FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 1998
Commission file number 333-24507

                              WILLCOX & GIBBS, INC.
             (Exact name of registrant as specified in its charter)



              Delaware                                         22-3308457
   (State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                         Identification No.)

   900 Milik Street, Carteret, New Jersey                        07008
  (Address of principal executive offices)                     (Zip Code)

                                 (732) 541-6255
              (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. Yes X No


           Indicate  the number of shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date:

      DATE                           CLASS                   SHARES OUTSTANDING
      ----                           -----                   ------------------

September 30, 1998                Common Stock                   1,001,319



<PAGE>


                     WILLCOX & GIBBS, INC. AND SUBSIDIARIES

                                      INDEX
                                      -----



PART I - Financial Information                                              PAGE
                                                                            ----

          Consolidated  Balance Sheets (Unaudited) at September 30, 1998
               and December 31, 1997                                          3

          Consolidated Statements of Operations (Unaudited) for the Nine
               Months and  Three Months Ended September 30, 1998 and 1997     5

          Consolidated Statements of Cash Flows (Unaudited) for the Nine
               Months Ended September 30, 1998 and 1997                       6

          Notes to Unaudited Consolidated Financial Statements                8

          Management's  Discussion  and Analysis of Financial Condition
               and Results of Operations                                     15

PART II - Other Information                                                  20

Signature                                                                    21



<PAGE>

<TABLE>
<CAPTION>

                                           WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                                                CONSOLIDATED BALANCE SHEETS
                                        (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                             ASSETS                                       September 30,          December 31,
                                                                              1998                   1997
                                                                           ---------              ---------
                                                                           (Unaudited)

<S>                                                                         <C>                 <C>
Current Assets:
      Cash                                                                  $  1,328            $    1,325
      Accounts receivable, less allowance for doubtful
          accounts of $4,890 in 1998 and $4,315 in 1997                       34,702                38,466
      Inventories                                                             45,737                48,735
      Prepaid expenses and other current assets                                3,596                 3,496
      Deferred income taxes                                                    1,521                 1,402
                                                                           ---------             ---------
           Total current assets                                               86,884                93,424

Property and equipment, net                                                    5,237                 5,595
Deferred financing costs, less accumulated amortization of
      $1,138 in 1998 and $650 in 1997                                          3,566                 3,903
Intangible assets, less accumulated amortization of $1,687
      in 1998 and $1,060 in 1997                                              31,759                32,386
Deferred income taxes                                                          1,195                 1,313
Other assets                                                                   5,886                 3,193
                                                                           ---------             ---------
                                                                           $ 134,527             $ 139,814
                                                                           =========             =========


          See accompanying notes to unaudited consolidated financial statements.
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

                                    WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS
                                (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


      LIABILITIES AND STOCKHOLDERS' EQUITY                             September 30,    December 31,
                                                                            1998           1997
                                                                         --------       ----------
                                                                       (Unaudited)

<S>                                                                     <C>                <C>    
Current Liabilities:
      Revolving line of credit                                          $  15,643          $10,617
      Book overdrafts                                                       3,248            3,233
      Current installments of long-term debt                                  607              594
      Trade accounts payable                                               17,167           23,254
      Accrued liabilities and other current liabilities                     9,427            6,856
                                                                         --------       ----------
           Total current liabilities                                       46,092           44,554

Accrued retirement benefits                                                 2,186            2,431
Long-term debt, excluding current installments                             84,578           84,742
                                                                         --------       ----------
           Total liabilities                                              132,856          131,727
                                                                         --------       ----------

Common stock subject to put option                                             --            3,000
Stockholders' Equity:
      Common stock:
        Class A, $10 stated value.  Authorized 1,500,000
             shares; issued and outstanding 1,187,396 in 1998
             and 1,001,319 in 1997                                         11,874            9,013
        Class B, no par value.  Authorized 250,000 shares;
             none issued                                                       --               --
        Class C, no par value.  Authorized 250,000 shares;
             none issued                                                       --               --
      Class A common stock subscriptions receivable                          (326)            (379)
      Accumulated deficit                                                  (9,942)          (3,624)
      Accumulated other comprehensive income  - cumulative
        translation adjustments                                                65               77
                                                                         --------       ----------
        Total stockholders' equity                                          1,671            5,087
                                                                         --------       ----------
                                                                         $134,527       $  139,814
                                                                         ========       ==========


          See accompanying notes to unaudited consolidated financial statements.

</TABLE>



<PAGE>

<TABLE>
<CAPTION>

                          WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                         UNAUDITED


                                                                     Nine Months Ended             Three Months Ended
                                                                -------------------------       -------------------------
                                                                       September 30,                  September 30,
                                                                -------------------------       -------------------------
                                                                   1998           1997             1998            1997
                                                                ---------       ---------       ---------       ---------

<S>                                                             <C>             <C>             <C>             <C>      
  Net sales                                                     $ 132,937       $ 135,671       $  42,128       $  46,429
   Cost of goods sold                                              90,869          93,489          28,556          32,607
                                                                ---------       ---------       ---------       ---------
        Gross profit                                               42,068          42,182          13,572          13,822

  Selling, general, and administrative expenses                    37,894          35,004          12,250          11,915
  Restructuring charge                                              1,850              --              --              --
                                                                ---------       ---------       ---------       ---------
        Operating income                                            2,324           7,178           1,322           1,907

  Interest expense                                                 (9,445)         (9,092)         (3,212)         (3,155)
  Other income, net                                                   327             192              19             102
                                                                ---------       ---------       ---------       ---------
        Loss before income taxes and extraordinary item            (6,794)         (1,722)         (1,871)         (1,146)

  Income tax expense (benefit)                                        (11)           (631)          1,752            (413)
                                                                ---------       ---------       ---------       ---------

        Loss before extraordinary item                             (6,783)         (1,091)         (3,623)           (733)

  Extraordinary loss, net of income tax benefit                        --          (1,557)             --              --

        Net loss                                                $  (6,783)      $  (2,648)      $  (3,623)      $    (733)
                                                                =========       =========       =========       =========

  Basic and diluted loss per common share and
    common share equivalent:

        Loss before extraordinary item                          $   (6.81)      $   (1.13)      $   (3.62)      $   (0.75)

        Extraordinary item, net                                        --           (1.60)             --              --
                                                                ---------       ---------       ---------       ---------

          Net loss per share                                    $   (6.81)      $   (2.73)      $   (3.62)      $   (0.75)
                                                                =========       =========       =========       =========

        Weighted average number of common
          shares and common share equivalents:
                Basic                                                 995             968           1,001             976
                                                                =========       =========       =========       =========
                Diluted                                               995             968           1,001             976
                                                                =========       =========       =========       =========


                  See accompanying notes to unaudited consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                          WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (DOLLARS IN THOUSANDS)
                                         UNAUDITED


                                                                                 For the Nine Months Ended
                                                                                         September 30,
                                                                               -----------------------------
                                                                                  1998                 1997
                                                                               --------             --------
<S>                                                                            <C>                  <C>      
Cash flows from operating activities:
      Net loss                                                                 $ (6,783)            $ (2,648)
      Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                                          1,001                  884
           Provision for losses on accounts receivable                              561                  830
           Amortization of intangible assets                                        627                  628
           Amortization of deferred financing costs                                 488                  458
           Amortization of debt discount                                            159                  158
           Deferred income taxes                                                     --                  205
           Extraordinary loss on debt extinguishment, net                            --                1,557
           Changes in  operating  assets  and  liabilities,  net  of
                effect  of business acquisitions:
                  Trade accounts receivable                                       3,191               (7,090)
                  Inventories                                                     2,987                4,117
                  Prepaid expenses and other current assets                        (100)                 861
                  Other assets                                                   (2,071)              (1,417)
                  Income taxes payable                                              (21)              (1,280)
                  Trade accounts payable and other liabilities                   (4,338)              (6,184)
                                                                               --------             -------- 
           Net cash used in operating activities                                 (4,299)              (8,921)
                                                                               --------             -------- 

Cash flows from investing activities:
      Capital expenditures                                                         (675)              (1,256)
      Proceeds from sale of property and equipment                                   41                   58
      Payment for business acquisitions, net of cash acquired                        --              (37,690)
                                                                               --------             -------- 
           Net cash used in investing activities                                   (634)             (38,888)
                                                                               --------             -------- 

     See accompanying notes to unaudited consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                           WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (DOLLARS IN THOUSANDS)
                                          UNAUDITED


                                                                                 For the Nine Months Ended
                                                                                         September 30,
                                                                               ------------------------------
                                                                                  1998                  1997
                                                                               --------             ---------
                                                                                         (Unaudited)
<S>                                                                            <C>                  <C>      

Cash flows from financing activities:
      Net proceeds from revolving line of credit                                $  5,026            $  12,488
      Increase (decrease) in book overdrafts                                          15                 (224)
      Principal payments on long-term debt                                          (342)                (203)
      Proceeds from debt issued in business acquisitions                              --               83,980
      Extinguishment of debt                                                          --              (41,137)
      Payment of financing costs                                                    (151)              (4,196)
      Repurchase and retirement of warrants                                           --               (3,026)
      Proceeds from common stock issued to Company ESOP                              379                  425
                                                                                --------             --------
           Net cash provided by financing activities                               4,927               48,107
                                                                                --------             --------

Effect of exchange rate changes on cash                                                9                  (25)
                                                                                --------             --------

      Net increase in cash                                                             3                  273
Cash at beginning of period                                                        1,325                  882
                                                                                --------             --------
Cash at end of period                                                           $  1,328             $  1,155
                                                                                ========            =========
Supplemental  disclosure of cash flow  information:
  Cash paid during the period for:
           Interest                                                             $  6,167             $  5,792
                                                                                ========            =========
           Income taxes                                                         $     11             $    275
                                                                                ========            =========

                    See accompanying notes to unaudited consolidated financial statements.
</TABLE>




<PAGE>


                     WILLCOX & GIBBS, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND BASIS OF PRESENTATION

      The accompanying  unaudited consolidated financial statements of Willcox &
Gibbs,  Inc. and  subsidiaries  (the "Company") have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and  with the  instructions  to Form  10-Q and  Article  10 of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the nine and three months  ending  September 30, 1998 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending December 31, 1998.

2.    ACQUISITION

      Effective  January 3,  1997,  the  Company  acquired  all the  outstanding
capital stock of Macpherson Meistergram,  Inc. ("Macpherson") for $24,000,000 in
cash  and  the  assumption  of  approximately  $6,100,000  of  indebtedness  and
$6,400,000  of  trade   payables.   Macpherson  is  primarily   engaged  in  the
distribution of embroidery equipment and supplies to the apparel industry.

3.    REFINANCING

      Effective January 3, 1997, the Company issued $85,000,000 principal amount
of 12.25% Series A senior notes which are due in December 2003. The Company used
the proceeds,  in part, to repay approximately  $40,952,000 of its indebtedness,
to redeem common stock  warrants for a total of  $3,026,000,  and to finance the
Macpherson acquisition.

4.    CLINTON RESTRUCTURING

      During June 1998, the Company effected a restructuring with respect to its
Clinton  Management  Corp. and Clinton  Machinery Corp.  subsidiaries  (together
"Clinton"),  principally  involving the departure from the Company of the former
shareholders  of Clinton and certain  other  employees.  The Company has taken a
charge of $2.8 million in the second quarter of 1998,  principally  with respect
to severance  payments,  as well as for the impairment of certain  inventory and
accounts  receivable.  Of this  amount,  $1.9  million has been  reflected  as a
restructuring  charge,  $0.6  million has been  charged to selling,  general and
administrative  expense and $0.3 million has been charged to cost of goods sold.
As part  of the  restructuring,  the  Company's  obligations  arising  from  its
original purchase of Clinton have been revised to reduce the contingent payments
for  each of the  years  1998,  1999 and 2000  from 35% of  Clinton's  operating
income,  as  defined,  to  10%  thereof  and to  eliminate  the  former  Clinton
shareholders' option to put 100,000 shares of the Company's Class A common stock
to the Company at $30 per share.  The Company is  monitoring  the effects of the
Clinton  restructuring  and may take  further  action  intended  to improve  the
Company's results attributable to Clinton.


<PAGE>


5.    PENSION PLAN

      On May 21, 1998, the Board of Directors of the Company approved amendments
to the WG Apparel, Inc. Retirement Plan, effective July 31, 1998, providing that
no employees  shall become a participant in the Plan after such date and that no
participant's accrued benefits under the Plan shall increase after such date.

6.    LOSS PER SHARE

      The following table sets forth the computation of basic and diluted income
(loss) per share, before extraordinary item, for the nine and three months ended
September 30, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                      Nine Months Ended                 Three Months Ended
                                                                        September 30,                      September 30,
                                                               -----------------------------      ---------------------------
                                                                    1998             1997             1998             1997
                                                               ------------      -----------      ------------     ----------
  <S>                                                          <C>               <C>              <C>              <C>        
  Numerator for basic and diluted loss

     per share                                                 $ (6,783,325)     $ (2,647,92)     $ (3,622,963)    $ (732,443)
                                                               ============      ===========      ============     ========== 
  Denominator for basic and diluted loss
     per share-weighted-average shares
     outstanding                                                    995,705          968,577         1,001,319        976,055
                                                               ============      ===========      ============     ========== 

  Loss per share - basic                                       $     (6.81)      $    (2.73)      $      (3.62)      $  (0.75)
                                                               ============      ===========      ============     ========== 

  Loss per share - diluted                                     $     (6.81)      $    (2.73)      $      (3.62)      $  (0.75)
                                                               ============      ===========      ============     ========== 
</TABLE>


      Employee stock options and warrants which were  outstanding  were excluded
from the computation since the effect would be antidilutive.

7.    COMPREHENSIVE INCOME

      Effective  January 1, 1998,  the Company  adopted  Statement  of Financial
Accounting  Standards  No. 130,  "Reporting  Comprehensive  Income"  ("Statement
130").  Statement 130 establishes items that are required to be recognized under
accounting  standards as  components  of  comprehensive  income.  Statement  130
requires,   among  other  things,   that  an  enterprise   report  a  total  for
comprehensive  income in  financial  statements  of  interim  periods  issued to
shareholders.  For the three and nine month periods ended September 30, 1998 and
1997, the Company's consolidated comprehensive income does not differ materially
from  the  consolidated  net loss set  forth  in the  accompanying  consolidated
statements of operations.

8.    GUARANTOR SUBSIDIARIES

      Set forth below are condensed  consolidating  financial  statements of the
subsidiaries  of the Company  that have fully and  unconditionally,  jointly and
severally  guaranteed  the  Company's  12  1/4%  Senior  Notes  (the  "Guarantor

<PAGE>


Subsidiaries")   and  the   non-guarantor   subsidiaries  of  the  Company  (the
"Non-Guarantor   Subsidiaries").   As  of  September  30,  1998,  the  Guarantor
Subsidiaries were WG Apparel,  Inc., Leadtec Systems, Inc., J&E Sewing Supplies,
Inc., W&G Daon, Inc. W&G Tennessee  Imports,  Inc.,  Clinton  Management  Corp.,
Clinton Machinery  Corporation,  Clinton Leasing Corp., Clinton Equipment Corp.,
Macpherson   Meistergram,   Inc.  and  Paradise  Color  Incorporated,   and  the
Non-Guarantor  Subsidiaries were Willcox & Gibbs,  Ltd.,  Sunbrand S.A. de C.V.,
Sunbrand  Caribe  S.A.,  Allied  Machine  Parts  Ltd.,  M.E.C.  (Sewing  Machine
Limited),  Unity  Sewing  Supply  Company (UK)  Limited,  Allide  Machine  Parts
Limited,  Natyork  Limited,  Forest  Needle  Company  Limited,  Morris  & Ingram
(Textiles) Limited,  Eildon Electronics Limited,  Geoffrey E. Macpherson Canada,
Inc.,  Embroidery Leasing Corporation,  Sunbrand de Colombia,  Unity de Colombia
and  Clinton de  Mexico.  The  Guarantor  Subsidiaries  are wholly  owned by the
Company,  and  there  are no  restrictions  on  the  ability  of  the  Guarantor
Subsidiaries  to make  distributions  to the  Company,  except  those  generally
applicable under relevant  corporation laws.  Separate  financial  statements of
each Guarantor Subsidiary and eliminating entries have not been included because
management has determined that they are not material to investors.


<PAGE>


<TABLE>
<CAPTION>

                     CONDENSED CONSOLIDATING BALANCE SHEETS
                               SEPTEMBER 30, 1998
                                 (IN THOUSANDS)

                                                                   GUARANTOR           NON-GUARANTOR
           ASSETS                                                 SUBSIDIARIES          SUBSIDIARIES      CONSOLIDATED
                                                                  ------------          ------------      ------------

  <S>                                                              <C>                 <C>                <C>      
  Cash                                                             $   1,313           $      15          $   1,328
  Accounts receivable, net                                            27,484               7,218             34,702
  Inventories                                                         32,503              13,234             45,737
  Other current assets                                                 4,805                 312              5,117
                                                                   ---------           ---------          ---------
        Total current assets                                          66,105              20,779             86,884
  Property and equipment, net                                          3,716               1,521              5,237
  Intangible assets, net                                              35,325                  --             35,325
  Other assets                                                         3,783               3,298              7,081
                                                                   ---------           ---------          ---------
                                                                   $ 108,929           $  25,598          $ 134,527
                                                                   =========           =========          =========


           LIABILITIES AND STOCKHOLDERS' EQUITY

  Current borrowings                                               $  15,825           $     425          $  16,250
  Book overdrafts                                                      3,103                 145              3,248
  Trade accounts payable                                              12,023               5,144             17,167
  Accrued liabilities and other current liabilities
                                                                       8,217               1,210              9,427
                                                                   ---------           ---------          ---------
        Total current liabilities                                     39,168               6,924             46,092

  Long-term debt, excluding current installments
                                                                      83,940                 638             84,578
  Accrued retirement benefits                                          2,000                 186              2,186
                                                                   ---------           ---------          ---------
        Total liabilities                                            125,108               7,748            132,856

  Intercompany, net                                                   (9,549)              9,549                 --

  Common stock                                                        11,874                  --             11,874
  Other equity (deficit)                                             (18,504)              8,301            (10,203)
                                                                   ---------           ---------          ---------
        Total stockholders' equity                                    (6,630)              8,301              1,671
                                                                   ---------           ---------          ---------
                                                                   $ 108,929           $  25,598          $ 134,527
                                                                   =========           =========          =========
</TABLE>



<PAGE>
<TABLE>
<CAPTION>

                                              CONDENSED CONSOLIDATING BALANCE SHEETS
                                                         DECEMBER 31, 1997
                                                           (IN THOUSANDS)

                                                                   GUARANTOR          NON-GUARANTOR
           ASSETS                                                 SUBSIDIARIES         SUBSIDIARIES      CONSOLIDATED
                                                                  ------------         ------------      ------------

  <S>                                                             <C>                 <C>                <C>      
  Cash                                                            $   1,254           $      71          $   1,325
  Accounts receivable, net                                           32,067               6,399             38,466
  Inventories                                                        42,370               6,365             48,735
  Other current assets                                                4,730                 168              4,898
                                                                  ---------           ---------          ---------
        Total current assets                                         80,421              13,003             93,424

  Property and equipment, net                                         4,037               1,558              5,595
  Intangible assets, net                                             36,289                  --             36,289
  Other assets                                                        2,361               2,145              4,506
                                                                  ---------           ---------          ---------

                                                                  $ 123,108           $  16,706          $ 139,814
                                                                  =========           =========          =========


           LIABILITIES AND STOCKHOLDERS' EQUITY

  Current borrowings                                              $  10,798           $     413          $  11,211
  Book overdrafts                                                     3,233                  --              3,233
  Trade accounts payable                                             22,563                 691             23,254
  Accrued liabilities and other current liabilities
                                                                      5,319               1,537              6,856
                                                                  ---------           ---------          ---------
        Total current liabilities                                    41,913               2,641             44,554

  Long-term debt, excluding current installments
                                                                     83,917                 825             84,742
  Accrued retirement benefits                                         2,245                 186              2,431
                                                                  ---------           ---------          ---------
        Total liabilities                                           128,075               3,652            131,727
                                                                  ---------           ---------          ---------

  Common stock subject to put option                                  3,000                 --               3,000

  Intercompany, net                                                  (5,627)              5,627                 --
  Common stock                                                        9,013                  --              9,013
  Other equity (deficit)                                            (11,353)              7,427             (3,926)
                                                                  ---------           ---------          ---------
        Total stockholders' equity                                   (2,340)              7,427              5,087
                                                                  ---------           ---------          ---------
                                                                  $ 123,108           $  16,706          $ 139,814
                                                                  =========           =========          =========
</TABLE>



<PAGE>
<TABLE>
<CAPTION>

                     CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                       FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                      (IN THOUSANDS)

                                                       GUARANTOR        NON-GUARANTOR
                                                      SUBSIDIARIES      SUBSIDIARIES    CONSOLIDATED
                                                      ------------      ------------    ------------

<S>                                                   <C>               <C>              <C>      
  Net sales                                           $ 115,534         $ 17,403         $ 132,937
                                                      ------------      ------------    ------------
  Cost of goods sold                                     79,279           11,590            90,869
        Gross profit                                     36,255            5,813            42,068

  Selling, general, and administrative expenses          34,958            4,786            39,744
                                                      ------------      ------------    ------------
        Operating income                                  1,297            1,027             2,324

  Interest expense                                       (9,337)           (108)            (9,445)
  Other income (expense), net                               475            (148)               327
                                                      ------------      ------------    ------------
        Income (loss) before income taxes                (7,565)            771             (6,794)
   
  Income tax expense (benefit)                                1            (12)               (11)

                                                      ------------      ------------    ------------
        Net income (loss)                             $  (7,566)        $   783          $  (6,783)
                                                      ============      ============    ============ 


                     CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                       FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                      (IN THOUSANDS)

                                                       GUARANTOR       NON-GUARANTOR
                                                      SUBSIDIARIES     SUBSIDIARIES    CONSOLIDATED
                                                      ------------     ------------    ------------

  Net sales                                           $ 118,830         $ 16,841         $ 135,671
  Cost of goods sold                                     81,873           11,616            93,489
                                                      ------------     ------------    ------------
        Gross profit                                     36,957            5,225            42,182

  Selling, general, and administrative expenses          31,053            3,951            35,004
                                                      ------------     ------------    ------------
        Operating income                                  5,904            1,274             7,178

  Interest expense                                       (8,955)           (137)           (9,092)
  Other income, net                                         113              79               192
                                                      ------------     ------------    ------------
        Income (loss) before income taxes and            (2,938)          1,216            (1,722)
            extraordinary item

  Income tax expense (benefit)                             (635)              4              (631)
                                                      ------------     ------------    ------------

        Income (loss) before extraordinary item          (2,303)          1,212            (1,091)

  Extraordinary loss, net of income tax benefit          (1,557)             --            (1,557)
                                                      ------------     ------------    ------------

        Net income (loss)                             $  (3,860)        $ 1,212        $   (2,648)
                                                      ============     ============    ============ 
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                       FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                      (IN THOUSANDS)

                                                    GUARANTOR       NON-GUARANTOR
                                                   SUBSIDIARIES     SUBSIDIARIES    CONSOLIDATED
                                                   ------------     ------------    ------------
    <S>                                            <C>              <C>              <C>      
    Cash flows from operating activities           $ (4,488)        $    189         $ (4,299)
                                                   ------------     ------------    ------------
    Cash flows from investing activities               (589)             (45)            (634)
                                                   ------------     ------------    ------------

    Cash flows from financing activities:
           Proceeds from borrowings                   5,041               --            5,041
           Principal payment on debt                   (133)            (209)            (342)
           Payment for financing costs                 (151)              --             (151)
           Other changes                                379               --              379
                                                   ------------     ------------    ------------

                                                      5,136             (209)           4,927
    Effect of exchange rates on cash balances            --                9                9
                                                   ------------     ------------    ------------
    Net change in cash                                   59              (56)               3
    Cash at beginning of period                       1,254               71            1,325
                                                   ------------     ------------    ------------
    Cash at end of period                          $  1,313         $     15         $  1,328
                                                   ============     ============    ============


     
                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                       FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                      (IN THOUSANDS)

                                                    GUARANTOR       NON-GUARANTOR
                                                   SUBSIDIARIES     SUBSIDIARIES    CONSOLIDATED
                                                   ------------     ------------    ------------
  Cash flows from operating activities             $ (9,398)        $    477          $ (8,921)
                                                   ------------     ------------    ------------
  Cash flows from investing activities:
         Payment for business acquisitions          (37,690)              --           (37,690)
         Other changes                                 (978)            (220)           (1,198)
                                                   ------------     ------------    ------------
                                                    (38,668)            (220)          (38,888)
                                                   ------------     ------------    ------------
  Cash flows from financing activities:
         Proceeds from borrowings                    96,244               --            96,244
         Extinguishment of debt                     (41,135)            (205)          (41,340)
         Payment of financing costs                  (4,196)              --            (4,196)
         Repurchase and retirement of warrants       (3,026)              --            (3,026)
         Other changes                                  425               --               425
                                                   ------------     ------------    ------------
                                                     48,312             (205)           48,107
  Effect of exchange rates on cash balances             --               (25)              (25)
                                                   ------------     ------------    ------------
  Net change in cash                                    246               27               273
  Cash at beginning of period                           343              539               882
                                                   ------------     ------------    ------------
  Cash at end of period                            $    589         $    566          $  1,155
                                                  =============     ============    ============
</TABLE>



<PAGE>


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


GENERAL

      Willcox & Gibbs,  Inc. (the "Company") was organized in 1994 by members of
the Company's  current  management and certain other investors (the  "Management
Buyout") to acquire the sewn products  replacement parts, supply and specialized
equipment   distribution   businesses   of  the   Company's   predecessor   (the
"Distribution Business"), which occurred on July 13, 1994.

      The Company currently  operates through six principal  business units: (i)
its Sunbrand division ("Sunbrand"), which is a distributor of replacement parts,
supplies and specialized  equipment to  manufacturers  of apparel and other sewn
products;  (ii) its Unity  Sewing  Supply  Co.  division  ("Unity"),  which is a
wholesale  distributor to dealers of  replacement  parts and supplies for use by
the apparel and other sewn products  industry;  (iii) its Willcox & Gibbs,  Ltd.
("W&G, Ltd.") subsidiary, which is a distributor to manufacturers and dealers in
the United Kingdom and Europe of  replacement  parts and supplies for use by the
apparel  and  other  sewn  products  industry;  (iv)  its  Clinton  subsidiaries
("Clinton"),  which  distribute  screen printing  equipment and supplies for the
apparel industry;  (v) its Leadtec Systems, Inc. ("Leadtec")  subsidiary,  which
develops and supplies computer-based production planning and control systems for
the apparel industry; and (vi) its Macpherson  Meistergram,  Inc. ("Macpherson")
subsidiary  which  distributes  embroidery  equipment  and supplies  used in the
apparel industry.

RESULTS OF OPERATIONS

      The following  table sets forth the  percentages  that certain  income and
expense items bear to net sales for the periods indicated.

<TABLE>
<CAPTION>
                                                       NINE MONTHS            THREE MONTHS
                                                   ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30
                                                   -------------------     ------------------
                                                      1998      1997          1998     1997
                                                   --------- ---------     ---------  -------

  <S>                                              <C>       <C>            <C>       <C>   
  Net sales                                        100.0%    100.0%         100.0%    100.0%
  Gross profit                                      31.6      31.1           32.2      29.8
  Selling, general and administrative expenses      28.5      25.8           29.1      25.7
  Restructuring charge                               1.4       0.0            0.0       0.0
  Operating income                                   1.7       5.3            3.1       4.1
  Interest expense                                   7.1       6.7            7.6       6.8
  Income tax expense (benefit)                      (0.0)     (0.5)           4.2      (0.9)
  Net loss                                          (5.1)     (2.0)          (8.6)     (1.6)
                                                    ====      ====           ====      ==== 
</TABLE>


<PAGE>

      NINE AND THREE MONTHS ENDED SEPTEMBER  30, 1998 COMPARED TO NINE AND THREE
      MONTHS ENDED SEPTEMBER 30, 1997

      Net sales were $132.9  million in the nine  months  ending  September  30,
1998, a decrease of $2.7 million, or 2.0%, as compared to the nine months ending
September  30, 1997.  Net sales were $42.1  million in the three  months  ending
September 30, 1998, a decrease of $4.3 million, or 9.3%, as compared to the 1997
period.  Macpherson's sales increased 16.1% and decreased 13.8% for the nine and
three months ended September 30, 1998 over the same periods in 1997. The decline
in Macpherson's third quarter sales was attributable to a delay in deliveries of
a new line of  embroidery  equipment  introduced in early  September.  Clinton's
sales declined by 35.6% and 34.4% for the nine and three months ended  September
30, 1998.  Clinton's net sales were  negatively  affected by a declining  screen
printing market and the replacement of an existing equipment product line, which
impacted market share.  Sales for the Company's other  operations  experienced a
decline  of 2.1% and an  increase  of 1.3% for the nine and three  months  ended
September  30, 1998 over the same  period in 1997.  The  decreases  for the nine
month period is due to the  continued  decline in apparel  manufacturing  in the
United States.

      Gross  profit  in the nine  months  ending  September  30,  1998 was $42.1
million, a decrease of $0.1 million,  or 0.3%, as compared to the same period of
1997.  Gross profit for the three  months  ending  September  30, 1998 was $13.6
million,  a decrease  of $0.2  million or 1.8% as compared to the same period in
1997.  As a percentage  of net sales,  gross profit in the nine and three months
ending  September 30, 1998 was 31.6% and 32.2%, as compared with 31.1% and 29.8%
in the same periods in 1997.  The increase in gross  profit  percentage  for the
nine and three  month  period  was  primarily  attributable  to the  decline  in
Clinton's sales which  historically have had lower gross profit margins than the
rest of the Company.

      Selling,  general and  administrative  expenses in the nine months  ending
September 30, 1998 were $37.9 million,  an increase of $2.9 million, or 8.3%, as
compared to the same period of 1997.  Such  expenses  were $12.3  million in the
three months ended September 30, 1998, an increase of $0.3 million,  or 2.8%, as
compared  to the same period in 1997.  As a  percentage  of the net sales,  such
expenses  increased  to 28.5% and 29.1%  for the nine and  three  months  ending
September  30,  1998  from  25.8%  and 25.7% in the same  periods  of 1997.  The
increase  in  expenses  as a  percentage  of sales was  principally  a result of
increased  costs as the  Company  continues  to expand in Latin  America,  fixed
overhead  costs that did not decline in  proportion  to lower sales and, for the
nine month period,  certain  charges  relating to the  restructuring  of Clinton
described below.

      In the nine months and three months ending  September 30, 1998 the Company
had operating income of $2.3 million and $1.3 million,  respectively, a decrease
of $4.9 million,  or 67.6%, and $0.6 million,  or 30.7%, as compared to the same
periods of 1997. As a percentage of net sales, operating income was 1.7% for the
nine months ended  September 30, 1998, as compared to 5.3% in the same period of
1997. The decreases were attributable to the factors discussed above.


<PAGE>


      During June 1998,  the Company  effected a  restructuring  with respect to
Clinton,  principally  involving  the  departure  from the Company of the former
shareholders  of Clinton and certain  other  employees.  The Company has taken a
charge of $2.8  million  in the  second  quarter,  principally  with  respect to
severance  payments,  as well as for the  impairment  of certain  inventory  and
accounts  receivable.  Of this  amount,  $1.9  million has been  reflected  as a
restructuring  charge,  $0.6  million has been  charged to selling,  general and
administrative  expense and $0.3 million has been charged to cost of goods sold.
As part  of the  restructuring,  the  Company's  obligations  arising  from  its
original purchase of Clinton have been revised to reduce the contingent payments
for  each of the  years  1998,  1999 and 2000  from 35% of  Clinton's  operating
income,  as  defined,  to  10%  thereof  and to  eliminate  the  former  Clinton
shareholders' option to put 100,000 shares of the Company's Class A common stock
to the Company at $30 per share.  The Company is  monitoring  the effects of the
Clinton  restructuring  and may take  further  action  intended  to improve  the
Company's results attributable to Clinton.

      Interest  expense was $9.4  million and $3.2 million in the nine and three
months ending September 30, 1998, respectively,  an increase of $0.3 million, or
3.8%, and unchanged, as compared to the respective periods in 1997. The increase
in  interest  expense  was a result of higher  borrowings  in 1998 over the same
period in 1997.

      The Company  recorded an income tax benefit of $1.8 million during the six
months  ended June 30, 1998.  The  Company's  net  deferred  tax assets  include
substantial amounts of net operating loss carryforwards. Since operating profits
continue to be lower than forecasts and as a result of operational  difficulties
and higher  than  expected  expenses  at  Clinton,  management  believes  that a
valuation allowance is required,  since sufficient  uncertainty exists regarding
the  realizability  of net  deferred  tax assets.  As a result,  the Company has
recorded  income tax  expense of $1.8  million  during  the three  months  ended
September  30,  1998,  which will  result in a nominal  tax benefit for the nine
months ended September 30, 1998. If the Company is unable to generate sufficient
taxable  income in the  future  through  operations,  further  increases  in the
valuation allowance will be required through a charge to income.

      The  Company's  results  for the  first  nine  months of 1997  reflect  an
extraordinary  loss from the  extinguishment of debt (net of income tax benefit)
of $1.6  million  owing to the  refinancing  of the  Company's  indebtedness  in
connection  with the Macpherson  acquisition  and the issuance by the Company of
$85.0 million  aggregate  principal  amount of its 12 1/4% Series A Senior Notes
due 2003 (the "Senior Notes") relating thereto.

      Net loss for the nine and three months ended  September  30, 1998 was $6.8
million and $3.6 million compared to a net loss of $2.6 million and $0.7 million
in the same  periods of 1997.  The  decrease  was  attributable  to the  factors
discussed above.

LIQUIDITY AND CAPITAL RESOURCES

      The  Company  has  funded  its  working  capital   requirements,   capital
expenditures and acquisitions from cash provided by operations, borrowings under
its  credit  facilities  and  proceeds  from the  issuance  of debt  and  equity
securities.


<PAGE>


      As a result of the decline in the Company's results of operations in 1998,
the Company may not generate sufficient cash from operations to pay the interest
payment on the Senior Notes due December 15, 1998. The Company has been actively
exploring new sources of debt financing,  including financing sufficient to make
such interest payment, and the possible  restructuring of its existing debt. The
Company has engaged a financial advisory firm to assist in implementing such new
financing and restructuring. However, no assurance can be given that the Company
will be able to  consummate  any such new  financing  or  restructuring.  If the
Company fails to make such interest  payment by January 15, 1999, the holders of
Senior Notes may seek to exercise remedies against the Company. In addition,  at
September 30, 1998, the Company was not in compliance with various  covenants in
its Credit  Agreement.  The lender  under the Credit  Agreement  has waived such
noncompliance,  but has required in connection  with such waiver that borrowings
thereunder not be used to make payments on the Senior Notes. The Company expects
that it will not be in compliance as of December 31, 1998 with  covenants  under
the Credit  Agreement.  If the  Company is unable to conclude  successfully  its
plans for new financing and  restructuring  and defaults in its obligations with
respect to the Senior Notes or the Credit  Agreement,  its existing  lenders may
seek to  exercise  remedies  against the  Company.  In such  circumstances,  the
Company may be required to seek reorganization under the Bankruptcy Code.

      At September 30, 1998, the Company had outstanding  indebtedness of $104.1
million and cash of $1.3 million.  In addition,  approximately  $1.9 million was
available for borrowings under the Company's Credit  Agreement.  The Company has
agreed to reduce the maximum  permitted  borrowings  under the Credit  Agreement
from 85% to 84%, 83% and 82% of eligible accounts receivable,  effective October
1, November 1 and December 1, 1998,  respectively.  In addition, loans under the
Credit  Agreement  bear interest at a rate per annum of 2.75% above the lender's
prime rate, effective November 1, 1998.

      The Company's  capital  expenditures  during the first nine months of 1998
aggregated  approximately  $0.7 million.  Such  expenditures  were primarily for
computer, office and warehouse equipment and improvements.

      Net cash  used in the  Company's  operating  activities  was $4.3  million
during the first nine months of 1998 principally due to working capital changes.
Net cash provided by financing  activities  during the first nine months of 1998
aggregated $4.9 million.

NEW ACCOUNTING STANDARD

      Statement of Financial  Accounting  Standards No. 131,  "Disclosures about
Segments of an Enterprise and Related Information" establishes revised standards
for the manner in which public business  enterprises  report  information  about
operating  segments.  The Company  does not  believe  that this  Statement  will
significantly  alter the  disclosures it currently  provides.  This Statement is
effective for fiscal years beginning after December 15, 1997.


<PAGE>


YEAR 2000 ISSUE

      Many existing  computer  programs use only the last two digits to define a
year and do not take  account of the  change in  century  that will occur in the
year 2000. If this problem is not corrected, computer applications could fail or
create mistakes.  As a result, the Company  established a Year 2000 project team
in 1998 to  assess  its Year  2000  risks and to  recommend  necessary  remedial
action.  The project scope  includes both  information  technology  and computer
based  embedded  technology.  The  project  team  has  focused  its  efforts  on
information systems software and hardware,  and third-party  relationships.  The
Company  does not  expect  remediation  costs to have a  material  impact on its
results of operations or liquidity.

      The Company  believes that its internal systems and equipment will be Year
2000 compliant in a timely  manner,  although there can be no assurance that the
Company's  systems or equipment will not encounter  problems.  In addition,  the
Company  cannot  predict  whether  systems  of third  parties  will be Year 2000
compliant in a timely manner.  The  implementation of the Company's new business
systems and  completion  of the Year 2000 project as  scheduled  will reduce the
possibility  of  significant  interruptions  of normal  operations.  The Company
believes its most  reasonably  likely worst case scenario is that  disruption of
its  distribution  system would occur,  through product delays from suppliers or
delayed  orders from  customers,  which  could  result in the  reduction  of the
Company's  operations.  The  Company  has not  developed  a  specific  Year 2000
contingency plan.  Contingency plans will be addressed as additional information
is available  regarding  the  Company's  remediation  and testing  steps and the
status of third-party Year 2000 readiness.

FORWARD-LOOKING STATEMENTS

      Statements  made in this  Form 10-Q for the nine and  three  months  ended
September 30, 1998 that state the Company's or management's  intentions,  hopes,
beliefs,   expectations  or  predictions  of  the  future  are   forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  It is important to note that the  Company's  actual  results could differ
materially from those contained in such forward-looking  statements.  Additional
information  concerning  factors  that  could  cause  actual  results  to differ
materially  from those in  forward-looking  statements is contained from time to
time in the Company's SEC filings,  including under the caption "Certain Factors
that May Affect  Results of Operations" in the Company's Form 10-K filed for the
year ended December 31, 1997.


<PAGE>


                     WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                           PART II - OTHER INFORMATION


Item 6.      EXHIBITS AND REPORTS ON FORM 8-K

    (a)   Exhibits

          EXHIBIT NO.                     DESCRIPTION
          -----------                     -----------

          27.1                            Financial  Data  Schedule (filed  with
                                          EDGAR only)


    (b)   Reports on Form 8-K

          During the nine months ended  September 30, 1998,  the Company did not
          file any reports on Form 8-K.



<PAGE>



                                    SIGNATURE

         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.

                                              WILLCOX & GIBBS, INC.
                                              (Registrant)


Date    November 16, 1998                     By /S/ JOHN K. ZIEGLER, JR.
                                                 ----------------------------
                                                 John K. Ziegler, Jr.
                                                 Vice President
                                                 and Chief Financial Officer