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, 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)

                                 (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, 1997:  3,995,987


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, 1997                       3

                      Statements of Operations for the three
                       month and six month periods ended
                       June 30, 1997 and 1996                                 4

                      Statement of Stockholders' Equity for the
                        six months ended June 30, 1997                        5

                      Statements of Cash Flows for the six months
                        ended June 30, 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                                                    14


SIGNATURE                                                                     18
EXHIBIT INDEX                                                                 19


                                       -2-

<PAGE>

                             BIG SMITH BRANDS, INC.
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1997
                                   (UNAUDITED)

                                     ASSETS

CURRENT ASSETS
  Cash                                                        $     39,814
  Temporary investments                                             72,233
  Accounts receivable, less allowance                     
       for doubtful accounts of  $343,468                        2,381,992
  Royalties receivable                                           1,194,681
  Inventories                                                    5,167,836
  Prepaid expenses                                                 248,745
                                                              ------------
               Total Current Assets                              9,111,214
                                                          
PROPERTY AND EQUIPMENT, AT COST                           
  Land                                                              20,000
  Buildings                                                        471,109
  Equipment                                                      1,947,268
  Vehicles                                                          83,085
                                                              ------------
                                                                 2,521,462
  Less Accumulated depreciation                                  1,188,470
                                                                 1,332,992
OTHER ASSETS                                              
  Security deposits                                                 18,042
  Loan Fees, net of amortization of $15,544                        348,482
  Trademark, net of amortization of $65,915                        449,945
                                                              ------------
                                                              $ 11,254,762
                                                              ============
                                              


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current maturities of long-term debt                       $  3,952,122
  Checks outstanding in excess of bank balance                    364,846
  Accounts payable                                              2,131,136
  Accrued Restructuring/Litigation                                603,939
  Accrued royalties                                               665,674
  Accrued expenses                                                353,287
                                                             ------------

         Total Current Liabilities                              8,071,004


LONG-TERM DEBT                                                  1,664,297
                                                             ------------

STOCKHOLDERS' EQUITY
  Common stock, $.01 par value; authorized 10,000,000 shares:
       issued and outstanding 3,995,987 shares                     39,960
  Additional paid-in capital                                    7,145,158
  Retained earnings                                            (5,665,657)
                                                             -------------
                                                                1,519,461
                                                             ------------
                                                             $ 11,254,762
                                                             ============

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,
                                                   --------------                 --------------
                                                1997           1996            1997           1996
                                                ----           ----            ----           ----
NET SALES                                       
<S>                                           <C>            <C>            <C>            <C>        
Trade                                         $ 2,365,784    $ 4,509,572    $ 4,109,607    $ 8,667,566
Royalties, net of related costs of $300,890
  and $491,494 in the three months and six
  months ended June 30, 1996, respectively              0        393,742              0        773,248
                                              -----------    -----------    -----------    -----------
                                                2,365,784      4,903,314      4,109,607      9,440,814

COST OF GOODS SOLD                              1,964,980      4,035,236      3,431,738      7,636,111
                                              -----------    -----------    -----------    -----------

GROSS PROFIT                                      400,804        868,078        677,869      1,804,703
                                              -----------    -----------    -----------    -----------
OPERATING EXPENSES
  Selling                                         373,208        427,707        662,486        891,715
  General and administrative                      516,468        664,936        996,196      1,204,683
                                              -----------    -----------    -----------    -----------
                                                  889,676      1,092,643      1,658,682      2,096,398
                                              -----------    -----------    -----------    -----------


INCOME (LOSS) FROM
  OPERATIONS                                     (488,872)      (224,565)      (980,813)      (291,695)
                                              -----------    -----------    -----------    -----------


OTHER INCOME (EXPENSE)
  Miscellaneous income                            (48,946)       (19,263)       (74,934)       (34,399)
  Interest expense                               (198,872)      (178,660)      (307,035)      (363,521)
                                              -----------    -----------    -----------    -----------
                                                 (247,818)      (197,923)      (381,969)      (397,920)
                                              -----------    -----------    -----------    -----------

INCOME (LOSS) BEFORE
  INCOME TAXES                                   (736,690)      (422,488)    (1,362,782)      (689,615)
CREDIT FOR INCOME TAXES                                 0        164,773              0        268,951
                                              -----------    -----------    -----------    -----------
NET INCOME (LOSS)                             $  (736,690)   $  (257,715)   $(1,362,782)   $  (420,664)
                                              ===========    ===========    ===========    ===========
NET INCOME (LOSS) PER SHARE                   $      (.19)   $      (.07)   $     (0.35)   $     (0.11)
                                              ===========    ===========    ===========    ===========
WEIGHTED AVERAGE SHARES
  OUTSTANDING                                   3,952,000      3,930,000      3,941,000      3,930,000
                                              ===========    ===========    ===========    ===========
</TABLE>

See Notes to Consolidated Financial Statements


                                       -4-

<PAGE>

                             BIG SMITH BRANDS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                         SIX MONTHS ENDED JUNE 30, 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

Discount on Convertible Debentures                            800,000                      800,000

Conversion of Debentures                65,987       660       29,340                       30,000

Net Income (loss)                           --        --           --    (1,362,783)    (1,362,783)
                                     ---------   -------   ----------   -----------    -----------
Balances at June 30, 1997            3,995,987   $39,960   $7,145,158   $(5,665,657)   $ 1,519,461
                                     =========   =======   ==========   ===========    ===========
</TABLE>


See Notes to Consolidated Financial Statements


                                       -5-

<PAGE>

                             BIG SMITH BRANDS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                   1997          1996
                                                                   ----          ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                            <C>            <C>       
  Net income (loss)                                            $(1,362,782)   $(420,664)
  Item not requiring cash:
    Depreciation and amortization                                  122,898      121,705
    Deferred income taxes                                                      (268,951)
  Changes in:
    Accounts receivable                                            769,960      160,188
    Inventories                                                 (1,023,073)     469,139
    Prepaid expenses                                              (102,680)    (131,862)
    Other assets                                                    (5,978)     (73,719)
    Accounts payable and accrued expenses                           41,962      106,133
                                                               -----------    ---------
       Net cash used in operating activities                    (1,559,693)     (38,031)
                                                               -----------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                               (11,994)     (82,533)
  Sale (purchase) of temporary investments                          72,673      (73,838)
                                                               -----------    ---------
      Net cash provided (used) in investing activities              60,679     (156,371)
                                                               -----------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Checks outstanding in excess of bank balance                      80,294      217,754
  Net borrowings (repayments) under line-of-credit agreement       (32,791)     139,429
  Principal payments on long-term debt                            (115,226)    (108,640)
  Net proceeds from convertible debenture                        1,436,000
  Principal payment on loan from stockholder                                    (50,028)
      Net cash provided by financing activities                  1,368,277      198,515
                                                               -----------    ---------

INCREASE (DECREASE) IN CASH                                       (130,737)       4,113
CASH, BEGINNING OF PERIOD                                          170,551        4,207
                                                               -----------    ---------
CASH, END OF PERIOD                                            $    39,814    $   8,320
                                                               ===========    =========
</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 June 30,  1997 and the  results of its  operations,  stockholders'
equity and its cash flows for the three month period then ended.

The results of operations for the period ended June 30, 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.


                                       -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 and
six month  periods  ended June 30, 1997 and June 30, 1996.  It should be read in
conjunction  with the  Unaudited  Financial  Statements  of the  Company and the
related  Notes  thereto  appearing  elsewhere in this Form  10-QSB.  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."

         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 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  thereof  or  to  reflect  the   occurrence  of
unanticipated events.

         Financial  Disclosure.  The  discussion and analysis set forth below is
for the fiscal  quarters  ended June 30, 1997 and June 30, 1996 and 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.

         Going Concern.  The Company's viability as a going concern is dependent
upon the successful  refinancing of its principal line of credit,  which expired
on June 30, 1997 and its meeting its  liquidity  needs  subsequent to such date,
which needs could exceed the amount of borrowings  available  under the existing
agreement.  On June 10, 1997,  the Company  entered into a letter of intent with
the CIT Group/Credit  Finance ("CIT") providing for a three year working capital
line. The letter of intent  provides for a working  capital line of credit of $7
million   secured  by  property,   equipment   and  other   long-lived   assets;
collateralized  borrowings  against accounts  receivable and inventory.  CIT has
substantially  completed  its due  diligence.  Closing  is  pending  subject  to
completion of  negotiations  with MBCI as to the precise amount of its remaining
second lien so the Company can comply with the excess availability provisions of
the  letter of intent  with CIT.  Additionally,  on April 2, 1997,  the  Company
closed a placement of $1.7 million of Debentures (as  hereinafter  defined) with
an offshore investor. See "--Liquidity and Capital Resources".


                                       -8-

<PAGE>

         The  Company  has  also  initiated   proceedings  to  collect   certain
significant  delinquent  accounts  receivable  from its  foreign  licensees  and
distributors.  See "Part II. Other Information Item I. Legal  Proceedings--Other
Litigation." Additionally,  the Company has taken steps to increase sales of its
Big  Smith  and  other  branded  products  during  the last six  months of 1997,
including developing  relationships with substantial new customers.  The Company
also is taking initial steps towards  establishing an international  network for
distribution of Big Smith and other branded  products  internationally,  through
meetings currently scheduled for September with candidates for  distributorships
in three  countries.  Finally,  the Company has  developed a new product line of
branded young mens'  sportswear,  to be formally  introduced at an industry wide
trade show during the last week of August.  The Company  believes  that this new
line could provide revenues to replace the high margin revenue stream previously
provided by Caterpillar branded products.

         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 JUNE 30, 1997  COMPARED TO THE THREE  MONTHS ENDED JUNE 30,
1996

         Net trade sales,  for the three months ended June 30, 1997 decreased by
$2.14  million,  or 47.5%,  to $2.37  million  from $4.51  million for the three
months ended June 30,  1996.  Net sales for the three months ended June 30, 1997
of  Caterpillar  branded  products,  Big Smith and other branded  products,  and
private  label  products were $0, $2.0 million and  $370,000,  respectively,  as
compared with $1.89 million, $1.77 million and $850,000,  respectively,  for the
three months ended June 30, 1996. The decrease in sales of  Caterpillar  branded
products resulted from the decision of the Company to cease sales of Caterpillar
branded  products  and due to a license  dispute and  purported  termination  by
Caterpillar, Inc. ("Caterpillar"). See "Part II. Other Information Item 1. Legal
Proceedings."  The  increase  in sales of Big Smith and other  branded  products
resulted  from the  addition of new  customers  and  additional  products  being
purchased  by existing  customers,  reflecting  the  increased  marketing by the
Company of such  products.  The decrease in private  label sales  reflected  the
Company's  strategic  decision in 1996 to phase out  certain low margin  private
label  programs for Kmart  Corporation.  The  Company's  strategy  following its
cessation of sales of  Caterpillar  branded  products is to focus its  marketing
efforts  on  increasing  sales of Big  Smith and other  branded  products,  and,
beginning in the third  quarter of fiscal 1997,  the Company's new line of young
mens'  sportswear,  rather  than on sales  under  licensed  labels or low margin
private  label  programs.  For the three months  ended June 30,  1997,  sales of
Caterpillar branded products,  Big Smith and other branded products, and private
label  products  accounted  for 0.0%,  and  84.8% and 15.2% of net trade  sales,
respectively,  as  compared  with  41.9%,  39.2% and  18.9% of net trade  sales,
respectively,  for the three  months  ended June 30, 1996.  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 June 30, 1997  decreased
to $0 from  $393,742  for the three months  ended June 30, 1996  reflecting  the
cessation of sales of Caterpillar  branded products.  The Company also is taking
initial steps towards establishing an international  network for distribution of
Big Smith and other branded products,  through meetings currently  scheduled for
September with candidates for distributorships in three countries.

         Gross profit,  excluding that from net royalties,  for the three months
ended June 30,  1997 was  $401,000,  or 16.9% of net trade  sales,  compared  to
$470,000, or 10.4% of net trade sales, for the three months ended June 30, 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,  a  reduction  in sales of  closeouts  and
irregulars  over the same  period  last year,  and the  increase in sales of Big
Smith and other branded products which were only partially offset by the loss of
sales of Caterpillar branded products.


                                       -9-

<PAGE>

         Selling  expenses  decreased  by $60,000 to  $370,000,  or 15.6% of net
trade sales, for the three months ended June 30, 1997, from $430,000, or 9.5% of
net trade sales,  for the three months  ended,  June 30, 1996.  This decrease in
selling  expenses  resulted  principally  from a decrease of $102,000 in royalty
expense  resulting  from decreased  sales by the Company of Caterpillar  branded
products,  a decrease of $39,000 in  advertising  and trade shows  expense and a
decrease in shipping  expense of $51,000  resulting  from the  decrease in trade
sales partially offset by an increase of $115,000 in selling expense relating to
design,  personnel  and  sampling of the new  sportswear  division.  General and
administrative  expenses were  $520,000,  or 21.9% of net trade sales during the
three months ended June 30, 1997, compared with $660,000,  or 14.6% of net trade
sales,  for the three months  ended June 30,  1996.  The decrease in general and
administrative  expense was  primarily  due to a decrease of payroll and related
expense of $95,000 along with a decrease in other  administrative  costs related
to the  downsizing and  restructuring.  The Company has retained a consultant to
analyze,  among  other  things,  its  selling  and  general  and  administrative
expenses,  and  report to the  Company  during the third  quarter  of 1997.  The
Company   believes   that  it  will  begin  to   implement   such   consultant's
recommendations immediately.

         The Company's interest expense for the three months ended June 30, 1997
was $199,000,  or 8.4% of net trade sales, as compared with $179,000, or 4.0% of
net trade  sales,  for the three  months  ended June 30,  1996.  The increase in
interest expense is primarily related to the amortization of the discount on the
Debentures.  The credit for income  taxes for the three month  period ended June
30, 1997  declined to $0 compared to $165,000  for the three month  period ended
June 30, 1996.

         As a result  of the  foregoing,  the  Company's  net loss for the three
months ended June 30, 1997 increased to $736,690 from a net loss of $257,715 for
the three months ended June 30, 1996.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30,1996

         Net trade sales,  for the six months  ended June 30, 1997  decreased by
$4.56 million,  or 52.6%, to $4.11 million from $8.67 million for the six months
ended June 30,  1996.  Net trade sales for the six months ended June 30, 1997 of
Caterpillar branded products,  Big Smith and other branded products, and private
label  products were  $80,000,  $3.55  million and  $489,000,  respectively,  as
compared with $3.31 million, $3.41 million and $1.95 million,  respectively, for
the six months ended June 30, 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.  See "Part II. Other Information Item 1. Legal Proceedings." The
increase  in sales of Big Smith and other  branded  products  resulted  from the
addition of new customers and additional  products  being  purchased by existing
customers,  reflecting the increased  marketing by the Company of such products.
The decrease in private label sales reflected the Company's  strategic  decision
in 1996 to phase  out  certain  low  margin  private  label  programs  for Kmart
Corporation.  The  Company's  strategy  following  its  cessation  of  sales  of
Caterpillar  branded  products is to focus its  marketing  efforts on increasing
sales of Big Smith and  other  branded  products,  and,  beginning  in the third
quarter of fiscal 1997, the Company's new line of young mens' sportswear, rather
than on sales under licensed  labels or low margin private label  programs.  For
the six months ended June 30, 1997, sales of Caterpillar  branded products,  Big
Smith and other branded products,  and private label products accounted for 1.9%
and 86.4% and 11.7% of net trade sales,  respectively,  as compared  with 38.1%,
39.4% and 22.5% of net trade sales, respectively,  for the six months ended June
30, 1996. Net royalties from  distributors for the manufacture and sale of goods
under the  Caterpillar  labels  abroad net of  related  costs for the six months
ended June 30, 1997  decreased to $0 from $773,248 for the six months ended June
30, 1996 reflecting the cessation of sales of Caterpillar branded products.  The
Company also is taking  initial  steps  towards  establishing  an  international
network  for  distribution  of Big  Smith and other  branded  products,  through
meetings currently scheduled for September with candidates for  distributorships
in three countries.


                                      -10-

<PAGE>

         Gross profit,  excluding  that from net  royalties,  for the six months
ended June 30, 1997 was $680,000, or 16.5% of net trade sales, compared to $1.03
million,  or 11.9% of net trade  sales,  for the six months ended June 30, 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,  a  reduction  in sales of  closeouts  and
irregulars  over the same  period last year,  and the  increase in Big Smith and
other branded  products which were only partially offset by the loss of sales of
Caterpillar branded products.

         Selling  expenses  decreased by $230,000 to  $660,000,  or 16.1% of net
trade sales, for the six months ended June 30, 1997, from $890,000,  or 10.3% of
net trade sales, for the six months ended June 30, 1996. The decrease in selling
expenses  resulted  principally  from a decrease of $187,000 in royalty  expense
resulting  from decreased  domestic sales by the Company of Caterpillar  branded
products,  a decrease of $71,000 in  advertising  and trade shows  expense and a
$44,000  decrease  in sample  expense,  and a decrease  of  $78,000 in  shipping
expense  resulting  from the  decrease  in trade  sales  partially  offset by an
increase of  $115,000  in selling  expense  relating  to design,  personnel  and
sampling of the new sportswear  division.  General and  administrative  expenses
were $1.0 million,  or 24.3% of net trade sales during the six months ended June
30, 1997,  compared with $1.2 million,  or 13.8% of net trade sales, for the six
months ended June 30, 1996. The decrease in general and  administrative  expense
was primarily due to a decrease of $159,000 in payroll and related  expenses due
to the Company's  downsizing and restructuring  following its  discontinuance of
the Caterpillar branded goods program.

         The Company's  interest  expense for the six months ended June 30, 1997
was $307,000,  or 7.5% of net trade sales, as compared with $364,000, or 4.2% of
net trade  sales,  for the six  months  ended June 30,  1996.  The  increase  in
interest expense is primarily related to the amortization of the discount on the
Debentures.  The credit for income taxes for the six month period ended June 30,
1997 declined to $0 compared to $269,000 for the six month period ended June 30,
1996.

         As a result of the foregoing, the Company's net loss for the six months
ended June 30, 1996 increased to $1,362,782  from a net loss of $420,664 for the
six months ended June 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES

         Going Concern.  The Company's viability as a going concern is dependent
upon the successful  refinancing of its principal line of credit,  which expired
on June 30, 1997 and its meeting its  liquidity  needs  subsequent to such date,
which needs could exceed the amount of borrowings  available  under the existing
agreement.  On June 10, 1997,  the Company  entered into a letter of intent with
the CIT  providing for a three year working  capital line.  The letter of intent
provides for a working capital line of credit of $7 million secured by property,
equipment  and  other  long-lived  assets;   collateralized  borrowings  against
accounts  receivable  and  inventory.  CIT has  substantially  completed its due
diligence. Closing is pending subject to completion of negotiations with MBCI as
to the  precise  amount of its  remaining  second lien so the Company can comply
with the excess  availability  provisions  of the letter of intent with CIT. The
Company has also initiated proceedings to collect certain significant delinquent
accounts  receivable from its foreign licensees and distributors.  See "Part II.
Other Information Item 1. Legal Proceedings--Other Litigation."

         On April 2, 1997,  the  Company  closed an offshore  placement  of $1.7
million  of its 6%  Convertible  Preferred  Debentures  due March 31,  2000 (the
"Debentures")  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.


                                      -11-

<PAGE>

         Goodbody International,  Inc. served as introducing agent in connection
with such placement and received in consideration  of its services  $255,000 and
warrants to purchase 100,000 shares of Common Stock of the Company,  exercisable
at $2.00 per share,  subject to  adjustment at any time prior to March 31, 2002,
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  purchaser  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.

         The  Company  has taken  steps to  increase  sales of its Big Smith and
other branded products during the last six months of 1997,  including developing
relationships with substantial new customers. The Company also is taking initial
steps towards  establishing  an  international  network for  distribution of Big
Smith and other  branded  products,  through  meetings  currently  scheduled for
September with candidates for distributorships in three countries. Additionally,
the Company has developed a new product line of branded young mens'  sportswear,
to be formally introduced at an industry wide trade show during the last week of
August.  The  Company  believes  that this new line could  provide  revenues  to
replace the high margin  revenue  stream  previously  represented by Caterpillar
branded products.

         The Company has financed its operations primarily with borrowings under
its line of  credit  and the  proceeds  from its  initial  public  offering  and
Regulation S private  placement  since the  consummation  of its initial  public
offering. The Company has reduced inventories  substantially from the prior year
levels,  primarily in connection with cessation of sales of Caterpillar  branded
products.   The  Company  also  has  certain  significant   delinquent  accounts
receivable  from its foreign  licensees  and  distributors  and the purchaser of
certain  Caterpillar  inventory  which have a  significant  impact on the amount
available to the Company under its working capital lines of credit.  The Company
has instituted  proceedings to collect these accounts receivable.  See "Part II.
Other  Information Item 1. Legal  Proceedings--Other  Litigation."  Cash used in
operating  activities totaled $1.6 million and $38,000 in the three months ended
June 30, 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. See "--Seasonality."

         At June 30, 1997 and June 30,  1996,  working  capital was $1.0 million
and $4.4 million, respectively.  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 June 30,  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 June 30, 1997 and June 30, 1996 was $3.6
million, and $6.9 million respectively. The line of credit bears 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
$500,000.  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.  The line of credit  is  secured  by the  Company's  accounts  receivable,
inventory,  property and equipment and general  intangibles  and matured on June
30,  1997.  The  Company  is  currently  negotiating  with  MBCI  a  stand-still
forbearance  agreement  pursuant to which MBCI would continue to provide funding
availability under line of credit until the closing of the contemplated new line
of credit.


                                      -12-

<PAGE>


CAPITAL EXPENDITURES

         Capital expenditures totaled  approximately  $12,000 for the six months
ended June 30, 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."

FORWARD LOOKING STATEMENTS

         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:
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 status of relations  between the Company
and its primary  customers,  licensees,  and  distributors,  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 Form 10-K for the year ended December
31, 1996.


                                      -13-

<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  Caterpillar  summary  judgment.  On
September 24, 1996, the District Court certified for appeal the question of


                                      -14-

<PAGE>

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 Court 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 and a
purchaser  in 1996 of certain of the  Company's  remaining  Caterpillar  branded
inventory.  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. The parties are completing the discovery process and are waiting for the
court to determine an available trial date.

         On January 6, 1997,  All American filed suit against BSG in the UK High
Court seeking damages for breach of contract and  interference  with contractual
relations  and interest.  All American has not yet  specified its damages.  This
suit has been 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 paid  $118,000 of the total  amount  claimed by the Company.  The  remaining
$15,000 is still the subject of litigation.

         On  March  21,  1997  the  Company   filed  suit   against  KPR  Sports
International,  Inc.  ("KPR") in United  States  District  Court for the Eastern
District of  Pennsylvania,  in  connection  with KPR's breach of contract in its
failure to pay the full agreed  upon price  relating  to its  purchase  from the
Company  of  certain  Caterpillar  inventory.   KPR  has  filed  an  answer  and
affirmative defenses and the parties are currently engaged in discovery.


                                      -15-

<PAGE>

         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.

ITEM 2.  Changes in Securities.
         None.

ITEM 3.  Defaults Upon Senior Securities.
         None.

ITEM 4.  Submission of Matters to a Vote of Security-Holders.

         At the Annual Meeting of Stockholders held on June 12, 1997,  3,913,000
of the  3,930,000  shares  eligible to vote at the meeting were cast 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.  17,000
shares  eligible to vote at the meeting  were cast  against the  election of the
above named persons as directors,  and 0 shares  eligible to vote at the meeting
were withheld. 3,914,000 of the 3,930,000 shares eligible to vote at the meeting
were  cast for,  16,000  votes  were cast  against  and 0 votes  were  withheld,
approving the appointment of the firm of Baird,  Kurtz & Dobson as the Company's
Independent Auditors for the fiscal year ending December 31, 1997.

ITEM 5.  Other Information.

         None.

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

         (a)
                                  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, 1992.***
(ab)   Warrant to Purchase Common Stock, dated as of April 2, 1997.***


                                      -16-

<PAGE>



        (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 4, 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 15, 1997.



                                      -17-

<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:  AUGUST 19, 1997                       /s/ Terry L. Dober
                                             --------------------
                                             TERRY L. DOBER
                                             VICE PRESIDENT OF FINANCE AND
                                             AUTHORIZED REGISTRANT SIGNER
                                             (PRINCIPAL ACCOUNTING
                                             AND FINANCIAL OFFICER)


                                      -18-

<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, 1992.***
(ab)   Warrant to Purchase Common Stock, dated as of April 2, 1997.***



--------------------------
*       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 4, 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 15, 1997.




                                      -19-