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                   JUNE 1, 2002
                              --------------------------------------------------

                                       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   [_]


         CLASS                               SHARES OUTSTANDING AT JULY 15, 2002
-------------------------------------        -----------------------------------
         Common stock, $.20 par value                   5,238,029

<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 June 1, 2002 and June 2, 2001 (unaudited)              2

         Condensed Consolidated Statements of Operations
         26 Weeks ended June 1, 2002 and June 2, 2001 (unaudited)              3

         Condensed Consolidated Balance Sheets
         June 1, 2002 (unaudited) and December 1, 2001                         4

         Condensed Consolidated Statements of Stockholders' Equity
         26 Weeks ended June 1, 2002 (unaudited)                               6

         Condensed Consolidated Statements of Cash Flows
         26 Weeks ended June 1, 2002 and June 2, 2001 (unaudited)              7

         Notes to Condensed Consolidated Financial Statements (unaudited)      8

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                         18

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk  22

PART II - OTHER INFORMATION                                                   23

         Item 4.  Submission of matters to a vote of stockholders

         Item 6. Exhibits and Reports on Form 8-K


SIGNATURES                                                                    24


                                       (1)
<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   FOR THE 13 WKS ENDED
                                              ---------------------------------
                                               JUNE 1, 2002    JUNE 2, 2001
                                              ---------------------------------
                                                (unaudited)     (unaudited)

Net sales                                      $ 17,362,000   $ 23,002,000
Cost of goods sold                               14,765,000     22,145,000
                                               ------------   ------------
Gross profit                                      2,597,000        857,000

Operating expenses:
Selling, general and administrative expenses      2,146,000      2,741,000
Asset impairment and restructuring charges               --      5,958,000
                                               ------------   ------------
Total operating expenses                          2,146,000      8,699,000
                                               ------------   ------------
Operating income (loss)                             451,000     (7,842,000)
                                               ------------   ------------
Other income (expense):
  Interest and dividend income                      931,000      1,053,000
  Net gain on investment securities               1,021,000        699,000
  Interest expense                                       --        (12,000)
                                               ------------   ------------
Total other income                                1,952,000      1,740,000
                                               ------------   ------------
Income (loss) before taxes                        2,403,000     (6,102,000)

Income tax expense (benefit)                        777,000     (1,709,000)
                                               ------------   ------------
Net income (loss)                              $  1,626,000   $ (4,393,000)
                                               ============   ============


Earnings (loss) per share: (Note 6)

      Basic                                    $       0.31   $      (0.83)

      Diluted                                  $       0.31   $      (0.83)

Cash dividends declared per share              $      10.00   $       0.10

See notes to condensed consolidated financial statements.


                                       (2)
<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   FOR THE 26 WKS ENDED
                                              ---------------------------------
                                               JUNE 1, 2002    JUNE 2, 2001
                                              ---------------------------------
                                                (unaudited)     (unaudited)

Net sales                                      $ 31,612,000    $ 43,007,000
Cost of goods sold                               27,829,000      42,302,000
                                               ------------    ------------
Gross profit                                      3,783,000         705,000

Operating expenses:
Selling, general and administrative expenses      4,518,000       5,627,000
Asset impairment and restructuring charges               --       5,958,000
Other expense (Note 12)                             750,000              --
                                               ------------    ------------
Total operating expenses                          5,268,000      11,585,000
                                               ------------    ------------
Operating loss                                   (1,485,000)    (10,880,000)
                                               ------------    ------------
Other income (expense):
  Interest and dividend income                    1,828,000       2,131,000
  Net gain on investment securities               1,116,000       1,222,000
  Interest expense                                  (10,000)        (22,000)
                                               ------------    ------------
Total other income                                2,934,000       3,331,000
                                               ------------    ------------
Income (loss) before taxes                        1,449,000      (7,549,000)

Income tax expense (benefit)                        500,000      (2,114,000)
                                               ------------    ------------
Net income (loss)                              $    949,000    $ (5,435,000)
                                               ============    ============

Earnings (loss) per share: (Note 6)

      Basic                                    $       0.18    $      (1.03)

      Diluted                                  $       0.18    $      (1.03)

Cash dividends declared per share              $      10.00    $       0.20

See notes to condensed consolidated financial statements.


                                       (3)
<PAGE>

                     FAB INDUSTRIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

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

                                                              AS OF
                                                 -------------------------------
                                                 JUNE 1, 2002   DECEMBER 1, 2001
                                                 -------------------------------
                                                   (unaudited)

Current Assets:

 Cash and cash equivalents (Note 2)                  $  7,838,000   $  6,742,000
 Investment securities available-for-sale (Note 3)     84,503,000     82,021,000
 Accounts receivable-net of allowance of
   $800,000 and $600,000 for doubtful accounts         11,260,000     10,668,000
 Inventories (Note 4)                                  10,100,000     12,335,000
 Other current assets                                   1,240,000      1,617,000
                                                     ------------   ------------
   Total current assets                               114,941,000    113,383,000
                                                     ------------   ------------

Property, plant and equipment - at cost                90,781,000     91,095,000
Less: Accumulated depreciation                         77,654,000     77,030,000
                                                     ------------   ------------
                                                       13,127,000     14,065,000

Other assets                                            3,927,000      4,080,000
                                                     ------------   ------------
                                                     $131,995,000   $131,528,000
                                                     ============   ============


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
                                            -------------------------------
                                            JUNE 1, 2002   DECEMBER 1, 2001
                                            -------------------------------
                                             (unaudited)

Current liabilities:

 Accounts payable                           $  4,142,000   $  3,661,000
 Corporate income and other taxes              2,108,000      1,787,000
 Accrued payroll and related expenses            908,000      1,318,000
 Dividends payable (Note 1)                   52,380,000        521,000
 Other current liabilities                       849,000        816,000
 Deferred income taxes                            96,000        269,000
                                            ------------   ------------
   Total current liabilities                  60,483,000      8,372,000
                                            ------------   ------------
Obligations under capital leases - net of
   current maturities                                 --        311,000

Other noncurrent liabilities                   2,297,000      2,342,000

                                            ------------   ------------
    Total liabilities                         62,780,000     11,025,000
                                            ------------   ------------

Stockholders' equity                          69,215,000    120,503,000
                                            ------------   ------------
                                            $131,995,000   $131,528,000
                                            ============   ============

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 JUNE 1, 2002 (unaudited)


<TABLE>
<CAPTION>
                                        COMMON STOCK *                                                             ACCUMULATED
                                        ============               ADDITIONAL                    LOAN TO             OTHER
                                          NUMBER OF                 PAID-IN      RETAINED     EMPLOYEE STOCK     COMPREHENSIVE
                               TOTAL       SHARES        AMOUNT      CAPITAL     EARNINGS     OWNERSHIP PLAN      INCOME (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>          <C>         <C>          <C>            <C>                   <C>
Balance at
December 1, 2001           $120,503,000   6,591,944    $1,319,000  $6,967,000   $151,224,000   $(3,957,000)          $334,000

Net income                      949,000                                              949,000

Change in net
unrealized holding
loss on  investment
securities available-for-
sale, net of taxes             (167,000)                                                                             (167,000)

Total comprehensive
  income                        782,000

Dividends (Note 1)          (52,380,000)                           (6,641,000)   (45,739,000)

Exercise of Stock Options       172,000     133,000        26,000   1,640,000

Purchase of
  treasury stock               (280,000)                               17,000

Termination of Employee
  Stock Ownership Plan
  (Note 1)                           --                            (2,401,000)                   3,957,000

Acceleration of stock options   418,000                               418,000

                            --------------------------------------------------------------------------------------------------------
Balance at
June 1, 2002                $69,215,000   6,724,944    $1,345,000         $--   $106,434,000          $ --           $167,000
(Unaudited)                 ========================================================================================================

<CAPTION>
                                        TREASURY STOCK         NOTES
                                        ==============      RECEIVABLE
                                 NUMBER OF                     FROM
                                   SHARES        COST       STOCKHOLDERS
--------------------------------------------------------------------------------
<S>                             <C>          <C>                <C>
Balance at
December 1, 2001                (1,383,574)  $(35,384,000)      $    --

Net income

Change in net
unrealized holding
loss on  investment
securities available-for-
sale, net of taxes

Total comprehensive
  income

Dividends (Note 1)

Exercise of Stock Options                                    (1,494,000)

Purchase of
  treasury stock                   (16,855)      (297,000)

Termination of Employee
  Stock Ownership Plan
  (Note 1)                         (86,456)    (1,556,000)

Acceleration of stock options

--------------------------------------------------------------------------------
Balance at
June 1, 2002                    (1,486,915)  ($37,237,000)  ($1,494,000)
(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 WKS ENDED
                                                           ------------------------------------
                                                             JUNE 1, 2002        JUNE 2, 2001
                                                           ------------------------------------
                                                             (unaudited)          (unaudited)
<S>                                                            <C>             <C>
OPERATING ACTIVITIES:
Net Income (loss)                                              $    949,000     $(5,435,000)
 Adjustments to reconcile net income
 to  net cash provided by operating
 activities:
   Provision for doubtful accounts                                  200,000         200,000
     Depreciation and amortization                                1,027,000       2,782,000
     Non-cash asset impairment
       and restructuring charges                                         --       5,958,000
     Deferred income taxes                                          (62,000)     (2,245,000)
     Net gain on investment securities                           (1,116,000)     (1,222,000)
     Compensation relating to
         acceleration of stock options                              418,000              --
     Gain on disposition of fixed assets                           (216,000)        (41,000)
     Decrease (increase) in:
     Accounts receivable                                           (792,000)      2,452,000
      Inventories                                                 2,235,000       2,885,000
     Other current assets                                           377,000         982,000
     Other assets                                                   153,000         192,000
    (Decrease) increase in:
     Accounts payable                                               481,000        (646,000)
     Accruals and other liabilities                                (412,000)     (1,519,000)
                                                               ------------    ------------
     Net cash provided by
     operating activities                                         3,242,000       4,343,000
                                                               ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                      (193,000)       (260,000)
   Proceeds from dispositions of property                           320,000         103,000
    Acquisition of investment securities                         (1,644,000)    (13,613,000)
                                                               ------------    ------------
   Net cash used in
   investing activities                                          (1,517,000)    (13,770,000)
                                                               ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of treasury stock                                      (280,000)       (224,000)
   Dividends                                                       (521,000)     (1,056,000)
   Exercise of Stock Options                                        172,000            --
                                                               ------------    ------------
   Net cash used in financing activities                           (629,000)     (1,280,000)
                                                               ------------    ------------
   Increase (decrease) in cash and cash equivalents               1,096,000     (10,707,000)

   Cash and cash equivalents, beginning of period                 6,742,000      14,695,000
                                                               ------------    ------------
   Cash and cash equivalents, end of period                    $  7,838,000    $  3,988,000
                                                               ============    ============
</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 June 1, 2002 are not necessarily indicative of the results that
may be expected for the entire fiscal year ending November 30, 2002. The balance
sheet at December 1, 2001 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 Annual Report on Form 10-K for the fiscal year
ended December 1, 2001.

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, pursue a sale of the business as a going concern and, if
the Company's Board of Directors deems it advisable, engage financial advisors
to assist with the sale of the business. On May 30, 2002, the Company's Board of
Directors declared an initial liquidating distribution of $10.00 per share,
which was paid on June 24, 2002, with a record date of June 10, 2002.
Accordingly, $52,380,000 was accrued as of June 1, 2002 and was paid on June 24,
2002.

In addition, pursuant to resolutions adopted by the Company's Board of
Directors, upon approval of the Plan by the stockholders, the Employee Stock
Ownership Plan (the "ESOP") was terminated and all shares of common stock of the
Company then held in the ESOP suspense account (86,456 shares) were transferred
to the Company, and held as treasury stock, in exchange for the cancellation of
the outstanding loan in the amount of $3,957,000 from the Company to the ESOP.

Pursuant to resolutions adopted by the Company's Board of Directors and
documentation sent to and returned to the Company by option holders, effective
immediately following stockholder approval of the Plan, all outstanding options
under the Company's 1997 Stock Incentive Plan became vested, and all options as
to which optionees (which includes employees and directors) had returned to the
Company the appropriate forms (representing options held by all but one
optionee) were exercised through the issuance of loans from the Company to the
optionees, with stock of the optionees held as collateral by the Company until
the loans have been satisfied. These loans receivable have been recorded as a
reduction of stockholders' equity as of June 1, 2002.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
---------------------------------------------

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities", the Company's
policy is to recognize all derivatives instruments as either assets or
liabilities on the balance sheet and to measure those instruments at market
value.

SFAS No. 133 also requires the disclosure of certain other information including
a description of the instruments, objectives, strategies and risk management
policies for holding all derivatives (Notes 3 and 10).


                                       (8)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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

                                                JUNE 1, 2002    DECEMBER 1, 2001
                                                ------------    ----------------
                                                (unaudited)

Cash                                            $  381          $  155
Taxable and tax-free
short-term debt instruments                      7,457           6,587
                                                ------          ------
                                                $7,838          $6,742
                                                ======          ======

3.       Investment Securities:

         At June 1, 2002 and December 1, 2001, investment securities
         available-for-sale consisted of the following (in thousands):

                                          GROSS        GROSS
                                          UNREALIZED   UNREALIZED
                                          HOLDING      HOLDING     FAIR
JUNE 1, 2002 (UNAUDITED)         COST     GAIN         LOSS        VALUE
------------------------         ----     ----         ----        -----
Equities                       $    797   $      --    $     (9)   $    788

U.S. Treasury obligations        40,282         291          (4)     40,569

Corporate bonds                  11,844         272        (272)     11,844

Money market                     31,302          --          --      31,302
                               --------    --------    --------    --------
                               $ 84,225    $    563    $   (285)   $ 84,503
                               ========    ========    ========    ========


                                          GROSS        GROSS
                                          UNREALIZED   UNREALIZED
                                          HOLDING      HOLDING     FAIR
DECEMBER 1, 2001                 COST     GAIN         LOSS        VALUE
----------------                 ----     ----         ----        -----

Equities                    $    798   $     --    $    (15)   $    783

U.S. Treasury obligations     47,240        316         (16)     47,540

Corporate bonds               32,288        721        (450)     32,559

Money Market                   1,139         --          --       1,139
                            --------   --------    --------    --------
                            $ 81,465   $  1,037    $   (481)   $ 82,021
                            ========   ========    ========    ========


                                       (9)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.       Investment Securities (continued):

During the six months ended June 1, 2002, the Company invested a portion of
their 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 call options. At June 1, 2002 and December 1, 2001,
the Company had no such investments, but may continue to invest in such equity
securities in the future.

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. By policy, the Company
limits 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 2001 and the six months ended June
1, 2002, that custodian had approximately $16 million and $17 million,
respectively, of the Company's cash under investment which from time to time
during such periods was invested entirely in equity securities. At June 1, 2002,
that custodian had approximately $17 million of the Company's cash under
investments, which were all invested in U.S. Treasury obligations. In June 2002,
the Company liquidated $8,000,000 from that custodian as part of the liquidating
dividend. The Company's investment policy currently permits up to 25% of the
Company's portfolio to include equity securities.


                                      (10)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.


                            JUNE 1, 2002   DECEMBER 1, 2001
                             (unaudited)
                            ------------   ----------------

Raw materials               $ 2,472,000    $ 3,036,000
Work in process               3,676,000      4,083,000
Finished goods                3,952,000      5,216,000
                            -----------    -----------
         Total              $10,100,000    $12,335,000
                            ===========    ===========

Approximate percentage of
   inventories valued
   under LIFO valuation              59%            56%
                            ===========    ===========

Excess of FIFO valuation
   over LIFO valuation      $ 2,200,000    $ 1,710,000
                            ===========    ===========


                                      (11)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5.       Asset Impairment and Restructuring Charges

As a result of the Company's plan to consolidate several manufacturing
facilities, the Company's quarter ended June 2, 2001 financial results include a
charge for impairment of fixed assets held for sale of $5,958,000 for the
writedown of fixed assets held for disposal to their fair value less costs to
dispose. The consolidation of manufacturing facilities was an effort to restore
the operations to an acceptable level of profitability by eliminating
over-capacities at the manufacturing level in response to the continued weakness
in the economy and market conditions that have adversely affected the domestic
textile industry.

The fixed assets held for disposal are comprised of buildings and machinery and
equipment from the knitting, dyeing and finishing activities of the business.
The marketability of the assets held for disposal are subject to worldwide
economic conditions which can affect the sale of such buildings and machinery.


                                      (12)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.       Earnings (loss) Per Share:

     Basic and diluted earnings (loss) per share for the 13 weeks ended June 1,
     2002 and June 2, 2001 are calculated as follows:

                                                         WEIGHTED
                                                          AVERAGE
                                           NET            COMMON
                                         INCOME           SHARES     PER-SHARE
                                         (LOSS)        OUTSTANDING    AMOUNT
                                         ------        -----------  ----------

For the 13 weeks ended June 1, 2002:
Basic and diluted earnings per share   $ 1,626,000      5,205,854   $   0.31
                                       ===========    ===========   ========

For the 13 weeks ended June 2, 2001
Basic and diluted loss per share       $(4,393,000)     5,270,557   $  (0.83)
                                       ===========    ===========   ========


Basic and diluted earnings (loss) per share for the 26 weeks ended June 1, 2002
and June 2, 2001 are calculated as follows:

                                                         WEIGHTED
                                                          AVERAGE
                                           NET            COMMON
                                         INCOME           SHARES     PER-SHARE
                                         (LOSS)        OUTSTANDING    AMOUNT
                                         ------        -----------  ----------

For the 26 weeks ended June 1, 2002
Basic and diluted earnings per share   $   949,000      5,207,605   $   0.18
                                       ===========    ===========   ========

For the 26 weeks ended June 2, 2001
Basic and diluted loss per share       $(5,435,000)     5,275,964   $  (1.03)
                                       ===========    ===========   ========


                                      (13)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


7.       Comprehensive Income (Loss):

Accumulated other comprehensive income (loss) is comprised of unrealized holding
gain (loss) related to available-for-sale securities. Comprehensive income
(loss) was $782,000 and ($5,111,000) for the 26 weeks ended June 1, 2002 and
June 2, 2001, respectively and $1,493,000 and ($4,532,000) for the 13 weeks
ended June 1, 2002 and June 2, 2001, respectively.


8.       Contingencies:

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, to the extent not provided for through insurance or
otherwise, would be material in relation to the Company's consolidated financial
position and results of operations.


9.       New Accounting Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued FASB
Statements Nos. 141 and 142 (FAS 141 and FAS 142), "Business Combinations" and
"Goodwill and Other Intangible Assets." FAS 141 replaces APB 16 and eliminates
pooling-of-interests accounting prospectively. It also provides guidance on
purchase accounting related to the recognition of intangible assets and
accounting for negative goodwill. FAS 142 changes the accounting for goodwill
from an amortization method to an impairment-only approach. FAS 141 and FAS 142
are effective for all business combinations completed after June 30, 2001.
Companies are required to adopt FAS 142 for fiscal years beginning after
December 15, 2001, but early adoption is permitted. The Company will adopt FAS
142 on December 2, 2002, the beginning of fiscal 2003. The Company does not
believe the adoption of FAS 142 will impact its results of operations or
financial position.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121 and the accounting and reporting
provisions of APB Opinion No. 30 for a disposal of a segment of a business. SFAS
144 is effective for fiscal years beginning after December 15, 2001, with
earlier application encouraged. The Company expects to adopt SFAS 144 as of
December 2, 2002, the beginning of fiscal 2003, and it does not expect that the
adoption of the Statement will have a significant impact on the Company's
financial position and results of operations.


                                      (14)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10.      Derivative Financial Instruments Held or Issued

From time to time, 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 June 1, 2002, the Company had no equity option contracts. During
the 6 months ended June 1, 2002, the Company was a party to equity option
contracts from time to time.

11.      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.

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.

Home Fashions and Accessories: While sales primarily to manufacturers of home
furnishings, the Company also uses the Company's own textile fabrics internally
to produce flannel and satin sheets, blanket products, comforters, and other
bedding products which sells to specialty stores, catalogue and mail order
companies, airlines and cruise lines, and health care institutions.

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
to vendors 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 (benefit)


                                      (15)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 segment assets as of June 1, 2002 includes asset impairment and
restructuring charges recorded in the second and fourth quarters of fiscal 2001
and apply mainly to the apparel segment with a small portion to the other
segment. The 26 weeks ended June 1, 2002 include a litigation settlement in the
amount of $750,000, which is included in the Home Fashions and Accessories
Segment (see Note 12).

For the 26 weeks and 13 weeks ending June 2, 2001, asset impairment and
restructuring charges apply to the apparel segment.

                                 (in thousands)


                                    HOME FASHIONS
26 WEEKS ENDED 06/01/02   APPAREL   AND ACCESSORIES   OTHER     TOTAL
-----------------------   -------   ---------------   -----     -----
External sales            $ 25,889    $  2,373    $  3,350   $ 31,612
Intersegment sales           1,918          23         204      2,145
Operating income (loss)       (418)     (1,120)         53     (1,485)
Segment assets              19,194       1,062       3,282     23,538



                                    HOME FASHIONS
26 WEEKS ENDED 06/02/01   APPAREL   AND ACCESSORIES   OTHER     TOTAL
-----------------------   -------   ---------------   -----     -----
External sales            $ 32,333    $  5,951   $  4,723    $ 43,007
Intersegment sales           6,579          28        143       6,750
Operating income (loss)    (11,044)        533       (369)    (10,880)
Segment assets              32,377       2,238      4,155      38,770


                                          26 WEEKS ENDED
                                       ---------------------
PROFIT OR LOSS                         JUNE 01     JUNE 02
--------------                         -------     -------
                                       2002        2001
                                       ----        ----

Total operating loss for segments      $ (1,485)   $(10,880)
Total other income
                                                   --------
                                          2,934       3,331
                                       --------    --------
Income (loss) before taxes on income   $  1,449    $ (7,549)
                                       ========    ========


                                      (16)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                    HOME FASHIONS
13 WEEKS ENDED 06/01/02   APPAREL   AND ACCESSORIES   OTHER     TOTAL
-----------------------   -------   ---------------   -----     -----
External sales            $14,355   $ 1,154    $ 1,853   $17,362
Intersegment sales          1,289        11        163     1,463
Operating income (loss)       581      (150)        20       451


                                    HOME FASHIONS
13 WEEKS ENDED 06/02/01   APPAREL   AND ACCESSORIES   OTHER     TOTAL
-----------------------   -------   ---------------   -----     -----
External sales            $ 18,332    $  2,758   $  1,912    $ 23,002
Intersegment sales           3,005           8         67       3,080
Operating income (loss)     (7,835)        227       (234)     (7,842)


                                          13 WEEKS ENDED
                                       ---------------------
PROFIT OR LOSS                         JUNE 01     JUNE 02
--------------                         -------     -------
                                       2002        2001
                                       ----        ----

Total operating (loss) for segments    $(7,842)   $   451
Total other income                       1,952      1,740
                                       -------    -------
Income (loss) before taxes on income   $ 2,403    $(6,102)
                                       =======    =======

12.      Other:

During the fall of 1999, San Francisco Network ("SFN") commenced an action in
the Superior Court of California, Marin County, against the Company and the
Company's Salisbury Manufacturing Corporation ("Salisbury") subsidiary. The
action related to an agreement between SFN and Salisbury (whose performance the
Company guaranteed), pursuant to which Salisbury was licensed to use the Karen
Neuburger trademark for branded bedding products. The case was removed to the
United States District Court of California. Salisbury and the Company denied any
wrongdoing and asserted affirmative claims against SFN and certain of its
principals. On March 14, 2002, at a court -ordered conference, the Company
settled this issue without admitting liability. On April 12, 2002, the Company
paid SFN $750,000 in exchange for a complete release of all claims.


                                      (17)
<PAGE>

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

RESULTS OF OPERATIONS
SECOND QUARTER AND SIX MONTHS
FISCAL 2002 COMPARED TO FISCAL 2001
-----------------------------------

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, pursue a sale of the business as a going concern and, if
the Company's Board of Directors deems it advisable, engage financial advisors
to assist with the sale of the business.

In addition, pursuant to resolutions adopted by the Company's Board of
Directors, upon approval of the Plan by the stockholders, ESOP was terminated
and all shares of common stock of the Company then held in the ESOP suspense
account (86,456 shares) were transferred to the Company, and held as treasury
stock, in exchange for the cancellation of the outstanding loan in the amount of
$3,957,000 from the Company to the ESOP.

Pursuant to resolutions adopted by the Company's Board of Directors and
documentation sent to and returned to the Company by option holders, effective
immediately following stockholder approval of the Plan, all outstanding options
under the Company's 1997 Stock Incentive Plan became vested, and all options as
to which optionees (which includes employees and directors) had returned to the
Company the appropriate forms (representing options held by all but one
optionee) were exercised through the issuance of loans from the Company to the
optionees, with stock of the optionees held as collateral by the Company until
the loans have been satisfied. These loans receivable have been recorded as a
reduction of stockholders' equity as of June 1, 2002.

Net sales for the second quarter of fiscal 2002 were $17,362,000 as compared to
$23,002,000 in the similar 2001 period, a decrease of $5,640,000 or 24.5%. For
the six months ended June 1, 2002, net sales were $31,612,000, a decline of
$11,395,000, or 26.5% from 2001. Such decreases were caused substantially by
lower volume, as business conditions within the domestic textile industry
remained depressed. The continued influx of low-cost foreign imports has also
taken a sustained toll in the U.S. manufacturing sector. These factors have
negatively impacted sales and production. These conditions have to date
continued into the third quarter.

Gross margins as a percentage of sales for the second quarter of fiscal 2002
increased to 15.0% from 3.7% as compared to the similar 2001 period. A more
favorable product mix and the consolidation of three of our manufacturing
facilities reducing costs relating to employee termination, decrease in
depreciation and other related costs resulted in the higher gross margins. For
the six months ended June 1, 2002 gross margins increased to 12.0% compared to
1.6% in the similar 2001 period. For the six months and three months ended June
1, 2002, an increase in LIFO reserves of $490,000 was recorded. This was due to
the liquidation of certain LIFO layers and higher average FIFO prices. In the
2001 six months, a reduction in LIFO inventory reserves benefited margins in the
amount of $628,000.


                                      (18)
<PAGE>


For the 26 weeks and 13 weeks ended June 2, 2001, the financial results includes
a charge of $5,958,000 for the asset impairment and restructuring charges as a
result of the Company's consolidation of its manufacturing facilities. Such
fixed assets are comprised of buildings and machinery and equipment from the
knitting, dyeing, and finishing activities of the business. The marketability of
the assets held for disposal are subject to worldwide economic conditions which
can affect the sale of such buildings and machinery.

Selling, general and administrative expenses in the current quarter decreased by
$595,000, or 21.7%. For the six months ended June 1, 2002, selling, general and
administrative expenses decreased by $1,109,000 or 19.7%. Reduced expenses
related primarily to the reduced number of employees and related expenses. In
addition, expenses decreased as a result of the continued effectiveness of our
expense and cost containment programs.

The Company settled a dispute without admitting liability for $750,000. See Note
12 to the Condensed Consolidated Financial Statements.

Interest and dividend income for the current quarter decreased by $122,000, or
11.6%. Although the Company had higher invested balances, the Company invested a
large portion of its portfolio in United States Treasury obligations resulting
in lower risks and lower yields.

In the current quarter, we realized gains from the sale of investment securities
of $1,021,000 compared to $699,000 in last year's second quarter.

The effective income tax rate for the current quarter was 32.3% as against a tax
benefit of 28.0% in last year's second quarter.

As a result of these factors, the Company had net income of $1,626,000 or $0.31
per share and $949,000 or $0.18 per share for the 13 and 26 weeks ended June 1,
2002, respectively. For the 13 weeks ended June 2, 2001, the Company had a net
loss of $4,393,000 after asset impairment and restructuring charges of
$4,289,000, net of income tax benefit. For the 26 weeks ended June 1, 2001, the
Company had a net loss of $5,435,000 after asset impairment and restructuring
charges of $4,289,000, net of income tax benefit.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Net cash provided by operating activities amounted to $3,242,000 and $4,343,000
for the 26 weeks ended June 1, 2002 and June 2, 2001, respectively. Of the
decrease, major changes were as follows: $3,244,000 relates to comparative
changes in accounts receivable, $650,000 to inventories, $1,755,000 to
depreciation and amortization, and $5,958,000 to non-cash asset impairment and
restructuring charges. These decreases were offset by $6,384,000 increase in net
income, $2,183,000 in deferred income taxes, $2,234,000 to accounts payable and
other current liabilities.

For the six months ended June 1, 2002, net acquisition of investment securities
were $1,644,000 as compared to net acquisition of $13,613,000 in the comparative
2001 period. In the six-month period ending June 2, 2001, approximately
$12,000,000 of the net acquisitions of investment securities was in cash and
cash equivalents. The Company has invested these funds in high quality,
investment grade, taxable bonds.


                                      (19)
<PAGE>

Capital expenditures for the six months ended June 1, 2002 were $193,000
compared to $260,000 in the comparable 2001 period.

Stockholders' equity was $69,215,000 ($13.21 book value per share) at June 1,
2002, as compared to $120,503,000 ($23.14 book value per share) at the previous
fiscal year-end December 1, 2001, and $124,470,000 ($23.65 book value per share)
at the end of the comparative 2001 second quarter. The reduction in
stockholders' equity was primarily due to the liquidating dividend of $10.00 per
share declared on May 30, 2002 by the Company's Board of Directors, which was
paid on June 24, 2002. Accordingly, $52,380,000 was accrued as of June 1, 2002.

Management believes that our current financial position is adequate to satisfy
working capital requirements and to internally fund any future expenditures to
maintain our manufacturing facilities for the next twelve months.

COMMITMENTS

STOCK REPURCHASE

The Company has an agreement with the Chairman of the Board of Directors and
Chief Executive Officer which provides that, in the event of the Chairman's
death, his estate has the option to sell, and the Company the obligation to
purchase, certain stock owned by the Chairman. The amount of stock subject to
purchase is equal to the lesser of $7 million or 10% of the book value of the
Company at the end of the year immediately following his death, plus the $3
million proceeds from insurance on his life for which the Company is the
beneficiary. The agreement extends automatically from year to year unless either
party gives notice of cancellation at least six months prior to the then current
expiration date. The current expiration date is March 2003.

CRITICAL ACCOUNTING POLICIES

The Company's significant accounting policies are discussed in Summary of
Accounting Policies in the audited financial statements, which are included in
the Company's most recent Annual Report on Form 10-K. Certain accounting
policies are important to the portrayal of the Company's financial condition and
results of operations, and require management's subjective judgements. These
policies relate to the following:

RISKS AND UNCERTAINITIES

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 reporting period.
Actual results could differ from those estimates and assumptions.

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents, investment
securities, and trade receivables. The Company places its cash and cash
equivalents with high credit quality financial institutions. The Company is
subject to credit risk if the brokers are unable to repay balances due or
deliver securities in their custody. By policy, the Company limits the amount of
credit exposure to any one financial institution. The Company has received
confirmation indicating that, with respect to investment


                                      (20)
<PAGE>

securities, each custodian with the exception of one custodian maintains
appropriate insurance coverage. During fiscal 2001 and the six months ended June
1, 2002, that custodian had approximately $16 million and $17 million,
respectively, of the Company's cash under investment which from time to time
during such periods was invested entirely in equity securities. At June 1, 2002,
that custodian had approximately $17 million of the Company's cash under
investments, which were invested in U.S. Treasury obligations. In June 2002, the
Company liquidated $8,000,000 from that custodian as part of the liquidating
dividend. The Company's investment policy currently permits up to 25% of the
Company's portfolio to include equity securities.

Concentrations of credit risk with respect to trade receivables are limited due
to the diverse group of manufacturers, wholesalers and retailers to whom the
Company sells. The Company reviews a customer's credit history before extending
credit. The Company further reduces its credit risk by factoring, without
recourse, a variable amount of trade receivables. As of June 1, 2002 and
December 1, 2001, 11% and 18%, respectively, of the accounts receivable
outstanding were due from factors. The Company has established an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.

REVENUE RECOGNITION

The Company recognizes its revenues upon shipment of the related goods.
Allowances for estimated returns are provided when sales are recorded.

INVESTMENTS

The Company follows Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
No. 115"). SFAS No. 115 addresses accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Investments in such securities are to be
classified as either held-to-maturity, trading, or available-for-sale. The
Company classifies all of its investments as available-for-sale. The investments
are recorded at their fair value and the unrealized gain or loss, net of income
taxes, is recorded in stockholders' equity.

Gains and losses on sales of investment securities are computed using the
specific identification method.

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. Factors that might
affect such forward-looking statements include, among other things: 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

                                      (21)
<PAGE>


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.



                          QUANTITATIVE AND QUALITATIVE
                          DISCLOSURES ABOUT MARKET RISK
                          -----------------------------

See "Derivative Instruments and Hedging Activities" in Note 1 and Note 3 of the
Notes to the Consolidated Financial Statements. See also "Derivative Financial
Instruments Held or Issued" in Note 10 of the Notes to the Consolidated
Financial Statements.


                                      (22)
<PAGE>

PART II.          OTHER INFORMATION

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

The Company held its Annual Meeting of Stockholders on May 30, 2002. The matters
submitted to a vote of the Company's stockholders were (i) a sale of the
Company's business pursuant to the Plan of Liquidation and Dissolution and (ii)
the election of three directors to Class II of the Company's Board of Directors.
The Company's stockholders approved a sale of the Company's business pursuant to
the Plan of Liquidation and Dissolution by a vote of 3,700,927 in favor, 51,327
against, with 4,656 abstentions. The Company's stockholders elected Messrs.
Lawrence H. Bober, Martin B. Bernstein and Steven Myers to Class II of the
Company's Board of Directors, to hold office until the 2005 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified. The results of the voting were as follows:

                                                                       VOTES
                                                VOTES FOR             WITHHELD

      Lawrence H. Bober                         4,727,513               24,104

      Martin B. Bernstein                       4,724,789               26,838

      Steven Myers                              4,528,182              223,445


Item 6.  Exhibits and Reports on Form 8-K

a)       Exhibits:

     2.1 Plan of Liquidation and Dissolution of Fab Industries, Inc.
         (incorporated by reference to Annex A of the Company's Definitive Proxy
         Statement on Schedule 14A, dated May 3, 2002)

b)       Reports on Form 8-K:

         On May 30, 2002, the Company filed a report on Form 8-K announcing that
         at its Annual Meeting of Stockholders its stockholders approved a sale
         of the Company's business pursuant to the Plan of Liquidation and
         Dissolution and that its Board of Directors declared an initial
         liquidating distribution of $10.00 per share.


                                      (23)
<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 16, 2002               FAB INDUSTRIES, INC.




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


                                      (24)