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    AUGUST 30, 2003
                `             ----------------------
                                       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 check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ____ No __X__

As of October 14, 2003, 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

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION                                                     PAGE
<S>                                                                                 <C>
          Item 1.  Financial Statements

          Condensed Consolidated Statements of Operations

          13 Weeks ended August 30, 2003 and August 31, 2002 (unaudited)             2

          Condensed Consolidated Statements of Operations
          39 Weeks ended August 30, 2003 and August 31, 2002 (unaudited)             3

          Condensed Consolidated Balance Sheets
          August 30, 2003 (unaudited) and November 30, 2002                          4

          Condensed Consolidated Statements of Stockholders' Equity
          39 Weeks ended August 30, 2003 (unaudited)                                 6

          Condensed Consolidated Statements of Cash Flows
          39 Weeks ended August 30, 2003 and August 31, 2002 (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        21

          Item 4. Controls and Procedures                                           22


PART II - OTHER INFORMATION

          Item 6. Exhibits and Reports on Form 8-K                                  22



SIGNATURES                                                                          23

</TABLE>


                                       (1)

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                           FAB INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                 FOR THE 13 WKS ENDED
                                                           --------------------------------
                                                           August 30, 2003  August 31, 2002
                                                           --------------------------------
                                                             (unaudited)      (unaudited)

<S>                                                         <C>             <C>
Net sales                                                   $ 13,357,000    $ 17,920,000
Cost of goods sold                                            12,238,000      15,376,000
                                                            ------------    ------------
Gross profit                                                   1,119,000       2,544,000

Operating expenses:
Selling, general and administrative expenses                   1,748,000       2,097,000
Asset impairment (Note 13)                                       685,000               -
Other expense  (Note 12)                                       1,441,000               -
                                                            ------------    ------------
Total operating expenses                                       3,874,000       2,097,000

Operating income (loss)                                       (2,755,000)        447,000
                                                            ------------    ------------
Other income:
  Interest and dividend income                                   355,000         345,000
  Net gain on investment securities                              798,000         788,000
                                                            ------------    ------------
Total other income                                             1,153,000       1,133,000
                                                            ------------    ------------
Income (loss) before taxes                                    (1,602,000)      1,580,000

Income tax expense (benefit)                                    (350,000)        570,000
                                                            ------------    ------------
Net income (loss)                                           $ (1,252,000)   $  1,010,000
                                                            ============    ============


Earnings (loss) per share: (Note 5)

      Basic                                                 $      (0.24)   $       0.19

      Diluted                                               $      (0.24)   $       0.19

Cash dividends declared per share                           $       4.00    $          -

See notes to condensed consolidated financial statements
</TABLE>


                                       (2)

<PAGE>




                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                   FOR THE 39 WKS ENDED
                                             --------------------------------
                                             August 30, 2003  August 31, 2002
                                             --------------------------------
                                               (unaudited)      (unaudited)


<S>                                            <C>             <C>
Net sales                                      $ 38,590,000    $ 49,532,000
Cost of goods sold                               35,061,000      43,205,000
                                               ------------    ------------
Gross profit                                      3,529,000       6,327,000

Operating expenses:
Selling, general and administrative expenses      4,955,000       6,615,000
Asset impairment (Note 13)                          685,000               -
Other expense (Notes 12 and 11)                   1,441,000         750,000
                                               ------------    ------------
Total operating expenses                          7,081,000       7,365,000
                                               ------------    ------------
Operating loss                                   (3,552,000)     (1,038,000)
                                               ------------    ------------
Other income:
  Interest and dividend income                    1,049,000       2,173,000
  Net gain on investment securities               1,001,000       1,904,000
  Interest expense                                        -         (10,000)
                                               ------------    ------------
Total other income                                2,050,000       4,067,000
                                               ------------    ------------
Income (loss) before taxes                       (1,502,000)      3,029,000

Income tax expense (benefit)                       (300,000)      1,070,000
                                               ------------    ------------
Net income (loss)                              $ (1,202,000)   $  1,959,000
                                               ============    ============

Earnings (loss) per share: (Note 5)

      Basic                                    $      (0.23)   $       0.38

      Diluted                                  $      (0.23)   $       0.38

Cash dividends declared per share              $       4.00    $      10.00

See notes to condensed consolidated financial statements.
</TABLE>


                                       (3)

<PAGE>



FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

           A S S E T S
           -----------
<TABLE>
<CAPTION>

                                                                  AS OF
                                                -------------------------------------
                                                 August 30, 2003   November 30, 2002
                                                -------------------------------------
                                                   (unaudited)

Current Assets:

<S>                              <C>                 <C>           <C>
 Cash and cash equivalents (Note 2)                  $ 1,927,000   $ 3,146,000
 Investment securities available-for-sale (Note 3)    28,552,000    45,551,000
 Accounts receivable-net of allowance of
 $800,000 and $1,000,000 for doubtful accounts         7,651,000     7,548,000
 Inventories (Note 4)                                  6,649,000     8,386,000
 Deferred income tax                                     103,000             -
 Other current assets                                    721,000       867,000
                                                     -----------   -----------
   Total current assets                               45,603,000    65,498,000
                                                     -----------   -----------

Property, plant and equipment - at cost               34,573,000    85,628,000
Less: Accumulated depreciation                        24,598,000    73,621,000
                                                     -----------   -----------
                                                       9,975,000    12,007,000

Other assets                                           3,445,000     3,724,000
                                                     -----------   -----------
                                                     $59,023,000   $81,229,000
                                                     ===========   ===========

</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
          ---------------------------------------
<TABLE>
<CAPTION>

                                                                  AS OF
                                                -------------------------------------
                                                 August 30, 2003   November 30, 2002
                                                -------------------------------------
                                                   (unaudited)
<S>                                                 <C>                <C>
Current liabilities:

 Accounts payable                                   $ 2,511,000        $ 2,858,000
 Corporate income and other taxes                     1,511,000          1,980,000
 Accrued payroll and related expenses                   672,000            903,000
 Other current liabilities                            1,057,000            940,000
 Deferred income taxes                                        -              9,000
                                                    -----------        -----------
   Total current liabilities                          5,751,000          6,690,000
                                                    -----------        -----------

Other noncurrent liabilities                          3,969,000          2,968,000

                                                    -----------        -----------
    Total liabilities                                 9,720,000          9,658,000
                                                    -----------        -----------

Redeemable common stock                                       -          7,000,000

Stockholders' equity                                 49,303,000         64,571,000
                                                    -----------        -----------
                                                    $59,023,000        $81,229,000
                                                    ===========        ===========
</TABLE>
W
See notes to condensed consolidated financial statements.




                                       (5)

<PAGE>


FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 39 WEEKS ENDED August 30, 2003 (unaudited)

<TABLE>
<CAPTION>




                                           Common Stock *                                       Treasury Stock
                                           ==============               Accumulated             ==============       Notes
                                     Number                                 Other         Number                     Receivable
                                       of                   Retained    Comprehensive       of                       from
                        Total        Shares     Amount      Earnings       Income         Shares           Cost      Stockholder's
------------------------------------------------------------------------------------------------------------------------------------

Balance at
<S>                  <C>           <C>        <C>         <C>             <C>          <C>             <C>            <C>
November 30, 2002    $64,571,000   6,724,944  $1,345,000  $100,455,000    $229,000     (1,486,929)     ($37,237,000)  ($221,000)

Net loss              (1,202,000)                           (1,202,000)

Change in net
unrealized
holding
loss on
investment
securities
available-for-
sale, net
of taxes                (209,000)                                         (209,000)
                    ---------------

Total comprehensive
loss                  (1,411,000)

Cash Dividends       (20,860,000)                          (20,860,000)

Repayment of notes
receivable from
stockholders             221,000                                                                                          221,000

Purchase of
treasury stock          (218,000)                                                         (22,984)         (218,000)

Reclass of
redeemable
common stock
to non-
 redeemable
common stock           7,000,000                             7,000,000
                    ----------------------------------------------------------------------------------------------------------------
Balance at
August 30, 2003      $49,303,000   6,724,944  $1,345,000   $85,393,000     $20,000     (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 39 WKS ENDED
                                                               --------------------------------
                                                               August 30, 2003  August 31, 2002
                                                               --------------------------------
                                                                 (unaudited)      (unaudited)
OPERATING ACTIVITIES:
<S>                                                              <C>             <C>
Net income (loss)                                                $ (1,202,000)   $  1,959,000
 Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
   Provision for doubtful accounts                                    300,000         300,000
     Depreciation and amortization                                  1,439,000       1,636,000
     Deferred income taxes                                           (410,000)       (397,000)
     Non-cash asset impairment                                        685,000               -
     Net gain on investment securities                             (1,001,000)     (1,904,000)
     Gain on disposition of fixed assets                             (433,000)       (397,000)
     Compensation relating to
         acceleration of stock options                                      -         418,000
     Decrease (increase) in:
     Accounts receivable                                             (403,000)     (1,210,000)
     Inventories                                                    1,737,000       3,801,000
     Other current assets                                             146,000         515,000
     Other assets                                                     717,000         389,000
    (Decrease) increase in:
     Accounts payable                                                (347,000)          6,000
     Accruals and other liabilities                                   417,000         315,000
                                                                 ------------    ------------
     Net cash provided by
     operating activities                                           1,645,000       5,431,000
                                                                 ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                        (138,000)       (205,000)
   Proceeds from dispositions of property                             480,000         517,000
   Proceeds from sales of investment securities                    17,651,000      41,528,000
                                                                 ------------    ------------
   Net cash provided by
   investing activities                                            17,993,000      41,840,000
                                                                 ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of treasury stock                                        (218,000)       (280,000)
   Dividends                                                      (20,860,000)    (52,901,000)
   Exercise of stock options                                                -       1,445,000
   Repayment of loan from stockholders                                221,000               -
                                                                 ------------    ------------
   Net cash used in financing activities                          (20,857,000)    (51,736,000)
                                                                 ------------    ------------
   Decrease in cash and cash equivalents                           (1,219,000)     (4,465,000)

   Cash and cash equivalents, beginning of period                   3,146,000       6,742,000
                                                                 ------------    ------------
   Cash and cash equivalents, end of period                      $  1,927,000    $  2,277,000
                                                                 ============    ============
</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
39 weeks ended August 30, 2003 are not necessarily indicative of the results
that may be expected for the entire fiscal year ending November 29, 2003. The
balance sheet at November 30, 2002 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 November 30, 2002.

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 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 August 1, 2003 and May 30, 2002, the Company's Board of Directors
declared a liquidating distribution of $4.00 per share and $10.00 per share,
respectively, which resulted in a payment to stockholders of $20,860,000 and
$52,380,000 in August 2003 and June 2002, respectively.

Pursuant to resolutions adopted by the Company's Board of Directors, upon
approval of the Plan by stockholders on May 30, 2002 the Employees 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.
The Company recorded the related treasury stock at the fair market value on the
date of the termination, which resulted in a $2.4 million charge to additional
paid-in-capital.

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, on May 30, 2002 all
outstanding options under the Company's 1997 Stock Incentive Plan became vested,
and all options as to which optionees (including employees and directors) had
returned to the Company the appropriate forms (representing options held by all
but one optionee, who exercised via payment to the Company) 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. The amount loaned to employees and directors to exercise their
options was approximately $1,495,000, which was all repaid prior to August 30,
2003. These options were subject to variable accounting at each reporting
period, until the related loans were repaid. In June 2003, the Company
repurchased 22,984 shares of its common stock at $9.48 per share from employees
and directors with outstanding loans from the Company and offset the related
payment against the loans due from such employees and directors, which were due
as of May 31, 2003 with a one month grace period. The Company purchased the
number of shares necessary for the employees and directors to pay off all
outstanding loans, including interest.

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

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 (See Notes 3 and 9).

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for it's
various stock option plans. The Company has adopted the disclosure - only
provisions of SFAS No. 123, "Accounting for Stock- Based Compensation" and SFAS
No. 148, "Accounting for Stock Based Compensation-Transition and Disclosure",
which was released in December 2002 as an amendment to SFAS No. 123. In
accordance with SFAS No. 148, the following table illustrates the effect on net
income and earnings per share as if the company has applied the fair value
recognition provisions of SFAS No. 123.
<TABLE>
<CAPTION>

                                                     (dollars in thousands, except per share data)
                                               THREE MONTHS ENDED                           NINE MONTHS ENDED
                                               ------------------                           -----------------
PROFIT OR LOSS  (UNAUDITED)              AUG 30, 2003        AUG 31, 2002            AUG 30, 2003         AUG 31, 2002
--------------  -----------              ------------        ------------            ------------         ------------
<S>                                           <C>                  <C>                    <C>                   <C>
Net income (loss) as reported                 $(1,252)             $1,010                 $(1,202)              $1,959
Less: Total stock-based employee
  compensation expense determined
  under fair value based method for
  all awards, net of tax.                           0                 (9)                       0                  (28)
                                              -------              ------                 -------               ------
Proforma net income (loss)                    $(1,252)             $1,001                 $(1,202)              $1,931
                                              -------              ------                 -------               ------


Basic and diluted net income (loss)
  per share: As reported                       $(0.24)              $0.19                  $(0.23)               $0.38

Pro Forma                                      $(0.24)              $0.19                  $(0.23)               $0.37





</TABLE>


                                       (9)


RECLASSIFICATIONS

Certain accounts in the 2002 financial statements have been reclassified with
the 2003 presentations for comparatives purposes.

2. Cash and Cash Equivalents:

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

                                      August 30, 2003         November 30, 2002
                                      (unaudited)
                                      ---------------        ------------------
Cash                                       $   482                    $   526
Taxable and tax-free
short-term debt instruments                  1,445                      2,620
                                      --------------         ------------------
                                           $ 1,927                    $ 3,146
                                      ==============         ==================

3. Investment Securities:

     At August 30, 2003 and November 30, 2002, investment securities
available-for-sale consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                  Gross         Gross
                                                  Unrealized    Unrealized
                                                  Holding       Holding         Fair
August 30, 2003 (unaudited)           Cost        Gain          Loss            Value
--------------------------           --------     -------       ---------       ---------
<S>                                  <C>          <C>           <C>             <C>
Equities                             $    750     $   0         $      0        $    750

U.S. Treasury obligations              27,017       460                0          27,477

Corporate bonds                           253         0             (252)              1

Money market                              324         0                0             324
                                     --------     -------        --------        --------

                                     $ 28,344     $   460        $   (252)       $ 28,552
                                     ========     =======        ========        ========
</TABLE>


                                      (10)
<PAGE>



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Investment Securities (continued):
<TABLE>
<CAPTION>

                                                         Gross             Gross
                                                         Unrealized        Unrealized
                                                         Holding           Holding         Fair
November 30, 2002                        Cost            Gain              Loss            Value
---------------------------             --------         -------           ---------       ---------
<S>                                     <C>              <C>               <C>              <C>
Equities                                $    750         $      0          $      0         $    750

U.S. Treasury obligations                 32,411              617                 0            33,028

Corporate bonds                            7,748              194              (254)            7,688

Money market                               4,085                0                 0             4,085
                                        --------         --------         --------           --------
                                        $ 44,994         $    811         ($   254)          $ 45,551
                                        ========         ========         ========           ========
</TABLE>


During the nine months ended August 30, 2003, 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 purchased short-term S&P 100
index put options and sold short-term S & P 100 index call options. At August
30, 2003 and November 30, 2002, 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. 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 2002 and the nine months
ended August 30, 2003, that custodian had an average balance of approximately
$10 million and $10.4 million, respectively, of the Company's cash under
investment which from time to time during such periods was invested entirely in
equity securities. At August 30, 2003, that custodian had approximately $8.3
million of the Company's cash under investments, which were all invested in U.S.
Treasury obligations. In August 2003, the Company liquidated $2.5million from
that custodian as part of the liquidating dividend. The Company's investment
policy currently permits up to 50% of the Company's portfolio to include equity
securities.



                                      (11)


<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.
<TABLE>
<CAPTION>

                                             August 30, 2003                  November 30, 2002
                                             (unaudited)
                                             ------------                        ------------

<S>                                          <C>                                  <C>
Raw materials                                $  1,457,000                         $ 2,131,000
Work in process                                 2,390,000                           2,717,000
Finished goods                                  2,802,000                           3,538,000
                                             ------------                        ------------
         Total                                 $6,649,000                          $8,386,000
                                             ============                        ============

Approximate percentage of
   inventories valued
   under LIFO valuation                                63%                                62%
                                                       ==                                 ==

Excess of FIFO valuation
   over LIFO valuation                       $  1,914,000                        $  1,614,000
                                             ============                        ============
</TABLE>


5. Earnings (loss) Per Share:

     Basic and diluted earnings (loss) per share for the 13 weeks ended August
     30, 2003 and August 31, 2002 are calculated as follows:
<TABLE>
<CAPTION>

                                                                              Weighted          Basic
                                                                               Average           and
                                                                Net            Common          Diluted
                                                              Income           Shares           Earning (loss)
                                                              (Loss)         Outstanding       Per-share
                                                              ------         -----------       ---------
<S>                                                          <C>                 <C>             <C>
     For the 13 weeks ended August 30, 2003:                 $(1,252,000)        5,216,546       $(0.24)
                                                             ===========         =========       ======


     For the 13 weeks ended August 31, 2002:                 $ 1,010,000         5,238,024        $0.19
                                                             ===========         =========        =====

</TABLE>



                                      (12)

<PAGE>


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   Basic and diluted earnings (loss) per share for the 39 weeks ended August 30,
2003 and August 31, 2002 are calculated as follows:
<TABLE>
<CAPTION>

                                                                  Weighted          Basic
                                                                   Average           and
                                                    Net            Common          Diluted
                                                  Income           Shares           Earning (loss)
                                                  (Loss)         Outstanding       Per-share
                                                  ------         -----------       ---------
<S>     <C>                   <C> <C>          <C>                <C>              <C>
For the 39 weeks ended August 30, 2003:        $(1,202,000)       5,230,859        $(0.23)
                                               ===========        =========        ======


For the 39 weeks ended August 31, 2002:        $ 1,959,000        5,217,744         $0.38
                                               ===========        =========         =====
</TABLE>

There were no options outstanding during the 13 weeks and 39 weeks ended August
30, 2003. All options outstanding during the 13 weeks and 39 weeks ended August
31, 2002 were not included in the computation of diluted earnings per share as
their effect would be anti-dilutive.

6. 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 $(1,411,000) and $1,998,000 for the 39 weeks ended August 30, 2003
and August 31, 2002, respectively, and $(1,810,000) and $1,216,000 for the 13
weeks ended August 30, 2003 and August 31, 2002, respectively.

 7. 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.

8.       New Accounting Standards

In July 2002, the FASB issued SFAS 146 "Accounting for Restructuring Costs".
SFAS 146 applies to costs associated with an exit activity (including
restructuring) or with a disposal of long-lived assets. Those activities can
include eliminating or reducing product lines, terminating employees and
contracts, and relocating plant facilities or personnel. Under SFAS 146, a
company will record a liability for a cost associated with an exit or disposal
activity when that liability is incurred and can be measured at fair value. SFAS
146 requires a company to disclose information about its exit and disposal
activities, the related costs and changes in those costs in the notes to the
interim and annual financial statements that include the period in which an exit
activity is initiated and in any subsequent period until the activity is
completed. SFAS 46, is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with an earlier adoption encouraged. Under
SFAS 146, a company may not restate its previously issued financial statements
and the new statement grandfathers the accounting for liabilities that a company
had previously recorded under Emerging Issues Task Force Issue 94-3. The
adoption of this statement did not have a material impact on the Company's
financial position or results of operations.


                                      (13)

<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation - Transition and Disclosure". This Statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for a voluntary change to the fair market value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of Statement 123 to require prominent
disclosures in both annual and interim financial statements about the method
used on reported results. The Statement has varying effective dates commencing
with interim periods beginning after December 15, 2002 (See Note 1).

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
the Indebtedness of Others, which addresses the accounting for and disclosure of
guarantees. Interpretation No. 45 requires a guarantor to recognize a liability
for the fair value of a guarantee at inception. The recognition of the liability
is required even if it is not probable that payments will be required under the
guarantee. The disclosure requirements are effective for interim and annual
financial statements ending after December 15, 2002. The initial recognition and
measurement provisions are effective on a prospective basis for guarantees
issued or modified after December 31, 2002. The Company's adoption of
Interpretation No. 45 did not have a material effect on the Company's
consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities. The objective of this interpretation is to provide
guidance on how to identify a variable interest entity ("VIE") and determine
when the assets, liabilities, noncontrolling interests, and results of
operations of a VIE need to be included in a company's consolidated financial
statements. A company that holds variable interests in an entity will need to
consolidate the entity if the company's interest in the VIE is such that the
company will absorb a majority of the VIE's expected losses and/or receive a
majority of the entity's expected residual returns, if they occur.
Interpretation No. 46 also requires additional disclosures by primary
beneficiaries and other significant variable interest holders. The
interpretation became effective upon issuance. The Company's adoption of this
interpretation did not have an effect on its consolidated financial statements.



In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". This statement
affects the classification, measurement and disclosure requirements of the
following three types of freestanding financial instruments: 1) mandatorily
redeemable shares, which the issuing company is obligated to buy back with cash
or other assets; 2) instruments that do or may require the issuer to buy back
some of its shares in exchange for cash or other assets, which includes put
options and forward purchase contracts; and 3) obligations that can be settled
with shares, the monetary value of which is fixed, tied solely or predominantly
to a variable such as a market index, or varies inversely with the value of the
issuers' shares. In general, SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The Company's adoption of SFAS No. 150 did not have a significant impact
on the Company's consolidated financial statements.



                                      (14)


<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 August
30, 2003, the Company had no equity option contracts. During the nine months
ended August 30, 2003, the Company was a 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.

Home Fashions and Accessories: While sales primarily to manufacturers of home
furnishings, the Company uses it'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





                                      (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 financial statements for the 39 weeks and 13 weeks ended August 30, 2003
include other expenses in the amount of $1,441,000, which represents agreements
with the Chief Executive Officer (See Note 12). This amount was allocated
between segments with a majority included in the Apparel segment. In addition,
asset impairment applies to the Apparel segment. (See Note 13)

The financial statements for the 39 weeks ended August 31, 2002 include a
litigation settlement in the amount of $750,000, which is included in the Home
Fashions and Accessory Segment. (See Note 11).
<TABLE>
<CAPTION>

                                                  (in thousands)

39 Weeks Ended 08/30/03
-----------------------                                 Home Fashions
(Unaudited)                        Apparel            and Accessories            Other            Total
-----------                        -------            ---------------            -----            -----
<S>                                    <C>                 <C>                  <C>              <C>
External sales                         $29,974             $2,861               $5,755           $38,590
Intersegment sales                       2,592                 30                  249             2,871
Operating income (loss)                 (3,669)              (216)                 333            (3,552)
Segment assets                          13,255                797                2,532            16,584


                                                        Home Fashions
39 Weeks Ended 08/31/02             Apparel           and Accessories             Other            Total
-----------------------             -------           ---------------             -----            -----
(Unaudited)
-----------
External sales                          $40,284           $3,767                $5,481           $49,532
Intersegment sales                        3,050                23                  352             3,425
Operating income (loss)                    (413)            (916)                  291            (1,038)
Segment assets                           17,164              880                 2,934            20,978
</TABLE>
<TABLE>
<CAPTION>

                                                                                 39 Weeks Ended
                                                                                 --------------
Profit or Loss (Unaudited)                                           August 30                   August 31
--------------------------                                           ---------                   ---------
                                                                          2003                        2002
                                                                          ----                        ----
<S>                                                                  <C>                         <C>
Total operating loss for segments                                    $ (3,552)                   $  (1,038)
Total other income                                                      2,050                        4,067
                                                                     --------                    ---------
Income (loss) before taxes on income                                 $ (1,502)                   $   3,029
                                                                     ========                    =========
</TABLE>

<TABLE>
<CAPTION>

13 Weeks Ended 08/30/03
-----------------------                               Home Fashions
(Unaudited)                         Apparel           and Accessories           Other             Total
-----------                         -------           ---------------           -----             -----
<S>                                     <C>               <C>                  <C>               <C>
External sales                          $10,266           $1,087               $2,004            $13,357
Intersegment sales                          840                9                   81                930
Operating  (loss)                        (2,613)            (124)                 (18)            (2,755)


13 Weeks Ended 08/31/02
-----------------------
(Unaudited)                                             Home Fashions
-----------                           Apparel           and Accessories          Other             Total
                                      -------           ---------------          -----             -----
External sales                          $14,395           $1,394                $2,131           $17,920
Intersegment sales                        1,132                -                   148             1,280
Operating income                              5              204                   238               447
</TABLE>

                                      (16)
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>

                                                                               13 Weeks Ended
                                                                               --------------
Profit or Loss  (Unaudited)                                          August 30                   August 31
---------------------------                                          ---------                   ---------
                                                                          2003                        2002
                                                                          ----                        ----
<S>                                                                   <C>                        <C>
Total operating income (loss) for segments                            $(2,755)                   $    447

Total other income                                                      1,153                        1,133
                                                                      -------                    ---------
Income (loss) before taxes on income                                  $(1,602)                   $   1,580
                                                                      =======                    =========
</TABLE>

11. 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
wrong doing 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.

12. Commitments:

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 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. Accordingly, the company recorded a
charge of $846,000, which was included in other expense for the 13 weeks and 39
weeks ended August 30, 2003.

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 two such policies during the current quarter having an aggregate
cash surrender value at August 30, 2003 of approximately $595,000. Accordingly,
the Company recorded a charge of $595,000, which was included in other expenses
for the 13 and 39 weeks ended August 30, 2003.

13. Asset impairment:

During the current quarter, the Company reviewed assets held for sale and
determined an additional charge of $685,000 was required.


                                      (17)
<PAGE>


ITEM 2.

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

Results of Operations
THIRD QUARTER AND NINE MONTHS OF FISCAL 2003 COMPARED TO THIRD QUARTER
AND NINE MONTHS OF 2002

Net sales for the third quarter of fiscal 2003 were $13,357,000 as compared to
$17,920,000 in the 2002 period, a decrease of $4,563,000 or 25.5%. For the nine
months ended August 30, 2003, net sales were $38,590,000, a decline of
$10,942,000, or 22.1% from 2002. Such decreases were caused substantially by
lower volume as business conditions within the domestic textile industry remain
depressed. The continued influx of low-cost foreign imports has also taken a
sustained toll in the U.S. textile manufacturing sector. These factors have
negatively impacted sales and production. These conditions have to date
continued into the fourth quarter.

Gross margins as a percentage of sales for the third quarter of fiscal 2003
decreased to 8.4% from 14.2% as compared to the similar 2002 period. For the
nine months ended August 30, 2003, gross margins decreased to 9.1% compared to
12.8% in the similar 2002 period. Lower sales volume reduced operating schedules
at production facilities. In the current quarter and in the comparative 2002
period no adjustments to LIFO inventory reserves were required. For the nine
months ended August 30, 2003 and August 31, 2002, an increase in LIFO reserves
of $300,000 and $490,000 respectively, was recorded. This was due to the
liquidation of certain LIFO layers and higher average FIFO prices.

Selling, general and administrative expenses in the current quarter decreased by
$349,000, or 16.6% from that in the three months ended August 31, 2002. For the
nine months ended August 30, 2003, selling, general and administrative expenses
decreased by $1,660,000, or 25.1% from that in the nine months ended August 31,
2002. The decrease in expenses results primarily from the reduction in the
number of employees and related expenses, moving its executive offices and
showroom facilities to smaller premises in July 2002, and the continued
effectiveness of the cost containment programs.

During the current quarter, the Company reviewed assets held for sale and
determined an additional charge of $685,000 was required.

For the 13 weeks and 39 weeks ended August 30, 2003, a charge of $1,441,000 was
recorded which represents certain amendments to the agreement with the Chief
Executive Officer. See note 12 to the Condensed Consolidated Financial
Statements.

In March 2002, the Company settled a dispute without admitting liability for
$750,000. See note 11 to the Condensed Consolidated Financial Statements.

Interest and dividend income for the current quarter remained approximately the
same from that in the similar August 31, 2002 quarter. For the nine months ended
August 30, 2003, interest and dividend income decreased by $1,124,000 or 51.7%,
from that in the similar nine months ended August 31, 2002. On June 24, 2002,
the Company distributed an initial liquidating distribution of $10.00 per share,
or $52,380,000. Accordingly, the Company had a lower average invested balance
for the nine months ended August 30, 2003. On August 22, 2003, the Company
distributed a second liquidating distribution of $4.00 per share, or
$20,860,000. This had minimum effect on interest and dividend income for the 13
weeks and 39 weeks ended August 30, 2003. In the current quarter, the Company
realized gains from the sale of investment securities of $798,000 compared to
$788,000 in last years third quarter. For the nine months ended August 30, 2003,
we realized gains from the sale of investment securities of $1,001,000 compared
to $1,904,000 in last year's nine months.

                                      (18)

<PAGE>


The company had realized a tax benefit for the current quarter, which had an
effective tax rate of 21.8% compared to an effective income tax rate of 36.1% in
the comparative 2002 period.

As a result of these factors, the company had a net loss of $1,252,000 or $0.24
basic and diluted loss per share and $1,202,000 or $0.23 basic and diluted loss
per share for the 13 and 39 weeks ended August 30, 2003. For the 13 and 39 weeks
ended August 30, 2002, the Company had net income of $1,010,000 or $0.19 basic
and diluted earnings per share and $1,959,000 or $0.38 basic and diluted
earnings per share.


LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities amounted to $1,645,000 and $5,431,000
for the 39 weeks ended August 20, 2003 and August 31, 2002, respectively. Of the
decrease, major changes were as follows: $3,161,000 decrease in net income,
$2,064,000 decrease in inventories, $418,000 in compensation relating to
acceleration of stock options, $197,000 to depreciation and $251,000 accounts
payable and other current liabilities. These decreases were offset by a $807,000
increase in accounts receivable, a decrease of $903,000 in net gain on
investment securities, and a $645,000 increase in non-cash asset impairment.

Net proceeds from sales of investment securities were $17,651,000 in the nine
months ended August 30, 2003 and $41,528,000 in the comparative 2002 period. In
the nine months ended August 30, 2003, the Company used the proceeds for the
second liquidating distribution of $4.00 per share or $20,860,000. In the nine
months ended August 31, 2002, the Company used the proceeds for the initial
distribution of $10.00 per share or $52,380,000.

Stockholders' equity was $49,303,000 ($9.45 book value per share) at August 30,
2003, as compared to 64,571,000 ($12.33 book value per share) at the previous
fiscal year end November 30, 2002, and $71,704,000 ($13.69 book value per share)
at the end of the comparative 2002 third quarter. The reduction in stockholders'
equity was primarily due to the second liquidating dividend of $4.00 per share
declared on August 1, 2003 by the Company's Board of Directors, which was paid
on August 22, 2003. This was partially offset by a re-classification of
redeemable common stock to non-redeemable common stock in the current quarter.

In June 2003, the Company repurchased 22,984 shares of its common stock at $9.48
per share from employees and directors with outstanding loans from the Company
and offset the related payment against the loans due from such employee and
directors, which were due as of May 31, 2003 with a one month grace period. The
Company purchased the number of shares necessary for the employees and directors
to pay off all outstanding loans, including interest.

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


                                      (19)


<PAGE>

COMMITMENTS

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 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. Accordingly, the Company recorded a
charge of $846,000, which was included in other expense for the 13 weeks and 39
weeks ended August 30, 2003.

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 two such policies having an aggregate cash surrender value at August
30, 2003 of approximately $595,000. Accordingly, the Company recorded a charge
of $595,000, which was included in other expenses for the 13 and 39 weeks ended
August 30, 2003.





                                      (20)


<PAGE>


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 reporting 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 30, 2002.

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

See "Derivative Instruments and Hedging Activities" in Note 1 and Note 3 of the
Notes to the Condensed Consolidated Financial Statements. See also "Derivative
Financial Instruments Held or Issued" in Note 9 of the Notes to the Condensed
Consolidated Financial Statements.




                                      (21)


<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

         a)       EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES: Our Chief
                  Executive Officer and Chief Financial Officer have 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 that 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)       CHANGE IN INTERNAL CONTROLS: There were no significant changes
                  in the Company's internal controls or in the other factors
                  that could significantly affect the Company's internal
                  controls and procedures subsequent to the evaluation, nor any
                  significant deficiencies or material weaknesses in such
                  internal controls and procedures requiring corrective actions.
                  As a result, no corrective action was taken.

                  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:

         10.1 Amendment, dated July 25, 2003, to Employment Agreement between
         Fab Industries, Inc. and Samson Bitensky.

         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 July 15, 2003 a report on Form 8-K announcing,
         under Item 9 of such form, its earnings for the 26 weeks and 13 weeks
         ended May 31, 2003.

         The Company filed on August 4, 2003 a report on Form 8-K announcing the
         payment of a Liquidating Distribution in connection with it's Plan of
         Liquidation.

                                      (22)

<PAGE>

                                   SIGNATURES



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


Date: October 14, 2003         FAB INDUSTRIES, INC.



                            By: /s/ Samson Bitensky
                                ------------------------
                                     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)


                                      (23)