**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**______________**





**FORM
      10-Q**


**______________**





**x QUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**





**For
      the quarterly period ended July 2, 2005**





OR





**o TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**


For
      the
      transition period from to





Commission
      File Number: 001-32568


__________________





**MAIDENFORM
      BRANDS, INC.**


(Exact
      name of registrant as specified in its charter)




**Delaware**
              **06-1724014**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**154
                  Avenue E, Bayonne, NJ**
              **07002**(Address
                  of principal executive offices)
              (Zip
                  Code)




**(201)
      436-9200**


(Registrant’s
      telephone number, including area code)


__________________








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. o Yes x No





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). o Yes x No





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes x No





As
      of
      August 26, 2005, there were 23,488,357 shares of the registrant’s common stock,
      par value $0.01 per share, outstanding.










**INDEX**








**PART
                I - FINANCIAL INFORMATION**
            **PAGE**Item
                1. Financial StatementsUnaudited
                Condensed Consolidated Balance Sheets at July 2, 2005 (Successor)
                and
                January 1, 2005 (Successor)
            2Unaudited
                Condensed Consolidated Statements of Operations for the three and
                six
                months ended July 2, 2005, and for the periods from May 11, 2004
                through
                June 26, 2004 (Successor) and from March 28, 2004 through May 10,
                2004
                (Predecessor), and for the periods from May 11, 2004 through June
                26, 2004
                (Successor) and from December 28, 2003 through May 10, 2004
                (Predecessor)
            3Unaudited
                Condensed Consolidated Statements of Cash Flows for the six month
                period
                ended July 2, 2005 (Successor) and for the periods from May 11, 2004
                through June 26, 2004 (Successor) and from December 28, 2003 through
                May
                10, 2004 (Predecessor)
            4Notes
                to the Unaudited Condensed Consolidated Financial Statements
            5Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            15Item
                3. Quantitative and Qualitative Disclosure About Market Risk
            39Item
                4. Controls and Procedures
            39**PART
                II - OTHER INFORMATION**Item1.
                Legal Proceedings
            40Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            40Item
                3. Defaults Upon Senior Securities
            40Item
                4. Submission of Matters to a Vote of Security Holders
            40Item
                5. Other Information
            40Item
                6. Exhibits
            40**SIGNATURES**
            42














**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




**MAIDENFORM
                    BRANDS, INC. AND SUBSIDIARIES****CONDENSED
                    CONSOLIDATED BALANCE SHEETS****(in
                    thousands, except share and per share amounts)****(unaudited)****Successor
                    at**
                
                **Successor
                    at****July
                    2, 2005**
                
                **January
                    1, 2005****Assets**Current
                    assetsCash
                    and cash equivalents
                
                $
                7,184
                
                $
                23,212Accounts
                    receivable, net
                
                
                51,886
                
                
                24,004Inventories,
                    net
                
                
                49,910
                
                
                37,067Deferred
                    income taxes
                
                
                9,103
                
                
                9,103Prepaid
                    expenses and other current assets
                
                
                11,678
                
                
                7,562Total
                    current assets
                
                
                129,761
                
                
                100,948Property,
                    plant and equipment, net
                
                
                19,323
                
                
                27,944Goodwill
                
                
                7,884
                
                
                7,884Intangible
                    assets, net
                
                
                101,418
                
                
                101,998Other
                    non-current assets
                
                
                3,633
                
                
                5,357Total
                    assets
                
                $
                262,019
                
                $
                244,131**Liabilities
                    and Stockholders’ Deficit**Current
                    liabilitiesShort-term
                    debt
                
                $
                10,445
                
                $
                -Current
                    portion of long-term debt
                
                
                1,500
                
                
                12,162Accounts
                    payable
                
                
                20,400
                
                
                11,724Accrued
                    expenses and other current liabilities
                
                
                20,559
                
                
                22,334Total
                    current liabilities
                
                
                52,904
                
                
                46,220Long-term
                    debt
                
                
                148,500
                
                
                135,588Deferred
                    income taxes
                
                
                10,714
                
                
                7,002Other
                    non-current liabilities
                
                
                8,678
                
                
                8,596Total
                    liabilities
                
                
                220,796
                
                
                197,406Commitments
                    and contingencies (Notes 12 and 14)Preferred
                    stock - Successor, subject to redemption, $0.01 par value;
                    liquidation
                      value $100; 50,000,000 shares authorized;
                      360,000
                        shares issued and outstanding
                
                
                43,721
                
                
                41,491Common
                    stock - Successor, subject to put option, $0.01 par value;
                    4,125,000
                      issued and outstanding (out of a total
                      100,000,000
                        shares authorized)
                
                
                5,891
                
                
                6,356Stockholders’
                    equity (deficit)Common
                    stock - Successor, $0.01 par value; 100,000,000shares
                    authorized; 15,675,000 shares issued and outstanding
                
                
                157
                
                
                157Additional
                    paid-in capital
                
                
                -
                
                
                2,098Accumulated
                    deficit
                
                
                (8,715
                )
                
                (3,368
                )Accumulated
                    other comprehensive income (loss)
                
                
                169
                
                
                (9
                )Total
                    stockholders’ deficit
                
                
                (8,389
                )
                
                (1,122
                )Total
                    liabilities and stockholders’ deficit
                
                $
                262,019
                
                $
                244,131
  The
                    accompanying notes are an integral part of these condensed consolidated
                    financial statements.




2


**MAIDENFORM
                    BRANDS, INC. AND SUBSIDIARIES****CONDENSED
                    CONSOLIDATED STATEMENTS OF OPERATIONS****(in
                    thousands, except share and per share amounts)****(unaudited)**Three
                    Months Ended
                
                Six
                    Months EndedSuccessor
                
                Successor
                
                Predecessor
                
                Successor
                
                Successor
                
                PredecessorFor
                    the period
                
                For
                    the period
                
                
                
                For
                    the period
                
                For
                    the periodfrom
                
                from
                
                
                
                from
                
                fromMay
                    11, 2004
                
                March
                    28, 2004
                
                
                
                May
                    11, 2004
                
                December
                    28, 2003through
                
                through
                
                
                
                through
                
                throughJuly
                    2, 2005
                
                June
                    26, 2004
                
                May
                    10, 2004
                
                July
                    2, 2005
                
                June
                    26, 2004
                
                May
                    10, 2004Net
                    sales
                
                $
                102,291
                
                $
                50,056
                
                $
                43,841
                
                $
                202,501
                
                $
                50,056
                
                $
                122,415Cost
                    of sales
                
                
                64,283
                
                
                39,210
                
                
                25,897
                
                
                130,173
                
                
                39,210
                
                
                77,113Gross
                    profit
                
                
                38,008
                
                
                10,846
                
                
                17,944
                
                
                72,328
                
                
                10,846
                
                
                45,302Selling,
                    general andadministrative
                    expenses
                
                
                24,735
                
                
                13,084
                
                
                10,803
                
                
                48,171
                
                
                13,084
                
                
                31,960Acquisition-related
                    charges
                
                
                -
                
                
                -
                
                
                14,286
                
                
                -
                
                
                -
                
                
                14,286Operating
                    income (loss)
                
                
                13,273
                
                
                (2,238
                )
                
                (7,145
                )
                
                24,157
                
                
                (2,238
                )
                
                (944
                )Interest
                    expense, net
                
                
                8,007
                
                
                1,680
                
                
                1,494
                
                
                10,904
                
                
                1,680
                
                
                2,180Income
                      (loss) before provisionforincome
                      taxes
                
                
                5,266
                
                
                (3,918
                )
                
                (8,639
                )
                
                13,253
                
                
                (3,918
                )
                
                (3,124
                )Income
                    tax expense (benefit)
                
                
                2,703
                
                
                (1,516
                )
                
                (1,083
                )
                
                6,219
                
                
                (1,516
                )
                
                1,122Net
                    income (loss)
                
                
                2,563
                
                
                (2,402
                )
                
                (7,556
                )
                
                7,034
                
                
                (2,402
                )
                
                (4,246
                )Preferred
                      stock dividends and changes in redemption value
                
                
                (14,102
                )
                
                (2,145
                )
                
                -
                
                
                (15,550
                )
                
                (2,145
                )
                
                -Net
                      loss available to common stockholders
                
                $
                (11,539
                )
                $
                (4,547
                )
                $
                (7,556
                )
                $
                (8,516
                )
                $
                (4,547
                )
                $
                (4,246
                )Basic
                    loss per common share
                
                $
                (0.58
                )
                $
                (0.23
                )
                $
                (0.55
                )
                $
                (0.43
                )
                $
                (0.23
                )
                $
                (0.31
                )Diluted
                    loss per common share
                
                $
                (0.58
                )
                $
                (0.23
                )
                $
                (0.55
                )
                $
                (0.43
                )
                $
                (0.23
                )
                $
                (0.31
                )Basic
                      weighted average number ofsharesoutstanding
                
                
                19,800,000
                
                
                19,800,000
                
                
                13,727,879
                
                
                19,800,000
                
                
                19,800,000
                
                
                13,727,879Diluted
                      weighted average number of shares outstanding
                
                
                19,800,000
                
                
                19,800,000
                
                
                13,727,879
                
                
                19,800,000
                
                
                19,800,000
                
                
                13,727,879
  The
                    accompanying notes are an integral part of these condensed consolidated
                    financial statements.





3




**MAIDENFORM
                    BRANDS, INC. AND SUBSIDIARIES****CONDENSED
                    CONSOLIDATED STATEMENTS OF CASH FLOWS****(in
                    thousands)****(unaudited)**Six
                    Months EndedSuccessor
                
                Successor
                
                PredecessorFor
                    the period
                
                For
                    the periodfrom
                    May 11, 2004
                
                from
                    December 28, 2003July
                    2, 2005
                
                through
                    June 26, 2004
                
                through
                    May 10, 2004**Cash
                    flows from operating activities**Net
                    income (loss)
                
                $
                7,034
                
                $
                (2,402
                )
                $
                (4,246
                )Adjustments
                    to reconcile net income (loss) to net cash
                  from
                    operating activitiesDepreciation
                    and amortization
                
                
                4,253
                
                
                886
                
                
                1,636Amortization
                    of intangible assets
                
                
                580
                
                
                138
                
                
                -Amortization
                    of deferred financing costs
                
                
                5,561
                
                
                155
                
                
                895Purchase
                    accounting step-up of inventory
                
                
                -
                
                
                10,842
                
                
                -Stock
                    compensation
                
                
                606
                
                
                10
                
                
                6,869Deferred
                    income taxes provision (benefit)
                
                
                3,712
                
                
                3,020
                
                
                (1,637
                )Tax
                    provision from exercise of stock options
                
                
                -
                
                
                -
                
                
                1,420Other
                    non-cash items
                
                
                488
                
                
                -
                
                
                -Net
                    changes in operating assets and liabilities, (net of
                    Acquisition)Accounts
                    receivable
                
                
                (27,882
                )
                
                1,228
                
                
                (16,746
                )Inventories
                
                
                (12,843
                )
                
                290
                
                
                (6,358
                )Prepaid
                    expenses and other current andnon-current
                    assets
                
                
                (4,147
                )
                
                (384
                )
                
                1,313Accounts
                    payable
                
                
                8,676
                
                
                (3,985
                )
                
                6,874Accrued
                    expenses and other current andnon-current
                    liabilities
                
                
                (3,379
                )
                
                286
                
                
                8,176Income
                    taxes payable
                
                
                4,528
                
                
                (4,690
                )
                
                1,017Net
                    cash from operating activities
                
                
                (12,813
                )
                
                5,394
                
                
                (787
                )**Cash
                    flows from investing activities**Capital
                    expenditures
                
                
                (950
                )
                
                (325
                )
                
                (681
                )Proceeds
                    from sale of assets
                
                
                920
                
                
                -
                
                
                -Payments
                    in connection with the Acquisition
                
                
                -
                
                
                (158,473
                )
                
                -Net
                    cash from investing activities
                
                
                (30
                )
                
                (158,798
                )
                
                (681
                )**Cash
                    flows from financing activities**Short-term
                    debt, net
                
                
                445
                
                
                283
                
                
                -Borrowings
                    under revolving facility
                
                
                10,000
                
                
                12,500
                
                
                109,391Repayments
                    under revolving facility
                
                
                -
                
                
                (40,765
                )
                
                (101,661
                )Term
                    loan facility borrowings
                
                
                61,037
                
                
                150,000
                
                
                -Term
                    loan facility repayments
                
                
                (58,787
                )
                
                (22,920
                )
                
                (2,080
                )Stock
                    options purchased
                
                
                (140
                )
                
                -
                
                
                -Special
                    cash dividends paid to preferred stockholders
                
                
                (13,320
                )
                
                -
                
                
                -Proceeds
                    from issuance of preferred and common stock
                
                
                -
                
                
                57,000
                
                
                -Deferred
                    financing costs
                
                
                (2,428
                )
                
                (6,684
                )
                
                (217
                )Net
                    cash from financing activities
                
                
                (3,193
                )
                
                149,414
                
                
                5,433Effects
                    of exchange rate changes on cash
                
                
                8
                
                
                41
                
                
                (328
                )Net
                    (decrease) increase in cash
                
                
                (16,028
                )
                
                (3,949
                )
                
                3,637**Cash
                    and cash equivalents**Beginning
                    of period
                
                
                23,212
                
                
                4,871
                
                
                1,234End
                    of period
                
                $
                7,184
                
                $
                922
                
                $
                4,871**Supplementary
                    disclosure of cash flow information**Cash
                    paid during the periodInterest
                
                $
                5,258
                
                $
                -
                
                $
                884Income
                    taxes
                
                $
                1,347
                
                $
                -
                
                $
                144
  The
                    accompanying notes are an integral part of these condensed consolidated
                    financial statements.





4





**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**1.**  **CHANGE
      IN OWNERSHIP**




On
      May
      11, 2004, MF Acquisition Corporation acquired 100% of Maidenform, Inc. (the
      ‘‘Acquisition’’) through a merger of its wholly owned subsidiary into
      Maidenform, Inc. Stockholders of Maidenform, Inc. received either cash or stock
      of MF Acquisition Corporation in exchange for their shares of Maidenform, Inc.
      On April 5, 2005, MF Acquisition Corporation changed its name to Maidenform
      Brands, Inc. Financing for this Acquisition totaled $237,265 and was provided
      by
      a first lien term loan of $100,000, revolver borrowings of $12,500, a second
      lien term loan of $50,000 and $74,765 of cash and capital from investors,
      including rollover equity by certain members of management of $2,765 and
      continuing stockholders of $15,000. The financial statements for the period
      including and after May 11, 2004 are those of Maidenform Brands, Inc. and
      subsidiaries (the ‘‘Successor’’). The financial statements for periods prior to
      May 11, 2004 are those of Maidenform, Inc. and subsidiaries (the
‘‘Predecessor’’). As a result of the Acquisition, the financial statements
      including and after May 11, 2004 are not comparable to those prior to that
      date.





The
      proceeds of the Acquisition and financing were used to pay selling stockholders
      $147,430, selling stockholders transaction expenses of $6,570, special
      compensation of $1,567 paid to management, buyers’ transaction expenses of
      $2,526, and to retire all of Maidenform, Inc.’s previously outstanding current
      and long-term debt of $54,065, including a debt redemption premium of $380.
      In
      addition, $658 of proceeds were held as cash for working capital purposes and
      $6,684 was used to pay debt issuance costs.





The
      Acquisition was accounted for as a purchase in accordance with Statement of
      Financial Accounting Standards (SFAS) No. 141, ‘‘Business Combinations,’’ and
      Emerging Issues Task Force (EITF) No. 88-16, ‘‘Basis In Leveraged Buyout
      Transactions.’’ In accordance with EITF 88-16, the basis of continuing
      stockholders that have a residual interest in Maidenform Brands, Inc. and have
      a
      20% or greater voting interest has been carried over at their predecessor basis.
      In addition, in accordance with EITF 88-16, the basis of management’s residual
      interest, which consisted of stock options, has also been carried over at their
      predecessor basis, as management actively participated in promoting the
      transaction. The retained interest of the stockholders has been recorded at
      predecessor basis (carryover basis) and aggregated 23.8% (20.1% related to
      continuing stockholders and 3.7% related to certain members of management).
      The
      remainder of the investment in the assets and liabilities acquired (the 76.2%
      acquired by new stockholders) was recorded at fair value. As a result, the
      assets and liabilities were assigned new values, which are part carryover basis
      and part fair value basis. The excess of the purchase price over carryover
      basis
      of net assets acquired, the deemed dividend to continuing stockholders, was
      recognized as a reduction of stockholders’ equity (deficit).





The
      following table summarizes both the cash and non-cash consideration, including
      transaction costs related to the Acquisition.




**Cash
                  consideration (1)**Cash
                  paid to sellers
              
              $
              147,430Repayment
                  of seller’s debt
              
              
              54,065Transaction
                  costs
              
              
              10,663**Non-cash
                  consideration**Securities
                  issued to continuing stockholders at carryover basis (2)
              
              
              14,520Carryover
                  basis allocated to management’s residual interest (3)
              
              
              -**Deemed
                  dividend to continuing stockholders**
              
              
              (21,529
              )Total
                  purchase price
              
              $
              205,149




(1)
      Cash
      consideration was paid with new financing of $155,158, net of debt issuance
      costs of $6,684 and proceeds held as cash of $658, and cash from new
      stockholders of $57,000. New stockholders received half of their interest in
      preferred stock and half of their interest in common stock. The allocation
      of
      the equity interest for the preferred stock and common stock was based on their
      fair values as determined by an independent third-party appraisal. Securities
      issued to new stockholders amounted to 285,000 shares of preferred stock and
      15,675,000 shares of common stock.





(2)
      Securities issued to the continuing stockholders were 75,000 shares of preferred
      stock and 4,125,000 shares of common stock.





(3)
      As
      management’s residual interest consisted entirely of options which had no
      predecessor basis, no carryover basis was allocated to their residual
      interest.





5





**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





The
      total
      purchase price of $205,149 was allocated to the acquired assets and liabilities
      based on their estimated fair values at the Acquisition date, after taking
      into
      account the carryover basis discussed above. These allocations were determined
      by valuation reports provided by independent third party appraisal firms. The
      excess of the purchase price over the underlying assets acquired and liabilities
      assumed was allocated to goodwill, none of which is deductible for tax purposes.
      The following table summarizes the estimated values of the assets acquired
      and
      liabilities assumed on May 11, 2004.




Other
                  current assets
              
              $
              51,254Inventory
              
              
              62,234Deferred
                  income taxes
              
              
              9,716Property,
                  plant and equipment
              
              
              31,425Intangible
                  assets, amortizing
              
              
              26,241Intangible
                  assets, non-amortizing
              
              
              76,476Other
                  non-current assets
              
              
              707Goodwill
              
              
              7,884Total
                  assets acquired
              
              
              265,937Other
                  current liabilities
              
              
              39,522Employee
                  termination costs
              
              
              2,159Defined
                  benefit pension plan
              
              
              7,378Postretirement
                  plans
              
              
              1,240Deferred
                  income taxes
              
              
              10,013Other
                  non-current liabilities
              
              
              476Total
                  liabilities assumed
              
              
              60,788Net
                  assets acquired
              
              $
              205,149




The
      following unaudited pro forma operating data presents the results of operations
      for the three and six month periods ended June 26, 2004 as if the Acquisition
      had occurred on December 28, 2003, with financing obtained as described above,
      and assumes that there were no other changes in our operations. The pro forma
      results are not necessarily indicative of the financial results that might
      have
      occurred had the transaction actually taken place on December 28, 2003, or
      of
      future results of operations:




Pro
                  forma for
              
              Pro
                  forma forthe
                  three month
              
              the
                  six monthperiod
                  ended
              
              period
                  endedJune
                  26, 2004
              
              June
                  26, 2004Net
                  sales
              
              $
              93,897
              
              $
              172,471Operating
                  income (loss)
              
              
              13,615
              
              
              (13,879
              )Interest
                  expense, net
              
              
              (2,805
              )
              
              (6,988
              )Net
                  income (loss)
              
              
              24,650
              
              
              (19,698
              )Preferred
                  stock dividends and accretion
              
              
              (1,401
              )
              
              (4,896
              )Net
                  income (loss) available to common stockholders
              
              
              23,249
              
              
              (24,594
              )Basic
                  net income (loss) per common share
              
              
              1.17
              
              
              (1.24
              )Diluted
                  net income (loss) per common share
              
              
              1.15
              
              
              (1.24
              )




Included
      in the pro forma operating income for the period from March 28, 2004 through
      June 26, 2004 shown above is a $8,901 charge to cost of sales related to the
      opening balance sheet step-up of inventory to fair market value, plus
      amortization related to intangible assets, advisory fees and depreciation
      related to the closing of our cutting and sewing facilities.





Included
      in interest expense for the period from March 28, 2004 through June 26, 2004
      shown above is interest expense related to the borrowings necessary to finance
      the Acquisition and amortization expense related to deferred financing costs
      for
      the additional borrowings.




6




**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





Included
      in the pro forma operating loss for the period from December 28, 2003 through
      June 26, 2004 shown above are the Predecessor’s Acquisition-related charges of
      $6,570 for sellers’ transaction fees and expenses, $1,960 in special
      compensation paid to management, $5,639 in stock compensation expense from
      settlement of stock options, and $117 of other Acquisition-related charges.
      Also, included is a $19,743 charge to cost of sales related to the opening
      balance sheet step-up of inventory to fair market value, plus amortization
      related to intangible assets, advisory fees and depreciation related to the
      closing of our cutting and sewing facilities.





Included
      in interest expense for the period from December 28, 2003 through June 26,
      2004
      shown above are charges of $895 related to the write-off of deferred financing
      costs in connection with the retirement of all of the outstanding debt, a debt
      redemption premium of $380, interest expense related to the borrowings necessary
      to finance the Acquisition and amortization expense related to deferred
      financing costs for the additional borrowings.





**2.**  **BASIS
      OF PRESENTATION**




Maidenform
      Brands, Inc. and its subsidiaries (the “Company,”  “we,”  “us” or
“our”) design, source and market an extensive range of intimate apparel
      products, including bras, panties and shapewear. We sell through multiple
      distribution channels including department stores, national chains, mass
      merchants (including warehouse clubs), specialty stores, off-price retailers
      and
      our website. In addition, we also operated 81 and 91 retail outlet stores as
      of
      July 2, 2005 and June 26, 2004, respectively.





In
      our
      opinion, the accompanying unaudited condensed consolidated financial statements
      contain all adjustments necessary to state fairly our financial position as
      of
      July 2, 2005 (Successor), the results of our operations for the three month
      period ended July 2, 2005 (Successor), for the period from May 11, 2004 through
      June 26, 2004 (Successor), and for the period from March 28, 2004 through May
      10, 2004 (Predecessor), the results of our operations for the six month period
      ended July 2, 2005 (Successor), for the period from May 11, 2004 through June
      26, 2004 (Successor), and for the period December 28, 2003 through May 10,
      2004
      (Predecessor), and cash flows for the six month period ended July 2, 2005
      (Successor) and for the period from May 11, 2004 through June 26, 2004
      (Successor) and for the period from December 28, 2003 through May 10, 2004
      (Predecessor). The three month period ended July 2, 2005 and combined
      Predecessor and Successor three month period ended June 26, 2004 both included
      13 weeks. These adjustments consist of normal recurring adjustments. Operating
      results for the three and six month periods ended July 2, 2005 (Successor)
      are
      not necessarily indicative of the results that may be expected for any other
      future interim period or for a full fiscal year. The condensed consolidated
      balance sheet at January 1, 2005 has been derived from our audited consolidated
      financial statements at that date.





These
      condensed consolidated financial statements have been prepared in accordance
      with Article 10 of Regulation S-X promulgated by the Securities and Exchange
      Commission. Accordingly, certain information and disclosures normally included
      in financial statements prepared in accordance with accounting principles
      generally accepted in the United States of America have been condensed or
      omitted pursuant to the rules and regulations of the Securities and Exchange
      Commission. The financial statements included herein should be read in
      conjunction with our audited consolidated financial statements for the year
      ended January 1, 2005, which were included as part of our registration statement
      on Form S-1 (Registration No. 333-124228), as declared effective by the
      Securities and Exchange Commission on July 21, 2005.





**3.**  **INVENTORIES**




Inventories
      at July 2, 2005 and January 1, 2005 consist of the following:




**Successor
                  at**
              
              **Successor
                  at****July
                  2, 2005**
              
              **January
                  1, 2005**Raw
                  materials
              
              $
              15
              
              $
              1,741Work-in-process
              
              
              1,802
              
              
              2,335Finished
                  goods
              
              
              48,093
              
              
              32,991$
              49,910
              
              $
              37,067
  7




**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**4.**  **DEBT**




On
      June
      29, 2005, we amended our existing First Lien Facilities and prepaid the
      outstanding balance of our Second Lien Facility. The amended First Lien
      Facilities (“Credit Facility”) provides for borrowings in the aggregate amount
      of $200,000 maturing on May 11, 2010 and is composed of: (i) a $150,000
      amortizing term loan facility (the ‘‘Term Loan Facility’’) and (ii) a $50,000
      revolving credit facility (the ‘‘Revolving Facility’’). The Credit Facility is
      collateralized by a first priority perfected lien, subject to certain permitted
      liens, on substantially all of the personal property assets and certain real
      property of Maidenform, Inc. and the guarantors.





In
      general, borrowings under the Term Loan Facility bear interest based, at our
      option, on the Prime rate or the London Interbank Offered Rate (LIBOR), plus
      a
      margin. Through December 29, 2005, the Prime rate margin will be fixed at 1.25%
      and the LIBOR rate margin will be fixed at 2.25%. These interest rate margins
      will be reduced by 0.25% on December 29, 2005. If our leverage ratio is less
      than 3 to 1, then, after that date, these margins will be further reduced by
      0.25%. Payments of principal will be made in quarterly installments based on
      an
      amortization schedule commencing on October 1, 2005.





The
      Revolving Facility provides direct borrowings and issuance of stand-by letters
      of credit on our behalf. Borrowings under the Revolving Facility are limited
      by
      the borrowing base, which consists of eligible accounts receivable and
      inventory, as defined. Borrowings under the Revolving Facility will bear
      interest at the same rate as the Term Loan Facility. Additional fees, including
      a letter of credit fee of 2.25% and a letter of credit fronting fee of 0.25%,
      are charged on the outstanding stand-by letters of credit. Additionally, an
      unused line of credit fee of 0.50% is charged on the maximum principal amount
      undrawn under the Revolving Facility.





As
      of
      July 2, 2005, we had $150,000 outstanding under our Term Loan Facility. At
      July
      2, 2005, approximately $37,800 was available for borrowings under the Revolving
      Facility, after giving effect to $10,000 of outstanding borrowings under the
      Revolving Facility and $2,200 of outstanding letters of credit. We use the
      letters of credit as collateral for our workers’ compensation insurance programs
      and bonds issued on our behalf to secure our obligation to pay customs duties.
      On August 1, 2005, we paid the total amount of outstanding borrowings on our
      Revolving Facility, which totaled $10,000.





The
      Credit Facility contains affirmative and restrictive covenants, including:
      (a)
      maintenance of a minimum fixed charge coverage ratio, (b) maintenance of a
      maximum leverage ratio, (c) limitations on consolidated capital expenditures,
      (d) limitations on the incurrence of indebtedness and liens, (e) limitations
      on
      investments/acquisitions and (f) restrictions on payments between Maidenform
      Brands, Inc. and its subsidiaries. There are a number of circumstances in which
      additional partial prepayments are required based upon conditions set forth
      in
      the Credit Facility, including net asset sales and net insurance/condemnation
      proceeds not reinvested in other assets of the business, net securities proceeds
      from the issuance of capital stock (excluding the initial public offering
      proceeds), additional debt facilities, and a percentage of annual consolidated
      excess cash flows, as defined. We were in compliance with all debt covenants
      at
      July 2, 2005.





In
      connection with the amendment of the Credit Facility, we paid fees of $2,428,
      and in connection with the repayment of the Second Lien Facility, we paid a
      prepayment penalty fee of $1,000. For the six month period ended July 2, 2005,
      amortization of financing costs included in interest expense was $5,561 (which
      includes the write-off of deferred financing costs of $4,943 in connection
      with
      the amendment of the First Lien Facilities and the prepayment of the Second
      Lien
      Facility).




8





**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**5. 
      BENEFIT PLANS AND POSTRETIREMENT PLANS**




We
      sponsor a defined benefit pension plan covering substantially all eligible
      employees not covered by the union plans. We also maintain postretirement
      medical benefit plans for certain eligible retirees for which postretirement
      benefit expense on a quarterly basis is insignificant.





The
      components of pension benefit expense charged to operations are as
      follows:




**Three
                  Months Ended**
              
              **Six
                  Months Ended****Successor**
              
              **Successor**
              
              **Predecessor**
              
              **Successor**
              
              **Successor**
              
              **Predecessor****For
                  the period**
              
              **For
                  the period**
              
              
              
              **For
                  the period**
              
              **For
                  the period****from**
              
              **from**
              
              
              
              **from**
              
              **from****May
                  11, 2004**
              
              **March
                  28, 2004**
              
              
              
              **May
                  11, 2004**
              
              **December
                  28, 2003****through**
              
              **through**
              
              
              
              **through**
              
              **through****July
                  2, 2005**
              
              **June
                  26, 2004**
              
              **May
                  10, 2004**
              
              **July
                  2, 2005**
              
              **June
                  26, 2004**
              
              **May
                  10, 2004**Service
                  cost
              
              $
              429
              
              $
              166
              
              $
              100
              
              $
              858
              
              $
              166
              
              $
              416Interest
                  cost
              
              
              308
              
              
              141
              
              
              80
              
              
              616
              
              
              141
              
              
              347Expected
                  return on plan assets
              
              
              (274
              )
              
              (124
              )
              
              (66
              )
              
              (548
              )
              
              (124
              )
              
              (300
              )Recognized
                  net actuarial loss
              
              
              8
              
              
              -
              
              
              99
              
              
              16
              
              
              -
              
              
              132Net
                  periodic benefit cost
              
              $
              471
              
              $
              183
              
              $
              213
              
              $
              942
              
              $
              183
              
              $
              595




**6.** **CLOSURE
        OF MANUFACTURING FACILITIES**


In
      connection with the Acquisition, we made the decision to exit our cutting and
      sewing facilities located in Mexico and Florida. We closed one facility in
      Mexico in January 2005, closed the facility in Florida in June 2005, and closed
      the remaining facility in Mexico in July 2005. As part of the allocation of
      the
      purchase price, we accrued probable employee termination costs of $2,159
      relating to services already rendered and vested for employees at these
      locations. Other costs of $446 associated with retention bonuses have been
      expensed during the Successor period from May 11, 2004 through January 1, 2005.
      At January 1, 2005, we had accrued employee termination costs of $2,077 related
      to the closing of these facilities. During the six month period ended July
      2,
      2005, we incurred additional retention bonus expense of $507 and paid $833.
      At
      July 2, 2005, we have accrued employee termination costs of $1,751. The
      retention bonus expense is recorded as part of our wholesale segment.
      Approximately two hundred and sixty employees have been terminated during the
      six months ended July 2, 2005. Approximately four hundred and twenty remaining
      employees were terminated by the end of July 2005.





In
      May
      2005, we sold the Mexican facility that was closed in January 2005. We have
      included $3,777 of property, plant and equipment related to our cutting and
      sewing facilities as prepaid expenses and other current assets in our condensed
      consolidated balance sheet at July 2, 2005, as they are being held for sale
      and
      no longer being depreciated.




9




**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**7.** **STOCKHOLDERS’
        EQUITY (DEFICIT)**




**Accumulated****Common**
              
              **Additional**
              
              
              
              **other**
              
              **Total****stock**
              
              **paid-in**
              
              **Accumulated**
              
              **comprehensive**
              
              **stockholders'****Shares**
              
              **$**
              
              **capital**
              
              **deficit**
              
              **(loss)
                  income**
              
              **deficit****Balance
                  at January 1, 2005**
              
              
              15,675,000
              
              $
              157
              
              $
              2,098
              
              $
              (3,368
              )
              $
              (9
              )
              $
              (1,122
              )Preferred
                  stock dividends and changes in redemption value
              
              
              
              
              
              
              
              
              (3,169
              )
              
              (12,381
              )
              
              
              
              
              (15,550
              )Adjust
                  common stock, subject toput
                  option, to redemption value
              
              
              
              
              
              
              
              
              465
              
              
              
              
              
              
              
              
              465Stock
                  compensation
              
              
              
              
              
              
              
              
              606
              
              
              
              
              
              
              
              
              606**Comprehensive
                  income**Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              7,034
              
              
              
              
              
              7,034Changes
                  during the period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              178
              
              
              178Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,212**Balance
                  at July 2, 2005**
              
              
              15,675,000
              
              $
              157
              
              $
              -
              
              $
              (8,715
              )
              $
              169
              
              $
              (8,389
              )




In
      accordance with the terms of the preferred stock as defined in our Certificate
      of Incorporation, we reduced the redemption value from $108 per share to $106
      per share on May 1, 2005.





On
      June
      1, 2005, the board of directors approved a special cash dividend to all holders
      of preferred stock as of June 1, 2005 in the aggregate amount of $13,320. This
      dividend was paid on June 21, 2005 and was accounted for as a reduction to
      additional paid-in capital to the extent available and as a reduction to
      retained earnings (accumulated deficit).





**8.** **COMPREHENSIVE
      INCOME (LOSS)**




The
      changes in comprehensive income (loss) are as follows:




Six
                  Months EndedSuccessor
              
              Successor
              
              PredecessorFor
                  the period
              
              For
                  the periodfrom
              
              fromMay
                  11, 2004
              
              December
                  28, 2003through
              
              throughJuly
                  2, 2005
              
              June
                  26, 2004
              
              May
                  10, 2004Net
                  income (loss)
              
              $
              7,034
              
              $
              (2,402
              )
              $
              (4,246
              )Foreign
                  currency translation adjustments (1)
              
              
              8
              
              
              41
              
              
              (149
              )Interest
                  rate swaps, (net of tax)
              
              
              170
              
              
              
              
              
              -Minimum
                  pension liability (2)
              
              
              -
              
              
              -
              
              
              (179
              )Comprehensive
                  income (loss)
              
              $
              7,212
              
              $
              (2,361
              )
              $
              (4,574
              )




(1)
            No
                tax benefit has been provided associated with the foreign currency
                translation adjustment due to management’s intention to permanently
                reinvest the earnings of our foreign
                subsidiaries.


(2)
            No
                tax benefit has been provided associated with the minimum pension
                liability due to the limitations of the realizability of deferred
                tax
                assets at the time the minimum pension liability was recorded.





10





**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**9.** **INCOME
        TAXES**


We
      review
      our annual projected effective tax rate on a quarterly basis and we make
      necessary changes if information or events warrant such changes. The annual
      projected effective tax rate is forecasted quarterly using actual historical
      information and forward-looking estimates. The estimated annual projected
      effective tax rate may fluctuate due to changes in forecasted annual operating
      income; changes to the valuation allowance for deferred tax assets; changes
      to
      actual or forecasted permanent book to tax differences (non-deductible
      expenses); impacts from future tax settlements with state, federal or foreign
      tax authorities; or impacts from tax law changes. Our projected effective income
      tax rate for the three and six month Successor periods ended July 2, 2005 was
      51.3% and 46.9%, respectively, as compared to an effective income tax rate
      for
      the combined Predecessor and Successor three and six month periods ended June
      26, 2004 of  (20.7)% and (5.6)%, respectively.  Our income tax
      expense
      for the three and six month periods ended July 2, 2005 was negatively impacted
      by non-deductible expenses incurred during those periods in connection with
      our
      initial public offering. During the three and six month periods ended June
      26,
      2004, we incurred losses before the provision for income taxes.  The
      income
      tax benefit from the losses was negatively impacted by non-deductible expenses
      incurred during those periods in connection with the Acquisition.





**10.** **SEGMENT
      INFORMATION**




We
      report
      segment information in accordance with the provisions of SFAS No. 131,
‘‘Disclosures about Segments of an Enterprise and Related Information,’’ which
      requires segment information to be disclosed based on a ‘‘management approach.’’
      The management approach refers to the internal reporting that we use for making
      operating decisions and assessing the performance of reportable segments. SFAS
      No. 131 also requires disclosure about products and services, geographic areas
      and major customers. For purposes of complying with SFAS No. 131, we identified
      our two reportable segments as ‘‘Wholesale’’ and ‘‘Retail.’’ Our wholesale sales
      are to department stores, national chains, mass merchants (including warehouse
      clubs), specialty stores, off-price retailers, and third-party distributors
      servicing similar customers in foreign countries while our retail segment
      reflects our operations from our retail stores and internet operations. Royalty
      income is also included in our wholesale segment. Within our reportable
      segments, wholesale includes corporate-related assets and expenses. Each
      segment’s results include the costs directly related to the segment’s net sales
      and all other costs allocated based on the relationship to consolidated net
      sales or units produced to support each segment’s net sales. Intersegment sales
      and transfers are recorded at cost and treated as a transfer of
      inventory.




11




**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***




Information
        on segments and reconciliation to income (loss) before provision for income
        taxes, are as follows:




Three
                  Months Ended
              
              Six
                  Months EndedSuccessor
              
              Successor
              
              Predecessor
              
              Successor
              
              Successor
              
              PredecessorFor
                  the period
              
              For
                  the period
              
              
              
              For
                  the period
              
              For
                  the periodfrom
              
              from
              
              
              
              from
              
              fromMay
                  11, 2004
              
              March
                  28, 2004
              
              
              
              May
                  11, 2004
              
              December
                  28, 2003through
              
              through
              
              
              
              through
              
              throughJuly
                  2, 2005
              
              June
                  26, 2004
              
              May
                  10, 2004
              
              July
                  2, 2005
              
              June
                  26, 2004
              
              May
                  10, 2004Net
                  salesWholesale
              
              $
              87,526
              
              $
              42,262
              
              $
              37,105
              
              $
              177,749
              
              $
              42,262
              
              $
              105,225Retail
              
              
              14,765
              
              
              7,794
              
              
              6,736
              
              
              24,752
              
              
              7,794
              
              
              17,190Total
              
              $
              102,291
              
              $
              50,056
              
              $
              43,841
              
              $
              202,501
              
              $
              50,056
              
              $
              122,415Operating
                  income (loss)Wholesale
              
              $
              12,411
              
              $
              (1,498
              )
              $
              7,095
              
              $
              24,759
              
              $
              (1,498
              )
              $
              14,558Retail
              
              
              862
              
              
              (740
              )
              
              46
              
              
              (602
              )
              
              (740
              )
              
              (1,216
              )Acquisition
                  - related charges
              
              
              -
              
              
              -
              
              
              (14,286
              )
              
              -
              
              
              -
              
              
              (14,286
              )Operating
                  income (loss)
              
              
              13,273
              
              
              (2,238
              )
              
              (7,145
              )
              
              24,157
              
              
              (2,238
              )
              
              (944
              )Interest
                  expense, net
              
              
              8,007
              
              
              1,680
              
              
              1,494
              
              
              10,904
              
              
              1,680
              
              
              2,180Income
                    (loss) before provision for income taxes
              
              $
              5,266
              
              $
              (3,918
              )
              $
              (8,639
              )
              $
              13,253
              
              $
              (3,918
              )
              $
              (3,124
              )Depreciation
                  and AmortizationWholesale
              
              $
              2,340
              
              $
              792
              
              $
              386
              
              $
              4,064
              
              $
              792
              
              $
              1,164Retail
              
              
              390
              
              
              232
              
              
              162
              
              
              769
              
              
              232
              
              
              472Total
              
              $
              2,730
              
              $
              1,024
              
              $
              548
              
              $
              4,833
              
              $
              1,024
              
              $
              1,636Net
                  sales by geographic areaUnited
                  States
              
              $
              95,951
              
              $
              47,906
              
              $
              41,470
              
              $
              190,202
              
              $
              47,906
              
              $
              116,574International
              
              
              6,340
              
              
              2,150
              
              
              2,371
              
              
              12,299
              
              
              2,150
              
              
              5,841Total
              
              $
              102,291
              
              $
              50,056
              
              $
              43,841
              
              $
              202,501
              
              $
              50,056
              
              $
              122,415Intercompany
                    sales fromwholesaleto
                    retail
              
              $
              1,388
              
              $
              1,903
              
              $
              2,164
              
              $
              3,029
              
              $
              1,903
              
              $
              4,508**Successor
                    at**
              
              
              **Successor
                  at**July
                  2, 2005
              
              
              **January
                  1, 2005**Identifiable
                  assetsWholesale
              
              $
              234,102
              
              $
              215,959Retail
              
              
              27,917
              
              
              28,172Total
              
              $
              262,019
              
              $
              244,131




At
      July
      2, 2005 and January 1, 2005, our five largest uncollaterized receivables
      represented approximately 53% and 55% of total accounts receivable,
      respectively.





For
      the
      three month Successor period ended July 2, 2005 and for the combined Predecessor
      and Successor three month period from March 28, 2004 through June 26, 2004,
      one
      customer in the wholesale segment accounted for more than 10% of our
      consolidated net sales. For the six month Successor period ended July 2, 2005
      and for the combined Predecessor and Successor six month period from December
      28, 2003 through June 26, 2004, two customers in the wholesale segment each
      accounted for more than 10% of our consolidated net sales.




12




**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**11.** **EARNINGS
      PER SHARE**




The
      following is a reconciliation of basic number of common shares outstanding
      to
      diluted common and common equivalent shares outstanding:




Three
                  Months Ended
              
              Six
                  Months EndedSuccessor
              
              Successor
              
              Predecessor
              
              Successor
              
              Successor
              
              PredecessorFor
                  the period
              
              For
                  the period
              
              
              
              For
                  the period
              
              For
                  the periodfrom
              
              from
              
              
              
              from
              
              fromMay
                  11, 2004
              
              March
                  28, 2004
              
              
              
              May
                  11, 2004
              
              December
                  28, 2003through
              
              through
              
              
              
              through
              
              throughJuly
                  2, 2005
              
              June
                  26, 2004
              
              May
                  10, 2004
              
              July
                  2, 2005
              
              June
                  26, 2004
              
              May
                  10, 2004Net
                  income (loss)
              
              $
              2,563
              
              $
              (2,402
              )
              $
              (7,556
              )
              $
              7,034
              
              $
              (2,402
              )
              $
              (4,246
              )Less:
                  Preferred stock dividendsand
                  changes in redemption value
              
              
              (14,102
              )
              
              (2,145
              )
              
              -
              
              
              (15,550
              )
              
              (2,145
              )
              
              -Loss
                  available to commonstockholders
              
              $
              (11,539
              )
              $
              (4,547
              )
              $
              (7,556
              )
              $
              (8,516
              )
              $
              (4,547
              )
              $
              (4,246
              )Weighted
                  average number of common andcommon
                  equivalent shares outstandingBasic
                  number of common sharesoutstanding
              
              
              19,800,000
              
              
              19,800,000
              
              
              13,727,879
              
              
              19,800,000
              
              
              19,800,000
              
              
              13,727,879Dilutive
                  number of common and commonequivalent
                  shares outstanding
              
              
              19,800,000
              
              
              19,800,000
              
              
              13,727,879
              
              
              19,800,000
              
              
              19,800,000
              
              
              13,727,879Basic
                  net loss per common share
              
              $
              (0.58
              )
              $
              (0.23
              )
              $
              (0.55
              )
              $
              (0.43
              )
              $
              (0.23
              )
              $
              (0.31
              )Diluted
                  net loss per common share
              
              $
              (0.58
              )
              $
              (0.23
              )
              $
              (0.55
              )
              $
              (0.43
              )
              $
              (0.23
              )
              $
              (0.31
              )




The
      dilutive potential common shares of 1,343,688 options, 357,357 options and
      1,216,317 options for the Successor three month period ended July 2, 2005,
      the
      Successor period from May 11, 2004 through June 26, 2004, and the Predecessor
      period March 28, 2004 through May 10, 2004, respectively, were not included
      in
      the computation of diluted earnings per share because of their anti-dilutive
      effect.





The
      dilutive potential common shares of 1,328,126 options, 357,357 options and
      1,216,317 options for the Successor six month period ended July 2, 2005, the
      Successor period from May 11, 2004 through June 26, 2004, and the Predecessor
      period December 28, 2003 through May 10, 2004, respectively, were not included
      in the computation of diluted earnings per share because of their anti-dilutive
      effect.





Options
      to purchase approximately 514,326 shares of common stock were outstanding during
      the Successor period May 11, 2004 through June 26, 2004, but were not included
      in the computation of diluted earnings per share because the option exercise
      prices were greater than the average market price of the shares of common
      stock.





**12.**  **COMMITMENTS
      AND CONTINGENCIES**




**Purchase
      commitments**




In
      the
      normal course of business, we enter into purchase commitments covering inventory
      requirements of both raw materials and finished goods. At July 2, 2005, we
      believe that we have adequate reserves for expected losses arising from all
      purchase commitments.





13





**MAIDENFORM
      BRANDS, INC. AND SUBSIDIARIES**


**NOTES
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)**


***(in
      thousands, except share and per share amounts)***


***(unaudited)***





**Litigation**




We
      are
      party to various legal actions arising in the ordinary course of business.
      Based
      on information presently available to us, we believe that we have adequate
      legal
      defenses, reserves or insurance coverage for these actions and that the ultimate
      outcome of these actions will not have a material adverse effect on our
      consolidated statements of financial position, results of operations or cash
      flows.





**13.**  **RECENTLY
      ISSUED ACCOUNTING STANDARDS**




In
      November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      151, ‘‘Inventory Cost—An Amendment of ARB 43, Chapter 4,’’ to clarify that
      abnormal amounts of certain costs should be recognized as period costs. This
      Statement is effective for fiscal years beginning after June 15, 2005. We are
      currently evaluating the impact, if any, that SFAS No. 151 will have on our
      consolidated statements of financial position, results of operations and cash
      flows.





In
      December 2004, the FASB issued SFAS No. 123-R (revised 2004), ‘‘Share Based
      Payment,’’ which is a revision of SFAS No. 123, ‘‘Accounting for Stock-Based
      Compensation.’’ This Statement supersedes APB Opinion No. 25, ‘‘Accounting for
      Stock Issued to Employees,’’ and its related implementation guidance. This
      Statement focuses primarily on accounting for transactions in which an entity
      obtains employee services in share-based payment transactions and is effective
      for fiscal years beginning after June 15, 2005. As we have already adopted
      SFAS
      No. 123, we do not believe that this revision will have a significant effect
      on
      our consolidated statements of financial position, results of operations and
      cash flows.





**14.**  **SUBSEQUENT
      EVENTS**




On
      July
      6, 2005, the compensation committee of Maidenform Brands, Inc. approved the
      payment of special cash bonuses in the aggregate amount of $1,478 to certain
      individuals in recognition of their performance, which allowed us to negotiate
      the amendment to our Credit Facility.





On
      July
      6, 2005, the Board of Directors adopted the Maidenform Brands, Inc. 2005 Stock
      Incentive Plan pursuant to which the Company can offer employees, consultants
      and non-employee directors equity-based awards, and accordingly 1,750,000 shares
      were set aside and allocated for issuance under this plan. The Board of
      Directors also amended the Maidenform Brands, Inc. 2004 Rollover Stock Option
      Plan, the Maidenform Brands, Inc. 2004 Stock Option Plan and the Maidenform
      Brands, Inc. 2004 Stock Option Plan for Non-Employees Directors to provide
      that
      no additional equity-based awards shall be available for issuance under these
      plans, although previously granted stock options will continue to remain
      outstanding in accordance with the terms of the applicable option agreement
      and
      the applicable plan.





On
      July
      22, 2005, we
      granted pursuant to our Maidenform Brands, Inc. 2005 Stock Incentive Plan,
      non-qualified stock options to purchase an aggregate of 509,000 shares of our
      common stock, including to our four executive officers, contingent upon and
      concurrent with the consummation of the initial public offering. More
      specifically, we granted each grantee a non-qualified stock option which (i)
      has
      a strike price equal to the initial public offering price of $17.00; (ii) vests
      in four equal annual installments commencing on the first anniversary of the
      date of grant; and (iii) expires seven years from the date of grant.





On
      July
      22, 2005, we priced an initial public offering of 14,513,889 shares of common
      stock of which 3,375,000 and 11,138,889 shares were offered by us and certain
      selling stockholders, respectively, at a price of $17.00 per share. Upon the
      consummation of the offering on July 27, 2005, net proceeds of $53,359 and
      $176,106 were distributed to us and selling stockholders, respectively.
      Approximately $46,828 of the net proceeds was used to redeem all the outstanding
      shares of our preferred stock, including shares of preferred stock acquired
      upon
      the exercise of all outstanding options to purchase shares of our preferred
      stock, and pay all accrued and unpaid dividends associated with the preferred
      stock and preferred stock options. In addition, the put option on certain shares
      of common stock classified as temporary equity was extinguished as a result
      of
      the initial public offering and such common stock will no longer be classified
      as temporary equity.





14





**Item
      2. Management’s Discussion and Analysis of Financial Conditions and Results of
      Operations**





*You
      should read the following discussion and analysis in conjunction with our
      financial statements and related notes included elsewhere in this report. 
      This report contains forward-looking statements relating to future events and
      our future performance within the meaning of Section 27A of the Securities
      Act
      of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
      as
      amended, including, without limitation, statements regarding our expectations,
      beliefs, intentions or future strategies that are signified by the
      words“anticipates,”  “believes”  “estimates,”  “expects,” 
“intends,”  “plans,”  “potential,”  “predicts,” 
“projects” or similar words or phrases, although not all forward-looking
      statements contain such identifying words.  All forward-looking statements
      included in this report are based on information available to us on the date
      hereof.  It is routine for our internal projections and expectations
      to
      change as the year or each quarter in the year progress, and therefore it should
      be clearly understood that the internal projections and beliefs upon which
      we
      base our expectations may change prior to the end of each quarter or the
      year.  Although these expectations may change, we are under no obligation
      to inform you if they do.  Actual events or results may differ materially
      from those contained in the projections or forward-looking statements. 
      Factors that could cause or contribute to such differences include those
      discussed below and elsewhere in this report, particularly in the section
      captioned “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations — Risk Factors That May Affect Future
      Results.”*





**Management
      Overview**




We
      are a
      global intimate apparel company with a portfolio of established, well-known
      brands, top-selling products and an iconic heritage. We design, source and
      market an extensive range of intimate apparel products, including bras, panties
      and shapewear. We sell through multiple distribution channels, including
      department stores, national chains, mass merchants (including warehouse clubs), specialty
      stores, off-price retailers, our company-operated outlet stores and our website.





We
      sell
      our products under some of the most recognized brands in the intimate apparel
      industry, including Maidenform, Flexees, Lilyette, Sweet Nothings, Self
      Expressions, Rendezvous, Subtract and Bodymates. Our Maidenform *,* Flexees
      and Lilyette brands are broadly sold in department stores and national chains.
      Our other brands are distributed through a national chain and selected mass
      merchants. These other brands carry our corporate endorsement and leverage
      our
      product technology, but are separate brands with distinctly different logos.
      In
      addition to our owned brands, we also supply private-label products to selected
      retailers.





We
      operate in two segments, wholesale and retail. Our wholesale segment includes
      both our domestic and international wholesale markets. Our retail segment
      includes our company-operated outlet stores and our website.





**Trends
      in Our Business**





We
      have
      identified many near-term opportunities for growth and operational improvements,
      as well as challenges to our business. In particular, management believes that
      there are many factors influencing the intimate apparel industry, including
      but
      not limited to: consistent demand for foundation garments, consumer demand
      for
      product innovation and leading brands, sourcing and supply chain efficiencies,
      continued growth of the mass merchant channel, pressure from retailers caused
      by
      the ongoing consolidation in the retail industry, increases in the cost of
      the
      raw materials used in intimate apparel products and uncertainty surrounding
      import restrictions.





We
      believe we are well-positioned to capitalize on or address these trends by,
      among other things:





Ø
            increasing
                consumer identification with our brands through further marketing
                investments;


Ø
            continuing
                to launch innovative products, such as the Maidenform Dream collection
                to
                be introduced in the third quarter of
                2005;


Ø
            increasing
                our presence in department stores and national
                chains;


Ø
            expanding
                our presence in the mass merchant channel primarily through the use
                of our
                Self Expressions, Sweet Nothings and Bodymates
                brands;


Ø
            expanding
                our international presence;


Ø
            being
                a marketer, rather than a manufacturer, of intimate apparel by sourcing
                all of our products from third-party
                suppliers;


Ø
            making
                selective acquisitions and or developing products and marketing that
                will
                complement our existing products or distribution channels;
                and


Ø
            merchandise,
                market and sell private label product for selected retailers.




15




**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**




*Wholesale
          Segment*
  The
          following trends are among the key variables that will affect our wholesale
          segment:




*Department
      Stores.* We
      plan
      to continue to invest in increasing our net sales in this channel, which we
      believe is important to our long-term positioning in the channel. In the
      department store channel, there has been a growing trend toward retailer
      consolidation. As a result, we expect the rate of our net sales growth to be
      moderated by the reduction in both the number of department store customers
      and
      the number of doors (distinct locations operated by a particular retailer)
      operated by those customers.





*National
      Chains.* In
      the
      national chains channel, we have grown both our market share and our net sales
      significantly in the past several years. We expect to see continued growth
      in
      this channel in the future as consumers continue to seek out value alternatives
      and as our customers in this channel continue to open new doors.





*Mass
      Merchants.* In
      the
      mass merchant channel, we intend to accelerate our penetration primarily through
      the use of our Self Expressions, Sweet Nothings and Bodymates brands to both
      mass merchants and, to a lesser degree, warehouse clubs. We have experienced
      significant growth in this channel over the past several years and expect to
      achieve significant growth in the future as we are able to increase both the
      floor space and number of doors at which our products are sold. We expect that
      both our net sales to this channel and our net sales to this channel as a
      percentage of our total net sales is likely to increase over time.





*International.* Our
      products are currently distributed in 48 foreign countries and territories,
      although our international sales represent only a modest portion of our total
      wholesale net sales. We intend to continue to focus our international selling
      efforts in markets with consumer preferences similar to those found in the
      United States, including the United Kingdom and Canada, where we have already
      developed a presence. We believe that we have established a broad footprint
      globally, and that there is a continuing opportunity to grow our brands and
      expand our presence in countries in which we currently sell.





*Other.* Our
      net
      sales from this channel have historically been a relatively small component
      of
      our overall net sales. We participate in private label in the specialty retailer
      area as opportunities present themselves. Because of fluctuations in
      opportunities in this channel and its relatively small contribution to our
      overall net sales, we do not view this as a meaningful component of our growth.
      We will selectively target strategic acquisitions to grow our consumer base
      and
      would utilize the acquired companies to complement the products, channels and
      geographic reach of our existing portfolio. We believe that acquisitions could
      enhance our product offerings to retailers and provide potential growth. We
      believe we can leverage our core competencies such as product development,
      brand
      management, logistics and marketing to create significant value from the
      acquired businesses.





*Retail
      Segment*




We
      believe our retail sales volume is driven by our ability to service our existing
      consumers and obtain new consumers, as well as overall general economic
      conditions, such as the general retail environment, that can affect our
      consumers and ultimately their levels of overall spending. Additionally,
      identifying optimal retail outlet locations, favorable leasing arrangements,
      and
      improving our store productivity are factors important to growing our retail
      segment’s net sales. We also sell our products through our website, www.maidenform.com,
      although we currently do not generate a significant amount of net sales through
      this channel.





16





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





Our
      objectives in our retail segment are to continue to increase the productivity
      of
      our portfolio of stores through effective merchandising and focused advertising,
      as well as selectively closing a few of our less productive locations and
      potentially opening new stores in more productive locations. Even in those
      situations where we selectively close less productive outlet stores and do
      not
      open a new location in that region, we believe those consumers can still
      purchase many of our Maidenform brands from our other outlet stores, our website
      or our wholesale segment customers that carry these brands. Historically, we
      have primarily sold excess and, to a lesser extent, obsolete inventories through
      our outlet stores at a higher margin than that achieved through other
      liquidation alternatives.





***Definitions***




In
      reviewing our operating performance, we evaluate both the wholesale and retail
      segments by focusing on each segment’s operating income, cash flows from
      operations and inventory turns.





*Net
      Sales* .
      Our net
      sales are derived from two operating segments, wholesale and retail. Our net
      sales in the wholesale segment are sales recorded net of cooperative advertising
      allowances, sales returns, sales discounts, and markdown allowances provided
      to
      our customers. Net sales in our retail segment are recorded at the
      point-of-sale.





*Cost
      of Sales* .
      During
      2005, we closed our remaining manufacturing facilities in Mexico and Florida;
      therefore, the principal elements of our cost of sales are for finished goods
      inventories purchased from our sourced vendors. Included in cost of sales and
      affecting our overall gross margins are freight expenses from the manufacturers
      to our distribution centers in situations where such expenses are charged
      separately. Also included in cost of sales is the cost of warehousing, labor
      and
      overhead related to receiving and warehousing at our distribution centers,
      and
      depreciation of assets related to our receiving and warehousing in our
      distribution centers. Direct labor, cost of fabrics, as well as raw materials
      for fabrics, are the primary components driving the overall cost of our sourced
      finished goods inventories from our sourcing vendors.





*Selling,
      General and Administrative (SG&A).* Our
      SG&A expenses include all of our marketing, selling, distribution and
      general and administrative expenses for both the wholesale and retail segments
      (which include our retail outlet store payroll and related benefits), and rent
      expense. General and administrative expenses include management payroll,
      benefits, travel, information systems, accounting, insurance and legal.
      Additionally, depreciation related to the shipping function in our distribution
      centers and our corporate office assets such as furniture, fixtures, and
      equipment, as well as amortization of intellectual property, is included in
      SG&A.





*Income
      Taxes.* We
      account for income taxes using the liability method, which recognizes the amount
      of income tax payable or refundable for the current year and recognizes deferred
      tax liabilities and assets for the future tax consequences of the events that
      have been recognized in the financial statements or tax returns. We routinely
      evaluate all deferred tax assets to determine the likelihood of their
      realization and record a valuation allowance if it is more likely than not
      that
      a deferred tax asset will not be realized. For more information, see Note 9
      to our condensed consolidated financial statements included elsewhere in this
      Form 10-Q. Net operating loss carryforwards (NOLs) enable a company to apply
      net
      operating losses incurred during a current period against a future period's
      profits in order to reduce cash tax liabilities in those future periods. In
      periods when a company is generating operating losses, its NOLs will increase.
      The tax effect of the NOLs is recorded as a deferred tax asset. If the company
      does not believe that it is more likely than not that it will be able to utilize
      the NOLs, it records a valuation allowance against the deferred tax asset.
      Additionally, Section 382 of the Internal Revenue Code ("Section 382")
      imposes limitations on a corporation's ability to utilize its NOLs if it
      experiences an "ownership change." In general terms, an ownership change results
      from transactions increasing the ownership of certain existing stockholders
      and,
      or, new stockholders in the stock of a corporation by more than
      50 percentage points during a three year testing period. Upon emergence
      from bankruptcy in 1999, our NOLs were subject to Section 382 limitations.
      As a result of the Acquisition (defined below) in 2004, we experienced a change
      in control, as defined by Section 382. As a result of this ownership
      change, the utilization of our NOLs are subject to a new annual limitation
      under
      Section 382. Any unused annual limitation may be carried over to later
      years, and the amount of the limitation may, under certain circumstances, be
      increased to reflect both recognized and deemed recognized "built-in gains"
      that
      occur during the 60-month period after the ownership change. Based on fair
      values of certain assets as determined in connection with the Acquisition and
      compared with those values in connection with the initial public offering,
      we
      have approximately $66.7 million of deemed built-in gains that are
      anticipated to be recognized or deemed recognized during the aforementioned
      60-month period. We have approximately $92.6 million of NOLs available
      for
      utilization in the years from 2005 through 2023. In addition, the sale of shares
      in the July 2005 initial public offering may have resulted in another change
      in
      control for the purpose of Section 382. We intend to assess the impact, if
      any,
      during the third quarter of 2005.





17





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





*Acquisition-Related
      Charges.* On
      May 11, 2004, MF Acquisition Corporation acquired 100% of
      Maidenform, Inc. (the "Acquisition") through a merger of its wholly
      owned
      subsidiary into Maidenform, Inc. Stockholders of Maidenform, Inc.
      received either cash or stock of MF Acquisition Corporation in exchange for
      their shares of Maidenform, Inc. On April 5, 2005, MF Acquisition
      Corporation changed its name to Maidenform Brands, Inc. Our capitalization
      structure changed significantly as a result of the Acquisition. Financing for
      the Acquisition totaled $237.3 million and was provided by a first lien
      term loan of $100.0 million, revolver borrowings of $12.5 million,
      a
      second lien term loan of $50.0 million and $74.8 million of cash
      and
      capital invested by MF Acquisition Corporation and other investors, including
      rollover equity by certain members of management of $2.8 million and
      continuing stockholders of $15.0 million.





The
      Acquisition was accounted for as a purchase in accordance with Statement of
      Financial Accounting Standards (SFAS) No. 141, "Business
      Combinations *,* "
      and
      Emerging Issues Task Force (EITF) No. 88-16, "Basis In Leveraged Buyout
      Transactions." Accordingly, the retained interest of the continuing stockholders
      (the 23.8% retained by certain members of management and continuing
      stockholders) was recorded at carryover basis. The remainder of the investment
      in the assets and liabilities acquired (the 76.2% acquired by new stockholders)
      was recorded at fair value. The excess of the purchase price over carryover
      basis of net assets acquired, treated as a deemed dividend of $21.5 million
      to continuing stockholders, was recognized as a reduction of stockholders'
      equity (deficit). As a result, the total purchase price of $205.2 million
      was allocated to the assets and liabilities based on their estimated fair values
      at the Acquisition date, after taking into account carryover basis as discussed
      above. The estimated fair values were determined by valuation reports provided
      by independent third-party appraisals.





**Results
      of Operations**




For
      discussion purposes only, our results for the three and six month periods ended
      June 26, 2004 discussed below represent the mathematical addition of the
      historical results for the Predecessor period from March 28, 2004 through May
      10, 2004 and the Successor period from May 11, 2004 through June 26, 2004 for
      the three months, and for the Predecessor period from December 28, 2003 through
      May 10, 2004 and the Successor period from May 11, 2004 through June 26, 2004
      for the six months. This approach is not consistent with generally accepted
      accounting principles and yields results that are not comparable on a
      period-to-period basis due to the new basis of accounting established at the
      Acquisition date. However, we believe it is the most meaningful way to comment
      on the results of operations for the three and six month periods ended July
      2,
      2005 compared to those of the three and six month periods ended June 26, 2004
      because a discussion of partial periods would not be meaningful.





The
      combined financial results shown below include certain purchase accounting
      adjustments and one-time charges directly related to the Acquisition, the most
      significant of which are $14.3 million of Acquisition-related charges incurred
      during the Predecessor period from December 28, 2003 through May 10, 2004 and
      a
      $10.8 million non-cash charge related to inventory recorded at fair market
      value
      in connection with the Acquisition and sold during the Successor period from
      May
      11, 2004 through June 26, 2004.





18





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**


Three
                  Months Ended
              
              Six
                  Months EndedSuccessor
              
              Combined
                  for
              
              Successor
              
              Combined
                  forthe
                  period from
              
              
              
              the
                  period fromMarch
                  28, 2004
              
              
              
              December
                  28, 2003through
              
              
              
              throughJuly
                  2, 2005
              
              June
                  26, 2004
              
              July
                  2, 2005
              
              June
                  26, 2004**OPERATING
                  DATA:**Wholesale
                  sales
              
              $
              87.5
              
              $
              79.4
              
              $
              177.7
              
              $
              147.5Retail
                  sales
              
              
              14.8
              
              
              14.5
              
              
              24.8
              
              
              25.0Net
                  sales
              
              
              102.3
              
              
              93.9
              
              
              202.5
              
              
              172.5Cost
                  of sales
              
              
              64.3
              
              
              65.1
              
              
              130.2
              
              
              116.3Gross
                  profit
              
              
              38.0
              
              
              28.8
              
              
              72.3
              
              
              56.2Selling,
                  general and administrative
              
              
              24.7
              
              
              23.9
              
              
              48.1
              
              
              45.1Acquisition-related
                  charges
              
              
              -
              
              
              14.3
              
              
              -
              
              
              14.3Operating
                  income (loss)
              
              $
              13.3
              
              $
              (9.4
              )
              $
              24.2
              
              $
              (3.2
              )


As
                  a percentage of net salesThree
                  Months Ended
              
              Six
                  Months EndedSuccessor
              
              Combined
                  for
              
              Successor
              
              Combined
                  forthe
                  period from
              
              
              
              the
                  period fromMarch
                  28, 2004
              
              
              
              December
                  28, 2003through
              
              
              
              throughJuly
                  2, 2005
              
              June
                  26, 2004
              
              July
                  2, 2005
              
              June
                  26, 2004**OPERATING
                  DATA:**Wholesale
                  sales
              
              
              85.5
              %
              
              84.6
              %
              
              87.8
              %
              
              85.5
              %Retail
                  sales
              
              
              14.5
              
              
              15.4
              
              
              12.2
              
              
              14.5Net
                  sales
              
              
              100.0
              
              
              100.0
              
              
              100.0
              
              
              100.0Cost
                  of sales
              
              
              62.9
              
              
              69.3
              
              
              64.3
              
              
              67.4Gross
                  profit
              
              
              37.1
              
              
              30.7
              
              
              35.7
              
              
              32.6Selling,
                  general and administrative
              
              
              24.1
              
              
              25.5
              
              
              23.8
              
              
              26.1Acquisition-related
                  charges
              
              
              -
              
              
              15.2
              
              
              -
              
              
              8.3Operating
                  income (loss)
              
              
              13.0
              %
              
              (10.0
              %)
              
              12.0
              %
              
              (1.9
              %)




***Net
      Sales***




Consolidated
      net sales increased $8.4 million, or 8.9%, from $93.9 million for the three
      months ended June 26, 2004 to $102.3 million for the three months ended July
      2,
      2005. Net sales in our wholesale segment increased by $8.1 million, or 10.2%,
      from $79.4 million for the three months ended June 26, 2004 to $87.5 million
      for
      the three months ended July 2, 2005. Net sales in our retail segment increased
      $0.3 million, or 2.1%, from $14.5 million for the three months ended June 26,
      2004 to $14.8 million for the three months ended July 2, 2005. Consolidated
      net
      sales increased $30.0 million, or 17.4%, from $172.5 million for the six months
      ended June 26, 2004 to $202.5 million for the six months ended July 2, 2005.
      Net
      sales in our wholesale segment increased by $30.2 million, or 20.5%, from $147.5
      million for the six months ended June 26, 2004 to $177.7 million for the six
      months ended July 2, 2005. Our net sales in the first quarter 2005
      benefited significant ly
      from a roll-out of certain products to all stores of a major mass merchant
      and the launch of a line of panties at a national chain. Net sales in our retail
      segment decreased $0.2 million, or 0.8%, from $25.0 million for the six months
      ended June 26, 2004 to $24.8 million for the six months ended July 2, 2005.




Our
      wholesale segment net sales are derived from the following channels: department
      stores, national chains, mass merchants (including warehouse clubs), specialty
      stores, and off-price retailers. Of the $8.1 million increase in wholesale
      net
      sales during the three months ended July 2, 2005, $6.9 million of the total
      increase was from increased sales in the mass merchant channel driven by
      increased allotted selling space, additional product placement within the stores
      and new door growth as compared to the three months ended June 26, 2004. An
      additional $4.7 million increase came from national chain stores primarily
      as a
      result of new door growth and additional product placement within the stores.
      The remaining sales increases resulted from $2.4 million from off-price
      retailers and $1.8 million from international sales. These increases were
      partially offset by a decrease in sales of $6.2 million to a specialty retailer
      due to discontinuation of certain styles and a decrease of $1.5 million from
      the
      department store channel.




19




**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





Of
      the
      $30.2 million increase in wholesale segment net sales during the six months
      ended July 2, 2005, $21.2 million of the total increase was from increased
      sales
      in the mass merchant channel driven by increased allotted selling space,
      additional product placement within the stores and new door growth as compared
      to the six months ended June 26, 2004. An additional $9.1 million increase
      came
      from national chain stores primarily as a result of new door growth and
      additional product placement within this channel. The remaining sales increases
      resulted from $4.3 million from international sales primarily due to new door
      growth and additional product placement within the stores and $3.2 million
      from
      off-price retailers. These increases were partially offset by a decrease in
      sales of $5.9 million to specialty retailers due to discontinuation and
      non-recurring launch of certain styles and a decrease of $1.7 million from
      the
      department store channel. Our net sales in the first quarter of 2005 benefited
      significantly from a roll-out of certain products to all stores of a
      major
      mass merchant and the launch of a line of panties at a national chain.





In
      our
      retail segment, we had 91 open outlet stores as of June 26, 2004 compared to
      81
      open outlet stores as of July 2, 2005.  The decline in retail net sales
      caused by fewer stores was more than offset by increased internet sales and
      increased same store sales for the three months ended July 2, 2005, and were
      offset in part by increased internet sales and increased same store sales for
      the six months ended July 2, 2005.  Same stores sales, defined as sales
      from stores open for more than one year, for the three month period ended July
      2, 2005 increased 1.9% as compared to the three months ended June 26, 2004
      and
      for the six month period ended July 2, 2005 increased 2.0% as compared to the
      six months ended June 26, 2004 due primarily to increased promotional offerings.
      Our internet sales increased by $0.4 million from $0.3 million for the three
      months ended June 26, 2004 to $0.7 million for the three months ended July
      2,
      2005. Our internet sales increased by $0.5 million from $0.6 million for six
      months ended June 26, 2004 to $1.1 million for the six months ended July 2,
      2005.





***Gross
      Profit***




Consolidated
      gross profit increased by $9.2 million from $28.8 million for the three months
      ended June 26, 2004 to $38.0 million for the three months ended July 2, 2005.
      As
      a percentage of net sales, gross margin increased by 6.4 percentage points
      from
      30.7% for the three months ended June 26, 2004 to 37.1% for the three months
      ended July 2, 2005.  Consolidated gross profit increased by $16.1 million
      from $56.2 million during the six months ended June 26, 2004 to $72.3 million
      for the six months ended July 2, 2005. As a percentage of net sales, gross
      profit increased by 3.1 percentage points from 32.6% for the six month periods
      ended June 26, 2004 to 35.7% for the six months ended July 2, 2005.





Both
      the
      three and six months ended June 26, 2004 include non-recurring adjustments
      of
      $10.8 million ($9.7 million recognized by our wholesale segment and $1.1 million
      recognized by our retail segment) related to increasing inventories to fair
      market value at the date of the Acquisition and the reversal of a $1.0 million
      reserve in our wholesale segment for a supplier advance that was no longer
      deemed required. Our gross margins for both the three and six month periods
      ended July 2, 2005 have been negatively impacted by increased manufacturing
      costs as a result of operating our plants at less than optimum capacity as
      we
      phased out our internal manufacturing through the closing of our remaining
      production facilities and by increased net sales to off-price retailers at
      a
      lower gross margin.





Gross
      profit for the wholesale segment was 28.1% for the three months ended June
      26,
      2004 as compared to 34.3% for the three months ended July 2, 2005 and 30.2%
      for
      the six months ended June 26, 2004 as compared to 33.4% for the six months
      ended
      July 2, 2005. Our gross margins for both the three and six month periods ended
      July 2, 2005 have been negatively impacted by the closing of our remaining
      production facilities and by increased net sales to off-price retailers as
      discussed above. Our gross margins for both the three and six month periods
      ended June 26, 2004 have been negatively impacted by the non-recurring
      adjustments as discussed above.





Gross
      profit for the retail segment was 44.8% for the three months ended June 26,
      2004
      as compared to 54.1% for the three months ended July 2, 2005 and 46.8% for
      the
      six months ended June 26, 2004 as compared to 52.0% for the six months ended
      July 2, 2005. Our gross margins for both the three and six month periods ended
      July 2, 2005 have been favorably impacted by increased internet sales offset
      by
      a change in sales mix in our retail stores. Our gross margins for both the
      three
      and six month periods ended June 26, 2004 have been negatively impacted by
      the
      non-recurring adjustments as discussed above.





20





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





***Selling,
      General and Administrative Expenses (SG&A)***




Consolidated
      SG&A increased by $0.8 million, or 3.3%, from $23.9 million for the three
      months ended June 26, 2004 to $24.7 million for the three months ended July
      2,
      2005. However, as a percentage of net sales, SG&A decreased from 25.5% for
      the three months ended June 26, 2004 to 24.1% for the three months ended July
      2,
      2005 primarily as a result of increased net sales. The $0.8 million increase
      is
      primarily a result of the following items within our wholesale segment: $1.3
      million of expenses associated with our initial public offering and an increase
      of $1.5 million primarily from amortization of intangible assets and severance
      expense. Partially offsetting these changes was a decrease of $1.7 million
      in
      payroll and related benefits from a reduction in our incentive compensation
      and
      other benefits, and a decrease of $0.3 million in other expenses.





Consolidated
      SG&A increased by $3.0 million, or 6.7%, from $45.1 million for the six
      months ended June 26, 2004 to $48.1 million for the six months ended July 2,
      2005. However, as a percentage of net sales, SG&A decreased from 26.1% for
      the six months ended June 26, 2004 to 23.8% for the six months ended July 2,
      2005 primarily as a result of increased net sales. The $3.0 million increase
      is
      primarily a result of the following items within our wholesale segment: $1.9
      million of expenses associated with our initial public offering; $1.3 million
      of
      increased professional fees associated with Sarbanes-Oxley compliance, legal
      services and recruiting expense; $1.1 million severance expense. Partially
      offsetting these changes was a decrease in payroll and related benefits
      of
      $1.0 million from a reduction in our incentive compensation and other benefits,
      and a decrease of $0.3 million in other expenses.




Wholesale
      segment SG&A, which includes corporate-related expenses, increased by $0.9
      million, or 5.4%, from $16.7 million for the three months ended June 26, 2004
      to
      $17.6 million for the three months ended July 2, 2005. However, as a percentage
      of net sales, wholesale segment SG&A declined from 21.0% for the three
      months ended June 26, 2004 to 20.1% for the three months ended July 2, 2005.
      Our
      wholesale segment SG&A increased by $3.1 million, or 9.8%, from $31.5
      million for the six months ended June 26, 2004 to $34.6 million for the six
      months ended July 2, 2005. However, as a percentage of net sales, SG&A
      decreased from 21.4% for the six months ended June 26, 2004 to 19.5% for the
      six
      months ended July 2, 2005. The increase of $0.9 million for the three months
      ended July 2, 2005 and the increase of $3.1 million for the six months ended
      July 2, 2005 are a result of the fluctuations discussed above.





SG&A
      for our retail segment decreased by $0.1 million, or 1.4%, from $7.2 million
      for
      the three months ended June 26, 2004 to $7.1 million for the three months ended
      July 2, 2005. However, as a percentage of net sales, SG&A decreased from
      49.7% for the three months ended June 26, 2004 to 48.0% for the three months
      ended July 2, 2005. Our retail segment SG&A decreased by $0.1 million, or
      0.7%, from $13.6 million for the six months ended June 26, 2004 to $13.5 million
      for the six months ended July 2, 2005. As a percentage of net sales, SG&A
      remained flat at 54.4% for the six months ended June 26, 2004 and for the six
      months ended July 2, 2005.





As
      a
      result of our initial public offering in July 2005, we will incur additional
      expenses associated with being a public company. The three and six month periods
      discussed above do not include such expenses. We estimate that the additional
      expenses will be approximately $0.8 million per quarter.





***Acquisition-Related
      Charges***




Acquisition-related
      charges of $14.3 million were recorded in May 2004 in connection with the
      Acquisition, including (i) $6.6 million for sellers’ transaction fees and
      expenses, (ii) $5.6 million for stock compensation expense from settlement
      of
      stock options on May 10, 2004, (iii) $2.0 million in special compensation paid
      to management and (iv) $0.1 million in other Acquisition-related
      charges.





***Operating
      Income (Loss)***




Our
      consolidated operating income increased by $22.7 million from a loss of $(9.4)
      million for the three months ended June 26, 2004 to $13.3 million for the three
      months ended July 2, 2005. Our consolidated operating income increased by $27.4
      million from a loss of $(3.2) million for the six months ended June 26, 2004
      to
      $24.2 million for the six months ended July 2, 2005. Our operating income for
      both the three and six month periods ended July 2, 2005 have been negatively
      impacted by the closing of our remaining production facilities and by increased
      net sales to off-price retailers as discussed above. Both the three and six
      months ended June 26, 2004 was negatively impacted by certain adjustments and
      non-recurring charges, including the Acquisition-related charges of $14.3
      million, as discussed above.





21





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





For
      the
      foregoing reasons, operating income for the wholesale segment increased by
      $6.8
      million, from $5.6 million during the three months ended June 26, 2004 to $12.4
      million during the three months ended July 2, 2005. Operating income for the
      wholesale segment increased by $11.8 million, from $13.0 million during the
      six
      months ended June 26, 2004 to $24.8 million during the six months ended July
      2,
      2005.





Also,
      for
      the reasons discussed above, operating income for the retail segment increased
      by $1.6 million from a loss of $(0.7) million during the three months ended
      June
      26, 2004 to $0.9 million during the three months ended July 2, 2005. The retail
      segment’s operating loss decreased by $1.3 million from a loss of $(1.9) million
      during the six months ended June 26, 2004 to a loss of $(0.6) million during
      the
      six months ended July 2, 2005.





***Interest
      Expense, Net***




On
      June
      29, 2005, we amended our Credit Facility by prepaying the total balance of
      $50.0
      million outstanding on our Second Lien Facility bearing an interest rate of
      LIBOR plus 7.5%. Simultaneously, we increased the borrowings
      on our First Lien Term Facility from $88.9 million to $150.0 million and
      modified the interest rate from LIBOR plus 2.75% to LIBOR plus 2.25%. This
      2.25%
      margin will be reduced by 0.25% on December 29, 2005. If our leverage ratio
      is
      less than 3 to 1, then, after
      that date, the 2.00% margin will be further reduced by 0.25%.




Interest
      expense, net increased by $4.8 million from $3.2 million for the three months
      ended June 26, 2004 to $8.0 million for the three months ended July 2, 2005,
      resulting from expensing deferred financing costs of $4.9 million in connection
      with the amendment of our Credit Facility and the prepayment of the Second
      Lien
      Facility on June 29, 2005.





Interest
      expense, net increased $7.0 million from $3.9 million for the six months ended
      June 26, 2004 to $10.9 for the six months ended July 2, 2005. This increase
      was
      a result of expensing deferred financing costs of $4.9 million in connection
      with the amendment of our Credit Facility and the repayment of the Second Lien
      Facility on June 29, 2005 and higher debt outstanding at a higher interest
      rate
      during the six months ended July 2, 2005. The average balance of total debt
      outstanding increased from $80.4 million for the six months ended June 26,
      2004
      to $144.6 million for the six months ended July 2, 2005 and the average interest
      rate during the six months ended June 26, 2004 was 5.7% as compared to a 7.0%
      average interest rate during the six months ended July 2, 2005.





***Income
      Tax Expense (Benefit)***




We
      review
      our annual effective tax rate on a quarterly basis and we make necessary changes
      if information or events warrant such changes. The annual effective tax rate
      is
      forecasted quarterly using actual historical information and forward-looking
      estimates. The estimated annual effective tax rate may fluctuate due to changes
      in forecasted annual operating income; changes to the valuation allowance for
      deferred tax assets; changes to actual or forecasted permanent book to tax
      differences (non-deductible expenses); impacts from future tax settlements
      with
      state, federal or foreign tax authorities; or impacts from tax law changes.
      Our
      effective income tax rate for the three and six month Successor periods ended
      July 2, 2005 was 51.3% and 46.9%, respectively,  as compared to an
      effective income tax rate for the combined Predecessor and Successor three
      and
      six month periods ended June 26, 2004 of  (20.7)% and (5.6)%, respectively.
       Our income tax expense for the three and six month periods ended July
      2,
      2005 was negatively impacted by non-deductible expenses incurred during those
      periods in connection with our initial public offering.  During the
      three
      and six month periods ended June 26, 2004, we incurred losses before the
      provision for income taxes.  The income tax benefit from the losses
      was
      negatively impacted by non-deductible expenses incurred during those periods
      in
      connection with the Acquisition.





Because
      of significant net operating loss carryforwards (NOLs) available to offset
      income taxes payable, our cash income taxes to be paid will be at a rate
      significantly lower than the effective income tax rate. These NOLs have the
      effect of reducing the GAAP effective income tax rate as reported on our income
      statement to a lower income tax rate to be paid on a cash basis.





***Net
      Income (Loss)***




For
      the
      foregoing reasons, our net income (loss) increased from a loss of $(10.0)
      million for the three months ended June 26, 2004 to net income of $2.6 million
      for the three months ended July 2, 2005. Our net income (loss) for the six
      months ended increased from a loss of $(6.6) million for the six months ended
      June 26, 2004 to net income of $7.0 million for the six months ended July 2,
      2005.





22





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





***Preferred
      Stock Dividends and Changes in Redemption Value***




For
      the
      three months ended July 2, 2005, preferred stock dividends and accretion include
      a special preferred stock dividend of $13.3 million, the accrual of $1.5 million
      of preferred stock dividends, and the reduction of the preferred stock
      redemption premium of $(0.7) million. The three months ended June 26, 2004
      include $2.2 million of accretion related to the preferred stock issued in
      connection with the Acquisition.





For
      the
      six months ended July 2, 2005 preferred stock dividends and accretion include
      a
      special preferred stock dividend of $13.3 million, the accrual of $2.9 million
      of preferred stock dividends, and the reduction of the preferred stock
      redemption premium of $(0.7) million. The six months ended June 26, 2004 include
      $2.2 million of accretion related to the preferred stock issued in connection
      with the Acquisition.





***Net
      Loss Available to Common Stockholders***




For
      the
      foregoing reasons, the net loss available to common stockholders for the three
      months ended July 2, 2005 was $(11.5) million as compared to net loss of $(12.1)
      million for the three months ended June 26, 2004. The net loss available to
      common stockholders for the six months ended July 2, 2005 was $(8.5) million
      as
      compared to net loss of $(8.8) million for the six months ended June 26, 2004.





**Liquidity
      and Capital Resources**




For
      discussion purposes only, our six months ended June 26, 2004 cash flow data
      represent the mathematical addition of the historical cash flow data for the
      Predecessor period from December 28, 2003 through May 10, 2004 and the Successor
      period from May 11, 2004 through June 26, 2004. This approach is not consistent
      with generally accepted accounting principles and yields results that are not
      comparable on a period-to-period basis due to the new basis of accounting
      established at the Acquisition date. However, we believe it is the most
      meaningful way to comment on the cash flows for the six months ended June 26,
      2004 compared to the six months ended July 2, 2005 because a discussion of
      partial periods would not be meaningful.





*Operating
      activities.* Cash
      flows used in operating activities were $12.8 million in the six months ended
      July 2, 2005 compared to cash flows provided by operating activities of $4.6
      million in the six months ended June 26, 2004. This change in cash from
      operating activities was due to increased accounts receivable and inventory
      and
      lower accrued expenses and other liabilities, primarily due to the timing of
      Acquisition-related expenses in the prior year period. Year-end fiscal 2004
      inventories were abnormally low as a result of import restrictions related
      to
      the China safeguards in place at the end of fiscal 2004. Accounts receivable
      at
      the end of the second quarter of 2005 rose to $51.9 million from $42.9 million
      for the comparable period of 2004 and up from $24.0 million at the  end
      of
      fiscal 2004. These factors were partially offset by higher net income, an
      increase in accounts payable associated with the increased inventory and an
      increase in higher income taxes payable (primarily due to non-deductible
      expenses associated with our initial public offering and the collection of
      our
      income tax receivable outstanding at fiscal year end 2004).





*Investing
      activities.* There
      were no cash flows used in investing activities in the six months ended July
      2,
      2005 compared to cash flows used in investing activities of $159.5 million
      in
      the six months ended June 26, 2004. The significant use of cash in the six
      months ended June 26, 2004 was primarily due to payments of $158.5 million
      related to the Acquisition.




*Financing
      activities.* Cash
      flows used in financing activities were $3.2 million in the six months ended
      July 2, 2005 compared to cash flows provided by financing activities of $154.8
      million in the six months ended June 26, 2004. The decrease is mainly due to
      lower net borrowings and the payment of a special preferred stock dividend
      during the six months ended July 2, 2005. The cash provided from financing
      activities during the six months ended June 26, 2004 was primarily from
      borrowings from new credit facilities entered into at the time of the
      Acquisition, offset by payment of all debt outstanding at May 11, 2004.




On
      June
      29, 2005, we amended our existing First Lien Facilities and prepaid the
      outstanding balance of our Second Lien Facility. The amended First Lien
      Facilities (“Credit Facility”) provides for borrowings in the aggregate amount
      of $200,000 maturing on May 11, 2010 and is comprised of: (i) a $150,000
      amortizing term loan facility (the “Term Loan Facility’’) and (ii) a $50,000
      revolving credit facility (the ‘‘Revolving Facility’’). In connection with the
      Credit Facility, we paid fees of $2.4 million, and in connection with the
      repayment of the Second Lien Facility, we paid a prepayment penalty fee of
      $1.0
      million. For the six month period ended July 2, 2005, amortization of financing
      costs included in interest expense was $5.6 million (which includes $4.9 million
      of deferred financing expense in connection with the amendment of the First
      Lien
      Facilities and the prepayment of the Second Lien Facility).





23




**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





As
      of
      July 2, 2005, we had $150.0 million outstanding under our Term Loan Facility
      and
      we had approximately $37.8 million available for borrowings under the Revolving
      Facility after giving effect to $10.0 million of outstanding borrowings under
      the Revolving Facility and $2.2 million of outstanding letters of credit. We
      use
      the letters of credit as collateral for our workers’ compensation insurance
      programs and bonds issued on our behalf to secure our obligation to pay customs
      duties. We were in compliance with all debt covenants at July 2, 2005. On August
      1, 2005, we paid the total amount of outstanding borrowings on our Revolving
      Facility, which totaled $10.0 million.





On
      July
      22, 2005, we priced an initial public offering of 14,513,889 shares of common
      stock of which 3,375,000 and 11,138,889 shares were offered by us and certain
      selling stockholders, respectively, at a price of $17.00 per share. Upon the
      consummation of the offering on July 27, 2005, net proceeds of $53.4 million
      and
      $176.1 million were distributed to us and selling stockholders, respectively.
      Approximately $46.8 million of the net proceeds to us was used to redeem all
      the
      outstanding shares of our preferred stock, including shares of preferred stock
      acquired upon the exercise of all outstanding options to purchase shares of
      our
      preferred stock, and pay all accrued and unpaid dividends associated with the
      preferred stock and preferred stock options. In addition, the put option on
      certain shares of common stock classified as temporary equity was extinguished
      as a result of the initial public offering and such common stock will no longer
      be classified as temporary equity.





We
      believe that our existing cash balances and available borrowings under the
      Revolving Facility, along with our future cash flow from operations, will enable
      us to meet our liquidity needs and capital expenditure requirements for at
      least
      the next 12 months.





***Contractual
      Obligations***




We
      have
      various contractual obligations which are recorded as liabilities in our
      consolidated financial statements. Other items, such as certain purchase
      commitments and other executory contracts are not recognized as liabilities
      in
      our consolidated financial statements but are required to be disclosed. For
      example, we are contractually committed to make certain minimum lease payments
      for the use of property under operating lease agreements.





The
      following table summarizes our significant contractual obligations and
      commercial commitments at July 2, 2005 and the future periods in which such
      obligations are expected to be settled in cash. In addition, the table reflects
      the timing of principal payments on outstanding borrowings. Additional details
      regarding these obligations are provided in the notes to our condensed
      consolidated financial statements included elsewhere in this Form
      10-Q.


**Balance
                  of****fiscal**
              
              **In
                  fiscal**
              
              **In
                  fiscal**
              
              **In
                  fiscal**
              
              **In
                  fiscal****2005**
              
              **2006**
              
              **2007**
              
              **2008**
              
              **2009**
              
              **Thereafter**
              
              **Total****(in
                  millions)**Short-term
                  debt
              
              $
              10.4
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              10.4Long-term
                  debt (1)
              
              
              0.7
              
              
              1.5
              
              
              1.5
              
              
              1.1
              
              
              37.2
              
              
              108.0
              
              
              150.0Interest
                  on long-term debt (2)
              
              
              4.2
              
              
              8.2
              
              
              8.2
              
              
              8.1
              
              
              7.5
              
              
              1.5
              
              
              37.7Operating
                  lease
              
              
              2.5
              
              
              4.2
              
              
              2.7
              
              
              2.1
              
              
              1.0
              
              
              0.7
              
              
              13.2Total
                  financial obligations
              
              
              17.8
              
              
              13.9
              
              
              12.4
              
              
              11.3
              
              
              45.7
              
              
              110.2
              
              
              211.3Purchase
                  obligations (3)
              
              
              48.5
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              48.5Total
                  financial obligations and commitments
              
              $
              66.3
              
              $
              13.9
              
              $
              12.4
              
              $
              11.3
              
              $
              45.7
              
              $
              110.2
              
              $
              259.8





*(1)
      For the years 2006 through the expiration date of the Credit Facility, we may
      be
      required to make annual consolidated excess cash flow payments depending on
      applicable leverage ratios.*


*(2)
      The interest rate for the variable portion of long-term debt was the rate in
      effect at July 2, 2005.*


*(3)
      Unconditional purchase obligations are defined as agreements to purchase goods
      that are enforceable and legally binding on us and that specify all significant
      terms, including fixed or minimum quantities to be purchased; fixed, minimum,
      or
      variable price provisions; and the approximate timing of the transaction. The
      purchase obligations category above relates to commitments for inventory
      purchases. Amounts reflected in our condensed consolidated balance sheets in
      accounts payable or other current liabilities are excluded from the table
      above.*





24





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





In
      addition to the total contractual obligations and commitments included in the
      table above, we have the following obligations and commitments: (i) pension
      and
      post-retirement benefit obligations included in other non-current liabilities
      (we expect to contribute approximately $1.7 million to our pension and
      post-retirement plans before the end of September 2005), and (ii) the redemption
      of our preferred stock, which occurred in connection with our initial public
      offering (see Liquidity and Capital Resources - Financing
      Activities).





***Contingent
      Commitments and Contingencies***




We
      also
      have certain contractual arrangements that would require us to make payments
      or
      provide funding if certain circumstances occur. We do not currently expect
      that
      the remaining contingent commitments will result in any amounts being paid
      by
      us.





**Critical
      Accounting Policies and Estimates**




Our
      discussion and analysis of our financial condition and results of operations
      is
      based upon our condensed consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States. The preparation of these financial statements requires us to
      make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues, expenses, and related disclosure of contingent assets and liabilities.
      We base our estimates on historical experience and on various other assumptions
      that we believe are reasonable under the circumstances, the results of which
      form the basis for making judgments about the carrying values of assets and
      liabilities that are not readily apparent from other sources. Actual results
      may
      differ from these estimates under different assumptions or conditions. A
      summary
      of our significant accounting policies and a description of accounting policies
      that we believe are most critical may be found in the Management’s Discussion
      and Analysis of Financial Conditions and Results of Operations included in
      our
      registration statement on Form S-1 (Registration No. 333-124228), as declared
      effective by the Securities and Exchange Commission on July 21, 2005.





***Recently
      Issued Accounting Standards***




In
      November 2004, the FASB issued SFAS No. 151, ‘‘Inventory Cost—An Amendment of
      ARB 43, Chapter 4,’’ to clarify that abnormal amounts of certain costs should be
      recognized as period costs. This Statement is effective for fiscal years
      beginning after June 15, 2005. We are currently evaluating the impact, if any,
      that SFAS No. 151 will have on our consolidated statements of financial
      position, results of operations and cash flows.





In
      December 2004, the FASB issued SFAS No. 123-R (revised 2004), ‘‘Share Based
      Payment,’’ which is a revision of SFAS No. 123, ‘‘Accounting for Stock-Based
      Compensation.’’ This Statement supersedes APB Opinion No. 25, ‘‘Accounting for
      Stock Issued to Employees,’’ and its related implementation guidance. This
      Statement focuses primarily on accounting for transactions in which an entity
      obtains employee services in share-based payment transactions and is effective
      for fiscal years beginning after June 15, 2005. As we have already adopted
      SFAS
      No. 123, we do not believe that this revision will have a significant effect
      on
      our consolidated statements of financial position, results of operations and
      cash flows.





**Risk
      Factors That May Affect Future Results**




*Any
      investment in our common stock involves a high degree of risk.  You
      should
      consider carefully the risks described below, together with the other
      information contained in this report.  If any of the following events
      actually occurs, our business, financial condition and results of operations
      may
      suffer materially.  As a result, the market price of our common stock
      could
      decline, and you could lose all or part of your investment in our common
      stock.*





***Risks
      Related To Our Business and Our Industry***




**Our
      growth cannot be assured. Even if we do experience growth, we cannot assure
      you
      that we will grow profitably.**




Although
      we have experienced significant growth in our net sales since 2001, historical
      growth rates may not be sustainable and are not necessarily indicative of future
      operating results. Our efforts to generate future growth in net sales might
      not
      be successful or result in increased net sales, higher margins or continued
      profitability. To the extent that net sales do not grow at anticipated rates,
      that increases in operating expenses precede or are not subsequently followed
      by
      commensurate increases in net sales, or that we are unable to adjust operating
      expense levels accordingly, our business, results of operations and financial
      condition could be materially and adversely affected.





25





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





**We
      have experienced losses in the past and may incur losses in the
      future.**




We
      experienced net losses for our 2004 fiscal year and for each of the fiscal
      years
      from 1995 to 2001. Furthermore, our predecessor company declared bankruptcy
      in
      July 1997 and emerged from bankruptcy in July 1999. We expect that our expenses
      will increase in the near term in order to continue expanding our business
      and
      to meet the requirements related to being a public company. We might not be
      able
      to return to profitability and we may incur losses in future periods. If we
      are
      not able to return to profitability, our stock price is likely to
      decline.





**If
      we experience fluctuations in our results of operations or rate of growth and
      fail to meet net sales and earnings expectations, our stock price may fall
      rapidly and without advance notice.**




We
      base
      our current and future expense levels and our investment plans on estimates
      of
      our future net sales and future rate of growth, and our actual results may
      vary
      significantly from these estimates. We expect that our expenses will generally
      increase in the future, but may fluctuate from period to period. We may not
      be
      able to adjust our spending quickly enough if our net sales fall short of our
      expectations.





Our
      results of operations depend on both the continued growth of demand for the
      products we offer and, to a lesser extent, general economic and business
      conditions. Any softening of demand for the products we offer will harm our
      operating results.





A
      new
      product introduction by us may result in higher growth in our net sales in
      the
      quarter in which the product is introduced as compared to subsequent quarters,
      when the customer is re-stocking the item rather than stocking it for the first
      time.





Our
      results of operations may fluctuate on a quarterly basis, which could result
      in
      decreases in our stock price. Growth in net sales may not be sustainable and
      may
      decrease in the future. We believe that period-to-period comparisons of our
      results of operations may not be meaningful, and you should not rely upon them
      as an indication of future performance.





**We
      depend on a limited number of customers for a significant portion of our sales,
      and our financial success is linked to the success of our customers, our
      customers’ commitment to our products and our ability to satisfy and retain our
      customers. Some of our customers have experienced financial difficulties during
      the past several years.**




We
      depend
      on a limited number of customers for a significant portion of our sales. 
      One customer accounted for more than 10% of our net sales in the three months
      ended July 2, 2005.  We expect that these customers will continue to
      represent a significant portion of our net sales in the future, especially
      with
      the consolidation that is occurring in the retail industry.




We
      sell
      the majority of our products to department stores, national chains and mass
      merchants which in turn sell our products to consumers. We do not have long-term
      contracts with any of our customers, as sales to retailers are generally made
      on
      an order-by-order basis. If we cannot fill customers’ orders on time, orders may
      be cancelled and relationships with customers may suffer, which could have
      an
      adverse effect on us. Furthermore, if any of our customers experiences a
      significant downturn in its business, or fails to remain committed to our
      products or brands, the customer may reduce or discontinue purchases from us.
      The loss of a customer or a reduction in the amount of our products purchased
      by
      one or more of our customers could have a material adverse effect on our
      business, results of operations or financial condition.




During
      the past several years, various retailers, including some of our customers,
      have
      experienced significant changes and difficulties, including restructurings,
      bankruptcies and liquidations. These and other financial problems experienced
      by
      some of our customers, as well as general weakness in the retail environment,
      increase the risk of extending credit to these customers. A significant adverse
      change in a customer relationship or in a customer’s financial position could
      cause us to limit or discontinue business with that customer, require us to
      assume more credit risk relating to that customer’s receivables or limit our
      ability to collect amounts related to previous purchases by that customer,
      all
      of which could have a material adverse effect on our business, results of
      operations or financial condition.





26




**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





**We
      operate in a highly competitive market, and the size and resources of some
      of
      our competitors may allow them to compete more effectively than we can,
      resulting in a loss of market share and, as a result, a decrease in net sales
      and profitability.**




The
      intimate apparel industry is highly competitive. Competition is generally based
      upon product quality, brand name recognition, price, selection, service and
      purchasing convenience. Both branded and private label manufacturers compete
      in
      the intimate apparel industry. Our primary competitors include Cupid Foundations
      Inc., Gap Inc., Jockey International, Inc., Kellwood Company, the Lane Bryant
      division of Charming Shoppes, Inc., Sara Lee Corporation, Triumph International,
      VF Corporation, the Victoria’s Secret division of Limited Brands, Inc., Wacoal
      Corp. and The Warnaco Group, Inc. Because of the highly fragmented nature of
      the
      balance of the industry, both domestically and internationally, we also compete
      with many small manufacturers and retailers. Additionally, department stores,
      specialty stores and other retailers, including our customers, have significant
      private label product offerings that compete with us, and these retailers may
      choose to source these private label product offerings directly from third-party
      manufacturers.





Specialty
      retailers, such as Victoria’s Secret, have grown at a faster rate in recent
      years than the industry in general and than department stores and national
      chains, to which we sell the majority of our products, in particular.
      Furthermore, many specialty retailers primarily sell private label products,
      and
      we cannot predict the future growth, if any, for our products in the specialty
      retailer channel.





Many
      of
      our competitors have significantly greater financial, marketing and other
      resources, broader product lines outside of intimate apparel and larger customer
      bases than we have and are less financially leveraged than we are. As a result,
      these competitors may be able to:





Ø
            adapt
                to changes in customer requirements more
                quickly;


Ø
            introduce
                new and more innovative products more
                quickly;


Ø
            better
                adapt to downturns in the economy or other decreases in
                sales;


Ø
            better
                withstand pressure to accept customer returns of their products or
                reductions in inventory levels carried by our
                customers;


Ø
            take
                advantage of acquisition and other opportunities more
                readily;


Ø
            devote
                greater resources to the marketing and sale of their
                products;


Ø
            adopt
                more aggressive pricing policies and provide greater contributions
                to
                retailer price markdowns than we can;
                and


Ø
            control
                sourcing production, thereby creating delays for our
                products.





The
      elimination of quotas and other trade barriers could increase competition
      further, as barriers to entry into the industry are reduced.





We
      might
      not be able to compete successfully with these competitors in the future. If
      we
      fail to compete successfully, our market share and results of operations would
      be materially and adversely affected.





**Retail
      trends could result in increased downward pressure on our prices, reduced floor
      space for our products and other changes that could be harmful to our
      business.**




There
      has
      been a growing trend toward retailer consolidation and, as a result, we
      increasingly sell our products to a reduced number of customers. As a result
      of
      this consolidation, we have observed an increased centralization of buying
      decisions and greater negotiating power by such retailers. Policy changes by
      our
      customers, such as reductions in inventory levels, limitations on access to
      display space and other changes by customers, could result in lower net sales.
      These consolidations in the retail industry, as well as further consolidations
      that may occur in the future, could result in price and other competition that
      could damage our business. Additionally, as our customers grow larger, they
      may
      increasingly require us to provide them with our products on an exclusive basis,
      which would cause an increase in the number of stock keeping units, or SKUs,
      we
      must carry and, consequently, our inventory levels and working capital
      requirements would increase. The potential impact of these types of policy
      changes by our customers has been amplified by the recent consolidation of
      retailers, as each retailer now represents a greater portion of our
      sales.





**The
      intimate apparel industry is subject to pricing pressures that may cause us
      to
      lower the prices we charge for our products.**




Average
      prices in the intimate apparel industry have been declining over the past
      several years, primarily as a result of the growth of the mass merchant channel
      of distribution, increased competition, consolidation in the retail industry
      and
      a general economic slowdown.





27





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





To
      remain
      competitive, we must adjust our prices from time to time in response to these
      industry-wide pricing pressures. Many of our competitors source their product
      requirements, as we do, from lesser-developed countries to achieve lower
      operating costs. Our competitors may possibly source from regions with lower
      costs than those of our sourcing partners and those competitors may apply such
      additional cost savings to further reduce prices.





Moreover,
      increased customer demands for markdown allowances, incentives and other forms
      of economic support reduce our gross margins and affect our profitability.
      Our
      financial performance may be negatively affected by these pricing pressures
      if
      we are forced to reduce our prices without being able to correspondingly reduce
      our production costs or if our production costs increase and we cannot increase
      our prices.





**We
      may not be able to keep pace with constantly changing fashion trends, and if
      we
      misjudge consumer preferences, the image of one or more of our brands may suffer
      and the demand for our products may decrease.**




Our
      success depends, in part, on management’s ability to anticipate and respond
      effectively to rapidly changing fashion trends and consumer tastes and to
      translate market trends into appropriate, saleable product offerings. If we
      are
      unable to successfully anticipate, identify or react to changing styles or
      trends and misjudge the market for our products or any new product lines, our
      sales may be lower and we may be faced with a significant amount of unsold
      finished goods inventory. In response, we may be forced to increase our
      marketing promotions, to provide markdown allowances to our customers, or to
      liquidate excess merchandise, any of which could have a material adverse effect
      on our net sales and profitability. Our brand image may also suffer if customers
      believe that we are no longer able to offer innovative products, respond to
      the
      latest fashion trends or maintain the quality of our products.





Even
      if
      we are able to anticipate and respond effectively to changing fashion trends
      and
      consumer preferences, our competitors may quickly duplicate or imitate one
      or
      more aspects of our products, promotions, advertising, brand image and business
      processes, whether or not they are protected under applicable intellectual
      property law, which may materially reduce our sales and
      profitability.





**Our
      customers may decide to discontinue carrying one or more of our brands or
      product lines in their stores if the brand or product line does not generate
      sufficient retail sales.**




Retailers
      have in the past sought, and may in the future seek, to consolidate their
      product offerings and reduce the number of overlapping products they carry
      in an
      effort to reduce their inventory and other costs. In doing so, retailers may
      decide not to purchase one or more of our brands or product lines if that brand
      or product line does not generate sufficient retail sales and profits for the
      retailer. The decision by any one of our major customers to stop selling one
      or
      more of our brands or product lines may result in other retailers following
      suit. Even if other retailers do not stop selling the brand or product line,
      the
      loss of economies of scale may make it less profitable for us to continue
      selling the brand or product line. We may ultimately be required to discontinue
      selling that brand or product line, which may have a material adverse effect
      on
      our net sales and profitability.





**Our
      substantial leverage could adversely affect our financial
      condition.**




Our
      substantial indebtedness could have significant negative consequences. For
      example, it could:





Ø
            increase
                our sensitivity to interest rate
                fluctuations;


Ø
            limit
                our ability to obtain additional financing to fund future working
                capital,
                capital expenditures, and
                other general corporate requirements, or to carry out other aspects
                of our
                business plan;


Ø
            require
                us to dedicate a substantial portion of our cash flows from operations
                to
                pay principal of, and interest on, our indebtedness, thereby reducing
                the
                availability of that cash flow to fund working capital, capital
                expenditures or other general corporate purposes, or to carry out
                other
                aspects of our business plan;


Ø
            limit
                our flexibility in planning for, or reacting to, changes in our business
                and the industry;


Ø
            cause
                our suppliers to institute more onerous payment terms generally or
                require
                us to purchase letters of credit for this
                purpose;


Ø
            limit
                our ability to enter into new store leases or renew existing store
                leases;


Ø
            make
                us more sensitive to any future reduction in our long-term credit
                rating,
                which could result in reduced access to the capital markets and higher
                interest costs on future
                financings;


Ø
            lead
                us to have less favorable credit terms which would increase the amount
                of
                working capital necessary to conduct our business;
                and


Ø
            place
                us at a competitive disadvantage compared to our competitors that
                have
                less debt.





28





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





In
      addition, our credit facility contains financial and other restrictive covenants
      that may limit our ability to engage in activities that may be in our long-term
      best interests such as selling assets, strategic acquisitions, paying dividends,
      and borrowing additional funds. Our failure to comply with those covenants
      could
      result in an event of default which, if not cured or waived, could result in
      the
      acceleration of all of our debt which could leave us unable to meet some or
      all
      of our obligations. See Note 4 to our condensed consolidated financial
      statements included elsewhere in this Form 10-Q.





**External
      events may cause disruptions to our supply chain, result in increased cost
      of
      sales or lead to an inability to deliver our products to our
      customers.**




Historically,
      we sourced a substantial portion of our offshore production through a network
      of
      various vendors in the Asia-Pacific region, including China. Commencing in
      August 2005, we moved all of our production offshore. There are myriad potential
      events that could disrupt our foreign supply chain, including the
      following:





Ø
            political
                instability, acts of war or terrorism, or other international events
                resulting in the disruption of trade with countries where our sourcing
                partners’ manufacturing facilities are
                located;


Ø
            disruptions
                in shipping and freight forwarding services, including as a result
                of
                dockworker or port strikes;


Ø
            increases
                in oil prices, which would increase the cost of
                shipping;


Ø
            interruptions
                in the availability of basic services and infrastructure, including
                power
                shortages;


Ø
            extraordinary
                weather conditions (such as hurricanes) or natural disasters (such
                as
                earthquakes or tsunamis); or


Ø
            the
                occurrence of an epidemic, the spread of which may impact our ability
                to
                obtain products on a timely basis.





These
      and
      other events could interrupt production in offshore facilities, increase our
      cost of sales, disrupt merchandise deliveries, delay receipt of the products
      into the United States or prevent us from sourcing our products at all.
      Depending on timing, these events could also result in lost sales, cancellation
      charges or excessive markdowns. Our future performance may be subject to the
      occurrence of such events, which are beyond our control, and which could have
      a
      material adverse effect on our financial condition and results of
      operations.





**The
      loss of one or more of our suppliers of finished goods or raw materials may
      interrupt our supplies.**




We
      purchase intimate apparel designed by us from a limited number of third-party
      manufacturers. In addition, approximately 74% of our total sourcing is
      concentrated in two foreign countries, China and Indonesia. We do not have
      any
      material or long-term contracts with any of our suppliers. Furthermore, our
      finished goods suppliers also purchase the fabrics and accessories used in
      our
      products from a limited number of suppliers. The loss of one or more of these
      vendors could interrupt our supply chain and impact our ability to deliver
      products to our customers, which would have a material adverse effect on our
      net
      sales and profitability.





**Increases
      in the price of raw materials used to manufacture our products could materially
      increase our costs and decrease our profitability.**




The
      principal fabrics used in our business are made from cotton, synthetic fabrics
      and cotton-synthetic blends. The prices we pay for these fabrics are dependent
      on the market price for the raw materials used to produce them, primarily cotton
      and chemical components of synthetic fabrics, and there can be no assurance
      that
      prices for these and other raw materials will not increase in the near future.
      These raw materials are subject to price volatility caused by weather, supply
      conditions, power outages, government regulations, economic climate and other
      unpredictable factors. Fluctuations in crude oil or petroleum prices may also
      influence the prices of related items such as chemicals, dyestuffs, man made
      fiber and foam. Any raw material price increase would increase our cost of
      sales
      and decrease our profitability unless we are able to pass higher prices on
      to
      our customers. In addition, if one or more of our competitors is able to reduce
      its production costs by taking advantage of any reductions in raw material
      prices or favorable sourcing agreements, we may face pricing pressures from
      those competitors and may be forced to reduce our prices or face a decline
      in
      net sales, either of which could have a material and adverse effect on our
      business, results of operations and financial condition.





29





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





**Changing
      international trade regulation and future quantitative limits, duties or tariffs
      may increase our costs or limit the amount of products that we can import from
      suppliers in a particular country.**




Our
      operations are, or may become, subject to various existing and proposed
      international trade agreements and regulations such as the North American Free
      Trade Agreement, the Central American Free Trade Agreement and the Caribbean
      Basin Initiative, and the activities and regulations of the World Trade
      Organization, or WTO. These trade agreements can impose requirements that
      negatively affect our business, such as limiting the countries from which we
      can
      source our products, restricting availability of raw material sourcing by
      requiring fabric from a particular country and setting quantitative limits
      on
      products that may be imported from a particular country. We are exposed to
      these
      risks as we import goods from third-party suppliers in Asia and Central America.





The
      countries in which our products are manufactured, or into which they are
      imported, may from time to time impose additional new regulations, or modify
      existing regulations, including:





Ø
            additional
                quantitative limits, duties, taxes, tariffs and other charges on
                imports,
                including retaliatory duties or other trade sanctions, which may
                or may
                not be based on WTO rules, and which would increase the cost of products
                purchased from suppliers in such
                countries;


Ø
            quantitative
                limits that may limit the quantity of goods which may be imported
                into the
                United States or other jurisdictions from a particular country, including
                the imposition of a ‘‘safeguard’’ mechanism by the U.S. government or
                governments in other jurisdictions, such as the European Union and
                its
                member countries, limiting our ability to import goods from
                China;


Ø
            changes
                in classification of products that could result in higher duty rates
                than
                we have historically paid;


Ø
            modification
                of the trading status of certain
                countries;


Ø
            requirements
                as to where raw materials must be
                purchased;


Ø
            creation
                of export licensing requirements, imposition of restriction on export
                quantities or specification of minimum export pricing;
                or


Ø
            creation
                of other restrictions on imports.





Adverse
      changes in these costs and restrictions could interrupt production in offshore
      facilities or delay receipt of our products in the United States and
      international markets, which would harm our business. A safeguard action has
      been initiated with respect to panties for the 2005 calendar year and a request
      for safeguard action has been requested with respect to bras. The safeguard
      action with respect to panties has resulted in an embargo on panties imported
      from China into the United States, which forecloses any such imports through
      the
      end of the 2005 calendar year. The European Union (EU) has entered into a trade
      agreement with China that has resulted in an embargo on bras imported from
      China
      into the EU for the balance of 2005 and quantitative restrictions on other
      categories. Furthermore, future trade agreements could provide our competitors
      with an advantage over us, or increase our costs, either of which could have
      a
      material adverse effect on our business, results of operations or financial
      condition.





**Decreases
      in the value of the U.S. dollar could materially increase our cost of
      sales.**




We
      have
      shifted all of our production to third-party suppliers, primarily in countries
      in the Asia-Pacific region. While we pay these third-party suppliers in U.S.
      dollars, their costs are typically based upon the local currency of the country
      in which they operate. Any decrease in the value of the U.S. dollar against
      these foreign currencies could result in a corresponding increase in our future
      cost of sales and decrease in our profitability, which could have a material
      adverse effect on our financial condition and operating results.





30





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





**We
      expect to continue to expand our sales operations outside of the United States
      and we may be unsuccessful in these efforts.**




We
      expect
      to continue to expand our operations outside of the United States. There are
      certain risks inherent in doing business in international markets, which
      include:





Ø
            difficulties
                in staffing and managing foreign
                operations;


Ø
            understanding
                consumer tastes and fashion trends in foreign
                jurisdictions;


Ø
            the
                inability to manage and coordinate the various regulatory requirements
                of
                multiple jurisdictions that are constantly evolving and subject to
                unexpected change;


Ø
            reduced
                or no protection for intellectual property
                rights;


Ø
            fluctuations
                in exchange rates;


Ø
            less
                developed technological
                infrastructures;


Ø
            inability
                to change management in these other countries due to applicable local
                law,
                severance obligations and social
                norms;


Ø
            difficulty
                in obtaining the necessary regulatory approvals for planned expansion,
                if
                any, and the possibility that any approvals that are obtained may
                impose
                restrictions on the operation of our
                business;


Ø
            reductions
                in business activity in those markets due to holidays and other seasonal
                slowdowns in the localized retail industry;
                and


Ø
            potentially
                adverse tax consequences.





Our
      inability to manage these risks effectively could adversely affect our business
      and limit our ability to expand our international operations, which could have
      a
      material adverse effect on our business, financial condition and results of
      operations.





**Our
      independent registered public accounting firm previously reported a material
      weakness in our internal control over financial reporting. If such material
      weakness were to recur, it could result in a material misstatement in our
      financial statements that would not be prevented or detected, cause investors
      to
      lose confidence in our reported financial information and have a negative effect
      on the trading price of our stock.**




In
      connection with the audit of our financial statements for the 2003 fiscal year,
      in March 2004, our independent registered public accounting firm reported to
      our
      audit committee a ‘‘material weakness’’ in our internal control over financial
      reporting. In general, a material weakness is defined as a control deficiency,
      or combination of control deficiencies, that results in more than a remote
      likelihood that a material misstatement of the annual or interim financial
      statements will not be prevented or detected. The material weakness reported
      by
      our independent registered public accounting firm was that the overall design
      and operation of our internal control over financial reporting were insufficient
      to effectively provide reasonable assurance of our ability to generate reliable
      financial information in accordance with generally accepted accounting
      principles. This was because:





Ø
            our
                accounting systems were not sufficiently integrated, thereby requiring
                an
                excessive amount of manual intervention to initiate, record, process
                and
                report financial data;


Ø
            our
                staffing levels of accounting personnel who possessed the requisite
                knowledge of generally accepted accounting principles to accurately
                prepare analyses and support accounting entries was
                insufficient;


Ø
            our
                monitoring and oversight of the accounting function was
                inadequate;


Ø
            our
                internal control over financial reporting did not include appropriate
                reviews and approvals of transactions, accounting entries or the
                data
                output from our accounting systems;
                and


Ø
            matters
                raised in the management letter relating to the audit for the 2002
                fiscal
                year were not addressed in a timely
                fashion.





We
      have
      employed qualified personnel and adopted and implemented policies and procedures
      to address the material weakness identified by our independent registered public
      accounting firm. Specifically, we hired a new Chief Financial Officer, Dorvin
      Lively, in November 2004, and a director of financial reporting. We have also
      engaged an accounting firm to augment the quality of our internal control over
      financial reporting. However, the process of designing and implementing
      effective internal control over financial reporting is a continuous effort
      that
      requires us to anticipate and react to changes in our business and the economic
      and regulatory environments and to expend significant resources to maintain
      a
      system of controls that is adequate to satisfy our reporting obligations as
      a
      public company.





In
      preparing our financial statements for our 2004 fiscal year, management did
      not
      identify any material weaknesses or significant deficiencies related to our
      internal control over financial reporting or our operations. In addition, in
      connection with the audit of our consolidated financial statements for our
      2004
      fiscal year, our independent registered public accounting firm did not advise
      our management or the audit committee of any material weaknesses or significant
      deficiencies related to our internal control over financial
      reporting.




31


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





Although
      we believe we have addressed all elements of the material weakness identified
      as
      a result of the fiscal 2003 audit with the remedial measures we have
      implemented, the measures we have taken to date or any future measures we may
      take might not sufficiently allow us to maintain adequate controls over our
      financial processes and reporting in the future. In addition, additional
      material weaknesses in our internal control over financial reporting could
      be
      discovered in the future.





To
      the
      extent we identify any additional weaknesses in our internal control over
      financial reporting, significant resources from our management team and
      additional expenses may be required to implement and maintain effective controls
      and procedures. In addition, we may need to hire additional employees and
      outside consultants, and further train our existing employees. If the material
      weakness previously reported by our independent registered public accounting
      firm were to recur, if we fail to implement required new or improved controls,
      or if we encounter difficulties in their implementation, our operating results
      could be adversely affected, we may fail to meet our reporting obligations
      or we
      may have material misstatements in our financial statements. Any such failure
      also could adversely affect the results of the periodic management evaluations
      and annual independent registered public accounting firm attestation reports
      regarding the effectiveness of our ‘‘internal control over financial reporting’’
      that will be required when the Securities and Exchange Commission’s rules under
      Section 404 of the Sarbanes-Oxley Act of 2002 (the ‘‘Sarbanes-Oxley Act’’)
      become applicable to us beginning with our Annual Report on Form 10-K for the
      year ending December 30, 2006. Ineffective internal control over financial
      reporting could also cause investors to lose confidence in our reported
      financial information, which could have a negative effect on the trading price
      of our common stock.





**Any
      problems at our distribution centers could materially affect our ability to
      distribute our products.**




Our
      distribution centers in Fayetteville, North Carolina and Shannon, Ireland serve
      our domestic and foreign customers. We do not have a backup facility or any
      alternate distribution arrangements in place. In the event that we experience
      problems at our distribution centers that impede the timeliness or fulfillment
      quality of the products being distributed, or that either of our distribution
      centers is partially or completely destroyed, becomes inaccessible, or is
      otherwise not fully usable, it would have a material adverse effect on our
      ability to distribute our products, which in turn would have a material adverse
      effect on our sales, profitability, financial condition and operating
      performance.





**We
      may suffer negative publicity or be sued if the manufacturers of our merchandise
      violate labor laws or engage in practices that are viewed as
      unethical.**




We
      rely
      on our sourcing personnel, utilizing established procedures, to select
      manufacturers with legal and ethical labor practices, but we cannot control
      the
      business and labor practices of our manufacturers. If one of these manufacturers
      violates, or is accused of violating, labor laws or other applicable
      regulations, or if such a manufacturer engages in labor or other practices
      that
      would be viewed as unethical if such practices occurred in the United States,
      we
      could in turn suffer negative publicity or be sued. In addition, if such
      negative publicity affected one of our customers, it could result in a loss
      of
      business for us.





**If
      we are unable to renew or replace our store leases or enter into leases for
      new
      stores on favorable terms, or if we violate any of the terms of our current
      leases, our growth and profitability could be harmed.**




We
      lease
      all of our outlet store locations. The majority of our store leases contain
      provisions for base rent plus an additional amount based on a percentage of
      sales in excess of an agreed upon minimum annual sales level. A number of our
      leases include a termination provision which applies if we do not meet certain
      sales levels during a specified period, typically in the third to fourth year
      of
      the lease. In addition, most of our leases will expire within the next ten
      years
      and generally do not contain options to renew. Furthermore, some of these leases
      contain various restrictions relating to the change of control of our company.
      Our leases also subject us to risks relating to compliance with changing outlet
      center rules and the exercise of discretion by our landlords on various matters
      within the outlet centers. If we are unable to renew or replace our store leases
      or enter into leases for new stores on favorable terms, or if we violate any
      of
      the terms of our current leases, our growth and profitability could be
      harmed.





**Our
      company-operated outlet stores are heavily dependent on the ability and desire
      of consumers to travel and shop.**




Our
      company-operated outlet stores are located principally in outlet centers, which
      are typically located at or near vacation destinations or away from large
      population centers where department stores and other traditional retailers
      are
      concentrated. As a result, developments that would lead to decreased travel,
      such as fuel shortages, increased fuel prices, travel restrictions, travel
      concerns, bad weather and other circumstances, including as a result of war,
      terrorist attacks or the perceived threat of war or terrorist attacks, could
      have a material adverse effect on us, as was the case after the September 11th
      terrorist attacks. Other factors which could affect the success of our stores
      include:





32





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





Ø
            the
                location of the outlet center or the location of a particular store
                within
                an outlet center;


Ø
            the
                other tenants occupying space at the outlet
                center;


Ø
            increased
                competition in areas where outlet centers are
                located;


Ø
            the
                opening of outlet centers closer to population centers, which could
                materially decrease the traffic to existing outlet centers that are
                located further away from established population
                centers;


Ø
            a
                downturn in the economy generally or in a particular area where an
                outlet
                center is located; and


Ø
            the
                amount of advertising and promotional dollars spent by the landlord
                of the
                outlet center to attract consumers to the outlet
                center.





**We
      experience fluctuations in our comparable outlet store sales and
      margins.**




Our
      continued success depends, in part, upon our ability to continue to further
      improve sales, as well as both gross margins and operating margins, at our
      company-operated outlet stores. A variety of factors affect comparable store
      sales, including competition, current economic conditions, the timing of release
      of new merchandise and promotional events, changes in our merchandise mix,
      the
      success of marketing programs and weather conditions. These factors may cause
      our comparable store sales results to differ materially from prior periods
      and
      from expectations.





Our
      ability to further improve our comparable store sales results and margins
      depends in large part on improving our forecasting of demand and fashion trends,
      selecting effective marketing techniques, providing an appropriate mix of
      merchandise for our broad and diverse consumer base, managing inventory
      effectively, using effective pricing strategies, and optimizing store
      performance by controlling operating costs and closing underperforming stores.
      Any failure to meet the expectations of investors, security analysts or credit
      rating agencies in one or more future periods could reduce the market price
      of
      our common stock and cause our credit ratings to decline.





**We
      are implementing changes to our IT systems that may disrupt
      operations.**




We
      continue to evaluate and are currently implementing, in a phased approach,
      modifications and upgrades to our information technology systems for sourcing
      and distribution operations, financial reporting, planning and forecasting.
      Modifications involve replacing legacy systems with successor systems, making
      changes to legacy systems or acquiring new systems with new functionality.
      We
      might not successfully launch these new systems as planned or without
      disruptions to our operations. Information technology system disruptions, if
      not
      anticipated and appropriately mitigated, could have a material adverse effect
      on
      our operations.





**We
      are subject to potential challenges relating to overtime pay and other
      regulations, and union contracts, that affect our relationship with our
      employees, which could adversely affect our business.**




Federal
      and state laws governing our relationships with our employees affect our
      operating costs. These laws include wage and hour laws and regulations, fair
      labor standards, minimum wage requirements, overtime pay, unemployment tax
      rates, workers’ compensation rates, citizenship requirements and payroll taxes.
      A determination that we do not comply with these laws could harm our
      profitability or business reputation. Additional government-imposed increases
      in
      minimum wages, overtime pay, paid leaves of absence or mandated health benefits
      could also materially adversely affect us.





We
      are a
      party to contracts with two separate unions. Our contract with Local 153 of
      OPEIU union expires in September 2005 and our contract with UNITE-HERE union
      expires in September 2006. Our failure or inability to renew either of these
      contracts could have a material adverse effect on our ability to operate our
      business and on our results of operations.





**We
      are subject to various laws and regulations in the countries in which we
      operate.**




We
      are
      subject to federal, state and local laws and regulations affecting our business,
      including those promulgated under the Occupational Safety and Health Act, the
      Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber
      Product Identification Act, the rules and regulations of the Consumer Products
      Safety Commission and various labor, workplace and related laws, as well as
      environmental laws and regulations. Our international business is subject to
      similar regulations in the foreign countries in which we operate. We may be
      required to make significant expenditures to comply with governmental laws
      and
      regulations, including labeling laws and privacy laws, compliance with which
      may
      require significant additional expense. Complying with existing or future laws
      or regulations may materially limit our business and increase our costs. Failure
      to comply with such laws may expose us to potential liability and have a
      material adverse effect on our results of operations.





33





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





**We
      cannot predict our future capital needs or our ability to obtain additional
      financing if we need it.**




Our
      business is dependent upon the availability of adequate funding. Historically,
      we have satisfied these needs primarily through debt financing and, more
      recently, internally-generated funds and our initial public offering. We believe
      there are a significant number of capital intensive opportunities for us to
      maximize our growth and strategic position, including, among others,
      acquisitions, joint ventures, strategic alliances or other investments. As
      a
      result, we may need to raise additional funds to:





Ø
            support
                more rapid growth in our business;


Ø
            develop
                new or enhanced products;


Ø
            respond
                to competitive pressures;


Ø
            acquire
                complementary companies or
                technologies;


Ø
            expand
                one or more of our distribution centers to support the growth of
                our
                business or to lease additional
                space;


Ø
            fund
                the working capital requirements of carrying additional
                inventory;


Ø
            enter
                into strategic alliances; and


Ø
            respond
                to unanticipated capital needs.





We
      might
      not be able to obtain additional financing, if needed, in amounts or on terms
      acceptable to us, if at all. If sufficient funds are not available or are not
      available on terms acceptable to us, our ability to fund our expansion, take
      advantage of acquisition opportunities, develop or enhance our products, or
      otherwise respond to competitive pressures would be significantly limited.
      These
      limitations could materially and adversely affect our business, results of
      operations and financial condition.





**We
      might not successfully integrate future acquisitions, which could have a
      material adverse effect on our business, financial condition, results of
      operations and cash flows.**




Although
      members of our current management team have previous experience in integrating
      acquisitions, they have not completed any acquisitions as a team. If appropriate
      opportunities present themselves, we may acquire or invest in businesses,
      products or technologies that we believe are strategic. We might not be able
      to
      identify, negotiate or finance any future acquisition or investment
      successfully. Even if we do succeed in acquiring or investing in a business,
      product or technology, such acquisitions and investments involve a number of
      risks, including:





Ø
            we
                may find that the acquired company or assets do not further our business
                strategy, or that we overpaid for the company or assets, or that
                the
                economic conditions underlying our acquisition decision
                change;


Ø
            we
                may have difficulty integrating the products with our existing product
                lines;


Ø
            we
                may have difficulty integrating the operations and personnel of the
                acquired business, or retaining the key personnel of the acquired
                business;


Ø
            our
                ongoing business and management’s attention may be disrupted or diverted
                by transition or integration issues and the complexity of expanding
                into
                new markets; and


Ø
            we
                may acquire a company with a different customer base than ours, and
                those
                customers may elect to shift their business to other companies following
                the acquisition.





Future
      acquisitions could have an adverse effect on our operating results, particularly
      in the fiscal quarters immediately following their completion while we integrate
      the operations of the acquired business. Once integrated, acquired operations
      may not achieve levels of revenues, profitability or productivity comparable
      with those achieved by our existing operations, or otherwise perform as
      expected.





Furthermore,
      the consideration paid in connection with an investment or acquisition will
      affect our financial results. If we were to proceed with one or more significant
      acquisitions in which the consideration included cash, we could be required
      to
      use a substantial portion of our available cash and our available borrowing
      capacity to consummate any acquisition. To the extent we issue shares of capital
      stock or other rights to purchase capital stock, including options or other
      rights, existing stockholders may be diluted and earnings per share may
      decrease. In addition, acquisitions may result in the incurrence of debt, large
      one-time write-offs (such as those relating to acquired in-process research
      and
      development costs) or restructuring charges. They may also result in goodwill
      and other intangible assets that are subject to impairment tests, which could
      result in future impairment charges. Any of these factors could have a material
      adverse effect on our business, financial condition, results of operations
      and
      cash flows.





34





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





**Our
      failure to register, renew or otherwise protect our trademarks and other
      intellectual property could have a negative impact on the value of our brand
      names and our ability to use those names in certain geographical
      areas.**




We
      use
      trademarks on nearly all of our products, which is an important factor in
      creating a market for our goods, in identifying us, and in distinguishing our
      goods from those of others. We believe our trademarks, service marks,
      copyrights, trade secrets, patent applications and similar intellectual property
      are critical to our success. We rely on trademark, copyright and other
      intellectual property laws to protect our proprietary rights. We also depend
      on
      trade secret protection through confidentiality agreements with our employees,
      licensees and others and through license agreements with our licensees and
      other
      partners. We may not have agreements containing adequate protective provisions
      in every case and the contractual provisions that are in place may not provide
      us with adequate protection in all circumstances. The unauthorized reproduction
      or other misappropriation of our intellectual property could diminish the value
      of our brand, competitive advantages or goodwill and result in decreased net
      sales.





Despite
      our efforts to protect our intellectual property rights, intellectual property
      laws afford us only limited protection. A third party could copy our products,
      designs and/or brands, or otherwise obtain information from us without
      authorization. Accordingly, we may not be able to prevent misappropriation
      of
      our intellectual property or to deter others from developing similar products.
      Further, monitoring the unauthorized use of our intellectual property, including
      our trademarks and service marks, is difficult. Litigation has been and may
      continue to be necessary to enforce our intellectual property rights or to
      determine the validity and scope of the proprietary rights of others. Litigation
      of this type has resulted in and could in the future result in further
      substantial costs and diversion of resources, may result in counterclaims or
      other claims against us and could significantly harm our results of operations.
      In addition, the laws of some foreign countries do not protect our proprietary
      rights to the same extent as do the laws of the United States. In addition,
      we
      have not obtained trademark protection for all of our brands in all of the
      countries where we sell our products. This could leave us helpless to stop
      potential infringers or possibly even unable to sell our products in certain
      territories.





**We
      may have disputes with, or be sued by, third parties for infringement or
      misappropriation of their proprietary rights, which could have a negative impact
      on our business.**




Other
      parties have asserted in the past, and may assert in the future, claims with
      respect to trademark, patent, copyright or other intellectual property rights
      that are important to our business. Other parties might seek to block the use
      of, or seek monetary damages or other remedies for the prior use of, our
      trademarks or other intellectual property or the sale of our products as a
      violation of their trademark, patent or other proprietary rights. Defending
      any
      claims, even claims without merit, could be time-consuming, result in costly
      settlements, litigation or restrictions on our business and could damage our
      reputation.





In
      addition, there may be prior registrations or use of intellectual property
      in
      the United States or foreign countries (including, but not limited to, similar
      or competing marks or other proprietary rights) of which we are not aware.
      In
      all such countries, it may be possible for any third-party owner of a trademark
      registration in that country or other proprietary right to enjoin or limit
      our
      expansion into those countries or to seek damages for our use of such
      intellectual property in such countries. In the event a claim against us were
      successful and we could not obtain a license to the relevant intellectual
      property or redesign or rename our products or operations to avoid infringement,
      our business, financial condition or results of operations could be harmed.
      In
      addition, securing registrations does not fully insulate us against intellectual
      property claims, as another party may have rights superior to our registration
      or our registration may be vulnerable to attack on various other grounds.





Any
      such
      claims of infringement or misappropriation, whether meritorious or not,
      could





Ø
            be
                expensive and time consuming to
                defend;


Ø
            prevent
                us from operating our business, or portions of our
                business;


Ø
            cause
                us to cease producing and marketing certain of our
                products;


Ø
            result
                in the loss of one or more key
                customers;


Ø
            require
                us to re-label or re-design our products, if
                feasible;


Ø
            result
                in significant monetary liability;


Ø
            divert
                management’s attention and resources;
                and


Ø
            potentially
                require us to enter into royalty or licensing agreements in order
                to
                obtain the right to use necessary intellectual
                property.





35





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





Third
      parties might assert infringement claims against us in the future with respect
      to any of our products. Any such assertion might require us to enter into
      royalty arrangements or litigation that could be costly to us. Any of these
      events could have a material adverse effect on our business, results of
      operations or financial condition.





**Sales
      of shares by us or our stockholders could limit our ability to utilize certain
      income tax benefits.**




At
      January 1, 2005, we had approximately $92.6 million of federal and state net
      operating loss carryforwards available for future utilization during the years
      2005 through 2023. To the extent any sales of common stock by us or our
      stockholders result in an ‘‘ownership change’’ within the meaning of Section 382
      of the Internal Revenue Code, we may not be able to realize certain of these
      net
      operating loss carryforwards existing at the date of such ownership change
      or
      the timing of when we can use these net operating loss carryforwards may be
      modified.  For more information regarding these potential income tax
      benefits and our net operating loss carryforwards, see ‘‘Management’s Discussion
      and Analysis of Financial Condition and Results of Operations—Trends in Our
      Business—Income Taxes.’’





**We
      are dependent on our management team, and the loss of any key member of this
      team may prevent us from implementing our business plan in a timely
      manner.**




Our
      success depends largely upon the continued services of our executive officers
      and other key personnel, including senior marketing, operational and finance
      executives. Any loss or interruption of the services of one or more of our
      executive officers or key personnel could result in our inability to manage
      our
      operations effectively and/or pursue our business strategy.





**Because
      competition for our employees is intense, we may not be able to attract and
      retain the highly skilled employees we need to support our planned
      growth.**




Our
      ability to provide high quality products, as well as our ability to execute
      our
      business plan generally, depends in large part upon our ability to attract
      and
      retain highly qualified personnel. Competition for such personnel is intense.
      We
      have in the past experienced, and we expect to experience in the future,
      difficulty in hiring and retaining highly skilled employees with appropriate
      qualifications. The location of our corporate offices outside of New York City
      has made it increasingly difficult to recruit personnel in certain fields,
      such
      as finance, marketing and design. We might not be successful in our efforts
      to
      recruit and retain the required personnel. If we fail to attract new personnel
      or fail to retain and motivate our current personnel, our business and future
      growth prospects could be severely harmed.





**As
      we enter new markets, we may not be able to successfully adapt our products
      and
      marketing strategy for use in those markets.**




Our
      strategy includes leveraging our brands and products to enter new markets.
      We
      might not be successful in our efforts to adapt our products and marketing
      strategy for use in those markets. If these efforts are not successful, we
      may
      realize less than expected earnings, which in turn could result in a decrease
      in
      the market value of our common stock. Furthermore, these efforts may divert
      management attention or inefficiently utilize our resources.





**The
      requirements of being a public company may strain our resources and require
      significant management time and attention.**




As
      a
      public company, we are subject to the reporting requirements of the Securities
      Exchange Act of 1934, the Sarbanes-Oxley Act and the rules of the New York
      Stock
      Exchange (NYSE). The requirements of these rules and regulations have in the
      past increased, and may further increase in the future, our legal and financial
      compliance costs, make some activities more difficult, time-consuming or costly
      and may also place undue strain on our systems and resources. The Securities
      Exchange Act of 1934 requires, among other things, that we file annual,
      quarterly and current reports with respect to our business and financial
      condition. The Sarbanes-Oxley Act requires, among other things, that we report
      on the effectiveness of our disclosure controls and procedures, and internal
      controls over financial reporting. In order to maintain and improve the
      effectiveness of our disclosure controls and procedures, and internal control
      over financial reporting, significant resources and management oversight will
      be
      required. As a result, management’s attention may be diverted from other
      business concerns, which could have a material adverse effect on our business,
      financial condition, results of operations and cash flows.





36





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**





These
      rules and regulations could also make it more difficult for us to attract and
      retain qualified independent members of our board of directors and qualified
      members of our management team. As an example, being a public company has
      significantly increased our cost for director and officer liability insurance.
      We may be required to accept reduced coverage or incur substantially higher
      costs to obtain such insurance coverage in the future. NYSE marketplace rules
      require that a majority of our board of directors and all of certain committees
      of the board of directors consist of independent directors. While each of the
      committees of our board of directors currently meet the NYSE independence
      requirements, the board of directors currently does not meet these requirements,
      with four out of eight directors being independent. We intend to have a board
      of
      directors comprised of a majority of independent directors within 12 months
      after our initial public offering, in reliance upon the transition period
      provided by the rules of the NYSE for issuers listing in conjunction with their
      initial public offering. We might not be able to expand our board of directors
      to include a majority of independent directors in a timely fashion to comply
      with the applicable requirements.





**The
      worldwide apparel industry is heavily influenced by general economic
      conditions.**




The
      apparel industry is highly cyclical and heavily dependent upon the overall
      level
      of consumer spending. Purchases of apparel and related goods tend to be highly
      correlated with changes in the disposable income of consumers. Consumer spending
      is dependent on a number of factors, including actual and perceived economic
      conditions affecting disposable consumer income (such as unemployment, wages
      and
      salaries), business conditions, interest rates, availability of credit and
      tax
      rates in the general economy and in the international, regional and local
      markets where our products are sold. Our wholesale customers may anticipate
      and
      respond to adverse changes in economic conditions and uncertainty by reducing
      inventories and canceling orders. Furthermore, in such circumstances, our
      customers may encounter difficulties in other apparel categories or their
      non-apparel businesses that may cause them to change their strategy with respect
      to intimate apparel. As a result, any deterioration in general economic
      conditions, reductions in the level of consumer spending or increases in
      interest rates in any of the regions in which we compete could adversely affect
      the sales of our products.





A
      return
      to recessionary or inflationary conditions, whether in the United States or
      globally, additional terrorist attacks or similar events could have further
      adverse effects on consumer confidence and spending and, as a result, could
      have
      a material adverse effect on our financial condition and results of
      operations.





***Other
      Risks***





**The
      market price of our common stock may be highly volatile or may decline
      regardless of our operating performance.**




The
      trading price of our common stock may fluctuate substantially. The price of
      our
      common stock may be higher or lower than the price you pay to purchase your
      shares, depending on many factors, some of which are beyond our control. Broad
      market and industry factors may adversely affect the market price of our common
      stock, regardless of our actual operating performance. The fluctuations could
      cause you to lose all or part of your investment in our shares of common stock.
      Factors that could cause fluctuation in the trading price of our common stock
      may include, but are not limited to, the following:




Ø
            price
                and volume fluctuations in the overall stock market from time to
                time;


Ø
            significant
                volatility in the market price and trading volume of apparel companies
                generally or intimate apparel companies in particular;


Ø
            actual
                or anticipated variations in our earnings or operating results;


Ø
            actual
                or anticipated changes in financial estimates by us or by any securities
                analysts who might cover our stock;


Ø
            market
                conditions or trends in our industry and the economy as a whole;


Ø
            announcements
                by us or our competitors of significant acquisitions, strategic
                partnerships or divestitures;


Ø
            announcements
                of investigations or regulatory scrutiny of our operations or lawsuits
                filed against us;


Ø
            capital
                commitments;


Ø
            loss
                of a major customer or the loss of a particular product line with
                a major
                customer;


Ø
            additions
                or departures of key personnel; and


Ø
            sales
                of our common stock, including sales of large blocks of our common
                stock
                or sales by our directors and officers.




37




**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
      (Continued)**




In
      addition, if the market for apparel company stocks or the stock market in
      general experiences loss of investor confidence, the trading price of our common
      stock could decline for reasons unrelated to our business, results of operations
      or financial condition. The trading price of our common stock might also decline
      in reaction to events that affect other companies in our industry or related
      industries even if these events do not directly affect us.




In
      the
      past, following periods of volatility in the market price of a company's
      securities, securities class action litigation has often been brought against
      that company. Due to the potential volatility of our stock price, we may
      therefore be the target of securities litigation in the future. Securities
      litigation could result in substantial costs and divert management's attention
      and resources from our business.




**The
      concentrated ownership of our capital stock by insiders will likely limit your
      ability to influence corporate matters.**




Our
      executive officers, directors, current 5% or greater stockholders and affiliated
      entities together beneficially own approximately 33.9% of our common stock
      outstanding. Additionally, Ares Corporate Opportunities Fund, L.P. (“Ares”), who
      is our largest stockholder, beneficially owns approximately 31.5% of our common
      stock outstanding. As a result, Ares may be able to influence or control matters
      that require approval by our stockholders, including the election of directors
      and approval of significant corporate transactions such as mergers and
      acquisitions. Ares may also have interests that differ from yours and may vote
      in a way with which you disagree and which may be adverse to your interests.
      Corporate action might be taken even if other stockholders, including those
      who
      purchase shares in this offering, oppose them. This concentration of ownership
      might also have the effect of delaying or preventing a change of control of
      our
      company that other stockholders may view as beneficial, could deprive our
      stockholders of an opportunity to receive a premium for their common stock
      as
      part of a sale of our company and might ultimately affect the market price
      of
      our common stock.




**The
      future sale of shares of our common stock may negatively affect our stock
      price.**




We
      currently have 8,974,468 shares of common stock that are “restricted
      securities.” These shares will become available for resale in the public market
      commencing on January 19, 2006. If our stockholders sell substantial amounts
      of
      our common stock, including shares issuable upon the exercise of outstanding
      options and warrants in the public market, or if our stockholders are perceived
      by the market as intending to sell substantial amounts of our common stock,
      the
      market price of our common stock could fall. These sales also might make it
      more
      difficult for us to sell equity securities in the future at a time and price
      that we deem appropriate.





**We
      do not expect to pay any dividends on our common stock for the foreseeable
      future.**




We
      do not
      anticipate that we will pay any dividends to holders of our common stock in
      the
      foreseeable future. Accordingly, investors must rely on sales of their common
      stock after price appreciation, which may never occur, as the only way to
      realize any future gains on their investment. Investors seeking cash dividends
      should not purchase our common stock.





**Provisions
      in our amended and restated certificate of incorporation and bylaws or Delaware
      law might discourage, delay or prevent a change of control of our company or
      changes in our management and, therefore, depress the trading price of our
      common stock.**




Delaware
      corporate law and our amended and restated certificate of incorporation and
      bylaws contain provisions that could discourage, delay or prevent a change
      in
      control of our company or changes in our management that the stockholders of
      our
      company may deem advantageous. These provisions:




Ø
            authorize
                the issuance of “blank check” preferred stock that our board could issue
                to increase the number of outstanding shares and to discourage a
                takeover
                attempt;


Ø
            provide
                that the board of directors is expressly authorized to make, alter
                or
                repeal our bylaws; and


Ø
            establish
                advance notice requirements for nominations for election to our board
                or
                for proposing matters that can be acted upon by stockholders at
                stockholder meetings.





38





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





*Foreign
      Currency Risk.* We
      do not
      believe that we have significant foreign currency transactional exposures.
      During the three and six month periods ended July 2, 2005, our net sales were
      favorably impacted by $0.3 million and $0.6 million, respectively, due to
      foreign exchange rates. For the three and six month periods ended July 2, 2005,
      approximately $6.0 million and $11.1 million, respectively, of our total net
      sales were in currencies other than U.S. dollars. Most of our purchases are
      denominated in U.S. dollars. Approximately 74% of our total sourcing is
      concentrated in two foreign countries, China and Indonesia. The impact of a
      10%
      unfavorable change in the exchange rate of the U.S. dollar against the
      prevailing market rates of the foreign currencies in which we have transactional
      exposures would be immaterial.





*Interest
      Rate Risk.* Interest
      rate risk is managed through a combination of variable and fixed rate debt
      composed of long-term instruments. The objective is to maintain a cost-effective
      mix that we deem appropriate and have entered into interest rate swap agreements
      to maintain that balance. At July 2, 2005, our debt portfolio was composed
      of approximately 93% variable-rate debt and 7% fixed-rate debt. With respect
      to
      our variable-rate debt, a 1% change in interest rates would be
      immaterial.





*Commodity
      Price Risk.* We
      are
      subject primarily to commodity price risk arising from fluctuations in the
      market prices of raw materials used in the garments purchased from our sourcing
      vendors if they pass along these increased costs. During the past five years,
      there has been no significant impact from commodity price fluctuations, nor
      do
      we currently use derivative instruments in the management of these risks. On
      a
      going-forward basis, fluctuations in crude oil or petroleum prices may also
      influence the prices of the related items such as chemicals, dyestuffs, man
      made
      fibers and foam. Any raw material price increase would increase our cost of
      sales and decrease our profitability unless we are able to pass our higher
      costs
      on to our customers.




*Inflation
      Risk.* We
      are
      affected by inflation and changing prices primarily through the cost of raw
      materials, increased operating costs and expenses, and fluctuations in interest
      rates. The effects of inflation on our net sales and operations have not been
      material in recent years. We do not believe that inflation risk is material
      to
      our business or our consolidated financial position, results of operations
      or
      cash flows.





*Seasonality.* We
      have
      not experienced any significant seasonal fluctuations in our net sales or our
      profitability.





**Item
      4. Controls and Procedures**





*Evaluation
      of Disclosure Controls and Procedures.*




Our
      management, including the Chief Executive Officer and Chief Financial Officer,
      evaluated the effectiveness of our “disclosure controls and procedures,” as that
      term is defined in Rule 13a-15(e) promulgated under the Securities Exchange
      Act
      of 1934, as amended (the “Exchange Act”), as of July 2, 2005. Based on that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that the disclosure controls and procedures are effective to ensure that
      information required to be disclosed by us in the reports that we file or submit
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in the Securities and Exchange Commission’s rules and
      forms, and to ensure that information is accumulated and communicated to our
      management, including the Chief Executive Officer and Chief Financial Officer,
      as appropriate to allow timely decisions regarding required
      disclosure.





*Changes
      in Internal Controls Over Financial Reporting.*




There
      were no changes in our internal controls over financial reporting during the
      quarter ended July 2, 2005 identified in connection with the evaluation thereof
      by our management, including the Chief Executive Officer and Chief Financial
      Officer, that have materially affected, or are reasonably likely to materially
      affect, our internal controls over financial reporting.





39




**PART
      II - OTHER INFORMATION**





**Item
      1. Legal Proceedings**




We
      are
      not currently a party to any material legal proceedings. We are subject to
      various claims and legal actions arising from time to time in the ordinary
      course of business. We do not believe that the outcome of any of these
      proceedings will have a material adverse effect on our financial conditions,
      results of operations or cash flows.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




None.





**Item
      3. Defaults Upon Senior Securities**




None.





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




On
      April
      4, 2005, certain of our stockholders took action by written consent in lieu
      of a
      special meeting of our stockholders pursuant to Section 228 of the Delaware
      General Corporation Law. In that consent, our stockholders approved an amendment
      to our previous certificate of incorporation pursuant to which we changed our
      name from MF Acquisition Corporation to Maidenform Brands, Inc. The holders
      of
      18,975,000 shares of our then outstanding common stock approved the amendment.
      A
      holder of 825,000 shares of our then outstanding common stock did not sign
      the
      consent but received written notice of the actions taken pursuant to Section
      228
      of the Delaware General Corporation Law.





On
      June
      6, 2005, all of our stockholders took action by written consent in lieu of
      a
      special meeting of the stockholders pursuant to Section 228 of the Delaware
      General Corporation Law. In that consent, our stockholders approved a second
      amendment to our previous certificate of incorporation pursuant to which certain
      provisions of our previous certificate of incorporation were amended to enable
      us to declare and pay a special dividend to the holders of our then outstanding
      shares of Series A preferred stock. The holders of all 19,800,000 shares of
      our
      then outstanding common stock approved the amendment.





On
      July
      7, 2005, all of our stockholders took action by written consent in lieu of
      a
      special meeting of the stockholders pursuant to Section 228 of the Delaware
      General Corporation Law. In that consent, our stockholders approved the
      following matters in connection with our initial public offering: (i) the
      amendment and restatement of our Certificate of Incorporation to implement
      certain changes with respect to our capital stock structure and to provide
      for
      certain corporate governance requirements and increases to our authorized
      capital stock that became effective immediately prior to the closing of the
      offering, (ii) the amendment and restatement of our Bylaws to provide for
      certain changes consistent with our becoming a public company that became
      effective immediately prior to the closing of the offering, (iii) the adoption
      of our 2005 Stock Incentive Plan and 2005 Annual Performance Plan, and an
      amendment to our 2004 Stock Option Plan for Non-Employee Directors, and (iv)
      the
      redemption of all outstanding shares of preferred stock and rollover preferred
      stock options, subject to and in connection with the closing of the offering.
      The holders of all 19,800,000 shares of our then outstanding common stock
      approved these matters.





**Item
      5. Other Information**




None.





**Item
      6. Exhibits**





The
      following exhibits are filed as part of this Quarterly Report on Form
      10-Q:





31.1
            Certification
                by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a),
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





31.2
            Certification
                by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a),
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





40


32.1
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





32.2
            Certification
                by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





41




**SIGNATURES**





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





MAIDENFORM
                  BRANDS, INC.
                (Registrant)Date:
                August 30, 2005
              By:
              /s/
                Thomas WardName:
                Thomas WardTitle:
                  Chief Executive Officer and Vice Chairmanof
                  the Board of Directors (principal executive
                  officer)
 Date:
                August 30, 2005
              By:
              /s/
                Dorvin D. LivelyName:
                Dorvin D. LivelyTitle:
                Chief Financial Officer (principal financial and accounting
                officer)


42


**EXHIBIT
      INDEX**





31.1
            Certification
                by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a),
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





31.2
            Certification
                by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a),
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





32.1
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





32.2
            Certification
                by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





43