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 March 31, 1999
                               --------------

        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 May 17, 1999:  8,613,546
                                                                  ---------

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




<PAGE>

                                             INDEX


<TABLE>
<CAPTION>
<S>            <C>                                                                       <C>

                                                                                         Pages
                                                                                         -----


PART I         FINANCIAL INFORMATION

               Item 1.       Consolidated Financial Statements

                               Balance Sheet  as of  March 31, 1999                          3

                               Statements of Operations for the three
                                 months ended March 31, 1999 and 1998                        5

                               Statement of Stockholders' (Deficit) Equity for the
                                 three months ended March 31, 1999                           6

                               Statements of Cash Flows for the three months
                                 ended March 31, 1999 and 1998                               7

                               Notes to Financial Statements                                 8


               Item 2.       Management's Discussion and Analysis of Financial
                                Condition and Results of Operations                          9

PART II        OTHER INFORMATION                                                            20


SIGNATURE                                                                                   24

EXHIBIT INDEX                                                                               25

</TABLE>






                                             -2-

<PAGE>

                                    BIG SMITH BRANDS, INC.
                                  CONSOLIDATED BALANCE SHEET
                                         March 31, 1999
                                          (Unaudited)


                                            ASSETS

<TABLE>
<CAPTION>
<S>                                                                          <C>

CURRENT ASSETS
  Cash                                                                             $33.647
  Temporary investments                                                              7,991
  Accounts receivable, less allowance
    for doubtful accounts of $56,717                                             1,302,917
  Inventories                                                                    3,648,718
  Prepaid expenses                                                                  60,158
                                                                              ------------
        Total current assets                                                     5,053,431
                                                                              ------------

PROPERTY AND EQUIPMENT, At Cost
  Land                                                                              20,000
  Buildings                                                                        600,317
  Equipment                                                                      1,948,221
  Vehicles                                                                          46,471
                                                                              ------------
                                                                                 2,615,009
  Less accumulated depreciation                                                  1,662,673
                                                                              ------------
        Net property and equipment                                                 952,336

OTHER ASSETS
  Security deposits                                                                 41,640
  Certificate of Deposit                                                           200,000
  Non-compete expense, less accumulated amortization of $0.00                      112,554
  Deferred finance charges, less accumulated amortization of $195,650              555,573
  Trademarks, less accumulated amortization of $126,099                            389,761
                                                                               -----------
        Total other assets                                                       1,299,528
                                                                               -----------


           Total assets                                                         $7,305,295
                                                                               ===========


                             LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
  Revolving line-of-credit                                                      $2,784,281
  Current maturities of long-term debt                                             284,176
  Checks outstanding in excess of bank balance                                      67,821
  Accounts payable                                                               2,711,878
  Accrued restructuring/litigation                                                  81,053
  Accrued litigation workwear                                                        2,141
  Accrued expenses                                                                 418,251
  Note Payable Stockholder                                                         250.000
                                                                              ------------
        Total current liabilities                                                6,599,061
                                                                              ------------

(Continued on next page)



                                             -3-

<PAGE>



(Continued)                         BIG SMITH BRANDS, INC.
                                  CONSOLIDATED BALANCE SHEET
                                         March 31, 1999
                                          (Unaudited)


LONG-TERM DEBT
  Long-term debt                                                                   574,056
  Litigation/Royalties                                                             664,587
  Note payable - stockholder                                                       200,000
                                                                              ------------
        Total Long-term debt                                                     1,438,633
                                                                              ------------

STOCKHOLDERS' DEFICIT
  Common stock, $.01 par value; authorized 10,000,000 shares:
    issued and outstanding 8,613,546 shares                                         86,135
  Additional paid-in capital                                                    10,088,910
  Accumulated Deficit                                                         (10,907,444)
                                                                              ------------
        Total stockholders' deficit                                              (732,399)
                                                                              ------------

           Total liabilities and stockholders' deficit                         $ 7,305,295
                                                                              ============

See Notes to Consolidated Financial Statements

</TABLE>



                                             -4-

<PAGE>

                                    BIG SMITH BRANDS, INC.
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                          THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                          (Unaudited)

<TABLE>
<CAPTION>

                                                       1999                  1998
                                                       ----                  ----
<S>                                                <C>                  <C>

NET SALES                                          $ 2,132,322          $ 2,263,917

COST OF GOODS SOLD                                   1,817,537            1,802,510
                                                   -----------          -----------

GROSS PROFIT                                           314,785              461,407
                                                   -----------          -----------



OPERATING EXPENSES
  Selling                                              315,859              366,991
  General and administrative                           348,932              468,480
                                                   -----------          -----------
                                                       664,791              835,471
                                                   -----------          -----------



LOSS FROM OPERATIONS                                  (350,006)            (374,064)
                                                   -----------          -----------



OTHER INCOME (EXPENSE)
  Miscellaneous expense                               (120,361)             (34,754)
  Amortization of debenture discount                                       (606,204)
  Interest expense                                    (129,348)            (121,786)
                                                   -----------          -----------
                                                      (249,709)            (762,744)
                                                   -----------          -----------



LOSS BEFORE INCOME TAXES                              (599,715)          (1,136,808)

PROVISION FOR INCOME TAXES                                   0                    0
                                                   -----------          -----------

NET LOSS                                           $  (599,715)         $(1,136,808)
                                                   ===========          ===========

NET LOSS PER SHARE                                 $     (0.07)         $     (0.16)
                                                   ===========          ===========


WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                                 8,613,546            4,829,844
                                                   ===========          ===========

</TABLE>

See Notes to Consolidated Financial Statements



                                             -5-

<PAGE>



                                    BIG SMITH BRANDS, INC.
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
                               THREE MONTHS ENDED MARCH 31, 1999
                                          (Unaudited)




                                         Common Stock,
                                        $.01 par value

<TABLE>
<CAPTION>

                                                                         Additional     Retained
                                                             Common        Paid-in       earnings
                                              Shares          Stock        capital      (deficit)        Total
                                              ------          -----        -------      ---------        -----
<S>                                            <C>          <C>            <C>           <C>            <C>

Balance (deficit), January 1, 1999           7,354,683      $ 73,547    $ 9,130,767  $(10,307,727)    $(1,103,413)

Debit Issuance Costs                                                         (8,268)                       (8,268)

Private Placement with warants               1,100,000        11,000        968,000                       979,000

Conversion of Accounts Payable
 Info Common Stock                             158,863         1,589         (1,589)                            0

Net loss- March 31, 1999                         -              -             -          (599,717)       (599,717)
                                         -------------  ------------  -------------  ------------     -----------

Balance (deficit), March 31, 1999            8,613,546  $     84,547  $  10,088,910  $(10,907,444)    $  (732,398)


</TABLE>






See Notes to Consolidated Financial Statements



                                             -6-

<PAGE>



                                       BIG SMITH BRANDS, INC.
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                             THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                             (Unaudited)


<TABLE>
<CAPTION>

                                                         1998             1997
                                                         ----             ----
<S>                                               <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                           $     (599,715)       $(1,136,808)
  Items not requiring cash:
    Depreciation and amortization                           119,026             97,119
    Amortization of debenture discount                                         606,204
  Changes in:
    Accounts receivable                                  (1,025,815)           829,143
    Inventories                                             307,977         (1,116,441)
    Prepaid expenses                                        (62,645)          (125,514)
    Other assets                                            131,604             14,559
    Accounts payable and accrued expenses                   107,153             47,964
                                                     --------------        -----------
       Net cash used in operating activities             (1,022,415)           (773,775)
                                                    --------------        -----------



CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                         (4,506)            (6,630)
  Reductions of temporary investments                         3,192             70,649
                                                       ------------        -----------
      Net cash provided (used) in investing activities       (1,314)            64,019
                                                       ------------        -----------



CASH FLOWS FROM FINANCING ACTIVITIES
  Checks outstanding in excess of bank balance             (113,775)           273,342
  Net borrowings (repayments) under line-of-credit
    agreement                                             1,127,035           (132,622)
  Principal payments on long-term debt                      (18,801)           (14,834)
                                                      -------------      -------------
      Net cash provided by financing activities             944,459            125,886
                                                      -------------      -------------

DECREASE IN CASH                                            (79,270)          (134,759)

CASH, BEGINNING OF PERIOD                                   112,917            170,551
                                                      -------------      -------------

CASH, END OF PERIOD                                   $      33,647      $      35,792
                                                      =============      =============

</TABLE>









                                                 -7-

<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  consolidated  financial  statements  included in its Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998.

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, 1998, which are included in
its Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998.

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 March 31,  1999 and the results of its  operations,  stockholders'
equity and cash flows for the three month period then ended.

The  results  of  operations  for the  period  ended  March  31,  1999,  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 year. 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.



                                       -8-

<PAGE>

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

               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 sportswear,  childrenswear and ladieswear  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 thereof.  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.


PRO FORMA FINANCIAL INFORMATION

        On April 20, 1999 a majority of holders of the 7,354,683 shares entitled
to vote at the Annual  Meeting of  Stockholders  voted in favor of a sale of the
workwear business to Walls Industries,  Inc.,  Cleburne,  Texas and on April 22,
1999, we completed the sale of our workwear product lines to Walls. We have sold
to Walls our entire inventory of workwear  products and raw materials along with
the machinery and equipment used in the  manufacture of those workwear  products
(excluding only certain computer  equipment).  We leased Walls our facilities in
Carthage,  Missouri and will allow Walls to use certain of our retained computer
equipment  while they are involved in the  transition of the business from us to
them.  Walls has assumed our leases for properties  used in the  manufacture and
distribution  of  workwear  products  and  has  hired  substantially  all of our
employees who were involved in our workwear business. We retained  substantially
all of the  assets  currently  used  in our  sportswear  business,  and we  also
retained our childrenswear products.

        In  addition,  we  transferred  all of our  trademarks  at  closing to a
subsidiary, Big Smith Holdings, Inc. ("Holdings"). Holdings has granted to Walls
a  royalty-free,  perpetual  license to use the Big Smith  trademark and certain
related  tradenames in connection  with the  manufacture,  sale and licensing of
workwear products.  Holdings granted to us a royalty-free,  perpetual license to
use the Big Smith trademark and certain  related  tradenames for sportswear and,
subject to certain approval rights of Walls,  for all other purposes.  Any other
licenses  granted by Holdings  will require the  unanimous  vote of its Board of
Directors including one director appointed by Walls.

        Because of this  transfer of our workwear  business at the  beginning of
the second fiscal  quarter of 1999,  the actual  results of  operations  for the
first fiscal quarter do not accurately reflect our current financial position or
what  may be  expected  for  our  future.  The  following  pro  forma  financial
information is based on our unaudited Financial Statements and the related Notes
thereto for the three  months ended March 31, 1999  appearing in this  quarterly
report.  This pro forma  financial  information  is  presented  to assist you in
analyzing  the impact of the sale and license to Walls on our Balance  Sheet and
Statement of Operations.  You should not assume, however, that the following pro
forma information reflects what our financial condition or results of operations
actually  would have been if the sale and license to Walls had occurred on March
31, 1999 (Balance Sheet) or April 1, 1999 (Statement of Operations).





                                       -9-

<PAGE>

                             BIG SMITH BRANDS, INC.
                            Pro Forma Balance Sheet
                                 March 31, 1999

                                     ASSETS

<TABLE>
<CAPTION>
CURRENT ASSETS                                                                                         After
                                   March 31, 1999   Sale of Assets    Other          Non-Compete    Transaction   Note #

<S>                                <C>              <C>               <C>            <C>            <C>           <C>
Cash                               $     33,647     $                 $  32,000      $  400,000    $    465,647   1,3a &3c
Temporary Investments                     7,991                                                           7,991

Accounts Receivable, less allowance
  for doubtful accounts of $56,717    1,302,918          (90,000)                                     1,302,918
Due from Seller - Miami Security Deposits                                 4,060                           4,060      3c
A/R Non-Compete                                                                         400,000         400,000       1
A/R Rental Income                                                        22,000                          22,000    3a & 3b
Inventories                           3,648,718       (3,209,357)                                       439,361      2a
Prepaid Expenses                         60,157                                                          60,157
                                 --------------     -------------    ----------      ----------    ------------
  Total current assets                5,053,431       (3,299,357)        58,060         800,000       2,612,134
                                 --------------     -------------    ----------      ----------    ------------

PROPERTY AND EQUIPMENT, At Cost
Land                                     20,000                                                          20,000
Buildings                               600,317          (11,000)                                       589,317      2b
Equipment                             1,918,221       (1,462,030)                                       486,191      2b
Vehicles                                 46,471          (46,471)                                        46,471     2b
                                 --------------     -------------    ----------      ----------    ------------
                                      2,615,009       (1,473,030)                                     1,141,979
Less accumulated depreciation        (1,662,673)       1,239,611)                                      (423,061)    2b
                                 --------------     -------------    ----------      ----------    ------------
  Net property and equipment            952,336         (233,419)                                       718,918
                                 --------------     -------------    ----------      ----------    ------------

OTHER ASSETS
Certificate of Deposit                  200,000                                                         200,000
Security Deposits                        41,640                          (4,970)                         36,670     3c, 4
Deferred finance charges, less
  accumlated amortization of $195,650   555,572                                                         555,572
Trademark, less accumulated
 amortization of  $126,099              389,760                                                         389,760
                                 --------------     -------------    ----------      ----------    ------------
  Total other assets                    112,551                          (4,970)                        112,551
                                 --------------     -------------    ----------      ----------    ------------
Total Assets                        $ 7,305,293      $(3,487,776)     $  53,090      $  800,000    $  4,665,637
                                 ==============     =============    ==========      ==========    ============

                                  LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Revolving line-of-credit            $ 2,784,281      $(1,962,506)     $              $             $    821,775      2c
Current maturities of long term debt    284,176         (160,952)                                       123,224      2c
Checks outstanding in excess of bank
 balance                                 67,821                                                          67,821
Accrued restructuring/litigation         81,053                                                          81,053
Deferred income                                                          22,000                          22,000   1, 3a & 3b
Accrued royalties                       664,588                                                         664,588
Account Payable                       2,711,875         (710,528)        30,060                       2,031,407     2c,3a
Accrued Expenses                        419,852          (48,759)                                       371,093
Note payable-stockholder                250,000         (250,000)                                             0
                                 --------------     -------------    ----------      ----------    ------------
  Total current liabilities           7,263,646       (3,132,745)        52,060                       4,182,961
                                 --------------     -------------    ----------      ----------    ------------

LONG-TERM DEBT                          774,046         (389,702)           -                -          536,630
                                 --------------     -------------    ----------      ----------    ------------

STOCKHOLDERS' DEFICIT
Common stock, $.01 par value; authorized
  10,000,000 shares: issued and          86,135                                                         86,135
  outstanding 8,613,546
Additional paid-in capital           10,088,910                                                     10,088,910
Accumulated Deficit                 (10,907,444)          29,701          1,030         800,000    (10,076,713)
                                 --------------     -------------    ----------      ----------    ------------
  Total stockholders' deficit          (732,399)          29,701          1,030         800,000         98,332
                                 --------------     -------------    ----------      ----------    ------------
     Total liabilities and           $7,305,293      $(3,198,505)     $  53,090      $  800,000    $ 4,959,878
                                 ==============     =============    ==========      ==========    ============
</TABLE>




                                      -10-

<PAGE>

                             BIG SMITH BRANDS, INC.
                        PRO FORMA STATEMENT OF OPERATIONS
                        Three Months Ended March 31, 1999


<TABLE>
<CAPTION>

                                                                   Sale of                                 After
                                     March 31, 1999  Adjustments    Assets       Other       Non-Compete   Transaction   Note #
                                     --------------  -----------    ------       -----      -----------    -----------   ------

<S>                                  <C>             <C>              <C>         <C>           <C>           <C>         <C>

Net Sales                             $2,132,332    $ (1,909,290) $         0  $         0   $        0     $  223,032

Cost of Goods Sold                     1,817,537      (1,524,318)                               293,219
                                     -----------    ------------  -----------  -----------   ----------    -----------

Gross Profit                             314,785        (384,972)           0            0            0        (70,187)
                                     -----------    ------------  -----------  -----------   ----------    -----------


Operating Expenses

Selling                                  315,859        (223,758)           0            0            0         92,101       4

General & Administrative                 348,932        (240,763)           0           60            0        108,229       3a

Bad debts                                      0                                                      0              0
                                     -----------    ------------  -----------  -----------   ----------    -----------

Total operating expenses                 664,791        (464,521)           0           60            0        200,330
                                     -----------    ------------  -----------  -----------   ----------    -----------

Gain/(Loss) from operations             (350,006)        (79,549)           0          (60)           0       (270,517)
                                     -----------    ------------  -----------  -----------   ----------    -----------


Other Income (Expenses)
Royalty Income                                 0                                                                     0
Interest income                                0                                                                     0
Interest expense                        (129,348)         74,913                                               (54,435)
Non-compete income                                                                              800,000        800,000       1
Rental Income                                                                       54,000                      54,000    3a & 3b
Gain/(Loss) sale of assets                                             29,701                                   29,701       2b
Amortization of trademarks and loan fees (47,725)                                                              (47,725)
Amortization of debenture discount             0               0                                                     0
Depreciation                             (71,301)                                                              (71,301)
Loss on sale of equipment                      0               0                                                     0
Other income                              (1,235)              0                                                 1,235
                                     -----------    ------------  -----------  -----------   ----------    -----------
                                        (249,609)         74,913       29,701       54,000      800,000        709,005
                                     -----------    ------------  -----------  -----------   ----------    -----------
Gain/(Loss) before Income Taxes         (599,615)        154,462       29,701       53,940      800,000        438,488

Provision for Income Taxes                     -               -           -             -            -              -
                                     -----------    ------------  -----------  -----------   ----------    -----------


  Net Gain/(Loss)                    $  (599,615)   $    154,462  $    29,701      $53,940   $  800,000    $  438,488
                                     ===========    ============  ===========  ===========   ==========    ==========

Net Gain/(Loss) per share            $     (0.07)                                                          $     0.05
                                     ===========                                                           ==========

Weighted Average
Common shares outstanding              8,613,546                                                            8,613,546
                                     ===========                                                           ==========

</TABLE>



                                      -11-

<PAGE>

                             Big Smith Brands, Inc.
                     Notes To Pro Forma Financial Statements
                                December 31, 1998

1.      Accounting treatment for the transaction:

        The various  elements of the transaction were recorded in their entirety
as though the  transaction  had been  consummated  as of March 31, 1999 (Balance
Sheet)  and April 1, 1999  (Statement  of  Operations).  In most  instances  the
various  elements of the transaction were recorded on a cash basis. At March 31,
1999,  approximately  $3,128,206  would  have been due upon the  closing  of the
transaction  (the  "Closing") for the workwear  inventory and fixed assets.  The
payments  under  the  non-compete  agreement  extend  over a period of eight (8)
years,  with  $400,000 due upon Closing and an  additional  $400,000 due six (6)
months thereafter.  Walls Industries,  Inc., Cleburne, Texas ("Walls") will rent
certain retained computer  equipment at $10,000 per month for a minimum of three
(3) months. Walls will also rent the Company's facilities in Carthage,  Missouri
for $2,000 per month for a minimum of twelve (12) months. The first month's rent
for the  Carthage,  Missouri  facilities  and three (3) months  computer  rental
payments  aggregating  $32,000 are due at Closing.  The assumption of the leases
for the Miami, Oklahoma facilities will effect the return of the $4,060 security
deposits  relating  thereto.  All  expenses  related  to  the  transaction  were
recorded.  At March 31,  1999,  the total  cash due at  Closing  would have been
$3,530,829.

        The  consummation  of the  transaction  also  affected  the  outstanding
revolving  line-of-credit and principal  balances with NationsCredit  Commercial
Funding,  a  NationsBank   Company   ("NationsCredit").   As  a  result  of  the
transaction,  the  revolving  line-of-credit  and the term loan was  reduced  to
$1,970,474 and $554,797 respectively,  leaving a total balance due NationsCredit
of $2,525,271.  This transaction  effected a reduction of the Company's  monthly
interest and loan payments of approximately $20,000.

        The actual working capital deficit for the year ended March 31, 1999 was
$1.55 million. If the transaction had been consummated as of March 31, 1999, the
working capital deficit would have been $1.57 million.

2.      The federal income tax consequences of the transaction:

        Non-compete income                                            $800,000
        Rental income                                                   54,000
        Related expenses                                               (30,060)
        Security deposits                                                 (910)
         Gain on sale of assets                                         29,701
                                                                   -----------
        Income before income taxes                                     852,740

        Provision for income taxes                                     285,000
         Benefit from NOL carryforward                                (285,000)
                                                                      --------
        Net income tax expense                                               0
                                                                      --------
               Net Income                                             $852,740
                                                                      ========

        The Company currently has net operating loss carryforwards of $3,825,509
which should be sufficient to offset all income  received under the  non-compete
agreement.

3.      Notes to transaction recorded:

        1.     The Company will grant to Walls a royalty-free, perpetual license
               to use the "Big Smith"  trademark and certain related  tradenames
               in  connection  with  the  manufacture,  sale  and  licensing  of
               workwear  products.  In consideration  for the Company entering a
               ten-year  non-compete  agreement,  Walls  will pay the  Company a
               total of $4,600,000, as follows:




                                      -12-

<PAGE>


                             Year 1                $800,000
                             Year 2                $700,000
                             Year 3                $700,000
                             Year 4 $600,000
                             Year 5                $600,000
                             Year 6                $400,000
                             Year 7                $400,000
                             Year 8 $400,000

               Year one (1) payment is  $400,000  at Closing  and the  remaining
               $400,000  is due and  payable  six  (6)  months  thereafter.  The
               subsequent   year  payments  will  be  due  and  payable  on  the
               anniversary of the Closing.

        2.     Sale of Assets:

               a.     Workwear:
                             Work in process                       $   358,784
                             Piece goods                               353,792
                             Trim                                      303,121
                             Finished Goods                          2,193,660
                                                                   -----------

                      Total                                        $ 3,209,357
                                                                   ===========

               The above  figures  are based on Company  records as of March 31,
               1999.  The  inventory has been  financed by  NationsCredit  at an
               advance  rate of sixty  percent  (60%).  At March 31,  1999,  the
               payment due to  NationsCredit  on the sale of the inventory would
               have  been  $1,925,614.  The  Company  has  further  agreed  with
               NationsCredit   to  reduce  the   revolving   line-of-credit   by
               $1,962,506.  These  payments will reduce the Company's  revolving
               line-of-credit  with  NationsCredit  to  $821,775  and also  will
               reduce the Company's interest costs.

               b.     Machinery and equipment:
                             Factory Equipment                      $1,127,371
                             Furniture & Fixtures                      345,659
                             Trucks                                     46,471
                                                                    ----------
                      Subtotal                                      $1,473,030
                             Less depreciation                      $1,239,611
                                                                    ----------

                      Total                                         $  233,419
                                                                    ==========

               Walls will pay to the  Company  for the assets  purchased a price
               that includes the appraised value (on a liquidated  basis) of the
               machinery and equipment sold which, at March 31, 1999, would have
               been $263,120. At March 31, 1999, the net gain on the sale of the
               machinery and equipment would have been $29,701.

               The Company's  obligation at March 31, 1999 to  NationsCredit  on
               the  term  loan  portion  of  the  Credit  Facility  against  the
               machinery  and  equipment  would  have  been  $411,600,   with  a
               remaining loan availability of $138,340.  The original  principal
               amount of the loan was based on the forced  liquidation  value of
               machinery and equipment at December 10, 1997 of $686,000, with an
               advance  of  eighty  percent  (80%) and  repayment  over five (5)
               years. The Company has been repaying the loan at the average rate
               of $9,146 per month.  At March 31, 1999, the pro forma  repayment
               to  NationsCredit  for the  portion of the term loan based on the
               value of the  trademarks  would have been  $143,197.  The Company
               currently has one (1) other long-term


                                             -13-


<PAGE>

               obligation  to  NationsCredit  on the term  loan  portion  of the
               credit facility  against the Carthage,  Missouri real property of
               $117,000 with a monthly payment of $2,600.

               c.     On a pro  forma  basis  as of  March  31,  1999,  the cash
                      received for the sale of the  Inventory  and Machinery and
                      Equipment would have been $3,128,206. The distribution and
                      application  of the  cash  received  would  have  been  as
                      follows:

                      Revolving line-of-credit                      $1,962,506
                      Machine & Equipment and Trademark loans          554,797
                      S. Peter Lebowitz loan                           250,000
                      Accounts Payable                                 312,144
                      Other Accrued expenses                            48,759
                                                                    ----------

                             Total Distribution                     $3,128,206

                      The  first  funds  received  pursuant  to the  non-compete
                      agreement and the rental income will be applied to working
                      capital. All accounts receivable,  $1,302,918 at March 31,
                      1999,   are   security  for  the  credit   facility   with
                      NationsCredit,  and are  expected to  generate  additional
                      working capital availability of approximately $195,438.

        3.     Rental Income and Miami Security Deposit:

               a.     Computer Rental:
                      Walls  has  agreed  to rent  the  AS400  computer  and RLM
                      program  for a period  of at least  three  (3)  months  at
                      $10,000  per month.  The  Company  expends  $10,020 on the
                      lease and service contract  resulting in a loss of $20 per
                      month.

               b.     Building occupancy:
                      Walls  has  agreed  to  rent  all  of the  Company's  real
                      property located in Carthage, Missouri at a monthly rental
                      of $2,000 for at least  twelve (12)  months.  This monthly
                      payment will be used to offset certain other costs related
                      to the ownership of this real property.

               c.     Miami, Oklahoma Security Deposits:
                      Walls has agreed to assume both of the leases covering the
                      Miami,  Oklahoma  facilities.  Accordingly,  all  deposits
                      relating  to  these  facilities  will be  refunded  to the
                      Company.

        4.     Outlet and Retail Stores:

               Other than the outlet store located in Carthage,  Missouri  which
               is now being operated by Walls, the Company will retain ownership
               of the outlet and retail stores and the  leaseholds on the leased
               properties  related to these stores. The security deposits on the
               Monett,   Missouri  and  the  Miami,   Oklahoma   outlet   stores
               aggregating  $910 will be applied to last month's rents.  The two
               retained  workwear  outlet  stores have been  closed.  The Miami,
               Florida retail store will remain open for business.


                                      -14-


<PAGE>

ACTUAL RESULTS

Going Concern

        Our viability as a going concern is dependent  upon our ability to raise
sufficient  working  capital and to meet any liquidity needs that may exceed our
availability under the Credit Facility. We experienced a loss from operations in
1998 and had a working capital deficit at December 31, 1998. We also experienced
a loss from  operations of $599,715 for the fiscal  quarter ended March 31, 1999
and had a working capital deficit of $1.55 million at March 31, 1999.  Also, our
liquidity needs could exceed the amount of borrowings available under our Credit
Facility.   See   "   --   Liquidity   and   Capital   Resources"   and   "Legal
Proceedings--Caterpillar Litigation."

General

        The  discussion  and  analysis  set forth below is for the three  months
ended March 31, 1999 and March 31, 1998. It should be read in  conjunction  with
our Financial  Statements and the related Notes thereto  appearing  elsewhere in
this  quarterly  report.  The  information  presented for the three months ended
March 31, 1999, was derived from unaudited  financial  statements  which, in our
opinion,   reflect  all  adjustments   (consisting   only  of  normal  recurring
adjustments)  necessary  for a fair  presentation.  The  three-month  results of
operations are not  necessarily  indicative of the results of operations you may
expect  for the  full  year  for  reasons  including,  without  limitation,  the
consummation of the Walls Sale and License as we have discussed above.

Overview

        Following the  consummation of the Walls Sale and License,  our business
plan  now  focuses  on  refining  our  retained  product  lines  and  increasing
merchandising,  sales and marketing of those retained products, particularly our
sportswear products. In order to achieve our objectives,  our strategy currently
includes:  (i)  negotiating  a  joint  venture  for  the  design,   manufacture,
marketing,  sales and sourcing of Big Smith branded sportswear,  (ii) continuing
enhancement of our retained  product lines and (iii) increasing the value of the
Big Smith trademarks through direct consumer advertising. We plan to subcontract
all  manufacturing and production  activities for the foreseeable  future but to
retain test and quality  assurance  functions  until all  subcontractors  can be
certified  with  respect to quality.  We have also signed a licensing  agreement
with  Amita,  srl,  an Italian  company,  for the  production  of  sweaters  and
outergarments to complement our sportswear products.

        We have  secured a facility to serve as executive  office and  warehouse
space in Deerfield,  Florida.  The  executive  office will be moved there and we
will begin warehouse operations at this facility this fall.

        Our  sportswear  line is a full line of young men's top and  bottomwear.
Currently,  our  sportswear  products  are sold through  apparel  stores such as
Gadzooks, J.C. Penney, Jean Country, Delia and Urban Outfitter. We are currently
in the process of  developing a business  plan to introduce a line of ladieswear
as a complement to our  sportswear and  childrenswear.  We expect the ladieswear
products to benefit  from the value of the Big Smith  trademark  in the workwear
and sportswear markets as well as our merchandising and marketing experience and
relationships in the apparel industry.

        Prior to 1997 a  substantial  portion of our  resources and efforts were
devoted to developing  products under the licensed  Caterpillar  label.  In June
1996  Caterpillar  sought to terminate the license and we decided to refocus our
energies on products  under our own labels.  Since June 1996, we have focused on
the development of products under our Big Smith labels.

        We have incurred  substantial  losses from operations,  including losses
from operations  during the three months ended March 31, 1999, and had a working
capital deficit of $1.55 million and an accumulated deficit of $732,399 at March
31, 1999. As a result, our Financial Statements are qualified by a going concern
opinion. We believe that the total income to be realized from the Walls Sale and
License will be sufficient to permit us to continue as a going concern.


                                      -15-


<PAGE>

        On December 10, 1997,  we obtained a revolving  line-of-credit  and term
loan credit  facility  (the "Credit  Facility")  with  NationsCredit  Commercial
Funding,   a  NationsBank   Company   ("NationsCredit")   allowing  for  maximum
availability of $7,000,000,  after an amendment  related to the  consummation of
the Walls Sale and License, based on a specified percentage of eligible accounts
receivable,  inventories  and real property.  At December 31, 1998 and March 31,
1999,  we had  approximately  $121,816  and  $85,110,  respectively,  of  unused
availability  under the total  credit  facility.  On April 23,  1999,  after the
consummation of the Walls deal, our  availability  under the Credit Facility was
$75,000.  The amount  outstanding under the Credit Facility as of March 31, 1999
was $2.78  million,  with $2.09  million  on the  revolving  line-of-credit  and
$690,000  under  the  term  loan  portion  of the  Credit  Facility.  After  the
consummation  of the Walls Sale and License,  the amount  outstanding  under the
Credit Facility was $821,775, with $704,775 on the revolving  line-of-credit and
$117,000 under the term loan portion. The loan bears interest at prime rate plus
1.875%  (9.625% at March 31, 1999) and matures in December  2001.  The agreement
also provides for  additional  interest  under certain  circumstances  and other
fixed fees  payable.  The loan is secured by all of our  retained  assets  which
includes, without limitation, accounts receivable,  inventories and property and
equipment.

        Eighty percent of our sales of sportswear are to three customers.  Sales
to Gadzooks,  J.C.  Penney and Jean Country of sportswear  products  represented
approximately 39%, 22% and 20%, respectively, of our net sales of sportswear for
the year ended December 31, 1998 and 35%, 0% and 0%, respectively, for the three
months ended March 31, 1999. If any one or more of these three customers were to
cease or materially reduce its purchases from us, the financial condition of the
Company might be materially  adversely  affected.  We have  significant  pending
orders for sportswear from two customers,  Delia and Urban Outfitters. We expect
sales to these customers to continue and we will continue to enhance our product
line  and  increase  the  value  of  the  Big  Smith  trademark  through  direct
advertising.

        The majority of our sales of childrenswear are to three customers. Sales
to  Busy  Bee,  Midstates,   Inc.  and  Whealtbelt  of  childrenswear   products
represented  approximately 19%, 12% and 20%,  respectively,  of our net sales of
childrenswear  for  the  year  ended  December  31,  1998  and 7%,  9% and  11%,
respectively,  for the three months ended March 31, 1999.  If any one or more of
these three customers were to cease or materially  reduce its purchases from us,
the financial  condition of the Company might be materially  adversely affected.
We intend  to  continue  to  broaden  the  customer  base for our  childrenswear
products,  lessening  the  concentration  in any one  customer or small group of
customers.   The  Company  has  secured  the   employment  of  a  well  seasoned
childrenswear  salesman with numerous years of experience.

        The  Company  is  currently  developing  a business  for the  contracted
manufacture and sale of ladieswear  products in the same or similar  channels of
distribution through which it currently sells its sportswear products.

        Our sales of workwear have been 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  was due to an increase in sales of winter  weight  garments,  which
sell at higher prices, combined with continued sales of regular weight garments.
This seasonality had a significant impact on our cash flow because our inventory
levels  tended  to  increase   during  the  summer  months  in  preparation  for
anticipated  higher sales levels in September,  October and  November.  With the
consummation  of the Walls  Sale and  License,  we believe  that our  continuing
business will be less subject to seasonal  variation  than it  historically  has
been.  Our sportswear and  childrenswear  products sell at a generally  constant
rate with some acceleration of sales in the spring and fall.

        In the  following  discussion,  the  figures  presented  for  Big  Smith
workwear and other  branded  workwear  include our  childrenswear  which we have
retained. For the year ended December 31, 1998,  childrenswear  represented 1.4%
of net  sales.  For  the  three  months  ended  March  31,  1999,  childrenswear
represented 1.5% of net sales.

        The following discussion and analysis should be read in conjunction with
our financial statements appearing elsewhere in this quarterly report.


                                      -16-


<PAGE>

Three Months  Ended March 31, 1999  Compared to the Three Months Ended March 31,
1998

        Net sales,  for the three months ended March 31, 1999  decreased by $.13
million, or 5.8%, to $2.13 million from $2.26 million for the three months ended
March 31, 1998. Net sales for the three months ended March 31, 1999 of Big Smith
sportswear,  Big Smith  workwear and other  branded  workwear and private  label
products were $.19 million,  $1.72 million and $.22,  respectively,  as compared
with $.22 million, $1.83 million and $.21 million,  respectively,  for the three
months ended March 31, 1998.  The  decrease in sales  resulted  from the sale of
last season's sportswear inventory at a reduced rate.

        Gross profit for the three months ended March 31, 1999 was $.31 million,
or 14.76% of net sales, compared to $.46 million, or 20.4% of net sales, for the
three months ended March 31, 1998.  The decrease in gross profit  percentage was
primarily due to the sale of prior season's sportswear inventory at cost or at a
smaller  profit  margin.  For the three months  ended March 31, 1999,  Big Smith
sportswear,  Big Smith  workwear and other  branded  workwear and private  label
products  accounted  for 8.9%,  80.7% and 10.4% of net sales,  respectively,  as
compared  with  9.7%,  81% and 9.3% of net  sales,  respectively,  for the three
months ended March 31, 1998.

        Selling expenses decreased by $.06 million to $.31 million,  or 14.8% of
net sales,  for the three  months ended March 31, 1999,  from $.37  million,  or
16.2% of net sales,  for the three months ended March 31, 1998. This decrease in
selling expenses resulted  principally from a reduction in sales personnel and a
redistribution of sales responsibility among existing administrative  personnel.
General and  administrative  expenses were $.35 million,  or 16.3% of net sales,
during the three months ended March 31, 1999,  compared  with $.47  million,  or
20.7% of net sales,  for the three months ended March 31, 1998.  The decrease in
the  general  and  administrative  expenses  as a  percentage  of net  sales was
primarily due to  restructuring  of the  accounting  department  and a continued
decrease in travel and entertainment expenses.

        On March 19, 1998, the holders of the Company's 6% Convertible Preferred
Debentures due March 31, 2000 (the  "Debentures")  converted the remaining $1.63
million of the Debentures  into 2,900,000  shares of Common Stock resulting in a
charge to earnings of $.61 million of related  discount  during the three months
ended March 31, 1998.

        The Company's interest expense for the three months ended March 31, 1999
was $.13 million,  or 6.1% of net sales, as compared with $.12 million,  or 5.3%
of net sales,  for the three  months  ended  March 31,  1998.  The  increase  in
interest  expense  was  primarily  due to  financing  of raw  materials  for the
workwear line through a line of credit with Actrade,  a longtime supplier to the
Company.

        As a result  of the  foregoing,  the  Company's  net loss for the  three
months  ended  March 31, 1999 was $.60  million  compared to a net loss of $1.14
million for the three months ended March 31, 1998.  Excluding the  non-recurring
convertible  debenture  amortization discount of $.61 million, the Company's net
loss for the three months ended March 31, 1998 was $.53 million.

Year 2000 Compliance

        We have initiated a Company-wide program to prepare our computer systems
and  applications  for year 2000  compliance.  We expect to incur internal staff
costs as well as other  expenses  necessary  to prepare our systems for the year
2000 ("Y2K"). We expect to replace some systems and upgrade others.  Maintenance
or modification costs will be expensed as incurred. Specifically, our 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.
We estimate the total cost of this effort to be approximately $75,000.


                                      -17-


<PAGE>

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  experienced a
loss from  operations  during the three  months ended March 31, 1999 and in 1998
and 1997 and had a working  capital  deficiency at March 31, 1999,  December 31,
1998 and December 31, 1997. Also, the Company's liquidity needs could exceed the
amount of borrowings  available  under the Credit  Facility.  At March 31, 1999,
December  31,  1998 and  December  31,  1997,  working  capital  deficiency  was
approximately  $1.55  million,  $2.5  million  and $1.5  million,  respectively,
primarily 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").  As a
result,  the Company has faced an on-going  liquidity need. 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.
The Company has taken several steps to obtain additional sources of liquidity.

        The net proceeds of the proceeds of the Walls Sale and License  improved
our capital  structure.  Additionally,  the Walls Sale and  License  removes the
overhead and interest costs associated with the low-potential  workwear business
allowing us to concentrate on the higher-margin sportswear business.

        In order to fund its cash needs, on April 2, 1997, the Company completed
a  Regulation  S  placement  of $1.7  million  of its 6%  Convertible  Preferred
Debentures  due March 31, 2000. By March 1998, the Debentures had been converted
to 3,169,842 shares of the Company's Common Stock.

        On  December   10,   1997,   the  Company   obtained  a  new   revolving
line-of-credit  and term loan  credit  facility  (the  "Credit  Facility")  with
NationsCredit  Commercial  Funding,  a  NationsBank  Company   ("NationsCredit")
allowing for maximum availability of $10,000,000 based on a specified percentage
of eligible accounts  receivable,  inventories,  real property,  equipment,  and
trademarks.  At December 31,  1998,  the Company had  approximately  $121,816 of
unused  availability  under the total credit  facility.  The amount  outstanding
under the Credit Facility as of December 31, 1998 was $4.65 million,  with $3.91
million on the revolving line-of-credit and $0.74 under the term loan portion of
the Credit  Facility.  The loan bears interest at prime rate plus 1.875% (9.625%
at December 31, 1998) and matures in December  2000. The agreement also provides
for  additional  interest  under  certain  circumstances  and other  fixed  fees
payable. The loan is secured by all of the assets of the Company which includes,
without limitation, accounts receivable, inventories, property and equipment and
trademarks.

        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. ("Cromwell").  Cromwell was paid a total
commission  of  $16,000.  The Units were sold to  accredited  investors  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.

        On February  18,  1999,  the Company  received the proceeds of a private
placement offering of 1,100,000 units (the "Units") of the Company's securities,
with each Unit  consisting  of one share of the  Company's  Common Stock and two
warrants each to purchase one share of the Company's  Common Stock, one of which
is  exercisable  at a price  of  $1.50  per  share  and the  second  of which is
exercisable at a price of $1.75 per share.  The warrants have a three-year term.
Cromwell was the placement  agent for the offering.  The Company paid Cromwell a
commission  of 11% of the  total  aggregate  purchase  price and  Cromwell  also
received  warrants to purchase  110,000  Units of the  Company's  securities  as
described above at an exercise price of $1.20 per Unit. Pursuant to the terms of
the offering,  we will effect a one for three reverse stock split.  The terms of
the offering  provided that the number and exercise prices of the warrants would
not be adjusted by virtue of the reverse stock


                                      -18-


<PAGE>

split.  As a result,  the Company  believes  that the  holders of a  substantial
portion of the warrants will exercise  their  warrants and that the Company will
realize further proceeds from such exercises.

        In 1998, the Company  financed its operations  primarily with borrowings
under its Credit Facility with NationsCredit.  Cash used in operating activities
totaled $1.02 million for the three months ended March 31, 1999 as compared with
cash used in operating  activities  of $0.77  million for the three months ended
March 31, 1998. This increase reflected  primarily the buildling up of inventory
and the reduction of payables.  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.

Capital Expenditures

        Capital  expenditures  totaled  $12,077 for the three months ended March
31,  1999.  These  expenditures  consisted  primarily  of  improvements  to  the
executive  offices in Boca Raton,  Florida to facilitate  moving the  accounting
department  into  those  offices.   The  Company   anticipates  further  capital
expenditures in 1999 connected with leasing and occupying the Deerfield, Florida
executive office and warehouse facility.

Intangible Assets

        In 1995, the Company  purchased the Big Smith trademark from Amita,  srl
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. A final payment of $50,000 is due in September 1999.

Seasonality

        The Company's  sales of workwear have been 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  was due to an increase in sales of winter  weight  garments,  which
sell at higher prices, combined with continued sales of regular weight garments.
This  seasonality  has had a significant  impact on the cash flow of the Company
because the  Company's  inventory  levels  tended to increase  during the summer
months in preparation for anticipated higher sales levels in September,  October
and November.  With the consummation of the Walls Sale and License,  the Company
believes that its continuing business will be less subject to seasonal variation
than  it  historically  has  been.  The  Company's  sportswear,  ladieswear  and
childrenswear  products sell at a generally constant rate with some acceleration
of sales in the spring and fall.


                                      -19-


<PAGE>

                                     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.

               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.


                                      -20-


<PAGE>

               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 be  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 these  litigations  have 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.


Item 2.        Changes in Securities.
               None.

Item 3.        Defaults Upon Senior Securities.
               None.

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

Item 5.        Other Information.
               None.


                                      -21-


<PAGE>

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


(a)     Exhibits:

                                  EXHIBIT TABLE

  Exhibit
    No.                                   Description
    ---                                   -----------

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

(b)       By-laws.*

10(c)     Loan and Security  Agreement,  dated  December  __, 1997,  between the
          Company and National Credit  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.**

(ac)      Letter  of  Intent,  dated  February  10,  1998,  from  D.L.  Cromwell
          Investments,  Inc. ("Cromwell") to Willora Company Limited ("Willora")
          with respect to the conversion of the remaining Debentures.***

(ad)      Letter Agreement,  dated February 10, 1998, among the Company, Willora
          and  Cromwell,  with  respect  to  the  conversion  of  the  remaining
          Debentures.***

(ae)      Form of  Subscription  Agreement  with  respect  to the  1999  private
          placement offering through D.L. Cromwell Investments, Inc.****

(af)      Form of  Warrant to  Purchase  Common  Stock with  respect to the 1999
          private placement offering through Cromwell.****

(ag)      Form of Placement  Agent's  Agreement with respect to the 1999 private
          placement offering through Cromwell.****

(ah)      Asset  Purchase  Agreement,  dated  February 26, 1999,  by and between
          Walls Industries, Inc., Cleburne, Texas and the Company.****

(ai)      Agreement  Not to Compete,  dated  February 26,  1999,  by and between
          Walls Industries, Inc., Cleburne, Texas and the Company.****

(aj)      Agreement  Not to Compete,  dated  February 26,  1999,  by and between
          Walls Industries, Inc., Cleburne, Texas and S. Peter Lebowitz.****


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").


                                      -22-


<PAGE>

**        Previously  filed with, and  incorporated  herein by reference to, the
          Registrant's  Annual Report on Form 10-KSB for the 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 for the year ended December
          31, 1997, filed on April 15, 1998.

****      Previously  filed with, and  incorporated  herein by reference to, the
          Registrant's  Annual Report on Form 10-KSB for the year ended December
          31, 1998, filed on March 29, 1999.

*****     Filed herewith.

         (b)      Reports on Form 8-K.

                                      None.


                                      -23-


<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.



Date: May 24, 1999                  /s/ Susan A. Leonhardt
                                   -----------------------------
                            By:    Susan A. Leonhardt
                                   Director of Accounting/Administration and
                                   Authorized Registrant Signer
                                   (Principal Accounting and Financial Officer)


                                      -24-


<PAGE>

                                  EXHIBIT INDEX

  Exhibit
    No.                                   Description
    ---                                   -----------

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

(b)       By-laws.*

10(c)     Loan and Security  Agreement,  dated  December  __, 1997,  between the
          Company and National Credit  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.**

(ac)      Letter  of  Intent,  dated  February  10,  1998,  from  D.L.  Cromwell
          Investments,  Inc. ("Cromwell") to Willora Company Limited ("Willora")
          with respect to the conversion of the remaining Debentures.***

(ad)      Letter Agreement,  dated February 10, 1998, among the Company, Willora
          and  Cromwell,  with  respect  to  the  conversion  of  the  remaining
          Debentures.***

(ae)      Form of  Subscription  Agreement  with  respect  to the  1999  private
          placement offering through D.L. Cromwell Investments, Inc.****

(af)      Form of  Warrant to  Purchase  Common  Stock with  respect to the 1999
          private placement offering through Cromwell.****

(ag)      Form of Placement  Agent's  Agreement with respect to the 1999 private
          placement offering through Cromwell.****

(ah)      Asset  Purchase  Agreement,  dated  February 26, 1999,  by and between
          Walls Industries, Inc., Cleburne, Texas and the Company.****

(ai)      Agreement  Not to Compete,  dated  February 26,  1999,  by and between
          Walls Industries, Inc., Cleburne, Texas and the Company.****

(aj)      Agreement  Not to Compete,  dated  February 26,  1999,  by and between
          Walls Industries, Inc., Cleburne, Texas and S. Peter Lebowitz.****


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 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 for the year ended December
          31, 1997, filed on April 15, 1998.


                                      -25-


<PAGE>

****      Previously  filed with, and  incorporated  herein by reference to, the
          Registrant's  Annual Report on Form 10-KSB for the year ended December
          31, 1998, filed on March 29, 1999.

*****     Filed herewith.


                                      -26-