UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-Q


(Mark One)

(X)   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 1999
                               -----------
                                       or

( )   TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934
For the transition period from ___________________to___________________

                        Commission File Number: 1-9474

                            FORSTMANN & COMPANY, INC.
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)


                  GEORGIA                                    58-1651326
       -------------------------------                   ------------------
       (State or other jurisdiction of                    (I.R.S. Employer
        incorporation or organization)                   Identification No.)


   498 Seventh Avenue, New York, New York                      10018
  ----------------------------------------                   ----------
   (Address of principal executive offices)                  (Zip Code)

(Registrant's telephone number, including area code) (212) 642-6900
                                                     --------------

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.     X   Yes            No

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

As of June 16, 1999 there was 4,418,887 shares of Common Stock outstanding.

Total number of pages: 30 pages.

<PAGE>




PART I -- FINANCIAL INFORMATION
Item 1.   Financial Statements

                            FORSTMANN & COMPANY, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THIRTEEN WEEKS ENDED MAY 2, 1999 AND MAY 3, 1998
           AND THE TWENTY-SIX WEEKS ENDED MAY 2, 1999 AND MAY 3, 1998
                                   (unaudited)



<TABLE>
                                              Thirteen           Thirteen      Twenty-Six      Twenty-Six
                                             Weeks Ended        Weeks Ended   Weeks Ended     Weeks Ended
                                             May 2, 1999        May 3, 1998   May 2, 1999     May 3, 1998
                                             -----------        -----------   -----------     -----------


<S>                                          <C>             <C>            <C>             <C>
Net sales ................................   $ 27,042,000    $ 49,625,000   $ 45,540,000    $ 78,642,000

Cost of goods sold .......................     24,593,000      41,718,000     43,645,000      67,423,000
                                             ------------    ------------   ------------    ------------

Gross profit .............................      2,449,000       7,907,000      1,895,000      11,219,000

Selling, general and
   administrative expenses ...............      2,789,000       3,176,000      6,184,000       6,766,000

Provision for uncollectible
   accounts ..............................        179,000         347,000        300,000         571,000

Restructuring items (gain) ...............       (629,000)        312,000        556,000         312,000
                                             ------------    ------------   ------------    ------------

Operating income (loss) ..................        110,000       4,072,000     (5,145,000)      3,570,000

Interest expense .........................      1,387,000       1,611,000      2,794,000       3,151,000
                                             ------------    ------------   ------------    ------------

Income (loss) before reorganization
   items, income taxes
   and extraordinary gain ................     (1,277,000)      2,461,000     (7,939,000)        419,000

Reorganization items .....................         40,000          35,000         54,000          55,000
                                             -------------    ------------   ------------    ------------

Income (loss) before income taxes
   and extraordinary gain ................     (1,317,000)      2,426,000     (7,993,000)        364,000

Income tax provision .....................           --           946,000           --           142,000
                                             ------------    ------------   ------------    ------------

Income (loss) before extraordinary
   gain ..................................     (1,317,000)      1,480,000     (7,993,000)        222,000

Extraordinary item - gain
   on debt discharge .....................        314,000            --          314,000            --
                                             ------------    ------------   ------------    ------------

Net income (loss) ........................   $ (1,003,000)   $  1,480,000   $ (7,679,000)   $    222,000
                                             ============    ============   ============    ============




</TABLE>


                           (continued on next page)





<PAGE>


FORSTMANN & COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>



                                                  Thirteen       Thirteen         Twenty-Six      Twenty-Six
                                                 Weeks Ended    Weeks Ended       Weeks Ended     Weeks Ended
                                                    May 2,         May 3,           May 2,          May 3,
                                                    1999           1998             1999            1998
                                                    ----           ----             ----            ----

<S>                                           <C>               <C>               <C>             <C>
Per share and share information:
   Income (loss) before extraordinary
    gain per common share
     - basic and diluted .....................$     (.30)       $     .34         $    (1.82)           .05
   Extraordinary gain
     per common share
      - basic and diluted ......................     .07                --               .07             --
                                              ----------        ----------        ----------       ----------

   Income (loss) per common share
    - basic and diluted ......................$    (.23)        $      .34        $    (1.75)      $     .05
                                              ==========        ==========        ==========       ==========

  Weighted average common
      shares outstanding - basic               4,391,458         4,384,436         4,389,639       4,384.436
                                              ==========        ==========        ==========      ==========

  Weighted average common
     shares outstanding-diluted .............  4,391,458         4,398,489         4,389,639       4,389,255
                                              ==========        ==========        ==========      ==========


See notes to condensed consolidated financial statements

</TABLE>

<PAGE>



                          FORSTMANN & COMPANY, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                       MAY 2, 1999 AND NOVEMBER 1, 1998
                                 (unaudited)
<TABLE>
<CAPTION>

                                                                   May 2,        November 1,
                                                                   1999             1998
                                                                   ----             ----
<S>                                                            <C>             <C>
ASSETS
Current Assets:
  Cash .....................................................   $     15,000    $    143,000
  Cash restricted for settlement of unpaid claims ..........           --           327,000
  Accounts receivable, net of allowance of
     $1,609,000 and $1,309,000 .............................     28,586,000      31,434,000
  Inventories ..............................................     32,198,000      38,818,000
  Current deferred tax assets ..............................           --              --
  Other current assets .....................................        189,000         281,000
  Property, plant and equipment
    held for sale ..........................................      6,904,000            --
                                                               ------------    ------------
      Total current assets .................................     67,892,000      71,003,000

Property, plant and equipment, net .........................     15,232,000      22,235,000
Other assets ...............................................      2,130,000       2,005,000
                                                               ------------    ------------
      Total ................................................   $ 85,254,000    $ 95,243,000
                                                               ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term debt .....................   $ 49,814,000    $  7,619,000
  Accounts payable .........................................      3,181,000       3,151,000
  Accrued liabilities ......................................      7,531,000       9,238,000
                                                               ------------    ------------
    Total current liabilities ..............................     60,526,000      20,008,000

Long-term debt .............................................        712,000      43,565,000
Deferred tax liabilities ...................................           --              --
                                                               ------------    ------------
    Total liabilities ......................................     61,238,000      63,573,000

Commitments and contingencies

Shareholders' Equity:
  Preferred stock, $0.01 per value, 1,000,000
    shares authorized, nil outstanding .....................           --              --
  Common stock, $.01 par value, 35,000,000
    shares authorized, 4,418,887 and 4,387,819 shares issued
    and outstanding ........................................         44,189          43,878
  Additional paid-in capital ...............................     50,347,811      50,323,122
  Retained deficit since July 23, 1997 .....................    (26,376,000)    (18,697,000)
                                                               ------------    ------------
    Total shareholders' equity .............................     24,016,000      31,670,000
                                                               ------------    ------------
    Total ..................................................   $ 85,254,000    $ 95,243,000
                                                               ============    ============
See notes to condensed consolidated financial statements ...

</TABLE>

<PAGE>


                          FORSTMANN & COMPANY, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE TWENTY-SIX WEEKS ENDED MAY 2, 1999 AND MAY 3, 1998
                                 (unaudited)
<TABLE>

                                                             May 2,           May 3,
                                                             1999             1998
                                                             ----             ----
<S>                                                      <C>             <C>
Net  income (loss) ...................................   $ (7,679,000)   $    222,000
                                                         ------------    ------------
Adjustments to reconcile net income (loss)
 to net cash  provided (used)
 by operating activities:
    Depreciation and amortization ....................      2,143,000       2,633,000
    Income tax provision .............................           --           142,000
    Provision for uncollectible accounts .............        300,000         571,000
    Increase in market reserves ......................         36,000       1,080,000
    Loss from disposal, abandonment and
      impairment of machinery and equipment
      and other assets ...............................           --             2,000
   Gain associated with restructuring
      equipment lease liability ......................       (647,000)           --
   Gain associated with NY office lease surrender ....           --          (987,000)
    Extraordinary gain on debt discharge .............       (314,000)           --
    Other ............................................        145,000            --
    Changes in current assets and current liabilities:
        Accounts receivable ..........................      2,548,000      (7,911,000)
        Inventories ..................................      6,464,000      (9,360,000)
        Other current assets .........................         92,000         225,000
        Accounts payable .............................         30,000        (429,000)
        Accrued liabilities ..........................     (1,465,000)       (876,000)
        Accrued interest payable .....................        409,000          44,000
                                                         ------------    ------------

  Total adjustments ..................................      9,741,000     (14,866,000)
                                                         ------------    ------------

    Net cash provided (used) by operations ...........      2,062,000     (14,644,000)
                                                         ------------    ------------








                           (continued on next page)
</TABLE>

<PAGE>


                            FORSTMANN & COMPANY, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
           FOR THE TWENTY-SIX WEEKS ENDED MAY 2, 1999 AND MAY 3, 1998
                                   (unaudited)
                                    <TABLE>


                                                                   May 2,          May 3,
                                                                   1999            1998
                                                                   ----            ----
<S>                                                             <C>             <C>
Cash flows used by investing activities:
  Capital expenditures ....................................     (1,622,000)     (1,425,000)
  Investment in other assets, primarily
     computer information systems .........................       (407,000)       (355,000)
  Net proceeds from disposal of machinery
    and equipment .........................................         98,000           1,000
                                                               -----------     -----------

    Net cash used by investing activities .................     (1,931,000)     (1,779,000)
                                                               -----------     -----------

Cash flows from financing activities:
  Net borrowings under the Revolving Loan Facility               8,929,000      24,566,000
  Repayment of Term Loan Facility .........................     (8,585,000)     (6,612,000)
  Repayment of Deferred Interest Rate Notes ...............             --      (1,571,000)
  Repayment of other financing arrangements ...............       (692,000)       (378,000)
  Deferred financing costs ................................       (238,000)        (23,000)
                                                               -----------     -----------
   Net cash provided (used) by financing activities .......       (586,000)     15,982,000
                                                               -----------     -----------
Net decrease in cash ......................................       (455,000)       (441,000)

Cash and restricted cash at beginning of period ...........        470,000       1,051,000
                                                               -----------     -----------

Cash and restricted cash at end of period .................    $    15,000     $   610,000
                                                               ===========     ===========



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


<PAGE>


                        FORSTMANN & COMPANY, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CHANGES
                           IN SHAREHOLDERS' EQUITY
                  FOR THE TWENTY-SIX WEEKS ENDED MAY 2, 1999
                                 (unaudited)

<TABLE>


                                                        Additional                          Total
                                          Common         Paid-In          Retained       Shareholders'
                                          Stock          Capital           Deficit         Equity
                                          -----          -------           -------         ------
<S>                                     <C>          <C>              <C>               <C>
Balance, November 1, 1998                $43,878      $50,323,122      $(18,697,000)     $31,670,000

Director shares awarded ............         311           24,689                --           25,000

Net loss ...........................          --              --         (7,679,000)      (7,679,000)
                                         -------      -----------      ------------      -----------

Balance, May 2, 1999 ...............     $44,189      $50,347,811      $(26,376,000)     $24,016,000
                                         =======      ===========      ============      ===========


See notes to condensed consolidated financial statements

</TABLE>

<PAGE>


                            FORSTMANN & COMPANY, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   MAY 2, 1999
                                   (unaudited)


1.    Forstmann & Company, Inc. ("the Company") is a leading designer,  marketer
      and  manufacturer of innovative,  high quality  woolen,  worsted and other
      fabrics  which are used  primarily in the  production  of  brand-name  and
      private label apparel for men and women, as well as specialty  fabrics for
      use in billiard and gaming tables,  sports caps and school  uniforms.  The
      apparel industry represents the majority of the Company's customers.

2.   As described in Note 1 to the Consolidated  Financial  Statements contained
     in the  Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
     November  1, 1998 (the "1998 Form  10-K"),  the Company  has  incurred  net
     losses of $19.0  million,  $7.0  million and $17.8  million in fiscal years
     1998, 1997 and 1996,  respectively.  Net sales declined from $199.0 million
     in fiscal year 1997 to $149.6  million in fiscal year 1998.  Management has
     responded to these losses,  the decline in sales and the resulting  adverse
     impact on the Company's  liquidity by implementing a business plan designed
     to align the  Company's  manufacturing  capacity and overhead with expected
     market demand.  In October 1998, the Company's Board of Directors  approved
     the closing of its Louisville,  Georgia plant, realignment of the Company's
     remaining   manufacturing   facilities   located  in  Georgia  and  further
     reductions  of its  selling,  styling and  administrative  costs (the "1999
     Realignment").  Implementation  of the 1999  Realignment was  substantially
     complete as of January 31, 1999.

      As a result of the 1999  Realignment,  the Company incurred  approximately
      $1.2 million in severance  expense which was recognized as a restructuring
      item during the thirteen weeks ended January 31, 1999. During the thirteen
      weeks  ended  May  2,  1999  (the  "1999  Second  Quarter"),  the  Company
      recognized a gain of $0.6  million  associated  with the  reduction of the
      operating  lease  cancellation  liability  previously  established  during
      fiscal year 1998.  Such gain  resulted  from an  agreement  reached with a
      lessor to exchange certain idle equipment  covered under a lease agreement
      for equipment in operation and owned by the Company. This agreement allows
      the Company to sell such idle  equipment.  Further,  the Company  incurred
      costs of  approximately  $0.1 million  during the  twenty-six  week period
      ended May 2, 1999 (the "1999 Period") related to the relocation of certain
      machinery  and  equipment.  Such costs were  charged to cost of goods sold
      during the 1999 Period.

      The  operating  results  for  fiscal  year  1998,  the  effect of the 1998
      Restructuring  and the 1999  Realignment  and the  formation  of Forstmann
      Apparel, Inc. ("FAI"),  including the purchase of substantially all of the
      assets of  Arenzano  Trading  Company,  Inc.  (see Note 4 to the 1998 Form
      10-K), have negatively impacted the Company's borrowing availability under
      its Revolving Loan Facility (herein defined).  The Company's  availability
      under its Revolving Loan Facility was approximately $1.5 million at May 2,
      1999 as  compared  to $25.5  million  at May  3,1998.  As of May 30,  1999
      borrowing availability under the Revolving Loan Facility was $1.3 million.
      The  Company's  ability  to  maintain  adequate  availability  to meet its
      operating  needs is dependent on achieving  future sales  consistent  with
      management's   expectations   for   fiscal   year   1999  and   successful
      implementation  of its cost  reductions.  The  majority  of the  Company's
      customers  are in the domestic  apparel  industry  which has  continued to
      suffer an  economic  decline as a result of higher  levels of imports  and
      changing  fashion trends.  Expected cash flow from operations is dependent
      upon  achieving  sales  expectations  during  fiscal year 1999,  which are
      influenced by market conditions,  including apparel sales at retail,  that
      are beyond the control of the  Company.  Further,  the  collectibility  of
      accounts  receivable  is  dependent  upon the state of the economy and, in
      particular,  the  financial  condition  of  the  apparel  industry.  Also,
      continuing  refinement of the Company's strategies in response to evolving
      circumstances  could materially  change the Company's  working capital and
      capital  expenditures  requirements.  There can be no  assurance  that the
      Company will be able to achieve an adequate level of sales consistent with
      management's  expectations  for fiscal  year 1999 to enable the Company to
      generate sufficient funds to meet its operating needs. These factors raise
      substantial  doubt  about the  Company's  ability to  continue  as a going
      concern.  The  financial  statements do not include any  adjustments  that
      might result from the outcome of these uncertainties.

3.   On April 30,  1999 the Company  entered  into a letter of intent with Newco
     Holdings  LLC  ("Newco")  which  provides  for the sale of the ladies  suit
     business and certain assets, and the assumption of certain liabilities,  of
     FAI by Newco.  Consummation  of the sale is expected to occur in June 1999.
     The assets of FAI to be sold consist  primarily of leasehold  improvements,
     furniture and fixtures and computer systems. The Company expects to incur a
     gain  on the  sale  of FAI  which  will  be  recognized  when  the  sale is
     consummated.  Net  sales of FAI for the 1999  Second  Quarter  and the 1999
     Period were $2.4 million and $3.9  million,  respectively.  Net loss of FAI
     for the 1999  Second  Quarter  and 1999  Period was $0.9  million  and $1.9
     million,  respectively.  FAI  rcognized  a  loss  before  depreciation  and
     amortization, interest expense and income taxes of $0.8 million in the 1999
     Second Quarter and $1.7 million in the 1999 Period.

     Assets and  liabilities  of FAI to be disposed of consist of the following
     (in thousands):

                                                    May 2,        November 1,
                                                    1999             1998
                                                    ----             ----
     Leasehold improvements and
       furniture and fixtures ................     $ 326             $ 290
     Other assets ............................        77               103
                                                    -----            -----
          Total assets .......................     $ 403             $ 393
                                                   -----             -----
     Capital lease obligations ...............        30                32
     Licensing agreement .....................       441               670
                                                   -----             -----
          Total liabilities ............           $ 471             $ 702
                                                   -----             -----
     Net liabilities to be
        disposed of ..........................     $ (68)            $(309)
                                                   =====             =====



<PAGE>


4.    One of the Company's customers accounted for approximately 8% of the
      Company's revenues for the 1999 Period and another customer accounted for
      approximately 8% of gross accounts receivable at May 2, 1999.  No other
      customer represented more than 8% of revenues for the 1999 Period or 6%
      of gross accounts receivable at May 2, 1999.  One of the Company's major
      customers has indicated that due to general, adverse trends in the
      apparel industry, it will reduce the amount of its orders to the Company
      significantly during fiscal year 1999.

5.    Inventories are stated at the lower of cost, determined principally by the
      LIFO method, or market and consist of (in thousands):


                                                      May 2,     November 1,
                                                      1999          1998
                                                      ----          ----

          Raw materials and supplies .....          $  5,922      $ 10,218
          Work in process ................            20,209        19,390
          Finished products ..............             9,224        12,331
          Less market reserves ...........            (3,157)       (3,121)
                                                    --------      --------
          Total ...................     .             32,198        38,818
          Difference between LIFO
            carrying value and current
            replacement cost .............               452            --
                                                    --------      --------
          Current replacement cost .......          $ 32,650      $ 38,818
                                                    ========      ========

6.   The Company had property, plant and equipment held for sale of $6.9 million
     as of May 2, 1999 which  related to assets  previously  idled in connection
     with the 1998  Restructuring  and 1999  Realignment (see Note 1 to the 1998
     Form 10-K and Note 2 to these Condensed Consolidated Financial Statements).
     Such assets are stated at fair value,  based on appraised values,  and will
     not be depreciated in future periods.

7.   Other assets consist of (in thousands):

                                                      May 2,     November 1,
                                                      1999         1998
                                                      ----         ----
          Computer information systems,
            net of accumulated amortization
            of $261 and $93 .....................    $1,131       $  909
          Deferred financing costs, net of
            accumulated amortization of
            $1,094 and $774......................       974        1,086
          Other, net ............................        25           10
                                                     ------       ------
          Total ........                             $2,130       $2,005
                                                     ======       ======



<PAGE>


8. Accrued liabilities consist of (in thousands):

                                                        May 2,       November 1,
                                                        1999           1998
                                                        ----           ----
             Salaries, wages and related
               payroll taxes                          $  503          $  606
             Incentive compensation                       50             290
             Vacation and holiday                      1,545           1,243
             Interest on long-term debt                  548             143
             Medical insurance premiums                1,416           1,416
             Professional fees                            13             105
             Environmental remediation                   176             292
             Deferred rental and other
               lease obligations                         632              --
             Loss on open wool purchase commitments      420           1,537
             Restructuring items                       1,260           1,796
             Other                                       968           1,810
                                                    --------         -------
             Total                                  $  7,531         $ 9,238
                                                    ========         =======


9. Long-term debt consists of (in thousands):

                                                     May 2,          November 1,
                                                     1999              1998
                                                     ----              ----


           Revolving Loan Facility                  36,837           $27,908
           Term Loan Facility                       11,758            20,343
           Other note                                  274               374
           Capital lease obligations                 1,138             1,890
           Licensing agreement                         519               669
                                                  --------           -------
           Total debt                               50,526            51,184
           Current portion of long-term debt       (49,814)           (7,619)
                                                  --------           -------
           Total long-term debt                   $    712           $43,565
                                                  ========           =======


     Reference  is  made  to  Note 9 to the  Consolidated  Financial  Statements
     contained in the 1998 Form 10-K. On July 23, 1997, the Company entered into
     the Loan and Security Agreement with a syndicate of financial  institutions
     led by BABC.  The Loan and Security  Agreement,  as  subsequently  amended,
     provides for a revolving  line of credit  (including a $15.0 million letter
     of credit  facility),  subject to a borrowing  base  formula,  of up to $70
     million (the  "Revolving  Loan  Facility") and term loans of  approximately
     $31.5 million (the "Term Loan Facility").

     As of  February 8, 1999,  the Company and its lenders  amended the Loan and
     Security Agreement, waived certain financial covenant defaults arising from
     the  Company's  financial  results  for fiscal  year 1998 and,  among other
     things, set new financial  covenants for fiscal year 1999.  However,  there
     can be no assurance that the Company will be able to


<PAGE>


     comply with the amended  financial  covenants  during  fiscal year 1999. In
     connection with the amendment, the Company agreed to prepay $5.6 million of
     the  Term  Loan  Facility  through  borrowings  under  the  Revolving  Loan
     Facility.  Additionally,  the Company  agreed to increase  its monthly Term
     Loan Facility  principal payment from $374,000 to $450,000  beginning March
     1, 1999. Further, based on the Company's declining working capital needs in
     light of declining  revenues,  the Company and its lenders agreed to reduce
     the  Revolving  Loan Facility  commitment  from $85 million to $70 million.
     This  reduction  is  expected  to reduce the  Company's  unused line fee by
     approximately  $75,000  per annum.  The Company  further  agreed to repay a
     portion of its Term Loan  Facility in the future if  subsequently  obtained
     appraised orderly liquidation values for the Company's property,  plant and
     equipment  securing the Term Loan  Facility fall below 83.1% in relation to
     the  outstanding  amount owed under the Term Loan  Facility.  In connection
     with  entering  into the  amendment to the Loan and Security  Agreement the
     Company agreed to pay BABC for the benefit of the lenders, $200,000 payable
     in four equal monthly  installments  commencing March 31, 1999 of which the
     March, April and May installments were timely paid.  Additionally,  BABC as
     Agent,  retains  the right to withhold up to  approximately  $1,694,000  in
     aggregate  availability  which arose from the expiration of certain letters
     of credit  previously  outstanding as a security  deposit for the Company's
     former New York headquarters lease.

     At May 2, 1999, the Company's loan  availability as defined in the Loan and
     Security  Agreement,  in excess of  outstanding  advances  and  letters  of
     credit, was approximately $1.5 million. At May 2, 1999, the Company was not
     in compliance  with the minimum EBITDA  covenant  contained in the Loan and
     Security Agreement.  As a result of uncertainty  surrounding the outcome of
     such  covenant  violation  as well  as  additional  uncertainties,  as more
     thoroughly  discussed  in Note 2 to the  Condensed  Consolidated  Financial
     Statements,  concerning  the  Company's  ability  to  continue  as a  going
     concern,  the long-term  amount due under the  Revolving  Loan Facility and
     Term Loan Facility ($43.2 million) has been included in the current portion
     of long-term debt at May 2, 1999.

     On March 22, 1999 the Company  entered  into a 9% Senior  Secured Note with
     ABB Industrial  Systems,  Inc. ("ABB") for the principal amount of $290,000
     in settlement of ABB's secured claim in the Company's  bankruptcy (see Note
     9 to the 1998 Form  10-K).  The note is payable in 60  consecutive  monthly
     installments  in the  amount  of  $6,019.91  commencing  on April 1,  1999.
     Additionally,  the Company paid $60,000 in respect of ABB's  secured  claim
     and issued  common  stock based on the  formula set forth in the  Company's
     Plan of  Reorganization in respect of ABB's unsecured claim during the 1999
     Second  Quarter.  The  Company  recognized  an  extraordinary  gain on debt
     discharge  of  $314,000  during the 1999 Second  Quarter  relating to ABB's
     unsecured claim.

     As  described  more  thoroughly  in  Note 9 to the  Consolidated  Financial
     Statements  contained  in the 1998 Form 10-K,  the Company  had  previously
     issued  subordinated  floating  rate notes  (the  "Deferred  Interest  Rate
     Notes") in respect of certain  accrued but unpaid  interest  (approximately
     $1.6  million).  On December  22,  1997,  the Company  repaid the  Deferred
     Interest  Rate Notes and accrued  interest due thereon  through  borrowings
     under the Revolving Loan Facility.


<PAGE>


10.  Statements of Financial Accounting Standards No. 128, "Earnings Per Share,"
     became effective during fiscal year 1998 and requires two  presentations of
     earnings per share  -"basic"  and  "diluted".  Basic  earnings per share is
     computed  by  dividing  income  available  to  common   stockholders   (the
     numerator)   by  the  weighted   average   number  of  common  shares  (the
     denominator) for the period.  The computation of diluted earnings per share
     is similar to basic  earnings  per share,  except that the  denominator  is
     increased to include the number of additional common shares that would have
     been outstanding if the potentially dilutive common shares had been issued.

     The numerator in calculating  both basic and diluted earnings per share for
     each period is the  reported net income  (loss).  The  denominator  used in
     calculating  both basic and diluted is the weighted  average  common shares
     outstanding as there were no potentially dilutive shares for either period.

11.  As discussed in Note 13 to the Consolidated  Financial Statements contained
     in the 1998 Form 10-K, the Company has accrued certain  estimated costs for
     environmental matters.

     Dublin, Georgia. On December 29, 1995, the Georgia Environmental Protection
     Division ("EPD") issued separate administrative orders (the "Administrative
     Orders") to the Company and to J.P. Stevens & Co., Inc.  ("Stevens")  which
     relate to three sites on the Georgia  Hazardous  Site  Inventory - the "TCE
     site",  the  "1,1-DCA  site" and another site known as the "Burn Area" - at
     the Company's Dublin,  Georgia facility. The Administrative Orders required
     the Company and Stevens to submit a compliance  status  report  ("CSR") for
     these sites that would  include,  among other things,  a description of the
     release,  including  its nature and extent,  and suspected or known source,
     the quantity of the release and the date of the release. The CSR would also
     have  to  include  a  determination  of  cleanup  standards  (called  "risk
     reduction standards") for the sites and a certification that the sites were
     in compliance with those standards; alternatively, the party submitting the
     CSR  could  acknowledge  that  the  site  is not in  compliance  with  risk
     reduction  standards.  Pursuant to the Administrative  Orders, if a site is
     not in  compliance  with the risk  reduction  standards,  then a Corrective
     Action Plan (a "Corrective  Action Plan") for remediating the release would
     have to be submitted to EPD.

     Since both the Company  and  Stevens had been  required to perform the same
     work at all  three of these  sites,  the  Company  and  Stevens  agreed  to
     allocate  responsibilities  between  themselves  pursuant  to an  Agreement
     Concerning  Performance of Work  ("Agreement")  dated January 24, 1997. The
     Agreement required the Company to prepare and submit to EPD the CSR for the
     TCE and 1,1-DCA sites, while requiring Stevens to prepare and submit to EPD
     a CSR for the Burn Area site. The Agreement does not commit either party to
     perform  corrective action at these sites.  Stevens submitted a CSR for the
     Burn Area site.  During  fiscal  year 1998,  EPD and  Stevens  corresponded
     regarding the Stevens CSR. It is the Company's  understanding  that Stevens
     is  waiting  for a  response  from EPD  regarding  the CSR  submitted  from
     Stevens.


<PAGE>


     The Company submitted a CSR for the TCE and 1,1-DCA sites,  which certified
     compliance with risk reduction standards for both sites. EPD indicated that
     it did not agree to the  certification  with respect to the TCE site. After
     extensive  discussions with EPD concerning the issue, the Company submitted
     a revised Corrective Action Plan ("CAP") on October 31, 1997 which has been
     approved  by EPD.  The  revised CAP calls for  continued  operation  of the
     Company's existing  groundwater  recovery system, as well as one additional
     groundwater  recovery  well and a  groundwater  collection  trench near the
     former dry cleaning basement. The Company has completed installation of the
     recovery well and the  groundwater  collection  trench.  In addition to the
     installation  of these two systems,  the CAP requires the  submission of an
     Annual  Corrective  Action Status  Report to EPD. The Company  submitted an
     interim  report to EPD on March 2, 1999 and  plans to submit  the  required
     Annual Corrective Action Status Report by July 31, 1999.

     Tifton,  Georgia.  In January 1997, the Company was notified by a potential
     buyer of the Company's  Tifton facility that soil and  groundwater  samples
     had been obtained from that facility and that certain contaminants had been
     identified.  Subsequently,  through  sampling and testing  performed by the
     Company's environmental consultants,  the Company confirmed the presence of
     contaminants  in  groundwater  samples  taken at the site.  On February 28,
     1997, the Company notified EPD of such findings, and the site was placed on
     the Georgia Hazardous Site Inventory.

     The Company  subsequently  consummated its sale of the Tifton facility.  As
     part  of  that  transaction,  the  Company,  the  Tift  County  Development
     Authority  as  purchaser   ("TCDA")  and  Burlen  Corporation  as  operator
     ("Burlen")  entered  into  an  Environmental  Cost  Sharing  and  Indemnity
     Agreement ("Cost Sharing Agreement"). Under the Cost Sharing Agreement, the
     Company retained  responsibility for remediating certain contamination,  to
     the extent required by law, that originated prior to Burlen's  occupancy of
     the premises.  Likewise,  the Company  assumed the  obligation to indemnify
     TCDA and Burlen in regard to such  contamination to the extent that a claim
     is made by an unaffiliated third party or governmental agency. In exchange,
     Burlen  agreed to pay to the Company the lesser of (1)  $150,000  minus any
     payments  already  made to the Company  (certain  expenses had already been
     shared)  to  respond  to the  contamination  or (2)  one-half  of the costs
     incurred by the Company in response to such contamination.

     By letter dated  December 21, 1998, EPD requested that the Company submit a
     CSR for the site by June 21, 1999.  EPD indicated that it had sent Burlen a
     similar request.  The Company intends to submit the CSR for the site by the
     requested deadline.

     At May 2,  1999,  the  Company  had $0.2  million  accrued  for costs to be
     incurred  in  connection   with  the  TCE,   1,1-DCA  and  Tifton  facility
     environmental  matters.  The  Company,  subject to EPD's  response  to J.P.
     Stevens revised CSR and compliance status  certification and EPD's response
     to the Tifton site,  believes the accrual for environmental costs at May 2,
     1999 is adequate.


<PAGE>


12.  Restructuring  items related to the Company's 1998  Restructuring  and 1999
     Realignment have been segregated and included in normal  operations  during
     the  thirteen  and  twenty-six  weeks ended May 2, 1999 and May 3, 1998 and
     consist of (in thousands):

                                                    Thirteen Weeks Ended
                                                     May 2,        May 3,
                                                     1999          1998
                                                     ----          ----

<TABLE>
<S>                                                  <C>              <C>
     Gain associated with reduction of
        operating lease cancellation liability       $(647)        $  --
     Severance and "stay-put" bonus expense             13           967
     Gain associated with New York office
        lease surrender ......................          --          (658)
     Other ...................................           5             3
                                                     -----         -----
     Total ..............................            $(629)        $ 312
                                                     =====         =====
</TABLE>
<TABLE>


                                                    Twenty-Six Weeks Ended
                                                     May 2,          May 3,
                                                     1999            1998
                                                     ----            ----

<S>                                                 <C>            <C>
     Gain associated with reduction of operating
        lease cancellation liability                $ (647)        $  --
     Severance and "stay-put"
        bonus expense                                1,195           967
     Gain associated with New York office
        lease surrender                                 --          (658)
     Other                                               8             3
                                                    -------        ------
     Total                                          $  556         $ 312
                                                    ======         =====
</TABLE>

During  the  thirteen  weeks  ended  January  31,  1999,  the  Company  incurred
approximately  $1.2  million  in  severance  expense  as a  result  of the  1999
Realignment  which was  recognized as a  restructuring  item during the thirteen
weeks  ended  January 31,  1999.  During the 1999  Second  Quarter,  the Company
recognized a gain of $0.6 million associated with the reduction of the operating
lease  cancellation  liability  previously  established during fiscal year 1998.
Such gain resulted from an agreement  reached with a lessor to exchange  certain
idle  equipment  covered under a lease  agreement for equipment in operation and
owned by the  Company.  This  agreement  allows  the  Company  to sell such idle
equipment.  This item was  recognized  as a  restructuring  item during the 1999
Second Quarter.

During  the  thirteen  weeks  ended  May 3,  1998,  the  Company  recognized  as
restructuring  items severance expense of approximately $0.8 million and expense
of approximately  $0.2 million for stay-put bonuses (see Note 1 to the 1998 Form
10-K).


<PAGE>


In anticipation  of entering into the lease surrender  agreement (see Note 13 to
the 1998 Form 10-K),  the Company  wrote-down  property,  plant and equipment by
approximately  $1.1 million  associated with the future abandonment of leasehold
improvements and furniture and fixtures,  wrote-down the estimated deferred rent
liability  at  January  1,  1999  by  approximately  $2.1  million  and  accrued
approximately  $0.3 million for broker's  commission.  These items resulted in a
$0.7 million gain which was recorded as a restructuring item during the thirteen
weeks ended May 3, 1998.



<PAGE>


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

Reference is made to Item 7 - "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations"  contained  in the 1998 Form 10-K for a
discussion  of  the  Company's  financial  condition  as of  November  1,  1998,
including  a  discussion  of the  Company's  anticipated  liquidity  and working
capital requirements during its 1999 fiscal year.

Forward Looking Statements

Certain  matters  discussed  in this  Quarterly  Report under Item 2 are forward
looking  statements  which reflect the  Company's  current views with respect to
future events and financial  performance.  These forward-looking  statements are
subject to certain risks and  uncertainties  which could cause actual results to
differ  materially from  historical  results or those  anticipated.  Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates.  The Company  undertakes no obligation to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information,  future  events or  otherwise.  The  following  factors could cause
actual  results  to  differ   materially  from   historical   results  or  those
anticipated:  demand for the  Company's  products,  competition,  the  Company's
production needs, wool market  conditions,  foreign currency exchange rates, the
adequacy  of  the  Company's  current   financing,   any  unexpected   financing
requirements, and changes in the general economic climate.

Recent Events

1999 Realignment

As described in Note 1 to the Consolidated Financial Statements contained in the
1998 Form 10-K,  the  Company has  incurred  net losses of $19.0  million,  $7.0
million and $17.8 million in fiscal years 1998, 1997 and 1996, respectively. Net
sales  declined  from $199.0  million in fiscal  year 1997 to $149.6  million in
fiscal year 1998. Management has responded to these losses, the decline in sales
and the resulting  adverse impact on the Company's  liquidity by  implementing a
business  plan  designed  to align  the  Company's  manufacturing  capacity  and
overhead with expected market demand.

In October 1998,  the Company's  Board of Directors  approved the closing of its
Louisville,  Georgia plant, realignment of the Company's remaining manufacturing
facilities located in Georgia and further reductions of its selling, styling and
administrative  costs  (the  "1999  Realignment").  Implementation  of the  1999
Realignment  was  substantially  complete as of January 31, 1999. As a result of
the 1999  Realignment,  the  Company  incurred  approximately  $1.2  million  in
severance  expense and  recognized  a gain of $0.6 million  associated  with the
reduction of the operating lease cancellation  liability previously  established
during fiscal year 1998.  Such gain  resulted  from an agreement  reached with a
lessor to exchange  certain idle equipment  covered under a lease  agreement for
equipment  in  operation  and owned by the Company.  This  agreement  allows the
Company  to  sell  such  idle   equipment.   These  items  were   recognized  as
restructuring  items  during the  twenty-six  week period ended May 2, 1999 (the
"1999  Period").  Further,  the Company  incurred  costs of  approximately  $0.1
million during the 1999 Period  related to the  relocation of certain  machinery
and  equipment.  Such costs were  charged to cost of goods sold  during the 1999
Period.

Sale of FAI

On April  30,  1999 the  Company  entered  into a letter of  intent  with  Newco
Holdings LLC ("Newco")  which  provides for the sale of the ladies suit business
and certain assets, and the assumption of certain liabilities,  of FAI by Newco.
Consummation of the sale is expected to occur in June 1999. The assets of FAI to
be sold consist primarily of leasehold improvements,  furniture and fixtures and
computer  systems.  The Company expects to incur a gain on the sale of FAI which
will be recognized  when the sale is  consummated.  (See Note 3 to the Condensed
Consolidated Financial Statements).

Financial Condition and Liquidity

The Company's business is seasonal,  with the vast majority of orders for woolen
fabrics placed from December through April for apparel  manufacturers to produce
apparel  for retail sale during the fall and winter  months.  This  results in a
seasonal sales order and billing  pattern which  historically  generates  higher
sales  during the  Company's  second and third fiscal  quarters  compared to the
Company's first and fourth fiscal  quarters.  This sales pattern places seasonal
constraints on the Company's manufacturing operations which results in increased
working capital  requirements in the Company's first fiscal quarter  relating to
the  manufacture  of  certain  components  of  inventory  which  are sold in the
Company's  second and third fiscal quarter.  Further,  the industry  practice of
providing  coating fabric customers with favorable billing terms (referred to as
"dating")  which permit payment 60 (sixty) days from July 1 for invoices  billed
in January through June encourages such coating fabric customers to place orders
in advance of their actual need.  This  enables the Company to  manufacture  and
bill certain coating fabric customers during the Company's first fiscal quarter.

Reference is made to Note 9 to the Consolidated  Financial  Statements contained
in the 1998 Form 10-K. The Company funds its operating needs through  borrowings
under its  Amended  and  Restated  Loan and  Security  Agreement  (the "Loan and
Security  Agreement") which was entered into between the Company and a syndicate
of financial  institutions led by BankAmerica  Business Credit, Inc. ("BABC") on
July 23,  1997.  The Loan  and  Security  Agreement,  as  subsequently  amended,
provides for a revolving  line of credit  (including a $15.0  million  letter of
credit facility),  subject to a base borrowing formula of up to $70 million.  On
February 8, 1999,  the Loan and Security  Agreement  was amended and the Company
agreed,  among other  things,  to prepay $5.6 million of the Term Loan  Facility
through  borrowings  under the  Revolving  Loan  Facility.  The $5.6 million had
previously  been reserved from the revolving line of credit  availability  under
the base borrowing formula.  Further, the Company agreed to increase its monthly
Term Loan Facility  principal payment from $374,000 to $450,000  beginning March
1, 1999.  The Company agreed to repay a portion of the Term Loan Facility in the
future if subsequently  obtained  appraised orderly  liquidation  values for the
Company's  property,  plant and  equipment  securing the Term Loan Facility fall
below  83.1% in  relation  to the  outstanding  amount  owed under the Term Loan
Facility.

The Company's  availability  under its Revolving Loan Facility was approximately
$1.5 million at May 2, 1999 as compared to $25.5  million at May 3, 1998. At May
30, 1999, the Company's  availability under its Revolving Loan Facility was $1.3
million.  At May 2, 1999,  the  Company was not in  compliance  with the minimum
EDITDA  covenant  contained in its Loan and Security  Agreement.  As a result of
uncertainty  surrounding  the  outcome  of such  covenant  violation  as well as
additional uncertainties concerning the Company's ability to continue as a going
concern,  the  long-term  amount  due  under the  Revolving  Loan  Facility  and
Term-Loan Facility ($43.2 million) has been classified in the current portion of
long-term debt at May 2, 1999 for financial reporting purposes.

The Company's  ability to maintain  adequate  availability to meet its operating
needs  is  dependent  on  achieving  future  sales  consistent  with  management
expectations  for fiscal  year 1999 and  successful  implementation  of its cost
reductions.  The majority of the Company's customers are in the domestic apparel
industry which has continued to suffer an economic decline as a result of higher
levels of imports and changing  fashion trends.  If these trends  continue,  the
Company's  results of  operations  and  financial  condition  will  continue  to
deteriorate, likely at a faster rate than previously experienced.  Expected cash
flow from  operations is dependent  upon  achieving  sales targets during fiscal
year 1999, which are influenced by market conditions, including apparel sales at
retail, that are beyond the control of the Company.  Further, the collectibility
of  accounts  receivable  is  dependent  upon the state of the  economy  and, in
particular,  the financial condition of the apparel industry.  Also,  continuing
refinement  of the Company's  strategies  in response to evolving  circumstances
could materially change the Company's  working capital and capital  expenditures
requirements. There can be no assurance that the Company will be able to achieve
an adequate level of sales consistent with management's  expectations for fiscal
year  1999 to  enable  the  Company  to  generate  sufficient  funds to meet its
operating needs.

During  the  twenty-six  week  period  ended May 2, 1999  (the  "1999  Period"),
operations  provided  $2.1 million of cash,  whereas  $14.6  million was used by
operations  during  the  twenty-six  week  period  ended May 3, 1998 (the  "1998
Period"). This $16.7 million increase in cash provided by operations in the 1999
Period was  primarily due to a $15.8  million  decrease in inventory  during the
1999 Period as compared to the 1998 Period. The decrease in inventory during the
1999 Period as compared to the 1998 Period resulted from the Company  curtailing
its  manufacturing  operations  during the 1999 Period.  This was in response to
significantly  lower receipt of customer  sales orders during the 1999 Period as
compared to the 1998 Period for product to be delivered in the Company's  second
and third  fiscal  quarters as well as the  Company's  decision to exit  certain
product lines in connection with the 1998  Restructuring (see Note 1 to the 1998
Form 10-K ) and reduced worsted  manufacturing  capacity resulting from the 1999
Realignment  (see Note 2 to the Condensed  Consolidated  Financial  Statements).
Accounts  receivable  declined by $2.6 million  during the 1999 Period,  whereas
accounts  receivable  increased  by $7.9  million  during the 1998  Period.  The
decrease in accounts receivable  primarily relates to a decrease in sales during
the 1999 Period when  compared to the 1998  Period.  Combined,  the  decrease in
inventory and accounts receivable during the 1999 Period resulted in


<PAGE>


$9.0 million being provided  during the 1999 Period as compared to $17.3 million
being used during the 1998 Period.  This $26.3 million increase in cash provided
was  somewhat  offset  by a $7.9  million  higher  net loss  and a $0.6  million
increase  in cash  used by  accrued  liabilities  during  the 1999  Period  when
compared to the 1998 Period.

Investing  activities  used $1.9  million in the 1999 Period as compared to $1.8
million  in  the  1998  Period.   The  Company  expects   spending  for  capital
expenditures,  principally  plant  and  equipment,  in  fiscal  year  1999 to be
approximately  the same as fiscal year 1998 due to costs  incurred in connection
with the Company's  leasehold  improvements at the Company's new headquarters in
New York and renewal or betterments  of plant and equipment and compliance  with
environmental regulations.

As a result of the foregoing,  during the 1999 Period,  $0.6 million was used by
financing  activities  whereas during the 1998 Period $16.0 million was provided
by financing activities.

The sales  order  backlog  at May 30,  1999 was  $21.7  million  whereas  at the
comparable  time a year earlier the sales order backlog was $58.0  million.  The
composition  of the sales order  backlog at May 30, 1999 reflects a weaker order
position in all product lines. Of the  approximate  $36.3 million decline in the
sales order  backlog at May 30, 1999 as compared to the  comparable  time a year
earlier,  approximately $25.1 million related to womenswear fabrics. The decline
in the backlog of sales orders for women's  fabrics is twofold.  First,  an over
capacity of woolen flannel  manufacturing  coupled with  excessive  women's wool
flannel  apparel  inventory  at retail  has lead to a decline  in demand for the
Company's women's wool flannel fabrics.  Second,  the reduction in the Company's
worsted fabrics manufacturing  capacity has caused the Company to limit somewhat
its women's worsted product offerings. The menswear fabric and government fabric
sales order backlog at May 30, 1999 declined by $6.5 million over the comparable
time a year earlier.  Approximately  $6.0 million of this decline related to the
Company's  decision  to exit men's  suits and  government  businesses.  Menswear
fabrics  further  declined  primarily due to an over capacity in global  worsted
wool manufacturing and fashion trends. The order position for coating fabrics at
May 30,  1999 has  declined  by $4.1  million  over the  comparable  time a year
earlier.  The decrease in coating fabric sales order backlog is primarily due to
the  unseasonably  warm  winter  experienced  throughout  much  of the  U.S.  in
1997-1998.  As a result,  initial  coating  fabric  orders have been  delayed by
retailers,  which has delayed orders from apparel  manufacturers.  The specialty
fabric  sales order  backlog at May 30, 1999  declined by $0.5  million over the
comparable  time a year  earlier due to a decrease in orders for fabrics used in
baseball caps.

The  Company  purchases  a  significant  amount of its raw wool  inventory  from
Australia.  Since all of the Company's forward purchase commitments for raw wool
are  denominated  in U.S.  dollars,  there is no  actual  currency  exposure  on
outstanding  contracts.  However,  future changes in the relative exchange rates
between  the United  States and  Australian  dollars can  materially  affect the
Company's results of operations for financial reporting purposes.  Based on wool
costs  incurred  during  the 1999  Period  and the  Company's  forward  purchase
commitments,  the Company  expects wool costs to decrease  approximately  11% in
fiscal year 1999 as compared to fiscal year 1998.



<PAGE>


Year 2000 Matters

Many computer systems  experience  problems handling dates beyond the year 1999.
Therefore, some computer hardware and software will need to be modified prior to
the year 2000 in order to remain  functional.  The  Company is in the process of
updating or replacing its  computerized  systems to ensure its systems are "Year
2000" compliant and to improve the Company's overall manufacturing, planning and
inventory  related systems.  The Company is utilizing both internal and external
resources  to  upgrade or  replace  its  existing  computerized  systems.  Costs
associated with upgrading  existing systems to address the Year 2000 matter will
be  expensed  in  the  period  incurred,   whereas  costs  associated  with  the
replacement  of existing  systems will be  capitalized  in the period  incurred.
During the 1999 Period, the Company capitalized $0.4 million in costs associated
with the replacement of existing systems.

The Company  expects its Year 2000 upgrade  project and the  replacement  of its
manufacturing  and inventory  related  systems to be completed  during the third
quarter of calendar year 1999.  There can be no assurance,  however,  that there
will not be a delay in, or increased costs associated with the implementation of
such changes,  and any inability to implement such changes could have a material
adverse effect on the Company.

The Company has not completed its assessment of the Year 2000  compliance of its
vendors and customers,  nor of the possible  consequences  to the Company of the
failure  of one or more  of its  vendors  and  customers  to  become  Year  2000
compliant on a timely basis.  The Company  expects to complete  such  assessment
before the end of the third  quarter of calendar  year 1999. It is possible that
if a substantial  number of the Company's  customers fail to implement Year 2000
compliant billing or payment systems, for example, their payments to the Company
might be disrupted  which might  adversely  affect the Company's  cash flow. The
Company will discuss these matters with its key vendors and customers during the
remainder  of 1999 to attempt  to  ascertain  whether  and to what  extent  such
problems are likely to occur.  It is not clear,  however,  what, if any measures
the Company could take to deal with such  eventualities  while still maintaining
customer  and vendor  relationships.  The Company  does not believe  that it has
other  relationships with vendors and suppliers which, if disrupted,  due to the
failure of such  vendors and  suppliers to deal  adequately  with their own Year
2000 compliance issues, would have a material adverse effect on the Company.

The Company has  completed an  assessment  of its  manufacturing  processes  and
identified which processes are dependent on third-party  provided  software that
may need to be modified in order to be Year 2000 compliant.  The Company intends
to notify  such  third-party  providers  before the end of the third  quarter of
calendar year 1999 to determine  whether such  software  needs to be modified in
order to be Year 2000 compliant.  Where software modifications are required, the
Company will engage the appropriate  third-party software providers to make such
Year 2000  compliant  modifications.  Should the Company be unable to obtain the
appropriate  software  modifications,  the  Company  believes  it can  alter its
manufacturing  processes to supplement any processes idled by noncompliance with
the Year 2000.


<PAGE>


Results of Operations

The Twenty-Six Weeks Ended May 2, 1999 the ("1999 Period") Compared to
The Twenty-Six Weeks Ended May 3, 1998 the ("1998 Period")

The  Company's  business is  seasonal,  accordingly,  results for these  interim
periods are not  indicative of results for a full fiscal year. Net sales for the
1999 Period were $45.5 million, a decrease of 42.1% from the 1998 Period.  Total
yards of fabric sold decreased 46.8% from the 1998 Period to the 1999 Period and
the average per yard  selling  price  decreased to $7.51 per yard from $7.55 per
yard due to shifts in product mix and sales price decline. The decrease in sales
was  primarily  due to womenswear  fabric sales which were  approximately  $23.2
million  lower in the 1999 Period as  compared  to the 1998 Period and  menswear
fabric sales which were approximately  $12.8 million lower in the 1999 Period as
compared  to  the  1998  Period.   Additionally,   coating   fabric  sales  were
approximately  $1.5 million lower during the 1999 Period as compared to the 1998
Period.  These decreases were nominally  offset by increases in specialty fabric
sales of $0.2 million and  government  fabric  sales of $0.4 million  during the
1999 Period as  compared to the 1998  Period.  Additionally,  the Company  added
sales of $3.9  million for FAI during the 1999  Period.  Menswear  fabric  sales
declined due, in part, to the Company's  decision made in March 1998 to exit the
men's top dyed suit business.  Overall,  the Company expects men's woolen fabric
sales to be lower in fiscal  year 1999 as  compared  to fiscal  year 1998 due to
fashion  trends and  increased  competition  from  imports.  Women's  woolen and
worsted  fabric  sales were  lower in the 1999  Period as  compared  to the 1998
Period.  Based on current backlog of sales orders for women's woolen and worsted
sales, market trends and increased  competitive  pressures,  the Company expects
overall  women's  woolen and worsted fabric sales to be  significantly  lower in
fiscal year 1999 as compared to fiscal year 1998. Currently, the Company expects
coating  fabric  sales in fiscal year 1999 to be  slightly  lower than in fiscal
year 1998.

Cost of goods sold  decreased  $23.8  million to $43.6  million  during the 1999
Period  primarily as a result of the decline in sales and change in product mix.
Gross profit  decreased  $9.3  million from $11.2  million in the 1998 Period to
$1.9 million in the 1999 Period, and gross profit margin for the 1999 Period was
4.2%  compared to 14.3% for the 1998  Period.  This  decline in the gross profit
margin  is  due to  fixed  manufacturing  costs  which  are  not  absorbed  when
manufacturing operations are running at volumes below full capacity. As a result
of operating below full capacity, $5.8 million in fixed manufacturing costs were
unabsorbed  during the 1999 Period as compared to $1.1  million  during the 1998
Period.

Selling,  general and  administrative  expenses,  excluding  the  provision  for
uncollectible  accounts,  decreased  8.6% to $6.2  million  in the  1999  Period
compared  to $6.8  million in the 1998  Period.  However,  included  in selling,
general  and  administrative  expenses  during the 1999  Period is $1.6  million
related  to  FAI.  The  majority  of  the  decrease  in  selling,   general  and
administrative  expenses  exclusive of FAI during the 1999 Period was  primarily
due to a decrease in human resource  related expenses as the Company reduced its
overhead in response  to lower  sales.  Additionally,  expense  associated  with
professional  services  and  incentive  compensation  were lower during the 1999
Period when compared to the 1998 Period.


<PAGE>


The provision for uncollectible  accounts  decreased to $0.3 million in the 1999
Period  as  compared  to $0.6  million  in the  1998  Period.  See Note 3 to the
Consolidated  Financial  Statements  contained  in  the  1998  Form  10-K  for a
discussion of the Company's  accounting  policies regarding the establishment of
its allowance for uncollectible accounts.

Interest  expense  for the 1999  Period  was $2.8  million as  compared  to $3.2
million in the 1998  Period.  The decrease in interest  expense  during the 1999
Period is mainly  attributable  to a lower Term Loan Facility  balance which was
somewhat  offset by a higher average  Revolving Loan Facility  balance and added
interest  expense of $0.2 million  associated with FAI during the 1999 Period as
compared to the 1998 Period.

As a result of the foregoing,  a loss before  reorganization  and  restructuring
items,  income taxes and extraordinary  gain of $7.4 million was realized in the
1999 Period as compared to income before  reorganization and restructuring items
and income taxes of $0.7 million in the 1998  Period.  Loss before  depreciation
and  amortization,  reorganization  and restructuring  items,  interest expense,
income taxes and  extraordinary  gain during the 1999 Period was $2.8 million as
compared to income before  depreciation  and  amortization,  reorganization  and
restructuring  items,  interest  expense and income taxes of $5.9 million during
the 1998 Period.

Restructuring  items were $0.6  million  during the 1999 Period and $0.3 million
during the 1998  Period  (see Note 12 to the  Condensed  Consolidated  Financial
Statements).

During  fiscal year 1995,  the Company  fully  utilized its net  operating  loss
carrybacks as permitted by the Internal  Revenue Code.  For the 1999 Period,  no
income tax benefit was recognized  from the realization of a net operating loss.
During the 1998 Period,  the Company  recognized an income tax provision of $0.1
million  at an  effective  income  tax  rate  of 39%  which  was  reversed  in a
subsequent interim period.

An  extraordinary  gain on debt discharge of $0.3 million was recognized  during
the 1999  Period  as a result  of the  settlement  reached  with ABB  Industrial
Systems,  Inc.  regarding  its  bankruptcy  claim  (see Note 9 to the  Condensed
Consolidated Financial Statements).

As a result of the  foregoing,  net loss for the 1999 Period was $7.7 million as
compared to net income of $0.2 million in the 1998 Period. The operating results
of FAI for  the  1999  Period  has  been  included  in  normal  operations.  FAI
recognized  a net loss of $1.9 million  during the 1999 Period.  As discussed in
Note 3 to the  Condensed  Consolidated  Financial  Statements,  the  Company has
entered into a letter of intent  which  provides for the sale of the ladies suit
business and certain assets, and the assumption of certain  liabilities,  of FAI
by Newco Holdings LLC.




<PAGE>


The Thirteen Weeks Ended May 2, 1999 (the "1999 Second Quarter") Compared to
The Thirteen Weeks Ended May 3, 1998 (the "1998 Second Quarter")

Net sales for the 1999 Second  Quarter were $27.0  million,  a decrease of 45.5%
from the 1998 Second Quarter.  Total yards of fabric sold decreased 50.8% during
the 1999 Second Quarter.  However,  the average per yard selling price increased
to $7.70 per yard  from  $7.62 per yard due to  shifts  in  product  mix.  Sales
declined  in all  major  product  lines  except  for  government  fabric  sales.
Additionally,  the Company  added sales of $2.4  million for FAI during the 1999
Second  Quarter.  The  decrease in net sales  during the 1999 Second  Quarter is
attributable  to the reasons  discussed above in the 1999 Period compared to the
1998 Period.

Cost of goods sold  decreased  $17.1  million to $24.6  million  during the 1999
Second Quarter primarily as a result of lower sales. Gross profit decreased $5.5
million or 69.0% to $2.4  million in the 1999 Second  Quarter,  and gross profit
margin  for the 1999  Second  Quarter  was 9.1%  compared  to 15.9% for the 1998
Second Quarter.

Selling,  general and  administrative  expenses,  excluding  the  provision  for
uncollectible  accounts,  decreased  12.2% to $2.8  million  in the 1999  Second
Quarter compared to $3.2 million in the 1998 Second Quarter.  However,  included
in selling,  general and administrative  expenses during the 1999 Second Quarter
is  $0.8  million  related  to  FAI.  The  reduction  in  selling,  general  and
administrative  expenses  during the 1999  Second  Quarter  exclusive  of FAI is
attributable  to the reasons  discussed above in the 1999 Period compared to the
1998 Period.

The provision for uncollectible accounts was $0.2 million during the 1999 Second
Quarter when compared to $0.3 million during the 1998 Second Quarter.

A  restructuring  gain of $0.6 million was recognized in the 1999 Second Quarter
as compared to expense of $0.3 million in the 1998 Second Quarter.  Reference is
made  to  Note  12 to the  Condensed  Consolidated  Financial  Statements  for a
discussion of  restructuring  items incurred  during the 1999 Second Quarter and
the 1998 Second Quarter.

Interest  expense for the 1999 Second  Quarter was $1.4  million or $0.2 million
lower than the 1998 Second  Quarter.  This decrease is  attributable  to a lower
Term Loan  Facility  balance  during the 1999 Second  Quarter as compared to the
1998 Second Quarter which was somewhat offset by added interest  expense of $0.1
million related to FAI during the 1999 Second Quarter.

As a result of the foregoing,  a loss before  reorganization  and  restructuring
items,  income taxes and extraordinary  gain of $1.9 million was realized in the
1999  Second   Quarter  as  compared  to  income   before   reorganization   and
restructuring items and income taxes of $2.8 million in the 1998 Second Quarter.
Income before  depreciation and amortization,  reorganization  and restructuring
items,  interest expense,  income taxes and  extraordinary  gain during the 1999
Second  Quarter was $0.3  million as compared  to $5.5  million  during the 1998
Second Quarter.

During  fiscal year 1995,  the Company  fully  utilized its net  operating  loss
carrybacks as permitted by the Internal Revenue Code. Accordingly,  for the 1999
Second Quarter, no income tax benefit was recognized from the realization of net
operating  losses.  During the 1998 Second  Quarter,  the Company  recognized an
income tax  provision  of $0.9  million at an  effective  income tax rate of 39%
which was reversed in a subsequent interim period.


An  extraordinary  gain on debt discharge of $0.3 million was recognized  during
the  1999  Second  Quarter  as a  result  of the  settlement  reached  with  ABB
Industrial  Systems,  Inc.  regarding  its  bankruptcy  claim (see Note 9 to the
Condensed Consolidated Financial Statements).

As a result of the  foregoing,  a net loss of $1.0 million was recognized in the
1999 Second  Quarter  compared to net income of $1.5  million in the 1998 Second
Quarter.  The  operating  results of FAI for the 1999  Second  Quarter  has been
included in normal operations.  FAI recognized a net loss of $0.9 million during
the 1999 Second  Quarter.  As discussed in Note 3 to the Condensed  Consolidated
Financial  Statements,  the Company has  entered  into a letter of intent  which
provides for the sale of the ladies suit  business and certain  assets,  and the
assumption of certain liabilities, of FAI by Newco Holdings LLC.



<PAGE>


      PART II -- OTHER INFORMATION

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


(a)  Exhibits

      11.1  Statement re  computation of per share earnings - not required since
            such  computation  can  be  clearly  determined  from  the  material
            contained herein.

      15.1  Independent  Accountants'  Review  Report,  dated June 11, 1999 from
            Deloitte & Touche LLP to Forstmann & Company, Inc.

(b)  Current Reports on Form 8-K

          None






<PAGE>


                                    SIGNATURES


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



                                        FORSTMANN & COMPANY, INC.
                                        ----------------------------
                                        (Registrant)



                                        /s/Gary E.Schafer
                                        ----------------------------
                                        Gary E. Schafer

June 16, 1999
-------------
   Date




<PAGE>


EXHIBIT INDEX





Exhibit                                                             Sequential
  No.                     Description                                Page No.


11.1      Statement re computation of per share earnings -
          not required since such computation can be
          clearly  determined  from the  material
          contained herein.

15.1      Independent Accountants' Review Report,
          dated June 11, 1999 from Deloitte & Touche LLP
          to Forstmann & Company, Inc.                                 29








<PAGE>




                                                                    Exhibit 15.1
INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Shareholders of Forstmann & Company, Inc.:

We have  reviewed  the  accompanying  condensed  consolidated  balance  sheet of
Forstmann & Company,  Inc. and subsidiary  (the "Company") as of May 2, 1999 and
the related condensed  consolidated  statements of operations and cash flows for
the  thirteen  and  twenty-six  weeks  ended May 2, 1999 and May 3, 1998 and the
condensed  consolidated  statement  of changes in  shareholders'  equity for the
twenty-six  weeks  ended  May  2,  1999.  These  financial  statements  are  the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such condensed  consolidated  financial  statements for them to be in
conformity with generally accepted accounting principles.

The accompanying  condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated  financial statements contained in the 1998 Form 10-K (not
presented  herein)  and in  Note 2 to  these  condensed  consolidated  financial
statements,  certain  conditions  raise  substantial  doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also described in Note 1 to the consolidated  financial  statements contained in
the  1998  Form  10-K  and  Note 2 to  these  condensed  consolidated  financial
statements.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the consolidated balance sheet of the Company as of November 1, 1998
and the related consolidated statements of operations, shareholders' equity, and
cash  flows  for the  period  from  November  3, 1997 to  November  1, 1998 (not
presented  herein);  and in our report dated  February 8, 1999,  we expressed an
unqualified opinion on those consolidated  financial  statements and included an
explanatory  paragraph concerning matters that raise substantial doubt about the
Company's  ability  to  continue  as  a  going  concern.  In  our  opinion,  the
information set forth in the accompanying  condensed  consolidated balance sheet
as of November 1, 1998 is fairly stated, in all material  respects,  in relation
to the consolidated balance sheet from which it has been derived.

Deloitte & Touche LLP
Atlanta, Georgia
June 11, 1999