<PAGE>
<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997

                           Commission File No. 0-14674

                               ANDOVER TOGS, INC.
             (Exact name of Registrant as specified in its charter)

          Delaware                                             13-5677957
(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                          Identification Number)

                     1333 Broadway, New York, New York 10018
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's telephone number, including area code: (212) 244-0700

        Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10
par value

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value at February 23, 1998 of shares of the Registrant's
Common Stock, $.10 par value (based upon the mean between the bid and asked
price of such stock as reflected in the over-the-counter market on such date),
held by non-affiliates of the Registrant was approximately $306,346. Solely for
the purpose of this calculation, shares held by the directors and executive
officers of the Registrant have been excluded. Such exclusion should not be
deemed an admission by the Registrant that such individuals are affiliates of
the Registrant.

Indicate by checkmark whether the Registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes X   No
          ---    ---

The number of shares outstanding of the Registrant's Common Stock, $.10 par
value, as of February 23, 1998, was 4,470,815.


<PAGE>
<PAGE>



                                     PART I

ITEM 1.  BUSINESS.

Reorganization under the Bankruptcy Code

         In the year ended November 30, 1995, the Company sustained a loss of
$4,279,000. The loss caused the Company to cease to be in compliance with many
of the financial covenants in its various credit agreements, resulting in
defaults under those agreements. Negotiations with the Company's lenders to
obtain waivers in connection with such defaults were unsuccessful. Negotiations
with such lenders and other prospective lenders to obtain more permanent
financing facilities were also unsuccessful. As a result of the ensuing severe
liquidity crisis, on March 19, 1996, the Company filed for protection under
Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code"). The
Company's shares of common stock were removed from listing on the NASDAQ
National Market and now trade in the over-the-counter market in what are
commonly referred to as the "pink sheets."

         The deterioration of the Company's business occurred over a period of
years and resulted from a number of factors, principally the following:

         -   The Company's customer base deteriorated as a result of an
             extremely weak retail environment, a consolidation among retailers
             and severe financial instability in the retail community.

         -   The Company experienced continuing erosion of margins due to
             pressure from customers and competitors. Competition from imports
             had a severe impact on the Company's commodity or base products.

         -   With excess domestic manufacturing capacity, the Company accepted
             some low margin business in order to keep its manufacturing
             facilities busy and maintain market share.

         -   In February 1995, the Company acquired certain assets of Dobie
             Industries, Inc. ("Dobie"), a manufacturer of children's and
             ladies' apparel. Substantial difficulties were encountered in
             implementing the acquisition. The Company phased out its ladies'
             apparel division and was not successful in expanding its business
             with Dobie's former customers. A loss of $3,195,000 in the fourth
             quarter of fiscal 1995 included sales allowances and markdowns
             attributable to the Dobie business and an $832,000 write-off of
             cost in excess of net assets acquired from Dobie.

         -   The filing for protection under the Bankruptcy Code itself
             exacerbated the Company's problems by reducing customer confidence.

         The Company obtained debtor-in-possession financing and conducted
operations as a debtor-in- possession from March 19, 1996 to May 12, 1997 when
it emerged from bankruptcy. During that period, the Company reorganized its
business in a number of significant respects, including the following:


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<PAGE>




         -   The Company closed several under-utilized and inefficient operating
             facilities: (i) an approximately 200,000 square foot leased
             facility in Scottsboro, Alabama, used for finishing, warehousing,
             distribution and office space, (ii) a 65,300 square foot leased
             facility in Springdale, North Carolina, used for sewing, finishing,
             warehouse and distribution, and (iii) a 15,000 square foot owned
             facility in Stevenson, Alabama. Prior to the bankruptcy
             proceedings, in early 1996, the Company had closed a sewing
             facility located in Pisgah, Alabama. Many of the operations
             previously conducted at Scottsboro, Springdale and Stevenson have
             been consolidated at the Company's remaining facilities in Pisgah,
             Alabama or New York City, and many of the operations conducted in
             those facilities and in Pisgah are or will be contracted out to
             unaffiliated manufacturers. (See "Item 2. Properties," for a fuller
             description of the Company's facilities).

         -   The Company moved its executive offices and showrooms from a 34,500
             square foot space located at One Penn Plaza, leased at an annual
             cost ranging from $766,000 to $932,200 to a 15,700 square foot
             space at 1333 Broadway, leased through 2001 at an annual cost
             ranging from $224,000 to $267,000.

         -   Historically, the Company's products were primarily manufactured in
             the Company's domestic facilities and in the Company's facilities
             in the Dominican Republic. A greater reliance is being placed on
             the Company's facilities in the Dominican Republic and on outside
             contractors.

         -   Prior to the bankruptcy filing, the Company had 1155 employees. The
             Company currently has approximately 455 employees.

         -   Senior management has been reorganized. William L. Cohen continues
             as Chairman and Chief Executive Officer. Steven A. Schwartz joined
             the Company as President and Chief Operating Officer on December 4,
             1997, and his duties include sales and merchandising
             administration. Alan Kanis continues as Chief Financial Officer.
             Stephen L. Fenyves continues as Senior Vice President. His duties
             include administration, manufacturing and sourcing.

         Net sales decreased from $80,552,000 in the fiscal year ended November
30, 1995, to $19,488,000 in the fiscal year ended November 30, 1997. After
losses in fiscal 1995 and fiscal 1996 of $4,279,000 and $9,812,000,
respectively, the Company's loss decreased to $1,991,000 in fiscal 1997.
Included in the loss for fiscal 1996 and fiscal 1997 were reorganization items
of approximately $6,375,000 and $1,617,000, respectively, consisting primarily
of professional fees, the write off of property and equipment relating to
facility closings, accrual of the lease rejection claim for the office space at
One Penn Plaza and severance pay, termination of employment agreements and
various other claims.

         On April 10, 1997, the U.S. Bankruptcy Court confirmed the Company's
Joint Plan of Reorganization and Disclosure Statement ("Joint Plan"). The Joint
Plan became effective on May 12, 1997, on which date the Company emerged from
bankruptcy. On that date, the Company entered into a new two year financing
agreement with CIT Group/Commercial Services, Inc. ("CIT") for a credit facility
of up to $10,500,000 of which $3,000,000 is available for letters of credit (the
"CIT Facility").
                                        2


<PAGE>
<PAGE>


Advances under the CIT Facility, as amended, are to be made at the discretion of
CIT and shall bear interest at prime plus .85%. The CIT Facility is secured by
all of the Company's assets other than its real estate. No borrowings have been
made to date on the CIT Facility.

         On May 12, 1997, allowed and disputed general unsecured claims ("Class
4 Claims") totalled approximately $5,636,000. Each holder of an Allowed Class 4
Claim has received or will receive (i) a pro-rata share of $786,000 being paid
in cash by the Company and (ii) a beneficial interest in a note ("Class 4 Note")
in principal amount equal to the amount by which the sum of all Allowed Class 4
Claims exceeds $786,000. The Class 4 Note is payable quarterly, with interest at
the rate of 6% per annum on the unpaid balance, commencing on June 30, 1997
based on a ten-year amortization schedule with the balance payable on May 12,
2002. The Class 4 Note also requires prepayments annually commencing in March
1998 in amounts aggregating 50% of the Company's excess cash flow (as defined)
for the preceding fiscal year. The Class 4 Note is secured by a second lien on
the same assets which secure the CIT Facility. The payee under the Class 4 Note
is M.J. Sherman & Associates (the "Collateral Trustee") which acts as such payee
and as trustee for the collateral securing the Class 4 Note pursuant to a Note
and Collateral Trust Agreement dated May 12, 1997 among the Company, its
subsidiaries and the Collateral Trustee. Each holder of an allowed Class 4 Claim
has received or will receive a Certificate of Beneficial Interest in Class 4
Note ("Certificate of Beneficial Interest") evidencing such holders' beneficial
interest in the Class 4 Note to the extent of such holder's ratable interest
therein.

         On May 12, 1997, the Class 4 Note was issued in the principal amount of
approximately $3,316,000, of which approximately $537,000 represented the
pro-rata portion to be paid in cash in respect of undisputed claims, and there
were approximately $1,783,000 of disputed claims. The principal amount of the
Class 4 Note will be increased as disputed claims become allowed claims. The
remaining disputed Class 4 Claim relates to a lease rejection claim (and related
pre-petition rental claim), in the aggregate amount of approximately $1,552,000,
asserted by the owner of the Company's former office space at One Penn Plaza.
This claim is currently under litigation in the U.S. Bankruptcy Court. See "Item
3. Legal Proceedings." The Company has included in long-term debt and current
portion of long-term debt approximately $1,399,000 as a reserve for all disputed
claims.

Recent Developments
-------------------

         Subsequent to the end of fiscal 1997, the Company hired Steven A.
Schwartz as its new President and Chief Operating Officer. See "Item 10.
Directors and Officers of the Registrant" regarding Mr. Schwartz's background.

General
-------

         The Company reincorporated in 1986 under the laws of the State of
Delaware. The Company was previously incorporated in New York in 1949. The
Company and its subsidiaries are referred to collectively herein as the
"Company". The Company conducts its operations directly, except that the
Company's manufacturing facility in the Dominican Republic is operated by its
subsidiary, Tortoni Manufacturing Corporation.

                                        3


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<PAGE>


Products and Product Design
---------------------------

         The Company designs, manufactures and sells popular-priced children's
active sportswear, including separate tops, dresses, slack sets, short sets,
three-piece sets, warm-up sets, pants, jeans, skirts, coordinates and related
separates. Such products are manufactured in girls' sizes infant through 14 and
boys' sizes infant through toddler. The Company also designs, manufactures and
sells girls' nightshirts and slips and markets and sells imported girls'
underwear.

         The majority of the Company's products are everyday garments required
in the wardrobe of the age group served. The garments are sold as non-branded
merchandise, under store labels.

         The Company's products are designed and marketed for two principal
selling seasons: Spring/Summer and Fall/Holiday. Retail prices for items in the
Company's 1998 Spring/Summer collection of children's sportswear generally range
from $4 to $20 and range from $6 to $25 for items in the Company's Fall/Holiday
Collection.

         The Company's product lines of sportswear for each season typically
consist of a variety of clothing items sold as separates as well as in
coordinated sets. Each seasonal offering of separates contain items designed to
enable customers to assemble coordinated outfits consisting of separate items
within a product line. The Company's products are designed by an in-house staff
which studies such indicators as prior years' product performance and current
fashions as represented in retail stores and other apparel markets. Designers
meet frequently with suppliers and customers to assess market reaction to the
Company's product lines, to accommodate individual design requirements and to
anticipate future retail demand.

Sales and Marketing
-------------------

         Sales during fiscal 1997 were made to approximately 120 customers,
although the Company's 10 largest customers accounted for approximately 95% of
the Company's sales. Wal-Mart Stores, Inc., the Company's largest customer,
accounted for approximately 68% of the Company's 1997 sales. The loss of this
customer would have an adverse effect on the Company's business. The Company
does not have long-term contracts with its customers. Wal-Mart Stores, Inc.
currently accounts for approximately 83% of the Company's booked orders.
Accordingly, the Company is dependent upon the continued support of this
customer, and it is essential that the Company expand its customer base in order
to reduce its reliance on Wal-Mart Stores, Inc. At various times during the
year, the Company has substantial credit exposure to its major customers.

         The Company currently has a direct, salaried sales force of five
persons. In addition, the Company retains two commission sales representatives.
The Company maintains a showroom at its principal office in New York City.

Production and Distribution
---------------------------

         Products accounting for approximately 73% of the Company's net sales in
fiscal 1997 were manufactured in the Company's facility located in the Dominican
Republic. The Company's domestic facility in Pisgah Alabama is now used
primarily for cutting, finishing, distribution and warehousing. The balance of
sales in fiscal 1997 was derived from imported goods and outside contractors
made to

                                        4


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<PAGE>


the company's specifications. As a result of the closing of the Company's
facilities in Scottsboro and Stevenson, Alabama, and in North Carolina, the
consolidation of operations in Pisgah and New York City and the reorganization
of the Company's manufacturing operations, there will be greater reliance placed
on the Company's facility in the Dominican Republic and on domestic and foreign
contractors.

         The Company's products are made from a variety of natural and synthetic
fabrics and blends such as cotton, poly-cottons and acrylics, in such forms as
knits, fleeces, corduroy and twills purchased from unaffiliated suppliers. As is
customary in the industry, the Company does not have any long-term, formal
arrangements with any of its suppliers of raw materials. The fabric and
accessories market in which the Company purchases its raw materials is composed
of a substantial number of suppliers with similar products and is characterized
by a high degree of competition. The Company has experienced little difficulty
in satisfying its requirements for raw materials, considers its sources of
supply to be adequate and believes that it would be able to obtain sufficient
raw materials of comparable quality should the products of any one of its
suppliers become unavailable.

         Shipments are made against customer delivery schedules, generally from
three to seven months after booking. The Company's customers have been reducing
the lead time between the time when an order is firm and its scheduled delivery
time. This has forced the Company in some instances to order piece goods based
upon less than firm orders and increased the risk and extent of markdowns.
Approximately 85% of the Company's garments are made to fill orders. Orders are
booked and processed either through an electronic data interface system or
through paper purchase orders.

Certain Cautionary Factors
--------------------------

         The following factors, in addition to those discussed elsewhere in this
Report, should be considered carefully in evaluating the Company and its
business.

         COMPETITION. The apparel industry, including children's active
sportswear, is fragmented and highly competitive. Although the Company's
products have been historically less sensitive to fashion trends than higher
fashion lines, the apparel industry is subject to rapidly changing consumer
preferences, which may have an adverse effect on the results of the Company's
operations if the Company does not accurately judge such preferences. The
Company competes with numerous domestic and foreign manufacturers on the basis
of quality, reliability and price. Many of the Company's competitors have
substantially greater financial resources than the Company. In addition, the
Company's customers have steadily increased the products they import directly.

         During the past several years, there has been a consolidation in the
retail apparel industry, resulting in a reduction in the number of retailers
available to purchase the Company's products. The remaining retailers are
relatively larger and possess strengthened negotiating positions. These
retailers have placed strong pricing pressures on the Company. It has become
increasingly important that the Company cooperate closely with its customers,
who are among the largest retailers in the United States, in the development of
products and programs and that it be able to quickly and completely ship orders.
In the period leading up to its filing under the Bankruptcy Code, the Company
experienced difficulty in filling all of its orders, caused in large part by the
inability to finance letters of credit. In addition, because of the bankruptcy
proceedings, some of the Company's customers lost confidence in the Company's
ability to deliver quality goods on time and turned to the Company's
competitors.

                                        5


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<PAGE>


         FINANCIAL CONDITION AND HISTORY OF LOSSES. The Company has suffered net
losses in each of its last three fiscal years. The Company has not yet fully
realized the benefits from its turnaround strategy, commenced during the
bankruptcy proceedings, which included closing inefficient manufacturing
facilities, reducing workforce, eliminating unprofitable product lines,
strengthening senior management and making numerous other operational and
financial improvements. See "Reorganization under the Bankruptcy Code" above.
There can be no assurance that the Company will return to profitability.

         DEPENDENCE ON MAJOR CUSTOMERS. In fiscal 1997, approximately 68% of the
Company's consolidated net sales were made to Wal-Mart Stores, Inc. as compared
to 36% for fiscal 1996. Currently, Wal-Mart accounts for approximately 83% of
the Company's orders, and the Company's ten largest customers accounted for
approximately 95% of the Company's sales in fiscal 1997. Accordingly, resumption
of stable and profitable operations will require the Company to both increase
its total sales and expand its customer base. The Company has no long-term
commitments from its customers. The loss of Wal-Mart would have a material
adverse effect on the Company.

         CONTROL BY OFFICER AND DIRECTOR. William L. Cohen, the Company's
Chairman of the Board and Chief Executive Officer and his brother Peter A.
Cohen, a director of the Company, together own approximately 60% (70% together
with their sister, Carolyn Cohen Zelikovic) of the Company's common stock, $.10
par value ("Common Stock"), although they disclaim ownership of each other's
shares. Consequently, they could, acting together, elect all of the Company's
directors and control the outcome of all other issues submitted to the Company's
stockholders. See "Item 12. Security Ownership of Certain Beneficial Owners and
Management."

         DISCLOSURE RELATING TO THINLY-TRADED AND LOW-PRICED STOCKS. During the
bankruptcy proceedings, the Common Stock was delisted from NASDAQ and now trades
only sporadically in the over-the-counter market. It is now quoted on the
National Quotations Bureau's "Pink Sheets." In addition, the Securities Exchange
Commission has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities, like the Company's Common Stock, with a price of less than $5.00 per
share (other than securities registered on certain national securities exchanges
or quoted on Nasdaq, provided that current price and volume information with
respect to transactions in that security is provided by the exchange or system).
The penny stock rules, particularly Rule 15g-9, require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document prepared by the Commission that
provides information about penny stocks and the nature and level of risks in the
penny stock market. Bid and offer quotations, and the broker dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from such rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the Company's Common Stock.

                                        6


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<PAGE>


Backlog
-------

         At February 2, 1998, the amount of the Company's booked orders believed
to be firm was approximately $4,997,000, all of which are expected to be filled
during the current fiscal year. This compares with approximately $3,835,000 of
such orders at February 3, 1997. The Company anticipates that sales volume for
fiscal 1998 will be approximately the same as in fiscal 1997.

Seasonality
-----------

         The Company's products are designed and marketed for two principal
selling seasons: Spring/Summer and Fall/Holiday. Shipments for the Spring/Summer
season are made in the first half of the fiscal year, and shipments for the
Fall/Holiday season are made in the second half of the fiscal year. The Company
generally sells most of its merchandise and receives most of its revenues in the
second half of the fiscal year, as demand is heaviest in connection with
back-to-school and holiday merchandise. Because of seasonal shipping patterns,
the Company's production and inventory levels fluctuate during the year.

Employees
---------

         In order to control costs, the Company has reduced its workforce by
approximately 65% since November 30, 1994. At November 30, 1997, the Company
employed approximately 420 persons, of whom approximately 385 persons were
engaged in manufacturing, five were engaged in sales, and the balance were
engaged in managerial and administrative functions. Reflecting its reduced sales
volume and increasing use of contract production, the Company is continuously
evaluating its staffing requirements.

         None of the Company's employees is covered by a collective bargaining
agreement. The Company believes that its relations with its employees are
satisfactory.

ITEM 2.  PROPERTIES.

         The following table sets forth in summary fashion the location of each
of the Company's principal production facilities, its principal use, approximate
floor space and the lease expiration date where leased.

<TABLE>
<CAPTION>
                                                                 Approximate Floor         Year of Lease
          Location                  Description of Use            Space (sq. ft.)          Expiration(1)
          --------                  ------------------           -----------------         -------------

<S>                            <C>                                        <C>                     <C>  
New York, New York             Executive offices and                   15,700                  2,001
                                  showrooms

Pisgah, Alabama                Cutting, finishing and                 120,000                    --
                                  distribution (2)
                               Equipment storage (2)                   80,000                    --
                               Warehouse                               10,000                    --
                               Warehouse                               15,000                    --
La Romana, Dominican           Sewing and finishing                    40,000                   1999 (3)
   Republic

</TABLE>

-----------

(1) Facility is owned if no lease expiration date is set forth.

                                        7


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<PAGE>


(2) This building is being listed for sale or lease.

(3) The lease provides for an option to construct an additional section of
    20,000 square feet of space.
  

         The 1333 Broadway space is utilized for design, costing and procurement
functions in addition to housing the Company's executive offices and showrooms.
The Company believes that the space will be suitable and adequate for these
needs for the foreseeable future.

         The Pisgah, Alabama facility consists of four separate buildings on
approximately 22 acres of property, utilized as shown in the table above. In
addition to functions already conducted at Pisgah, some of which are being moved
to New York or are being outsourced, many of the Company's operations previously
conducted by the Company in other locations have been consolidated into the
Pisgah facility. The facility is relatively old with high maintenance costs. Its
location requires additional ground transportation costs from ports of entry for
products manufactured in the Dominican Republic and import goods. Expansion of
services at the facility is limited by the availability of labor. The Company
intends in the future to analyze alternative locations to serve as
manufacturing, warehousing and distribution centers in place of Pisgah in order
to reduce transportation costs and manufacturing times.

         The Company believes that its Dominican Republic facility is suitable
and adequate for its needs at this time. Expansion of the facility may become
necessary in the future, and for that purpose, the Company has an option to
construct an additional 20,000 square feet.

ITEM 3.  LEGAL PROCEEDINGS.

         On March 19, 1996 the Company, together with its wholly owned
subsidiaries, Springdale Fashions, Inc., Tortoni Manufacturing Corp. and
Stonehenge Financial Corp., filed voluntary petitions for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York. The Company and such subsidiaries operated their
respective businesses as debtors-in-possession pursuant to the Bankruptcy Code
until May 12, 1997 when they emerged from bankruptcy pursuant to the Plan (See
"Item 1. Business -- Reorganization under the Bankruptcy Code").

         The Company is litigating in the U.S. Bankruptcy Court a lease
rejection claim (and related pre- petition rental claim) by Mid-City Associates
asserted against the Company in the bankruptcy proceedings seeking a total
amount of approximately $1,552,000 relating to the Company's former executive
offices and showroom at One Penn Plaza in New York City. The trial has
concluded, and the dispute is now before the judge for decision. Even if the
Company prevails, the decision can be appealed. The Company believes that the
amount allowed for such lease and rental claims as a result of the litigation
will be less than the $1,552,000 claimed. Any amount so allowed will be treated
as an allowed Class 4 Claim in the manner described under "Item 1. Business --
Reorganization under the Bankruptcy Code."

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

                                        8


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                                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON
         EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information
------------------

         Until May 1, 1996, the Company's Common Stock was traded in the
over-the-counter market on the NASDAQ National Market (ticker symbol: ATOG). The
following table sets forth, for the fiscal year ended November 30, 1996 through
May 1, 1996, the quarterly high and low bid prices for the Common Stock, as
reported by Nasdaq.

<TABLE>
<CAPTION>

                                                               Bid Prices
                                                              -------------
         Fiscal Year Ended November 30, 1996                  High      Low
         -----------------------------------                  ----      ----                                      ----        ---
<S>                                                          <C>      <C>   
First Quarter                                                $1.625   $1.375
Second Quarter (through May 1, 1996)                         $1.375   $0.500
</TABLE>


         On May 2, 1996, the Common Stock was delisted from the NASDAQ National
Market and began trading in the over-the-counter market in what are commonly
referred to as the "pink sheets" (symbol: ATOQ). Trading and quotations have
been sporadic. The following table sets forth the high and low bid prices for
the Common Stock as reported in the pink sheets by quarters for the period from
May 2, 1996 through the fiscal year ended November 30, 1997.


<TABLE>
<CAPTION>

                                                                Bid Prices
                                                              --------------
         Fiscal Year Ended November 30, 1996                  High       Low
         -----------------------------------                  ----       ---
<S>                                                         <C>         <C>    
Second Quarter (from May 2, 1996)                           $ 0.625     $ 0.500
Third Quarter                                                  --          --
Fourth Quarter                                              $ 0.625     $ 0.125

        Fiscal Year Ended November 30, 1997
        ------------------------------------

First Quarter                                               $ 0.625     $ 0.047
Second Quarter                                              $ 0.500     $ 0.250
Third Quarter                                               $ 0.625     $ 0.375
Fourth Quarter                                              $ 0.375     $ 0.250

</TABLE>



         All over-the-counter market quotations reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

Number of Stockholders
----------------------

         On February 3, 1998, there were approximately 127 holders of record of
the Common Stock. A substantial number of shares of the Common Stock is held of
record by brokers and depositories.

                                        9


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Accordingly, the Company believes that the actual number of holders of the
Common Stock may be substantially higher.

Dividends
---------

         The Company has not paid cash dividends on its Common Stock for more
than the past five years. The CIT Facility prohibits the declaration or payment
of dividends of any kind on the Common Stock.

                                       10


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<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA.

         The following information has been derived from the audited
Consolidated Financial Statements of the Company included elsewhere herein and
in earlier filings of the Company on Form 10-K and should be read in conjunction
with the audited Consolidated Financial Statements and the notes thereto
included herein.


<TABLE>
<CAPTION>

                                                       Fiscal Year Ended November 30,
                                                       ------------------------------
                                      1997            1996         1995            1994          1993
                                      ----            ----         ----            ----          ----
                                                    (in thousands, except per share data)
<S>                                <C>             <C>            <C>            <C>             <C>    

Income Statement Data

Net sales                          $19,488         $43,057        $80,552        $73,767         $89,289
Cost of goods sold                  16,139          37,363         70,582         60,138          72,298
Gross profit                         3,349           5,694          9,970         13,629          16,991
Selling, general and
   administrative expenses           3,661           8,129         13,619         12,481          15,106
(Loss) income before interest,
  reorganization items and
  write-off of cost in excess
  of net assets acquired              (312)         (2,435)        (3,649)         1,148           1,885
Reorganization items                 1,617(2)        6,375(2)          --             --              --
Write-off of cost in excess
   of net assets acquired               --              --            832(1)          --              --
Operating (loss) income             (1,929)         (8,810)        (4,481)         1,148           1,885
Interest expense, net                   35             992          1,435          1,006           1,455
(Loss) income before income
   tax provision (benefit)          (1,964)         (9,802)        (5,916)           142             430
Income tax provision
   (benefit)                            27              10         (1,637)            17             169
Net (loss) income                  ($1,991)        ($9,812)       ($4,279)          $125            $261

Net (loss) income
   per share                         ($.45)         ($2.19)         ($.96)          $.03            $.06

Weighted average shares              4,471           4,471          4,435          4,358           4,372

Balance Sheet Data

Working capital                   $  5,068        $  6,524      $  10,161      $  16,086       $  15,920

Total assets                         9,994          17,689         33,981         36,880          35,276
Long-term debt,
   excluding current portion         3,963           4,527          4,002          5,238           6,531

Stockholders' equity                 3,229           5,160         14,972         18,956          18,831

</TABLE>

-----------------
(1) Write-off of cost in excess of net assets acquired related to the Dobie
    acquisition.

(2) Costs relating to proceedings under Chapter 11 of the Bankruptcy Code.

                                       11



<PAGE>
<PAGE>




ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS.

Bankruptcy and Reorganization
-----------------------------

         On March 19, 1996, the Company filed for bankruptcy under Chapter 11 of
the Bankruptcy Code. During the bankruptcy, the Company continued to operate as
a debtor-in-possession. On May 12, 1997, the Company emerged from Chapter 11.
The Company has taken various steps to reduce its debts and restructure its
business. See "Item 1. Business -- Reorganization under the Bankruptcy Code."

Results of Operations
---------------------

         The following table sets forth, for the periods indicated, certain
items from the Company's Statements of Operations expressed as a percentage of
sales:

<TABLE>
<CAPTION>

                                                                Fiscal Year Ended November 30,
                                                         1997          1996            1995
                                                         ----          ----            ----
<S>                                                      <C>            <C>             <C>   
Net sales............................................    100.0%         100.0%          100.0%
Cost of goods sold...................................     82.8           86.8            87.6
                                                         -----          -----           ----- 
Gross profit.........................................     17.2           13.2            12.4
Selling, general and
   administrative expenses...........................     18.8           18.9            16.9
Loss before interest, reorganization items,
  and write-off of cost in excess
  of net assets acquired.............................     (1.6)          (5.7)           (4.5)
Reorganization items.................................      8.3           14.8              --
Write-off of cost in excess of net assets
  acquired...........................................       --             --             1.0
                                                         -----          -----           ----- 
Operating (loss) ....................................     (9.9)         (20.5)           (5.5)
Interest expense, net................................       .2            2.3             1.8
                                                         -----          -----           ----- 
(Loss) before income tax (benefit)...................     10.1          (22.8)           (7.3)
Income tax (benefit).................................       .1             --            (2.0)
                                                         -----          -----           ----- 
Net (loss) ..........................................    (10.2%)        (22.8%)         (5.3%)
                                                         =====          =====           =====

</TABLE>


1997 vs. 1996
-------------

         Sales for the 1997 fiscal year were $19,488,000 as compared to
$43,057,000 in fiscal 1996, a decrease of $23,569,000 or 54.7%. The decrease is
attributable to a number of factors. In fiscal 1996, the Company discontinued
its big boys division and a division that relied on imported merchandise as its
product source, leaving it with girls' sizes infant through 14 and boys sizes
infant through toddler. The Company discontinued the import-sourced division
because it was unable to finance letters of credit. The Company's resulting
inability to meet orders for imported merchandise affected the Company's
credibility. The Dobie division, which was phased out and discontinued in 1995,
continued to close out merchandise through fiscal 1996. The import-sourced
division's sales decreased approximately $6,015,000 in 1997 compared to 1996.
Dobie and big boys division sales

                                       12



<PAGE>
<PAGE>




decreased $1,850,000 and $4,900,000, respectively, in 1997 compared to 1996. The
remaining decrease represents the decrease in the volume of sales to many of the
Company's customers due to the bankruptcy proceedings.

         The Company's gross profit as a percentage of net sales increased to
17.2% in fiscal 1997 from 13.2% in fiscal 1996. The lower margin in fiscal 1996
was a reflection of large sales and markdown allowances to close out inventory
in the discontinued divisions and costs associated with the closing of
inefficient manufacturing facilities, as the Company attempted to combat further
margin erosion.

         Selling, general and administrative expenses decreased $4,468,000 to
$3,661,000 in fiscal 1997 from $8,129,000 in fiscal 1996. As a percentage of net
sales, the expenses decreased from 18.9% to 18.8%. The decrease in expenses was
attributable primarily to reduced salaries and fringe benefits relating to
terminated employees; professional fees; rent; and depreciation and
amortization, relating to fixed assets written off in 1996.

         The decrease in reorganization items of $4,758,000 from $6,375,000 in
fiscal 1996 to $1,617,000 in fiscal 1997 resulted from the Company's emergence
from bankruptcy on May 12, 1997. The reorganization items in fiscal 1997
included primarily professional fees related to the bankruptcy proceedings.

         Interest expense decreased $795,000 to $226,000 in 1997 from $1,021,000
in 1996. The decrease was due to the payment in fiscal 1996 of all bank debt and
the release of interest payments relating to the Industrial Revenue Bond on the
Scottsboro, Alabama facility. Interest expense in fiscal 1996 included $385,000
of facility fees relating to the various financings.

1996 vs. 1995
-------------

         Sales for the 1996 fiscal year were $43,057,000 as compared to
$80,552,000 in fiscal 1995, a decrease of $37,495,000 or 46.5%. The decrease is
attributable to a number of factors. The Company discontinued its import-sourced
and big boys divisions, leaving it with girls' sizes infant through 14 and boys
sizes infant through toddler. The Company discontinued its import-sourced
division because it was unable to finance letters of credit. The Company's
resulting inability to meet orders for imported merchandise affected the
Company's credibility, and the Company therefore lost programs for merchandise
manufactured domestically and in the Dominican Republic. The Company sustained
large sales and markdown allowances attributable to the Dobie division which was
phased out and discontinued in 1995. The import-sourced division's sales
decreased approximately $6,650,000 in 1996 compared to 1995. Dobie and big boys
division sales decreased $9,400,000 and $7,900,000, respectively, in 1996
compared to 1995. The remaining decrease represents the deterioration of the
Company's customer base as many customers lost confidence in the Company's
ability to deliver goods due to the bankruptcy proceedings.

         The Company's gross profit as a percentage of net sales increased to
13.2% from 12.4% in 1995. Margin erosion over the past two years was
attributable to sales and markdown allowances to close out inventory,
discontinued divisions and inefficient manufacturing facilities.

         Selling, general and administrative expenses decreased $5,490,000 to
$8,129,000 in 1996 from $13,619,000 in 1995. As a percentage of net sales, the
expenses increased from 16.9% to 18.9%. The

                                       13


<PAGE>
<PAGE>


Company reduced its salaries and related fringe benefits by approximately
$3,409,000. The Company reduced outside design expense by approximately
$334,000, and related selling and shipping expenses including travel and
entertainment in the amount of approximately $809,000. Rent and utilities
decreased by approximately $463,000. The provision for doubtful accounts
decreased by approximately $247,000. The increase in expenses as a percentage of
net sales is indicative of the severe reduction in sales volume.

         The write off of cost in excess of net assets acquired of $832,000 in
fiscal 1995 pertained to the Dobie acquisition. Reorganization items in 1996
related to the bankruptcy proceedings.

         Interest expense decreased $414,000 to $1,021,000 in 1996 from
$1,435,000 in 1995. The decrease was due to the payment of all bank debt in
fiscal 1996 and the release of interest payments relating to the Industrial
Revenue Bond on the Scottsboro facility. Interest expense in fiscal 1996
included $385,000 of facility fees relating to the various financings. There
were no facility fees included in fiscal 1995.

Liquidity and Capital Resources
-------------------------------

         On May 12, 1997, the Company emerged from Chapter 11 of the Bankruptcy
Code and entered into the CIT Facility. The CIT Facility, as amended, provides
for a $10,500,000 discretionary revolving credit line, of which $3,000,000 is
available for letters of credit. Advances under the revolver are to bear
interest at prime plus .85%. Advances are based on 85% of eligible accounts
receivable plus 50% of eligible inventory and are secured by all of the
Company's assets other than its real estate. Under the CIT Facility, the Company
is prohibited, among other restrictions, from pledging assets, creating
additional indebtedness or paying dividends. An amendment to the CIT Facility
eliminated the financial covenants previously contained therein. The Company has
not borrowed on the CIT Facility to date. See Note 5 of Notes to Consolidated
Financial Statements.

         At November 30, 1997, working capital was $5,068,000, compared to
$6,524,000 at November 30, 1996, due primarily to the Company's net loss for the
year. The Company believes that cash generated from operations and available
borrowings will be sufficient to meet working capital needs for the current
fiscal year. The Company's current ratio, at November 30, 1997 and 1996, was 3.0
and 1.8, respectively.

         Under the provisions of the Internal Revenue Code, the Company has
approximately $10.2 million of net operating loss carryforwards available to
offset future tax liabilities of the Company, that expire from 2010 through
2012.

New Accounting Standards
------------------------

         In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share, which
is required to be adopted on December 31, 1997. At that time, the Company is
required to change the method currently used to compute earnings (loss) per
share and to restate all prior periods. Under the new requirements for
calculating basic earnings (loss) per share, the dilutive effect of stock
options will be excluded. The Company does not expect the impact on the earnings
per share to be material.

                                       14


<PAGE>
<PAGE>


Year 2000 Computer Software Conversion
--------------------------------------

         The Company relies on numerous computer programs in its day-to-day
business. Older computer programs use only two digits to identify a year in the
date field. As a result, when the Company has to identify the year 2000, the
computer will think it means the year 1900, and the operation attempting to be
performed may fail or crash, thus resulting in the potential interference in the
operations of the Company's business. The Company has formulated plans to
safeguard against the Year 2000 conversion problem. The cost of the
implementation of the Year 2000 safeguards will not be material to the Company.

Company Outlook and Current Uncertainties
-----------------------------------------

         The Company hired Steven A. Schwartz as its new President and Chief
Operating Officer at the beginning of fiscal 1998. The Company has announced
that Mr. Schwartz, together with a new team of experienced sales, marketing and
design executives, seeks to rebuild and refresh the Company's core childrenswear
business and to offer fashion and value childrenswear products. The Company also
intends to consider opportunities for expanding its apparel lines beyond the
current childrenswear offerings. During this rebuilding process, particularly in
the first six months of 1998, the Company anticipates that it will continue to
report losses. The Company believes that this rebuilding process will result in
long term benefits for the Company by allowing it to build a stronger and
broader customer base, although there can be no assurance that the Company will
be able to do so. Currently, Wal-Mart Stores, Inc. accounts for approximately
83% of the Company's orders, and the Company's ten largest customers accounted
for approximately 95% of the Company's sales in fiscal 1997. Accordingly,
resumption of stable and profitable operations will require the Company to both
increase its total sales and expand its customer base.

Forward-Looking Statements
--------------------------

         This Annual Report on Form 10-K contains certain forward-looking
statements that involve risks and uncertainties. Discussion containing such
forward-looking statements may be found in the materials set forth under "Item
1. Business" and in this Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results to differ materially
from those anticipated in the forward-looking statements. Such factors include
those discussed under "Item 1. Business -- Certain Cautionary Factors" and
elsewhere in this Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

         Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The information required by this item is included herein immediately
following Part IV of this Report.

                                       15


<PAGE>
<PAGE>



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.

         The information required by this item was previously reported on
Registrant's Current Reports on Form 8-K, dated March 7, 1997 and August 15,
1997, and such information is hereby incorporated herein.

                                       16


<PAGE>
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Identification of Directors.

         The following table sets forth the names and ages and principal
occupations of each of the Company's directors and the year in which each was
first elected director.

<TABLE>
<CAPTION>
Director                       Principal                                             Director
Name and Age                   Occupation                                              Since
------------                   ----------                                            --------
<S>                            <C>                                                    <C> 
George S. Blumenthal (54)      Chairman of the Board and Treasurer of OCOM             1991
                               Corporation and NTL Incorporated and the
                               Chairman of the Board, CEO and Treasurer of
                               CoreComm Incorporated (1)

Peter A. Cohen (51)            Managing Member of Ramius Capital                       1981
                               Group, LLC (2)(3)(4)

William L. Cohen (56)          Chairman of the Board and Chief Executive               1979
                               Officer of the Company (3)(5)

Donald D. Shack (69)           Attorney, Shack & Siegel, P.C. (6)                      1986

Monte Wolfson (72)             President of Monte Wolfson                              1994
                               Associates, Inc. (7)
</TABLE>
-----------

(1)   Mr. Blumenthal has been Chairman of the Board and Treasurer of OCOM
      Corporat ion since 1990. He has been Chairman of the Board and Treasurer
      of NTL Incorporated since April 1993 and has been Chairman of the Board,
      CEO and Treasurer of CoreComm Incorporated since April 1989. Mr.
      Blumenthal was President of Blumenthal Securities, Inc., a New York Stock
      Exchange member firm for in excess of five years prior to November 1992.
      Mr. Blumenthal was the Chairman and Treasurer of Cellular Communications
      International, Inc. until April 1994. He was the Chairman and Treasurer of
      Cellular Communications, Inc. until August 1996, when such company merged
      into AirTouch Communications, Inc. He is a director of CoreComm
      Incorporated, OCOM Corporation and NTL Incorporated.

(2)   Mr. Cohen is the Managing Member of Ramius Capital Group LLC, a private
      investment firm, which is the successor to Ramius Capital Corporation, of
      which Mr. Cohen had been the Managing Director since August 1994. From
      August 1994 until July 1997 he was a partner in Palladin Partners, a
      private investment management firm. From December 1992 through May 1994,
      Mr. Cohen was the Chairman of Republic New York Securities Corp. and Vice
      Chairman of Republic New York Corp. Prior to January 1990, Mr. Cohen was
      employed in various senior executive capacities by Shearson Lehman Hutton
      Inc., an investment banking firm, including as its Chief Operating Officer
      from 1979 to 1984 and as its Chairman and Chief

                                       17


<PAGE>
<PAGE>


      Executive Officer from 1984 to January 1990. From May 1991 through
      December 1992 Mr. Cohen was President of Andrew Lauren & Co., Inc., an
      investment consulting firm. He is currently a director of Presidential
      Life Corporation, Trace Holdings, Inc., GRC International, Inc. and
      Olivetti SpA.

(3)   Messrs. William L. Cohen and Peter A. Cohen are siblings.

(4)   Peter A. Cohen renders financial and management consulting services to the
      Company. Until March 19, 1996, he was paid a fee at the annual rate of
      $75,000 plus certain benefits. Effective March 19, 1996 his consulting fee
      was eliminated. Mr. Cohen received $18,750 in consulting fees during
      fiscal 1996. He has continued to render services without charge.

(5)   For information regarding William L. Cohen's business history, see
      "Identification of Executive Officers" below.

(6)   Mr. Shack has served as Secretary of the Company since 1986. Mr. Shack is
      a director and shareholder of the law firm of Shack & Siegel, P.C., which
      has served as general counsel to the Company since April 1993. Prior to
      April 1993, Mr. Shack was a member of Whitman & Ransom, which served as
      general counsel to the Company from January 1990 through March 1993. Prior
      to January 1990, Mr. Shack was a member of the law firm of Golenbock and
      Barell, which served as general counsel to the Company from 1986 through
      1989. Mr. Shack is a director of Ark Restaurants Corp., International
      Citrus Corporation and Just Toys, Inc.

(7)   Mr. Wolfson has been the President of Monte Wolfson Associates, Inc., a
      retail and marketing consultant, for over five years. In addition, Mr.
      Wolfson has been a United States Government advisor on the retail textile
      industry for over 25 years. From 1975 until his retirement in 1986, Mr.
      Wolfson was employed as President of Netco, Inc., the New York subsidiary
      of Zayre Group, an apparel retailer. Prior thereto he served as Chairman
      and CEO of Diana Stores, Corp., an apparel retailer. He was also Chairman
      of the Board of Ice Nine, Inc., an apparel manufacturer, from 1992 until
      March 1995.

         Each director holds office until the next annual meeting of
stockholders and until his successor is elected and qualifies.

Identification of Executive Officers.
-------------------------------------

         The following table sets forth the names and ages of executive officers
of the Company and all offices held by each such person on the date hereof.

<TABLE>
<CAPTION>
Name                           Age               Position with the Company
----                           ---               -------------------------
<S>                            <C>               <C>
William L. Cohen               56                 Chairman of the Board and
                                                    Chief Executive Officer

Steven A. Schwartz             53                 President and Chief Operating
                                                    Officer

Stephen Fenyves                53                 Senior Vice President -
                                                    Administration and Operations

</TABLE>

                                       18


<PAGE>
<PAGE>


<TABLE>


<S>                            <C>                 <C>
Alan Kanis                     48                  Treasurer and Chief Financial
                                                    and Chief Accounting Officer

Stanley F. Schmoller           59                  Vice President - Manufacturing

Donald D. Shack                69                  Secretary

</TABLE>


         Mr. William L. Cohen has been principally employed in senior managerial
positions with the Company since 1965, as its Vice President-Administration from
1970 to 1983 and as its Chief Executive Officer since 1983. He was also
President of the Company from 1983 until December 1997. Mr. Cohen was elected to
the office of Chairman of the Board of Directors in 1987.

         Mr. Schwartz joined the Company as President and Chief Operating
Officer effective December 4, 1997. Prior to his employment by the Company, Mr.
Schwartz was President and Chief Operating Officer of the children's division of
Bascorale LLC from February 1996 until August 1997. For over five years prior to
February 1996, Mr. Schwartz was President and Chief Operating Officer of The Doe
Spun Company, Inc.

         Mr. Fenyves has been employed by the Company since 1969 in various
executive capacities, including Vice President-Administration from 1986 to 1988,
Senior Vice-President-Administration, from 1989 to 1996 and in his present
capacity since 1996.

         Mr. Kanis joined the Company as Treasurer and Chief Financial and Chief
Accounting Officer effective September 1, 1990. Prior to his employment by the
Company, Mr. Kanis had been Vice President-Finance of Shelburne Shirt Co. Inc.
for over five years.

         Mr. Schmoller has been employed by the Company in various production
capacities since 1958 and in his present capacity for in excess of 16 years.

         Mr. Shack has served as Secretary of the Company since 1986. See
"Identification of Directors" above.

         Each executive officer holds office at the pleasure of the Board of
Directors or until his successor has been duly elected and qualifies.

Section 16(a) Beneficial Ownership Reporting Compliance.
--------------------------------------------------------

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Such reporting persons are required by regulation to furnish the Company with
copies of all Section 16(a) reports that they file.

         Based solely on its review of the copies of such reports received by
it, or written representations from certain reporting persons that no Form 5 was
required for those persons, the Company believes that, during the period from
December 1, 1996 through November 30, 1997, all filing requirements applicable
to its officers, directors and greater than 10 percent beneficial owners were
complied with.

                                       19


<PAGE>
<PAGE>


ITEM 11. EXECUTIVE COMPENSATION.

         The Summary Compensation Table below sets forth, for the last three
fiscal years, all compensation paid or accrued to the chief executive officer
and each other executive officer receiving salary and bonus in excess of
$100,000 for services rendered to the Company and its subsidiaries during the
last fiscal year.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                              LONG-TERM
                                                                          ANNUAL COMPENSATION               COMPENSATION
                                                                          -------------------               ------------
                                                                                            OTHER ANNUAL       OPTIONS
                                                   YEAR            SALARY       BONUS      COMPENSATION(1)     AWARDED
                                                   ----            ------       -----      ------------
<S>                                               <C>            <C>            <C>          <C>              <C>
William L. Cohen,                                  1997           $200,000(2)    --           $21,734            --
         Chairman of the Board                     1996            433,077(2)    --             --               --
         and Chief Executive Officer(3)            1995            500,000       --             --             20,000

Stephen Fenyves,                                   1997           $140,000       --             --               --
         Senior Vice President -                   1996            175,000       --             --               --
         Administration and Operations(3)          1995            179,609     $30,000          --             10,000

Alan Kanis,                                        1997           $150,000       --             --               --
         Treasurer and Chief Financial and         1996            166,000       --             --               --
         Chief Accounting Officer(3)               1995            169,680     $35,000          --             15,000

Stanley F. Schmoller,                              1997           $109,150       --             --               ---
         Vice President --Manufacturing            1996            132,807       --             --               ---
                                                   1995            138,540     $25,000          --             10,000
</TABLE>

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

         (1) Except as shown, officers' benefits, including car allowances,
medical, disability and life insurance and other benefits are valued, in the
aggregate, below reportable thresholds.

         (2) Pursuant to the employment agreement between the Company and Mr.
Cohen, more fully described below, Mr. Cohen was entitled to be paid a base
salary of $500,000. Effective March 19, 1996, Mr. Cohen voluntarily reduced his
base salary by 20% to $400,000. Effective December 1, 1996, Mr. Cohen further
voluntarily reduced his base salary to $200,000.

         (3) See "Other Officer Compensation Arrangements," below.

         The following table details the total number and value of securities
underlying unexercised options held at the end of the fiscal year ended November
30, 1997, separately identifying the exercisable and unexercisable options of
the persons named in the summary compensation table above.

                                       20


<PAGE>
<PAGE>


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                            AND FY-END OPTION VALUES

<TABLE>
<CAPTION>

                                                                              Number of                      Value of Unexercised
                                                                         Unexercised Options                     In-the-Money
                            Shares Acquired         Value                   at FY-End (#)                   Options at FY-End (#)
         Name               on Exercise (#)      Realized ($)         Exercisable/Unexercisable           Exercisable/Unexercisable
         ----               ---------------      ------------         -------------------------           -------------------------

<S>                            <C>               <C>                    <C>          <C>                       <C>         <C>
William L. Cohen                 ----                ----                 10,000      10,000                    $0          $0

Stephen Fenyves                  ----                ----                  5,000       5,000                    $0          $0

Alan Kanis                       ----                ----                  7,500       7,500                    $0          $0 

Stanley F. Schmoller             ----                ----                  5,000       5,000                    $0          $0

</TABLE>


Stock Options
-------------

         On June 13, 1995, the Company's stockholders ratified a new 1995 Stock
Option Plan (the "1995 Plan"), which replaced the Company's prior Non-Qualified
Stock Option Plan (the "NQ Plan"). The NQ Plan was terminated, although 103,500
options granted under the NQ Plan remain outstanding, 78,250 of which are
currently exercisable. Officers, directors, employees and independent sales
representatives were eligible for option grants to purchase shares of Common
Stock under the NQ Plan. The 1995 Plan permits the grant of both non-qualified
and incentive stock options. The 1995 Plan makes available, for issuance to
directors, employees and consultants of the Company, options to purchase up to
an aggregate of 225,000 shares of Common Stock. 65,000 of such options have been
granted to date, of which 1,875 are exercisable.

         In addition, Steven A. Schwartz, the Company's new President, received
options dated January 4, 1998, outside of the plans described above to purchase
up to 300,000 shares of Common Stock at the exercise price of $.25 per share,
the market value on the date of grant, 50,000 of which are exercisable. An
additional 50,000 of such options become exercisable at the times that the
Common Stock reaches and maintains each of the following progressive trading
price thresholds: $1.50, $3.00, $4.00, $5.00 and $6.00. On January 30, 1998,
Donald D. Shack, the Company's Secretary and a director, received options
outside of the plans described above to purchase 15,000 shares of Common Stock
at the exercise price of $.25 per share, the market value on the date of grant,
exercisable immediately, in consideration of legal services rendered to the
Company.

         There were no in-the-money options at November 30, 1997.

Director Compensation
---------------------

         During each of the Company's past three fiscal years, a fee of $10,000
was paid to each of Messrs. Blumenthal and Wolfson in consideration of their
acting as directors of the Company, except that in fiscal 1996, Mr. Blumenthal
received $7,500. Due to the bankruptcy proceedings, Mr. Blumenthal's remaining
$2,500 is being paid to him over a five year period as an unsecured creditor.

         The NQ Plan provided, and the 1995 Plan provides, for the annual grant
of options to purchase 2,500 shares of Common Stock to members of the Company's
Stock Option Committee (the "Committee") and outside directors who are not
members of the Committee. During fiscal 1995, 1996

                                       21


<PAGE>
<PAGE>



and 1997, Messrs. Blumenthal, Shack and Wolfson were each granted such options.
These options are exercisable with respect to 25% of the shares covered thereby
commencing one year from the date of grant and as to an additional 25% of the
shares covered by the option upon each of the three succeeding anniversary dates
of the date of grant.

Employment Agreement
--------------------

         William L. Cohen was employed under an agreement which expired in June
1996. The agreement provided for a base salary of $500,000 per annum, or such
greater amount from time to time determined by the Board of Directors of the
Company, incentive compensation in an amount equal to 5% of the Company's pretax
income up to $3,000,000 and 6% of the Company's pretax income in excess of
$3,000,000 and certain other benefits. Effective March 19, 1996, Mr. Cohen
voluntarily reduced his base salary by 20% to $400,000, and effective December
1, 1996, Mr. Cohen further reduced his base salary to $200,000.

Other Officer Compensation Arrangements
---------------------------------------

         The Company maintains a $4,000,000 split dollar life insurance policy
on Mr. Cohen. Annual premiums for the policy are approximately $122,600. The
Company currently pays approximately $115,900 of the premiums, and the William
L. Cohen Irrevocable Life Insurance Trust (the "Trust") pays the balance. Upon
Mr. Cohen's death, the Corporation will receive an amount approximately equal to
all premium payments made by it, and the Trust will receive the balance of the
$4,000,000 death benefit. The trustees of the Trust have assigned the policy to
the Corporation to secure such payment. In addition, the Company may borrow
against the policy.

         The Company and Mr. Stephen Fenyves are parties to an agreement
pursuant to which the Company has agreed to pay Mr. Fenyves a retirement benefit
in the form of salary continuation for 15 years after his retirement in annual
amounts ranging from $27,500 to $55,000 per year depending upon the age between
55 and 65 at which Mr. Fenyves retires. In the event of his death prior to
attaining age 65, but while he is employed by the Company, the Company will pay
a death benefit of $55,000 per year until Mr. Fenyves would have attained age 65
but in any event for a minimum of 10 years. The Company currently maintains
insurance coverage to fund the death obligation.

         During the bankruptcy, the Company established an enhanced severance
program to induce officers and certain key employees to remain with the Company.
Stephen Fenyves, Alan Kanis and one other employee are currently included in
this program. The program entitles the individuals to up to six months of
additional severance if they are terminated without cause during the 18 month
period that commenced on January 16, 1997.

         Mr. Schwartz and the Company entered into an agreement whereby, if the
Company terminates Mr. Schwartz's employment without cause (as defined), Mr.
Schwartz shall receive a severance payment ranging from two months' salary to
one year's salary, depending on his length of service to the Company. In
addition, Mr. Schwartz has received certain stock options, as described above
under "Stock Options."

                                       22


<PAGE>
<PAGE>



Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

         The Company does not have a compensation committee. Compensation
decisions are made by the Board of Directors. The members of the Board include
William L. Cohen, Peter A. Cohen and Donald D. Shack. William L. Cohen is
Chairman of the Board and President of the Company. Peter A. Cohen is his
brother. Mr. Shack is Secretary of the Company and a shareholder and director of
the law firm of Shack & Siegel, P.C., the Company's general counsel.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Beneficial Owners of More than Five Percent of Common Stock.
------------------------------------------------------------

         The following table sets forth certain information at February 23, 1998
with respect to the beneficial owners of more than five percent of the Common
Stock.

<TABLE>
<CAPTION>
     Name and Address                    Amount and Nature of                  Percent
   of Beneficial Owner                   Beneficial Ownership                  of Class
   -------------------                   -------------------                   --------
<S>                                       <C>                                  <C>
William L. Cohen                            1,400,697 (1)(2)                    31.2%
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10118

Peter A. Cohen                              1,304,407 (1)                       29.2%
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10118

Carolyn Cohen Zelikovic                        436,142(3)                        9.8%
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10118

Herbert Rosenstock,                            230,787 (4)                       5.2%
  Stanley Rosenstock and
General Sportswear Co., Inc.
23 Market Street
Ellenville, New York  12428

</TABLE>
-----------------
(1)   Does not include 41,250 shares held by a charitable foundation. Messrs.
      William L. and Peter A. Cohen are two of the five directors of such
      foundation and exercise shared voting power with respect to such shares.

(2)   Includes 15,000 shares of Common Stock which Mr. Cohen has the right to
      acquire upon exercise of currently exercisable stock options.

(3)   Ms. Zelikovic is the sister of William and Peter Cohen.

(4)   Based upon information provided to the Company by Herbert Rosenstock on
      January 9, 1998.

                                       23



<PAGE>
<PAGE>


Beneficial Ownership of Common Stock by Directors and Executive Officers.
-------------------------------------------------------------------------

         The following table sets forth certain information at February 23, 1998
with respect to Common Stock beneficially owned by all directors, the executive
officers named in the Summary Compensation Table above and all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>

          Name of                           Amount and Nature of                Percent
      Beneficial Owner                      Beneficial Ownership                of Class
      ----------------                      --------------------                --------
<S>                                            <C>                               <C>

George S. Blumenthal, Director                       62,785(1)                     1.4%

Peter A. Cohen, Director                          1,304,407(2)                    29.2%

William L. Cohen, Director,                       1,400,697(2)                    31.2%
  Chairman of the Board
  and Chief Executive Officer

Steven Fenyves, Senior Vice                          13,000(3)                       *
  President - Administration
  and Operations

Alan Kanis, Treasurer and                            11,250(4)                       *
  Chief Financial and Chief
  Accounting Officer

Stanley F. Schmoller, Vice                           15,750(5)                       *
  President - Manufacturing

Donald D. Shack, Director and                        80,150(6)                     1.8%
  Secretary

Monte Wolfson, Director                               3,750(7)                       *

All directors and executive officers              2,941,789(8)                    63.9%
  as a group (9 persons)

</TABLE>

-------------
*     Less than one percent

(1)   Includes 44,110 shares beneficially owned by Mr. Blumenthal as co-trustee
      and income beneficiary under a trust created under the will of Klara
      Blumenthal. Also includes 11,250 shares of Common Stock which Mr.
      Blumenthal has the right to acquire upon the exercise of stock options
      exercisable as of April 10, 1998.

(2)   See "Beneficial Owners of More Than Five Percent of Common Stock" above
      for information in respect of shares of Common Stock beneficially owned by
      the Messrs. Cohen.

(3)   Includes 7,500 shares of Common Stock which Mr. Fenyves has the right to
      acquire upon the exercise of currently exercisable stock options.

(4)   Includes 11,250 shares of Common Stock which Mr. Kanis has the right to
      acquire upon the exercise of currently exercisable stock options.

                                       24


<PAGE>
<PAGE>



(5)   Includes 7,500 shares of Common Stock which Mr. Schmoller has the right to
      acquire upon the exercise of currently exercisable stock options.

(6)   Includes 53,900 shares owned by Skylark Partners, a partnership of which
      Mr. Shack is a member. Also includes 26,250 shares of Common Stock which
      Mr. Shack has the right to acquire upon the exercise of stock options
      exercisable as of April 10, 1998.

(7)   Includes 3,750 shares of Common Stock which Mr. Wolfson has the right to
      acquire upon the exercise of stock options exercisable as of April 10,
      1998.

(8)   Includes (i) 91,250 shares of Common Stock which certain executive
      officers have the right to acquire upon the exercise of currently
      exercisable stock options and (ii) 41,250 shares of Common Stock which
      certain directors may acquire upon the exercise of currently exercisable
      stock options.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Peter A. Cohen renders financial and management consulting services to
the Company. Until March 19, 1996, he was paid a fee at the rate of $75,000 plus
certain benefits. Effective March 19, 1996 his consulting fee was eliminated. In
fiscal 1996, Mr. Cohen received $18,750 in consulting fees. He has continued to
render services without charge. Mr. Cohen is William Cohen's brother.

         The firm of Shack & Siegel, P.C., of which Donald D. Shack is a
director and shareholder, has served as general counsel to the Company since
April 1993. Prior thereto, the firms of Whitman & Ransom and Golenbock and
Barell, in both of which Mr. Shack was a member, served as general counsel.

         William L. Cohen is indebted to the Company in the amount of $74,000 in
respect of certain expenses paid on behalf of Mr. Cohen in 1997.

                                       25


<PAGE>
<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)          Financial Statements:

              The following consolidated financial statements of Andover Togs,
              Inc. and its subsidiaries are included herein.

              Independent Auditor's Report                           F-1

              Independent Auditors' Report                           F-2

              Consolidated Balance Sheets -
                  As of November 30, 1997 and 1996                   F-3

              Consolidated Statements of Operations -
                  Years ended November 30, 1997, 1996 and 1995       F-4

              Consolidated Statements of Stockholders' Equity -
                  Years ended November 30, 1997, 1996 and 1995       F-5

              Consolidated Statements of Cash Flows -
                  Years ended November 30, 1997, 1996 and 1995       F-6

              Notes To Consolidated Financial Statements             F-8

              Financial Statement Schedule:

              Schedule II - Valuation and Qualifying Accounts        F-18

              Exhibits:

     2(a)     Debtors' Joint Plan of Reorganization under Chapter 11 of the
              Bankruptcy Code dated January 30, 1997, incorporated by reference
              to Exhibit 16 to the Company's current report on Form 8-K dated
              April 10, 1997.

     3(a)     Certificate of Incorporation of the Company, incorporated by
              reference to Exhibit 3(a) to Registration Statement on Form S-1
              (SEC File No. 33-5363) of the Company (the "Form S-1").

     3(b)     Certificate of Merger of Andover Togs, Inc., a New York
              corporation, into and with Andover Togs, Inc., a Delaware
              corporation, incorporated by reference to Exhibit 3(b) to the Form
              S-1.

                                       26


<PAGE>
<PAGE>



     3(c)     Certificate of Amendment of Certificate of Incorporation, filed
              June 1, 1987, incorporated by reference to Exhibit 3(a) to the
              Company's quarterly report on Form 10-Q dated May 31, 1994 (the
              "May 1994 10-Q").

     3(d)     Restated By-laws of the Company, as amended through December 4,
              1997.

    10(a)     English translation of Lease between Zona Franca Romana, S.A. and
              Tortoni Manufacturing Corp., dated 1987, incorporated by reference
              to Exhibit 10(h) to the May 1994 10-Q.

    10(b)     The Company's Non-Qualified Stock Option Plan, as amended May 21,
              1987 and April 9, 1992, incorporated by reference to Exhibit 4(a)
              to the Amendment to the Registration Statement on Form S-8 (SEC
              File No. 33-33963), as filed with the Securities and Exchange
              Commission on November 2, 1992.

    10(c)     Form of Indemnity Agreement between the Company and its officers
              and directors, incorporated by reference to Exhibit 10(j) to the
              May 1994 10-Q.

    10(d)     Insurance Agreement dated as of September 1, 1994 by and among the
              Company, William L. Cohen and Peter A. Cohen and Stanley I.
              Schachter, as trustees of the William L. Cohen Irrevocable Life
              Insurance Trust Agreement, dated January 31, 1984, incorporated by
              reference to Exhibit 10(a) to the Company's quarterly report on
              Form 10-Q dated February 28, 1995.

    10(e)     Post-Petition Revolving Credit and Security Agreement among
              Chemical Bank and Fleet Bank, N.A. as lenders, Fleet Bank, N.A. as
              agent and the Company dated May 28, 1996 incorporated by reference
              to Exhibit 10 to the Company's current report on Form 8-K dated
              May 28, 1996 (the "May 1996 8-K").

    10(f)     The Company's 1995 Stock Option Plan, incorporated by reference to
              Exhibit 4(f) to the Company's quarterly report on Form 10-Q dated
              May 31, 1995 (the "May 1995 10- Q").

    10(g)     Replacement DIP Financing and Security Agreement between the CIT
              Group/Commercial Services, Inc. and the Company dated as of
              September 19, 1996 incorporated by reference to Exhibit 99(a) to
              the Company's current report on Form 8-K dated September 19, 1996
              (the "September 1996 8-K").

    10(h)     Amended and Restated Financing Security Agreement dated as of May
              12, 1997 between the Registrant and CIT incorporated by reference
              to Exhibit 99(a) to the Company's current report on Form 8-K dated
              May 12, 1997 (the "May 1997 8-K").

    10(i)     Amended and Restated Subsidiary Security Agreement dated as of May
              12, 1997 made by Springdale, Tortoni and Stonehenge in favor of
              CIT incorporated by reference to Exhibit 99(b) to the May 1997
              8-K.

                                       27



<PAGE>
<PAGE>




    10(j)     Amended and Restated Guaranty dated as of May 12, 1997 by
              Springdale in favor of CIT incorporated by reference to Exhibit
              99(c) to the May 1997 8-K.

    10(k)     Amended and Restated Guaranty dated as of May 12, 1997 by Tortoni
              in favor of CIT incorporated by reference to Exhibit 99(d) to the
              May 1997 8-K.

    10(l)     Amended and Restated Guaranty dated as of May 12, 1997 by
              Stonehenge in favor of CIT incorporated by reference to Exhibit
              99(e) to the May 1997 8-K.

    10(m)     Amended and Restated Security Agreement and Mortgage for
              Trademarks and Patents dated as of May 12, 1997 between the
              Registrant and CIT incorporated by reference to Exhibit 99(f) to
              the May 1997 8-K.

    10(n)     Amended and Restated Security Agreement and Mortgage for
              Trademarks and Patents dated as of May 12, 1997 between Tortoni
              and CIT incorporated by reference to Exhibit 99(g) to the May 1997
              8-K.

    10(o)     Amended and Restated Security Agreement and Mortgage for
              Trademarks and Patents dated as of May 12, 1997 between Springdale
              and CIT incorporated by reference to Exhibit 99(h) to the May 1997
              8-K.

    10(p)     Amended and Restated Security Agreement and Mortgage for
              Trademarks and Patents dated as of May 12, 1997 between Stonehenge
              and CIT incorporated by reference to Exhibit 99(i) to the May 1997
              8-K.

    10(q)     Intercreditor Agreement dated as of May 12, 1997 between CIT and
              M.J. Sherman and Associates (the "Collateral Trustee")
              incorporated by reference to Exhibit 99(j) to the May 1997 8-K.

    10(r)     Class 4 Note dated as May 12, 1997 made by the Registrant in favor
              of the Collateral Trustee incorporated by reference to Exhibit
              99(k) to the May 1997 8-K.

    10(s)     Note and Collateral Trust Agreement dated as of May 12, 1997
              between the Registrant, Springdale, Tortoni and Stonehenge and the
              Collateral Trustee incorporated by reference to Exhibit 99(l) to
              the May 1997 8-K.

    10(t)     Class 4 Security Agreement dated as of May 12, 1997 by the
              Registrant, Springdale, Tortoni and Stonehenge in favor of the
              Collateral Trustee incorporated by reference to Exhibit 99(m) to
              the May 1997 8-K.

    10(u)     Guaranty dated as of May 12, 1997 by Springdale in favor of the
              Collateral Trustee incorporated by reference to Exhibit 99(n) to
              the May 1997 8-K.

    10(v)     Guaranty dated as of May 12, 1997 by Stonehenge in favor of the
              Collateral Trustee incorporated by reference to Exhibit 99(o) to
              the May 1997 8-K.

                                       28



<PAGE>
<PAGE>




    10(w)     Guaranty dated as of May 12, 1997 by Tortoni in favor of the
              Collateral Trustee incorporated by reference to Exhibit 99(p) to
              the May 1997 8-K.

    10(x)     Class 4 Security Agreement and Mortgage for Trademarks and Patents
              dated as of May 12, 1997 between Springdale and the Collateral
              Trustee incorporated by reference to Exhibit 99(q) to the May 1997
              8-K.

    10(y)     Class 4 Security Agreement and Mortgage for Trademarks and Patents
              dated as of May 12, 1997 between the Registrant and the Collateral
              Trustee incorporated by reference to Exhibit 99(r) to the May 1997
              8-K.

    10(z)     Class 4 Security Agreement and Mortgage for Trademarks and Patents
              dated as of May 12, 1997 between Stonehenge and the Collateral
              Trustee incorporated by reference to Exhibit 99(s) to the May 1997
              8-K.

   10(aa)     Class 4 Security Agreement and Mortgage for Trademarks and Patents
              dated as of May 12, 1997 between Tortoni and the Collateral
              Trustee incorporated by reference to Exhibit 99(t) to the May 1997
              8-K.

       16     Letter from Deloitte & Touche LLP dated August 15, 1997
              incorporated by reference to the Company's current report on Form
              8-K dated August 15, 1997.

       21     List of subsidiaries of the Company, incorporated by reference to
              Exhibit 21 to the May 1994 10-Q.

       23     Consent of Mahoney Cohen & Company, CPA, P.C.

       27     Financial Data Schedule.

(b)   Reports on Form 8-K:
      --------------------

         No reports on From 8-K were filed during the last quarter of fiscal
1997.

                                       29


<PAGE>
<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

To the Stockholders and
Board of Directors of
  Andover Togs, Inc. and Subsidiaries

         We have audited the accompanying consolidated balance sheets of Andover
Togs, Inc. and Subsidiaries as of November 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows and
the related Schedule II for the years then ended. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Andover
Togs, Inc. and Subsidiaries as of November 30, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.

                                         /s/  MAHONEY COHEN & COMPANY, CPA, P.C.

New York, New York
January 30, 1998

                                       F-1



<PAGE>
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Andover Togs, Inc.
New York, New York

We have audited the consolidated balance sheet as of November 30, 1995 (which is
not included herein) and the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Andover Togs, Inc. and subsidiaries for
the year ended November 30, 1995. Our audit also included the financial
statement schedule as of and for the year ended November 30, 1995 listed in the
index at Item 14(a). These consolidated financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Andover Togs, Inc. and subsidiaries
at November 30, 1995, and the results of their operations and their cash flows
for the year ended November 30, 1995 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic 1995 consolidated financial statements
taken as a whole, presents fairly in all material respects the 1995 information
set forth therein.

/s/  DELOITTE & TOUCHE LLP
New York, New York

February 9, 1996
(February 4, 1997 as to Note 8(b) and
May 12, 1997, as to Note 5)

                                       F-2


<PAGE>
<PAGE>


ANDOVER TOGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                  (In Thousands, Except Share Amounts)
                                                         1997              1996
                                                         ----              ----
<S>                                                      <C>              <C>
ASSETS (Note 5)

CURRENT ASSETS:

    Cash                                                $ 3,045           $ 4,865
    Accounts receivable, net of allowance
       for doubtful accounts of $250 in 1997
       and $300 in 1996                                   1,841             2,870
    Inventories (Note 3)                                  2,487             3,617
    Assets held for sale (Notes 6 and 7)                     50             2,804
    Other current assets (Notes 1 and 9)                    234               241
                                                         ------           -------
                  Total current assets                    7,657            14,397

PROPERTY, PLANT AND EQUIPMENT, NET (Notes 4 and 7)        2,237             3,158

OTHER ASSETS                                                100               134
                                                         ------           -------
TOTAL ASSETS                                            $ 9,994           $17,689
                                                        =======           =======

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

    Accounts payable                                    $   815           $   861
    Accrued expenses and other current liabilities
       (Note 8)                                             992             2,482
    Current portion of liabilities
       subject to compromise (Notes 2 and 7)                 --             4,530
    Current portion of long-term debt (Notes 2 and 7)       782                --
                                                         ------           -------

                  Total current liabilities               2,589             7,873

OTHER LIABILITIES                                           213               129

LIABILITIES SUBJECT TO COMPROMISE (Notes 2 and 7)           --              4,527

LONG-TERM DEBT (Notes 2 and 7)                            3,963                --
                                                         ------           -------
                                                          6,765            12,529
                                                         ------           -------
COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY (Note 13):
    Common stock, $.10 par value per share
       authorized 7,500,000 shares;
       issued 4,655,490 in 1997 and 1996;
       outstanding 4,470,815 in 1997 and 1996               465               465
    Additional paid-in capital                           11,154            11,154
    Unrealized gain - securities (Note 1)                    60                --
    Accumulated deficit                                  (7,810)           (5,819)
    Less treasury shares, at cost (184,675 shares
       in 1997 and 1996)                                   (640)             (640)
                                                         ------           -------
                                                          3,229             5,160
                                                         ------           -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 9,994           $17,689
                                                        =======           =======

</TABLE>

See notes to consolidated financial statements.


                                       F-3



<PAGE>
<PAGE>



ANDOVER TOGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                              (In Thousands, Except Per Share Amounts)

                                                     1997        1996        1995
                                                   --------    --------    --------
<S>                                                <C>         <C>         <C>     
NET SALES                                          $ 19,488    $ 43,057    $ 80,552

COST OF GOODS SOLD                                   16,139      37,363      70,582
                                                    -------     --------   --------
GROSS PROFIT                                          3,349       5,694       9,970

SELLING, GENERAL AND
    ADMINISTRATIVE EXPENSES                           3,661       8,129      13,619
                                                    -------     --------   --------

LOSS BEFORE INTEREST,
    REORGANIZATION ITEMS AND
    WRITE-OFF OF COST IN EXCESS
    OF NET ASSETS ACQUIRED                             (312)     (2,435)     (3,649)

REORGANIZATION ITEMS
    (Note 10)                                         1,617       6,375        --

WRITE-OFF OF COST IN EXCESS
    OF NET ASSETS ACQUIRED
    (Note 15)                                          --          --           832
                                                   --------    --------    --------

OPERATING LOSS                                       (1,929)     (8,810)     (4,481)

INTEREST EXPENSE, NET OF INTEREST
    INCOME OF $191 IN 1997,
    $29 IN 1996 AND $0 IN 1995                           35         992       1,435
                                                   --------    --------    --------

LOSS BEFORE INCOME TAX
    PROVISION (BENEFIT)                              (1,964)     (9,802)     (5,916)

INCOME TAX PROVISION
    (BENEFIT)(Note 11)                                   27          10      (1,637)
                                                   --------    --------    --------

NET LOSS                                           $ (1,991)   $ (9,812)   $ (4,279)
                                                   ========    ========    ========

NET LOSS PER SHARE                                 $  (0.45)   $  (2.19)   $  (0.96)
                                                   ========    ========    ========

WEIGHTED AVERAGE SHARES                            $  4,471    $  4,471    $  4,435
                                                   ========    ========    ========


</TABLE>

See notes to consolidated financial statements.


                                       F-4



<PAGE>
<PAGE>



ANDOVER TOGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                      (In Thousands)
                                                                                           Retained
                                                                 Additional  Unrealized    Earnings
                                              Common Stock         Paid-in     Gain-     (Accumulated    Treasury Stock
                                           Shares      Amount      Capital   Securities     Deficit)    Shares     Amount  Total
                                           ------      ------    ----------  ----------   ----------    ---------  -----   -----

<S>                                          <C>       <C>        <C>          <C>           <C>           <C>   <C>         <C>
BALANCE, DECEMBER 1, 1994                     4,543   $    454   $ 10,870   $      --       $8,272        185     $ (640)   $18,956

    Issuance of stock in                        112         11        284          --           --         --         --        295
    connection with acquisition (Note 15)

    Net loss                                     --         --         --          --       (4,279)        --         --     (4,279)
                                           --------   --------   --------   ---------     --------     ------   --------    -------

BALANCE, NOVEMBER 30, 1995                    4,655        465     11,154          --        3,993       185       (640)     14,972

    Net loss                                     --         --         --          --       (9,812)       --         --      (9,812)
                                           --------   --------   --------   ---------     --------    ------   --------    --------

BALANCE, NOVEMBER 30, 1996                    4,655        465     11,154          --       (5,819)      185       (640)      5,160

    Unrealized gain - securities                 --         --         --          60           --        --         --          60
    (Note 1)

    Net loss                                     --         --         --          --       (1,991)       --         --      (1,991)
                                           --------   --------   --------   ---------     --------    ------   --------    --------

BALANCE, NOVEMBER 30, 1997                    4,655   $    465   $ 11,154   $      60     $ (7,810)      185   $   (640)   $  3,229
                                           ========   ========   ========   =========     ========    ======   ========    ========


</TABLE>


See notes to consolidated financial statements.

                                       F-5



<PAGE>
<PAGE>




ANDOVER TOGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          (In Thousands)

                                                      1997      1996      1995
                                                      ----      ----      ----
<S>                                              <C>          <C>       <C>      

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                            $ (1,991) $ (9,812) $ (4,279)
Adjustments to reconcile net loss
  to net cash (used in)
  provided by operating activities:

   Depreciation and amortization                         514      1,195    1,319
   Write-down of net fixed assets
     to reorganization items                             280      1,542       --
   Gain on exchange of property,
     plant, equipment and
     restricted cash                                    (434)       --        --
   Gain on sale of property, plant
     and equipment                                      (148)       --        --
   Settlement of unsecured claim                         (63)       --        --
   Deferred rent                                          84        --        --
   Write-off of cost in excess of
     net assets acquired                                  --        --        832
   Deferred income taxes                                  --        --       (777)
Changes in operating assets and
  liabilities, net of acquisition:

   Accounts receivable                                 1,029      6,826    2,963
   Inventories                                         1,130      9,674    3,982
   Refundable income taxes                                --        915     (920)
   Other current assets                                   67         --       --
   Other assets                                           17        253     (119)
   Accounts payable                                      (46)    (3,751)      52
   Liabilities subject to compromise                      --      5,003      --
   Accrued expenses and other current
     liabilities                                      (1,490)       434     (260)
                                                     -------    -------  -------

   Net cash (used in)
     provided by operating activities                 (1,051)    12,279    2,793
                                                     -------    -------  -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Decrease in cash surrender value                        17         --       --
  Payment for acquisition of business                     --         --   (3,938)
  Proceeds from sale of property, plant
   and equipment                                         412         --       -- 
  Capital expenditures                                    (4)      (110)    (893)
                                                     -------    -------   ------

  Net cash provided by (used in)
   investing activities                                  425       (110)  (4,831)
                                                     -------    -------  -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  (Repayment of) proceeds from
    notes payable - bank                                  --     (6,200)   3,800
  Repayments of long-term debt                        (1,194)    (1,967)  (1,483)
                                                     -------    -------  -------

    Net cash (used in)
     provided by financing activities                $(1,194)  $ (8,167) $ 2,317
                                                     -------    -------  -------
</TABLE>
                                                                     (Continued)
See notes to consolidated financial statements

                                       F-6



<PAGE>
<PAGE>




ANDOVER TOGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                               (In Thousands)

<S>                                                   <C>          <C>       <C>
NET (DECREASE) INCREASE IN CASH                       $(1,820)     $ 4,002   $    279

CASH, BEGINNING OF YEAR                                 4,865          863        584
                                                      -------      -------   --------
CASH, END OF YEAR                                     $ 3,045      $ 4,865   $    863
                                                      =======      =======   ========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid during the year for:
    Interest                                          $   199      $ 1,055   $  1,406
                                                      =======      =======   ========

Income taxes                                          $    24      $    12   $    176
                                                      =======      =======   ========
 
The following liabilities which were outstanding
at November 30, 1995 and still outstanding on
March 19, 1996 have been reclassified to
"liabilities subject to compromise."

  Accounts payable                                    $    --      $    --   $     72
  Accrued expense and other
    current liabilities                                    --           --        674
  Long-term debt and obligations
    under capital leases                                   --           --      3,256
                                                      -------      -------   --------
                                                      $    --      $    --   $  4,002
                                                      =======      =======   ========

SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
  Exchange of property, plant and equipment:
  Release of Industrial Revenue Bond                  $ 3,055      $    --   $     --
  Property, plant and equipment and
    restricted cash                                    (2,621)          --         --
                                                      -------      -------   --------

Gain on exchange                                      $   434      $    --   $     --
                                                      =======      =======   ========

Acquisition of business:

  Fair value of assets acquired                       $    --      $    --   $  4,233
  Common stock issued                                      --           --       (295)
                                                      -------      -------   --------

            Total cash paid                           $    --      $    --   $  3,938
                                                      =======      =======   ========
CONVERSION OF LIABILITIES
  SUBJECT TO COMPROMISE:

Balance at November 30, 1996                          $ 9,057      $    --   $     --

  1997 Activity:
    Exchange of Scottsboro-IRB                         (3,055)
    Conversion to Class 4 Notes                        (3,316)          --         --
    Mid-City disputed claim                            (1,399)          --         --
    Amounts paid                                       (1,067)          --         --
    Adjustment of accrual                                (220)          --         --
                                                      -------      -------   --------
                                                       (9,057)          --         --
                                                      -------      -------   --------

Balance at November 30, 1997                          $   -0-      $    --   $     --
                                                      =======      =======   ========
</TABLE>

See notes to consolidated financial statements.

                                       F-7



<PAGE>
<PAGE>




ANDOVER TOGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------
1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      General - Andover Togs, Inc. (the "Company") is engaged in the design,
      manufacture, import and sale of active sportswear primarily for infants,
      toddlers and children, principally to national retail stores.

      The Company is headquartered in New York with manufacturing facilities
      located in Alabama and the Dominican Republic. The Company's North
      Carolina facility closed in November 1996. A significant amount of
      inventory is manufactured in the Dominican Republic.

      Basis of Presentation - The consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, Springdale
      Fashions, Inc., Tortoni Manufacturing Corporation and Stonehenge Financial
      Corporation. All material intercompany profits, transactions and balances
      have been eliminated.

      Fair Value of Financial Instruments - For financial instruments including
      cash, accounts receivable and payable and accruals, it was assumed that
      the carrying amount approximated fair value because of their short
      maturity. The carrying amount of long-term debt, which bears interest at
      floating rates, also approximates fair value. Based on the borrowing rates
      currently available to the Company, the estimated fair value of the Class
      4 Notes and disputed claim is approximately $3,800,000 as of November 30,
      1997.

      Available-For-Sale Securities - Debt and equity securities not classified
      as either held-to-maturity securities or trading securities are classified
      as available-for-sale securities and reported at fair value, with
      unrealized gains and losses excluded from earnings and reported in a
      separate component of shareholders' equity. As of November 30, 1997,
      $60,000 has been classified as unrealized gain-securities.

      Concentration of Credit Risk - Financial instruments that potentially
      subject the Company to concentration of credit risk consist primarily of
      trade receivables and cash. The Company extends credit to its customers
      based upon an evaluation of the customer's financial condition and credit
      history and generally does not require collateral. The Company has
      historically incurred minimal trade losses. At November 30, 1997 and 1996,
      approximately 78% and 80%, respectively, of the Company's net accounts
      receivable balances were due from three national retail customers. Sales
      to these three entities comprised approximately 85%, of which one customer
      represents approximately 68%, of net sales for the year ended November 30,
      1997, approximately 36%, 29% and 13%, respectively, of net sales for the
      year ended November 30, 1996 and approximately 30%, 29% and 10%,
      respectively, of net sales for the year ended November 30, 1995. The
      Company maintains cash balances at various banks earning interest.
      Accounts at banks are insured up to certain limits. The Company does not
      anticipate any losses with respect to cash.

      Use of Estimates - 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 revenue and
      expenses during the reporting period. Actual results could differ from
      those estimates.

                                       F-8



<PAGE>
<PAGE>




      Inventories - Inventories are stated at the lower of cost or market. Cost
      is determined on a first-in, first-out basis.

      Net Loss Per Share - Net loss per share is computed by dividing net loss
      by the weighted average number of shares outstanding during the period.
      For fiscal 1997, 1996 and 1995, outstanding stock options are not included
      in the calculation, as the effect would have been anti-dilutive.

      In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 128, Earnings Per Share
      ("SFAS#128"), which is required to be adopted on December 31, 1997. At
      that time, the Company will be required to change the method currently
      used to compute earnings (loss) per share and to restate all prior
      periods. Under the new requirements for calculating basic earnings (loss)
      per share, the dilutive effect of stock options will be excluded. The
      Company does not expect the impact on the earnings per share to be
      material.

      Impairment of Long-Lived Assets - In the event that facts and
      circumstances indicate that the cost of an asset may be impaired, an
      evaluation of recoverability would be performed. If an evaluation is
      required, the estimated future undiscounted cash flows associated with the
      asset would be compared to the asset's carrying amount to determine if a
      write-down to market or discounted cash flow value is required. The impact
      of this is discussed in Notes 4 and 6.

      Property, Plant and Equipment - Property, plant and equipment is stated at
      cost less accumulated depreciation and amortization. Depreciation and
      amortization are provided by the straight-line method over the following
      estimated useful lives:

                                                            Years
                                                            ------
         Buildings                                            30
         Machinery and equipment                             3 - 10
         Leasehold improvements                        Lesser of useful life
                                                          or lease term

      Upon sale or retirement of property, plant and equipment, the related cost
      and accumulated depreciation are removed from the accounts and any gain or
      loss is reflected in operations.

      Revenue Recognition - Revenue is recognized at the time the merchandise is
      shipped.

      Accounting for Stock Options - Prior to December 1, 1996, the Company
      accounted for its stock option plans in accordance with the provisions of
      Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
      Issued to Employees," and related interpretations. APB No. 25 requires
      that compensation expense be recorded on the date of grant only if the
      current market price of the underlying stock exceeded the exercise price.
      During the fiscal year ended November 30, 1997, the Company adopted
      Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
      for Stock-Based Compensation," which permits entities to recognize as
      expense over the vesting period the fair value of all stock-based awards
      on the date of grant. Alternatively, SFAS No. 123 allows entities to
      continue to apply the provisions of APB No. 25 and provide pro forma net
      income (loss) and pro forma income (loss) per share disclosures for
      employee stock option grants made from 1995 forward as if the
      fair-valued-based method defined in SFAS No. 123 had been applied. The
      Company has elected to continue to apply the provisions of APB Opinion No.
      25 and provide pro forma disclosure provisions of SFAS No. 123.

                                       F-9



<PAGE>
<PAGE>


      Reclassifications - Certain 1996 amounts have been reclassified to conform
      to the 1997 financial statement presentation.

2.    CHAPTER 11 FILING

      During the year ended November 30, 1995, the Company incurred net losses
      of $4,279,000 and was unable to comply with certain covenants of its
      existing debt agreements. Negotiations with the Company's lenders to
      obtain waivers in connection with such defaults were unsuccessful.
      Negotiations with such lenders and other prospective lenders to obtain
      more permanent financing were also unsuccessful. As a result of the
      ensuing severe liquidity crisis, on March 19, 1996, the Company filed for
      protection under Chapter 11 of the United States Bankruptcy Code.

      Subsequent to March 19, 1996, the Company obtained debtor-in- possession
      financing with its lenders to expire in December 1996. On September 19,
      1996, the Company obtained a new debtor-in-possession financing ("DIP
      Facility") which was to expire in September 1998. The DIP Facility was
      replaced by a two-year financing agreement on May 12, 1997 (see Note 5).

      The Company has taken the following actions, among others, to reorganize
      the Company's business and enable it to emerge from bankruptcy.

      An approximately 200,000 square foot leased facility in Scottsboro,
      Alabama, used for finishing, warehousing, distribution and office space
      has been closed (see Note 6). A 65,300 square foot leased facility in
      Springdale, North Carolina, used for sewing, finishing, warehouse and
      distribution was closed on December 4, 1996. A 15,000 square foot owned
      facility in Stevenson, Alabama, used for sewing has been closed and sold.
      Many of the operations previously conducted at Scottsboro, Springdale and
      Stevenson have been consolidated at the Company's remaining facilities in
      Pisgah, Alabama, or New York City, and many of the operations previously
      conducted in those facilities and in Pisgah are or will be subcontracted
      out to unaffiliated manufacturers.

      The Company moved its executive offices and showrooms from the 34,500
      square foot space located at One Penn Plaza, New York, New York, leased at
      an annual cost ranging from $766,000 to $932,000 to a 15,700 square foot
      space at 1333 Broadway, New York, New York, leased at an annual cost
      ranging from $224,000 to $267,000 (see Note 11). As a result of this move,
      the Company wrote off approximately $615,000 of leasehold improvements
      during the year ended November 30, 1996. The new lease expires in 2001.

      On February 28, 1997, the Company filed its Plan of Reorganization under
      Chapter 11 of the Bankruptcy Code. The Plan, among other things,
      classifies the claims in categories for payment. The priority and
      convenience class claims (under $2,000) were to be paid immediately. The
      general unsecured claims are to be paid 100% of their claim with interest
      at 6% per annum, payable in quarterly installments of principal and
      interest that commenced on June 30, 1997 based on a ten-year amortization
      schedule with the balance payable on the fifth anniversary (see Note
      7(a)).

      On May 12, 1997, the Company emerged from Chapter 11 of the Bankruptcy
      Code and entered into a new financing agreement (see Note 5).

                                      F-10



<PAGE>
<PAGE>




3.    INVENTORIES

<TABLE>
<CAPTION>
                                                  (In Thousands)
                                                    November 30,
                                              -----------------------
                                              1997               1996
                                              ----               ----
<S>                                        <C>                <C>      
         Raw materials                     $     497          $     765
         Work-in-process                         992                911
         Finished goods                          998              1,941
                                           ---------          ---------
                                           $   2,487          $   3,617
                                           =========          =========
</TABLE>


4.       PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>


                                                    (In Thousands)
                                                     November 30,
                                               -----------------------
                                               1997               1996
                                               ----               ----

<S>                                          <C>                <C>       
         Land                                $       14         $       14
         Buildings                                3,110              3,348
         Leasehold improvements                     276                350
         Machinery and equipment                  4,790              5,321
                                             ----------         ----------
                                                  8,190              9,033

         Less accumulated depreciation

         and amortization                         5,953              5,875
                                             ----------         ----------
                                             $    2,237         $    3,158
                                             ==========         ==========
</TABLE>


         Property, plant and equipment has been adjusted by approximately
         $314,000 and $36,000 at November 30, 1997 and 1996, respectively,
         representing an impairment as determined by Management.

5.       REVOLVING CREDIT FACILITY

         On May 12, 1997, the Company emerged from Chapter 11 of the Bankruptcy
         Code and entered into a two year financing agreement with CIT/Group
         Commercial Services, Inc. (the "CIT Facility"). The CIT Facility, as
         amended, provides for a discretionary $10,500,000 revolving credit
         line, of which $3,000,000 is available for letters of credit. Advances
         under the revolver are to bear interest at prime plus .85%, which, at
         November 30, 1997, was 9.35%. Advances are based on 85% of eligible
         accounts receivable plus 50% of eligible inventory and are
         collateralized by all of the Company's assets other than its real
         estate. Under the CIT Facility, the Company is prohibited, among other
         restrictions, from pledging assets, creating additional indebtedness or
         paying dividends. An amendment to the CIT Facility eliminated the
         financial covenants previously contained therein. The Company has not
         borrowed on the CIT Facility.

6.       ASSETS HELD FOR SALE

         Assets held for sale represents property, plant and equipment
         segregated and held for sale. Asset held for sale is summarized as
         follows:

<TABLE>
<CAPTION>
                                                         (In Thousands)
                                                         November 30,
                                                     ----------------------
                                                     1997             1996
                                                     ----             ----
         <S>                                          <C>             <C> 
          Machinery and equipment                     $ 90            $ 237
          Property, plant and
            equipment and restricted
            cash-Scottsboro facility
            (Note 7(b))                                 --            2,621
 
         Impairment                                   $(40)             (54)
                                                      ----            -----
                                                      $ 50           $2,804
                                                      ====           ======
</TABLE>


                                      F-11


<PAGE>
<PAGE>



7.       LONG-TERM DEBT AND LIABILITIES SUBJECT TO COMPROMISE

<TABLE>
<CAPTION>

                                                          (In Thousands)
                                                           November 30,
                                                       ---------------------
                                                       1997             1996
                                                       ----             ----
<S>                                                  <C>              <C>    
         Long-term debt (a)                          $ 4,563          $    --
         Liabilities subject to compromise (a)            --            6,002
         Obligation under capital lease (b)               --            3,055
         Other                                           182               --
                                                     -------          -------
                                                       4,745            9,057

         Less current portion                            782            4,530
                                                     -------          -------
                                                     $ 3,963          $ 4,527
                                                     =======          =======
</TABLE>


(a)      On May 12, 1997 (the effective date the Company emerged from
         bankruptcy), a note was established for allowed and disputed general
         unsecured claims. Each holder of an allowed claim has received or will
         receive (i) a pro- rata share of $786,000 being paid in cash by the
         Company and (ii) a beneficial interest in a note in principal amounts
         equal to the amount by which the sum of all such claims exceeds
         $786,000 (the "Note"). The Note is payable quarterly, with interest at
         the rate of 6% per annum on the unpaid balance, commencing June 30,
         1997 based on a ten year amortization schedule with the balance payable
         on May 12, 2002. The Note also requires prepayments annually commencing
         in March 1998 in amounts aggregating 50% of the Company's excess cash
         flow (as defined) for the preceding fiscal year. There is no excess
         cash flow (as defined) for fiscal 1997. The Note is secured by a second
         lien on the same assets which secure the CIT Facility.

         At November 30, 1997, there was one remaining disputed claim, which
         relates to a lease rejection claim (and related pre-petition rental
         claim) in the aggregate amount of approximately $1,552,000, asserted by
         the owner of the Company's former office space at One Penn Plaza, New
         York City. This claim is currently under litigation in the U.S.
         Bankruptcy Court. The trial has concluded, and the dispute is now
         before the judge for decision. Even if the Company prevails, the
         decision can be appealed. The Company has included in Long-Term Debt
         and Current Portion of Long- Term Debt, approximately $1,399,000 as a
         reserve for this claim at November 30, 1997.

(b)      During 1989, a municipality issued an Industrial Revenue Bond in the
         principal amount of $3,600,000, the proceeds of which were used to
         finance the construction of a 200,000 square foot manufacturing and
         distribution facility. This transaction was accounted for as a capital
         lease. The bond was payable in annual installments of varying amounts
         with interest payable semi-annually at 9-7/8% per annum. As of February
         4, 1997, this obligation was deemed satisfied, and the Company was
         released from any claim with respect to the Scottsboro facility (see
         Note 6).

         At November 30, 1997, original repayment terms for the principal
         portion of long-term debt and liabilities subject to compromise were as
         follows:

                                                (In Thousands)
                               Year                 Amount
                               ----                -------
                               1998                 $  782
                               1999                    510
                               2000                    514
                               2001                    489
                               2002                  2,450
                                                    ------
                                                    $4,745
                                                    ======

                                      F-12



<PAGE>
<PAGE>




8.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
                                                            (In Thousands)
                                                             November 30,
                                                        ------------------------
                                                        1997               1996
                                                        ----               ----

<S>                                                     <C>              <C>      
         Accrued payroll                                $  212           $     320
         Accrued professional fees                         160                  --
         Accrued reorganization items                      231               1,384
         Other                                             389                 778
                                                        ------           ---------
                                                        $  992           $   2,482
                                                        ======           =========
</TABLE>


9.    OTHER CURRENT ASSETS

      Other current assets consists of the following:

<TABLE>
<CAPTION>

                                                               (In Thousands)
                                                                November 30,
                                                            ---------------------
                                                            1997             1996
                                                            ----             ----
<S>                                                      <C>              <C>      
         Available-for-sale securities                      $ 113             $  69
         Due from officer                                      74                37
         Advances to suppliers                                 --                44
         Other                                                 47                91
                                                            -----             -----
                                                            $ 234             $ 241
                                                            =====             =====
</TABLE>


10.   REORGANIZATION ITEMS

      Due to the filing for protection under Chapter 11 of the Bankruptcy Code,
      the Company incurred expenses relating to the hiring of professionals and
      facility closing costs for the year ended November 30, 1997 and 1996 as
      follows:

<TABLE>
<CAPTION>
                                                                  (In Thousands)
                                                                   November 30,
                                                      ---------------------------------
                                                        1997                       1996
                                                        ----                       ----
<S>                                                     <C>                  <C>       
         Professional fees                              $    1,758           $    2,448
         Write off of property and
                other costs relating to
                plant closings                                 280                1,542
         Gain on exchange of property
                plant and equipment                           (434)                  --
         Gain on sale of property and
                equipment                                      (95)                  --
         Moving expenses                                        --                  366
         Lease rejection claim                                  --                1,000
         Employment agreement claims                            --                  458
         Interest on convenience and
                priority claims                                 38                   --
         Payroll taxes on priority and
                unsecured claims                                93                   --
         Severance pay                                          37                  275
         Settlement of claims                                  (63)                  --
         Other                                                   3                  286
                                                        ----------           ----------
                                                        $    1,617           $    6,375
                                                        ==========           ==========

</TABLE>


      At November 30, 1997, approximately $231,000 of reorganization items
      remained in accrued liabilities. This amount represents estimated future
      cash outflows for professional fees. A summary of the reorganization
      activity is presented below:


                                      F-13



<PAGE>
<PAGE>



<TABLE>
<CAPTION>

                                                                         (In Thousands)

<S>                                                                         <C>    
         Balance at December 1, 1995                                        $     0

         1996 provision                                                       6,375
         1996 activity:
         Cash outflow for professional fees                                  (1,204)
         Non-cash write off of property and other
                costs relating to plant closings                             (1,542)
         Non-cash rejection of lease claim                                   (1,000)
         Non-cash employment agreement claims                                  (458)
         Moving expenses                                                       (366)
         Reduction in workforce-severance pay                                  (135)
         Other                                                                 (286)
                                                                            --------
         Balance at November 30, 1996                                         1,384

         1997 provision                                                       1,617
         1997 activity:
         Cash outflow for professional fees                                  (2,179)
         Non-cash write-off of property and other
                costs relating to plant closings                               (280)
         Interest and payroll taxes on claims                                  (131)
         Reduction in workforce-severance pay                                  (177)
         Other                                                                   (3)
                                                                            --------
         Balance at November 30, 1997                                       $   231
                                                                            ========
</TABLE>

11.   INCOME TAXES

      The income tax provision (benefit) consists of the following:

<TABLE>
<CAPTION>
                                                      (In Thousands)
                                                  Year Ended November 30,
                                           -------------------------------------
                                           1997           1996              1995
                                           ----           ----              ----
<S>                                       <C>             <C>            <C>     
       Current:
           Federal                        $   --          $   --         $  (868)
           State and local                    27              10               8
                                          ------          ------          -------
              Total current                   27              10            (860)
       Deferred                               --              --            (777)
                                          ------          ------         --------
                                          $   27          $   10         $(1,637)
                                          ======          ======        ========
</TABLE>


       The (benefit) provision for income taxes differs from amounts computed at
       statutory rates as follows:

<TABLE>
<CAPTION>
                                                      (In Thousands)
                                                  Year Ended November 30,
                                              ---------------------------------
                                              1997         1996            1995
                                              ----         ----            ----
<S>                                       <C>           <C>           <C>         
       Federal income taxes at
           statutory rates                   $(648)       $(3,333)        $(2,011)
       Increase (decrease)
           resulting from:
       Valuation allowance                     648          3,333             352
       State and local taxes,
           net of Federal income
           tax benefit                          27             10              30
       Reversal of prior years'
           under provision                      --             --               8
       Other                                    --             --             (16)
                                             -----        -------         ------- 
                                             $  27        $    10         $(1,637)
                                             =====        =======         ======= 
</TABLE>



                                      F-14



<PAGE>
<PAGE>




       Deferred income taxes reflect the net tax effects of temporary
       differences between the carrying amounts of assets and liabilities for
       financial reporting purposes and the amounts used for income tax
       purposes. Significant components of the Company's deferred tax assets and
       liabilities as of November 30, 1997 and November 30, 1996 are presented
       below:

<TABLE>
<CAPTION>
                                                                (In Thousands)
                                                          November 30,    November 30,
                                                              1997           1996
                                                            --------       --------
<S>                                                          <C>            <C>   
         Deferred tax liabilities:
         Difference between book and tax
           basis of property                                 $    --        $  589
                                                             -------       -------
         Deferred tax assets:
         Difference between book and tax
           basis of property                                 $    88            --
         Expenses capitalized into inventory                      52            43
         Expenses not currently deductible                       596           612
         Reserves not currently deductible                        96           166
         Net operating loss                                    4,066         3,823
         Other                                                    --            19
                                                             -------       -------
                                                               4,898         4,663
                                                             -------       -------
         Net deferred tax asset                                4,898         4,074
         Less valuation allowance                             (4,898)       (4,074)
                                                             -------       -------
         Net deferred tax                                    $    --       $    --
                                                             =======       =======
</TABLE>


         At November 30, 1997, the Company has a federal net operating loss
         carryforward for income tax purposes of approximately $ 10,200,000
         which will expire as follows:

                                           (In Thousands)
                     Year                       Amount
                     ----                       ------
                     2010                      $ 2,200
                     2011                        7,500
                     2012                          500
                                               -------
                                               $10,200
                                               =======
12.      COMMITMENTS AND CONTINGENCIES

         a. Effective September 15, 1996, the Company negotiated a lease for its
            executive office and showroom located in New York.  The new lease
            expires on December 31, 2001 and provides for  minimum annual rental
            payments ranging from approximately $224,000 to $267,000.  The
            Company also leases various warehousing, manufacturing and office
            facilities and equipment under operating leases.  Future minimum
            rental payments under these leases as of November 30, 1997 are as
            follows:

                                           (In Thousands)
                      Year                     Amount
                      ----                     ------
                      1998                     $  398
                      1999                        379
                      2000                        266
                      2001                        267
                      2002                         22
                                               ------
                                               $1,332
                                               ======

                                      F-15



<PAGE>
<PAGE>





            Rental expense was $418,000, $839,000 and $1,350,000 for the
            years ended November 30, 1997, 1996, and 1995, respectively.

         b. At November 30, 1997, the Company was contingently liable for open
            letters of credit of approximately $177,000.

13.      STOCK OPTION PLAN

         The Company adopted a new non-qualified and incentive stock option plan
         in May 1995 to replace its old non-qualified and incentive stock option
         plans (the "1995 Plan"). The 1995 Plan provides for options to be
         granted for the purchase of up to 225,000 shares of common stock at
         prices not less than 80% for the non-qualified options and 100% for the
         incentive options of the fair market value of the common stock at the
         date of the grant. Options granted as incentive stock options are
         intended to qualify under Section 422 of the Internal Revenue Code. No
         new options can be granted under the old plans, although 103,500
         options remained outstanding under the Company's old non-qualified
         plan, and 15,000 options were outstanding under the 1995 Plan, at
         November 30, 1997. As of November 30, 1997, no incentive stock options
         had been granted.

         A summary of activities for the non-qualified stock options is as
follows:

<TABLE>
<CAPTION>
                                                    Number      Weighted Average
                                                  of Shares      Price per Share
                                                  ---------      ---------------
<S>                                                <C>              <C>   
         Options outstanding,
          December 1, 1994                         245,000          $3.179
              Granted                              146,500           1.943
              Cancelled                            (28,600)          2.575
                                                   -------
         Options outstanding,
          November 30, 1995                        362,900           2.727
              Granted                                7,500            .875
              Cancelled                           (249,200)          2.975
                                                  --------
         Options outstanding,
          November 30, 1996                        121,200           2.104
              Granted                                7,500            .375
              Cancelled                            (10,200)          2.927
                                                  --------
         Options outstanding,
          November 30, 1997                        118,500          $1.924
                                                  ========          ======
         Exercisable at November 30, 1997           59,875          $2.216
                                                  ========          ======
</TABLE>

         There were 210,000 shares reserved for future grant at November 30,
         1997. The options expire beginning April 1999 through April 2004.

14.      DEFINED CONTRIBUTION PLAN

         The Company maintains a defined contribution plan subject to Section
         401(k) of the Internal Revenue Code. All full-time employees who
         complete at least one year of service and have attained the age of
         20-1/2 are eligible to participate. The Company may, at its sole
         discretion, make certain matching contributions to this plan. The
         Company made no contributions in 1997, 1996 and 1995.

15.      ACQUISITION

         On February 27, 1995, the Company acquired the inventory, tradenames
         and customer orders of Dobie Industries, Inc., a manufacturer of
         children's and women's apparel ("Dobie"). The purchase price was
         approximately $3,900,000 in cash, including acquisition fees, 112,500
         shares of the


                                      F-16



<PAGE>
<PAGE>




         Company's common stock and a warrant to purchase 50,000 additional
         shares of stock at $2.50 per share. The acquisition was accounted for
         as a purchase and gave rise to $832,000 of cost in excess of net assets
         acquired. In November 1995, based on an evaluation of Dobie's projected
         future operations, management wrote off the cost in excess of net
         assets acquired.

16.      QUARTERLY DATA (UNAUDITED)

         Selected quarterly operating data is as follows (in thousands of
         dollars, except per share amounts):

<TABLE>
<CAPTION>
                              Net           Gross       Net Income     Per Share
         Quarter Ended       Sales          Profit        (Loss)     Income (Loss)
         -------------       -----          ------      ----------    ------------
<S>                          <C>            <C>           <C>            <C>    
         1997
         ----
         February            $ 4,006        $  710        $  (409)       $ (.09)
         May                   4,290           771           (905)         (.20)
         August                3,821           627           (694)         (.16)
         November              7,371         1,241             17
                             -------        ------        --------       -------
                             $19,488        $3,349        $(1,991)       $ (.45)
                             =======        ======        ========       =======
         1996
         ----
         February            $12,810        $1,386        $(2,033)       $ (.45)
         May                  13,618         1,191         (2,291)         (.51)
         August                9,506         1,742         (1,971)         (.44)
         November              7,123         1,375         (3,517)         (.79)
                             -------        ------        --------       -------
                             $43,057        $5,694        $(9,812)       $(2.19)
                             =======        ======        ========       =======
</TABLE>




                                      F-17



<PAGE>
<PAGE>




                                   SCHEDULE II

ANDOVER TOGS, INC. AND SUBSIDIARIES
-----------------------------------
VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                           (In Thousands)
Column A                  Column B               Column C          Column D       Column E
--------                  --------              ---------          --------       --------
                                                Additions
                                        -------------------------
                                           (1)           (2)

                          Balance at    Charged to     Charged to                 Balance at
                          Beginning     Costs and      Other                      End of
                          of Period     Expenses       Accounts    Deductions     Period
                          ----------    ----------     ----------  ----------     ----------
<S>                       <C>           <C>                                         <C>  
ALLOWANCE FOR
 DOUBTFUL  ACCOUNTS:
Year Ended
November 30, 1997         $ 300         $              $             $ 50(A)        $ 250
                          =====         ======         ======        ====           =====
Year ended
November 30, 1996         $ 310         $              $             $ 10(A)        $ 300
                          =====         ======         ======        ====           =====
Year ended
November 30, 1995         $  43         $ 267          $             $              $ 310
                          =====         =====          ======        =====          =====
</TABLE>



(A) Write-off of uncollectible accounts.


                                      F-18



<PAGE>
<PAGE>




                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  February 27, 1998               ANDOVER TOGS, INC.


                                   By: /s/ William L. Cohen
                                       --------------------------------------
                                       William L. Cohen, Chairman
                                       of the Board and Chief
                                       Executive Officer

                                   By: /s/ Alan Kanis
                                       --------------------------------------
                                       Alan Kanis, Treasurer, Chief Financial
                                       and Chief Accounting Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
     Signature                                  Title                           Date
     ---------                                  -----                           ----
<S>                                      <C>                             <C> 
/s/   George S. Blumenthal               Director                        February 27, 1998
----------------------------------
      George S. Blumenthal

/s/   Peter A. Cohen                     Director                         February 27, 1998
----------------------------------
      Peter A. Cohen

/s/   William L. Cohen                   Director, Chairman of the        February 27, 1998
----------------------------------       Board and Chief
      William L. Cohen                   Executive Officer

/s/   Donald D. Shack                    Director and Secretary           February 27, 1998
----------------------------------
      Donald D. Shack

/s/   Monte Wolfson                      Director                         February 19, 1998
----------------------------------
      Monte Wolfson
</TABLE>




<PAGE>
<PAGE>



                                  EXHIBIT INDEX

Exhibit No.                Description
-----------                -----------
3(d)              Restated By-laws of the Company

23                Consent of Mahoney Cohen & Company, CPA, P.C.

27                Financial Data Schedule



<PAGE>