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 June 30, 1998


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

                         Commission file number 01-13470

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

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

           7100 West Camino Real, Suite 201, 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 July 31, 1998:  7,099,842

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


<PAGE>

                                      INDEX


                                                                           Pages
                                                                           -----

PART I                FINANCIAL INFORMATION

           Item 1.  Consolidated Financial Statements

                      Balance Sheet  as of June 30, 1998                      3

                      Statements of Operations for the three
                        month and six month periods ended
                        June 30, 1998 and 1997                                4

                      Statement of Stockholders' Equity for the
                        six months ended June 30, 1998                        5

                      Statements of Cash Flows for the six months
                        ended June 30, 1998 and 1997                          6

                      Notes to Financial Statements                           7


           Item 2.    Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                     8

PART II        OTHER INFORMATION                                             13


SIGNATURE                                                                    17

EXHIBIT INDEX                                                                18


                                       -2-

<PAGE>

                             BIG SMITH BRANDS, INC.
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1998
                                   (UNAUDITED)

                                     ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S>                                                                            <C>         
  Cash                                                                         $     20,211
  Temporary investments                                                              16,214
  Accounts receivable, less allowance
       for doubtful accounts of  $261,333                                         1,216,527
  Inventories                                                                     4,931,737
  Prepaid expenses                                                                  235,325
                                                                                -----------
        Total current assets                                                      6,420,014

PROPERTY AND EQUIPMENT, AT COST
  Land                                                                               20,000
  Buildings                                                                         557,289
  Equipment                                                                       1,981,631
  Vehicles                                                                           81,511
                                                                                 ----------
                                                                                  2,640,431
  Less accumulated depreciation                                                   1,488,216
        Net property and equipment                                                1,152,215

OTHER ASSETS
  Security deposits                                                                  12,880
  Deferred finance charges, less accumulated amortization of $113,266               332,551
  Trademarks, less accumulated amortization of $91,708                              418,420
                                                                                -----------
        Total other assets                                                          763,851

           Total assets                                                         $ 8,336,080
                                                                                ===========


                             LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
  Revolving line-of-credit                                                      $ 4,056,624
  Current maturities of long-term debt                                              431,595
  Checks outstanding in excess of bank balance                                      304,549
  Accounts payable                                                                2,763,047
  Accrued restructuring/litigation                                                  244,169
  Accrued royalties                                                                 665,674
  Accrued expenses                                                                  679,262
                                                                                -----------
        Total current liabilities                                                 9,144,920


LONG-TERM DEBT                                                                      947,081

STOCKHOLDERS' DEFICIT
  Common stock, $.01 par value; authorized 10,000,000 shares:
       issued and outstanding  7,099,842 shares                                      70,998
  Additional paid-in capital                                                      8,784,120
  Accumulated Deficit                                                           (10,611,040)
                                                                                ------------
        Total stockholders' deficit                                              (1,755,922)

           Total liabilities and stockholders' deficit                          $ 8,336,079
                                                                                ===========
</TABLE>

See Notes to Consolidated Financial Statements


                                       -3-

<PAGE>

                                    BIG SMITH BRANDS, INC.
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (UNAUDITED)

<TABLE>
<CAPTION>
                                        Three Month Period                    Six Month Period
                                           Ended June 30                        Ended June 30
                                           -------------                        -------------

                                      1998              1997               1998              1997
                                      ----              ----               ----              ----


<S>                                  <C>               <C>                <C>                <C>        
NET SALES                            $ 2,541,746       $ 2,365,784        $ 4,805,664        $ 4,109,607


COST OF GOOD SOLD                      1,894,916         1,964,980          3,697,426          3,431,738
                                     -----------       -----------       ------------       ------------


GROSS PROFIT                             646,831           400,804          1,108,238            677,869
                                     -----------       -----------        -----------       ------------


OPERATING EXPENSES

 Selling                                 390,454           373,208            757,445            662,486

General and administrative               636,913           516,468          1,105,393            996,196
                                     -----------      ------------        -----------        -----------

                                       1,027,367           889,676          1,862,838          1,658,682
                                     -----------      ------------        -----------        -----------


LOSS FROM OPERATIONS                   (380,536)         (488,872)          (754,600)          (980,813)
                                     -----------      ------------       ------------        -----------

0THER INCOME (EXPENSE)

 Miscellaneous income                  ( 27,240)         ( 48,946)          ( 61,994)           (74,934)

 Amortization of debenture
 discount                                                                   (606,204)

 Interest expense                      (137,158)         (198,872)          (258,944)          (307,035)
                                    ------------      -----------        -----------        ------------

                                       (164,398)         (247,818)          (927,142)          (381,969)
                                    ------------      ------------       ------------       ------------

LOSS BEFORE INCOME
TAXES                                  (544,934)         (736,690)        (1,681,742)        (1,362,782)


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

NET LOSS                           $   (544,934)     $   (736,690)     $  (1,681,742)      $ (1,362,782)
                                   =============     =============     ==============      =============



NET LOSS PER SHARE                $    (   0.08)     $  (    0.18)   $    (     0.24)    $   (     0.34)
                                  ==============     =============   ================    ===============



WEIGHTED AVERAGE
COMMON SHARES
  OUTSTANDING                          7,099,842         3,995,987          7,099,842          3,995,987
                                    ============       ===========     ==============        ===========
</TABLE>

See Notes to Consolidated Financial Statements


                                       -4-

<PAGE>

                                    BIG SMITH BRANDS, INC.
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
                                SIX MONTHS ENDED JUNE 30, 1998
                                          (UNAUDITED)


<TABLE>
<CAPTION>
                                               Common Stock,
                                              $.01 par value
                                        -----------------------------
                                                                       Additional     Retained
                                                           Common        Paid-in       earnings
                                             Shares         Stock        capital      (deficit)        Total
                                             ------         -----        -------      ---------        -----
<S>                                      <C>             <C>        <C>          <C>               <C>          
Balance (deficit), January 1, 1998        4,199,842       $ 41,998   $ 7,181,620  $ (8,929,297)     $ (1,705,679)


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

Net loss - June 30, 1998                      -              -               -      (1,681,743)       (1,681,743)
                                          ----------     ---------   ----------   -------------      -------------

Balance (deficit), June 30, 1998          7,099,842       $ 70,998   $ 8,784,120  $(10,611,040)     $ (1,755,922)
                                          =========       ========   ===========  =============      =============

</TABLE>


See Notes to Consolidated Financial Statements


                                       -5-

<PAGE>



                                        BIG SMITH BRANDS, INC.
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                              (UNAUDITED)


<TABLE>
<CAPTION>
                                                             1998            1997
                                                             ----            ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                      <C>            <C>         
  Net loss                                               $(1,681,742)   $(1,362,782)
  Item not requiring cash:                                   
    Depreciation and amortization                            185,093        122,898
    Amortization of debenture discount                       606,204
  Changes in:                                                
    Accounts receivable                                      787,649        770,924
    Inventories                                           (1,665,754)    (1,023,073)
    Prepaid expenses                                         (73,731)      (102,680)
    Other assets                                             (24,699)       (84,481)
    Accounts payable and accrued expenses                    582,463         41,962
                                                         -----------    -----------
       Net cash used in operating activities              (1,284,517)    (1,637,232)
                                                         -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                        (100,690)       (11,994)
  Reductions (Purchase) of temporary investments              (8,452)        72,673
      Net cash provided (used) in investing activities      (109,142)        60,679
                                                         -----------    -----------


CASH FLOWS FROM FINANCING ACTIVITIES
  Checks outstanding in excess of bank balance                27,265         80,294
  Net borrowings (repayments) under line-of-credit         1,461,258        (32,791)
    agreement                                                              (115,226)
  Principal payments on long-term debt                      (185,843)     1,436,000
                                                         -----------    -----------
      Net cash provided by financing activities            1,302,680      1,368,277
                                                         -----------    -----------


DECREASE IN CASH                                             (90,975)      (129,773)

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

CASH, END OF PERIOD                                      $    20,211    $    40,778
                                                         ===========    ===========
</TABLE>


See Notes to Consolidated Financial Statements


                                       -6-

<PAGE>

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

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF COMPANY

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

SIGNIFICANT ACCOUNTING POLICIES

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

NOTE 2:  INTERIM FINANCIAL STATEMENTS

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

In the opinion of the management of the Company,  the accompanying  consolidated
financial  statements  reflect all adjustments  necessary  (consisting solely of
normal  recurring  adjustments) to present fairly the financial  position of the
Company as of June 30,  1998 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  June  30,  1998,  are not
necessarily  indicative  of the results to be expected for the entire year.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Seasonality."

NOTE 3:  INCOME PER SHARE INFORMATION

Earnings per share are computed  based on the weighted  average number of common
shares outstanding  during the 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.


                                       -7-

<PAGE>

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

GENERAL

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

         Forward  Looking-Statements.  When used in this report,  press releases
and  elsewhere by the  management  of the Company  from time to time,  the words
"believes", "anticipates", and "expects" and similar expressions are intended to
identify   forward-looking   statements   that   involve   certain   risks   and
uncertainties. Additionally, certain statements contained in this discussion may
be  deemed  forward-looking  statements  that  involve  a number  of  risks  and
uncertainties.  Among the  factors  that could  cause  actual  results to differ
materially  are the  following:  the  ability of the Company to meet its working
capital and liquidity  needs, the status of relations  between the Company,  its
primary  customers  and  distributors,  the  availability  of long-term  credit,
unanticipated  changes  in  the  U.S.  and  international  economies,   business
conditions  and  growth  in the  workwear/sportswear  industry  and the level of
growth in retail sales generally,  the timely  development and acceptance of new
products, the impact of competitive products and pricing, changes in the cost of
raw  materials,  changes in product mix, the outcome of  litigation in which the
Company is involved,  along with product  delays and other risks  detailed  from
time to time in the Company's SEC reports, including but not limited to the Form
10-KSB.   Readers  are   cautioned   not  to  place  undue   reliance  on  these
forward-looking  statements which speak only as of the date 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.

         Going Concern.  The Company's viability as a going concern is dependent
upon its ability to raise  sufficient  working capital and to meet any liquidity
needs that may exceed the  availability  under the Credit  Facility  (as defined
below). The Company experienced a loss from operations in the periods ended June
30, 1998 and 1997 and had a working  capital  deficit of $1.135  million at June
30, 1998. See "--Liquidity and Capital Resources."

         The Company has authorized an investment  banker to identify  potential
purchasers of bridge notes and warrants of the Company. The terms and conditions
of such interim financing facility are currently under negotiation.  The Company
also has entered into a letter of intent for a registered  public  offering (the
"Proposed  Public  Offering")  of  the  Company's  Common  Stock  pursuant  to a
prospectus  during 1998. There can be no assurance,  however,  that the Proposed
Public Offering will be consummated or that interim financing can be obtained.


                                       -8-

<PAGE>

         At December  10, 1997,  the Company  secured a new  revolving  loan and
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.  The amount outstanding
under the Credit Facility as of June 30, 1998 was $4,056,624.  See "--Liquidity
and Capital Resources."

RESULTS OF OPERATIONS

THREE  MONTHS  ENDED JUNE 30, 1998  COMPARED TO THE THREE  MONTHS ENDED JUNE 30,
1997

         Net sales,  for the three months ended June 30, 1998  increased by $.18
million,  or 7.44%,  to $2.54  million  from $2.37  million for the three months
ended June 30,  1997.  Net sales for the three months ended June 30, 1998 of Big
Smith  workwear and other branded  workwear,  Big Smith  sportswear  and private
label products were $2.19 million,  $.24 million and $.11 million  respectively,
as compared  with $2.15  million,  $.0 and $.11 million,  respectively,  for the
three  months  ended June 30,  1997.  The  increase in sales  resulted  from the
increase in sales of Big Smith  sportswear  to new and existing  customers,  the
addition of new  customers  including  Mills Fleet & Farm Corp.,  and  increased
product  purchases by existing  customers,  especially  Wal-Mart  Stores,  Inc.,
reflecting the increased marketing by the Company of such products.

         Gross profit for the three months ended June 30, 1998 was $.65 million,
or 25.4% of net sales,  compared to $.40 million, or 16.9% of net sales, for the
three months ended June 30, 1997.  The increase in gross profit  percentage  was
primarily  due  to  the  increased  production  levels  and  plant  efficiencies
resulting in lower  overhead and the  relatively  higher gross profit margins of
Big Smith  sportswear  compared to Big Smith workwear and other branded workwear
and private label products.  For the three months ended June 30, 1998, Big Smith
workwear and other  branded  workwear,  Big Smith  sportswear  and private label
products  accounted  for  86.2%,  9.5% and 4.3% of net sales,  respectively,  as
compared  with  93.7%,  0% and 6.3% of net  sales,  respectively,  for the three
months ended June 30, 1997.

         Selling expenses increased by $.02 million to $.39 million, or 15.4% of
net sales, for the three months ended June 30, 1998, from $.37 million, or 15.8%
of net sales, for the three months ended June 30, 1997. This increase in selling
expenses  resulted  principally  from an  increase  of $.02  million  in selling
expense related to the new Big Smith sportswear line. General and administrative
expenses were $.64 million,  or 25.1% of net sales during the three months ended
June 30, 1998,  compared with $.52 million, or 21.8% of net sales, for the three
months  ended June 30,  1997.  The  decrease in the  general and  administrative
expenses  percentage of net sales was primarily due to the increase in sales for
the three  months ended June 30, 1998 as compared to the three months ended June
30, 1997.

         The Company's interest expense for the three months ended June 30, 1998
was $.14 million,  or 5.4% of net sales, as compared with $.20 million,  or 8.4%
of net sales, for the three months ended June 30, 1997. The increase in interest
expense  was  primarily  due to  $20,000  of  interest  expense  related  to the
Debentures, which were not outstanding in the three months ended June 30, 1997.

         As a result  of the  foregoing,  the  Company's  net loss for the three
months ended June 30, 1998 was  $544,934  compared to a net loss of $736,690 for
the three months ended June 30, 1997.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997

         Net sales,  for the six months  ended June 30, 1998  increased  by $.70
million,  or 16.9%, to $4.81 million from $4.11 million for the six months ended
June 30,  1997.  Net sales for the six months  ended June 30,  1998 of Big Smith
workwear  and other  branded  workwear,  Big  Smith  sportswear,  private  label
products and Caterpillar branded products were $4.03 million, $.46 million, $.32
million and $0,  respectively,  as compared with $3.92 million, $0, $.11 million
and $.08 million, respectively, for the six months ended June


                                       -9-

<PAGE>

30, 1997. The increase in sales resulted from the increase in sales of Big Smith
sportswear  to new  and  existing  customers,  the  addition  of  new  customers
including Mills Fleet & Farm Corp., and increased  product purchases by existing
customers,  especially Wal-Mart Stores, Inc., reflecting the increased marketing
by the Company of such products.]

         Gross profit for the six months ended June 30, 1998 was $1.11  million,
or 23.1% of net sales,  compared to $.68 million, or 16.5% of net sales, for the
six months ended June 30, 1997.  The  increase in gross  profit  percentage  was
primarily  due  to  the  increased  production  levels  and  plant  efficiencies
resulting in lower  overhead and the  relatively  higher gross profit margins of
Big Smith  sportswear  compared to Big Smith workwear and other branded workwear
and private label  products.  For the six months ended June 30, 1998,  Big Smith
workwear  and other  branded  workwear,  Big  Smith  sportswear,  private  label
products and Caterpillar  branded products  accounted for 83.8%,  9.5%, 6.7% and
1.9% of net sales,  respectively,  as compared with 95.4%,  0%, 2.7% and 1.9% of
net sales, respectively, for the six months ended June 30, 1997.

         Selling expenses increased by $.09 million to $.76 million, or 15.8% of
net sales,  for the six months ended June 30, 1998, from $.66 million,  or 16.1%
of net sales,  for the six months ended June 30, 1997.  This increase in selling
expenses  resulted  principally  from an increase of $143,000 in selling expense
related  to the  new Big  Smith  sportswear  line.  General  and  administrative
expenses were $1.11  million,  or 23.0% of net sales during the six months ended
June 30, 1998,  compared with $.97 million,  or 23.5% of net sales,  for the six
months  ended June 30,  1997.  The  decrease in the  general and  administrative
expenses  percentage of net sales was primarily due to the increase in sales for
the six months  ended June 30, 1998 as compared to the six months ended June 30,
1997.

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

         The Company's  interest  expense for the six months ended June 30, 1998
was $.26 million,  or 5.4% of net sales, as compared with $.31 million,  or 7.5%
of net sales,  for the six months ended June 30, 1997.  The decrease in interest
expense  was  primarily  due to  $20,000  of  interest  expense  related  to the
Debentures, which were outstanding at June 30, 1997.

         As a result of the foregoing, the Company's net loss for the six months
ended June 30, 1998 was $1.68  million  compared to a net loss of $1.36  million
for the six  months  ended June 30,  1997.  Excluding  a one time  non-recurring
convertible  debenture  amortization discount of $606,204 arising as a result of
the retirement of all outstanding convertible debentures of the Company in March
1998,  the  Company's  net loss for the six months ended June 30, 1998 was $1.08
million.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company's  viability  as a going  concern  is  dependent  upon its
ability to raise sufficient working capital and to meet any liquidity needs that
may exceed the availability under the Credit Facility. The Company experienced a
loss from  operations  in the  periods  ended  June 30,  1998 and 1997 and had a
working  capital  deficiency of $1.135 million at June 30, 1998. The Company has
commenced several steps to obtain additional sources of liquidity  including the
pursuit  of bridge  financing  arrangements  and the sale of  additional  common
stock.

         The Company has authorized an investment  banker to identify  potential
purchasers of bridge notes and warrants of the Company.  This interim  financing
facility is  currently  in the  process of being  funded.  The Company  also has
entered into a letter of intent for a Proposed  Public Offering of the Company's
Common Stock  pursuant to a prospectus  during 1998.  There can be no assurance,
however,  that the Proposed  Public Offering will be consummated or that interim
financing can be obtained.


                                      -10-

<PAGE>


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

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

         At June 30,  1998 and 1997  working  capital was  approximately  $1.135
million and $.40 million,  respectively.  This decrease resulted  primarily from
the loss of revenue due to the  Caterpillar  Termination].  Working capital also
may vary from time to time as a result of seasonal inventory  requirements,  the
level of trade credit available and the level of accounts receivable balances.

         Cash used in  operating  activities  totaled  $1.28  million  and $1.64
million for the six months  ended June 30, 1998 and June 30, 1997  respectively.
This increase  reflected  primarily an increase in inventory  resulting from the
increased build-up of inventory of winter weight workwear and the new sportswear
products.  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. In the
six months ended June 30, 1998 such  inventory  build-up  increased over the six
months ended June 30, 1997 due to  anticipation of increased sales in the second
half of 1998. See "-Seasonality."

         Cash flows from  financing  activities  totaled $1.37 million and $1.37
million for the six months ended June 30, 1998 and June 30, 1997, respectively.

         At December  10, 1997,  the Company  secured a new  revolving  loan and
Credit  Facility  with  NationsCredit   allowing  for  maximum  availability  of
$10,000,000 based upon a specified  percentage of eligible accounts  receivable,
inventories,  real property,  equipment, and trademarks.  The amount outstanding
under  the  Credit  Facility  as of June 30,  1998 was  $4,056,624.  The  Credit
Facility bears interest at prime plus 1.875% ( 10.375% at June 30, 1998).

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

CAPITAL EXPENDITURES

               Capital expenditures  totaled  approximately $.12 million for the
three months ended June 30, 1998, primarily for necessary physical  improvements
at the Carthage plant and leasehold improvements at the Miami, Florida store.

INTANGIBLE ASSETS

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


                                      -11-

<PAGE>

SEASONALITY

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


                                      -12-

<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.


                                      -13-

<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  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 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 believed were due and owing.  Since the suit
was  commenced,  All  American  has  paid  substantially  all of the  amount  in
controversy.

         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.

         Stockholders  holding  4,183,000  shares of the Company's Common Stock,
constituting more than a majority of the outstanding shares of the Common Stock,
acted  by  written  consent,  executed  as of June  11,  1998,  to  approve  the
following:  (i) the  amendment and  restatement  (the "Plan  Amendment")  of the
Company's  1994 Stock  Incentive Plan (a) to increase to 1,800,000 the number of
shares  reserved for issuance  under the 1994 Plan, and to increase to 1,000,000
the  number of shares of Common  Stock  with  respect  to which  options  may be
granted to any one employee in any calendar year, and (b) to bring the 1994 Plan
into compliance with certain provisions of the Internal Revenue Code of 1986, as
amended  and the  Exchange  Act;  (ii)  the  amendment  and  restatement  of the
Company's  Amended and  Restated  Certificate  of  Incorporation  (the  "Charter
Amendment")  to create a new class of "blank check"  preferred  stock,  $.01 par
value per share,  consisting of 100,000 shares;  and (iii) a reverse stock split
of the Common Stock of the Company (the "Reverse  Split") pursuant to which each
three shares of Common  Stock of the Company  presently  issued and  outstanding
will be  changed  into one share of Common  Stock and any  fractional  number of
shares due to any holder of record  resulting from such reverse stock split will
be rounded up to the next whole number of shares.  The above referenced  actions
were to become effective on or after July 1, 1998.

         The Board of Directors was  specifically  given the authority to change
the ratio of the Reverse Split and to postpone the effective date of the reverse
stock  split or to abandon the reverse  stock split as they,  in their  business
judgment,  deem to be in the best interests of the Company and its stockholders.
In addition,  the proper officers of the Corporation (such proper officers being
the Chairman of the Board, the Chief Executive


                                      -14-

<PAGE>

Officer, the President,  any Vice President,  the Treasurer, the Chief Financial
Officer and the Secretary of the Corporation)  were  specifically  authorized to
determine in their sole  discretion the filing date of the Charter  Amendment or
in such discretion  determine not to file such Charter  Amendment.  As of August
19,  1998,  neither  the  Reverse  Split  nor the  Charter  Amendment  have been
effected.

         At the Annual Meeting of Stockholders held on June 25, 1998,  4,210,100
of the  7,099,842  shares  eligible to vote at the meeting  were  present at the
meeting.  Of the 4,210,100 shares present at the meeting,  4,210,100 shares were
voted in favor of the election of each of the following  persons to serve on the
Board of  Directors  of the  Company:  S. Peter  Lebowitz,  Julian  Shaps,  Glen
Freeman,  Theodore Listerman and Jack Schultz,  constituting the entire Board of
Directors.  No shares  eligible  to vote at the  meeting  were cast  against the
election of the above named persons as directors or were withheld.  4,210,100 of
the shares  present at the meeting were voted for approving the  appointment  of
the firm of  Daszkal,  Bolton  &  Manela,  CPAs,  as the  Company's  Independent
Auditors for the fiscal year ending  December 31,  1998.  No shares  eligible to
vote at the  meeting  were cast  against  the  approval  of the  appointment  of
Daszkal,  Bolton & Manela, CPAs, or were withheld. No other business was brought
before the Annual Meeting of Stockholders.

ITEM 5.   Other Information.

               None.


                                      -15-

<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  NationsCredit Commercial  Funding,  Inc., a NationsBank
           Company.***

(z)        Amended and Restated Employment Agreement, dated January 1, 1998, 
           between the Company and S. Peter Lebowitz***
(ab)       Warrant to Purchase Common Stock, dated as of April 2, 1997.**

(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.***


27         Financial Data Schedule****

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

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

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

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

         ****  Filed herewith

        (b)    Reports on Form 8-K

                      None.


                                      -16-

<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:  August 19, 1998                    /s/ Susan A. Leonhardt
-----  ---------------                    ----------------------
                                   By:    Susan A. Leonhardt
                                          Director -- Accounting/Administration
                                          and Authorized Registrant Signer
                                          (Principal Accounting
                                          and Financial Officer)



                                      -17-

<PAGE>

                                  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  NationsCredit Commercial  Funding,  Inc., a NationsBank
           Company.***

(z)        Amended and Restated Employment Agreement, dated January 1, 1998, 
           between the Company and S. Peter Lebowitz***
(ab)       Warrant to Purchase Common Stock, dated as of April 2, 1997.**

(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.***

27         Financial Data Schedule****

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

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

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

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

         ****  Filed herewith


                                      -18-