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, 1997

_____  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 201, Boca Raton, Florida 33433
           -----------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (407) 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 15, 1997:  3,930,000

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  March 31, 1997                     3

                      Statements of Operations for the three
                      months ended March 31, 1997 and 1996                     4

                      Statement of Stockholders' Equity for the
                        three months ended March 31, 1997                      5

                      Statements of Cash Flows for the three months
                        ended March 31, 1997 and 1996                          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                                                   11


SIGNATURE                                                                     12

EXHIBIT INDEX                                                                 13


                                      - 2 -


<PAGE>

                             BIG SMITH BRANDS, INC.
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 1997
                                   (UNAUDITED)
                                     ASSETS
<TABLE>
<CAPTION>


CURRENT ASSETS
<S>                                                                           <C>         
Cash                                                                          $     35,792
Temporary investments                                                               74,257
Accounts receivable, less allowance
     for doubtful accounts of $334,394                                           2,481,056
Royalties Receivable                                                             1,195,803
Inventories                                                                      4,561,025
Prepaid expenses                                                                   239,618
                                                                              ------------
         Total Current Assets                                                    8,587,551
                                                                              ------------


PROPERTY AND EQUIPMENT, AT COST
  Land                                                                              20,000
  Buildings                                                                        471,109
  Equipment                                                                      1,943,478
  Vehicles                                                                          81,511
                                                                              ------------
                                                                                 2,516,098
Less accumulated depreciation                                                    1,148,898
                                                                              ------------
                                                                                 1,367,200
OTHER ASSETS
  Security deposits                                                                 12,130
  Trademark, net of amortization                                                   455,676
                                                                              ------------
                                                                              $ 10,422,557
                                                                              ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current maturities of long-term debt                                        $  3,847,647
  Checks outstanding in excess of bank balance                                     557,894
  Accounts payable                                                               2,060,309
  Accrued restructuring/litigation                                                 626,835
  Accrued expenses                                                                 432,760
  Accrued royalties                                                                665,674
                                                                              ------------
         Total Current Liabilities                                               8,191,119
                                                                              ------------

LONG-TERM DEBT                                                                     805,286



STOCKHOLDERS' EQUITY
  Common stock, $.01 par value; authorized 10,000,000 shares;
    issued and outstanding 1996 - 3,930,000 shares                                  39,300
  Additional paid-in capital                                                     6,315,818
  Retained earnings (deficit)                                                   (4,928,966)
                                                                              ------------
                                                                                 1,426,152
                                                                              ------------
See Notes to Consolidated Financial Statements                                $ 10,422,557
                                                                              ============
</TABLE>


                                      - 3 -

<PAGE>

                             BIG SMITH BRANDS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                             1997              1996
                                                             ----              ----
NET SALES
<S>                                                     <C>              <C>           
 Trade                                                  $  1,743,823     $    4,157,993
 Royalties, net of related costs of $190,603 in 1996               0            379,505
                                                        ------------     --------------
                                                           1,743,823          4,537,498
                                                       
COST OF GOODS SOLD                                         1,466,758          3,600,874
                                                       -------------     --------------
                                                       
GROSS PROFIT                                                 277,065            936,624
                                                       -------------     --------------
OPERATING EXPENSES                                     
  Selling                                                    289,278            464,007
  General and administrative                                 479,728            539,744
                                                       -------------     --------------
                                                             769,006          1,003,751
                                                       -------------     --------------
                                                       
                                                       
INCOME (LOSS) FROM                                     
  OPERATIONS                                                (491,941)           (67,127)
                                                       --------------    ---------------
                                                       
                                                       
OTHER INCOME (EXPENSE)                                 
  Miscellaneous (expense)                                    (25,988)           (15,138)
  Interest expense                                          (108,163)           184,861
                                                       --------------    --------------
                                                            (134,151)          (199,999)
                                                      ---------------    --------------
                                                       
INCOME (LOSS) BEFORE                                   
  INCOME TAXES                                              (626,092)          (267,129)
CREDIT FOR INCOME TAXES                                            0            104,178
                                                       -------------     --------------
NET INCOME (LOSS)                                      $    (626,092)    $     (162,948)
                                                       =============     ===============
NET INCOME (LOSS) PER SHARE                            $        (.16)             (0.04)
                                                       ==============    ===============
                                                       
                                                       
WEIGHTED AVERAGE SHARES                                
  OUTSTANDING                                              3,930,000          3,930,000
                                                       =============     ==============
</TABLE>

See Notes to Consolidated Financial Statements


                                                     - 4 -

<PAGE>



                             BIG SMITH BRANDS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                        THREE MONTHS ENDED MARCH 31, 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                     Common Stock,
                                                    $.01 par value
                                                    --------------
                                                                                Additional        Retained           Total
                                                                                 paid-in          earnings       stockholders'
                                                Shares           Amount           capital         (deficit)          equity
                                                ------           ------           -------         ---------          ------
<S>                                            <C>              <C>            <C>           <C>                 <C>          
Balances at December 31, 1996                  3,930,000        $  39,300      $  6,315,818  $   (4,302,874)     $   2,052,244


Net Income (loss)                                  -                 -                -            (626,092)        (626,092)
                                              ----------       ----------      ------------   --------------      -----------
Balances at March 31, 1997                     3,930,000       $   39,300      $  6,315,818   $  (4,928,966)       $ 1,426,152
                                               =========       ==========      ============   ==============       ===========
</TABLE>


See Notes to Consolidated Financial Statements


                                                     - 5 -

<PAGE>

                             BIG SMITH BRANDS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                         1997                1996
                                                                         ----                ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                <C>                   <C>        
  Net income (loss)                                                $   (626,092)         $ (162,948)
  Item not requiring cash:
    Depreciation, amortization & impairment                              62,051              52,185
    Deferred income taxes                                                                    (4,800)
  Changes in:
    Accounts receivable                                                 669,774             455,533
    Inventories                                                        (416,261)            204,783
    Prepaid expenses                                                     87,640             108,926
    Other Assets                                                                            (47,373)
    Accounts payable and accrued expenses                                73,504            (631,826)
    Due to Stockholder                                                                      (50,028)
                                                                     ----------          ----------
       Net cash provided (used) in operating activities                (324,664)           (293,400)
                                                                     ---------          -----------


CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                                     (6,630)           (31,202)
  Reductions (purchase) of temporary investments                         70,649            (93,782)
                                                                     ----------        ------------
      Net cash provided (used) in investing activities                   64,019           (124,984)
                                                                     ----------       -------------


CASH FLOWS FROM FINANCING ACTIVITIES
  Checks outstanding in excess of bank balance                          273,342             319,870
  Net borrowings under line-of-credit agreement                        (132,622)            136,975
  Principal borrowings (payments) on long-term debt                     (14,834)            (32,427)
                                                                     ----------          ----------
      Net cash provided by financing activities                         125,886             424,418
                                                                     ----------          ----------


INCREASE (DECREASE ) IN CASH                                           (134,759)              6,034
CASH, BEGINNING OF PERIOD                                               170,551               4,207
                                                                     ----------         -----------
CASH, END OF PERIOD                                                $     35,792        $     10,241
                                                                    ===========         ===========
</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  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, 1996.

NOTE 2:  INTERIM FINANCIAL STATEMENTS

The accompanying  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 complete  financial
statements.  The financial  statements  should be read in  conjunction  with the
audited financial  statements and accompanying notes of the Company for the year
ended December 31, 1996,  which are included in its Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.

In the opinion of  management  of the  Company,  the  accompanying  consolidated
financial  statements  reflect all adjustments  necessary  (consisting solely of
normal  recurring  adjustments) to present fairly the financial  position of the
Company  as of March 31,  1997 and the  results of its  operations  and its cash
flows for the three month periods ended March 31, 1997 and March 31, 1996.

The  results  of  operations  for the  period  ended  March  31,  1997,  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

Net earnings  (loss) per share is computed using the weighted  average number of
shares of common stock outstanding and common stock equivalent shares from stock
options  and  warrants  unless  the  effect  of  common  stock   equivalents  is
anti-dilutive.

NOTE 4:  CONTINGENCIES

Certain  contingencies   relating  to  the  Company's  financial  condition  are
discussed in "Part II Item 1. Legal Proceedings" of this Form 10-QSB.



                                      - 7 -

<PAGE>

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

GENERAL

         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 status of relations  between the Company and
its primary customers,  and distributors,  unanticipated changes in the U.S. and
international economies, business conditions and growth in the workwear 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 report on the Form  10-KSB for the year ended  December  31, 1996
(the "Form 10K").  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.

         Financial  Disclosure.  The  discussion and analysis set forth below is
for the three month  periods  ended March 31, 1997 and March 31, 1996. It should
be read in  conjunction  with the  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, 1996
and December 31, 1995 and the related Notes thereto  appearing in the Form 10-K.
The Company  believes  that its  business is seasonal  and has  experienced  and
expects to continue to  experience  lower  revenues  and net income in the first
half of each fiscal  year as  compared  to the second half of each fiscal  year.
This  seasonality is due to increased  sales in the apparel  industry during the
Christmas  season  and the  increase  in sales of the  Company's  winter  weight
garments,  which  sell at  higher  per  unit  prices  than the  Company's  other
products,  and  back-to-school  clothes,  during  the  months of August  through
November.  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. See "--Seasonality."

         Going Concern.  The Company's viability as a going concern is dependent
upon the successful  refinancing of its principal line of credit,  which expires
on June 30, 1997 and its meeting its liquidity  needs prior to such date,  which
needs  could  exceed  the  amount of  borrowings  available  under the  existing
agreement.  The Company has taken several steps to obtain additional  sources of
liquidity and provide for longer-term lending arrangements  including soliciting
several   proposals  from  lenders  of  national   repute  relating  to  lending
arrangements  which would provide for term loans secured by property,  equipment
and  other  long-lived  assets;   collateralized   borrowings  against  accounts
receivable and inventory; and additional working capital lines of credit.

         Following  the receipt and  evaluation of several such  proposals,  the
Company  determined  to accept the proposal  proffered  by The CIT  Group/Credit
Finance ("CIT").  CIT's proposal was subject to successful completion of its due
diligence,  and the  Company  believes  that CIT has  nearly  completed  its due
diligence.  Management currently expects to receive a firm commitment to provide
such financing  arrangements from CIT. The Company  currently  believes that the
new arrangements may be completed within thirty days after its receipt of a firm
commitment from CIT.


                                      - 8 -

<PAGE>

         The  Company  has  also  initiated   proceedings  to  collect   certain
significant  delinquent accounts receivable from its foreign  distributors.  See
"Item 1. Legal Proceedings".  Additionally, on April 2, 1997, the Company closed
a  placement  of $1.7  million of  Debentures  with an  offshore  investor.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations-Liquidity and Capital Resources".

         The following  discussion  and analysis  should be read in  conjunction
with the Company's financial statements appearing elsewhere in this report.

RESULTS OF OPERATIONS

THREE MONTHS  ENDED MARCH 31, 1997  COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996

         Net trade sales, for the three months ended March 31, 1997 decreased by
$2.42  million,  or 58.2%,  to $1.74  million  from $4.16  million for the three
months ended March 31, 1996. Net sales for the three months ended March 31, 1997
of  Caterpillar  branded  products,  Big Smith and other branded  products,  and
private  label  products  were $.08  million,  $1.55  million and $.11  million,
respectively,  as compared with $1.41 million,  $1.65 million and $1.10 million,
respectively,  for the three months ended March 31, 1996.  The decrease in sales
of  Caterpillar  branded  products  resulted  primarily from the decision of the
Company to cease sales of Caterpillar  branded products due to a license dispute
and purported  termination by Caterpillar,  Inc.  ("Caterpillar").  See "Item 1.
Legal  Proceedings".  The  decrease  in sales of Big  Smith  and  other  branded
products  resulted from two one-time  sales of those  products  during the three
months  ended March 31, 1996,  which were not  repeated  during the three months
ended March 31, 1997.  The  decrease in private  label sales  resulted  from the
discontinued  private label  programs for the Kmart  Corporation.  Net royalties
from  distributors  for the  manufacture and sale of goods under the Caterpillar
labels  abroad net of related  costs for the three  months  ended March 31, 1997
were $0 as compared with $379,505 for the three months ended March 31, 1996.

         Gross profit,  excluding that from net royalties,  for the three months
ended March 31, 1997 was $.28 million, or 16.1% of net trade sales,  compared to
$.56 million,  or 13.5% of net trade sales, for the three months ended March 31,
1996. The increase in gross profit  percentage was primarily due to the decrease
in low margin private label sales resulting from the discontinued  private label
programs for the Kmart  Corporation.  For the three months ended March 31, 1997,
sales of Caterpillar branded products, Big Smith and other branded products, and
private  label  products  accounted  for  4.6%,  and 89.1% and 6.3% of net trade
sales, respectively, as compared with 33.9%, 39.7% and 26.4% of net trade sales,
respectively, for the three months ended March 31, 1996.

         Selling expenses decreased by $.17 million to $.29 million, or 16.7% of
net trade sales,  for the three months ended March 31, 1997,  from $.46 million,
or 11.1% of net trade sales,  for the three  months  ended March 31, 1996.  This
decrease in selling expenses resulted  principally from a decrease of $86,000 in
royalty expense a decrease of $49,000 in advertising and trade shows expense and
a $40,000 decrease in sample expense,  each related to the discontinuance by the
Company of its  Caterpillar  branded  goods  program  and a decrease in shipping
expense of $35,000  resulting from the decrease in trade sales,  which were only
partially  offset by a change in  classification  to include in selling expenses
rather than general and  administrative  expenses certain  personnel and related
expenses of approximately $40,000. General and administrative expenses were $.48
million,  or 27.6% of net trade sales  during the three  months  ended March 31,
1997,  compared  with $.54 million,  or 13.0% of net trade sales,  for the three
months ended March 31, 1996. The decrease in general and administrative  expense
was  primarily  due to a decrease of payroll of $61,000 along with a decrease in
other administrative costs related to the Company's downsizing and restructuring
following its discontinuance of the Caterpillar branded goods program which were
only partially offset by an increase of $30,000 in professional fees, consulting
fees, and costs associated with being a public Company.


                                      - 9 -

<PAGE>

         The  Company's  interest  expense for the three  months ended March 31,
1997 was $.11  million,  or 6.3% of net  trade  sales,  as  compared  with  $.18
million,  or 4.3% of net trade sales, for the three months ended March 31, 1996.
This decrease resulted  primarily from a decrease in inventory which resulted in
reduced  borrowings  for the three months ended March 31, 1997 as compared  with
those during the three months ended March 31, 1996.

         As a result  of the  foregoing,  the  Company's  net loss for the three
months ended March 31, 1997  increased  to $626,092  from a net loss of $162,948
for the three months ended March 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company's  viability  as a going  concern  is  dependent  upon the
successful  refinancing of its principal  line of credit,  which expires on June
30,  1997 and its meeting its  liquidity  needs prior to such date,  which needs
could exceed the amount of borrowings  available  under the existing  agreement.
The Company is taking  several steps to obtain  additional  sources of liquidity
and provide  for  longer-term  lending  arrangements.  The Company has  received
several   proposals  from  lenders  of  national   repute  relating  to  lending
arrangements  which would provide for term loans secured by property,  equipment
and  other  long-lived  assets;   collateralized   borrowings  against  accounts
receivable  and  inventory;  and  additional  working  capital  lines of credit.
Following  the receipt and  evaluation  of several such  proposals,  the Company
determined to accept the proposal  proffered by CIT.  CIT's proposal was subject
to successful completion of its due diligence, and the Company believes that CIT
has nearly completed its due diligence.  Management currently expects to receive
a firm commitment to provide such financing  arrangements  from CIT. The Company
currently believes that the new arrangements may be completed within thirty days
after its receipt of a firm  commitment from CIT. The Company has also initiated
proceedings to collect certain  significant  delinquent accounts receivable from
its foreign licensees and distributors. See "Item 1. Legal Proceedings."

         Additionally,  on  April  2,  1997,  the  Company  closed  an  offshore
placement of $1,700,000 of its 6% Convertible Preferred Debentures due March 31,
2000 to a single accredited investor.  Beginning 45 days after such closing, the
Debentures will be convertible  into Common Stock of the Company at a conversion
ratio  of one  share  for the  lesser  of (i)  $2.80  or (ii)  70% (or  67.5% if
converted  more than 100 days from the  closing of the  offering)  of the Market
Price (as  defined  in the  Debentures)  of the Common  Stock on the  conversion
date).  The  value  of the  discount  included  in the  conversion  ratio of the
Debentures  as of the  issuance  date will be  credited  to  additional  paid in
capital  and the  resulting  discount on the  Debenture  will be charged to 1997
operations  as imputed  interest.  The Company has agreed to redeem  outstanding
Debentures at 148% of their initial principal amount if required to do so by any
applicable law, rule,  regulation of any regulatory body, securities exchange or
trading market.

         Goodbody International,  Inc. served as introducing agent in connection
with such placement and received in  consideration  of it services  $255,000 and
warrants to purchase  100,000  shares of Common Stock of the Company at any time
prior to March 31, 2002,  exercisable at $2.00 per share,  subject to adjustment
based upon the bid price of the Company's common stock for the five trading days
ending on each anniversary of the date of issuance of the warrants.

         The Placement was a private transaction not involving a public offering
and was exempt from the registration  provisions of the Act, pursuant to Section
4(2)  thereof,  and  pursuant to  Regulation  S  promulgated  under the Act. The
Company  is a  reporting  issuer,  offering  restrictions  were  implemented  in
connection  with  the  Placement.  The  investor  represented  that  it  was  an
accredited  non-U.S.  Person  not  acting  for the  account or benefit of a U.S.
person and that it had received adequate information about the Company, and made
other customary representations and covenants under Regulation S.


                                     - 10 -

<PAGE>

         The Company has financed its growth primarily with borrowings under its
line of credit and, since the consummation of its initial public offering,  with
the  proceeds  of such  offering.  Cash used in  operating  activities  totalled
approximately  $32 million and $.29  million in the three months ended March 31,
1997 and 1996,  respectively.  During the first half of each year,  the  Company
typically  experiences negative cash flow from operations due to the build-up of
inventory in preparation  for increased  sales volume in the second half of each
year however,  in accordance with managements  plans to reduce inventory certain
plants  were  partially  shutdown  during  the first  quarter  resulting  in the
decrease of cash used in operating activities. See "--Seasonality."

         At March 31, 1997 and March 31, 1996, working capital was approximately
$.40 million and $9.7 million,  respectively.  This decrease resulted  primarily
from the  reclassification  as  current  liabilities  of  amounts  due under the
Company's line of credit on June 30, 1997 and a reduction in inventory.  Working
capital  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.

         At March 31,  1997,  the Company  had a $9 million  line of credit with
Mercantile  Business Credit Inc.  ("MBCI"),  with borrowing  levels based upon a
specified percentage of eligible accounts receivable and inventories. The amount
outstanding  under the credit  line as of March 31,  1997 and March 31, 1996 was
$3.5 million, and $6.9 million respectively. The line of credit bore interest at
the MBCI prime rate plus a premium interest factor. This premium interest factor
varied from 1.5 to 2.0 percent,  based upon the Company's  leverage ratio.  MBCI
has amended the loan agreement, retroactive to February 16, 1995, to provide for
interest at the MBCI prime rate plus a premium  interest factor of 0.75 percent.
The line of  credit  also  permits  overadvances  for up to 120  days per  year,
peaking at $.5  million.  The  overadvance  portion of the line of credit has an
interest  rate equal to the prime  rate as  published  by MBCI plus an  interest
premium  factor of 1.75. In addition,  the Company must  maintain  stockholders'
equity  of at least  $6,000,000  at  December  31,  1996.  The line of credit is
secured by the Company's accounts receivable,  inventory, property and equipment
and general  intangibles  and matures on June 30, 1997. At December 31, 1996 the
Company was not, and currently the Company is not, in compliance with certain of
the loan agreement's financial covenants.

CAPITAL EXPENDITURES

         Capital expenditures totaled  approximately $7,000 for the three months
ended March 31, 1997.


INTANGIBLE ASSETS

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

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 an increase in sales of winter weight garments,  which sell at higher prices,
combined with  continued  sales of regular  weight  garments.  This  seasonality
impacts the cash flow of the Company significantly since the Company's inventory
levels  typically  tend  to  increase  during  the  first  half  of the  year in
preparation for anticipated  higher sales levels in the second half of the year.
See - "Liquidity and Capital Resources."


                                     - 11 -

<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  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 11, 1996, the Company  received
from the High Court of Justice, Chancery Division, London, England,  preliminary
injunctive  relief under  section 21 of the Trade Mark Act of 1994 of the United
Kingdom  barring  Caterpillar  from  threatening  the  Company's   international
distributors with trademark infringement based on the purported termination.

         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").   In  its  complaint,   Caterpillar  sought
declaratory judgment that its purported termination of the Agreement was proper.
Based  upon such  purported  termination,  Caterpillar  also  alleges  trademark
infringement, unfair competition, false advertising, and breach of contract, and
seeks injunctive relief and unspecified damages.

         On July 18, 1996,  Caterpillar  filed an  emergency  motion for summary
judgment   seeking  a  determination   that  the  Agreement  had  been  properly
terminated.  The defendants have filed responsive  pleadings.  On July 26, 1996,
the defendants filed an answer to the summons and complaint stating  affirmative
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,   and  counterclaims   for  breach  of  contract,   tortious
interference with contractual relations,  interference with prospective business
relations,   conspiracy,   commercial  disparagement  and  breach  of  franchise
agreement.  S. Peter  Lebowitz  also filed an  additional  motion to dismiss for
failure to state a claim against him in his individual capacity.

         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")
denying  the  Company's  motion  for  a  preliminary   injunction  and  granting
Caterpillar's  motion for summary  judgment on the grounds  that the Company had
breached  the   Agreement  by  failing  to  obtain   certain   agreements   from
manufacturers  producing  Caterpillar  branded apparel as was required under the
Agreement,  and that the Agreement permitted Caterpillar to terminate based upon
such breach regardless of whether or not it was material. On September 24, 1996,
the District Court denied the Defendant's request for reconsideration.

         On August  26,  1996,  Caterpillar  filed  responses  to the  Company's
counterclaims.  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 September 3, 1996, the Company moved for  reconsideration  or in the
alternative, certification to the United States Court of Appeals for the Seventh
Circuit of the August 19th Order granting


                                     - 12 -

<PAGE>

Caterpillar  summary  judgment.  On  September  24,  1996,  the  District  Court
certified  for appeal the  question of whether  Illinois  common law has a "good
cause"  requirement  for  terminating  a  franchise  agreement  that  meets  the
definition of a franchise  under  Illinois law, but does not involve a franchise
located  in the State of  Illinois  and  stayed  further  action in the  pending
litigation  until the  Count of  Appeals  rules on the  certified  question.  On
October 4, 1996, the  Defendants  filed a Petition for Permission to Appeal with
the Seventh  Circuit Court of Appeals (the "Court of  Appeals"),  and on October
15, 1996,  Caterpillar  filed a response to such petition.  On December 6, 1996,
the Court of Appeals denied the Petition for Permission to Appeal.

         At a discovery  scheduling  conference  held on April 17,  1997,  the
District Court set the  Caterpillar  litigation for discovery to be completed by
November 1997 and scheduled trial for December 1997.

         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 is  involved  in  litigation  with a number of its foreign
distributors  in  connection  with their  refusal to pay  royalties  the Company
believes  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 have made claims against the Company relating
to the effects of the purported  termination of the Caterpillar license on their
arrangements with the Company. A summary of these actions follows.

         On December 11, 1996,  BSG filed suit in the UK High Court  against The
Big  Yellow  Corporation  Limited  ("Big  Yellow")  seeking  to  collect  unpaid
royalties of  approximately  500,000 British pounds together with interest.  The
Company  believes that following  filing of the suit additional  royalties in an
amount of  approximately  180,000 British pounds have become due and owing.  Big
Yellow  has  filed  a  counterclaim   against  BSG  and  the  Company   alleging
quantifiable   damages  of  approximately   18.15  million  British  pounds  and
unquantifiable damages for breach of contract, interest and indemnity in respect
of potential claims by Caterpillar.  On April 3, 1997, BSG amended its Statement
of Claim to include  allegations  of damages for breach of contract  against Big
Yellow.

         On January 6, 1997,  All American filed suit against BSG in the UK High
Count seeking damages for breach of contract and  interference  with contractual
relations and interest. All American has not yet specified its damages. On March
19, 1997,  All American  indicated  through its attorneys  that the suit will be
withdrawn.

         On March 20, 1997,  the Company and BSG filed suit against All American
in the  Commercial  Court of Paris,  France  seeking  recovery of  approximately
$133,000 of accounts  receivable  it believes are due and owing.  A hearing on a
summary  judgment motion is currently  scheduled for May 22, 1997. The defendant
has indicated its interest in settling this action, and the Company is currently
engaged in settlement discussions with the defendant.

         The  Company  has  engaged in  discussions  with  Selected  Brands Shoe
Company in  seeking  recovery  of at least  $73,000 of  accounts  receivable  it
believes are due and owing and with Fashion  Fever CC seeking  recovery of an as
yet  undetermined  amount of  royalties  it  believes  are due and owing.  These
discussions are preliminary to filing collection actions if the amounts due from
these parties are not settled in such discussions.


                                     - 13 -

<PAGE>

         Although  the  Company's  international  attorney's  have  advised  the
Company that it has valid claims in these actions for royalties owing, there can
be no assurance that the outcome of these litigations or of any of them will be,
on net  favorable to the Company.  Additionally,  the Company  believes that the
outcome of these actions, and particularly with respect to any claims against it
in these  actions,  may  depend,  in part,  on the  outcome  of the  Caterpillar
litigation.

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.

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


         (a)


                                     - 14 -

<PAGE>

                                  EXHIBIT TABLE

EXHIBIT
NO.                                 DESCRIPTION
---                                 -----------


        3(a)    Form of Restated Certificate of Incorporation.*
        (b)     By-laws.
        4(a)    Form of Common Stock Purchase Warrant.*
        (b)     Form of Warrant Agreement.*
        10(y)   Employment Agreement, dated January, 1 1996, between the Company
                and S. Peter Lebowitz.**
        (z)     Offshore Securities Subscription Agreement, dated April 2, 1997,
                between the Company and Willora Company Limited***
        (aa)    Form of Big Smith  Brands,  Inc. 6%  Convertible  Debenture  due
                March 31, 2000, dated April 2, 1997***
        (ab)    Warrant to Purchase Common Stock, dated as of April 2, 1997***

(b) No reports on Form 8-K have been filed for the quarter  for which  report is
    being filed.

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

*       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, 1995, filed on April ___, 1996.

***     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 5, 1997.


                                     - 15 -

<PAGE>

                                   SIGNATURES

         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.
                                       Registrant



Date:  May 14, 1996                          /s/ Terry. L. Dober
                                             -------------------
                                             Terry L. Dober
                                             Vice President of Finance and
                                             Authorized Registrant Signer
                                             (Principal Accounting
                                             and Financial Officer)


                                     - 16 -

<PAGE>

                                  EXHIBIT INDEX

EXHIBIT
NO.                                 DESCRIPTION
---                                 -----------

        3(a)    Form of Restated Certificate of Incorporation.*
        (b)     By-laws.
        4(a)    Form of Common Stock Purchase Warrant.*
        (b)     Form of Warrant Agreement.*
        10(y)   Employment Agreement, dated January, 1 1996, between the Company
                and S. Peter Lebowitz.**
        (z)     Offshore Securities Subscription Agreement, dated April 2, 1997,
                between the Company and Willora Company Limited***
        (aa)    Form of Big Smith  Brands,  Inc. 6%  Convertible  Debenture  due
                March 31, 2000, dated April 2, 1997***
        (ab)    Warrant to Purchase Common Stock, dated as of April 2, 1997***

(b) No reports on Form 8-K have been filed for the quarter  for which  report is
    being filed.

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

*       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, 1995, filed on April ___, 1996.

***     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 5, 1997.


                                     - 17 -