1949. The Registrant,
through its operating division, Sports Imprints/Fun Wear, is principally
engaged in the design, imprinting and distribution of young men's and boys'
active wear products under various license agreements.  The accompanying
consolidated financial statements include the accounts of Littlefield, Adams &
Company and its now dissolved subsidiaries, Medical Sales Associates, Inc.,
Cornerstone Laboratories, Inc., and NUTECH, Inc.  The former wholly owned
subsidiaries, Collegiate Pacific Company and Sports Imprints, Inc., were merged
into the Company effective June 30, 1995.  In January 1996, the former wholly
owned subsidiaries, Medical Sales Associates, Inc., Cornerstone Laboratories,
Inc., and NUTECH, Inc., were dissolved.  Neither Medical Sales Associates,
Inc., Cornerstone Laboratories, Inc. nor NUTECH, Inc., conducted any business
during 1996.   The Company closed its Collegiate Pacific division on August 31,
1995.

     The Registrant's principal executive offices are located at 6262 Executive
Boulevard, Huber Heights, Ohio 45424.  The Company's telephone number is (937)
236-0660.  Its operating division, Sports Imprints, also known as "Fun Wear,"
maintains its principal operating headquarters at the same location.

     Effective August 19, 1996, the Company changed its principal executive
offices from 253 North First Avenue, Sturgeon Bay, Wisconsin  54235, to the
present location stated above.

     The Company also maintains an administrative office and sales showroom in
the Empire State Building, New York, New York.


PRODUCTS

     The products of Sports Imprints/Fun Wear include imprinted and embroidered
T-shirts, sweatshirts, boxer shorts and related sportswear.  Prior to its
closure on August 31, 1995, Collegiate Pacific, in addition to the above
products, also produced jackets, hats, banners and pennants.  Sports
Imprints/Fun Wear produces its own art designs which are transferred to apparel
by the direct textile printing method (application of ink directly to garments
using silk screens).

     Sports Imprints/Fun Wear is continuously developing new graphics, designs,
logos and other art using modern computer equipment and technology; seeking new
licenses; researching different methods of applying artwork to garments and
seeking newer and faster methods for production of the artwork.  Presently,
Sports Imprints/Fun Wear is also engaging the services of an outside
contractor.  In addition, the Company is currently buying  the products for its
new boxer short line from outside resources.

     The following table discloses the percentage of total revenue contributed
by any class of products which accounted for the consolidated revenue during
each of the past three fiscal years:


<TABLE>
<CAPTION>
                                  PERCENTAGE OF CONSOLIDATED REVENUE
         PRODUCT CLASS             1996          1995          1994
         --------------------  ------------  ------------  ------------
         <S>                            <C>           <C>           <C>
         T-shirt                        88%           82%           80%
         Pennants and Banners            --            4%            4%
         Fleece Wear                    12%           13%           15%
</TABLE>



             Littlefield, Adams & Company 1996 Form 10-K, Page 1
<PAGE>   4

TRADEMARKS

     The Company is the owner of the trademark "Fun Wear", which is registered
with the U.S. Patent and Trademark Office, registration number 1,952,545.  This
registration is due for renewal in 2006.  The Company is also in the process of
registering its "TacoBat" character trademark.

LICENSES

     Refer to Note 3 (section "Significant Licensors") of the Notes to the
Consolidated Financial Statements.

MARKETS AND CUSTOMERS

     The markets for the Sports Imprints/Fun Wear products are principally
retail chain stores, specialty stores and department stores.  Prior to its
closure, Collegiate Pacific sold its products primarily to college bookstores,
resort areas, theme parks, and industrial and commercial customers.

     The Company sells its products through Company employed sales personnel,
and, to a lesser degree, through a sales force of independent representatives.

     An important part of the Company's ability to compete in the imprinting
industry is its ability to create marketable art designs.  The Company has its
own art staff for that purpose, uses modern computer equipment and technology.
As needed, the Company utilizes free-lance artists in various capacities to
assist in that effort.

     Sales to Wal-Mart and K-Mart during 1996 amounted to 56% and 16%,
respectively, of consolidated revenue.  Refer  to Note 3 of the Notes to the
Consolidated Financial Statements.

     Other major customers include J.C. Penney, Meijer, Shopko, Ames, Sears,
Hills, Duckwall and Army-Air Force Exchange.

INVENTORY, BACKLOG AND PRODUCTION

     As of December 31, 1996, 1995 and 1994, the Company had a backlog of
orders of approximately $26 thousand, $3.5 million and $5.8 million,
respectively.  From January 1, 1997 through March 20, 1997, the Company
received orders for approximately $709,000 of goods.  The decrease in backlog
as of December 31, 1996 is due to the transition from sales of Harley-Davidson
licensed products to sales of the Company's new licensed product lines.

     The Company maintained an inventory adequate to meet anticipated demands
during a 69 day period in 1996, compared to a 119 day period in 1995 and an 80
day period in 1994.  The total value of such inventory as of
December 31, 1996, was $1,579,000.  During calendar years 1996, 1995 and 1994,
$56,000, $160,000 and $228,000, respectively, in merchandise, was returned to
the Company by customers.

     Generally, the Company requires payment for goods within 30 days after
delivery; however, exceptions are made on a case by case basis depending on
circumstances such as sizes of orders, anticipated future business and past
credit experience.  As of December 31, 1996, the Company had net receivables of
$2,894,000, with an average aging period, from delivery, of 29 days.

SUPPLIERS

     The Company currently purchases T-shirts, sweatshirts, sweatpants and
boxer shorts from various mills.  Availability is plentiful, and good
relationships with suppliers are very important.  The Company believes that it
has such relationships.

             Littlefield, Adams & Company 1996 Form 10-K, Page 2

<PAGE>   5


EMPLOYEES

     As of December 31, 1996, the Company had approximately 74 full time
employees, and the Company believes that employee relations are good.

COMPETITION

     The Company competes against a large number of national and regional
manufacturers of similar products and does not have a dominant market share in
the imprinted young men's and boys' active wear industry.  The Company believes
that competition is based on popularity of a particular licensed brand, price,
quality of merchandise, artistic creativity and service, including timeliness
of delivery.

     There are a significant number of major participants in the imprinted
young men's and boys' active wear industry.  Starter, Champion, Changes, Sun
Sportswear, Freeze, Signal Knitting Mills, Wilson and Salem Knitting Mills are
among the Company's most significant competitors.

COST & EFFECT OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS


<TABLE>
<S>              <C>
1.   Federal:    To the best of management's knowledge, the Company will not be required to directly incur material expenses in
                 conjunction with environmental regulations; however, like all other companies, there are  many incalculable
                 indirect expenses  associated with compliance by other entities that affect the prices paid by the Company for
                 goods and services.

2.   State:      To the best of management's knowledge, the Company will not be required to directly incur material expenses in
                 conjunction with environmental regulations at the state level.

3.   Local:      To the best of management's knowledge, the Company will not be required to directly incur material expenses in
                 conjunction with environmental regulations at the local level.

</TABLE>



THE MEDICAL GROUP

     The former Medical Group was comprised of Medical Sales Associates, Inc.,
Cornerstone Laboratories, Inc. and NUTECH, Inc. In January 1996, Medical Sales
Associates, Inc., Cornerstone Laboratories, Inc. and NUTECH, Inc. were
dissolved.  As a result, the Medical Group, which never produced revenue for
the Company, will not be of any further cost or expense to the Company.

ITEM 2:        PROPERTIES

     The following tables set forth information with respect to the material
real property owned or leased by the Registrant as of December 31, 1996.  Refer
to Note 13 of the Notes to the Consolidated Financial Statements.


<TABLE>
<CAPTION>
                                                                  OWNERSHIP
                GENERAL CHARACTER                                 OR EXPIRATION
LOCATION        AND USE OF PROPERTY                               DATE OF LEASE
--------------  ------------------------------------------------  -------------
<S>             <C>                                               <C>
Huber Heights,  64,000 square feet, used for  administration and      1999
Ohio            graphics design, imprinting and shipping.

New York,       2,000 square feet in the Empire State Building,       2004
New York        used as a sales showroom and for administration.
</TABLE>


     As of December 31, 1996, the Registrant's facilities and the equipment
located therein were in good working condition and adequate for its needs and
future expansion.

             Littlefield, Adams & Company 1996 Form 10-K, Page 3

<PAGE>   6

ITEM 3:        LEGAL PROCEEDINGS

     Refer to  Note 18 of the Notes to the Consolidated Financial Statements.


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

      No matters were submitted during the fourth quarter of 1996 to a vote of
      security holders, through the solicitation of proxies or otherwise.


                                    PART II

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

     The Registrant's Common Stock is traded on the American Stock Exchange
(the "Exchange") under the symbol "LFA".  However, the Registrant does not
satisfy all the financial guidelines for continued listing on the Exchange and
accordingly there can be no assurance that such listing will be continued.

     The Exchange, as a matter of policy, will consider the suspension of
trading in or delisting of a security when, in the opinion of the Exchange, the
financial condition and/or operating results of the issuer appear to be
unsatisfactory.  To assist in the application of this and other listing
policies, the Exchange has adopted certain guidelines under which it will
normally give consideration to suspending dealings in or delisting a security.
The Exchange's financial guidelines include as criteria for the Exchange to
consider suspending dealings in or delisting securities that the issuer (i) has
shareholders' equity of less than $2 million if such issuer had losses in two
of its three most recent fiscal years, or (ii) has shareholders' equity of less
than $4 million if such issuer had losses in three of its four most recent
fiscal years, or (iii) has sustained losses which are so substantial in
relation to its overall operations or its existing financial resources, or its
financial condition has become so impaired that it appears questionable, in the
opinion of the Exchange, as to whether such issuer will be able to continue
operations and/or meet its obligations as they mature.

     The Company, which at December 31, 1995, had losses in three of its four
most recent fiscal years, and shareholders' equity at that date of
approximately $24,000, had at December 31, 1996, income in two of its three
most recent fiscal years.  The Company therefore met the American Stock
Exchange financial guidelines summarized in clauses (i) and (ii) above.
However, the Exchange may also suspend trading in or delist the Company's
securities under the guideline summarized in clause (iii) above if, in the
opinion of the Exchange, the financial condition of the Company has become so
impaired that it appears questionable as to whether the Company will be able to
continue operations and/or meet its obligations as they mature.  In addition,
the Exchange is not limited or restricted by these guidelines, and the Exchange
may at any time, in view of the circumstances in each case (and regardless of
whether the issuer meets or fails to meet any or all of such guidelines),
suspend dealings in or delist any security when, in the opinion of the
Exchange, such security is unsuitable for continued trading on the Exchange.
For these reasons, no assurance can be given that the Exchange, which continues
to monitor the Company's progress, will not suspend trading in or delist the
Company's stock.

     The high and low closing prices of the Registrant's common stock, as
reported on the Exchange for each quarter of the last two fiscal years, were as
follows:


<TABLE>
<CAPTION>
                          1996           1995
                  High     Low   High     Low
                ------  ------  -----  ------
<S>             <C>     <C>     <C>    <C>
First Quarter    2 1/4   1 1/2      7   4 5/8
Second Quarter   2 1/8  1 1/16  7 3/8   4 3/8
Third Quarter   5 9/16   15/16  5 5/8  3 3/16
Fourth Quarter   4 1/2  2 9/16  3 3/4   1 1/8
</TABLE>

             Littlefield, Adams & Company 1996 Form 10-K, Page 4

<PAGE>   7


     The Registrant has not paid any dividends on its common stock during the
last two fiscal years.  There were approximately 180 holders of record of the
Registrant's common stock as of December 31, 1996, including several holders
who are nominees for an undetermined number of beneficial owners.  The
Registrant believes there are approximately 1,028 beneficial owners of the
Registrant's common stock.  These numbers may increase with the issuance of
stock in 1997 in settlement of the Class Action Litigation.  The estimated
dilution caused by issuing this additional stock will be an increase in the
shares currently outstanding of approximately 22% (Note 18 of the Notes to the
Consolidated Financial Statements).


ITEM 6:          SELECTED FINANCIAL DATA

     The selected financial data presented below are derived from the audited
consolidated financial statements of the Company.  The data presented below for
the fiscal years ended December 31, 1996, 1995 and 1994, should be read in
conjunction with the consolidated financial statements, the notes thereto, and
the other financial information included in this report.

     LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES



<TABLE>
<CAPTION>
OPERATING RESULTS (1)                          1996       1995       1994     1993 (2)    1992 (2)
---------------------                        ---------  ---------    ----     ----          ----
CONTINUING OPERATIONS                                                       (Unaudited)  (Unaudited)
---------------------
<S>                                          <C>        <C>         <C>       <C>          <C>
Total revenues                                 $12,036    $14,735   $24,557   $16,722      $4,653
Income (loss) before income taxes                  769     (1,006)      951    (4,041)       (707)
Income tax benefit (provision)                      30         14      (294)     (129)         --
Net income (loss) before extraordinary gain        799       (992)      657    (4,170)       (707)
Extraordinary gain, net                             94         --        --        --          --
Net income (loss)                                  893       (992)      657    (4,170)       (707)
Net income (loss) per common share:
 Before extraordinary gain                        0.27      (0.44)     0.29     (2.03)      (0.41)
 Extraordinary gain                               0.03         --        --        --          --
   Net income (loss) per common share             0.30      (0.44)     0.29     (2.03)      (0.41)
Weighted average common shares and
 common share equivalents outstanding        2,967,812  2,275,701 2,230,391 2,058,731   1,711,927


FINANCIAL POSITION (1)
-------------------------------------------
Working capital                                  1,336       (295)      605       838        (347)
Working capital ratio                           1.36/1      .94/1    1.09/1    1.12/1       .81/1
Property, plant and equipment, net                 558      1,109     1,254     1,194         826
Total assets                                     6,120      6,676     9,232    10,464       2,396
Long term debt, less current portion                 1        119       219       768         344
Shareholders' investment                         2,321         24     1,172       205         140
</TABLE>


(1)    Dollars in thousand except for per share amounts.
(2)    See Note 4 of the Notes to Consolidated Financial Statements in both
the 1995 and 1994 Form 10-K concerning the restatement of prior years'
financial statements audited by the Company's former independent public
accountants.  The opinion of such auditors does not cover the restatement.

             Littlefield, Adams & Company 1996 Form 10-K, Page 5

<PAGE>   8

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

     The following discussion provides information which management believes is
relevant to assessing and understanding the Registrant's operations and
financial condition.  This discussion should be read in conjunction with the
financial statements included in this report on Form 10-K and their
accompanying notes.

RESULTS OF OPERATIONS

     Revenues

     Net product sales decreased from  $14,478,000 in 1995 to $11,884,000 in
1996, a decrease of 18%.  This decrease was attributable to a downturn in the
imprinted sportswear business, a decline in customer interest in the Company's
Harley-Davidson licensed products and the closing of Collegiate Pacific in
Roanoke, Virginia.  Collegiate Pacific's revenues for 1995 were $1,527,000,
compared to $25,000 in 1996.  Since the Company closed its Collegiate Pacific
operations in August 1995, the Company does not expect to derive any future
revenue from that division
(Note 5 of the Notes of the Consolidated Financial Statements).

     Other revenues declined from $257,000 in 1995 to $152,000 in 1996 due to
the termination of a sub-lease agreement from which the Company had received
monthly revenues.  The Company does not expect to receive any material amounts
of other revenues in 1997.

     For the period from 1994 to 1995, net product sales decreased 40% on a
year-to-year basis.  The decrease was due to a lessening of customer interest
in the Company's licensed products (primarily Harley-Davidson), the downturn of
retail apparel sales in general and the closing of Collegiate Pacific.  In
1995, revenues from Collegiate Pacific decreased  to $1,527,000 from $3,756,000
in 1994 (Note 5 of the Notes of the Consolidated Financial Statements).

     The gross profit margin, as a percentage of net sales, was 29% for 1996,
compared to 30% for 1995.  The gross profit margin decreased from 33% in 1994
to 30% in 1995.  The decreases were due primarily to the decreased sales volume
and lower average selling prices for these periods.

     In 1996, Harley-Davidson Motor Co. (Harley-Davidson) advised the Company
that it desired to upgrade the quality of apparel associated with its
trademarks, trade dress and designs and to sell those licensed products through
second-tier department stores rather than mass merchandisers.  Harley-Davidson
offered to enter into a new license agreement which would have allowed the
Company to move from the mass merchandising market into the second-tier
department store market.  The Company declined that offer based on its
evaluation of Harley-Davidson as a second-tier department store license.
Accordingly, the Company's Harley-Davidson license agreement expired on
December 31, 1996.  Sales of Harley-Davidson licensed products accounted for
90%, 89% and 80% of total consolidated product sales for 1996, 1995 and 1994,
respectively.  The expiration of the Harley-Davidson license is expected to
have, at a minimum, a short-term material adverse effect on future revenue and
results of operations (Note 2 of the Notes of the Consolidated Financial
Statements).

     The Company is continuing its efforts to enhance and stabilize its
business through the acquisition of significant new licenses and the
development of new product lines, and the reduction of overhead.  During 1996,
the Company entered into a two-year license agreement with PepsiCo, Inc., for
its soft drink brands, and a two-year license agreement with Miller Brewing
Company.  In 1997, the Company entered into a three-year license agreement with
Kawasaki Motors Corp., U.S.A.  The Company also expanded its business by
entering the boxer shorts segment of the apparel market under each of these
license agreements.  Management considers the potential of each of these new
license agreements to be significant.  There can be no assurance, however, that
the Company will be successful in its efforts to maintain or increase sales
levels through any or all of these new licenses, or that, if it is able to do
so, the revenue from such sales will be sufficient to sustain the Company for
any particular period (Note 3 of the Notes to the Consolidated Financial
Statements).


             Littlefield, Adams & Company 1996 Form 10-K, Page 6

<PAGE>   9


     The Company also closed its Collegiate Pacific division in Roanoke,
Virginia, on August 31, 1995.  Collegiate Pacific had not shown a profit in
several years and was requiring on-going substantial infusions of cash in order
to remain in business.  By closing Collegiate Pacific, the Company was able to
eliminate the continuing drain on its resources (Note 5 of the Notes of
Consolidated Financial Statements).  The Company also closed its Sturgeon Bay,
Wisconsin, office in August 1996, and consolidated its operations in Huber
Heights, Ohio. The consolidation of operations in Ohio has resulted in
significant cost savings, and the Company believes these cost savings will
continue.

     The Company records estimated local, state and federal income taxes,
including federal alternative minimum taxes.  For year ended December 31, 1996,
the Company reported a net income tax benefit of $30,000 before the
extraordinary gain.  The extraordinary gain of $94,000 reported for the same
period is net of $9,000 of estimated income tax expense.  The net tax benefit
was due to the reversal of excess prior period accruals of $61,000 based on the
refunds and credits requested on the Company's 1995 income tax returns.  A
summary of income taxes reported for 1996 is as follows:

<TABLE>
<CAPTION>
                                                       For the Year Ended
                                                           December 31,
                                                              1996
                                                       ------------------
          <S>                                               <C>
          Estimated combined current year income tax
            expense before extraordinary gain               $ 31,000

                Refunds and credits reversed                 (61,000)
                                                            ---------

          Net income tax benefit before extraordinary gain   (30,000)

                Estimated income tax on extraordinary gain     9,000
                                                            ---------

          Total 1996 estimated income tax effect            $(21,000)
                                                            =========
</TABLE>


     Expenses

     Selling and administrative expenses, as a percentage of net sales,
decreased from 40% in 1995 to 27% in 1996 due to cost cutting efforts.  Total
professional fees amounted to approximately $475,000 and $806,000 in 1996 and
1995, respectively, a reduction of 41%.  Professional fees in 1995 were
particularly high due to the Company's involvement in numerous lawsuits.
Management believes that the decreased level of professional fees (compared
with 1995 professional fees) will continue through 1997, since the majority of
the Company's litigation has been resolved.

     Included in selling and administrative expenses are royalty expenses
related to the sales of licensed products amounting to $671,000, $1,611,000 and
$2,312,000 in 1996, 1995 and 1994, respectively.  Due to decreased average
borrowings because of lower inventory levels, interest expense for the year
1996 was $235,000, compared to $327,000 in 1995, a decrease of 28% .

     From December 31, 1995 to December 31, 1996, management's efforts to
reduce inventory by controlling purchases resulted in a decrease in net
inventories of $1,753,000, a 53% reduction for the year.  The annualized
inventory turnover rate for 1996 increased to 5.3 turns per year compared to
3.0 turns per year for 1995, primarily due to management control of inventory
levels (Note 4 of the Notes to the Consolidated Financial Statements).

     Included in other income from litigation settlements in 1996 is a net gain
of $395,000, of which $325,000 relates to the Company's settlement with
Midlantic National Bank, N.A. and $70,000 relates to the derivative action
settlement (Note 18 of the Notes to the Consolidated Financial Statements).


             Littlefield, Adams & Company 1996 Form 10-K, Page 7

<PAGE>   10

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1995, the Company had an accounts receivable financing
agreement with Merchant Factors Corp., which expired on January 31, 1996, and
which allowed the Company to borrow up to 75% of net qualified accounts
receivable.  The balance as of December 31, 1995, was approximately $1,269,000,
and was repaid as the receivables were collected.  The agreement bore interest
at prime plus 3.5%; however, the Company did not pay any additional financing
fees.  The Company's accounts receivable were the collateral for this loan
(Note 8 of the Notes to the Consolidated Financial Statements).

     Effective February 1, 1996, the Company entered into a new discount
factoring agreement with Merchant Factors Corp., which expires in August 1997.
All of the Company's accounts receivable which Merchant Factors Corp. approves
for credit, excluding Wal-Mart, are being factored at the rate of 1 1/8%.
Accounts that are credit approved by Merchant Factors are at its risk, which
minimizes the Company's credit risk.  The Company, at its option, can factor at
a rate of 1 1/8%, with recourse, accounts that Merchant Factors Corp. does not
approve for credit.  The servicing of all factored accounts is done by Merchant
Factors.  Under the factoring agreement, the Company may borrow up to 75% of
the net accounts receivable at an annual interest rate of prime plus 2.5%.  At
December 31, 1996, the Company had factored receivables amounting to $858,000,
most of which had been approved for credit by Merchant Factors (Note 8 of the
Notes to the Consolidated Financial Statements).  At December 31, 1996, the
amount borrowed was $396,000.

     In addition, the Company has an accounts receivable financing arrangement
with Merchant Factors Corp. covering only its accounts receivable from
Wal-Mart.  This agreement allows the Company to borrow up to 75% of its net
receivables from Wal-Mart at an annual interest rate of prime plus 5%.  The
Company does not pay any factoring fees for the financing of the Wal-Mart
accounts receivable (Note 8 of the Notes to the Consolidated Financial
Statements).  At December 31, 1996, the amount borrowed was $40,000.

     In addition, Merchant Factors Corp. has periodically issued purchase order
guarantees and/or letters of credit against this line of credit.  At December
31, 1996, outstanding purchase order guarantees issued by Merchant Factors
Corp. amounted to approximately $48,000 (Note 8 of the Notes to the
Consolidated Financial Statements).

     At December 31, 1996, the remaining borrowing availability from both
agreements with Merchant Factors Corp. was approximately $1,705,000 (Note 8 of
the Notes to the Consolidated Financial Statements).

     In March 1997, the Company signed two new promissory notes, effective as
of January 31, 1997 and February 1, 1997 in the amounts of $468,000 and
$143,000, respectively, evidencing its outstanding obligations to The Bank of
Floyd.  The notes, bearing an annual interest rate of prime plus 1%, provide
for monthly payments on terms substantially similar to the note payable and
line of credit in place at December 31, 1996.  The new promissory notes are
payable on demand and are collateralized by the Company's fixed assets.  The
Company is currently in discussions with The Bank of Floyd to convert these new
promissory notes to a term loan to be collateralized by the Company's fixed
assets.  There can be no assurances, however, that such discussions will be
successful (Note 8 of the Notes to the Consolidated Financial Statements).

     For the year ended December 31, 1996, operating activities provided cash
of $225,000, while $797,000 was provided from investing activities.  The
Company borrowed a total of $9,473,000 during 1996, and repaid $10,646,000.
Additionally, the Company utilized $36,000 to purchase rights to stock.  This
resulted in net cash used in financing activities of $1,209,000.  During 1996,
there was a net decrease in cash of $187,000.

     At December 31, 1995, the Company had a working capital deficit of
$295,000 and a working capital ratio of .94/1.  However, at December 31, 1996,
the Company had net working capital of $1,336,000 and a working capital ratio
of 1.36/1.


             Littlefield, Adams & Company 1996 Form 10-K, Page 8

<PAGE>   11


     The Company expects to renew its agreement with Merchant Factors Corp.
when the current agreement expires in August 1997, although there can be no
assurance that the Company will, or will be able to, do so.  The availability
of cash flow from operations subsequent to December 31, 1996, is dependent on
the ability of the Company to acquire and sell licensed products other than
Harley-Davidson throughout 1997.  The success of the Company's new licensed
product sales with Pepsi and Mountain Dew, Miller Brewing Company and Kawasaki
Motors Corp., U.S.A. is an integral part of that effort.  There can be no
assurance, however, that sales of these new licensed products will be
sufficient to sustain the Company's operations (Notes 2 and 3 of the Notes to
the Consolidated Financial Statements).

     In spite of lower sales levels in 1996 compared to 1995, income from
operations increased from a loss of $1,090,000 in 1995 to income of $391,000 in
1996.  The Company believes that this increase in operating results, the
collection of current accounts receivable, increased control of inventory
purchasing and the anticipated 1997 sales of newly acquired licensed products
will help the Company's cash flow during 1997, and support the Company's effort
to achieve sufficient sales revenue from new licenses to offset the reduction
in revenue resulting from the expiration of the Harley-Davidson license.  There
can be no assurance, however, that the anticipated level of 1997 sales will be
achieved, or that, even if it is, the revenue from such sales will be
sufficient to sustain the Company for any particular period.

     The Company manufactures and sells imprinted apparel primarily to national
retail discount chains.  The license agreement with Harley-Davidson, which
terminated on December 31, 1996, had limited the number of customers to which
the Company could sell Harley-Davidson products.  Because Harley-Davidson
accounted for such a large portion of the Company's revenues and sales efforts,
the Company did not pursue customers who were not approved by Harley-Davidson.
The Company's new licenses, including Pepsi and Mountain Dew, Miller Brewing
Company and Kawasaki Motors Corp., U.S.A., do not limit the customers to which
the products can be sold.  Additionally, the Company has recently entered into
the boxer short segment of the apparel industry.  Accordingly, the Company is
expanding its sales force and aggressively seeking new customer accounts (Notes
2 and 3 of the Notes to the Consolidated Financial Statements).

     Sale of Assets

     During 1996,  the Company sold fixed assets, with a net book value of
$445,000, for $663,000; resulting in a reported net gain of $218,000.  Included
in the sale was real property utilized by Collegiate Pacific in Roanoke,
Virginia.  The proceeds were used to pay down debt (Note 5 of the Notes to the
Consolidated Financial Statements).

     Purchase of Property, Plant and Equipment

     During 1996, the Company acquired $95,000 of additional property, plant
and equipment.  Of the total $95,000, approximately 40% was for office
furniture, fixtures and data processing equipment; 22% was for  production
equipment; and 38% was for leasehold improvements.

     The Company does not plan any major capital expenditures during 1997 and
has a 1997 capital expenditures budget of $100,000.

     Settlement of Securities Class Action Litigation and Derivative Action

     The Company reached an agreement with the plaintiffs to settle the class
action litigation, as described in Note 18 of the Notes to the Consolidated
Financial Statements, on February 21, 1995.  Under the agreement approved by
the Court, the Company will issue $1,400,000 of its common stock and pay
$210,000 in cash to the members of the class.  The Company estimates that the
number of shares to be issued is approximately 478,000, an increase of
approximately 21% of the shares currently outstanding, based on the average
closing price of the Company's stock for the 20 trading days immediately
preceding the end of the appeal period following entry of the final order of
dismissal.  The final order of dismissal was entered by the Court on January
27, 1997, and no appeal was filed within the 30 day appeal period.  The
$210,000 cash portion of the Company's settlement obligation was received by
the Company from a third party in connection with the settlement of a related
matter, and was paid into the settlement fund escrow account.  Upon the final
conclusion of the litigation, the Company received an additional $150,000 from
the same third party.  The


             Littlefield, Adams & Company 1996 Form 10-K, Page 9

<PAGE>   12
derivative action, described in Note 18 of the Notes to the Consolidated
Financial Statements, was also settled on February 21, 1995.  As part of the
settlement of the derivative action, the Company will receive 1,000 shares of
its stock from a former president of the Company.  A former president and
director of the Company will relinquish to the Company  rights to 5,000 shares
of stock, and rights that he had as of February 21, 1995 under options to
acquire 50,000 shares of LFA stock (the options expired unexercised on July 12,
1996).  A current officer and director will relinquish to the Company rights to
5,000 shares of stock.  The Company will also issue and provide $50,000
(approximately 17,000 shares) of the Company's common stock to its former
auditor, which when combined with the shares to go to the class members
described above, represents a total increase in the shares currently
outstanding of approximately 22%.  The total of $1,450,000 payable in the
Company's stock has been classified as capital in excess of par value as of
December 31, 1996.  At December 31, 1995, these amounts were classified as
liabilities rather than shareholders' investment due to the uncertainty of the
final resolution.  Based on the recommendation of the magistrate judge in the
derivative action, the Company expects to receive approximately $70,000 cash,
net of attorneys' fees and expenses, from a $130,000 payment made by the
Company's former auditor as part of the derivative action settlement.
Management does not expect these settlements to have a material adverse effect
on the condition of the Company.  The settlement costs, together with related
professional fees, were recorded in 1993 as part of the restatement of that
year (Note 18 of the Notes to the Consolidated Financial Statements).

Legal Matters

     See Note 18 of the Notes to the Consolidated Financial Statements for a
review of the other outstanding legal matters.

ITEM 8:        FINANCIAL STATEMENTS

     The consolidated financial statements of the Company and the related
report of the Company's independent public accountants thereon are included in
this report at the page indicated.

                                                                  PAGE
<TABLE>
    <S>                                                             <C>
    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                        F-1
    FINANCIAL STATEMENTS:
       Consolidated Balance Sheets at December 31, 1996 and 1995    F-2
       Consolidated Statements of Operations for the Years Ended
         December 31, 1996, 1995 and 1994                           F-3
       Consolidated Statements of Shareholders' Investment for the
         Years Ended December 31, 1996, 1995 and 1994               F-4
       Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1996, 1995 and 1994                           F-5
       Notes to Consolidated Financial Statements                   F-7

</TABLE>

    ITEM 9:        CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
    -------        ---------------------------------------------

                    None

             Littlefield, Adams & Company 1996 Form 10-K, Page 10

<PAGE>   13
                                    PART III

ITEM 10:      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required is set forth under the captions "Management -
Directors and Executive Officers" in the Company's Definitive Proxy Statement
to be filed pursuant to Regulation 14A and is incorporated herein by reference.

ITEM 11:      EXECUTIVE COMPENSATION

     The information required is set forth under the captions "Management
Compensation" and "Certain Transactions" in the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A and is incorporated herein by
reference.

ITEM 12:      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required is set forth under the caption "Security
Ownership of Certain Beneficial Owners" in the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A and is incorporated herein by
reference.


ITEM 13:     CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     The information required is set forth under the caption "Certain
Transactions" in the Company's definitive Proxy Statement to be filed pursuant
to Regulation 14A and is incorporated herein by reference.


                                    PART IV

ITEM 14:       FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K

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

     (1) Consolidated Financial Statements

     Report of Independent Public Accountants
     Consolidated Balance Sheets At December 31, 1996 and 1995
     Consolidated Statements of Operations For Years Ended December 31, 1996,
1995 and 1994
     Consolidated Statements of Shareholders' Investment For Years Ended
December 31, 1996, 1995 and 1994
     Consolidated Statements of Cash Flows For Years Ended December 31, 1996,
1995 and 1994
     Notes to Consolidated Financial Statements

     (2) Exhibits

     NUMBER          DESCRIPTION OF EXHIBIT

        3.1  Certificate of Incorporation of the Registrant and all
             amendments thereto.  Incorporated by reference to exhibit 1 to the
             Registrant's Form 8-K filed November 1991.

        3.2  Certificate of Amendment to the Certificate of
             Incorporation of Littlefield, Adams & Company amending Article IV
             to increase the number of shares of Common Stock authorized for
             issuance from 3,000,000 shares, $1.00 par value, to 25,000,000
             shares, $1.00 par value. Incorporated by reference to exhibit 3.2
             to the Registrant's 1994 Form 10-K, filed March 1995.

             Littlefield, Adams & Company 1996 Form 10-K, Page 11

<PAGE>   14


        3.3  Certificate of Amendment to the Certificate of
             Incorporation of Littlefield, Adams & Company amending Article VI
             to provide for classification of the Board of Directors into three
             classes. Incorporated by reference to exhibit 3.3 to the
             Registrant's 1994 Form 10-K, filed March 1995.

        3.4  Composite copy of the Certificate of Incorporation of the
             Registrant. Incorporated by reference to exhibit 3.4 to the
             Registrant's 1994 Form 10-K, filed March 1995.

        3.5  By-laws of the Registrant, as amended.  Incorporated by
             reference to exhibit 3.5 to the Registrants 1995 Form 10-K, filed
             April 1996.

       10.1  A.  Promissory Note for $250,000, dated August 29, 1994,
                 between Collegiate Pacific Company and The Bank of Floyd.
                 Incorporated by reference to exhibit 10.2A to the Registrant's
                 1994 Form 10-K, filed March 1995.

             B.  Line of Credit of $500,000, dated August 29,
                 1994, between Collegiate Pacific Company and The Bank of
                 Floyd. Incorporated by reference to exhibit 10.2B to the
                 Registrant's 1994 Form 10-K, filed March 1995.

       10.2  Financing Agreement with Merchant Factors Corp., dated
             October 16, 1993.  Incorporated by reference to exhibit 10.27.2 to
             the Registrant's 1994 Form 10-K, filed March 1995.

       10.3  Financing Agreement with Merchant Factors Corp., dated
             January 25, 1996. Incorporated by reference to exhibit 10.9 to the
             Registrant's 1994 Form 10-K, filed March 1995.

       10.4  Settlement Agreement in the Registrant's Securities Class
             Action litigation. Incorporated by reference to exhibit 2.5 to the
             Registrant's 1994 Form 10-K, filed March 1995.

       10.5  Full and Final Release and Settlement Agreement by and
             among Littlefield, Adams & Company, Jeffers, Brook, Kreager and
             Gragg, Inc., David Ylitalo, and Michael Kreager.  Incorporated by
             reference to exhibit 10.8 to the Registrants 1995 Form 10-K, filed
             April 1996. *

       10.6  Littlefield, Adams & Company Incentive Plan. Incorporated
             by reference to exhibit 2.1 to the Registrant's 1994 Form 10-K,
             filed March 1995.

       10.7  Settlement Agreement between Harley-Davidson Motor Co. and
             Sports Imprints division of Littlefield, Adams & Company, dated
             March 1, 1996, relating to License Agreement with Harley-Davidson
             Motor Co., dated January 12, 1995.  Incorporated by reference to
             exhibit 10.7 to the Registrants 1995 Form 10-K, filed April 1996. *

       10.8  License Agreement with PepsiCo, Inc., dated as of February
             1, 1996.  Incorporated by reference to exhibit 10.9 to the
             Registrants 1995 Form 10-K, filed April 1996.

       10.9  Amendment of License Agreement with PepsiCo, Inc., dated
             October 1, 1996.

       10.10 Collateral Product License Agreement with Miller Brewing
             Company, dated October 31, 1996.

       10.11 License Agreement with Kawasaki Motors Corp., U.S.A.,
             dated January 1, 1997.

       10.12 Purchase Agreement with 5W Partnership for sale of real
             estate and all improvements located at 1302 Rockland Avenue, N.W.,
             Roanoke, Virginia, dated March 5, 1996.

       10.13 Amendment to Purchase Agreement with 5W Partnership by
             letter dated May 14, 1996.

             Littlefield, Adams & Company 1996 Form 10-K, Page 12

<PAGE>   15

       10.14 Employment Agreement with Stanley I. Halbreich, dated
             November 16, 1992.

       10.15 Amendment to Employment Agreement with Stanley I.
             Halbreich, dated January 4, 1993.

       10.16 Employment Agreement with Warren L. Rawls, dated June 21,
             1996.

       10.17 Promissory Note for $142,634.32, dated February 1, 1997,
             loan number 0105592300, payable to The Bank of Floyd, Floyd,
             Virginia.

       10.18 Business Loan Agreement, effective as of February 1, 1997,
             relating to loan number 0105592300, with The Bank of Floyd, Floyd,
             Virginia.

       10.19 Promissory Note for $468,483.83, dated January 31, 1997,
             loan number 5312501, payable to The Bank of Floyd, Floyd, Virginia.

       10.20 Business Loan Agreement, effective as of January 31, 1997,
             relating to loan number 5312501, with The Bank of Floyd, Floyd,
             Virginia.

       10.21 Commercial Security Agreement, dated January 31, 1997,
             relating to loan numbers 0105592300 and 5312501, with The Bank of
             Floyd, Floyd, Virginia.

       11    Computation of Earnings Per Share

       27    Financial Data Schedule.


*    The Company has requested confidential treatment for portions of this
     Exhibit, and such portions are omitted from the Exhibit filed herewith.  A
     complete copy of such Exhibit has been filed separately with the
     Securities and Exchange Commission.

(b) REPORTS ON FORM 8-K:

     None

             Littlefield, Adams & Company 1996 Form 10-K, Page 13

<PAGE>   16

                             ADDITIONAL INFORMATION


                             CORPORATE HEADQUARTERS

               6262 Executive Boulevard, Huber Heights, OH  45424

                         INDEPENDENT PUBLIC ACCOUNTANTS

                              ARTHUR ANDERSEN, LLP
                 901 Main Street, Suite 5600, Dallas, TX  75202

                                GENERAL COUNSEL

                            DAVID M. SIMMONDS, ESQ.*
                      P.O. Box 70091, Bellevue, WA  98007

                                 TRANSFER AGENT

                          FIRST CITY TRANSFER COMPANY
                                   Suite 206
                111 Wood Avenue South, Iselin, New Jersey  08830


     Exhibits to the Form 10-K will be provided to shareholders of the Company
upon written request addressed to Stanley I. Halbreich, Investor Relations,
Littlefield, Adams & Company, 6262 Executive Boulevard, Huber Heights, OH
45424.  Any exhibits furnished are subject to a reasonable photocopying charge.

     THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THIS FORM 10-K AND ANNUAL REPORT TO SHAREHOLDERS, NOR HAS IT PASSED UPON ITS
ACCURACY OR ADEQUACY.

     * Mr. Simmonds also serves as the Company's Chairman, Chief Executive
Officer and President.


             Littlefield, Adams & Company 1996 Form 10-K, Page 14

<PAGE>   17

                                   SIGNATURES


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


                          LITTLEFIELD, ADAMS & COMPANY


                           By: /S/ DAVID M. SIMMONDS
                               David M. Simmonds
                  Chairman, CEO, President and General Counsel
                                 March 28, 1997

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



<TABLE>
<S>                        <C>                                           <C>
                           Chairman, CEO, President and General Counsel
                           (principal executive officer)
/S/ DAVID M. SIMMONDS      Director                                      March 28, 1997
-------------------------
David M. Simmonds

                           Chief Financial Officer and Treasurer
                           (principal financial and accounting officer)
/S/ STANLEY I. HALBREICH   Director                                      March 28, 1997
-------------------------
Stanley I. Halbreich



/S/ WILLIAM E. GOETTELMAN  Director                                      March 28, 1997
-------------------------
William E. Goettelman



/S/ MARTIN B. SHIFRIN      Director                                      March 28, 1997
-------------------------
Martin B. Shifrin
</TABLE>

             Littlefield, Adams & Company 1996 Form 10-K, Page 15

<PAGE>   18

                              ARTHUR ANDERSEN LLP



                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders of
Littlefield, Adams & Company:

We have audited the accompanying consolidated balance sheets of Littlefield,
Adams & Company (a New Jersey corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations,
shareholders' investment and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements 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 Littlefield, Adams & Company
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  The Company has been
largely dependent on the sales of specific licensed products during the past
three years.  The Company's license agreement relating to the right to sell
such licensed products expired on December 31, 1996, and was not renewed.
Sales of such products represented  90 percent, 89 percent and 80 percent of
total consolidated net product sales in 1996, 1995 and 1994, respectively.  In
addition, the Company has limited financial resources available to support its
ongoing operations subsequent to termination of this license agreement.  These
matters, as further discussed in Notes 2 and 3, raise substantial doubt
concerning the ability of the Company to continue as a going concern.
Management's plans regarding these matters are also described in Notes 2 and 3.
The consolidated 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.




Dallas, Texas                              /S/  ARTHUR ANDERSEN LLP
March 7, 1997



                                     F-1
<PAGE>   19


                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                             1996         1995
                                                            (DOLLARS IN THOUSANDS)
<S>                                                         <C>          <C>
Current assets:
  Cash                                                         $54         $241
  Accounts receivable:
    Trade, net of allowances of $86 and $288
      for 1996 and 1995, respectively                        2,036        1,010
    Due from factor                                            858           --
    Note and other                                             419           43
  Inventories                                                1,579        3,332
  Prepaid expenses and other                                   142          163
                                                            ------       ------
    Total current assets                                     5,088        4,789

Property, plant and equipment, net                             558        1,109
Goodwill, net                                                  449          524
Note receivable and other assets, net of allowance of
  $0 and $75 for 1996 and 1995, respectively                    25          254
                                                            ------       ------
    TOTAL ASSETS                                            $6,120       $6,676
                                                            ======       ======
</TABLE>

                    LIABILITIES AND SHAREHOLDERS' INVESTMENT

<TABLE>
<S>                                                         <C>          <C>
Current liabilities:
  Notes payable                                                $22          $28
  Factor borrowing                                             396           --
  Revolving lines of credit                                    509        1,754
  Current portion of long-term debt                            150          456
  Accounts payable                                             974        1,041
  Accrued expenses                                           1,701        1,805
                                                            ------       ------
    Total current liabilities                                3,752        5,084

Creditors' debt settlement                                      --          109
Long-term debt, less current portion                             1           10
Deferred compensation                                           46           49
Class action settlement payable                                 --        1,400

Commitments and contingencies (Notes 13 and 18)

Shareholders' investment:
  Common stock, $1.00 par; authorized 25,000,000;
    issued 2,296,145 for 1996 and 1995; outstanding
    2,277,981 and 2,279,647 for 1996 and 1995, respectively  2,296        2,296
  Capital in excess of par value                             6,820        5,406
  Accumulated deficit                                       (6,682)      (7,575)
                                                            ------       ------
                                                             2,434          127
  Treasury stock, at cost - shares of 18,164 and
    16,498 for 1996 and 1995, respectively                    (113)        (103)
                                                            ------       ------
                                                             2,321           24
                                                            ------       ------
    TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT          $6,120       $6,676
</TABLE>                                                    ======       ======


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



                                     F-2
<PAGE>   20

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                                  For the Years Ended December 31,
                                                              1996              1995              1994
                                                          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                        <C>               <C>               <C>
Revenues:
 Net product sales                                           $11,884           $14,478           $24,329
 Other revenues                                                  152               257               228
                                                           ---------         ---------         ---------
    Total revenues                                            12,036            14,735            24,557

Costs and expenses:
 Cost of products sold                                         8,403            10,073            16,214
 Selling and administrative                                    3,242             5,752             7,081
                                                           ---------         ---------         ---------
    Total costs and expenses                                  11,645            15,825            23,295
                                                           ---------         ---------         ---------
      Income (loss) from operations                              391            (1,090)            1,262

Other income (expense):
 Gain on sale of property and equipment                          218                49                68
 Litigation settlements, net                                     395               362                --
 Interest                                                       (235)             (327)             (379)
                                                           ---------         ---------         ---------
    Total other income (expense)                                 378                84              (311)
                                                           ---------         ---------         ---------
Income (loss) before income taxes                                769            (1,006)              951

Income tax benefit (provision)                                    30                14              (294)
                                                           ---------         ---------         ---------
    Net income (loss) before extraordinary gain                  799              (992)              657

Extraordinary gain, net of
 income tax provision                                             94                --                --
                                                           ---------         ---------         ---------
    Net income (loss)                                           $893             $(992)             $657
                                                           =========         =========         =========
Weighted average common shares and common
 share equivalents outstanding (Note 1)                    2,967,812         2,275,701         2,230,391

Net income (loss) per share:
 Before extraordinary gain                                     $0.27            $(0.44)            $0.29
 Extraordinary gain                                             0.03                --                --
    Net income (loss) per share                                $0.30            $(0.44)            $0.29



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


</TABLE>

                                     F-3
<PAGE>   21


                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF SHAREHOLDER'S INVESTMENT

            FOR THE YEARS ENDED DECEMBER 31, 1994 , 1995 AND 1996
<TABLE>
<CAPTION>
                                                    Common Stock
                                                                     Capital in
                                                                     Excess of   Accumulated  Treasury
                                                   Shares    Amount  Par Value     Deficit     Stock
                                                                 (DOLLARS IN THOUSANDS)
<S>                                               <C>        <C>     <C>         <C>          <C>
Balance at December 31, 1993
 (unaudited - Note 1)                             2,371,145  $2,371      $5,501     $(7,240)    $(427)

Reissuance of 20,396 shares of treasury stock as
 contingent acquisition consideration                    --      --        (98)           --        98
Reissuance of 35,000 shares of treasury stock as
 officers' bonuses                                       --      --          47           --       167
Reissuance of 15,000 shares of treasury stock as
 directors' awards                                       --      --          24           --        72
Net income                                               --      --          --          657        --
                                                  ---------   -----       -----      -------       ---
Balance at December 31, 1994                      2,371,145   2,371       5,474       (6,583)      (90)

Retirement of 75,000 shares previously held in
 escrow as contingent acquisition consideration     (75,000)    (75)         75           --        --
Acquisition of 7,974 shares of treasury stock            --      --          --           --       (88)
Acquisition of 12,690 shares of treasury stock           --      --          --           --       (68)
Reissuance of 23,044 shares of treasury stock as
 contingent acquisition consideration                    --      --        (143)          --       143
Net loss                                                 --      --          --         (992)       --
                                                  ---------  ------      ------      -------     -----
Balance at December 31, 1995                      2,296,145   2,296       5,406       (7,575)     (103)

Acquisition of 1,666 unvested, forfeited shares
 originally granted to a former outside
 director                                                --      --          --           --       (10)
Purchase of rights to shares due a former
 officer and director as a contingent
 acquisition consideration                               --      --         (36)          --        --
Accrual of approximately 495,000 shares
 to be issued in settlement of litigation                                 1,450
Net income                                               --      --          --          893        --
                                                  ---------  ------      ------      -------     -----
Balance at December 31, 1996                      2,296,145  $2,296      $6,820      $(6,682)    $(113)
                                                  =========  ======      ======      =======     =====

</TABLE>

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


                                     F-4
<PAGE>   22


                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    For the Years Ended December 31,
                                                                    1996         1995           1994
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                            <C>          <C>          <C>
Cash flows from operating activities:
 Net income (loss)                                                    $893       $(992)         $657
 Adjustments to reconcile net income (loss) to
  net cash provided by (used in)  operating activities:
 Depreciation and amortization                                         266         545           330
 Gain on sale of property and equipment                               (218)        (49)          (69)
 Expenses paid with treasury stock                                      --          --           251
 Extraordinary gain on debt extinguishment                            (109)         --            --
 Changes in operating assets and liabilities:
  (Increase) decrease in receivables, net                           (2,260)      1,739         1,698
  (Increase) decrease in inventories, net                            1,753         292          (149)
  (Increase) decrease in prepaid expenses and other                     21           3          (105)
  Decrease in accounts payable                                         (67)     (1,106)         (478)
  Increase (decrease) in accrued expenses and other                    (54)       (771)          523
                                                                    ------      ------        ------
        Net cash provided by (used in) operating activities            225        (339)        2,658

Cash flows from investing activities:
 Proceeds from sale of property and equipment                          663         127           150
 Purchase of property, plant and equipment                             (95)       (239)         (351)
 Decrease in notes receivable and other assets                         229          70            34
                                                                    ------       -----        ------
        Net cash provided by (used in) investing activities            797         (42)         (167)

Cash flows from financing activities:
 Decrease in bank overdraft                                             --          --           (24)
 Proceeds from (payments of) line of credit and
    factor borrowings                                                 (849)        618        (2,047)
 Payment on creditors' debt settlement                                  --         (96)         (269)
 Proceeds from bank and other notes payable                             80          93           250
 Payments of bank and other notes payable                             (404)       (146)         (180)
 Purchase of rights to stock                                           (36)         --            --
 Purchases of treasury stock                                            --         (68)           --
                                                                    ------       -----        ------
        Net cash provided by (used in) financing activities         (1,209)        401        (2,270)
                                                                    ------       -----        ------
        Net increase (decrease) in cash                               (187)         20           221

Cash at beginning of year                                              241         221            --
                                                                    ------       -----        ------
Cash at end of year                                                    $54        $241          $221
                                                                    ======       =====        ======
</TABLE>

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

                                     F-5
<PAGE>   23

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       For the Years Ended December 31,
                                                                       1996         1995           1994
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                                   <C>         <C>              <C>
Supplemental disclosures of cash  flows information:
Cash paid during the year for interest                                $243         $333            $376
Cash paid during the year for income taxes                             $31         $322            $144
</TABLE>

Supplemental schedule of noncash investing and financing activities:

     In 1996, the Company accrued 495,000 shares of common stock to be issued
     in the settlement of litigation which represented $1,450 of capital in
     excess of par value (Note 18).

     In 1995, the Company received 7,974 shares of its own stock which
     satisfied a receivable of $88.

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

                                     F-6
<PAGE>   24



                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Note 1:  Summary of Significant Accounting Policies

  Basis of Presentation -
     The accompanying consolidated financial statements include the accounts of
Littlefield, Adams & Company and its now dissolved subsidiaries,  Medical Sales
Associates, Inc., Cornerstone Laboratories, Inc. and NUTECH, Inc. ("the
Company" and "LFA").  Former wholly owned subsidiaries, Collegiate Pacific
Company and Sports Imprints, Inc., were merged into Littlefield, Adams &
Company effective June 30, 1995.  Medical Sales Associates, Inc., Cornerstone
Laboratories, Inc., and NUTECH, Inc., were dissolved in January 1996, and had
no significant operations in each of the years ended December 31, 1996, 1995
and 1994, and had no consolidated assets or liabilities as of December 31, 1996
and 1995.  All significant intercompany accounts and transactions have been
eliminated in consolidation.

  Restatement of Prior Period Results -
     As a result of investigations by the Company and the Securities and
Exchange Commission and inquiries by its current independent public
accountants, the Company reviewed its accounting treatment for certain prior
year transactions and concluded that restatements were required to be made to
the previously issued financial statements for the year ended December 31,
1993.  The company has been unable to obtain a report of independent public
accountants related to the restated consolidated financial statements for 1993
due to the class action litigation as described in Note 18 and disputes between
the Company and its former auditor concerning performance of the auditor for
such years and related unpaid professional fees.

  Reclassifications -
     Certain reclassifications have been made to prior year amounts to conform
to current year presentations.

  Nature of Business -
     The Company is principally engaged in the imprinting and distribution of
young men's and boys' active wear products under various license agreements.
Prior to August 31, 1995, the Company sold its products to customers in various
markets, such as major nationwide retailers, college bookstores, resort areas
and theme parks across the United States.  On August 31, 1995, the Collegiate
Pacific division was closed.  Subsequent thereto, the Company's distribution
has been primarily to nationwide retailers.

  Inventories -
     Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market (net realizable value).  Costs include direct
materials, direct labor and certain indirect manufacturing overhead expenses.

   Property, Plant and Equipment -
     Property, plant and equipment are carried at historical cost less
accumulated depreciation and amortization. Depreciation is generally recorded
on the straight-line basis over the estimated useful lives of the  related
assets.  These are as follows:


<TABLE>
                    <S>                         <C>
                    Buildings and improvements  10-30 years
                    Machinery and equipment      3-10 years
</TABLE>


     Leasehold improvements are amortized on a straight-line basis over the
shorter of the terms of the respective leases or their estimated useful lives.
Major renewals and betterments are capitalized.  Maintenance and repairs which
do not extend the useful lives of property, plant and


                                 (Continued)
                                     F-7
<PAGE>   25

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

equipment are expensed as incurred. When property, plant and equipment are
retired or otherwise disposed of, related cost and accumulated depreciation and
amortization are removed from the accounts, and any gain or loss is reflected in
the determination of income.

  Goodwill -
     The Company has classified as goodwill the cost in excess of the fair
value of the net assets of Sports Imprints, Inc., acquired in a purchase
transaction in early 1993.  Goodwill is being amortized on a straight-line
basis over 10 years.  Accumulated amortization was approximately $300 and $225
in 1996 and 1995, respectively.

  Income Taxes -
     The Company files a consolidated federal income tax return which includes
all of its former subsidiaries.  The provision for income taxes includes
federal, state and local income taxes currently payable and those deferred
because of temporary differences between the financial statement and tax bases
of assets and liabilities.

     Deferred tax liabilities and assets are recorded based on the enacted
income tax rates which are expected to be in effect in the periods in which the
deferred tax liability or asset is expected to be settled or realized.  A
change in the tax laws or rates results in adjustments to the deferred tax
liabilities and assets.  The effect of such adjustments shall be included in
income in the period in which the laws or rates are changed.

  Treasury Stock -
     The purchase of the Company's treasury stock is recorded using the cost
method.  Issuances of treasury stock are recorded at average cost.

  Revenue Recognition -
     Revenues are generally recognized when products are shipped or legal
ownership of the products otherwise passes to the customer, and are presented
net of sales returns and allowances.

  Net Income (Loss) Per Share -
     Net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares and common share equivalents
outstanding during each year.  Any options outstanding are considered common
stock equivalents provided they have a dilutive effect on income (loss) per
share.  For 1995 such items were antidilutive and have not been included in the
per share calculation.  Net income per share for 1996 reflects the approximate
495,000 shares of the Company's stock to be issued in the securities class
action and derivative action settlements (Note 18).

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

  New Accounting Standards -
     In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which provides accounting and reporting standards for, among
other things, the transfer and servicing of financial assets, such as factoring
receivables with recourse.  SFAS No. 125 is effective for transfers and
servicing of financial assets occurring after December 31, 1996, and is to be
applied prospectively.  In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of SFAS No. 125".  SFAS
No. 127 amends


                                 (Continued)
                                     F-8
<PAGE>   26

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

the effective date for certain provisions of SFAS No. 125 to December 31,
1997.  Management of the Company does not anticipate the adoption of SFAS No.'s
125 and 127 will have a material impact on the Company's financial position or
results of operations.

     In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share (EPS) for
entities with publicly held common stock or potential common stock.  SFAS No.
128 simplifies the standards for computing EPS previously found in APB Opinion
No. 15, "Earnings per Share," and makes them comparable to international EPS
standards.  It replaces the presentation of primary EPS with a presentation of
basic EPS, which excludes dilution.  It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures.  Management of the Company does not anticipate the
adoption of SFAS No. 128 will have a material impact on the Company's financial
position or results of operations.

     In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure," which establishes standards for the disclosing
information about an entity's capital structure.  SFAS No. 129 is effective for
fiscal years ending after December 15, 1997.  Management of the Company does
not anticipate the adoption of SFAS No. 129 will have a material impact on the
Company's financial position or results of operations.

Note 2:  Future Operations

     The Company has been largely dependent on sales of Harley-Davidson Motor
Co. (Harley-Davidson) licensed products to generate cash flow from operations
and provide funds to meet the Company's obligations as they become due.  In
1996, Harley-Davidson advised the Company that it desired to upgrade the
quality of apparel associated with its trademarks, trade dress and designs and
to sell these licensed products through second-tier department stores rather
than mass merchandisers.  Harley-Davidson offered to enter into a new license
agreement which would have allowed the Company to move from the mass
merchandising market into the second-tier department store market.  The Company
declined this offer based on its evaluation of Harley-Davidson as a second-tier
department store license.  Accordingly, the Company's Harley-Davidson license
agreement expired on December 31, 1996.  Sales of Harley-Davidson licensed
products accounted for 90%, 89%, and 80% of total consolidated net product
sales for the years ended December 31, 1996, 1995 and 1994, respectively.  The
expiration of the Harley-Davidson license will have, at a minimum, a short-term
material adverse effect on future results of operations, and in the event that
the Company cannot generate sufficient sales of other licensed products, it is
probable that the Company will not be able to continue as a going concern.  The
Company also has limited financial resources available to support existing
operations until such time sales of other licensed products are sufficient to
generate positive cash flow from operations at levels necessary to meet the
Company's obligations as they become due.  These factors raise substantial
doubt concerning the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon the
ongoing support of its stockholders, customers and creditors and its ability to
generate sufficient sales of other licensed products subsequent to the
termination of the Harley-Davidson license agreement, effective December 31,
1996. The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business.

     In response to the matters discussed above, the Company has obtained new
licenses as described in Note 3, and continues to pursue other new license
opportunities to replace the sales volume which was attributable to the
Company's Harley-Davidson licensed products.  The Company had net income before
extraordinary gain of $799 for the year ended December 31, 1996, and had
working capital of $1,336 at December 31, 1996.  Furthermore, in 1995, the
Company closed its Collegiate Pacific Division, which incurred an operating
loss of $495 for the year ended


                                 (Continued)
                                     F-9
<PAGE>   27

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

December 31, 1995.  Closure of that division has eliminated the negative
operating cash flow associated with those operations.  The sale of various fixed
assets primarily related to Collegiate Pacific in Roanoke, Virginia, generated
$663 of cash flow during 1996, and was used primarily to reduce debt.  The
Company closed its Sturgeon Bay, Wisconsin, office in August 1996, and
consolidated its operations in Huber Heights, Ohio. The consolidation of
operations in Ohio has resulted in significant cost savings, and the Company
believes these cost savings will continue.

     As part of its effort to enhance and stabilize its business through the
acquisition of significant new licenses and the development of new product
lines, during 1996, the Company entered into a two-year license agreement with
PepsiCo, Inc., for its soft drink brands and a two-year license agreement with
Miller Brewing Company.  In 1997, the Company entered into a three-year license
agreement with Kawasaki Motors Corp., U.S.A.  The Company also expanded its
business by entering the boxer shorts segment of the apparel market under each
of these licenses.  The Company continues to pursue other new license
opportunities (Note 3).

     In spite of lower sales levels in 1996 compared to 1995, income from
operations increased from a loss of $1,090 in 1995 to income of $391 in 1996.
The Company believes that this increase in operating results, collection of
current accounts receivable, increased control of inventory purchasing and the
anticipated 1997 sales of newly acquired licensed products will help the
Company's cash flow during 1997 and support the Company's effort to achieve
sufficient sales revenue from new licenses to offset the reduction in revenue
resulting from the expiration of the Harley-Davidson license.  There can be no
assurance, however, that the anticipated level of 1997 sales will be achieved,
or that, even if it is, the revenue from such sales will be sufficient to
sustain the Company for any particular period.

     The Company expects to renew its agreement with Merchant Factors Corp.
when the current agreement expires in August 1997, although there can be no
assurance that the Company will, or will be able to, do so.  The availability
of cash flow from operations subsequent to December 31, 1996, is dependent on
the ability of the Company to acquire and sell licensed products other than
Harley-Davidson throughout 1997.  The success of the Company's new licensed
product sales with Pepsi and Mountain Dew, Miller Brewing Company and Kawasaki
Motors Corp., U.S.A. is an integral part of that effort.  There can be no
assurance, however, that sales of these new licensed products will be
sufficient to sustain the Company's operations (Note 3).


Note 3:  Concentration of Sales and Credit Risk

  Significant Customers-
     The Company's customers are reputable national retail discount chains.
Effective February 1, 1996, the Company entered into a factoring arrangement
for all accounts, except the Company's largest retail customer.  The Company,
at its option and its credit risk, can factor accounts receivable that the
factor does not approve for credit (Note 8).  Historically, bad debt expense
has been minimal.

     Sales to customers which individually exceeded 10% of consolidated net
product sales were as follows:


<TABLE>
                                      1996  1995  1994
                                      ----  ----  ----
                          <S>         <C>   <C>   <C>
                          Customer 1   56%   66%   40%
                          Customer 2   16%    4%   10%
                                      ----  ----  ----
                          Total        72%   70%   50%
                                      ====  ====  ====
</TABLE>


                                  (Continued)
                                     F-10
<PAGE>   28

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     Trade receivable balances relating to these two customers were
approximately $2,117 and $439 at December 31, 1996.  The trade receivable
balances relating to the two customers were $731 and $197 at December 31, 1995.

  Significant Licensors-
     The Company had one significant license, Harley-Davidson, which expired on
December 31, 1996.  Harley-Davidson licensed sales accounted for 90%, 89% and
80% of total consolidated net product sales in 1996, 1995 and 1994.

     Current licenses and their respective expiration dates are as follows:


<TABLE>
<CAPTION>
                  LICENSE                           EXPIRATION
                  -----------------------------  -------------
                  <S>                            <C>
                  PepsiCo, Inc.                   January 1998
                  Miller Brewing Company         December 1998
                  Kawasaki Motors Corp., U.S.A.  February 2000
                  Hershey Foods Corporation      November 1998
                  Heinz U. S. A.                 December 1998
</TABLE>


     Refer to Note 2 for discussion of the Harley-Davidson license expiration
and its impact on the Company.  In light of the expiration of the
Harley-Davidson license as discussed above, the Company has developed, and will
continue to pursue, new license opportunities in order to replace sales of
Harley-Davidson licensed products.  However, there can be no assurance that
revenues from other such licenses will be sufficient to replace the revenues
that were attributable to Harley-Davidson licensed products (Note 2).

     As of December 31, 1996, the minimum  royalties to be paid in future years
are:


<TABLE>
                                   <S>   <C>
                                   1997  $45
                                   1998    5
                                         ---
                                         $50
                                         ===
</TABLE>

Note 4:  Inventories
--------------------

       Inventories at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                              1996     1995
                                                              ----     ----
           <S>                                              <C>      <C>
           Raw materials                                    $1,192   $1,838
           Finished goods                                      537    1,895
           Allowance for inventory obsolescence               (150)    (401)
                                                            ------   ------
                                                            $1,579   $3,332
                                                            ======   ======
</TABLE>


                                 (Continued)
                                     F-11

<PAGE>   29

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


Note 5:  Property, Plant and Equipment
--------------------------------------

Property, plant and equipment at December 31 is summarized as follows:
<TABLE>
<CAPTION>

                                                                1996     1995
                                                                ----     ---
           <S>                                                 <C>       <C>
           Land                                                $   --      $95
           Building and improvements                              266      906
           Machinery and equipment                                843    1,609
                                                               ------   ------
                                                                1,109    2,610

           Less:  Accumulated depreciation and amortization      (551)  (1,501)
                                                                -----   ------
                                                                $ 558   $1,109
                                                                =====   ======
</TABLE>


     As a result of the Company closing its Collegiate Pacific division, the
Company has included in the balance of property, plant and equipment at
December 31, 1996 and 1995, respectively, assets to be disposed of with net
book values of approximately $52 and $206 of machinery and equipment and $0 and
$382 related to the land and building of the Collegiate Pacific division.
Management believes the fair value of the above assets exceeds the above stated
net book values at December 31, 1996 and anticipates disposition of these
assets within the next two years.

     Selected results of operations of the Collegiate Pacific division for the
years ended December 31, 1996, 1995 and 1994, and which will be non-recurring
in the future, are summarized below:


<TABLE>
<CAPTION>
                                1996     1995     1994
                               -----  -------  -------
<S>                            <C>    <C>      <C>
Revenues                         $25   $1,527   $3,756
Expenses                          --   (2,022)  (3,817)
Income (loss) from operations     25     (495)     (61)
Depreciation                      --      103       93
Gain on sales of assets          216       34       68
</TABLE>

Note 6:  Recoverability of Long-Lived Assets

     During the fourth quarter of 1995, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of".  SFAS No. 121 requires an assessment of the recoverability
of the Company's investment in long-lived assets to be held and used in
operations whenever events or circumstances indicate that their carrying
amounts may not be recoverable.  Such assessment requires that the future cash
flows associated with the long-lived assets be estimated over their remaining
useful lives and an impairment loss recognized when the future cash flows are
less than the carrying value of such assets.

     The Company has assessed the recoverability of its investment in
long-lived assets to be held and used in operations under the guidelines set
forth in SFAS No. 121 and determined that no impairment loss was required as of
December 31, 1996 or 1995.  Such assessment required the Company to make
certain estimates of future sales volumes and prices which are expected to
occur over the remaining useful lives of its long-lived assets.  Such
long-lived assets

                                 (Continued)
                                     F-12
<PAGE>   30

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


primarily consist of the Company's investment in property, plant and
equipment, and goodwill.  The Company's estimates of these factors are based
upon management's belief that the Company will be successful in developing new
licensed products which generate sales subsequent to 1996, which are sufficient
to offset the loss of revenues from the expiration of the Harley-Davidson
license (Notes 2 and 3).

     Although the Company believes it has a reasonable basis for its estimates
of future sales volumes and prices, it is reasonably possible that the
Company's actual performance could materially differ from such estimates.
Management expects that the Company's performance during 1997 will provide
additional evidence to confirm or disprove such future estimates.  Management
also believes that if such estimates are not confirmed, revisions to such
estimates could result in a material impairment loss on its long-lived assets
constituting all or a material portion of the carrying value of the Company's
property, plant and equipment, and goodwill which were $558 and $449,
respectively, at December 31, 1996.


Note 7:  Accrued Expenses

     Included in accrued expenses at December 31, 1996, are $1,052 of accrued
royalties, $214 of professional fees, and $57 of accrued income taxes.

     The December 31, 1995, balance of accrued expenses consists primarily of
$976 of accrued royalties, $229 of professional fees and $76 of accrued income
taxes.


Note 8:  Revolving Lines of Credit

     In January 1992, Collegiate Pacific Company entered into a line of credit
agreement with The Bank of Floyd, Virginia for a maximum principal amount of
$750 payable on demand, but not less than monthly payments of 0.25% of the
outstanding principal balance and accrued interest.  Effective August 1994, the
Bank of Floyd reduced the maximum principal amount available to $500 payable on
demand.  In addition, the Bank of Floyd set the interest rate on the line of
credit at prime plus 1%.  The Company is required to make monthly payments of
0.25% of the outstanding principal balance and accrued interest until the line
is paid in full.  Collateral consists of all of the plant and equipment of
Collegiate Pacific Company and was guaranteed by Littlefield, Adams & Company.
At December 31, 1996, there was no remaining availability under this line of
credit.  In March 1997, the Company signed two new promissory notes, effective
as of January 31, 1997 and February 1, 1997 in the amounts of $468 and $143,
respectively, evidencing its outstanding obligations to The Bank of Floyd.  The
notes, bearing an annual interest rate of prime plus 1%, provide for monthly
payments on terms substantially similar to the note payable and the line of
credit in place at December 31, 1996.  The new promissory notes are payable on
demand and are collateralized by the Company's fixed assets.  The Company is
currently in discussions with The Bank of Floyd to convert these new promissory
notes to a term loan to be collateralized by the Company's fixed assets.  There
can be no assurances, however, that such discussions will be successful.

     The Company had an accounts receivable financing agreement with Merchant
Factors Corp., which expired January 31, 1996, and which allowed the Company to
borrow up to 75% of net qualified accounts receivable.  The balance as of
December 31, 1995, was approximately $1,269 and was repaid as the receivables
were collected. The agreement bore annual interest at prime plus 3.5%.  This
loan was secured by the Company's accounts receivable.  Additionally, Merchant
Factors Corp., when needed, issued purchase order guarantees and/or letters of
credit against this line of credit which are collateralized by the related
inventory purchases.


                                 (Continued)

                                     F-13


<PAGE>   31

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


     For the year ended December 31, 1995, Merchant Factors Corp., under a
special loan arrangement, lent the Company additional amounts not exceeding
$600 at any one time, secured by the Company's inventory.  This arrangement was
repaid in full in January 1996.

     Effective February 1996, the Company entered into a new discount factoring
agreement with Merchant Factors Corp., which expires in August 1997.  All of
the Company's accounts receivable which Merchant Factors Corp. approves for
credit, excluding Wal-Mart, are being factored at the rate of 1 1/8%.  Accounts
that are credit approved by Merchant Factors Corp. are at its risk, which
minimizes the Company's credit risk.  The Company, at its option, can factor at
a rate of 1 1/8%, with recourse, accounts that Merchant Factors Corp. does not
approve for credit.  The servicing of all factored accounts is done by Merchant
Factors Corp.  Under the factoring agreement, the Company may borrow up to 75%
of the net accounts receivable at an annual interest rate of prime plus 2.5%.
Borrowings are secured by the Company's accounts receivable and inventories.
At December 31, 1996, the Company had factored receivables amounting to $858,
most of which had been approved for credit by Merchant Factors Corp.

     In addition, the Company has an accounts receivable financing arrangement
with Merchant Factors Corp. covering only its accounts receivable from
Wal-Mart, which amounted to $2,117 at December 31, 1996.  This agreement allows
the Company to borrow up to 75% of its net receivables from Wal-Mart at an
annual interest rate of prime plus 5%.  Borrowings are secured by the Company's
accounts receivable and inventories.  The Company does not pay any factoring
fees for the financing of the Wal-Mart accounts receivable.  At December 31,
1996, outstanding purchase order guarantees issued by Merchant Factors Corp.
amounted to approximately $48.

     At December 31, 1996, the combined remaining borrowing availability from
Merchant Factors Corp. was approximately $1,705.

     The weighted average interest rates on short-term borrowings were 11.0%,
12.3% and 11.0% as of December 31, 1996, 1995 and 1994, respectively.


       Outstanding balances are as follows:

<TABLE>
<CAPTION>
                                                          December 31,
                                                          --------------
                                                            1996    1995
                                                          ------  ------
       <S>                                                <C>     <C>
               The Bank of Floyd                            $469    $485
               Merchant Factors Corp. - Line of Credit        40   1,269

                                                          ------  ------
                  Subtotal Revolving Lines of Credit         509   1,754

               Merchant Factors Corp. - Factor Borrowing     396      --

                                                          ------  ------
                  Total                                     $905  $1,754
                                                          ======  ======
</TABLE>


                                 (Continued)

                                     F-14

<PAGE>   32


                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Note 9:  Long-Term Debt
<TABLE>
<CAPTION>
                                                                 December 31,
                                                        ------------------------
                                                                1996    1995
                                                                ----    ----
Long-term debt balances are as follows:
<S>                                                             <C>    <C>
  Mortgage payable, principal callable after
     January 1995, interest at 9.38%, due July 1, 2003,
     payable monthly, collateralized by real property            $--    $253

  Note payable to a bank, principal callable on demand,
     due September 1, 1999, interest at 8.75%, payable
     monthly, collateralized by machinery and equipment          147     192

  Other                                                            4      21

                                                                 ---     ---
           Total debt                                            151     466
     Less - current portion                                      150     456
                                                                 ---     ---
                                                                  $1     $10
                                                                 ===     ===

</TABLE>

     Following are the maturities of long-term debt outstanding at December
31, 1996:

                               1998                               $    1

Note 10:  Creditor's Debt Settlement

     In December 1991,  Sports Imprints, Inc., (the Company's former wholly
owned subsidiary acquired in 1993) entered into a plan of reorganization with
its creditors and a bank pursuant to Chapter 11 of the U.S. Bankruptcy Code.
As a result, Sports Imprints, Inc., negotiated a payment plan with its
creditors that included extending payments through 1996.  Of the total of $204
to be repaid as of December 31, 1995, $95 is included in accrued expenses in
the accompanying financial statements and the remaining $109 is shown as
creditors' debt settlement.

     In July 1996, an order was entered by a court relieving the Company of
$109 of liability for the settlement of the creditors' debt.  As a result, an
extraordinary gain from the extinguishment of debt was recognized in 1996 as
follows:


<TABLE>
                          <S>                       <C>
                          Extinguishment of debt    $109
                          Legal costs                 (6)
                                                    ----
                                                     103
                                                    ----
                          Income taxes (9)
                          Extraordinary gain, net   $ 94
                                                    ====

</TABLE>

                                 (Continued)

                                     F-15


<PAGE>   33

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


Note 11:  Common Stock

     The Registrant's Common Stock is traded on the American Stock Exchange
(the "Exchange") under the symbol "LFA".  However, the Registrant does not
satisfy all the financial guidelines for continued listing on the Exchange and
accordingly there can be no assurance that such listing will be continued.

     The Exchange, as a matter of policy, will consider the suspension of
trading in or delisting of a security when, in the opinion of the Exchange, the
financial condition and/or operating results of the issuer appear to be
unsatisfactory.  To assist in the application of this and other listing
policies, the Exchange has adopted certain guidelines under which it will
normally give consideration to suspending dealings in or delisting a security.
The Exchange's financial guidelines include as criteria for the Exchange to
consider suspending dealings in or delisting securities that the issuer (i) has
shareholders' equity of less than $2 million if such issuer had losses in two
of its three most recent fiscal years, or (ii) has shareholders' equity of less
than $4 million if such issuer had losses in three of its four most recent
fiscal years, or (iii) has sustained losses which are so substantial in
relation to its overall operations or its existing financial resources, or its
financial condition has become so impaired that it appears questionable, in the
opinion of the Exchange, as to whether such issuer will be able to continue
operations and/or meet its obligations as they mature.

     The Company, which at December 31, 1995, had losses in three of its four
most recent fiscal years, and shareholders' equity at that date of
approximately $24, had at December 31, 1996, income in two of its three most
recent fiscal years.  The Company therefore met the American Stock Exchange
financial guidelines summarized in clauses (i) and (ii) above.  However, the
Exchange may also suspend trading in or delist the Company's securities under
the guideline summarized in clause (iii) above if, in the opinion of the
Exchange, the financial condition of the Company has become so impaired that it
appears questionable as to whether the Company will be able to continue
operations and/or meet its obligations as they mature.  In addition, the
Exchange is not limited or restricted by these guidelines, and the Exchange may
at any time, in view of the circumstances in each case (and regardless of
whether the issuer meets or fails to meet any or all of such guidelines),
suspend dealings in or delist any security when, in the opinion of the
Exchange, such security is unsuitable for continued trading on the Exchange.
For these reasons, no assurance can be given that the Exchange, which continues
to monitor the Company's progress, will not suspend trading in or delist the
Company's stock.


Note 12:  Sales and Repurchases of Treasury Stock

     During 1996, the Company reacquired 1,666 unvested, forfeited shares which
were originally granted to an outside director.

     During 1995, the Company reissued 23,044 shares as contingent
consideration for the Sports Imprints, Inc., acquisition in connection with the
earn-out agreement for 1994.  Additionally, 75,000 shares previously held in
escrow as contingent acquisition consideration were retired and an additional
20,664 shares were reacquired.

     In 1994, the Company reissued 20,396 shares as contingent consideration
for the Sports Imprints, Inc., acquisition in connection with the earn-out
agreement for 1993.  Additionally, 35,000 shares were reissued to officers as
bonuses and 15,000 shares were reissued to directors as awards.


                                 (Continued)
                                    F-16


<PAGE>   34
                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


Note 13:  Leases

     In March 1987, the Company shut down its Gardena, California, facility
and, in conjunction therewith, sold the machinery and equipment at that
location to an unrelated third party through a "sales type" lease agreement.
Under this agreement, the Company would receive payments of approximately $2
per month for 10 years.  The net present value of these payments was $20 and
$32 as of December 31, 1995 and 1994, respectively, of which $0 and $12,
respectively, was included in other assets.  The Company also renegotiated its
lease of the California facility. The agreement provided for annual rentals of
$72 over a ten-year period beginning July 1, 1987.  The Company also entered
into another agreement to sublease the facility at $188 annually over the same
period of the principal lease.  Rental income under these agreements (before
payments to the lessor) was $111, $179 and $195 in 1996, 1995 and 1994,
respectively.

     In June 1996, the Company and the sub-lessee agreed to a settlement of the
remaining payments owed under the sub-lease agreement.  The settlement required
the sub-lessee to deliver $100 of blank T-shirts to the Company, which were
delivered to the Company in 1996.

     In August 1996, the Company and the lessor agreed to a settlement of the
lease agreement for $36, payable in twelve equal monthly payments, without
interest.

     The Company leases production, office and warehouse space in Huber
Heights, Ohio.  Lease payments are $189, $196 and $202 for years 1997, 1998 and
1999, respectively.

     The Company leases showroom and office space in the Empire State Building,
New York, New York, with payments of $59 per year through 2003 and $54 in 2004.

     Total rent expense was $313, $330 and $342 for 1996, 1995 and 1994,
respectively.


Following are the future minimum lease payments under non-cancelable
operating leases as of December 31, 1996:

<TABLE>
<CAPTION>

                                 <S>                   <C>
                                 1997                  $248
                                 1998                   255
                                 1999                   261
                                 2000                    59
                                 2001                    59
                                 Thereafter             172
                                                    -------
                                     Total          $ 1,054
</TABLE>

                                 (Continued)

                                    F-17


<PAGE>   35
                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


Note 14:  Deferred Compensation

     The Company has deferred compensation agreements with certain retired
employees under which the Company agreed to pay certain amounts annually over a
ten-year period subsequent to retirement.  The present value of such payments
was charged ratably to expense over the years of active employment.  In
addition, the Company has incentive plans for which charges to operations have
been made generally based upon certain defined levels of income before taxes.
The plan has been frozen and no additional benefits are accruing.  The accrued
but unfunded liability at December 31, 1996 and 1995, amounted to $78 and $80,
respectively.  The amount currently due of $32 is included in accrued expenses
at December 31, 1996.


Note 15:  Income Taxes

     Composition of the income tax benefit (provision) consisted of the
following:


<TABLE>
<CAPTION>
                      Years Ended December 31,
                       1996      1995     1994
<S>                  <C>         <C>      <C>
Federal -
   Current               $3       $--       $--
   Deferred              --        --        --
                      -----       ----    -----
                         $3       $--       $--
Local and State -
   Current             $(33)      $14     $(294)
   Deferred              --        --        --
                      -----       ----    -----
                       $(33)      $14     $(294)
Total -
   Current             $(30)      $14     $(294)
   Deferred              --        --        --
                      -----       ----    -----
                       $(30)      $14     $(294)
                      =====       ====    =====
</TABLE>

     The following summarizes the estimated tax effect of significant
cumulative temporary differences which comprise the deferred tax assets:


<TABLE>
<CAPTION>
                                                                    December 31,
                                                                  1996     1995
<S>                                                             <C>      <C>
Differences in depreciation and amortization                        $87      $75
Accruals and reserves not deducted for tax purposes until paid      558      845
Net operating loss carryforwards                                  2,427    2,596
Deferred tax assets                                              $3,072   $3,516
Valuation allowance                                              (3,072)  (3,516)
                                                                 ------   ------
                                                                    $--      $--
                                                                 ======   ======
</TABLE>



                                  (Continued)

                                     F-18


<PAGE>   36
                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


     The Company has recorded valuation allowances for the entire amount of
deferred income tax assets and net operating loss carryforwards at December 31,
1996 and 1995.  As of December 31, 1996, the Company had net operating loss
(NOL) carryforwards of approximately $7,137 for federal income tax purposes
available to reduce future taxable income.  The carryforwards expire in 1999
through 2010 if not utilized.

     The Company's ability to use its NOL carryforwards to offset future
taxable income is subject to restrictions enacted in the Internal Revenue Code
of 1986 as amended (the "Code").  These restrictions provide for limitations on
the Company's utilization of its NOL carryforwards following certain ownership
changes described in the Code.  As a result of ownership changes in 1993, $673
of the Company's existing NOL carryforwards are subject to the limitation of
which the maximum amount which can be utilized is $315 in 1997 and $61
thereafter.

     The reconciliation of the U.S. statutory tax rate to the effective income
tax rate is as follows:


<TABLE>
<CAPTION>
                                         Years Ended December 31,
                                         1996      1995      1994
<S>                                    <C>       <C>       <C>

United States statutory rate              34.0%   (34.0)%   34.0%
Amortization of goodwill                   4.7      3.4      0.8
State income taxes                        (4.3)    (1.4)    30.9
NOL benefit (recognized) unrecognized    (38.3)    30.6    (34.8)
                                         -----     -----   -----
                                          (3.9)%   (1.4)%   30.9%
                                         =====     =====    ====
</TABLE>

Note 16:  Related-Party Transactions

     During 1995 and 1994, the Company paid approximately $33 and $55,
respectively, in sales commissions to John Stuth Associates, Inc. (JSA, Inc.),
a sales and marketing company founded by John K. Stuth, former Chairman of the
Board of Directors, Chief Executive Officer and President of Littlefield, Adams
& Company.  The relationship between the Company and JSA, Inc.,  has been
terminated.  Thus, no such payments were made in 1996.

     The Company incurred approximately $92 and $81 in legal fees and
reimbursed expenses for the years of 1995 and 1994, respectively, to David M.
Simmonds, Esquire.  Mr. Simmonds, who is a member of the Board of Directors,
also serves as General Counsel for the Company.  Mr. Simmonds was elected
President of the Company by the Board of Directors on May 30, 1995, and Chief
Executive Officer of the Company and interim Chairman of the Board on July 12,
1995.  On March 5, 1996, Mr. Simmonds was elected Chairman of the Board.  As a
result, Mr. Simmonds is now compensated as an employee.

     During May 1995, John K. Stuth, former Chairman of the Board of Directors,
Chief Executive Officer and President, and Warren L. Rawls, Secretary and
former Chief Financial Officer, sold back to the Company 9,482 and 3,208
shares, respectively, of the Company's common stock, for approximately $51 and
$17, respectively.  The shares had been received by Mr. Stuth and Mr. Rawls as
stock grants under the Company's Stock Incentive Plan and were returned to the
Company's treasury.


                                 (Continued)

                                    F-19
<PAGE>   37

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Note 17:  Incentive Plan (the "Plan")

     During 1994, the Company adopted the Littlefield, Adams & Company
Incentive Plan (the "Plan").  All options referred to herein were granted, and
are governed, under the Plan.  There are a maximum of 1,000,000 shares of the
Company's common stock available for issuance under the Plan.  Under the Plan,
incentive stock options, nonstatutory stock options, performance units,
restricted stock awards, stock appreciation rights, and cash and stock bonus
awards may be granted to key employees, directors, and certain consultants and
advisors of the Company.  Awards granted are approved by a committee of the
Company's board of directors.  Each award will vest pursuant to individual
award agreements.  Through December 31, 1996, stock options granted pursuant to
the Plan have been one hundred percent vested on the date of grant.
Unexercised stock options will expire at the end of the term set forth pursuant
to the individual option agreements, or ten years from the date of grant,
whichever is sooner. The exercise price allowable for stock options granted
under the Plan depends on the type of option but, in any case, may not be less
than the greater of either (a) the par value per share of the stock, or (b)
fifty percent of the fair market value (as defined in the Plan) per share of
the stock on the date of grant.  Through December 31, 1996, stock options
granted pursuant to the Plan have had an exercise price equal to one hundred
percent of the fair market value (as defined in the Plan) per share of the
stock on the date of grant.

     A summary of the status of options granted pursuant to the Plan at
December 31, 1996, 1995 and 1994, and changes during the years then ended, is
presented below:


<TABLE>
<CAPTION>
                                             1996               1995             1994
                                     -----------------  ----------------- ----------------
                                              Weighted           Weighted         Weighted
                                              Average            Average          Average
                                              Exercise           Exercise         Exercise
                                      Shares   Price    Shares    Price   Shares    Price
                                     -----------------  ----------------- ----------------
<S>                                 <C>         <C>      <C>       <C>     <C>      <C>
Outstanding at beginning of year     352,500    $6.02   325,000    $6.13        --  $  --
Granted                              645,000     1.22    27,500     4.74   325,000   6.13
Exercised                                 --       --        --       --        --     --
Forfeited                           (313,500)    6.01        --       --        --     --
Expired                                   --       --        --       --        --     --

Outstanding at end of year           684,000     1.50   352,500     6.02   325,000   6.13
                                     -------            -------            -------
Exercisable at end of year           684,000    $1.50   352,500    $6.02   325,000  $6.13

Weighted average fair
 value of options granted             $0.68               $3.14

</TABLE>

                                 (Continued)

                                    F-20

<PAGE>   38

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     The following table summarizes information about stock options outstanding
     at December 31, 1996:



<TABLE>
<CAPTION>
                                    Options Outstanding
                            ----------------------------------
                                                                   Options Exercisable
                                          Weighted              --------------------------
                                           Average    Weighted      Number       Weighted
                                          Remaining   Average   Exercisable at   Average
     Grant        Exercise    Number     Contractual  Exercise   December 31,    Exercise
      Date         Price    Outstanding     Life       Price         1996         Price
----------------  --------  -----------  -----------  --------  --------------  ----------
<S>               <C>       <C>          <C>          <C>       <C>             <C>
October 21, 1994     $6.13       25,000  7.8 years       $6.13          25,000       $6.13
May 9, 1995           6.88       10,000  8.3 years        6.88          10,000        6.88
December 2, 1995      2.19       10,000  8.9 years        2.19          10,000        2.19
May 28, 1996          1.25      309,000  9.4 years        1.25         309,000        1.25
June 4, 1996          2.00        5,000  9.4 years        2.00           5,000        2.00
August 5, 1996        1.00      300,000  9.6 years        1.00         300,000        1.00
December 4, 1996      3.38       25,000  9.9 years        3.38          25,000        3.38
                            -----------                         --------------
                                684,000  9.4 years       $1.50         684,000       $1.50
                            ===========                         ==============
</TABLE>


     The Company accounts for the Plan under APB Opinion No. 25, under which no
compensation cost has been recognized for stock options granted under the Plan.
Had compensation cost for stock options granted under the Plan been determined
consistent with SFAS Statement No. 123, the Company's net income (loss) and net
income (loss) per share would have been the following pro forma amounts:


<TABLE>
<CAPTION>
                                                     1996     1995
                                                     -----  --------
           <S>                          <C>          <C>    <C>

           Net income (loss)            As reported   $893    $(992)
                                        Pro forma     $511  $(1,078)

           Net income (loss) per share  As reported  $0.30   $(0.44)
                                        Pro forma    $0.17   $(0.47)
</TABLE>


     The fair value of each grant is estimated on the date of the grant using
the Modified Black-Scholes American option pricing model with the following
weighted average assumptions used:


<TABLE>
<CAPTION>
                                               1996       1995
                                             ---------  ---------
              <S>                            <C>        <C>

              Risk free interest rate             6.1%       5.9%
              Estimated dividend yield            0.0%       0.0%
              Estimated expected lives       3.2 years  5.1 years
              Estimated expected volatility        77%        72%
</TABLE>


     During 1996, 1995 and 1994 no compensation expense was recorded for
options granted because the exercise price was equal to fair market value on
such measurement date.


                                 (Continued)

                                    F-21

<PAGE>   39
                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


Note 18:  Litigation

     Securities Class Action

     The Company and certain of its current and past officers and directors,
and others, were named as defendants in three actions brought by individual
plaintiffs, purportedly representing persons who purchased securities of the
Company during a total period running from July 1, 1991 through May 17, 1994.
These actions were filed by the plaintiffs on July 22,  1993, August 13, 1993
and March 16, 1994.  These actions were consolidated for discovery and pretrial
purposes in the United States District Court of the Western District of Texas
and are captioned In re Littlefield, Adams & Co. Securities Litigation, Civil
Action No. SA 93 CA 0561 ("Consolidated Action").  The plaintiffs alleged that
the Company and certain of its current and past officers and directors, and
others violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10(b)-5 promulgated thereunder, and other law, as a result of alleged
misrepresentations and omissions in connection with the annual report for 1992,
the 1993 quarterly reports, and certain press releases.  The complaint also
alleged a claim for treble-damages under the Racketeer Influenced and Corrupt
Organization Act, 18 U.S.C. Sec. 1964.  On February 21, 1995, the Company
reached an agreement with the plaintiffs to settle these claims, as well as
certain related claims involving other parties.  The settlement has been
approved by the Court and a final order of dismissal was entered  on January
27, 1997.  As no appeal was filed within 30 days following the entry of the
dismissal order, that order is now final and non-appealable.  Under the terms
of the settlement, the Company will issue $1,400 (approximately 478,000 shares)
of the Company's stock and pay $210 in cash to the members of the class to
settle the claims brought by the securities litigation plaintiffs.  A total of
$1,450 payable in the Company's stock, which consists of the $1,400 referred to
above and $50 as part of the derivative action settlement discussed below, has
been classified as capital in excess of par value as of December 31, 1996.  At
December 31, 1995, these amounts were classified as liabilities rather than
shareholders' investment due to the uncertainty of the final resolution.  In
return for the cash paid and the stock to be issued, the Company received
releases from the class plaintiffs and the other defendants.  The number of
shares to be issued is to be based on the average closing price of the
Company's stock for the 20 trading days immediately preceding the end of the
appeal period following entry by the Court of the final order of dismissal.
The issuance of these shares will result in an increase of approximately 22% in
the number of the Company's shares outstanding. Based on the recommendation of
the magistrate judge in the derivative action, the Company expects to receive
approximately $70 cash, net of attorneys' fees and expenses, from a $130
payment made by the Company's former  auditor as part of the derivative action
settlement.  The $210 cash portion of the Company's settlement obligation was
received by the Company from a third party in connection with the settlement of
a related matter, and was paid into a court monitored escrow account
established for the benefit of the securities litigation plaintiffs.  Upon the
final conclusion of the litigation, the Company received an additional $150
from the same third party.


     Charlotte E. Picard, Derivatively on Behalf of Littlefield, Adams &
Company, v. Curtis A. Younts, Jr., et al.-

     This action was filed in the United States District Court, Western
District of Texas on June 29, 1994, under Cause No. SA 94 CA 0544.  The Company
was named as a nominal defendant.  The complaint alleged that certain current
and former officers and directors of the Company, certain of the Company's
former lawyers, and the Company's former auditors "damaged LFA by causing or
permitting LFA to commit securities fraud and by damaging or destroying the
Company's reputation," and otherwise.  The parties to this action, with the
exception of certain of the Company's former lawyers, have settled this action.
The settlement agreement has been approved by the Court and a final order of
dismissal was entered on January 27, 1997.  As no appeal was filed within 30
days following the entry of the dismissal order, that order is now final and
non-appealable. Under the terms of the settlement, the Company's former
auditors will pay $130 to the Company (of which the Company expects to receive
$70, net of attorneys' fees


                                 (Continued)

                                    F-22

<PAGE>   40

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

and expenses) and the Company will issue $50 (approximately 17,000 shares) of
the Company's stock to those former auditors in settlement of claims for fees.
The $130 has been placed into a Court monitored escrow account for the
benefit of the Company.  In addition, (1) John K. Stuth, the Company's former
Chairman of the Board and CEO, will relinquish to the Company rights to 5,000
shares of LFA stock, and rights that he had as of February 21, 1995 under
options to acquire 50,000 shares of LFA stock (the options expired unexercised
on July 12, 1996); (2) Director Stanley Halbreich, currently the Company's
Treasurer and Chief Financial Officer, will relinquish to the Company rights to
5,000 shares of LFA stock; and (3) former President Wade Hudman will return
1,000 shares of LFA stock to the Company.


     Littlefield, Adams & Company v. Younts, et al.-

     This action was filed on June 15, 1994, in the Texas District Court in the
57th Judicial District, Bexar County, Texas, by the Company against its former
Chairman, Curtis A. Younts, Jr., his wife and various of their affiliated
entities seeking the immediate repayment of $912 and other amounts alleged to
have been misappropriated by the defendants.  Younts filed a counterclaim
against the Company seeking compensation for an unstated amount for services
and expense funds he claims to have provided the Company.  The Company denies
that it owes any amount to Younts.  As a result of Younts agreeing to
contribute $330 to settle the class action litigation described above, all of
the parties have agreed to dismiss their claims and provide mutual releases of
liability.


     Curtis A. Younts, Jr. v. Littlefield, Adams & Company, et al.-

     This action was filed on June 16, 1994, in the Texas District Court in the
169th Judicial District, Bell County, Texas, against the Company and one of its
officers by its former Chairman, Curtis A. Younts, Jr.  Mr. Younts sought an
unspecified amount for the reasonable value of his services, allegedly rendered
on behalf of the Company since 1991.  The Company denied that it owed any
amount to Younts.  As a result of Younts agreeing to contribute $330 to settle
the class action litigation described above, all of the parties had agreed to
dismiss their claims and provide mutual releases of liability.  Notwithstanding
the foregoing, this case was dismissed by the Court, on its own initiative, in
August 1996, for want of prosecution.


     Atkisson v. Littlefield, Adams & Company and Curtis A. Younts, Jr.

     The Company and a former chief executive officer have been named as
defendants in an action filed on October 15, 1995, by A. Carroll Atkisson in
the United States District Court for the Western District of Virginia, Cause
No. 95-1107-R.  Atkisson was the owner of a company known as Personal
Screening, Inc.  In approximately 1991, Atkisson transferred all of his stock
in Personal Screening, Inc., to LFA, in exchange for shares of LFA.
Subsequently, Personal Screening, Inc. was merged into Collegiate Pacific.
Thereafter, Atkisson served, for a period of time, as a director of LFA and an
officer of Collegiate Pacific.

     Atkisson alleges that LFA has wrongly deprived him of a total of 52,500
(post-split) shares of LFA stock, to which he claims he is entitled in
compensation for services rendered as a director, pursuant to an alleged stock
option agreement, and otherwise.  He alleges that he is entitled to damages, in
lieu of the referenced stock, of approximately $370.  He also alleges that he
is entitled to damages of $16, which he claims to be owed by virtue of LFA's
breach of an employment agreement under which LFA allegedly promised to pay him
$4 per month salary for four months in


                                 (Continued)

                                    F-23


<PAGE>   41
                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


1993, but failed to do so.  In an apparently separate claim, he alleges what
appears to be a claim for compensatory damages of not less than $600.
Atkisson's complaint seeks judgment of $1,000.

     The Company answered and filed a counterclaim on December 22, 1995.  The
Company denies Atkisson's allegations against it, denies that it is indebted to
Atkisson in any amount and contends that it is entitled to recovery against
Atkisson on its counterclaims.  In its counterclaim, the Company asserts causes
of action for breach of fiduciary duty, negligence, fraud, conspiracy and
violation of the Texas Deceptive Trade Practices Act.

     Based on the opinion of the Company's General Counsel that the Company has
factual and legal defenses to the plaintiff's claims against it, the Company
does not expect the outcome of this litigation will have a material adverse
effect on the Company's financial position or results of operations.


     Littlefield, Adams & Co. v. Midlantic Bank, N.A.

     On October 17, 1995, the Company commenced an action against Midlantic
National Bank, N.A., in the District Court, 131st Judicial District, Bexar
County, Texas.  The Company alleged that Midlantic, acting as transfer agent
for LFA, breached its contract and common law duties by facilitating the
wrongful transfer of shares of common stock, and in connection with a scheme
concocted by LFA's former chief executive officer, Curtis Younts, Jr., to steal
and convert shares of LFA's common stock which were legally and/or beneficially
owned by LFA.

     On December 15, 1995, Midlantic Bank counterclaimed on grounds that LFA's
action was brought in bad faith and for purposes of harassment.  Midlantic
sought unspecified damages, including attorneys fees and costs incurred in
defending the action, and damages under the Texas Deceptive Trade Practices
Act.  The Company denied Midlantic's allegations.

     The Company and Midlantic Bank reached an agreement to settle their
claims, pursuant to which the action was dismissed in August 1996.  In
connection with the settlement, the Company recorded other income of $325, net
of associated legal fees, in 1996.


                                 (Continued)


                                    F-24

<PAGE>   42

                LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 1996, 1995 AND 1994

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     Jerrold Luloff v. Littlefield, Adams & Company, et al.-

     On May 9, 1996, the Company's former President, Co-CEO and director filed
a lawsuit against the Company and certain of its current officers and directors
in The Court of Common Pleas of Franklin County, Ohio.  The plaintiff sought
combined damages of $284, plus punitive damages and attorney's fees, based on
an alleged breach by the Company of a purported severance agreement related to
the plaintiff's termination/resignation as an officer, employee and director
of the Company.

     The Company answered and filed a counterclaim on June 28, 1996.  In its
counterclaim, the Company asserted causes of action for breach of fiduciary
duty, mismanagement and waste, conversion and defalcation, and for judgment
declaring that an alleged agreement under which Luloff claimed rights and
benefits created no such rights and entitled him to no such benefits.  The
Company denied the plaintiff's allegations against it and contended that it was
entitled to recover against Luloff on its counterclaim.

     In September 1996, a settlement was reached, whereunder the Company agreed
to pay Luloff a total of $36 over two years, without interest, and Luloff
released his rights to 23,044 shares of stock which he had earned under the
agreement pursuant to which the Company acquired Sports Imprints, Inc., in
1993.




                                    F-25
<PAGE>   43



            EXHIBIT INDEX REQUIRED BY ITEM 601 OF REGULATION S-K

      Number Description of Exhibit
      ------ ----------------------
        3.1  Certificate of Incorporation of the Registrant and all
             amendments thereto.  Incorporated by reference to exhibit 1 to the
             Registrant's Form 8-K filed November 1991.

        3.2  Certificate of Amendment to the Certificate of
             Incorporation of Littlefield, Adams & Company amending Article IV
             to increase the number of shares of common stock authorized for
             issuance from 3,000,000 shares, $1.00 par value, to 25,000,000
             shares, $1.00 par value. Incorporated by reference to exhibit 3.2
             to the Registrant's 1994 Form 10-K, filed March 1995.

        3.3  Certificate of Amendment to the Certificate of
             Incorporation of Littlefield, Adams & Company amending Article VI
             to provide for classification of the Board of Directors into three
             classes. Incorporated by reference to exhibit 3.3 to the
             Registrant's 1994 Form 10-K, filed March 1995.

        3.4  Composite copy of the Certificate of Incorporation of the
             Registrant. Incorporated by reference to exhibit 3.4 to the
             Registrant's 1994 Form 10-K, filed March 1995.

        3.5  By laws of the Registrant, as amended.  Incorporated by
             reference to exhibit 3.5 to the Registrants 1995 Form 10-K, filed
             April 1996.

       10.1  A.  Promissory Note for $250,000, dated August 29, 1994,
                 between Collegiate Pacific Company and The Bank of Floyd.
                 Incorporated by reference to exhibit 10.2A to the Registrant's
                 1994 Form 10-K, filed March 1995.

             B.  Line of Credit of $500,000, dated August 29,
                 1994, between Collegiate Pacific Company and The Bank of
                 Floyd. Incorporated by reference to exhibit 10.2B to the
                 Registrant's 1994 Form 10-K, filed March 1995.

       10.2  Financing Agreement with Merchant Factors Corp., dated
             October 16, 1993.  Incorporated by reference to exhibit 10.27.2 to
             the Registrant's 1994 Form 10-K, filed March 1995.

       10.3  Financing Agreement with Merchant Factors Corp., dated
             January 25, 1996. Incorporated by reference to exhibit 10.9 to the
             Registrant's 1994 Form 10-K, filed March 1995.

       10.4  Settlement Agreement in the Registrant's Securities Class
             Action litigation. Incorporated by reference to exhibit 2.5 to the
             Registrant's 1994 Form 10-K, filed March 1995.

       10.5  Full and Final Release and Settlement Agreement by and
             among Littlefield, Adams & Company, Jeffers, Brook, Kreager and
             Gragg, Inc., David Ylitalo, and Michael Kreager.  Incorporated by
             reference to exhibit 10.8 to the Registrants 1995 Form 10-K, filed
             April 1996. *

       10.6  Littlefield, Adams & Company Incentive Plan. Incorporated
             by reference to exhibit 2.1 to the Registrant's 1994 Form 10-K,
             filed March 1995.

       10.7  Settlement Agreement between Harley-Davidson Motor Co. and
             Sports Imprints division of Littlefield, Adams & Company, dated
             March 1, 1996, relating to License Agreement with Harley-Davidson
             Motor Co., dated January 12, 1995.  Incorporated by reference to
             exhibit 10.7 to the Registrants 1995 Form 10-K, filed April 1996. *


             Littlefield, Adams & Company 1996 Form 10-K

<PAGE>   44


            EXHIBIT INDEX REQUIRED BY ITEM 601 OF REGULATION S-K
                                 (Continued)

      Number Description of Exhibit
      ------ ----------------------

       10.8  License Agreement with PepsiCo, Inc., dated as of February
             1, 1996.  Incorporated by reference to exhibit 10.9 to the
             Registrants 1995 Form 10-K, filed April 1996.

       10.9  Amendment of License Agreement with PepsiCo, Inc., dated
             October 1, 1996.

       10.10 Collateral Product License Agreement with Miller Brewing
             Company, dated October 31, 1996.

       10.11 License Agreement with Kawasaki Motors Corp., U.S.A.,
             dated January 1, 1997.

       10.12 Purchase Agreement with 5W Partnership for sale of real
             estate and all improvements located at 1302 Rockland Avenue, N.W.,
             Roanoke, Virginia, dated March 5, 1996.

       10.13 Amendment to Purchase Agreement with 5W Partnership by
             letter dated May 14, 1996.

       10.14 Employment Agreement with Stanley I. Halbreich, dated
             November 16, 1992.

       10.15 Amendment to Employment Agreement with Stanley I.
             Halbreich, dated January 4, 1993.

       10.16 Employment Agreement with Warren L. Rawls, dated June 21,
             1996.

       10.17 Promissory Note for $142,634.32, dated February 1, 1997,
             loan number 0105592300, payable to The Bank of Floyd, Floyd,
             Virginia.

       10.18 Business Loan Agreement, effective as of February 1, 1997,
             relating to loan number 0105592300, with The Bank of Floyd, Floyd,
             Virginia.

       10.19 Promissory Note for $468,483.83, dated January 31, 1997,
             loan number 5312501, payable to The Bank of Floyd, Floyd, Virginia.

       10.20 Business Loan Agreement, effective as of January 31, 1997,
             relating to loan number 5312501, with The Bank of Floyd, Floyd,
             Virginia.

       10.21 Commercial Security Agreement, dated January 31, 1997,
             relating to loan numbers 0105592300 and 5312501, with The Bank of
             Floyd, Floyd, Virginia.

       11    Computation of Earnings Per Share

       27    Financial Data Schedule.


*    The Company has requested confidential treatment for portions of this
     Exhibit, and such portions are omitted from the Exhibit filed herewith.  A
     complete copy of such Exhibit has been filed separately with the
     Securities and Exchange Commission.



             Littlefield, Adams & Company 1996 Form 10-K