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

                                   FORM 10-QSB
(Mark One)

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

For the quarterly period ended September 30, 1996

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

                         Commission file number 01-13470

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

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

           7100 West Camino Real, Suite 201, Boca Raton, Florida 33433
                    (Address of Principal Executive Offices)

                                 (407) 367-8283
                (Issuer's Telephone Number, Including Area Code)

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

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

Yes__X__            No____

Number of shares of common stock outstanding as of November 13, 1996:  3,930,000

Transitional Small Business Disclosure Format (check one):  Yes____    No__X__


<PAGE>


                                      INDEX

                                                                          Pages
                                                                          -----

PART I                     FINANCIAL INFORMATION

      Item 1. Consolidated Financial Statements

              Consolidated Balance Sheet  as of  September
               30, 1996                                                     3

              Consolidated Statements of Operations for the three
               month and nine month periods ended
               September 30, 1996, and 1995                                 4

              Consolidated Statement of Stockholders' Equity for the
               nine months ended September 30, 1996                         5

              Consolidated Statements of Cash Flows for the nine months
               ended September 30, 1996, and 1995                           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 4


SIGNATURE                                                                  17
EXHIBIT INDEX                                                              18


                                       -2-


<PAGE>

                             BIG SMITH BRANDS, INC.
                           CONSOLIDATED BALANCE SHEET
                               September 30, 1996
                                   (Unaudited)
                                     ASSETS


CURRENT ASSETS
Cash and cash equivalents                                        $    13,814
Temporary investments                                                192,452
Accounts receivable, less allowance
     for doubtful accounts of $136,889                             4,847,282
Inventories                                                        8,078,483
Prepaid expenses                                                     344,054
                                                                 -----------
         Total Current Assets                                     13,476,085
                                                                 -----------

PROPERTY AND EQUIPMENT, At Cost
  Land                                                                20,000
  Buildings                                                          471,109
  Equipment                                                        2,121,290
  Vehicles                                                            81,511
                                                                 -----------
                                                                   2,693,910
Less accumulated depreciation                                      1,273,822
                                                                 -----------
                                                                   1,420,088
                                                                 -----------
OTHER ASSETS
  Trademark, less accumulated amortization
  of $40,122                                                         475,738
  Other                                                               11,106
                                                                 -----------
                                                                     486,844
                                                                 -----------
                                                                 $15,383,017
                                                                 ===========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current maturities of long-term debt                           $ 7,290,563
  Checks outstanding in excess of bank balance                       160,403
  Accounts payable                                                 2,847,554
  Accrued expenses                                                 1,439,671
                                                                 -----------
         Total Current Liabilities                                11,738,191
                                                                 -----------
LONG-TERM DEBT                                                       925,737
                                                                 -----------

STOCKHOLDERS' EQUITY
  Common stock, $.01 par value; authorized 10,000,000 shares;
    issued and outstanding 1996 - 3,930,000 shares                    39,300
  Additional paid-in capital                                       6,315,818
  Retained earnings (deficit)                                     (3,636,029)
                                                                 ----------- 
                                                                   2,719,089
                                                                 -----------
See Notes to Consolidated Financial Statements                   $15,383,017
                                                                 ===========


                                       -3-


<PAGE>

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

                                                         Three Month Period                      Nine Month Period
                                                         Ended September 30,                    Ended September 30
                                                      ------------------------------      --------------------------------
                                                        1996              1995              1996              1995
                                                        ----              ----              ----              ----
NET SALES
<S>                                                   <C>                <C>               <C>                <C>         
 Trade                                                $ 6,181,048        $ 6,300,088       $ 14,848,613       $ 15,969,318
 Royalties, net of related costs of $303,492
 $221,517, and $794,986 and $518,702, respectively        360,767            318,370          1,134,015            690,708
                                                       ----------          ---------       ------------       ------------
                                                        6,541,815          6,618,458         15,982,628         16,660,026

COST OF GOODS SOLD                                      6,161,939          5,350,674         13,798,052         13,439,264
                                                      -----------          ---------       ------------        -----------

GROSS PROFIT                                              379,876          1,267,784          2,184,576          3,220,762
                                                      -----------          ---------        -----------         ----------
OPERATING EXPENSES
  Selling                                                 504,576            525,863          1,396,289          1,263,611
  General and administrative                              649,148            488,382          1,853,827          1,614,645
  Restructuring and Litigation Cost                     1,397,481                  0          1,397,481                  0
                                                      ------------         ---------        -----------         ----------
                                                        2,551,205          1,014,245          4,647,597          2,878,256
                                                      -----------          ---------        -----------         ----------


INCOME (LOSS) FROM
  OPERATIONS                                           (2,171,329)           253,539         (2,463,021)           342,506
                                                     ------------        -----------      -------------         ----------


OTHER INCOME (EXPENSE)
  Miscellaneous income                                     (6,368)             2,172            (40,771)            29,941
  Interest expense                                       (175,516)          (225,204)          (539,037)          (586,973)
                                                     ------------         ----------         ----------        -----------

                                                         (181,884)          (223,032)          (579,808)          (557,032)
                                                     -------------        ----------         ----------        -----------

INCOME (LOSS) BEFORE
  INCOME TAXES                                         (2,353,213)            30,507         (3,042,829)          (214,526)
CREDIT (PROVISION) FOR INCOME TAXES                      (504,087)          (12,745)           (235,136)            49,590
                                                    --------------       -----------         ----------        -----------
NET INCOME (LOSS)                                   $  (2,857,300)        $   17,762        $(3,277,965)         $(164,936)
                                                   ==============         ==========        ===========        ===========
NET INCOME (LOSS) PER SHARE                        $         (.73)        $      .01        $      (.83)         $    (.05)
                                                   ==============         ==========        ===========        ===========


WEIGHTED AVERAGE SHARES
  OUTSTANDING                                           3,930,000          3,605,879          3,930,000          3,605,879
                                                        =========          =========          =========          =========

See Notes to Consolidated Financial Statements

</TABLE>


                                       -4-


<PAGE>



                             BIG SMITH BRANDS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      NINE MONTHS ENDED SEPTEMBER 30, 1996
                                   (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, 1995                 3,930,000        $  39,300     $   6,315,818   $     (358,064)      $ 5,997,054




Net Income (Loss)                                -                 -                -            (3,277,965)       (3,277,965)
                                              ---------       ----------      ------------  ---------------     -------------
Balances at September 30, 1996                3,930,000       $   39,300      $  6,315,818  $    (3,636,029)     $  2,719,089
                                              =========       ==========      ============  ================     ============

</TABLE>




See Notes to Consolidated Financial Statements


                                       -5-

<PAGE>


                             BIG SMITH BRANDS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                  1996           1995
                                                           -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                        <C>            <C>         
  Net income (loss)                                        $(3,277,965)   $  (164,936)
  Item not requiring cash:
    Depreciation, amortization & impairment                    373,381        101,861
    Deferred income taxes                                      220,568         25,880
  Changes in:
    Accounts receivable                                     (1,350,691)    (3,040,478)
    Inventories                                              3,429,483     (5,682,174)
    Prepaid expenses                                          (134,834)      (322,288)
    Other Assets                                               181,858           --
    Accounts payable and accrued expenses                      712,463      1,607,079
                                                           -----------    -----------
       Net cash provided (used) in operating activities        154,263     (7,475,056)
                                                           -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                          (413,959)      (520,725)
  Trademark                                                       --         (515,000)
  Purchase of temporary investments                            (65,677)          --
                                                           -----------    -----------
      Net cash used in investing activities                   (479,636)    (1,035,725)
                                                           -----------    -----------


CASH FLOWS FROM FINANCING ACTIVITIES
  Checks outstanding in excess of bank balance                 (16,941)       192,790
  Proceeds from issuance of stock, net of offering costs          --        6,088,117
  Net borrowings under line-of-credit agreement                260,559      2,614,460
  Principal borrowings (payments) on long-term debt            141,390       (250,507)
  Due to stockholder                                           (50,028)          --
  Dividends paid                                                  --         (100,000)
                                                           -----------    -----------
      Net cash provided by financing activities                334,980      8,544,860
                                                           -----------    -----------


INCREASE IN CASH AND CASH
  EQUIVALENTS                                                    9,607         34,079
CASH AND CASH EQUIVALENTS, BEGINNING
  OF PERIOD                                                      4,207         18,994
                                                           -----------     ----------
CASH AND CASH EQUIVALENTS, END
  OF PERIOD                                                    $13,814        $53,073
                                                           ===========     ==========

</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,  Big Smith  Vintage  and  currently  including  the  licensed  brands,
Caterpillar  and Wolverine.  The Company  anticipates  terminating  its sales of
Caterpillar  and  Wolverine   branded  goods  in  January  1996.  See  "Item  2.
Management's  Discussion  and  Analyses of  Financial  Condition  and Results of
Operations - General." 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, 1995.

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, 1995,  which are included in its Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995.

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  September  30,  1996,  and  the  results  of  its   operations,
stockholders' equity and its cash flows for the nine month period then ended.

The results of  operations  for the period ended  September  30,  1996,  are not
necessarily  indicative  of the results to be expected for the entire year.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Seasonality."


NOTE 3:  INCOME PER SHARE INFORMATION

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

NOTE 4:  LITIGATION

The Company is currently involved in litigation with Caterpillar, Inc. See "Part
II Other Information. Item 1."


                                       -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
nine month periods ended  September 30, 1996,  and September 30, 1995. 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's  business is seasonal and the Company 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." The Company elected to be treated as an
S corporation for tax purposes under the Internal  Revenue Code through February
8,  1995.  As a result,  the net income  (loss) of the  Company  was taxed,  for
federal  (and  some  state)  corporate  income  tax  purposes,  directly  to the
Company's  stockholders  and  not  to  the  Company.  Upon  consummation  of the
Company's  initial  public  offering on February 8, 1995, the Company became a C
corporation for both federal and state tax purposes.

         The Company is currently engaged in litigation with  Caterpillar,  Inc.
(the "Caterpillar  litigation") with respect to the Company's rights to continue
to manufacture, and sell Caterpillar branded products. The Company believes that
its agreement with Caterpillar (the "Agreement") licensing it to manufacture and
sell  such  products,  has not  properly  been  terminated  and that it  remains
licensed to produce such goods through December 31, 1999, the expiration date of
its license.  On August 19, 1996,  the District Court ruled that the license had
been  properly  terminated,  a ruling which the Company is currently  appealing.
There can be no  assurance,  however,  that the outcome will be favorable to the
Company  and that the  license  will be  preserved,  and if the  outcome  is not
favorable,  such outcome could have a material  adverse  effect on the financial
condition of the Company.  See "Other  Information,  Item 1. Legal Proceedings."
Because of the uncertainty  arising from the litigation,  management has decided
to refocus the Company's efforts on development of Company owned brands. In this
connection,  during the three months ended  September 30, 1996,  the Company has
increased its efforts to liquidate its inventory of  Caterpillar  branded goods,
written  down the value of  certain  inventory  of  Caterpillar  branded  goods,
downsized certain  production  functions devoted primarily to production of such
goods,  and has begun  implementing  plans for increased sales and marketing and
production efforts in connection with its Big Smith 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  September  30,  1996  Compared to the Three  Months  Ended
September 30, 1995

         Net trade  sales,  for the  three  months  ended  September  30,  1996,
decreased by $.12 million,  or 1.9%, to $6.18 million from $6.30 million for the
three months  ended  September  30,  1995.  Net trade sales for the three months
ended  June 30,  1996,  of  Caterpillar  branded  products,  Big Smith and other
branded products,  and private label products were $1.96 million,  $3.51 million
and $.71 million,  respectively,  as compared with $1.70 million,  $2.91 million
and $1.69 million, respectively, for the three months ended September 30, 1995.


                                       -8-


<PAGE>

The  increase  in sales of  Caterpillar  branded  products  resulted  from price
reductions and increased marketing reflecting the Company's efforts to liquidate
its remaining  inventory of Caterpillar  branded  products.  The increase in Big
Smith and other branded products  primarily reflects an increase in sales of Big
Smith  branded  products  to Walmart due to the  increased  demand for Big Smith
branded  outerwear.  The  decrease  in private  label  sales  resulted  from the
discontinuance in 1996 of private label programs for Kmart. For the three months
ended September 30, 1996, sales of Caterpillar  branded products,  Big Smith and
other branded  products,  and private label  products  accounted for 31.7%,  and
56.8% and 11.5% of net trade sales,  respectively,  as compared with 27%,  46.2%
and 26.8% of net trade sales, respectively, for the three months ended September
30, 1995. The Company has begun implementing its plans to increase marketing and
sales of Big Smith branded products.

         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 September 30, 1996, increased by $42,000 to $361,000 from $318,000 for the
three months ended  September  30, 1995.  This increase was due to the increased
manufacture  and  sale  of  Caterpillar   branded   products  by   distributors,
particularly in the United  Kingdom.  In the event that the final outcome of the
litigation  with  Caterpillar  is adverse to the Company,  the Company  would be
required to cease its sales of Caterpillar branded products through distributors
and  otherwise,  on January  10,  1997,  which would mark the end of a six month
grace  period  provided  in the  contract  with  Caterpillar.  As a result of an
alleged  failure  to timely  provide  Caterpillar  a royalty  report  and to pay
certain royalties, Caterpillar notified the Company on November 8, 1996, that it
regarded the grace period as terminated, which contention the Company disputes.

         Gross profit,  excluding that from net royalties,  for the three months
ended September 30, 1996,  decreased by $.93 million to $.02 million,  or .3% of
net trade sales,  compared to $.95 million, or 15.1% of net trade sales, for the
three months ended  September  30, 1995.  This  decrease was primarily due to an
$817,000  write-down of inventory  primarily due to the Caterpillar  litigation,
and  to an  increase  of  approximately  $192,000  in  sales  of  closeouts  and
irregulars at approximately $127,000 below cost. See "Other Information, Item 1,
Legal Proceedings."

         Selling expenses decreased by $.02 million to $.51 million,  or 8.3% of
net trade  sales,  for the three  months ended  September  30,  1996,  from $.53
million,  or 8.4% of net trade sales,  for the three months ended  September 30,
1995.  This  decrease  resulted  principally  from  a  decrease  of  $61,000  in
advertising  and a $53,000  decrease  in  shipping  expense  resulting  from the
decrease in trade sales,  which were partially  offset by an increase of $74,000
in travel and entertainment expense resulting primarily from increased marketing
efforts. General and administrative expenses increased to $.65 million, or 10.5%
of net trade sales during the three months ended  September 30, 1996,  from $.49
million,  or 7.8% of net trade sales,  for the three months ended  September 30,
1995. This increase  resulted  primarily from an increase in payroll and related
fringe  benefits of $28,000,  and $28,000 in  professional  fees and other costs
relating to the  Company's  European  operations,  and a  write-off  of accounts
receivable of $71,000 related to Caterpillar branded products.

         During the three months ended  September 30, 1996, the Company  accrued
or incurred an aggregate of $1.40 million of restructuring  and litigation costs
in connection with the Caterpillar litigation which included costs such as legal
and  professional,   impairment  write-downs,  plant  shutdown  costs,  employee
termination  costs,  other costs related to foreign operations and other related
costs.

                  The  Company's  interest  expense for the three  months  ended
September 30, 1996,  was $.18 million,  or 2.9% of net trade sales,  as compared
with $.23  million,  or 3.7% of net trade  sales,  for the  three  months  ended
September 30, 1995. This decrease  resulted from the decrease in inventory which
led to decreased borrowings for the period.


                                       -9-


<PAGE>

         At December 31, 1995, the Company  recorded a net deferred tax asset of
$220,568  relating to expected  future  utilization  of its net  operating  loss
carryforwards and for the tax effects of certain timing differences. The Company
continued  to  recognize a credit  income tax  provision  relating to  operating
losses for the first two quarters of 1996.  The Company is not currently able to
determine that future  utilization of loss carryforwards is more likely than not
and, therefore, has established a valuation allowance equal to the amount of the
net deferred tax asset previously recorded.

         As a result  of the  foregoing,  the  Company's  net loss for the three
months ended  September 30, 1996,  increased to $2,857,300  from a net income of
$17,762 for the three months ended September 30, 1995.

Nine Months Ended September 30, 1996 Compared to the Nine Months Ended September
30, 1995

         Net  trade  sales,  for the  nine  months  ended  September  30,  1996,
decreased by $1.12  million,  or 7.0%, to $14.85 million from $15.97 million for
the nine months ended  September  30, 1995.  Net trade sales for the nine months
ended September 30, 1996, of Caterpillar  branded products,  Big Smith and other
branded products,  and private label products were $5.26 million,  $6.93 million
and $2.66 million,  respectively,  as compared with $2.84 million, $7.21 million
and $5.92 million,  respectively,  for the nine months ended September 30, 1995.
The increase in sales of Caterpillar  branded products  resulted  primarily from
the  reestablishment  of the  Company's  distribution  channels for  Caterpillar
branded  products  following a disruption  of those  channels and the  Company's
efforts to liquidate its remaining  inventory of Caterpillar  branded  products.
The decrease in Big Smith and other branded  products  reflected  unusually high
Walmart sales during the first three months of 1995 due to the carryover to 1995
of certain orders from 1994 which was only partially  offset by increased  sales
to Walmart  during the three months ended  September  30, 1996.  The decrease in
private label sales  resulted from the  discontinuance  in 1996 of private label
programs for Kmart and Walls  Corporation.  For the nine months ended  September
30, 1996,  sales of Caterpillar  branded  products,  Big Smith and other branded
products, and private label products accounted for 35.4%, and 46.7% and 17.9% of
net trade sales,  respectively,  as compared with 17.8%,  45.1% and 37.1% of net
trade sales,  respectively,  for the nine months ended  September 30, 1995.  The
Company has begun implementing its plans to increased marketing and sales of Big
Smith branded products.

         Net royalties from  distributors  for the manufacture and sale of goods
under the  Caterpillar  labels  abroad net of related  costs for the nine months
ended  September 30, 1996,  increased by $.66 million to $1.13 million from $.69
million for the nine months ended  September 30, 1995.  This increase was due to
the  increased   manufacture  and  sale  of  Caterpillar   branded  products  by
distributors,  particularly in the United  Kingdom.  In the event that the final
outcome of the  litigation  with  Caterpillar  is adverse  to the  Company,  the
Company  would be required to cease its sales of  Caterpillar  branded  products
through  distributors  and otherwise,  on January 10, 1997, which would mark the
end of a six month grace period provided in the contract with Caterpillar.  As a
result of an alleged failure to timely provide  Caterpillar a royalty report and
to pay certain royalties,  Caterpillar notified the Company on November 8, 1996,
that it regarded the grace period as  terminated,  which  contention the Company
disputes.

         Gross profit,  excluding that from net  royalties,  for the nine months
ended September 30, 1996,  decreased by $1.48 million to $1.05 million,  or 7.1%
of net trade sales,  from $2.53  million,  or 15.8% of net trade sales,  for the
nine months ended  September  30, 1995.  This  decrease was  primarily due to an
$817,000 the write-down of inventory  primarily due in sales to the  Caterpillar
litigation,  an increase of approximately  $385,000 of close outs and irregulars
at approximately  $361,0001 below cost and unabsorbed  overhead of approximately
$224,000  related to the partial plant  shutdowns to facilitate the reduction of
certain categories of


                                      -10-

<PAGE>

the  Company's  inventory  during  the first  quarter  of 1996,  which were only
partially offset by the increased sales of Caterpillar branded goods.

         Selling expenses increased by $.14 million to $1.40 million, or 9.4% of
net trade  sales,  for the nine months  ended  September  30,  1996,  from $1.26
million,  or 7.9% of net trade sales,  for the nine months ended  September  30,
1995. This increase in selling expenses resulted principally from an increase of
$124,000 in royalty  expense  resulting  from  increased  domestic  sales by the
Company of Caterpillar  branded  products,  an increase of $43,000 in travel and
entertainment  expense and a $44,000  increase in sample expense  related to the
development of new Caterpillar  branded product lines, which were only partially
offset by the  decrease  of  $120,000 in  shipping  expense  resulting  from the
decrease in trade sales.  General and administrative  expenses increased by $.24
million to $1.85  million,  or 12.5% of net trade  sales  during the nine months
ended September 30, 1996, from $1.61 million,  or 10.1% of net trade sales,  for
the nine months ended  September 30, 1995. This increase was primarily due to an
increase  of $98,000 in payroll  and  related  fringe  benefits  and a change in
accounting  procedure  to  inclusion  in general and  administrative  expense of
certain  insurance and postage of $56,000,  rather than in cost of goods sold as
was done in 1995 and an increase of $41,000 costs associated with being a public
Company.

         During the nine months ended  September 30, 1996 the Company accrued or
incurred an aggregate of $1.40 million of restructuring  and litigation costs in
connection  with the Caterpillar  litigation  which included costs such as legal
and  professional,   impairment  write-downs,  plant  shutdown  costs,  employee
termination  costs,  other costs related to foreign operations and other related
costs.

         The Company's  interest expense for the nine months ended September 30,
1996,  decreased to $.54 million,  or 3.6% of net trade sales,  as compared with
$.59 million,  or 3.7% of net trade sales,  for the nine months ended  September
30, 1995.  This decrease  resulted  from the decrease in inventory  which led to
decreased borrowings for the period.

         At December 31, 1995, the Company  recorded a net deferred tax asset of
$220,568  relating to expected  future  utilization  of its net  operating  loss
carryforwards and for the tax effects of certain timing differences. The Company
continued  to  recognize a credit  income tax  provision  relating to  operating
losses for the first two quarters of 1996.  The Company is not currently able to
determine that future  utilization of loss carryforwards is more likely than not
and, therefore, has established a valuation allowance equal to the amount of the
net deferred tax asset previously recorded.

         As a  result  of the  foregoing,  the  Company's  net loss for the nine
months ended  September  30, 1996,  increased to  $3,277,965  from a net loss of
$164,936 for the nine months ended September 30, 1995.


Liquidity and Capital Resources

         The Company has financed its growth primarily with borrowings under its
line of credit and, since the consummation of its initial public offering,  with
the proceeds of such offering.  Cash provided by operating  activities increased
to $.15 million  during the nine months ended  September  30, 1996,  as compared
with cash used in operating  activities of $7.5 million in the nine months ended
September 30, 1995.  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.
During 1996 in accordance with managements plans to reduce  inventory,  however,
certain plants were partially shutdown during the first quarter resulting in the
decrease of cash used in operating activities. See "--Seasonality."


                                      -11-


<PAGE>

         At September  30, 1996,  and September  30, 1995,  working  capital was
approximately  $1.9  million  and $14.0  million,  respectively.  This  decrease
resulted  primarily  from the  reclassification  of the Company's line of credit
with Mercantile  Business Credit Inc. ("MBCI") as current debt and reductions in
inventory and accounts receivable. 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 September 30, 1996, the Company had a $9 million line of credit with
MBCI,  with  borrowing  levels  based upon a  specified  percentage  of eligible
accounts  receivable and inventories.  The amount  outstanding  under the credit
line as of September 30, 1996,  and September  30, 1995,  was $7.0 million,  and
$8.7 million  respectively.  The line of credit bore  interest at the MBCI prime
rate plus a premium  interest  factor.  This premium interest factor varied from
1.5 to 2.0 percent,  based upon the Company's  leverage ratio.  MBCI has amended
the loan agreement, retroactive to February 16, 1995, to provide for interest at
the MBCI  prime  rate plus a premium  interest  factor of 0.75  percent.  If the
Company's  pre-tax net income for the twelve month period ending on December 31,
1996, is at least $1.5 million, no premium interest will be charged for 1997. If
the Company's pre-tax net income for the twelve month periods ending 1996 is not
at least $1.5 million  respectively,  the premium interest factor will remain at
0.75 percent.  The line of credit also permits  overadvances  for up to 120 days
per year, peaking at $.5 million.  The overadvance portion of the line of credit
has an  interest  rate  equal to the  prime  rate as  published  by MBCI plus an
interest  premium factor of 1.75. The line of credit is secured by the Company's
accounts receivable,  inventory,  property and equipment and general intangibles
and matures on September 30, 1997 with one year renewals.  The Company  believes
that at such time it will be able to renew such line of credit or obtain similar
working capital financing from a similar institution.

         At September 30, 1996, the Company classified all of the debt under the
MBCI line of credit as current  maturity  due to the  scheduled  maturity of the
line  credit  on  September  30,  1997.  Additionally,  the  Company  was not in
compliance with certain  financial loan covenants under the MBCI line of credit.
The Company will enter into discussions  with the lender  concerning the renewal
of such line for a long term period and the formal waiver of such noncompliance,
in the event of such renewal and waiver, such debt would be reclassified as long
term debt.

Capital Expenditures

         Capital  expenditures  totaled  $413,959  for  the  nine  months  ended
September  30,  1996.  These  expenditures  consisted  primarily of purchases of
computer related equipment.


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 has a
significant impact on the cash flow of the Company since the Company's inventory
levels typically tend to increase during the first half of the year in


                                      -12-


<PAGE>

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:
the  status  of  relations  between  the  Company  and  its  primary  licensors,
customers,  licensees,  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, 1995.  See
"Part II -- Other Information Item 1. Legal Proceedings."


                                      -13-


<PAGE>

                                     PART II


                                OTHER INFORMATION


Item 1. Legal Proceedings.

         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,  Inc.  ("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 seeks 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 September  24, 1996,  the District  Court  certified  for appeal the
question  of whether  Illinois  common law has a "good  cause"  requirement  for
terminating a franchise agreement that meets the definition of a franchise under
Illinois law, but does not involve a franchise  located in the State of Illinois
and stayed further action in the pending  litigation  until the 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, and
on October 15, 1996, Caterpillar filed a response to such petition.

         Provided a favorable  outcome is obtained in the Court of Appeals,  the
defendants  intend  to  press  their  claim  that  Illinois  common  law  barred
Caterpillar from terminating the Agreement based upon


                                      -14-


<PAGE>

immaterial  breaches by the Company. To date, the Court of Appeals has not ruled
on whether it will hear the  appeal.  Regardless  of whether  the results of the
appeal are  favorable,  the Company has additional  claims  against  Caterpillar
which it intends to pursue.

         There can be no assurance,  however, that the outcome will be favorable
to the Company and that the Agreement  will be preserved,  and if the outcome is
not favorable such outcome could have a material adverse effect on the financial
condition of the Company.

Item 2.           Changes in Securities.
                  None.

Item 3.           Defaults Upon Senior Securities.
                  None.

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

Item 5.           Other Information.
                  None.

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

         (a)
                                  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.



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


                                      -15-


<PAGE>

                                   SIGNATURES

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

                                         BIG SMITH BRANDS, INC.
                                                           Registrant



Date:  November 19, 1996                           /s/ Terry L. Dober
                                                   -------------------------
                                                   Terry L. Dober
                                                   Vice President of Finance
                                                   (Principal Accounting
                                                   and Financial Officer)


                                      -16-


<PAGE>



                                                   EXHIBIT INDEX

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

                  3(a)          Form of Restated Certificate of Incorporaton*
                  (b)           By-laws.*
                  4(a)          Form of Common Stock Purchase Warrant.*
                  (b)           Form of Warrant Agreement.*




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

*    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").


                                      -17-