SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    Form 10-Q

(Mark One)
   [X]          QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended August 1, 1998

                                       OR

   [ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to _________

                       Commission file number(s) 000-22385
                       -----------------------------------

                             ITHACA INDUSTRIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                              56-1385842
-------------------------------                           ----------------------
(State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                           Identification number)

              Highway 268 West, P.O. Box 620, Wilkesboro, NC 28697
--------------------------------------------------------------------------------
               (Address of principal executive office) (Zip Code)

                                 (336) 667-5231
--------------------------------------------------------------------------------
                  (Registrant's telephone, including area code)

--------------------------------------------------------------------------------
             (Former name, former address and former fiscal year, if
                           changed since last report)

Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 ninety days.

                                 YES [X] NO [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                 YES [X] NO [ ]

         APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the registrant's classes of common stock, as of the
latest practicable date. As of September 15, 1998, the registrant had 10,400,000
shares of common stock, par value $.01 per share outstanding.
<PAGE>

                             ITHACA INDUSTRIES, INC.
                                QUARTERLY REPORT

                          QUARTER ENDED AUGUST 1, 1998


                                      INDEX


PART I.  FINANCIAL INFORMATION                                              Page

Item 1.  Consolidated Balance Sheets - August 1, 1998 and January 31, 1998    3

         Consolidated Statements of Operations - Thirteen Weeks Ended 
         August 1, 1998 and August 2, 1997                                    4

         Consolidated Statements of Operations - Twenty-Six Weeks Ended       5
         August 1, 1998 and August 2, 1997

         Consolidated Statements of Cash Flows - Twenty-Six Weeks Ended       6
         August 1, 1998 and August 2, 1997

         Notes to Consolidated Financial Statements                           7

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


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                    *

Item 2.  Changes in Securities                                                *

Item 3.  Defaults upon Senior Securities                                      *

Item 4.  Submission of Matters to a Vote of Security Holders                  *

Item 5.  Other Information                                                    *

Item 6.  Exhibits and Reports on Form 8-K                                    13

         Signature                                                           14


* NO INFORMATION PROVIDED DUE TO INAPPLICABILITY OF ITEM

                                     Page 2
<PAGE>

                    ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)


                                               August 1, 1998  January 31, 1998
                                               --------------  ----------------
ASSETS
------
Current Assets:

    Cash and Cash Equivalents                  $          230  $            680

    Accounts Receivable - Net                          34,114            21,561

    Inventories  (Note 2)                              69,114            57,036

    Prepaid Expenses and Other Current Assets           4,382               667
                                               --------------  ----------------
        Total Current Assets                          107,840            79,944

Property, Plant and Equipment - Net                    34,858            34,115

Other Assets                                            7,703             1,931
                                               --------------  ----------------
        Total Net Assets                       $      150,401  $        115,990
                                               ==============  ================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:

    Current Installments of Long-Term Debt     $          414  $             14

    Accounts Payable                                   15,820            10,102

    Accrued Payroll and Related Expenses                7,390             7,860

    Accrued Restructuring Costs                           -0-               995

    Other Accrued Expenses                              2,892             1,387

    Current Deferred Income Tax                         4,424             4,424

    Income Taxes Payable                                3,404             3,667
                                               --------------  ----------------
       Total Current Liabilities                       34,344            28,448

Long Term Debt - Related                                  783            20,036

Long Term Debt - Non Related                           79,623            33,483

Deferred Income Taxes                                  13,315            13,128
                                               --------------  ----------------
       Total Liabilities                              128,065            95,095

Stockholders' Equity:

    Common Stock of $.01 Par Value                        104               100

    Additional Paid-In Capital                         23,276            22,016

    Accumulated Deficit                                (1,044)           (1,221)
                                               --------------  ----------------
       Total Stockholders' Equity                      22,336            20,895

    Total Liabilities and Stockholders' Equity $      150,401  $        115,990
                                               ==============  ================

                                     Page 3
<PAGE>

                    ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)


                                                     Thirteen Weeks Ended
                                               --------------------------------
                                               August 1, 1998    August 2, 1997
                                               --------------    --------------
Net Sales                                      $       67,249    $       60,934

Cost of Sales                                          56,438            51,187
                                               --------------    --------------
     Gross Profit                                      10,811             9,747

Selling, General and Administrative Expenses            7,594             6,375
                                               --------------    --------------
     Operating Profit                                   3,217             3,372
 
Interest Expense, Related Parties                          18               426

Interest Expense, Non-Related Parties - Net             2,182             1,339

Other Income - Net                                         90               127
                                               --------------    --------------
     Income Before Income Taxes                         1,107             1,734

Income Tax Expense                                        324               729
                                               --------------    --------------
     Net Income                                $          783    $        1,005
                                               ==============    ==============
                                           
Basic and Dilutive Net Income Per Common Share $         0.08    $         0.10
                                               ==============    ==============

Weighted Average Common Shares Outstanding         10,400,000        10,000,000
                                               ==============    ==============

                                     Page 4
<PAGE>

                    ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                    Twenty-Six Weeks Ended
                                               --------------------------------
                                               August 1, 1998    August 2, 1997
                                               --------------    --------------
Net Sales                                      $      127,637    $      119,676

Cost of Sales                                         109,082           101,714
                                               --------------    --------------
     Gross Profit                                      18,555            17,962

Selling, General and Administrative Expenses           14,627            13,164
                                               --------------    --------------
     Operating Profit                                   3,928             4,798

Interest Expense, Related Parties                         315               656

Interest Expense, Non-Related Parties - Net             3,571             2,853

Other Income - Net                                        123               319
                                               --------------    --------------
     Income Before Income Taxes                           165             1,608

Income Tax Expense (Benefit)                              (9)               754
                                               --------------    --------------
     Net Income                                $          174    $          854
                                               ==============    ==============

Basic and Dilutive Net Income Per Common Share $         0.02    $         0.09
                                               ==============    ==============

Weighted Average Common Shares Outstanding         10,288,520        10,000,000
                                               ==============    ==============

                                     Page 5
<PAGE>

                    ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                    Twenty-Six Weeks Ended
                                               --------------------------------
                                               August 1, 1998    August 2, 1997
                                               --------------    --------------
Cash Provided By Operating Activities:

     Net Income                                $          174    $          854

Adjustments to Reconcile Net Income to Net 
Cash Provided by Operations

     Depreciation and Amortization                      3,010             3,080

     Deferred Taxes                                       187             1,507

     Gain on Sale of Property, Plant and 
     Equipment                                            (66)              (65)

Changes in Assets and Liabilities:

     (Increase) in Accounts Receivable                 (5,823)             (553)

     Decrease (Increase) in Inventories                (4,086)            1,660

     (Increase) Decrease in Assets Held for 
     Disposition                                         (100)            3,626

     (Increase) Decrease in Prepaid Expenses             (464)             (131)

     Increase (Decrease) in Accounts Payable            2,239            (2,337)

     (Decrease) Increase in Accrued Expenses 
     and Other Liabilities                                 20            (3,721)

     Decrease In Asset Writedown and Restructuring 
     Reserve                                           (1,245)             (832)

     Decrease in Income Taxes Payable                    (263)             (568)
                                               --------------    --------------
        Net Cash Provided by Operations                (6,417)            2,520

Cash Flows From Investing Activities:

     Cash Used for the Purchase of Glendale 
     Hosiery Assets                                    (6,911)              -0-

     Proceeds From the Sale of Property, Plant 
     and Equipment                                        545               205

     Additions to Property, Plant and Equipment        (2,752)           (2,133)
                                               --------------    --------------
        Net Cash Used in Investing Activities          (9,118)           (1,928)

Cash Flows From Financing Activities:

     Borrowings (Repayment) of Long-Term Debt - Net     2,895           (10,656)

     Increase (Decrease) in Revolver                   14,934            11,500

     Cash Paid for Refinancing                         (2,744)              -0-
                                               --------------    --------------
        Net Cash Provided by Financing 
        Activities                                     15,085               844

Net Increase (Decrease) in Cash and Cash 
Equivalents                                              (450)            1,436

Cash and Cash Equivalents at Beginning of 
Period                                                    680                66
                                               --------------    --------------

Cash and Cash Equivalents at End of Period     $          230    $        1,502
                                               ==============    ==============

Supplemental Disclosure of Cash Paid (Received) 
During the Period For:

     Income Taxes                              $           47    $         (182)
                                               ==============    ==============

     Interest                                  $        2,923    $        2,599
                                               ==============    ==============

                                     Page 6
<PAGE>

                    ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         FOR THE TWENTY-SIX WEEKS ENDED
                        AUGUST 1, 1998 AND AUGUST 2, 1997
                                   (UNAUDITED)


1.  FINANCIAL STATEMENTS

         The consolidated balance sheet as of August 1, 1998 and the
consolidated statements of operations for the thirteen and twenty-six weeks
ended August 1, 1998 and August 2, 1997, respectively, and the consolidated
statements of cash flows for the twenty-six weeks ended August 1, 1998 and
August 2, 1997 have been prepared by Ithaca Industries, Inc. the ("Company"). In
the opinion of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the financial position of the
Company at August 1, 1998 and the results of operations for the thirteen and
twenty-six weeks ended August 1, 1998 and August 2, 1997, respectively, and the
statements of cash flows for the twenty-six weeks ended August 1, 1998 and
August 2, 1997 have been made on a consistent basis.

         Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the audited financial statements and
notes thereto for the year ended January 31, 1998 and February 1, 1997 included
in the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission on May 2, 1998.

         The results of operations for the periods presented are not necessarily
indicative of the operating results for the full year.

         Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at period-end and revenues and
expenses for the periods ended to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

2.  INVENTORIES

         Inventories consist of the following:

                                               August 1, 1998  January 31, 1998
                                               --------------  ----------------
Raw Materials                                  $       17,492  $         13,142

Work in Process                                        20,144            14,625

Finished Goods                                         32,028            29,519
                                               --------------  ----------------
                                               $       69,664  $         57,286

     Less Excess of FIFO over LIFO Cost                   550               250
                                               --------------  ----------------
                                               $       69,114  $         57,036
                                               ==============  ================

                                     Page 7
<PAGE>

3.  ACQUISITION AND REFINANCING

         Effective March 24, 1998, the Company purchased substantially all of
the assets and assumed substantially all liabilities of Glendale Hosiery Company
("Glendale"). Glendale is in the business of manufacturing, marketing and
distributing women's hosiery located in Siler City, North Carolina. The
aggregate purchase price included cash, the Company's common stock, subordinated
notes payable, and the assumption of indebtedness and liabilities.

         The following represents the summary unaudited pro forma results of
operations for the thirteen and twenty-six week periods ended August 1, 1998 and
August 2, 1997 as if the acquisition of Glendale had occurred at the beginning
of fiscal 1997. The pro forma results are not necessarily indicative of the
results which may occur in the future.

<TABLE>
<CAPTION>
                                              Thirteen Weeks Ended                       Twenty-Six Weeks Ended
                                      --------------------------------------    ----------------------------------------
                                        August 1, 1998      August 2, 1997        August 1, 1998        August 2, 1997
                                      ------------------  ------------------    ------------------    ------------------
<S>                                   <C>                 <C>                   <C>                   <C>               
Net Sales                             $           67,249  $           71,881    $          134,635    $          143,219

Net Income                            $              783  $            1,104    $              150    $            1,165

Basic and Dilutive Net Income Per     $             0.08  $             0.11    $             0.01    $             0.11
    Common Share
</TABLE>

         The Company has entered into a $110 million in senior credit facilities
("Senior Credit Facilities"). The Senior Credit Facilities include a five-year
bank credit facility consisting of a $25 million term loan and up to $70 million
in revolving credit loans to be provided by a syndicate of banks led by
NationsBank, N.A. The Senior Credit Facilities also include an additional $15
million term loan provided by Foothill Capital Credit Corporation and arranged
by NationsBanc Montgomery Securities LLC. The Senior Credit Facilities were also
used to refinance the Company's existing credit agreement with another bank
syndicate, to fund the acquisition of Glendale, and will also be used for
general corporate purposes.

                                     Page 8
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

                  THIRTEEN WEEKS ENDED AUGUST 1, 1998 COMPARED
                    WITH THIRTEEN WEEKS ENDED AUGUST 2, 1997

         Net sales increased from $60.9 million for the thirteen weeks ended
August 2, 1997 to $67.2 million for the thirteen weeks ended August 1, 1998.
Included in this year's sales is $8.7 million for Glendale Hosiery which was
acquired on March 24, 1998. Partially offsetting this increase was a decrease of
$3.0 million in other hosiery related business from the division's major
customers due to product packaging changes and the lowering of in-store
inventory levels. The company's underwear division's sales during this period
were $500,000 higher than the same period last year.

         The gross profit margin for the second quarter of fiscal 1999 increased
to 16.1% from 16.0% in the comparable period last year. This increase resulted
from improved sourcing costs in the company's underwear division partially
offset by the costs associated with consolidating the Company's two hosiery
divisions.

         Selling, general and administrative expenses for the second quarter of
fiscal 1999 increased to $7.6 million from $6.4 million last year primarily due
to the higher sales volume associated with the Glendale acquisition. As a
percent of sales, this year's expense was 11.3% versus 10.5% last year.

         Operating income decreased to $4.7 million for the second quarter of
fiscal 1999 from $4.8 million for the comparable period last year.

         Interest expense for the thirteen weeks ended August 1, 1998 increased
to $2.2 million from $1.8 million for the same period last year. This increase
is attributed primarily to the increased average bank borrowings associated with
the Glendale Hosiery acquisition.

                 TWENTY-SIX WEEKS ENDED AUGUST 1, 1998 COMPARED
                   WITH TWENTY-SIX WEEKS ENDED AUGUST 2, 1997

         Net sales increased from $119.7 million for the twenty-six weeks ended
August 2, 1997 to $127.6 million for the twenty-six weeks ended August 1, 1998.
The sales increase reflects, in part, $12.5 million for Glendale Hosiery. Sales
in this year's first half declined by $3.3 million in other hosiery related
business and by $1.2 million in the Company's underwear division.

         The gross profit margin decreased for the first half of fiscal 1999 to
14.5% from 15.0% for the comparable period last year. The decrease results
primarily from the costs incurred to consolidate the Company's two hosiery
divisions.

         Selling, general and administrative expenses for the first half of
fiscal 1999 increased to $14.6 million from $13.2 million last year. This
increase is due primarily to the higher sales volume associated with the
Glendale acquisition. As a percent of sales, this year's expense was 11.5%
versus 11.0% in the comparable period last year.

                                     Page 9
<PAGE>

         Operating income decreased to $3.9 million for the first half of fiscal
1999 from $4.8 million for the comparable period last year.

         Interest expense for the twenty-six weeks ended August 1, 1998
increased to $3.9 million from $3.5 million in the first half last year. This
increase is attributed primarily to the increases average bank borrowings
associated with the Glendale Hosiery acquisition.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Certain statements in this report including information set forth under
"Management's Discussion and Analysis of Financial condition and Results of
Operations," constitute "Forward-Looking Statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Ithaca
Industries, Inc., a Delaware corporation (the "Company" or "Ithaca"), desires to
take advantage of certain "safe harbor" provisions of the Reform Act and is
including this special note to enable the Company to do so. Forward- looking
statements included in this report, involve known and unknown risks,
uncertainties, and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ materially from
the future results, performance (financial or operating) or achievements
expressed or implied by such forward-looking statements. These risks include
business risks such as changes in the price of raw materials, concentration of
Ithaca's principal customers, availability of labor and competitive factors;
industry risks such as changes in the retailing industry and shifts in consumer
preferences; financial risks such as liquidity and access to capital;
integration of the Glendale Hosiery Company acquisition; and other risks as set
forth from time to time in the company's filings with the Securities and
Exchange Commission.

         Many of the foregoing factors have been discussed in the Company's
prior filings with the Securities and Exchange Commission (the "Commission") and
other publicly available documents. Had the Reform Act been effective at an
earlier time, this special note would have been included in earlier Commission
filings. The foregoing review of significant factors should not be construed as
exhaustive or as an admission regarding the adequacy of disclosures previously
made by the Company prior to the effective date of the Reform Act.

LIQUIDITY AND CAPITAL RESOURCES

         On March 24, 1998, the Company completed the acquisition of Glendale
Hosiery Company for a combination of stock, cash and the assumption of certain
indebtedness. In conjunction with the acquisition, the Company's existing Credit
Agreement was replaced by a $110.0 million new credit facility. One part of the
new facility provides for a term loan ("Term Loan") of $25.0 million and a
revolving loan facility of up to $70.0 million. A separate part of the new
credit facility provides for an additional $15.0 million term loan. The
revolving loan facility includes a sub-limit of $15.0 million for the issuance
of letters of credit. As of September 8, 1998, the Company had $38.6 million of
Term Loans outstanding, $41.9 million of borrowings under the revolving loan
facility, and $5.6 million of outstanding letters of credit. The Company at
September 8, 1998 had $11.5 million of availability under its revolving loan
facility.

                                     Page 10
<PAGE>

YEAR 2000 ("Y2K") COMPLIANCE

         Some of the Company's computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs recognize a date using "00" as the year 1900 rather than the year 2000.
This could cause a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage similar normal business activities.

         To improve the Company's overall financial and operational information,
an Enterprise Resource Planning ("ERP") system was selected and is in the
process of being installed. This new ERP system which is Y2K complaint, will
replace the Company's legacy systems. The ERP project is supervised and
supported by senior management. Areas outside the scope of the ERP project that
have Y2K compliance issues, such as time clocks, phone systems and manufacturing
machines, are also being addressed.

         The project is estimated to be completed not later than July 31, 1999,
which is prior to any anticipated impact on the Company's operating systems. The
Company believes that with modifications to existing software and a conversion
to new software, the Y2K issue will not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Y2K issue could have a material impact on
the operations of the Company.

         The Company has had formal communications with its major customers and
suppliers regarding standardizing systems for Y2K compliance. There is no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect on the
Company's systems.

         The incremental cost of becoming Y2K compliant is not material and the
date on which the Company believes it will complete the Y2K modifications are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be not guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and costs of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.

                                     Page 11
<PAGE>

PART II. OTHER INFORMATION

Item 1   Legal Proceedings                                          None

Item 2   Changes in Securities                                      None

Item 3   Defaults upon Senior Securities                            None

Item 4   Submission of Matter to a Vote of Security Holders         None

Item 5   Other Information                                          None

Item 6   Exhibits and Reports on Form 8-K:
           (a)  Exhibits

           Ex. 27 -- Financial Data Schedule

           (b)  Reports on Form 8-K                                   13

                                     Page 12
<PAGE>

PART II.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K:

           (a)  Exhibits

                Ex. 27 - - Financial Data Schedule

           (b)  Reports on Form 8-K

                1. Form 8-K filed July 20, 1998 reported under Item 5 "Other
                   Events" that the Company's Board of Directors declared a
                   dividend distribution of one right for each outstanding share
                   of common stock to stockholders of record at the close of
                   business on July 23, 1998.

                2. Form 8-K filed July 14, 1998 reported under Item 5 "Other
                   Events" the issuance of a press release announcing the
                   Company had entered into a Rights Agreement.

                3. Form 8-K filed June 10, 1998 reported under Item 5 "Other
                   Events" the issuance of a press release reporting results for
                   the fiscal 1999 first quarter ended May 2, 1998.

                4. Form 8-K/A filed June 10, 1998 amended Form 8-K filed on
                   April 3, 1998 to include the consents of independent
                   accountants.

                5. Form 8-K/A filed June 2, 1998 amended Form 8-K filed on April
                   3, 1998 to include the audited financial statements of the
                   business acquired, Glendale Hosiery Company, and pro forma
                   financial information.

                                     Page 13
<PAGE>

                                    SIGNATURE


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                ITHACA INDUSTRIES, INC.
                                -----------------------
                                     (Registrant)


                                By: /s/ Richard P. Thrush
                                -------------------------
                                RICHARD P. THRUSH
                                Senior Vice President Finance and Administration
                                Principal Financial and Chief Accounting Officer


Dated: September 15, 1998

                                     Page 14
<PAGE>

Exhibit Index
-------------

Exhibit No.    Description of Exhibits
-----------    -----------------------

    27         Financial Data Schedule for the six month period ended August 1, 
               1998

                                     Page 15