FORM 10-Q QUARTERLY REPORT

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended             May 29, 2004
                                        ---------------------------------------

                                       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                 1-5901
                                -----------------------------------------------


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


         DELAWARE                                                13-2581181
--------------------------------------------------------------------------------
  (State or other jurisdiction of                             (I.R.S. Employer
   incorporation or organization)                            Identification No.)


  200 MADISON AVENUE, NEW YORK, N.Y.                               10016
--------------------------------------------------------------------------------
(Address of principal executive office)                          (Zip Code)


                                 (212) 592-2700
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [_]

Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [_]    No [X]

As of July 13, 2004, 5,215,031 shares of the registrant's common stock, $0.20
par value, were outstanding.


<PAGE>


                           FAB INDUSTRIES INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS


PART 1 - FINANCIAL INFORMATION                                              PAGE

         Item 1.  Financial Statements

         Condensed Consolidated Statements of Operations
         13 Weeks ended May 29, 2004 and May 31, 2003 (unaudited) .............2

         Condensed Consolidated Statements of Operations
         26 Weeks ended May 29, 2004 and May 31, 2003 (unaudited) .............3

         Condensed Consolidated  Balance Sheets
         May 29, 2004 (unaudited) and November 29, 2003 .......................4

         Condensed Consolidated Statements of Stockholders' Equity
         26 Weeks ended May 29, 2004 (unaudited) ..............................6

         Condensed Consolidated Statements of Cash Flows
         26 Weeks ended May 29, 2004 and May 31, 2003 (unaudited) .............7

         Notes to Condensed Consolidated Financial Statements (unaudited) .....8

         Item 2. Management Discussion and Analysis of Financial
                 Condition And Results of Operations .........................17

         Item 3. Quantitative and Qualitative Disclosures
                 about Market Risk ...........................................20

         Item 4.  Controls and Procedures ....................................21

PART II - OTHER INFORMATION

         Item 6. Exhibits and Reports on Form 8-K ............................21

SIGNATURES ...................................................................22


                                       (1)

<PAGE>

                 FAB INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                     FOR THE 13 WKS ENDED
                                              ---------------------------------
                                                 May 29, 2004     May 31, 2003
                                              ----------------------------------
                                                  (unaudited)      (unaudited)

Net sales                                        $ 14,596,000    $ 13,646,000
Cost of goods sold                                 12,285,000      12,293,000
                                                 ------------    ------------
Gross profit                                        2,311,000       1,353,000

Operating Expenses:
  Selling, general and administrative expenses      1,993,000       1,579,000
  Gain on sale of fixed assets                       (322,000)       (142,000)
                                                 ------------    ------------
Total operating expenses                            1,671,000       1,437,000
                                                 ------------    ------------
Operating income (loss)                               640,000         (84,000)
                                                 ------------    ------------
Other income:
  Interest and dividend income                        108,000         347,000
  Net gain on investment securities                   434,000         232,000
                                                 ------------    ------------
Total other income                                    542,000         579,000
                                                 ------------    ------------
Income before taxes                                 1,182,000         495,000

Income tax expense                                    415,000         175,000
                                                 ------------    ------------
Net income                                       $    767,000    $    320,000
                                                 ============    ============


Income per share: (Note 5)

      Basic                                      $       0.15    $       0.06

      Diluted                                    $       0.15    $       0.06

Cash dividends declared per share                $       3.00    $         --


See notes to condensed consolidated financial statements.

                                       (2)

<PAGE>

                 FAB INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                     FOR THE 26 WKS ENDED
                                              ---------------------------------
                                                 May 29, 2004     May 31, 2003
                                              ----------------------------------
                                                  (unaudited)      (unaudited)

Net sales                                        $ 24,737,000    $ 25,233,000
Cost of goods sold                                 21,997,000      23,139,000
                                                 ------------    ------------
Gross profit                                        2,740,000       2,094,000

Operating Expenses:
  Selling, general and administrative expenses      3,669,000       3,207,000
  Gain on sale of fixed assets                     (1,007,000)       (316,000)
  Other expense (Note 12)                             250,000              --
                                                 ------------    ------------
Total operating expenses                            2,912,000       2,891,000
                                                 ------------    ------------
Operating loss                                       (172,000)       (797,000)
                                                 ------------    ------------
Other income:
  Interest and dividend income                        330,000         694,000
  Net gain on investment securities                   602,000         203,000
                                                 ------------    ------------
Total other income                                    932,000         897,000
                                                 ------------    ------------
Income before taxes                                   760,000         100,000

Income tax expense                                    285,000          50,000
                                                 ------------    ------------
Net income                                       $    475,000    $     50,000
                                                 ============    ============


Income per share: (Note 5)

      Basic                                      $       0.09    $       0.01

      Diluted                                    $       0.09    $       0.01

Cash dividends declared per share                $       3.00    $         --



See notes to condensed consolidated financial statements.

                                       (3)

<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      A S S E T S
                      - - - - - -

<TABLE>
<CAPTION>
                                                                         AS OF
                                                      ------------------------------------------
                                                             May 29, 2004      November 29, 2003
                                                      ------------------------------------------
                                                             (unaudited)
<S>                                                      <C>                    <C>
Current Assets:

 Cash and cash equivalents (Note 2)                      $    1,847,000         $   3,397,000
 Investment securities available-for-sale (Note 3)           17,936,000            29,004,000
 Accounts receivable-net of allowance of
   $900,000 for doubtful accounts for both periods            8,276,000             7,171,000
 Inventories (Note 4)                                         5,319,000             5,531,000
 Deferred tax asset                                             673,000               506,000
 Other current assets                                           414,000               701,000
                                                         --------------         -------------
   Total current assets                                      34,465,000            46,310,000
                                                         --------------         -------------

Property, plant and equipment - at cost                      31,678,000            33,787,000
Less: Accumulated depreciation                               23,700,000            24,303,000
                                                         --------------         -------------
                                                              7,978,000             9,484,000

Other assets                                                  2,257,000             2,281,000
                                                         --------------         -------------
                                                            $44,700,000           $58,075,000
                                                         ==============         =============
</TABLE>



See notes to condensed consolidated financial statements.

                                       (4)

<PAGE>

                FAB INDUSTRIES, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS


                     L I A B I L I T I E S and
                     -------------------------
                S T O C K H O L D E R S' E Q U I T Y
                ------------------------------------


                                                       AS OF
                                      ------------------------------------------
                                            May 29, 2004      November 29, 2003
                                      ------------------------------------------
                                             (unaudited)

Current liabilities:

 Accounts payable                               3,111,000         $ 1,913,000
 Corporate income and other taxes               1,118,000             861,000
 Accrued payroll and related expenses             782,000             763,000
 Other current liabilities                      1,441,000           1,106,000
                                              -----------         -----------
   Total current liabilities                    6,452,000           4,643,000
                                              -----------         -----------

Deferred income taxes                                  --              52,000
Other noncurrent liabilities                    4,739,000           4,451,000
                                              -----------         -----------
    Total liabilities                          11,191,000           9,146,000
                                              -----------         -----------

Stockholders' equity                           33,509,000          48,929,000
                                              -----------         -----------
                                              $44,700,000         $58,075,000
                                              ===========         ===========



See notes to condensed consolidated financial statements.

                                       (5)

<PAGE>

FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 26 WEEKS ENDED May 29, 2004  (unaudited)

<TABLE>
<CAPTION>
                                              Common Stock *                          Accumulated            Treasury Stock
                                          =====================                          Other         ======================
                                          Number of                   Retained       Comprehensive      Number of
                              Total        Shares        Amount       Earnings       Income (Loss)       Shares          Cost
                           --------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>          <C>          <C>              <C>               <C>          <C>
Balance at
November 29, 2003          $48,929,000    6,724,944    $1,345,000   $85,225,000      $  (186,000)      (1,509,913)  ($37,455,000)

Net income                     475,000                                  475,000

Change in net
unrealized holding
loss on investment
securities available-for-
sale, net of taxes            (250,000)                                                 (250,000)
                           -----------
Total comprehensive
income                         225,000

Cash dividends             (15,645,000)                              (15,645,000)

                           --------------------------------------------------------------------------------------------------------
Balance at
May 29, 2004               $33,509,000    6,724,944    $1,345,000    $70,055,000       $(436,000)     (1,509,913)    $(37,455,000)
(Unaudited)                ========================================================================================================
</TABLE>

*    Common stock $0.20 par value - 15,000,000 shares authorized.
     Preferred stock $1.00 par value - 2,000,000 shares authorized, none issued.

            See notes to condensed consolidated financial statements.


                                       (6)

<PAGE>

FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           FOR THE 26 WEEKS ENDED
                                                                 -----------------------------------------
                                                                   May 29, 2004              May 31, 2003
                                                                 -----------------------------------------
                                                                   (unaudited)                 (unaudited)
<S>                                                                <C>                        <C>
OPERATING ACTIVITIES:
Net income                                                         $    475,000               $     50,000
 Adjustments to reconcile net income to net
 cash provided by (used in) operating activities:
   Provision for doubtful accounts                                      350,000                    200,000
     Depreciation and amortization                                      815,000                    960,000
     Deferred income taxes                                              (52,000)                  (121,000)
     Net gain on investment securities                                 (602,000)                  (203,000)
     Gain on disposition of fixed assets                             (1,007,000)                  (316,000)
     Decrease (increase) in:
     Accounts receivable                                             (1,455,000)                  (792,000)
     Inventories                                                        212,000                    467,000
     Other current assets                                               287,000                    348,000
     Other assets                                                        24,000                     74,000
     (Decrease) increase in:
     Accounts payable                                                 1,198,000                   (378,000)
     Accruals and other liabilities                                     899,000                   (526,000)
                                                                   ------------               ------------
     Net cash provided by (used in)
     operating activities                                             1,144,000                   (237,000)
                                                                   ------------               ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property, plant and equipment                          (40,000)                  (108,000)
    Proceeds from dispositions of property and equipment              1,738,000                    347,000
    Acquisition of investment securities                                     --                   (634,000)
    Proceeds from sales of investment securities                     11,253,000                         --
                                                                   ------------               ------------
    Net cash provided by (used in) investing activities              12,951,000                   (395,000)
                                                                   ------------               ------------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Dividends                                                       (15,645,000)                        --
                                                                   ------------               ------------

    Decrease in cash and cash equivalents                            (1,550,000)                  (632,000)
    Cash and cash equivalents, beginning of period                    3,397,000                  3,146,000
                                                                   ------------               ------------
    Cash and cash equivalents, end of period                       $  1,847,000               $  2,514,000
                                                                   ============               ============
</TABLE>


See notes to condensed consolidated financial statements.


                                       (7)
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of presentation:

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
26 weeks ended May 29, 2004 are not necessarily indicative of the results that
may be expected for the entire fiscal year ending November 27, 2004. The balance
sheet at November 29, 2003 has been derived from the audited balance sheet at
that date. The financial information included in the quarterly report should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K for the fiscal year ended November
29, 2003.

The Company's Board of Directors has determined that it is in the best interests
of its stockholders to sell the Company's textile business as a going concern.
In order to maximize stockholder value, the Board of Directors adopted
resolutions dated March 1, 2002, which authorized, subject to stockholder
approval, the sale of the Company's business pursuant to a Plan of Liquidation
and Dissolution (the "Plan"). The Company's stockholders approved the Plan at
the Company's annual meeting on May 30, 2002. The Plan provides the Company's
officers and directors will continue to operate the Company's textile business
in its current fashion and pursue a sale of the business as a going concern. The
Company's Board of Directors has approved the engagement of McFarland Dewey &
Co., LLC financial advisors in November 2002 to assist with the sale of the
business. The accompanying financial statements have been prepared on a going
concern basis. There can be no assurance, however, that the Company will be
successful in selling it's business or if it does sell the business, that it
will be able to recover full value of it's assets, particularly it's property,
plant and equipment. On February 18, 2004, August 1, 2003 and May 30, 2002, the
Company's Board of Directors declared a liquidating distribution of $3.00 per
share, $4.00 per share and $10.00 per share, respectively, which resulted in a
payment to stockholders of $15,645,000, $20,860,000 and $52,380,000 in March
2004, August 2003 and June 2002, respectively. Of the total June 2002
liquidating dividend, $6,641,000 was deducted from additional paid in capital
until the paid in capital account was eliminated and represents a return of
capital. The remaining liquidating dividend of $45,739,000 was deducted from
retained earnings.

The Company's plan of liquidation provides the Company's officers and directors
will continue to operate the Company's textile business in its current fashion
and pursue the sale of the business as a going concern. If the Company is not
sold by May 2005, all assets will be transferred to a liquidating trust. The
liquidating trust would then succeed to all our remaining assets, liabilities
and obligations.

The Company is currently in compliance with the 40% limitation on holding
investment securities set forth in the Investment Company Act of 1940 and
intends to remain in compliance with such requirement in the future.


                                       (8)

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is party to equity option contract as part of its investing
activities. Option contracts are contractual agreements that give the purchaser
the right, but not the obligation, to purchase or sell a financial instrument at
a predetermined exercise price. In return for this right, the purchaser pays a
premium to the seller of the option. By selling or writing options, the Company
receives a premium and becomes obligated during the term of the option to
purchase or sell a financial instrument at a predetermined exercise price if the
option is exercised, and assumes the risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist.

In accordance with SFAS No. 133, the Company's policy is to recognize all
derivatives instruments as either assets or liabilities on the balance sheet at
fair value. Changes in fair value are recognized in the income statement in the
period in which they occur. Derivatives are not used for trading purposes.
Derivatives are used to hedge against fluctuations in the market value of equity
securities.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company's stock option plans were terminated subsequent to the fiscal year
ended November 30, 2002 and there has been no stock compensation expense under
the disclosure-only provision of SFAS No.123 subsequent thereto.

COST OF GOODS SOLD

Cost of goods sold includes labor, purchases, inbound freight charges, receiving
costs, warehousing costs and the change in inventory during the period. Excess
fixed production costs are not inventoried and are expensed in the period
incurred.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expenses primarily include costs relating to
administrative and salespersons salaries and benefits, bad debt expense,
professional and consulting fees, insurance expense and rent for the New York
office.

REVENUE RECOGNITION

The Company recognizes its revenues upon shipment of the related goods. Shipping
terms are FOB shipping point pursuant to the Company's sales agreements. Risk of
loss transfers to the Company's customers at the time the goods are transferred
to a common carrier, per the Company's sales agreements. The acceptance of goods
by customers is not subject to inspection. Allowances for estimated returns are
provided when sales are recorded.

SHIPPING AND HANDLING COSTS

Shipping and handling costs billed to customers are recorded as revenue. The
costs associated with shipping goods to customers are recorded as cost of goods
sold. The majority of the shipping costs are paid directly by the Company's
customers to independent trucking companies.

RECLASSIFICATIONS

Certain accounts in 2003 financial statements have been reclassified with the
2004 presentations for comparative purposes.


                                       (9)

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


2.   Cash and cash equivalents consist of the following (in thousands):

                                         May 29, 2004        November 29, 2003
                                      - - - - - - - - - -    - - - - - - - - -
Cash                                         $   293              $   549
Taxable and tax-free
short-term debt instruments                    1,554                2,848
                                      - - - - - - - - - -    - - - - - - - - -
                                             $ 1,847              $ 3,397


3.   Investment Securities:

At May 29, 2004 and November 29, 2003, investment securities available-for-sale
consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                           Gross            Gross
                                                        Unrealized       Unrealized
                                                          Holding          Holding          Fair
May 29, 2004 (unaudited)                  Cost              Gain             Loss           Value
-----------------------------          ------------    -------------     -------------    ----------
<S>                                    <C>              <C>              <C>              <C>
Equities                                 $    750          $    15          $      0        $    765
U.S. Treasury obligations                   5,549                1                 0           5,550
Corporate bonds                               250                0              (248)              2
Money market                               11,619                0                 0          11,619
                                       ------------     -------------     -------------    ----------
                                         $ 18,168          $    16             ($248)       $ 17,936
                                       ============     =============     =============    ==========

<CAPTION>
                                                           Gross            Gross
                                                        Unrealized       Unrealized
                                                          Holding          Holding          Fair
November 29, 2003                         Cost              Gain             Loss           Value
-----------------------------          ------------    -------------     -------------    ----------
<S>                                    <C>              <C>              <C>              <C>
Equities                                 $    750         $    17           $     0         $    767
U.S. Treasury obligations                  27,519             418                 0           27,937
Corporate bonds                               253               0              (250)               3
Money Market                                  297               0                 0              297
                                       ------------     -------------     -------------    ----------
                                         $ 28,819         $   435             ($250)        $ 29,004
</TABLE>


During the six months ended May 29, 2004, the Company invested a portion of it's
investment securities in equity consisting of a portfolio of Standard and Poor's
100 ("S&P 100") common stocks, the fair value of which varies consistently with
changes in the S&P 100 index. To hedge against fluctuations in the market value
of the portfolio, the Company has purchased short-term S & P 100 index put
options and sold short-term S & P 100 index call options. Although the Company
uses these instruments to hedge against fluctuations in the market value of the
securities, the Company has not elected to use hedge accounting. All gains and
losses from the use of these instruments are included in the income statement in
the period that they occur. At May 29, 2004 and November 29, 2003, the Company
had no such investments, but will continue to invest in such equities in the
future.


                                      (10)

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


3.   Investment Securities (continued):

The Company has agreements with various brokerage firms to carry its account as
a customer. The brokers have custody of the Company's securities and, from time
to time, cash balances, which may be due from these brokers. These securities
and/or cash positions serve as collateral for any amounts due to brokers or as
collateral for securities sold short or securities purchased on margin. The
securities and/or cash positions also serve as collateral for potential defaults
of the Company.

The Company is subject to credit risk if the brokers are unable to repay
balances due or deliver securities in their custody. It is the policy of the
Company to limit the amount of credit exposure to any one financial institution.
The Company has received confirmation indicating that, with respect to
investment securities, each custodian with the exception of one custodian
maintains appropriate insurance coverage. During fiscal 2003 and the six months
ended May 29, 2004, that custodian had an average balance of approximately $9.6
million, and $6.7 million, respectively, of the Company's cash under investment
which from time to time during such periods was invested entirely in equity
securities. At May 29, 2004, that custodian had approximately $5.6 million of
the Company's cash under investments, which were all invested in U.S. Treasury
obligations. The Company's investment policy currently permits up to 50% of the
Company's portfolio to be held by the custodian.

4.   Inventories:

The Company's inventories are valued at the lower of cost or market. Cost is
determined principally by the last-in, first-out (LIFO) method with the
remainder being determined by the first-in, first-out (FIFO) method. Because the
inventory valuation under the LIFO method is based upon an annual determination
of inventory levels and costs as of the fiscal year-end, the interim LIFO
calculations are based on management's estimates of expected year-end inventory
levels and costs.

                                        May 29, 2004         November 29, 2003
                                      - - - - - - - -        - - - - - - - - -
Raw materials                           $  1,799,000           $  1,446,000
Work in process                            1,653,000              1,867,000
Finished goods                             1,867,000              2,218,000
                                      ---------------        ----------------
         Total                          $  5,319,000           $  5,531,000
                                      ===============        ================

Approximate percentage of
   inventories valued
   under LIFO valuation                           63%                    61%
                                      ===============        ================
Excess of FIFO valuation
   over LIFO valuation                  $  1,307,000           $  1,007,000
                                      ===============        ================


Inventories accounted for under the LIFO method are goods manufactured for the
Apparel segment. Inventories accounted for under the FIFO method are goods
manufactured for the Home Furnishing and Accessories and the Other segments.
Both methods are not used for similar types of goods. The Company reviews
inventory values on a quarterly basis for items requiring markdowns to lower of
cost or market value or due to obsolescence.


                                      (11)
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


5.   Income Per Share:

     Basic and diluted earnings per share for the 13 weeks ended May 29, 2004
     and May 31, 2003 are calculated as follows:

<TABLE>
<CAPTION>
                                                                                                 Weighted
                                                                  Net            Average         Per-share
                                                                 Income           Shares           Amount
                                                                --------        ---------        ----------
<S>                                                             <C>             <C>                <C>
     For the 13 weeks ended May 29, 2004:                       $767,000        5,215,031          $0.15
                                                                --------        ---------        ----------

     For the 13 weeks ended May 31, 2003:                       $320,000        5,238,015          $0.06
                                                                --------        ---------        ----------

     Basic and diluted earnings per share for the 26 weeks ended May 29, 2004
     and May 31, 2003 are calculated as follows:

<CAPTION>
                                                                                                 Weighted
                                                                  Net            Average         Per-share
                                                                 Income           Shares           Amount
                                                                --------        ---------        ----------
<S>                                                             <C>             <C>                <C>
     For the 26 weeks ended May 29, 2004:                       $475,000        5,215,031          $0.09
                                                                --------        ---------        ----------

     For the 26 weeks ended May 31, 2003:                       $ 50,000        5,238,015          $0.01
                                                                --------        ---------        ----------

</TABLE>

     There were no options outstanding during the 26 weeks ended May 29, 2004
     and May 31, 2003, respectively. During fiscal 2002, all outstanding options
     were either exercised or cancelled.


6.   Comprehensive Income:

    Accumulated other comprehensive income (loss) is comprised of unrealized
    holding gains (losses) related to available-for-sale securities.
    Comprehensive income was $225,000 and $399,000 for the 26 weeks ended May
    29, 2004 and May 31, 2003, respectively, and $468,000 and $427,000 for the
    13 weeks ended May 29, 2004 and May 31, 2003 respectively.


7.   Litigation:

     On November 10, 2003, a class action suit was filed against the Company in
     Delaware Chancery Court. The complaint asserts claims against the Company
     and certain of its officers and directors based on the management buy-out
     proposal at a price allegedly lower than the cash value and book value of
     the Company's shares and which was an allegedly interested transaction, the
     amendment to Mr. Bitensky's employment contract, the Company's failure to
     seek stockholder approval for the management buyout and the Company's
     failure to file a certificate of dissolution with the Delaware Secretary of
     State. The complaint alleges such actions constitute violations of
     defendants fiduciary duties as well as the provisions of the Delaware
     General Corporation.

     The complaint does not seek a specific amount of damages, and seeks to
     enjoin defendants from effectuating the planned management buyout. The
     company served an answer to the complainant on December 11, 2003. On each
     of November 21 and November 26, 2003 class action lawsuits were initiated
     against the Company in Delaware Chancery Court asserting substantially the
     same allegations as those described above.


                                      (12)

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


7.   Litigation (continued):

     The Company believes that each of the claims described above is without
     merit. Further, certain of the claims described above have been rendered
     moot by the withdrawal of preliminary offer by management-led buyout to
     acquire the Company.

     A number of claims and lawsuits seeking unspecified damages and other
     relief are pending against the Company. It is impossible at this time for
     the Company to predict with any certainty the outcome of such litigation.
     However, management is of the opinion based upon information presently
     available, that it is unlikely that any liability would be material in
     relation to the Company's consolidated financial position and results of
     operations.

     Other

     The Company has a letter of credit with its insurance provider for
     $400,000.

8.   Effect of recently Issued Accounting Standards

     In January 2003, the Financial Accounting Standards Board ("FASB") issued
     FASB Interpretation No. 46, "Consolidation of Variable Interest Entities"
     ("FIN 46"). This interpretation requires certain variable interest entities
     ("VIEs"), commonly referred to as special purpose entities, to be
     consolidated by the primary beneficiary of the entity if the equity
     investors in the entity do not have the characteristics of a controlling
     financial interest or do not have sufficient equity at risk for the entity
     to finance its activities without additional subordinated financial support
     from other parties. FIN 46 was effective for all new VIEs created or
     acquired after January 31, 2003. During December 2003, the FASB issued a
     revision to FIN 46 ("FIN 46R"). Under the new provisions, public entities
     were required to apply the guidance if the entity has interests in VIEs for
     the periods ending after December 15, 2003. Application of this guidance by
     public companies was required for all other types of entities for periods
     ending after March 15, 2004. The Company's adoption of FIN 46R did not have
     an effect on its consolidated financial statements.



                                      (13)

<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


9.   Derivative Financial Instruments Held or Issued

     The Company is party to equity option contracts as part of its investing
     activities. Option contracts are contractual agreements that give the
     purchaser the right, but not the obligation, to purchase or sell a
     financial instrument at a predetermined exercise price. In return for this
     right, the purchaser pays a premium to the seller of the option. By selling
     or writing options, the Company receives a premium and becomes obligated
     during the term of the option to purchase or sell a financial instrument at
     a predetermined exercise price if the option is exercised, and assumes the
     risk of not being able to enter into a closing transaction if a liquid
     secondary market does not exist. As of May 29, 2004, the Company had no
     equity option contracts. During the six months ended May 29, 2004, the
     Company was party to equity option contracts from time to time.

10.  Segment Information:

     The Company adopted SFAS No. 131 "Disclosure About Segments of an
     Enterprise and Related Information" in fiscal 1999. SFAS No. 131 requires
     companies to report information on segments using the way management
     organizes segments within the company for making operating decisions and
     assessing financial performance.

     The Company's chief operating decision-maker is considered to be the Chief
     Executive Officer (CEO). The Company's CEO evaluates both consolidated and
     disaggregated financial information in deciding how to allocate resources
     and assess performance. The Company has identified three reportable
     segments based upon the primary markets it serves: Apparel Fabrics, Home
     Fashions, Industrial Fabrics and Accessories and Other.

     Apparel Fabrics: The Company is a major manufacturer of warp and circular
     knit fabrics and raschel laces. The Company's textile fabrics are sold to a
     wide variety of manufacturers of ready-to-wear and intimate apparel for
     men, women, and children, including dresses and sportswear, children's
     sleepwear, activewear, swimwear, and recreational apparel.



                                      (14)
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


10.  Segment Information (continued):

Home Fashions and Accessories: While sales primarily to manufacturers of home
furnishings, we also use our own textile fabrics internally to produce flannel
and satin sheets, blanket products, comforters, and other bedding products which
we sell to specialty stores, catalogue and mail order companies, and airlines.

Other: The Company produces a line of ultrasonically, hot melt adhesive, flame
and adhesive bonded products for apparel, environmental, health care, industrial
and consumer markets. The Company's textile fabrics are sold to manufacturers
servicing the residential and contract markets. The Company also sells fabrics
in the over the counter markets.

The Company neither allocates to the segments nor bases segment decisions on the
following:

                        -    Interest and dividend income
                        -    Interest and other expense
                        -    Net gain on investment securities
                        -    Income tax expense or benefit

Many of the Company's assets are used by multiple segments. While certain assets
such as Inventory and Property, Plant and Equipment are identifiable by segment,
an allocation of the substantial remaining assets is not meaningful.

The 26 weeks and the 13 weeks ended May 29, 2004 and May 31, 2003, includes gain
on the sale of fixed assets of $1,007,000, and $322,000, and $316,000 and
$142,000, respectively. Of this, $441,000 in the 26 weeks ended May 29, 2004
belongs to the Other Segment and the balance applied to the Apparel Segment. In
addition, for the 26 weeks ended May 29, 2004 the Apparel Segment includes a
$250,000 reserve for environmental costs.

<TABLE>
<CAPTION>
                                                     (in thousands)

26 Weeks Ended 05/29/04                                Home Fashions
(Unaudited)                            Apparel        and Accessories        Other       Total
-------------------------------        -------        ---------------      --------    ---------
<S>                                    <C>            <C>                  <C>         <C>
External sales                         $17,724            $2,595            $4,418      $24,737
Intersegment sales                       1,657                25                96        1,778
Operating income/(loss)                 (1,478)              186             1,120         (172)
Segment assets                          11,060               941             1,572       13,573

<CAPTION>

                                                     (in thousands)

26 Weeks Ended 05/29/04                                Home Fashions
(Unaudited)                            Apparel        and Accessories        Other       Total
-------------------------------        -------        ---------------      --------    ---------
<S>                                    <C>            <C>                  <C>         <C>
External sales                         $19,708            $1,774             $3,751      $25,233
Intersegment sales                       1,752                21                168        1,941
Operating income/(loss)                 (1,056)              (92)               351        (797)
Segment assets                          15,462               920              2,615       18,997
</TABLE>


                                      (15)
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                                     26 WEEKS ENDED
                                                     --------------

PROFIT OR LOSS (UNAUDITED)                     MAY 29, 2004      MAY 31, 2004
--------------------------                     ------------      ------------
Total operating loss for segments                $  (172)          $ (797)
Total other income                                   932              897
                                               ------------      ------------
Income before income tax benefit                 $   760           $  100
                                               ============      ============

<TABLE>
<CAPTION>
                                                      Home Fashions
13 Weeks Ended 05/29/04            Apparel            and Accessories      Other            Total
-----------------------            -------            ---------------      -----            -----
(UNAUDITED)
-----------
<S>                               <C>                     <C>             <C>              <C>
External sales                    $10,734                 $1,362          $2,500           $14,596
Intersegment sales                    608                     10              54               672
Operating income (loss)               (95)                   263             472               640

<CAPTION>
                                                      Home Fashions
13 Weeks Ended 05/31/03            Apparel            and Accessories      Other            Total
-----------------------            -------            ---------------      -----            -----
<S>                               <C>                     <C>             <C>              <C>
External sales                     $10,586                  $969           $2,091           $13,646
Intersegment sales                     906                     2               96             1,004
Operating income (loss)               (292)                  (54)             262               (84)
</TABLE>


                                                        13 WEEKS ENDED
                                                        --------------

PROFIT OR LOSS (UNAUDITED)                        MAY 29, 2004     MAY 31, 2004
--------------------------                        ------------     ------------
Total operating income (loss) for segments          $    640         $  (84)
Total other income                                       542            579
                                                  ------------     ------------
Income before taxes on income                       $  1,182         $  495
                                                  ============     ============


11.  Commitments:

On July 25, 2003, the Company and Mr. Bitensky amended the employment agreement
between the Company and Mr. Bitensky dated as of March 1, 1993 to provide that
at such time as the Company is sold or liquidated pursuant to the Plan, in lieu
of the annual consulting fees due under such an agreement over the five year
consulting period provided therein, Mr. Bitensky will receive a lump sum payment
equal to the aggregate net present value of each payment due under such
agreement, such present value to be determined utilizing the prevailing prime
rate at the time of the payment, as determined by the Board.

Such amendment to the Employment Agreement also provides that Mr. Bitensky
relinquishes his right under the terms of the original agreement to require the
Company to purchase upon his death approximately $10,000,000 of shares of Common
Stock from his estate. In consideration of Mr. Bitensky's relinquishing such
right, the Company agreed to transfer to Mr. Bitensky ownership of the three
life insurance policies on Mr. Bitensky's life owned by the Company. The Company
transferred these policies during fiscal year ended November 29, 2003.

12.  Other Expense:

During the 26 weeks ended May 29, 2004, the Company recorded an accrual of
$250,000 for environmental costs.


                                      (16)
<PAGE>

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

The domestic textile industry has been negatively affected by a flow of low cost
foreign imports and market conditions since 1998.

The Company's Board of Directors has determined that it is in the best interests
of its stockholders to sell the Company's textile business as a going concern.
In order to maximize stockholder value, the Board of Directors adopted
resolutions dated March 1, 2002, which authorized, subject to stockholder
approval, the sale of the Company's business pursuant to a Plan of Liquidation
and Dissolution (the "Plan"). The Company's stockholders approved the Plan at
the Company's annual meeting on May 30, 2002. The Plan provides the Company's
officers and directors will continue to operate the Company's textile business
in its current fashion and pursue a sale of the business as a going concern. The
Company's Board of Directors has approved the engagement of McFarland Dewey &
Co., LLC financial advisors in November 2002 to assist with the sale of the
business. The accompanying financial statements have been prepared on a going
concern basis. There can be no assurance, however, that the Company will be
successful in selling it's business or if it does sell the business, that it
will be able to recover full value of it's assets, particularly it's property,
plant and equipment. On February 18, 2004, August 1, 2003 and May 30, 2002, the
Company's Board of Directors declared a liquidating distribution of $3.00 per
share, $4.00 per share and $10.00 per share, respectively, which resulted in a
payment to stockholders of $15,645,000, $20,860,000 and $52,380,000 in March
2004, August 2003 and June 2002, respectively. Of the total June 2002
liquidating dividend, $6,641,000 was deducted from additional paid in capital
until the paid in capital account was eliminated and represents a return of
capital. The remaining liquidating dividend of $45,739,000 was deducted from
retained earnings.

The Company's plan of liquidation provides the Company's officers and directors
will continue to operate the Company's textile business in its current fashion
and pursue the sale of the business as a going concern. If the Company is not
sold by May 2005, all assets will be transferred to a liquidating trust. The
liquidating trust would then succeed to all our remaining assets, liabilities
and obligations.

The Company is currently in compliance with the 40% limitation on holding
investment securities set forth in the Investment Company Act of 1940 and
intends to remain in compliance with such requirement in the future.

RESULTS OF OPERATIONS

Second Quarter and Six Months

FISCAL 2004 COMPARED TO FISCAL 2003

Net sales for the second quarter of fiscal 2004 were $14,596,000 as compared to
$13,646,000 in the similar 2003 period, an increase of $950,000 or 7.0%. Even
though the domestic textile industry has been negatively affected by a flow of
low cost foreign imports and market conditions since 1998, the Company in the
current quarter has shown a slight increase in all 3 segments; Apparel, Home
Fashions and Accessories and Other, as a result of volume increases to several
customers. For the six months ended May 29, 2004, net sales were $24,737,000, a
decline of $496,000, or 2.0% from 2003.


                                      (17)
<PAGE>


Gross margins as a percentage of sales for the second quarter of fiscal 2004
increased to 15.8% from 9.9% as compared to the similar 2003 period. For the six
months ended May 29, 2004 gross margins increased to 11.1% compared to 8.3% in
the similar 2003 period. These increases are due to a more favorable product mix
and reduction in costs due to employee termination and related expenses and a
decrease in depreciation expenses. For the six months and three months ended May
29, 2004 and the six months and three months ended May 31, 2003, an increase in
LIFO reserves of $300,000 was recorded. This was due to higher average FIFO
prices.

Selling, general and administrative expenses for the 13 weeks and 26 weeks
increased by $414,000 and $462,000, respectively, compared to the similar 2003
period. An increase in professional fees, salesmen's commission, and provision
for doubtful accounts was partially offset by a reduction in payroll and other
expenses.

Other expenses for the 26 weeks include an accrual for $250,000 for
environmental costs, which was recorded in the quarter ending February 28, 2004.

For the 13 weeks and 26 weeks ended May 29, 2004, the Company has a gain on the
sale of fixed assets of $322,000 and $1,007,000 respectively, compared to
$142,000 and $316,000 respectively for the 13 weeks and 26 weeks ended May
31,2003.

Interest and dividend income for the 13 and 26 weeks ended May 29, 2004
decreased by $239,000 and $364,000 respectively from the similar 2003 period. On
March 10, 2004, the Company distributed its third liquidating distribution of
$3.00 per share, or $15,645,000. Accordingly, the Company had lower average
invested balances for the three and six months ended May 29, 2004. In the
current quarter, the Company realized gains from the sale of investment
securities of $434,000 compared to $232,000 in the comparable second quarter of
2003. For the six months ended May 29, 2004, the Company realized gains from the
sale of investment securities of $602,000 compared to $203,000 in last year's
comparable six months.

The effective income tax rate for the current quarter was 35.1% as compared to
35.4% last year's second quarter. The effective income tax rate for the 26 weeks
ended May 29, 2004 was 37.5%, as compared to 50.0% last year's 26 weeks. The
prior year's 50% effective income tax rate for the 26 weeks ended May 31, 2003,
was due to minimum state and franchise taxes.

As a result of these factors, the Company has net income of $767,000 or $0.15
basic and diluted earnings per share and $475,000 or $0.09 basic and diluted
earnings per share for the 13 weeks and 26 weeks ended May 29, 2004,
respectively, compared to net income of $320,000 or $0.06 basic and diluted
earnings per share and $50,000 or $0.01 basic and diluted earnings per share for
the 13 and 26 weeks ended May 31, 2003, respectively.



                                      (18)
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for the 26 weeks ended May 29, 2004
amounted to $1,144,000 due to an increase in operating cash flows from increased
gross margins and an increase in accounts payable, accruals and other
liabilities, partially offset by an increase in accounts receivable. The
variability of operating cash flows is principally caused by sales fluctuations
and the amount of cash provided by changes in working capital accounts. Net
proceeds from sales of investment securities were $11,253,000 for the 26 weeks
ended May 29, 2004 compared to acquisition of investment securities of $634,000
in the comparative 2003 period. The Company mainly used the proceeds from sales
of investment securities during the 26 weeks ended May 29, 2004 for the third
liquidating distribution of $3.00 per share or $15,645,000 on March 10, 2004.

Stockholders equity was $33,509,000 ($6.43 book value per share) at May 29, 2004
as compared to $48,929,000 ($9.38 book value per share) at the previous year-end
November 29, 2003 and $64,977,000 ($12.40 book value per share) at May 31, 2003.
The reduction in stockholders' equity from May 31, 2003 was primarily due to the
second liquidating distribution of $4.00 per share, or $20,860,000 on August 22,
2003 and the third liquidating distribution of $3.00 per share or $15,645,000
paid on March 10, 2004.

Management believes that the Company's current financial position is adequate to
satisfying working capital requirements and to internally fund any future
expenditures to maintain its manufacturing facilities for the next twelve
months.

Commitments:

On July 25, 2003, the Company and Mr. Bitensky amended the Employment Agreement
between the Company and Mr. Bitensky dated as of March 1, 1993 to provide that
at such time as the Company is sold or liquidated pursuant to the Plan, in lieu
of the annual consulting fees due under such an agreement over the five year
consulting period provided therein, Mr. Bitensky will receive a lump sum payment
equal to the aggregate net present value of each payment due under such
agreement, such present value to be determined utilizing the prevailing prime
rate at the time of the payment, as determined by the Board.

Such amendment to the Employment Agreement also provides that Mr. Bitensky
relinquishes his right under the terms of the original agreement to require the
Company to purchase upon his death approximately $10,000,000 of shares of Common
Stock from his estate. In consideration of Mr. Bitensky's relinquishing such
right, the Company agreed to transfer to Mr. Bitensky ownership of the three
life insurance policies on Mr. Bitensky's life owned by the Company. The Company
transferred these policies during fiscal year ended November 29, 2003.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. The critical
accounting policies that affect the Company's more complex judgments and
estimates are described in the Company's Annual Report on Form 10-K for the
fiscal year ended November 29, 2003.


                                      (19)
<PAGE>


FORWARD-LOOKING INFORMATION

Certain statements in this report are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risks and uncertainties. In particular, any
statement contained herein, in press releases, written statements or other
documents filed with the Securities and Exchange Commission, or in our
communications and discussions with investors and analysts in the normal course
of business including, but not limited to, meetings, phone calls and conference
calls, regarding the sale of our assets pursuant to a plan of liquidation and
dissolution, as well as expectations with respect to future sales and operating
efficiencies prior to a sale of the company, are subject to known and unknown
risks, uncertainties and contingencies, many of which are beyond our control and
which may cause actual results, performance or achievements to differ materially
from anticipated results, performances or achievements. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies, and expectations, are generally identifiable by the use of
words "may", "will", "should", "expect", "anticipate", "estimate" "believe"
"intend" or "project" or the negative of them or other variations of them or
comparable terminology.

Factors that could have a material adverse effect on our operations and future
prospects include, but are not limited to: our ability to find qualified buyers
for our assets; overall economic and business conditions; our continuing ability
to support the demand for our goods and services; competitive factors in the
industries in which we compete; changes in government regulation; changes in tax
requirements (including tax rate changes, new tax laws and revised tax law
interpretations); interest rate fluctuations and other capital market
conditions, including foreign currency rate fluctuations; material contingencies
provided for in a sale of our assets; de-listing of our common stock from the
American Stock Exchange; our ability to retain key employees through any wind
down period; and any litigation arising as a result of our plan to wind down our
operations. These risks and uncertainties should be considered in evaluating any
forward-looking statements contained in this quarterly report on Form 10-Q.

We undertake no obligation to update or revise a forward-looking statement,
whether as a result of new information, future events, or otherwise, other than
required by law.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to risk of fluctuations in the market value of equity
securities. To manage this exposure, the Company uses derivatives to hedge
against fluctuations in the market value of equity securities. The Company's
policy is to recognize all derivative instruments as either assets or
liabilities on the balance sheet at fair value. Changes in the fair value are
recognized in the income statement in the period in which they occur.
Derivatives are not used for trading purposes. At May 29, 2004 and November 29,
2003, the Company has no such investments, but will continue to invest in such
equities in the future.


                                      (20)
<PAGE>


ITEM 4.  CONTROLS AND PROCEDURES

(a)      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES: Our Chief Executive
         Officer and Chief Financial Officer, having concluded, based on their
         evaluation, as of the end of the period covered by this report, that
         our disclosure controls and procedures (as defined in the Securities
         and Exchange Act of 1934 Rules 13a-15(e) and 15-15(e)) are (1)
         effective to ensure that material information required to be disclosed
         by us in reports filed or submitted by us under the Securities Exchange
         Act of 1934, as amended, is recorded, processed, summarized, and
         reported within the time periods specified in the SEC's rules and
         forms, and (2) designed to ensure the material information required to
         be disclosed by us in such reports is accumulated, organized and
         communicated to our management, including our Chief Executive Officer
         and Chief Financial Officer, as appropriated, to allow timely decisions
         regarding required disclosure.

(b)      INTERNAL CONTROL OVER FINANCIAL REPORTING: There were no significant
         changes in the Company's internal controls over financial reporting (as
         defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities and
         Exchange Act of 1934, as amended) that occurred during the Company's
         most recent quarter that has materially affected, or is reasonably
         likely to materially affect, the Company's internal control over
         financial reporting.

         It should be noted that any system of controls, however well designed
         and operated, can provide only reasonable, and not absolute assurance
         that the objectives of the system will be met. In addition, the design
         of any control system is based in part upon certain assumptions about
         the likelihood of future events. Because of these and other inherent
         limitations of control systems, there is only reasonable assurance that
         our controls will succeed in achieving their stated goals under all
         potential future conditions.

PART II. OTHER INFORMATION

         Item 6. Exhibits and Reports on Form 8-K

         a)       Exhibits:

         31.1     Certification by Samson Bitensky pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         31.2     Certification by David A. Miller pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         32.1     Certification by Samson Bitensky pursuant to 18 U.S.C.
                  Section 1350, as adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

         32.2     Certification by David A. Miller pursuant to 18 U.S.C.
                  Section 1350, as adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

         b)       Reports on Form 8-K:

                  The Company furnished on April 13, 2004, a report on Form
                  8-K announcing, under Item 9 of such form, its earnings
                  for the 13 weeks ended February 28, 2004.


                                      (21)
<PAGE>


                                   SIGNATURES

        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.





Dated: July 13, 2004                  FAB INDUSTRIES, INC.


                                      By: /s/ Samson Bitensky
                                          ---------------------------------
                                          Chairman of the Board
                                            And Chief Executive Officer




                                      By: /s/ David A. Miller
                                          ---------------------------------
                                          David A. Miller
                                          Vice President-Finance, Treasurer
                                             and Chief Financial Officer
                                          (Principal Financial and Accounting
                                             Officer)




                                      (22)