SECURITIES AND EXCHANGE COMMISSION
 
                             Washington, D.C. 20549


 
                                    FORM 10-Q

             Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


For the quarterly period ended November 29, 1997

Commission File No.  0-19369


                   LITTLE SWITZERLAND, INC.

    (Exact name of registrant as specified in its charter)

Delaware                            66-0476514
(State of Incorporation)            (I.R.S Employer
                                    Identification No.)

161-B Crown Bay Cruise Ship Port
St. Thomas U.S.V.I.                             00802
(Address of Principal Executive Offices)   (Zip Code)

(809) 776-2010
(Registrant's Telephone Number, Including Area Code)


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



At December 27, 1997, 8,467,359 shares of $.01 par value
common stock of the registrant were outstanding.




<PAGE>





                            LITTLE SWITZERLAND, INC.

                               INDEX TO FORM 10-Q

                     FOR THE QUARTER ENDED November 29, 1997


                                                              PAGE
PART I.         FINANCIAL INFORMATION

Item 1.         Financial Statements

      Consolidated Balance Sheets as of
      November 29, 1997 (unaudited) and
      May 31, 1997                                             3

      Consolidated Statements of Income (unaudited)
      for the three and six months ended
      November 29, 1997 and November 30, 1996                  4
 
 
      Consolidated Statements of Cash Flows (unaudited)
      for the six months ended November 29,1997 and
      November 30, 1996                                        5

      Notes to Consolidated Financial
      Statements (unaudited)                                   6-11


Item 2.  Management's Discussion and Analysis
         of Financial Condition and Results
         of Operations                                        12-16


Item 3.  Quantitative and Qualitative Disclosures
         about Market Risk                                    17
 

PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K                     17

Signature Page                                                18



<PAGE>

PART I.  FINANCIAL INFORMATION                                       FORM 10-Q
Item 1.  Financial Statements                                        Page 3
 
                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                      (in thousands except per share data)

                                                     November 29,     May 31,
                          ASSETS                         1997          1997   
                          ------                      ---------      ---------
Current assets:                                       (unaudited)
   Cash and cash equivalents..........................$  4,416       $  1,710
   Accounts receivable................................   3,288          2,083
   Inventory..........................................  52,075         44,728
   Prepaid income taxes...............................      83           ---
   Prepaid expenses and other current assets..........   3,715          2,172 
                                                      ---------      --------- 
         Total current assets.........................  63,577         50,693 
                                                      ---------      ---------

Property, plant and equipment, at cost................  39,147         38,565
   Less -- Accumulated depreciation................... (16,483)       (15,201)
                                                      ---------      --------- 
                                                        22,664         23,364 
                                                      ---------      ---------  

Other assets..........................................   3,162          3,334 
                                                      ---------      ---------
 
         Total assets.................................$ 89,403       $ 77,391 
                                                      =========      ========= 
 
               LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
   Current portion of long term debt..................$  2,225       $  2,225
   Unsecured notes payable............................  15,525          8,100
   Accounts payable...................................  12,572          7,002
   Accrued and currently deferred income taxes........     ---            429
   Other accrued expenses and deferred income.........   3,037          2,431 
                                                      ---------      ---------
 
         Total current liabilities....................  33,359         20,187

Long term debt........................................   5,281          6,119

Deferred income taxes.................................     186            186 
                                                      ---------      ---------
         Total liabilities............................  38,826         26,492 
                                                      ---------      ---------

Commitments and contingencies.........................     ---            ---

Minority interest.....................................   1,619          1,619  
                                                      ---------      ---------
Stockholders' equity:                                 
  Preferred stock, $.01 par value--
    Authorized--5,000 shares
    Issued and outstanding--none......................     ---            ---
  Common stock, $.01 par value--
    Authorized--20,000 shares
    Issued and outstanding--8,462 shares
      at November 29, 1997 and at May 31, 1997 .......      85             85
Capital in excess of par..............................  14,814         14,811
Retained earnings.....................................  34,059         34,384 
                                                      ---------      ---------

      Total stockholders' equity...................... 48,958          49,280 
                                                      ---------      ---------
      Total liabilities, minority interest            
         and stockholders' equity.....................$ 89,403       $ 77,391 
                                                      =========      =========
 
          See accompanying notes to consolidated financial statements

<PAGE>

PART I. FINANCIAL INFORMATION                                        FORM 10-Q
Item 1. Financial statements                                         Page 4


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                      (in thousands except per share data)
                                   (unaudited)



                               For the three               For the six
                               months ended                months ended
                          November 29,  November 30,  November 29,  November 30,
                              1997          1996          1997         1996    
                           ---------     ---------      ---------   ---------
 
Net sales..................$ 21,034      $ 17,458       $ 41,404    $ 33,326
Cost of sales..............  11,997         9,820         23,710      18,792 
                           ---------     ---------      ---------   ---------

Gross profit...............   9,037         7,638         17,694      14,534
 
Selling, general and
administrative expenses....   8,826         8,019         17,306      15,948

Business interruption
insurance (proceeds).......     --           (132)           --         (560)
                           ---------     ---------      ---------   ---------

  Operating income(loss)...     211          (249)           388        (854)

Interest expense, net......     426           436            796         768 
                           ---------     ---------      ---------   ---------

   (Loss) before
      income taxes.........    (215)         (685)          (408)     (1,622)

(Benefit) for
income taxes...............     (47)         (125)           (82)       (293)
                           ---------     ---------      ---------   ---------

Net (loss).................$   (168)     $   (560)     $    (326)     (1,329)
                           =========     =========     ==========     ======= 
                           
Net (loss)
   Per share...............$  (0.02)     $  (0.07)     $   (0.04)   $  (0.16)
                           =========     =========     ==========     =======

Weighted average shares
   outstanding.............   8,676         8,494          8,679       8,476 
                           =========     =========     ==========     =======



            See accompany notes to consolidated financial statements





<PAGE>

PART I. FINANCIAL INFORMATION                                        FORM 10-Q
Item 1. Financial statements                                         Page 5

                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)

                                                      For the six months ended
                                                     November 29,  November 30,
Cash flows from operating activities:                    1997         1996
                                                        -------      -------
   
Net (loss)............................................$   (325)    $ (1,329)
     Adjustments to reconcile net (loss) to net cash
       provided by (used in) operating activities--
       Depreciation...................................   1,282        1,571
       Changes in assets and liabilities:
         (Increase) decrease in accounts receivable...  (1,206)          28
         (Increase) in inventory......................  (7,347)      (6,148)
         (Increase) in prepaid income taxes...........     (83)         --
         (Increase) in prepaid expenses
           and other current assets...................  (1,542)      (1,587)
          Decrease in other assets....................     171          119
          Increase in accounts payable................   5,570        5,152
          Increase (decrease) in other accrued
            expenses and deferred income..............     606         (757)
         (Decrease) in accrued and currently
           deferred income taxes......................    (428)      (1,490)
                                                        -------      -------
   Net cash (used in) operating activities............  (3,302)      (4,441)
                                                        -------      -------
Cash flows from investing activities:
     Capital expenditures.............................    (582)      (2,651)
                                                        -------      -------
   Net cash (used in) investing activities............    (582)      (2,651)
                                                        -------      -------
Cash flows from financing activities:
     Proceeds from unsecured notes payable............  21,125       12,600
     Repayments of unsecured notes payable............ (13,700)      (6,100)
     Repayments of long term borrowings...............    (838)         --
     Issuance of common stock.........................       3            9
                                                        -------      -------
Net cash provided by financing activities.............   6,590        6,509
                                                        -------      -------

Net increase (decrease) in cash and cash equivalents..   2,706         (583)

Cash and cash equivalents, beginning of period........   1,710         5,393
                                                        -------      -------
Cash and cash equivalents, end of period..............$  4,416     $  4,810 
                                                        =======      ======= 

During the six months ended November 29, 1997 and November 30, 1996, the
Company paid income taxes of $428 and $1,197, respectively, and paid interest
of $785 and $709, respectively.

           See accompanying notes to consolidated financial statements

<PAGE>

FINANCIAL INFORMATION                                                FORM 10-Q
Item 1.  Financial statements                                        Page 6
 

                 LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                 Notes to Consolidated Financial Statements
 
                             (unaudited)

1. CONSOLIDATED FINANCIAL STATEMENTS

     The accompanying  consolidated  financial statements include the operations
of Little  Switzerland,  Inc. (the "Company") and its wholly owned subsidiaries,
L.S.  Holding,  Inc.  and L.S.  Wholesale,  Inc.  All  significant  intercompany
balances have been eliminated in consolidation. The interim financial statements
are  unaudited  and,  in the  opinion of  management,  contain  all  adjustments
necessary to present fairly the Company's  financial position as of November 29,
1997 and November 30, 1996 and the results of its  operations and cash flows for
the interim  periods  presented.  It is suggested  that these interim  financial
statements be read in  conjunction  with the financial  statements and the notes
thereto included in the Company's latest report on Form 10-K.

     The  results  of  operations  for the  interim  periods  presented  are not
necessarily indicative of the results to be expected for a full fiscal year, due
to the seasonal nature of the Company's operations.

2. USE OF ESTIMATES

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


3. TRANSACTIONS WITH AFFILIATES

     The  Company  enters  into a number  of  transactions  with  Town & Country
Corporation and its affiliates ("Town & Country"), of which one of the Company's
directors is controlling  shareholder  and one of the Company's  directors is an
executive officer.  The Company purchases a portion of its merchandise from Town
&  Country  at  prices  that  management   believes   approximate   arm's-length
transactions.

<PAGE>

                                                                     FORM 10-Q
                                                                     Page 7


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


4. CREDIT ARRANGEMENTS

     The Company  has  available a total of $22.2  million in  unsecured  credit
facilities, of which $2.5 million is available for borrowing. Approximately $4.2
million of the credit  facilities is utilized to secure  customs bonds and other
bank guarantees required in the normal course of business.  Any unfunded portion
of  the  facilities  can be  withdrawn  at the  bank's  discretion.  Outstanding
borrowings against these credit facilities totaled  approximately  $15.5 million
as of November 29, 1997.  Additionally,  in February 1996,  the Company  secured
term debt of  approximately  $8.9 million from its two lead banks to finance the
acquisition of the fixtures,  leasehold  rights and inventories of two stores in
Barbados.  Interest  on  this  debt  accrues  at  an  annual  interest  rate  of
approximately  7.25%, and is payable monthly.  The principal is payable in equal
quarterly  payments  over a four  year  period,  commencing  March  1997.  As of
November 29, 1997, the Company had $7.5 million of term debt outstanding and was
in compliance with all restrictive  covenants  related to its unsecured and term
debt agreements. Additionally, the Company has available separate facilities for
foreign exchange contracts.


5. EARNINGS PER SHARE

     Earnings  per share is based on the weighted  average  number of common and
dilutive  common  equivalent  shares  (stock  options)  outstanding  during each
period.


6. ACCOUNTING FOR INCOME TAXES

     The Company follows the liability  method of accounting for income taxes as
set forth in SFAS No.  109,  Accounting  for Income  Taxes.  Under SFAS No. 109,
deferred tax assets and  liabilities  are recognized for the expected future tax
consequences  of events that have been included in the  financial  statements or
tax  returns.  The amount of  deferred  tax asset or  liability  is based on the
difference  between  the  financial  statement  and  tax  bases  of  assets  and
liabilities  using  enacted  tax  rates in  effect  for the  year in  which  the
differences are expected to reverse.


<PAGE>

                                                                    FORM 10-Q
                                                                    Page 8


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)

7.  OTHER ASSETS


     Other  assets  consist  primarily  of amounts  related to non-  competition
agreements, rental deposits and the excess of cost over the fair market value of
the  net  assets  of  the  business  acquired  (goodwill).  Amounts  related  to
non-competition  agreements  are  amortized  over the  lives  of the  respective
agreements.  Amounts  related to goodwill are being amortized over periods of up
to  10  years.  Accumulated  amortization  totaled  approximately  $495,000  and
$340,000 at November 29, 1997 and May 31, 1997, respectively.

     The Company  accounts for long-lived  and  intangible  assets in accordance
with SFAS No. 121,  Accounting for the  Impairment of Long-lived  Assets and for
Long-lived Assets to be Disposed of. The Company  continually reviews applicable
assets for events or changes in circumstances  which might indicate the carrying
amount  of  the  assets  may  not  be  recoverable.  The  Company  assesses  the
recoverability  of these assets by  determining  whether the  amortization  over
their remaining lives can be recovered  through  projected  undiscounted  future
results.  The amount of  impairment,  if any,  is  measured  based on  projected
discounted  future  results  using a discount rate  commensurate  with the risks
involved. No such impairment existed as of November 29, 1997.


8.  STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 - EARNINGS
       PER SHARE

 
     In March 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 128 ("SFAS No.  128"),  Earnings per Share,
which   supersedes   Accounting   Principles  Board  Opinion  15,  the  existing
authoritative  guidance.  SFAS No. 128 is designed to improve the  earnings  per
share  information  provided in the  financial  statements  by  simplifying  the
existing computational  guidelines,  revising the disclosure  requirements,  and
increasing the  comparability of earnings per share on an  international  basis.
SFAS No. 128 is effective for financial  statements  for both interim and annual
periods  ending  after  December  15,  1997  and  requires  restatement  of  all
prior-period earnings per share data presented.

<PAGE>

                                                                
                                                                      FORM 10-Q
                                                                      Page 9

                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


     The new statement  modifies the  calculations  of primary and fully diluted
earnings per share and replaces them with basic and diluted  earnings per share.
Basic  earnings per share includes no dilution and is calculated by dividing net
income by the  weighted  average  number of common  shares  outstanding  for the
period.  Diluted  earnings per share  reflects the  potential  dilution of stock
options that could share in the earnings of an entity,  similar to fully diluted
earnings per share.  Earnings per share in these financial  statements would not
be affected under the new pronouncement.
 

9.  STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 -
          ACCOUNTING FOR STOCK-BASED COMPENSATION

     In December 1995, the Financial  Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation,  which became effective for fiscal
years  beginning  after  December  15,  1995.  SFAS No.  123  requires  employee
stock-based  compensation  to be either recorded or disclosed at its fair value.
Management  continues to account for  employee  stock-based  compensation  under
Accounting  Principles Board Opinion No. 25 and did not adopt the new accounting
provision  for  employee  stock-based  compensation  under  SFAS  No.  123.  The
additional  required  disclosures  will be included in the Company's fiscal year
end financial statements.


10.  ADVERTISING

     The Company expenses the costs of advertising as advertisements are printed
and distributed.  The Company's advertising consists primarily of advertisements
with local,  regional  and  national  travel  magazines  which are produced on a
periodic  basis  and  distributed  to  visiting  tourists,  and  fees  paid  for
promotional  "port  lecturer"   programs  directed   primarily  at  cruise  ship
passengers.







<PAGE>

                                                                     FORM 10-Q
                                                                     Page 10


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
 
                                   (unaudited)


11.  COMMITMENTS AND CONTINGENCIES


HURRICANE DAMAGE
 
     In September 1995,  Hurricanes Luis and Marilyn inflicted damage to several
of the  Company's  stores and  caused  significant  damage to  various  islands'
infrastructures,  including hotels and other tourist facilities.  As of November
20, 1996, all stores had reopened.

     The Company has settled all  outstanding  claims  related to the hurricanes
with its  insurance  carrier.  In  connection  with this final  settlement,  the
Company   received   approximately   $13.4  million  in  property  and  business
interruption   insurance   proceeds.   The  Company   recorded  a  net  gain  of
approximately  $4.7 million in fiscal 1996, after write-offs  related to damaged
assets  of  approximately  $8.1  million,   including  furniture  and  fixtures,
inventory  and other assets  related to stores  affected by the  hurricanes.  In
addition,  approximately  $560,000,  representing fiscal 1997 lost profits for a
store in Marigot not  reopened  until  November  1996,  was recorded as deferred
income on the  Company's  consolidated  balance sheet as of June 1, 1996. In the
three and six month  periods  ended  November  30,  1996,  the Company  recorded
$132,000  and  $560,000,   respectively,   as  business  interruption  insurance
proceeds.


EMPLOYEE DEFALCATION

     In July 1997, management disclosed to its independent auditors that certain
transactions may have been recorded in error on the books of the Company for the
fiscal  year  ended  May 31,  1997.  As a result,  the  Company  engaged  Arthur
Andersen,  LLP to evaluate the matter and determine  the impact,  if any, on the
Company's previously and currently reported  consolidated  financial statements.
After  extensive  review,  analysis and  evaluation,  which focused on unlocated
differences in cash balances,  management believes that an employee  defalcation
occurred  during the 1997  fiscal  year.  The  employee  was able to  circumvent
existing internal  controls largely due to lapses in appropriate  segregation of


<PAGE>

                                                                     FORM 10-Q
                                                                     Page 11


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
 
                                   (unaudited)


duties regarding cash deposits and disbursements,  inter-bank transfers and bank
account  reconciliations.  These lapses in the  segregation  of such duties were
further  exacerbated by the resignation of the Company's  Assistant Treasurer on
February  28,  1997,  which  office was not filled  until  April 29,  1997.  The
estimated loss of approximately $2.4 million was classified as Selling,  General
and  Administrative  expense in the  consolidated  financial  statements for the
fiscal year ended May 31, 1997. Selling, General and Administrative expenses for
the three and six month  periods  ended  November 30, 1996 include  $481,000 and
$758,000, respectively, of defalcation loss expense.
 
     The Company has  insurance  coverage  with a maximum  claim  limitation  of
$1,000,000  (less a  $25,000  deductible).  A claim  has been  submitted  to the
Company's fidelity bond carrier and the Company is seeking  restitution from the
employee,  but the Company does not know what, if any, of the funds are still in
the  possession  or under the control of the  employee.  Recoveries  relating to
these losses, if any, will be recorded as income in the period(s) received.






















<PAGE>

                                                                     FORM 10-Q
                                                                     Page 12


PART I. FINANCIAL INFORMATION


ITEM 2.            Management's Discussion and Analysis
               of Financial Condition and Results of Operations


RESULTS OF OPERATIONS


NET SALES

     Net sales for the second quarter ended November 29, 1997 were $21.0 million
or 20.5%  higher than net sales of $17.5  million for the same period last year.
Net sales of $41.4 million for the six month period ended November 29, 1997 were
24.2% higher than net sales of $33.3 million for the  corresponding  period last
year.

     Net sales for the stores  which were open for the full three  month  period
this year and last year  improved to $20.1  million or 15.6% from $17.4  million
last year.  Net sales of $38.7  million for stores  which were open for the full
six month period this year  increased  17.0% from net sales of $33.1 million for
the same period last year.

     Management  attributes  both  improvements  to strong  sales in Alaska,  an
increase in tourism in the  Caribbean,  concentration  on core product lines and
suppliers and the Company's  aggressive  promotional  programs  directed  toward
Caribbean cruise ships, hotels and resorts.


GROSS PROFIT

     Gross  profit as a  percentage  of net sales during the three and six month
periods ended November 29, 1997 were 43.0% and 42.7%, respectively,  compared to
the three and six month  periods  ended  November  30,  1996 of 43.7% and 43.6%,
respectively.  Management  attributes the decline in gross margin  percentage to
clearance markdowns to liquidate  discontinued  product lines, and the effect of
relative changes in the sales mix.






<PAGE>

                                                                    FORM 10-Q
                                                                    Page 13
 
PART I. FINANCIAL INFORMATION


ITEM 2.            Management's Discussion and Analysis
               of Financial Condition and Results of Operations



SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Second  quarter  Selling,  General  and  Administrative  expenses  ("SG&A")
increased  10.1% to $8.8 million for the three month  period ended  November 29,
1997 from $8.0 million for the same period last year. As a percent to net sales,
SG&A expenses  decreased to 42.0% for the quarter  ended  November 29, 1997 from
45.9% for the same quarter  last year.  Six month SG&A  increased  8.5% to $17.3
million for the period ended  November 29, 1997 from $15.9  million for the same
period last year. As a percent to net sales, SG&A decreased to 41.8% for the six
month  period  this year from 47.9% for the same  period  last year.  The dollar
increase of  approximately  $1.4 million is  primarily  due to new stores in St.
Lucia  and  in  Skagway,   Alaska,   and  non-recurring   professional  fees  of
approximately $400,000 for the three month period and $660,000 for the six month
period  ended  November  29, 1997 which are related to the  Company's  strategic
planning  efforts.  Also,  the  three and six month  periods  last year  include
$481,000 and $758,000, respectively, of defalcation loss expense. The percent to
sales  decrease is primarily  due to the effect of the sales  increases on fixed
expenses.


EMPLOYEE DEFALCATION

     In July 1997, management disclosed to its independent auditors that certain
transactions  may have been recorded in error on the books of the Company.  As a
result,  the Company  engaged  Arthur  Andersen,  LLP to evaluate the matter and
determine  the  impact,  if  any,  on  the  Company's   consolidated   financial
statements.  After extensive review,  analysis and evaluation,  which focused on
unlocated  differences in cash balances,  management determined that an employee
theft occurred  during the fiscal year ended May 31, 1997. The employee was able
to circumvent  existing  internal  controls largely due to lapses in appropriate
segregation  of duties  regarding  cash deposits and  disbursements,  inter-bank
transfers and bank account  reconciliations.  These lapses in the segregation of
such  duties  were  further  exacerbated  by the  resignation  of the  Company's
Assistant  Treasurer  on February  28,  1997,  which office was not filled until

<PAGE>

                                                                    FORM 10-Q
                                                                    Page 14
 
PART I. FINANCIAL INFORMATION


ITEM 2.            Management's Discussion and Analysis
               of Financial Condition and Results of Operations



April 29, 1997. The estimated loss of approximately  $2.4 million was charged to
Selling,  General and  Administrative  expense for the fiscal year ended May 31,
1997.
 
     As a result of the charge,  the Company filed amended financial  statements
on Form 10-Q for each of the quarters within the fiscal year.  Accordingly,  the
comparative  consolidated  Statements of Income for the three month period ended
November 30, 1996 reflects a net loss of $560,000 or $0.07 per share,  including
a charge to  administrative  expense of $481,000  which,  after tax,  negatively
impacted net income and  earnings per share by $394,000 and $.05,  respectively.
For the six month period ended November 30, 1996, the  comparative  consolidated
Statement  of Income  reflects  a net loss of $1.3  million  or $0.16 per share,
including a charge to general  and  administrative  expense of  $758,000  which,
after tax, negatively impacted net income and earnings per share by $621,000 and
$0.08, respectively.


OTHER

     Net interest  expense for the quarter was $426,000  compared to $436,000 in
the same period last year.  For the six month period,  net interest  expense was
$796,000  compared  to $768,000  in the same  period  last year.  This  increase
reflects higher average borrowings this year.

     The Company's effective tax rates for the three and six month periods ended
November 29, 1997 was approximately 21% and 20%, respectively. For the three and
six  month  periods  ended  November  30,  1996,  the  effective  tax  rate  was
approximately 18%.


FORWARD-LOOKING STATEMENTS

     This quarterly  report on Form 10-Q contains  certain  statements  that are
"forward-looking   statements"  as  that  term  is  defined  under  the  Private
Securities  Litigation  Reform Act of 1995 and releases issued by the Securities
and Exchange Commission.  The words "believe," "expect," "anticipate," "intend,"


<PAGE>

                                                                    FORM 10-Q
                                                                    Page 15
 
PART I. FINANCIAL INFORMATION

ITEM 2.            Management's Discussion and Analysis
               of Financial Condition and Results of Operations


"estimate" and other  expressions  which are  predictions of or indicate  future
events  and  trends  and which do not  relate  to  historical  matters  identify
forward-looking statements. Forward-looking statements involve known and unknown
risks,  uncertainties  and other  factors,  which may cause the actual  results,
performance or achievements of the Company to differ materially from anticipated
future  results,  performance  or  achievements  expressed  or  implied  by such
forward- looking  statements.  The Company  undertakes no obligation to publicly
update or  revise  any  forward-looking  statement,  whether  as a result of new
information, future events or otherwise.

     The future operating  results and performance  trends of the Company may be
affected by a number of factors,  including,  without limitation, the following:
(i) the frequency of tourist visits to the locations where the Company maintains
retail stores (ii) the Company's ability to retain  relationships with its major
suppliers  of product for resale  (iii)  weather in the  Company's  markets (iv)
actions of the Company's  competitors  and the  Company's  ability to respond to
such  actions (v)  economic  conditions  that affect the buying  patterns of the
Company's  customers (vi)  availability of new tourist markets for expansion and
(vii) the continued  success of the  Company's  efforts to implement its planned
strategic initiatives.


LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operations  during the six month period ended November 29,
1997 was $3.3  million,  compared to $4.4  million for the same six month period
last year.  The  decrease in net cash used in  operations  primarily  reflects a
lower net loss, an increase in accrued  expenses and a lower decrease in accrued
taxes  this  year,  partially  offset by higher  seasonal  increases  in account
receivables and merchandise inventories this year.

     The Company's  working  capital  position as of November 29, 1997 decreased
slightly to $30.2  million from $30.5  million at May 31, 1997.  Current  ratios
were 1.9 and 2.5 as of the same periods, respectively. Capital expenditures were
approximately $582 thousand during the six month period ended November 29, 1997,
compared to $2.7 million during the same period last year.

<PAGE>


                                                                     FORM 10-Q
                                                                     Page 16
 

 
PART I. FINANCIAL INFORMATION


ITEM 2.            Management's Discussion and Analysis
               of Financial Condition and Results of Operations


     The Company  has  available a total of $22.2  million in  unsecured  credit
facilities, of which $2.5 million is available for borrowing. Approximately $4.2
million of the credit  facilities is utilized to secure  customs bonds and other
bank guarantees required in the normal course of business.  Any unfunded portion
of  the  facilities  can be  withdrawn  at the  bank's  discretion.  Outstanding
borrowings against these credit facilities totaled  approximately  $15.5 million
as of November 29, 1997.  Additionally,  in February 1996,  the Company  secured
term debt of  approximately  $8.9 million from its two lead banks to finance the
acquisition of the fixtures,  leasehold  rights and inventories of two stores in
Barbados.  Interest  on  this  debt  accrues  at  an  annual  interest  rate  of
approximately  7.25%, and is payable monthly.  The principal is payable in equal
quarterly  payments  over a four  year  period,  commencing  March  1997.  As of
November 29, 1997, the Company had $7.5 million of term debt outstanding and was
in compliance with all restrictive  covenants  related to its unsecured and term
debt agreements. Additionally, the Company has available separate facilities for
foreign  exchange  contracts.  It remains  management's  expectation  that funds
available  from  operations  and  bank  financing  will  be  sufficient  to fund
operations and expansion for at least the next three years.
















<PAGE>


                                                                    FORM 10-Q
                                                                    Page 17

PART II.  OTHER INFORMATION


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

             None.



Item 6.  Exhibits and Reports of Form 8-K

(a)      Exhibits

             3.1      The Amended and Restated Certificate of Incorpo-
                      ration of the Company is incorporated herein
                      by reference to Exhibit 3.3 to Amendment No. 1
                      to the Company's Registration Statement on Form
                      S-1, Registration No. 33-40907, files with the
                      Securities and Exchange Commission on July 10,
                      1992 ("Amendment No. 1 to the Form S-1").


             3.2      The Amended and Restated By-Laws of the Company are
                      incorporated herein by reference to Exhibit 3.4 to
                      Amendment No. 1 to the Form S-1 and the First
                      Amendment to the Amended and Restated By-laws of the
                      Company is incorporated herein by reference to the
                      Current Report on Form 8-K filed with the Securities
                      and Exchange Commission on November 12, 1997.

 
 
(b)      Reports on Form 8-K during the quarter ended November 29, 1997


             1.       On October 9, 1997 the Company filed a Current
                      Report on Form 8-K announcing the record date and
                      annual meeting date for its regular annual meeting
                      of Shareholders.

             2.       On November 12, 1997 the Company filed a Current
                      Report on Form 8-K announcing an amendment to is
                      Amended and Restated By-laws.

 


<PAGE>

                                                                    FORM 10-Q
                                                                    Page 18


                 LITTLE SWITZERLAND, INC. AND SUBSIDIARIES


                                 SIGNATURES


Pursuant  to the  requirements  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.


                                               LITTLE SWITZERLAND, INC.


Date: January 13, 1998                        /s/ Thomas S. Liston     

                                              Thomas S. Liston
                                              Chief Financial Officer,
                                              Vice President and Treasurer