U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB
(Mark One)

[X]  Quarterly report under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934

For the quarterly period ended September 30, 1998


[ ]  Transition  report under  Section 13 or 15(d) of the Exchange Act for the
     transition period from __________ to ___________.

                         Commission file number 01-13470

                             BIG SMITH BRANDS, INC.
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

              Delaware                                        13-3005371
              --------                                        ----------
(State or Other Jurisdiction of                            (I.R.S. Employer
 Incorporation or Organization)                           Identification No.)

           7100 West Camino Real, Suite 402, Boca Raton, Florida 33433
           -----------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (561) 367-8283
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
                                       ---
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

Yes [X]             No [ ]

Number of shares of common stock outstanding as of October 31, 1998:  7,099,842

Transitional Small Business Disclosure Format (check one):  Yes [ ]  No  [X]




<PAGE>

                                      INDEX


                                                                          Pages


PART I   FINANCIAL INFORMATION

         Item 1.  Consolidated Financial Statements
          
                 Balance Sheet as of September 30, 1998                     3
          
                 Statements of Operations for the three
                   month and nine month periods ended
                   September 30, 1998 and 1997                              4
          
                 Statement of Stockholders' Equity for the
                   nine months ended September 30, 1998                     5
          
                 Statements of Cash Flows for the nine months
                   ended September 30, 1998 and 1997                        6
          
                 Notes to Financial Statements                              7
          
          
          Item 2.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                     8
          
PART II  OTHER INFORMATION                                                12
          

SIGNATURE                                                                  16

EXHIBIT INDEX                                                              17

<PAGE>



                                              BIG SMITH BRANDS, INC.
                                            CONSOLIDATED BALANCE SHEET
                                                 September 30, 1998
                                                    (Unaudited)
<TABLE>
<S>                                                                                              <C>           
                                                      ASSETS
CURRENT ASSETS
  Cash                                                                                           $       87,119
  Temporary investments                                                                                  26,214
  Certificates of deposit                                                                               200,000
  Accounts receivable, less allowance
       for doubtful accounts of $31,057                                                               2,772,894
  Inventories                                                                                         4,116,370
  Prepaid expenses                                                                                      123,197
                                                                                                 ---------------
         Total current assets                                                                         7,325,794

PROPERTY AND EQUIPMENT, At Cost
  Land                                                                                                   20,000
  Buildings                                                                                             544,789
  Equipment                                                                                           1,988,717
  Vehicles                                                                                               62,985
                                                                                                        -------
                                                                                                      2,616,491
  Less accumulated depreciation                                                                       1,536,355
                                                                                                      ---------
         Net property and equipment                                                                   1,080,136

OTHER ASSETS
  Security deposits                                                                                      36,779
  Deferred finance charges, less accumulated amortization of $159,899                                   328,515
  Trademarks, less accumulated amortization of $108,904                                                 406,956
                                                                                                        -------
         Total other assets                                                                             772,250
                                                                                                      ---------

              Total assets                                                                       $    9,178,180
                                                                                                 ==============
<CAPTION>

                                       LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
  Revolving line-of-credit                                                                       $    4,849,798
  Current maturities of long-term debt                                                                  428,150
  Checks outstanding in excess of bank balance                                                          423,443
  Accounts payable                                                                                    2,607,816
  Accrued restructuring/litigation                                                                      211,359
  Accrued royalties                                                                                     664,587
  Accrued expenses                                                                                      474,232
                                                                                                 --------------
         Total current liabilities                                                                    9,659,385
                                                                                                 --------------

LONG-TERM DEBT                                                                                        1,025,223
                                                                                                 --------------

STOCKHOLDERS' DEFICIT
  Common stock, $.01 par value; authorized 10,000,000 shares:
       issued and outstanding 7,099,842 shares                                                           70,998
  Additional paid-in capital                                                                          8,784,120
  Accumulated Deficit                                                                               (10,361,546)
                                                                                                 ---------------
         Total stockholders' deficit                                                                 (1,506,428)
                                                                                                 --------------

              Total liabilities and stockholders' deficit                                        $    9,178,180
                                                                                                 ==============
</TABLE>


See Notes to Consolidated Financial Statements

                                      - 3 -

<PAGE>



                                              BIG SMITH BRANDS, INC.
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)
<TABLE>
<CAPTION>

                                                       Three Month Period                           Nine Month Period
                                                       Ended September 30                           Ended September 30
                                                       ------------------                           ------------------
                                                  1998                   1997                   1998                  1997
                                                  ----                   ----                   ----                  ----

<S>                                             <C>                    <C>                    <C>                   <C>       
NET SALES                                       $4,123,616             $4,232,476             $8,929,280            $8,342,082

COST OF GOODS SOLD                               3,023,424              3,512,065              6,720,850             6,943,802
                                                 ---------              ---------              ---------             ---------

GROSS PROFIT                                     1,100,192                720,411              2,208,430             1,398,280
                                                 ---------             ----------              ---------             ---------

OPERATING EXPENSES
 Selling                                           508,558                360,028              1,266,004             1.022.514
 General and administrative                        161,328                963,444              1,266,721             1,959,640
                                                ----------           ------------             ----------             ---------
                                                   669,886              1,323,472              2,532,725             2,982,154
                                                  --------           ------------             ----------            ----------

INCOME (LOSS) FROM
OPERATIONS                                         430,306              (603,061)              (324,295)           (1,583,874)
                                                   -------          -------------              ---------           -----------

OTHER INCOME (EXPENSE)
 Miscellaneous income                             (50,272)              ( 35,477)             ( 112,217)             (110,411)
 Amortization of debenture                                                                                  
   discount                                                                                    (606,204)
 Interest expense                                (130,588)              (182,315)              (389,532)             (489,350)
                                               -----------           -----------               ---------          ------------
                                                 (180,860)              (217,792)            (1,107,953)             (599,761)
                                               -----------           ------------            -----------          ------------
INCOME (LOSS) BEFORE
INCOME TAXES                                       249,444              (820,853)            (1,432,248)           (2,183,635)

PROVISION FOR INCOME
TAXES                                                    0                      0                      0                     0
                                          ----------------       ----------------       ----------------      ----------------
NET INCOME (LOSS)                                 $249,444          $   (820,853)         $  (1,432,248)         $ (2,183,635)
                                                  ========          =============         ==============         =============

NET INCOME (LOSS) PER
SHARE                                             $    .04          $  (    0.21)         $  (     0.20)         $ (     0.55)
                                                  ========          =============       ================       ===============


WEIGHTED AVERAGE
COMMON SHARES
  OUTSTANDING                                    7,099,842              3,995,987              7,099,842             3,959,000
                                                 =========              =========              =========             =========

</TABLE>


See Notes to Consolidated Financial Statements

                                      - 4 -

<PAGE>



                             BIG SMITH BRANDS, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
                      NINE MONTHS ENDED SEPTEMBER 30, 1998
                                   (Unaudited)




                                                   Common Stock,
                                                  $.01 par value
<TABLE>
<CAPTION>

                                                 Shares           Common          Additional        Retained
                                                                   Stock           Paid-in          earnings
                                                                                   capital          (deficit)          Total

<S>                                              <C>              <C>             <C>           <C>                <C>          
Balance (deficit), January 1, 1998               4,199,842        $ 41,998        $ 7,181,620   $ (8,929,297)      $ (1,705,679)


Conversion of convertible debentures                                                          
into common shares                               2,900,000           29,000        1,602,500                          1,631,500

Net loss - September 30, 1998                      -                 -                -            (1,432,248)       (1,432,248)
                                             ---------------------------------------------------------------- -----------------

Balance (deficit) September 30, 1998             7,099,842         $ 70,998       $ 8,784,120    $(10,361,546)     $ (1,506,427)
                                        ========================================================================================


</TABLE>

See Notes to Consolidated Financial Statements

                                                       - 5 -

<PAGE>



                             BIG SMITH BRANDS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                       1998                1997
                                                                       ----                ----
<S>                                                                  <C>                  <C>          
CASH FLOWS FROM OPERATING ACTIVITIES

  Net loss                                                           $  (1,432,248)       $ (2,183,635)
  Item not requiring cash:
    Depreciation and amortization                                           294,311             211,608
    Amortization of debenture discount                                      606,204             142,600
  Changes in:
    Accounts receivable                                                   (768,718)           (878,998)
    Inventories                                                           (850,387)           (160,733)
    Prepaid expenses                                                         24,788            (87,212)
    Other assets                                                           (80,568)           (113,198)
    Accounts payable and accrued expenses                                   189,393             113,723
                                                                      -------------         -----------
       Net cash used in operating activities                            (2,017,225)         (2,955,845)
                                                                    ---------------       -------------


CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                                       (76,750)            (20,305)
  Reductions (Purchase) of Certificate of Deposit and
   temporary investments                                                  (218,452)              64,594
                                                                   ----------------         -----------
      Net cash provided (used) in investing activities                    (295,202)              44,289
                                                                   ----------------         -----------


CASH FLOWS FROM FINANCING ACTIVITIES                                                
  Checks outstanding in excess of bank balance                              146,159           (164,984)
  Net borrowings (repayments) under line-of-credit
    agreement                                                             2,254,710           1,774,718
  Net Proceeds from Convertible Debentures                                                    1,436,000
  Principal payments on long-term debt                                    (504,422)           (273,326)
                                                                       ------------          ----------
      Net cash provided by financing activities                           1,896,447           2,772,408
                                                                         ----------       -------------


DECREASE IN CASH                                                           (24,071)           (139,148)

CASH, BEGINNING OF PERIOD                                                   111,190             170,551
                                                                      -------------          ----------

CASH, END OF PERIOD                                                  $       87,119        $     31,403
                                                                     ==============        ============

</TABLE>

See Notes to Consolidated Financial Statements

                                      - 6 -

<PAGE>



                             BIG SMITH BRANDS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Company

Big Smith  Brands,  Inc.  (the  "Company")  manufactures  and sells quality work
apparel and  sportswear  under a variety of brand  names,  including  Big Smith,
Smith Mountain Classics and Big Smith Vintage.  The Company markets its products
to national chains and local stores worldwide.

Significant Accounting Policies

The accounting  policies  followed by the Company are set forth in Note 1 to the
Company's financial  statements included in its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997.

NOTE 2:  INTERIM FINANCIAL STATEMENTS

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance  with the  instructions to Form 10-QSB of the Securities and Exchange
Commission  and in accordance  with  generally  accepted  accounting  principles
applicable  to  interim  financial  statements  and  do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for audited  financial  statements.  The financial  statements should be read in
conjunction with the audited consolidated  financial statements and accompanying
notes of the Company for the year ended December 31, 1997, which are included in
its Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997.

In the opinion of the management of the Company,  the accompanying  consolidated
financial  statements  reflect  all  adjustments  (consisting  solely  of normal
recurring adjustments) necessary to present fairly the financial position of the
Company  as  of  September   30,  1998  and  the  results  of  its   operations,
stockholders'  equity and cash flows for the three month and nine month  periods
then ended.

The results of  operations  for the period ended  September  30,  1998,  are not
necessarily  indicative  of the results to be expected for the entire year.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Seasonality."


NOTE 3:  INCOME PER SHARE INFORMATION

Earnings per share are computed  based on the weighted  average number of common
shares outstanding during the period. Stock warrants and options outstanding are
common stock  equivalents  and are included in the  calculation  of earnings per
share to the extent they are dilutive using the treasury-stock method. Basic and
diluted earnings per share are the same.

NOTE 4:  CONVERTIBLE DEBENTURES

In March 1998,  the  convertible  long-term  debt was converted  into  2,900,000
shares of common stock. At the date of conversion  there was $606,204  remaining
of unamortized  discount  which had been netted against the principal  amount at
December  31, 1997.  Upon  conversion  this  unamortized  portion  resulted in a
non-cash,  non-recurring  charge  against income of $606,204 in the period ended
March 31, 1998.


                                      - 7 -

<PAGE>



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


General

         The  discussion  and  analysis  set forth  below is for the three month
periods  ended  September  30, 1998 and September 30, 1997. It should be read in
conjunction with the unaudited  Consolidated Financial Statements of the Company
and the related Notes thereto appearing elsewhere in this Form 10-QSB as well as
the Financial  Statements of the Company for the fiscal years ended December 31,
1997 and  December  31,  1996 and the related  Notes  thereto  appearing  in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997 (the
"Form  10-KSB").  The Company  believes  that its  business is seasonal  and has
experienced and expects to continue to experience  generally higher sales in the
last six months of the year as compared to the first six months of the year both
in terms of revenues  generated  and, to a lesser  extent,  total garments sold.
This  seasonality is due to increased  sales in the apparel  industry during the
Christmas  season and to an increase in sales of winter weight  garments,  which
sell at higher  prices than the Company's  other  products,  and  back-to-school
clothes  during the months of August through  November,  combined with continued
sales of regular weight garments.  In addition,  the Company's quarterly results
may  fluctuate  depending  upon the timing of delivery  of large  orders and the
introduction of new product lines or additional labels, among other things. This
seasonality has a significant impact on the cash flow of the Company because the
Company's  inventory  levels  tend to  increase  during  the  summer  months  in
preparation  for  anticipated  higher  sales  levels in  September,  October and
November. See "--Seasonality."

         Forward  Looking-Statements.  When used in this report,  press releases
and  elsewhere by the  management  of the Company  from time to time,  the words
"believes", "anticipates", and "expects" and similar expressions are intended to
identify   forward-looking   statements   that   involve   certain   risks   and
uncertainties. Additionally, certain statements contained in this discussion may
be  deemed  forward-looking  statements  that  involve  a number  of  risks  and
uncertainties.  Among the  factors  that could  cause  actual  results to differ
materially  are the  following:  the  ability of the Company to meet its working
capital and liquidity  needs, the status of relations  between the Company,  its
primary  customers  and  distributors,  the  availability  of long-term  credit,
unanticipated  changes  in  the  U.S.  and  international  economies,   business
conditions  and  growth  in the  workwear/sportswear  industry  and the level of
growth in retail sales generally,  the timely  development and acceptance of new
products, the impact of competitive products and pricing, changes in the cost of
raw  materials,  changes in product mix, the outcome of  litigation in which the
Company is involved,  along with product  delays and other risks  detailed  from
time to time in the Company's SEC reports, including but not limited to the Form
10-KSB.   Readers  are   cautioned   not  to  place  undue   reliance  on  these
forward-looking  statements which speak only as of the date hereof.  The Company
undertakes  no  obligation  to  publicly  release  the  results of any events or
circumstances   after  the  date  hereof  or  to  reflect  the   occurrence   of
unanticipated events.

         Going Concern.  The Company's viability as a going concern is dependent
upon its ability to raise  sufficient  working capital and to meet any liquidity
needs that may  exceed  the  availability  under the  revolving  loan and credit
facility (the "Credit Facility") with NationsCredit  Commercial Funding, Inc., a
NationsBank Company allowing for maximum  availability of $10,000,000 based on a
specified  percentage  of  eligible  accounts  receivable,   inventories,   real
property,  equipment,  and  trademarks.  The  Company  experienced  income  from
operations  in the period  ended  September  30, 1998 but had a working  capital
deficit of $2.3 million at  September  30, 1998.  See  "--Liquidity  and Capital
Resources."

         On or about  August 10,  1998 the Company  sold units (the  "Units") to
accredited  investors  including  warrants  to  purchase  20,000  shares  of the
Company's  common  stock,  par value $.01 per share (the  "Common  Stock"),  and
$200,000 of the Company's 12% promissory  notes in a private  placement  through
D.L.  Cromwell  Investments,  Inc., a  registered  broker  dealer  ("Cromwell").
Cromwell  was paid a total  commission  of $16,000.  The Units were sold without
registration  under the Securities Act of 1933, as amended (the "1933 Act"),  or
the securities  laws of any state,  in reliance on the  exemptions  contained in
Rule 506 of  Regulation  D  promulgated  under the 1933 Act.  The  Company  also
contemplated a registered  public offering  through  Cromwell and entered into a
letter of intent in connection with such proposal. The letter of intent


                                      - 8 -

<PAGE>



entered  into in  connection  with it was  terminated  by mutual  consent of the
parties as was a letter of intent with respect to the  possible  sale of certain
of the Company's assets.

         The  Company  realized  income  from  operations  for the period  ended
September 30, 1998 primarily  through a permanent and  significant  reduction of
executive  personnel  salaries and related overhead costs due to streamlining of
executive  staff and a decrease  in travel and  entertainment  costs  related to
reduced  foreign sales  activities.  See "-Results of  Operations."  The Company
believes that it will continue to realize income from operations. The Company is
also seeking other  potential  sources of financing.  There can be no assurance,
however,  that the Company will continue to recognize  income from operations or
that any income  recognized  will be sufficient to supply the Company's need for
working capital or that alternative interim financing can be obtained.

Results of Operations

Three  Months  Ended  September  30,  1998  Compared to the Three  Months  Ended
September 30, 1997

         Net sales for the three months ended  September  30, 1998  decreased by
$.11 million,  or 2.6%, to $4.12 million from $4.23 million for the three months
ended  September  30, 1997.  Net sales for the three months ended  September 30,
1998 of Big Smith workwear and other branded workwear,  Big Smith sportswear and
private  label  products  were $2.88  million,  $.47  million and $.77  million,
respectively,   as  compared   with  $3.82   million,   $.0  and  $.41  million,
respectively,  for the three months ended  September  30, 1997.  The decrease in
sales resulted from product purchases which fell into the first week of the next
quarter by existing customers, especially Wal-Mart Stores, Inc.

         Cost of goods  sold for the  three  months  ended  September  30,  1998
decreased by $0.49  million,  or 14.0%,  to $3.02 million from $3.51 million for
the three months ended September 30, 1997. This decrease resulted primarily from
savings  recognized  by the  Company by  extending  its annual  summer  vacation
closing for two additional  weeks. The annual summer vacation closing allows the
Company to make needed repairs and  improvements  to the plant and equipment and
to effect other routine  maintenance.  The Company  planned and  implemented the
additional  closing to  accommodate  cash flow  requirements  relating to making
certain  accounts  with  suppliers  current  and to  implement  planned  changes
relating to supervisory and executive personnel reductions.

         Gross profit for the three months  ended  September  30, 1998 was $1.10
million, or 26.7% of net sales, compared to $.72 million, or 17.0% of net sales,
for the three months  ended  September  30,  1997.  The increase in gross profit
percentage  was  primarily  due to the  increased  production  levels  and plant
efficiencies  resulting  in lower  overhead  and an increase in the gross profit
margins of Big Smith  workwear  and other  branded  workwear  and private  label
products.  For the three months ended September 30, 1998, Big Smith workwear and
other  branded  workwear,  Big  Smith  sportswear  and  private  label  products
accounted  for 69.8%,  11.6% and 18.6% of net sales,  respectively,  as compared
with 90.37%, 0% and 9.7% of net sales, respectively,  for the three months ended
September 30, 1997.

         Selling expenses increased by $.15 million to $.51 million, or 12.3% of
net sales, for the three months ended September 30, 1998, from $.36 million,  or
8.5% of net sales,  for the three months ended September 30, 1997. This increase
in selling  expenses  resulted  principally  from an increase of $.21 million in
selling  expense  related  to the new Big Smith  sportswear  line.  General  and
administrative  expenses were $.16  million,  or 3.9% of net sales for the three
months ended  September 30, 1998,  compared  with $.96 million,  or 22.7% of net
sales,  for the three  months  ended  September  30,  1997.  The decrease in the
general  and  administrative  expenses  was  primarily  due  to  a  decrease  in
restructuring and related  litigation costs to $0 for the period ended September
30, 1998,  as compared  with  approximately  $358,000 for the three month period
ended  September  30, 1997, a permanent and  significant  reduction in executive
personnel  salaries and related  overhead costs due to streamlining of executive
staff and a  decrease  in travel  and  entertainment  costs  related  to reduced
foreign sales activities.

         The Company's interest expense for the three months ended September 30,
1998 was $.13 million,  or 3.2% of net sales, as compared with $.18 million,  or
4.3% of net sales, for the three months ended

                                      - 9 -

<PAGE>


September  30, 1997.  The decrease in interest  expense was  primarily  due to a
decrease in borrowings and loan fees.

         As a result of the  foregoing,  the  Company's net income for the three
months ended September 30, 1998 was $249,444  compared to a net loss of $820,853
for the three months ended September 30, 1997.

Nine Months Ended September 30, 1998 Compared to the Nine Months Ended September
30, 1997

         Net sales for the nine months  ended  September  30, 1998  increased by
$.59  million,  or 7.0%, to $8.93 million from $8.34 million for the nine months
ended September 30, 1997. Net sales for the nine months ended September 30, 1998
of Big Smith workwear and other branded workwear, Big Smith sportswear,  private
label  products  and  Caterpillar  branded  products  were $6.91  million,  $.93
million, $1.09 million and $0, respectively, as compared with $7.33 million, $0,
$.93 million and $.08 million, respectively, for the nine months ended September
30, 1997. The increase in sales resulted from the increase in sales of Big Smith
sportswear  to new  and  existing  customers,  the  addition  of  new  customers
including Mills Fleet & Farm Corp., and increased  product purchases by existing
customers,  especially Wal-Mart Stores, Inc., reflecting the increased marketing
by the Company of such products.

         Cost of  goods  sold for the  nine  months  ended  September  30,  1998
decreased by $0.22 million, or 3.2%, to $6.72 million from $6.94 million for the
nine months ended  September 30, 1997.  This decrease  resulted  primarily  from
savings  recognized  by the  Company by  extending  its annual  summer  vacation
closing for two additional  weeks. The annual summer vacation closing allows the
Company to make needed repairs and  improvements  to the plant and equipment and
to effect other routine  maintenance.  The Company  planned and  implemented the
additional  closing to  accommodate  cash flow  requirements  relating to making
certain  accounts  with  suppliers  current  and to  implement  planned  changes
relating to supervisory and executive personnel reductions.

         Gross  profit for the nine months  ended  September  30, 1998 was $2.20
million,  or 24.7% of net  sales,  compared  to $1.40  million,  or 16.8% of net
sales,  for the nine months  ended  September  30,  1997.  The increase in gross
profit percentage was primarily due to the increased production levels and plant
efficiencies resulting in lower overhead and an increase in gross profit margins
of Big Smith workwear and other branded workwear and private label products. For
the nine months ended  September 30, 1998,  Big Smith workwear and other branded
workwear,  Big Smith sportswear,  private label products and Caterpillar branded
products accounted for 77.4%, 10.4%, 12.2% and 0% of net sales, respectively, as
compared with 87.9%, 0%, 11.2% and 0.9% of net sales, respectively, for the nine
months ended September 30, 1997.

         Selling expenses  increased by $.24 million to $1.27 million,  or 14.2%
of net sales,  for the nine months ended September 30, 1998, from $1.02 million,
or 12.2% of net sales,  for the nine  months  ended  September  30,  1997.  This
increase  in selling  expenses  resulted  principally  from an  increase of $.47
million in selling expense related to the new Big Smith sportswear line. General
and  administrative  expenses were $1.27 million,  or 14.2% of net sales for the
nine months ended September 30, 1998,  compared with $1.96 million,  or 23.5% of
net sales,  for the nine months ended  September  30, 1997.  The decrease in the
general  and  administrative  expenses  was  primarily  due  to  a  decrease  in
restructuring  and  litigation  costs  to $0 for the  nine  month  period  ended
September 30, 1998, as compared with  approximately  $358,000 for the nine month
period  ended  September  30,  1997, a permanent  and  significant  reduction in
executive  personnel salaries and related overhead costs due to the streamlining
of executive  staff,  a decrease in travel and  entertainment  costs  related to
reduced foreign sales activities and the closing of two manufacturing plants.

         On  March  19,  1998,  the  holders  of the  Company's  6%  Convertible
Preferred  Debentures  due  March  31,  2000 (the  "Debentures")  converted  the
remaining  $1,631,500 of the Debentures  into  2,900,000  shares of Common Stock
resulting in a non-recurring  charge to earnings of $606,204 of related discount
during the three months ended March 31, 1998.

         The Company's  interest expense for the nine months ended September 30,
1998 was $.39 million,  or 4.4% of net sales, as compared with $.49 million,  or
5.9% of net sales, for the nine months ended

                                     - 10 -

<PAGE>



September 30, 1997.  The decrease in interest  expense was primarily due to $.10
million of interest expense related to the Debentures, which were outstanding at
September 30, 1997, and less borrowings and loan fees.

         As a  result  of the  foregoing,  the  Company's  net loss for the nine
months  ended  September  30, 1998 was $1.43  million  compared to a net loss of
$2.18 million for the nine months ended September 30, 1997. Excluding a one time
non-recurring convertible debenture amortization discount of $606,204 arising as
a result of the  retirement  of all  outstanding  convertible  debentures of the
Company  in March  1998,  the  Company's  net loss  for the  nine  months  ended
September 30, 1998 was $.83 million.

Liquidity and Capital Resources

         The  Company's  viability  as a going  concern  is  dependent  upon its
ability to raise sufficient working capital and to meet any liquidity needs that
may exceed the availability  under the Credit  Facility.  The Company had income
from operations in the period ended September 30, 1998 but had a working capital
deficiency of $2.3 million at September 30, 1998.

         On or about  August  10,  1998 the  Company  sold  Units to  accredited
investors  including  warrants to purchase 20,000 shares of the Company's Common
Stock and $200,000 of the Company's 12% promissory notes in a private  placement
through  Cromwell.  Cromwell was paid a total  commission of $16,000.  The Units
were sold without registration under the 1933 Act, or the securities laws of any
state,  in reliance on the  exemptions  contained  in Rule 506 of  Regulation  D
promulgated  under the 1933 Act.  The Company  also  contemplated  a  registered
public  offering  through  Cromwell  and  entered  into a letter  of  intent  in
connection  with such proposal.  The letter of intent entered into in connection
with it was  terminated  by mutual  consent  of the  parties  as was a letter of
intent with respect to the possible sale of certain of the Company's assets.

         On April 2,  1997,  in order to meet its  liquidity  needs the  Company
closed an offshore placement of $1,700,000 of its Debentures. By March 1998, the
Debentures had been converted to 3,169,842 shares of the Company's Common Stock.
As a result, the Company no longer has outstanding any convertible debentures.

         The Company experienced a significant decrease in revenues in 1997 as a
result of the purported  termination  effective in January 1997 by  Caterpillar,
Inc.  ("Caterpillar")  of the Company's license to manufacture and sell workwear
under the Caterpillar label (the "Caterpillar Termination").  See "Part II. Item
1. Legal Proceedings - Caterpillar Litigation."

         At September 30, 1998 and 1997 working capital was approximately $(2.3)
million  and  $1.04  million,  respectively.  This  decrease  resulted  from the
Company's  net loss  resulting  primarily  from the loss of  revenue  due to the
Caterpillar  Termination.  Working  capital also may vary from time to time as a
result of seasonal inventory  requirements,  the level of trade credit available
and the level of accounts receivable balances.

         Cash used in  operating  activities  totaled  $2.08  million  and $2.96
million for the nine months ended  September  30, 1998 and  September  30, 1997,
respectively.  This  decrease  reflected  primarily  savings  recognized  by the
Company by  extending  its annual  summer  vacation  closing for two  additional
weeks.  The Company  typically  experiences  negative cash flow from  operations
during  the  first  half  of each  year  due to the  build-up  of  inventory  in
preparation  for  increased  sales  volume in the second half of each year.  See
"-Seasonality."

         Cash flows from  financing  activities  totaled $1.90 million and $2.77
million for the nine months ended  September  30, 1998 and  September  30, 1997,
respectively.

         The Company  secured the Credit  Facility at December 10, 1997 allowing
for maximum  availability  of  $10,000,000  based on a specified  percentage  of
eligible  accounts  receivable,   inventories,  real  property,  equipment,  and
trademarks.  At September 30, 1998, the Company had no unused availability.  The
amount  outstanding  under the  revolving  portion of the Credit  Facility as of
September 30, 1998 was  $4,849,798.  The Credit Facility bears interest at prime
plus 1.875% (10.375% at September 30, 1998).

                                     - 11 -

<PAGE>



         The Credit Facility also provides for additional interest under certain
circumstances and other fixed fees payable annually during the term of the loan.
A portion of the  proceeds  under the Credit  Facility  were used to pay off the
previous revolving  line-of-credit and other equipment and working capital loans
in an aggregate  principal  amount of  approximately  $4.1 million.  The loan is
secured by all of the assets of the Company  including the accounts  receivable,
inventories, property and equipment and trademarks.

Capital Expenditures

         Capital expenditures  totaled  approximately $.08 million for the three
months ended September 30, 1998,  primarily for necessary physical  improvements
at the Carthage plant and leasehold improvements at the Miami, Florida store.

Intangible Assets

         In 1995,  the Company  purchased  the Big Smith  trademark in the seven
countries  in Europe for which the Company  did not  previously  have  trademark
rights for an aggregate purchase price of $500,000 payable over four years.

Year 2000 Compliance

         Management  has  initiated  a  Company-wide   program  to  prepare  the
Company's  computer  systems  and  applications  for year 2000  compliance.  The
Company  expects  to  incur  internal  staff  costs  as well as  other  expenses
necessary to prepare its systems for the year 2000 ("Y2K").  The Company expects
to replace some systems and upgrade others.  Maintenance or  modification  costs
will be expensed as incurred.  Specifically,  the Company's  accounting software
must be upgraded to be Y2K  compliant,  the payroll system will be Y2K compliant
upon the  purchase  of a new  personal  computer  unit and the  Electronic  Data
Information  system,   through  which  major  customers   electronically   order
merchandise and invoices are electronically  issued, is currently Y2K compliant.
Management estimates the total cost of this effort to be approximately $75,000.

Seasonality

         The Company's sales are generally  higher in the last six months of the
year as  compared  to the first six months of the year both in terms of revenues
generated and, to a lesser extent,  total garments sold. This seasonality is due
to increased sales in the apparel industry during the Christmas season and to an
increase in sales of winter  weight  garments,  which sell at higher prices than
the Company's other products,  and  back-to-school  clothes during the months of
August  through  November,  combined  with  continued  sales of  regular  weight
garments.  In addition,  the Company's quarterly results may fluctuate depending
upon the timing of delivery of large orders and the  introduction of new product
lines  or  additional  labels,  among  other  things.  This  seasonality  has  a
significant  impact  on the  cash  flow of the  Company  because  the  Company's
inventory  levels tend to increase  during the summer months in preparation  for
anticipated higher sales levels in September, October and November. 

                                    PART II

                                OTHER INFORMATION


Item 1.           Legal Proceedings.

Caterpillar Litigation

         On June 25,  1996,  Big  Smith  Global  Ltd.  ("BSG"),  a wholly  owned
subsidiary  of the Company  holding the rights to the Company's  agreement  (the
"Agreement")  with  Caterpillar   licensing  the  use  by  the  Company  of  the
Caterpillar and related  trademarks,  received a purported notice of termination
of the Agreement, citing purported violations of the Agreement.

                                     - 12 -

<PAGE>



         On July 9, 1996,  the Company  was served with a summons and  complaint
naming it, BSG and S. Peter Lebowitz, the Company's CEO, defendants in a suit by
Caterpillar  in the  U.S.  District  Court  for the  Central  District  Court of
Illinois (the "District Court").  The complaint alleges trademark  infringement,
unfair  competition,  false  advertising  and  breach  of  contract,  and  seeks
injunctive  relief and  unspecified  damages in  connection  with the  Company's
alleged violations of the Agreement and Caterpillar's proprietary marks.

         On  July  26,  1996  the  defendants   answered  the  complaint  filing
responsive defenses of failure to assert a claim, waiver, amendment,  promissory
estoppel, equitable estoppel, laches, failure to provide an opportunity to cure,
unclean  hands and misuse.  The Company and BSG  (collectively,  the  "Corporate
Defendants") filed counterclaims for breach of contract,  tortious  interference
with contractual  relations,  interference with prospective  business relations,
conspiracy,  commercial  disparagement  and  breach of  franchise  agreement  in
connection  with  what the  Corporate  Defendants  believe  to be  Caterpillar's
wrongful efforts to terminate the Corporate  Defendants'  license to use certain
Caterpillar  trademarks on its apparel. S. Peter Lebowitz also filed a motion to
dismiss for failure to state a claim against him in his individual capacity.

         On July 18, 1996,  Caterpillar  filed an  emergency  motion for summary
judgment  seeking a  declaratory  judgment  that the Agreement had been properly
terminated.  On July 29,  1996,  the  Company  filed a motion for a  preliminary
injunction  against  Caterpillar's  purported  termination of the Agreement.  On
August 19, 1996,  the District Court entered an order (the "August 19th Order"),
which  was  subsequently  confirmed  in  a  Reconsideration  Order  denying  the
Corporate   Defendants'  motion  for  a  preliminary   injunction  and  granting
Caterpillar's  motion for summary  judgment  on the basis of a finding  that the
Agreement,  by its terms,  provided for  termination  by  Caterpillar  following
certain  breaches  of the  Agreement  by BSG  regardless  of whether or not such
breaches were  material.  On August 28, 1996, the District Court granted in part
Mr.  Lebowitz's  motion  and  dismissed  him from the  breach  of  contract  and
declaratory judgment counts of the complaint.

         On April  16,  1997 Big  Smith  filed an  Amended  Counterclaim  adding
Overland Group, Ltd. and Stephen Palmer as counterdefendants  seeking damages in
excess of $20 million plus costs.  Thereafter,  on October 31, 1997, a Corrected
Second Amended  Counterclaim  was filed by Big Smith naming  Overland  Footwear,
Limited as an  additional  counter-defendant.  The Second  Amended  Counterclaim
alleges similar claims as in the original  counterclaim and, among others, newly
alleges that Caterpillar was barred from  terminating the Corporate  Defendants'
license  to use its marks  since a common  law  franchise  relationship  existed
between the parties which could not be terminated absent good cause.

         Counterdefendants  have filed  motions to  dismiss  the Second  Amended
Counterclaim for failure to state a claim. Additionally, Palmer and the Overland
defendants  have filed motions seeking  dismissal for lack of jurisdiction  over
them.  On December  16, 1997,  the Court heard oral  arguments on the motions to
dismiss. To date the Court has not ruled on said motions.

         Management  intends to vigorously  defend the claims of Caterpillar and
to diligently  pursue its  counterclaims  and its claims  against Palmer and the
Overland defendants. At this stage of litigation, it is not possible to evaluate
the  likelihood of favorable or unfavorable  outcome.  There can be no assurance
that the outcome of this litigation  will be favorable to the Company,  that the
Company's  defenses to the claims against it will  vindicated or that any of its
counterclaims will be found to be valid. If the outcome of the litigation is not
favorable,  such outcome could have a material  adverse  effect on the financial
condition of the Company.

Other Litigation

         The  Company  has been  involved  in  litigation  with a number  of its
foreign  distributors  in  connection  with their  refusal to pay  royalties the
Company  believed  to be due  in  respect  of  sales  by  such  distributors  of
Caterpillar  branded  products  prior  to the  Company's  ceasing  to sell  such
products.  Additionally,  certain  distributors  made claims against the Company
relating to the effects of the purported  termination of the Caterpillar license
on  their  arrangements  with  the  Company.  Most of this  litigation  has been
resolved.  The Company has begun  discussions  with Selected Brands Shoe Company
seeking recovery of at least $73,000 of accounts  receivable it believes are due
and payable and with Fashion Fever CC seeking recovery of an as yet undetermined
amount of  royalties  it believes are due and  payable.  These  discussions  are
preliminary to filing collection  actions if satisfactory  settlements cannot be
reached.


                                     - 13 -

<PAGE>

Item 2.           Changes in Securities.

         On or about  August  10,  1998 the  Company  sold  Units to  accredited
investors  including  warrants to purchase 20,000 shares of the Company's Common
Stock and $200,000 of the Company's 12% promissory notes in a private  placement
through  D.L.   Cromwell   Investments,   Inc.,  a  registered   broker   dealer
("Cromwell").  Cromwell was paid a total  commission of $16,000.  The Units were
sold  without  registration  under the 1933 Act, or the  securities  laws of any
state,  in reliance on the  exemptions  contained  in Rule 506 of  Regulation  D
promulgated under the 1933 Act.

Item 3.           Defaults Upon Senior Securities.
                  None.

Item 4.           Submission of Matters to a Vote of Security-Holders.
                  None.

Item 5.           Other Information.
                  None.

                                     - 14 -

<PAGE>



Item 6.           Exhibits and Reports on Form 8-K.
                  None.

(a)      Exhibits:
                                                   EXHIBIT TABLE

   Exhibit                                          Description
     No.

3(a)          Form of Restated Certificate of Incorporation.*

(b)           By-laws.*

10(c)         Loan and Security Agreement,  dated December __, 1997, between the
              Company and NationsCredit  Commercial Funding, Inc., a NationsBank
              Company.***

(z)           Amended and Restated Employment Agreement, dated January 1, 1998, 
              between the Company and S. Peter Lebowitz***

(ab)          Warrant to Purchase Common Stock, dated as of April 2, 1997.**

(ae)          Form of Subscription Agreement, dated May __, 1998 relating to 
              placement of bridge notes and warrants.****

(af)          Form of 12% Promissory Note, dated May __, 1998 relating to bridge
              financing.****

(ag)          Form of Warrant to Purchase Common Stock, dated May __, 1998 
              relating to bridge financing.****


27            Financial Data Schedule****

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

    *         Previously filed with, and incorporated herein by reference to, 
              the Registrant's Registration Statement on Form SB-2(No.33-85302),
              as amended, declared effective on February 8, 1995("Form SB-2").

   **         Previously  filed with, and  incorporated  herein by reference to,
              the Registrant's  Annual Report on Form 10-KSB for the fiscal year
              ended December 31, 1996, filed on April 15, 1997.

 ***          Previously  filed with, and  incorporated  herein by reference to,
              the Registrant's Annual Report on Form 10-KSB,  filed on April 15,
              1998.

****          Filed herewith

         (b)      Reports on Form 8-K

                           None.

                                                      - 15 -

<PAGE>



                                    SIGNATURE

          In  accordance  with  the   requirements  of  the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

BIG SMITH BRANDS, INC.

<TABLE>

<S>                          <C>
Date: November 13, 1998                                                                              
                             ------------------------------------------------------------------------
                                   By:      Susan A. Leonhardt
                                            Director -- Accounting/Administration and
                                            Authorized Registrant Signer
                                            (Principal Accounting and Financial Officer)

</TABLE>




                                     - 16 -

<PAGE>


EXHIBIT INDEX

   Exhibit                                          Description
     No.

3(a)          Form of Restated Certificate of Incorporation.*

(b)           By-laws.*

10(c)         Loan and Security Agreement,  dated December __, 1997, between the
              Company and NationsCredit  Commercial Funding, Inc., a NationsBank
              Company.***

(z)           Amended and Restated Employment Agreement, dated January 1, 1998, 
              between the Company and S. Peter Lebowitz***

(ab)          Warrant to Purchase Common Stock, dated as of April 2, 1997.**

(ae)          Form of Subscription Agreement, dated May __, 1998 relating to 
              placement of bridge notes and warrants.****

(af)          Form of 12% Promissory Note, dated May __, 1998 relating to bridge
              financing.****

(ag)          Form of Warrant to Purchase Common Stock, dated May __, 1998 
              relating to bridge financing.****

27            Financial Data Schedule****





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

    *         Previously filed with, and incorporated herein by reference to, 
              the Registrant's Registration Statement on Form SB-2(No.33-85302),
              as amended, declared effective on February 8, 1995("Form SB-2").

   **         Previously  filed with, and  incorporated  herein by reference to,
              the Registrant's  Annual Report on Form 10-KSB for the fiscal year
              ended December 31, 1996, filed on April 15, 1997.

 ***          Previously  filed with, and  incorporated  herein by reference to,
              the Registrant's Annual Report on Form 10-KSB,  filed on April 15,
              1998.

****          Filed herewith


                                     - 17 -