SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 APRIL 4, 1998

                                       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: 0-24179

                               KASPER A.S.L. LTD.
             (Exact name of registrant as specified in its charter)


State of incorporation:  DELAWARE     IRS Employer Identification No: 22-3497645
                         --------                                     ----------

                    77 Metro Way, Secaucus, New Jersey 07094
    ------------------------------------------------------------------------
              (Address and zip code of principal executive office)


                                 (201) 864-0328
    ------------------------------------------------------------------------
              (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 [_]       No [X]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS.

          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.    Yes [X]     No [_]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

          The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of June 1, 1998 was 6,800,000.



<PAGE>



                      KASPER A.S.L., LTD. AND SUBSIDIARIES




                                      INDEX


                                                                        PAGE NO.
PART I - FINANCIAL INFORMATION


Item 1.     Financial Statements:

            Condensed Consolidated Balance Sheets at April 4,
               1998 and January 3, 1998........................................2

            Condensed Consolidated/Combined Statements of
               Operations for the Thirteen weeks ended April 4, 1998
               and Fourteen weeks ended April 5, 1997..........................3

            Condensed Consolidated/Combined Statements of Cash
               Flows for the Thirteen weeks ended April 4,
               1998 and Fourteen weeks ended April 5, 1997.....................4

            Notes to Condensed Consolidated/Combined Financial Statements......5

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations................................9


PART II - OTHER INFORMATION

Item 1.     Legal Proceedings.................................................16

Item 6.     Exhibits and Reports on Form 8-K..................................16

SIGNATURES....................................................................17

EXHIBIT INDEX.................................................................18




<PAGE>



                      KASPER A.S.L., LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                     ASSETS                                     APRIL 4,    JANUARY 3,
                                                                                  1998         1998
                                                                               ---------    ---------
                                                                              (Unaudited)
<S>                                                                            <C>          <C>
Current Assets:
    Cash and cash equivalents ..............................................   $   2,182    $  16,677
    Accounts receivable-net of allowances for possible losses of
       $20,269 and $18,725 respectively ....................................      63,806       30,000
    Inventories ............................................................      75,124       78,796
    Prepaid expenses and other current assets ..............................       5,212        4,462
                                                                               ---------    ---------
          Total Current Assets .............................................     146,324      129,935
                                                                               ---------    ---------
Property, Plant and Equipment, at cost less accumulated
  depreciation and amortization of $3,708 and $2,985,
  respectively .............................................................      14,458       14,337
Reorganization value in excess of identifiable assets, net of
  accumulated amortization of $2,716 and $1,902, respectively ..............      62,465       63,279
Trademarks, net of accumulated amortization of $1,214 and $850,
  respectively .............................................................      49,786       50,150
Other Assets, at cost less accumulated amortization of $811 and
  $596, respectively .......................................................       2,740        2,955
                                                                               ---------    ---------
          Total Assets .....................................................   $ 275,773    $ 260,656
                                                                               =========    =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Accounts payable .......................................................   $  18,533    $  17,637
    Accrued expenses and other current liabilities .........................       6,377        6,703
    Interest Payable .......................................................          48        3,555
    Income taxes payable ...................................................       3,771        1,164
                                                                               ---------    ---------
          Total Current Liabilities ........................................      28,729       29,059

Long-Term Liabilities:
    Deferred Taxes .........................................................         639          639
    Long-Term Debt .........................................................     110,000      110,000
    Bank Revolver ..........................................................      10,923         --
    Minority Interest ......................................................         520         --
                                                                               ---------    ---------
          Total Liabilities ................................................     150,811      139,698

Commitments and Contingencies
Shareholders' Equity:
    Common Stock, $0.01 par value; 20,000,000 shares
       authorized; 6,800,000 shares issued and outstanding .................          68           68
    Preferred Stock, $0.01 par value; 1,000,000 shares
       authorized; none issued and outstanding .............................        --           --
    Capital in excess of par value .........................................     119,932      119,932
    Retained Earnings ......................................................       4,980          972
Accumulated Comprehensive Income:
    Cumulative Translation Adjustment ......................................         (18)         (14)
                                                                               ---------    ---------
          Total Shareholders' Equity .......................................     124,962      120,958
                                                                               ---------    ---------
    Total Liabilities and Shareholders' Equity .............................   $ 275,773    $ 260,656
                                                                               =========    =========
</TABLE>

The accompanying Notes to Condensed  Consolidated/Combined  Financial Statements
are an integral part of these balance sheets.


                                       -2-

<PAGE>



                      KASPER A.S.L., LTD. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                      REORGANIZED   |   PREDECESSOR
                                                        COMPANY     |     COMPANY
                                                     -------------- | --------------
                                                     THIRTEEN WEEKS | FOURTEEN WEEKS
                                                         ENDED      |     ENDED
                                                        APRIL 4,    |    APRIL 5,
                                                          1998      |      1997
                                                       ----------   |  ----------
                                                       (Unaudited)  |  (Unaudited)
<S>                                                    <C>             <C>
Net Sales ........................................     $   96,132   |  $   99,231
Cost of Sales ....................................         67,960   |      74,165
                                                       ----------   |  ----------
      Gross profit ...............................         28,172   |      25,066
Operating Expenses:                                                 |
Selling, warehouse, general and                                     |
administrative expenses ..........................         15,089   |      14,988
Depreciation and Amortization ....................          2,059   |         713
                                                       ----------   |  ----------
      Total operating expenses ...................         17,148   |      15,701
                                                       ----------   |  ----------
Operating income .................................         11,024   |       9,365
Interest and Financing Costs .....................          4,111   |         462
                                                       ----------   |  ----------
Income before provision for income taxes .........          6,913   |       8,903
Provision for Income Taxes .......................          2,905   |       3,561
                                                       ----------   |  ----------
Net Income .......................................     $    4,008   |  $    5,342
                                                       ==========   |  ==========
Basic earnings per share .........................            .59   |        --
                                                       ==========   |
Diluted earnings per share .......................            .59   |        --
                                                       ==========   |
Weighted average number of shares used in                           |
computing Basic earnings per share ...............      6,800,000   |
Weighted average number of shares used in                           |
computing Diluted earnings per share .............      6,800,000   |
</TABLE>


The accompanying Notes to Condensed  Consolidated/Combined  Financial Statements
are an integral part of these financial statements.


                                       -3-

<PAGE>




                      KASPER A.S.L., LTD. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                       Reorganized|  Predecessor
                                                                         Company  |    Company
                                                                        --------  |   --------
                                                                        Thirteen  |   Fourteen
                                                                         Weeks    |    Weeks
                                                                         Ended    |    Ended
                                                                        --------  |   --------
                                                                        April 4,  |   April 5,
                                                                          1998    |     1997
                                                                        --------  |   --------
                                                                      (Unaudited) | (Unaudited)
<S>                                                                     <C>           <C>
Cash Flows from Operating Activities:                                             |
  Net income ........................................................   $  4,008  |   $  5,342
    Adjustments to reconcile net income to net cash (used in)                     |
      provided by operating activities:                                           |
    Depreciation and amortization ...................................      1,302  |        548
    Amortization of reorganization value in excess of                             |
      identifiable assets ...........................................        814  |       --
    Amortization of excess purchase price over net                                |
      assets acquired ...............................................       --    |        165
    Excess of cost over fair value of assets acquired ...............       --    |        (23)
    Income applicable to minority interest ..........................        520  |       --
    Change in provision for possible losses on accounts receivable         1,544  |        237
    Decrease (increase) in:                                                       |
          Accounts receivable .......................................    (35,350) |    (16,450)
          Inventories ...............................................      3,672  |     24,703
          Prepaid expenses and other current assets .................       (750) |       (948)
    Increase (decrease) in:                                                       |
          Accounts payable, accrued expenses and other                            |
             current liabilities ....................................        570  |     (2,272)
          Interest Payable ..........................................     (3,507) |       --
          Income taxes payable ......................................      2,607  |        113
                                                                        --------  |   --------
             Total adjustments ......................................    (28,578) |      6,073
                                                                        --------  |   --------
             Net cash (used in) / provided by operating activities ..    (24,570) |     11,415
                                                                        --------  |   --------
                                                                                  |
Cash Flows from Investing Activities:                                             |
    Capital expenditures net of proceeds from the sale of fixed                   |
       assets .......................................................       (844) |     (1,762)
                                                                        --------  |   --------
    Net cash used in investing activities ...........................       (844) |     (1,762)
                                                                        --------  |   --------
                                                                                  |
Cash Flows from Financing Activities:                                             |
    Bank Revolver ...................................................     10,923  |       --
    Net (decrease) in cash invested with Leslie Fay .................       --          (9,061)
                                                                        --------  |   --------
    Net cash provided by / (used in)  financing activities ..........     10,923  |     (9,061)
                                                                        --------  |   --------
Effect of exchange rate changes on cash and cash equivalents ........         (4) |       --
                                                                        --------  |   --------
Net (decrease) increase in cash and cash equivalents ................    (14,495) |        592
                                                                                  |
Cash and cash equivalents, at beginning of period ...................     16,677  |      1,886
                                                                        --------  |   --------
                                                                                  |
Cash and cash equivalents, at end of period .........................   $  2,182  |   $  2,478
                                                                        ========  |   ========
</TABLE>

The accompanying Notes to Condensed  Consolidated/Combined  Financial Statements
are an integral part of these financial statements.


                                       -4-

<PAGE>



                      KASPER A.S.L., LTD. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED/COMBINED FINANCIAL STATEMENTS


NOTE 1.  GENERAL

          The  Condensed  Consolidated/Combined  Financial  Statements  included
herein have been prepared by Kasper  A.S.L.,  Ltd.  (name  legally  changed from
Sassco Fashions, Ltd. on November 5, 1997) and subsidiaries (Kasper A.S.L., Ltd.
being  sometimes  referred to, and together with its  subsidiaries  collectively
referred to, as the  "Company"  or "Kasper" as the context may require)  without
audit,  pursuant to the rules and  regulations  of the  Securities  and Exchange
Commission.  Certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principals  have been condensed or omitted from this report;  as is permitted by
such rules and  regulations;  however the Company  believes that the disclosures
are adequate to make the information  presented not misleading.  These Condensed
Consolidated/Combined  Financial  Statements  included  herein should be read in
conjunction with the  Consolidated/Combined  Financial  Statements and the notes
thereto  included in the  Company's  Registration  Statement on Form S-1 for the
Fiscal Year ended January 3, 1998.

          In the  opinion of  management,  the  accompanying  interim  Condensed
Consolidated/Combined  Financial  Statements  contain all  material  adjustments
necessary  to  present  fairly  the  Condensed  Consolidated/Combined  financial
condition,   results  of  operations,  and  changes  in  financial  position  of
shareholders'  equity of Kasper and its  subsidiaries  for the  interim  periods
presented.

          Due to the Company's  Reorganization and implementation of Fresh Start
Reporting (see Note 2), the Condensed Consolidated/Combined Financial Statements
for the new  Reorganized  Company  (period  starting June 5, 1997, the effective
date of the Reorganized  Company's emergence from bankruptcy) are not comparable
to those of the Predecessor Company.

          A  black   line  has  been   drawn  on  the   accompanying   Condensed
Consolidated/Combined   Financial   Statements   to   distinguish   between  the
Reorganized Company and the Predecessor Company.

NOTE 2.  FRESH START REPORTING

          Kasper was a division of The Leslie Fay Company,  Inc.  ("Leslie Fay",
formerly The Leslie Fay Companies,  Inc.), a Delaware corporation which operated
its  business  as a  debtor  in  possession  subject  to  the  jurisdiction  and
supervision of the United States  Bankruptcy Court for the Southern  District of
New  York  (the   "Bankruptcy   Court")  until  June  4,  1997.   The  Condensed
Consolidated/Combined   Financial   Statements   herein  presented  include  the
operations of three related Hong Kong corporations, Asia Expert Limited ("AEL"),
Tomwell Limited ("Tomwell"), and Viewmon Limited ("Viewmon"), none of which were
part of the Leslie Fay bankruptcy proceeding. These three Hong Kong corporations
were  subsidiaries of Leslie Fay (upon emergence from bankruptcy  these entities
became  subsidiaries  of Kasper) that procure and arrange for the manufacture of
apparel products in the Far East solely for the benefit of Kasper. The Condensed
Consolidated/Combined  Financial  Statements  also include the results of Kasper
Europe, Ltd., Kasper Canada, ASL Retail Outlets, Inc. and ASL/K Licensing Corp.,
all of which are wholly owned  subsidiaries  of the Company.  Kasper Canada is a
70% owner of Kasper Partnership. The portion of Kasper Partnership pertaining to
its minority  owner is reflected in the  accompanying  financial  statements  as
minority interest. The Condensed  Consolidated/Combined  Financial Statements of
Kasper,  AEL,  Tomwell and Viewmon have been prepared on a stand-alone  basis in
accordance with generally accepted accounting  principles  applicable to a going
concern. The Predecessor Company financial


                                       -5-

<PAGE>



data reflects the combined results of Kasper,  AEL,  Tomwell,  and Viewmon.  The
financial  statements of the Reorganized  Company are consolidated as opposed to
combined  because  as of  the  date  of  reorganization,  the  three  Hong  Kong
corporations became subsidiaries of Kasper.  Prior to the reorganization,  these
entities  were  subsidiaries  of  Leslie  Fay and,  accordingly,  the  financial
statements  were combined for those periods.  The Company's  fiscal year ends on
the Saturday  closest to December  31st.  The fiscal year ended  January 3, 1998
("1997") included 53 weeks.

          Leslie  Fay was  operating  its  business  as a debtor  in  possession
subject to the  jurisdiction of the Bankruptcy  Court. On April 5, 1993,  Leslie
Fay and certain of its wholly  owned  subsidiaries  filed a  voluntary  petition
under Chapter 11 of the United States  Bankruptcy Code (the "Bankruptcy  Code"),
as  a  result  of  the  announcement  of  accounting  irregularities,   numerous
stockholder  and  other  party  lawsuits  filed  against  the  Company  and  its
directors,  and the breach of certain  provisions of its financing  agreement at
the time.  On October  31,  1995,  the Debtors and the  Committee  of  Unsecured
Creditors (the "Creditors  Committee") filed Leslie Fay's Plan of Reorganization
(the "Plan") pursuant to Chapter 11 of the Bankruptcy Code.

          The Plan was subsequently amended on March 13, 1996, December 5, 1996,
February 3, 1997 and February 28, 1997. On December 5, 1996, the Debtors filed a
Disclosure  Statement for the Amended Joint Plan of  Reorganization  pursuant to
Chapter 11 of the Bankruptcy Code (the "Disclosure  Statement"),  which was also
subsequently  amended  on  February  3, 1997 and  February  28,  1997.  The Plan
provided for,  among other things,  the  separation of the Debtors'  estates and
assets into two separate reorganized entities.  Under the Plan,  stockholders of
the  Company  would not  retain or  receive  any value for their  interest.  The
Debtors  obtained  Bankruptcy  Court  approval of the  Disclosure  Statement  on
February 28, 1997. The Plan was approved by the creditors and on April 21, 1997,
the Bankruptcy  Court  confirmed the Plan.  Refer to the Condensed  Consolidated
Financial  Statements of Leslie Fay for the fiscal year ended December 28, 1996,
included  in Leslie  Fay's  Annual  Report on Form  10-K,  for more  information
regarding Leslie Fay's bankruptcy proceedings.

          The Plan called for the spin-off of Kasper as a newly organized entity
and which  consists of Kasper,  AEL,  Tomwell,  Viewmon,  Sassco  Europe and ASL
Retail (collectively referred to as "Kasper A.S.L., Ltd. and Subsidiaries).

          On  June  4,  1997,  the  Plan  was   consummated  by  Leslie  Fay  1)
transferring the equity interest in both Leslie Fay and Kasper, to its creditors
in exchange  for relief from the  aggregate  amount of the claims  estimated  at
$338,000,000;  2) assigning to certain  creditors the ownership  rights to notes
aggregating  $110,000,000  payable by  Kasper;  and 3)  transferring  the assets
(including  $10,963,000 of cash) and  liabilities of the then Sassco division to
Kasper and the assets  and  liabilities  of Leslie  Fay's  Dress and  Sportswear
divisions to three wholly owned subsidiaries of Leslie Fay. In addition,  Leslie
Fay retained  approximately  $41,080,000 in cash, of which  $23,580,000  will be
used to pay administrative claims as defined in the Plan. As provided for in the
Plan, the Company has issued approximately eighty (80%) percent of its 6,800,000
of new shares to its creditors in July 1997.  The remaining  shares will be held
back pending the resolutions of certain  litigation before the Bankruptcy Court.
On June 4, 1997,  Leslie Fay emerged from bankruptcy and Kasper has emerged as a
newly organized separate entity.

          Pursuant to the guidelines  provided by SOP 90-7, the Company  adopted
fresh-start  reporting with a reorganization value of $120,000,000 and allocated
the  reorganization  value to its net assets on the basis of the purchase method
of accounting.



                                       -6-

<PAGE>



          The fresh-start  reporting  reorganization  value of $120,000,000  was
based on averaging  several valuation  methodologies  prepared by an independent
appraiser. A five-year analysis of the Company's actual and projected operations
(fiscal years ended  1997-2001) was prepared by management and a discounted cash
flow methodology was applied to those numbers.  A equity value was determined by
calculating  the  impact  of  various   assumption  changes  to  the  five  year
projections  and adding the  projected  cash flows for the first four years to a
"capitalization"  of the fifth year's projected cash flow under each assumption.
The fifth year's  projected cash flow was capitalized  into value and discounted
to the present.

          The  aggregate  cash flow  value was then  discounted  to its  present
value,  using a  discount  rate of 14%.  The  reorganization  values  were  then
weighted with a range between  $118,000,000 and  $123,000,000,  and $120,000,000
was established as the Company's reorganization value.

          The  five-year  cash flow  projections  were  based on  estimates  and
assumptions  about  circumstances and events that have not yet taken place. Such
estimates and  assumptions  are inherently  subject to significant  economic and
competitive  uncertainties and contingencies  beyond the control of the Company,
including,  but not limited to, those with  respect to the future  course of the
Company's business activity.


NOTE 3.  INVENTORIES

          Inventories  are  valued  at  lower of cost or  (first-in,  first-out,
"FIFO") market.

          Inventories, net of reserves, consist of the following:


                                                 APRIL 4,       JANUARY 3,
                                                   1998            1998
                                                 -------         -------
                                                     (In thousands)

Raw materials                                    $38,388         $32,121
Work in process                                        3               3
Finished goods                                    36,733          46,672
                                                 -------         -------
            Total inventories                    $75,124         $78,796
                                                 =======         =======


NOTE 4.  INCOME PER SHARE

          The  computation of income per common share is based upon the weighted
average  number of common shares  outstanding  during the period.  The pro forma
weighted  average number of common shares  outstanding  and pro forma net income
per common  share for the  period  ended  April 5, 1997 have not been  presented
because,  due to the restructuring  and  implementation of Fresh Start Reporting
they are not comparable to subsequent periods.



                                       -7-

<PAGE>



NOTE 5.  DEBT

          At  April  4,  1998,  there  were  direct  borrowings  of  $10,923,000
outstanding under the Bank Boston Credit Agreement and approximately $19,341,000
outstanding   in  letters  of  credit  under  the  facility.   The  Company  has
approximately $26,600,000 available for future borrowings as of April 4, 1998.

          The  Company  paid  $2,422,000  in  commitment  and  related  fees  in
connection  with the credit  facility in June 1997.  These fees are  included in
other assets and will be amortized as interest and financing costs over the term
of the Credit Agreement (three years).

NOTE 6.  COMMITMENTS AND CONTINGENCIES

          On April 5, 1993,  Leslie Fay and  several of its  subsidiaries  filed
voluntary  petitions in the Bankruptcy  Court under Chapter 11 of the Bankruptcy
Code. All civil  litigation  commenced  against Leslie Fay and those  referenced
subsidiaries  prior to that date was stayed  under the  Bankruptcy  Code.  By an
order dated April 30, 1997 (the  "Confirmation  Order"),  the  Bankruptcy  Court
confirmed the Plan. The Plan was consummated on June 4, 1997.

          The  Confirmation  Order,  inter alia,  dismissed  with  prejudice all
pending  litigation's,  and  released all claims that could have been brought in
litigation.  Both prior to and  subsequent  to the Filing  Dates,  various class
action  suits were  commenced  on behalf of certain  prior  stockholders  of the
Company.  Any  claims  against  the  Company  arising  out of these  suits  were
discharged  as  part  of,  and  in  accordance  with  the  terms  of  the  Plan.
Accordingly,  whatever  the  eventual  outcome of these  cases,  there can be no
material financial impact on the Company based on the terms of the Plan.

          On November 17, 1997,  the  Company's  wholly-owned  subsidiary,  Asia
Expert,  Ltd.  received a letter from the United States Customs  Service stating
that a monetary claim in the amount of $694,860 was being  contemplated  against
Asia Expert, Ltd. as a result of an alleged trans-shipment of goods in late 1995
from China by a contractor.  The trans-shipment in question involved a Hong Kong
contractor  who  allegedly  diverted  goods that were to be sewn in Hong Kong to
China.  Upon completion,  the goods were then returned to Hong Kong for shipment
to the  United  States  without  disclosing  the  diversion,  which  would  be a
violation of U.S. Customs laws.  However,  it is the Company's position that its
subsidiary  did not knowingly or  intentionally  participate in any violation of
U.S.  Custom laws and the Company  intends to vigorously  pursue all appropriate
legal  defenses.  The Company has  conducted its own  investigation  through its
customs  legal  counsel.  As a result  of the  investigation,  the  Company  has
obtained  an  admission  from the  contractor  that actual  trans-shipments  had
occurred,   but  that  the  contractor  acted  independently  and  intentionally
misrepresented its actions to the Company. The contractor further confirmed in a
sworn affidavit that these practices were done entirely without the knowledge of
the Company.  Based upon these facts, the Company responded to U.S. Customs in a
letter dated January 8, 1998  requesting  termination of the proceeding  without
the issuance of any penalties.  On May 4, 1998, U.S. Customs  dismissed the case
without the issuance of any penalties.

NOTE 7.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

          In 1998, AcSEC issued SOP No. 98-5 "Reporting on the Costs of Start-Up
Activities." SOP No. 98-5  establishes  standards on accounting for start-up and
organization  costs  and in  general,  requires  such  costs to be  expensed  as
incurred.  This  standard  is  required  to be adopted  on January 1, 1999.  The
Company is currently evaluating the estimated impact on adoption, if any.


                                       -8-

<PAGE>



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

      The following  discussion and analysis should be read in conjunction  with
the  foregoing   consolidated  financial  statements  and  notes  thereto.  This
discussion  contains  forward-looking  statements based on current  expectations
that involve risks and  uncertainties.  Actual results and the timing of certain
events may differ  significantly  from those  projected in such  forward-looking
statements due to a number of factors,  including  those set forth at the end of
this Item.

OVERVIEW

          On June 4, 1997,  Kasper  A.S.L.,  Ltd. (the  "Company") was separated
from The Leslie Fay  Companies,  Inc.  ("Leslie  Fay"),  in accordance  with the
fourth amended and restated joint plan of  reorganization  (the  "Reorganization
Plan")  approved  by the U.S.  Bankruptcy  Court.  On that date,  all assets and
corresponding  liabilities  associated with the operation of the Sassco Fashions
Division  of  Leslie  Fay,  including  the  Nipon  Trademarks,  were sold to the
Company.  Prior to that  date,  the  Company  operated  as the  Sassco  Fashions
Division of Leslie Fay, from the time it was acquired by Leslie Fay in 1980. The
Company  received  the  assets and  liabilities  of the  former  Sassco  Fashion
Division of Leslie Fay as part of the Reorganization  Plan of Leslie Fay. In the
aggregate,  $249.6 million of assets,  subject to $19.6 million of  liabilities,
were sold by Leslie Fay to the creditors in  satisfaction  of creditor claims of
like amount.  The Company in turn transferred to the creditors  6,800,000 shares
of its common stock with a market value of $120 million and 12.75%  Senior Notes
with an  aggregate  principal  amount of $110  million in  exchange  for the net
assets.  The Company is one of the largest marketers and manufacturers of career
women's suits in the United  States.  The Company also markets  career  dresses,
sportswear and knitwear. The Company has grown through the extension of existing
product lines,  the  introduction  of new brands and the expansion of its retail
outlet operations.

          The accompanying  financial  statements have been prepared to show the
Company as a free standing entity apart from Leslie Fay. Until 1996, the Company
was totally dependent upon Leslie Fay for all administrative support,  including
accounting,  credit, collections,  legal, etc. As such, the financial statements
reflect an allocation of Leslie Fay administrative expenses to the Company.

          As a division of Leslie  Fay,  the Company was not subject to Federal,
State and Local income taxes. Effective June 4, 1997, the Company became subject
to such  taxes.  The  effective  tax  rate  used  for the  historical  financial
statements  reflects the rate that would have been  applicable,  had the Company
been  independent.  Provisions  for  deferred  taxes were not  reflected  on the
Company's  books,  but were  reflected on Leslie Fay's books and records.  Going
forward, the Company will record deferred taxes in accordance with the provision
of Statement of  Financial  Accounting  Standards  Number 109,  "Accounting  for
Income Taxes."

          The  Company's  business is  primarily  the design,  distribution  and
wholesale  sale of women's  career suits,  dresses and sportswear to principally
major  department  stores and  specialty  shops.  Over the last five years,  the
Company has increased its share of the  wholesale  market by expanding  into all
markets,  including the "lower moderate" (LeSuit), "upper moderate" (Kasper) and
"bridge"  (Nipon) markets.  The Company has also introduced a career  sportswear
label,  Kasper  and  Company(R),   and  career  knitwear  under  the  name  Nina
Charles(TM).  In analyzing  the  performance  of the  knitwear  division and its
capital and operational requirements, the Company has decided to discontinue the
Nina  Charles(TM)  label at  wholesale  in the  United  States for the Fall 1998
season.  The Company will  continue to market the label in its retail stores and
in Canada and Europe.  For Fall 1998, the Company will  incorporate its knitwear
business into its Dress and Sportswear lines.



                                       -9-

<PAGE>



          In July 1995,  the Company  started its retail  outlet  operations  by
acquiring 22 lease properties,  which were assigned to the Company by Leslie Fay
on June 4, 1997 pursuant to the  Reorganization  Plan. As of April 4, 1998,  the
Company had 50 retail outlet stores  throughout the United States.  Sales at the
retail  outlet  stores  totaled $38.6 million in the year ended January 3, 1998.
The stores  operate  under the name Kasper  ASL(R),  but also sell the Company's
other labels, including Nipon(R),  Kasper and Company(R),  Nina Charles(TM),  Le
Suit(TM)and b. bennett(TM).

          In  connection  with  the  separation  from  Leslie  Fay,  Leslie  Fay
transferred all rights and title to the Nipon trademarks to the Company.  At the
time of the  transfer,  there  were  several  licensing  agreements  in  effect,
including men's sportswear,  dress slacks, ties, ladies coats, etc. In 1997, the
Company  received  approximately  $900,000 in  licensing  income from  licensing
agreements.

          On June 4, 1997,  the Company  acquired the trade name  Kasper(R) from
Forecast Designs, Inc., a company owned by Herbert Kasper, for $6 million. Prior
to June 4, the Company paid royalties for the use of the Kasper name to Forecast
Designs,  Inc. In accordance  with the agreement,  Forecast  Designs,  Inc. will
retain the right to the  licensing  income  from  pre-existing  licenses,  which
licenses will be transferred to the Company upon Mr. Kasper's death. The Company
will be entitled to 50% of the income generated by any new licenses. Pursuant to
the  terms of the  acquisition  agreement,  the  Company  also  entered  into an
Employment,  Consulting and Non- Competition Agreement with Herbert Kasper. Such
agreement, which has a term of ten years, provides for the payment to Mr. Kasper
of $300,000 in annual  salary and $7,500 for each 1% by which the gross  profits
from the Company's sales of Kasper women's  apparel,  namely suits,  dresses and
sportswear  in each of the six years 1998 to 2003 exceeds the total gross profit
derived by the Company  from the sale of such  products in the year 1995.  Under
the terms of the Agreement,  Mr. Kasper may and has been dedicating his business
time to the  licensing  activities  of ASL/K  Licensing  Corp.,  which  includes
meeting with current and prospective licensees of the Kasper brand name. He also
participates  in marketing  trips and is involved in the Company's ad campaigns,
reviews  competitor's  products and meets with  prospective  wholesale buyers on
behalf of the  Company.  Mr.  Kasper may also perform such other tasks as he and
Mr. Levine may agree.

          The Company has plans to launch an advertising  campaign  beginning in
1998.  Anticipated costs relating to the advertising  campaign are $2.0 million.
Costs for advertising are expensed as incurred.

RESULTS OF OPERATIONS

THIRTEEN  WEEKS ENDED APRIL 4, 1998 AS COMPARED TO FOURTEEN WEEKS ENDED APRIL 5,
1997

          NET SALES

          Net Sales  for the  thirteen  weeks  ended  April 4, 1998 (the  "first
quarter  1998") were $96.1  million as compared to $99.2 for the fourteen  weeks
ended April 5, 1997 (the "first quarter  1997").  Wholesale  sales  decreased to
$87.2  million  for the first  quarter  1998,  from  $91.6  million in the first
quarter 1997.  However,  the extra week's  wholesale sales for the first quarter
1997 were $5.4  million,  resulting in an overall  increase of $1.0 million on a
comparable 13-week basis.

          Retail  sales  increased  to  approximately  $8.9 million in the first
quarter 1998 from  approximately  $7.6  million in the first  quarter  1997,  an
increase of  approximately  16.8% due primarily to the net addition of 11 retail
outlet  stores over the last 12 months.  The extra  week's  retail  sales in the
first  quarter 1997  amounted to  approximately  $0.5  million,  resulting in an
overall


                                      -10-

<PAGE>



increase of $1.8 million on a comparable  13-week basis.  Comparable store sales
for the first quarter 1998 were $7.1 million as compared to $6.8 million for the
first quarter 1997, an increase of 4.4%.

          GROSS PROFIT

          Gross Profit as a percentage  of net sales  increased to 29.3% for the
first  quarter  1998,  compared  to  25.3%  for  the  first  quarter  1997.  The
improvement  over the first  quarter 1997 can be attributed to the higher retail
sales as well as the improved  performance  at the  wholesale  level.  Wholesale
gross profit as a percentage  of sales  increased to 28.2% in the first  quarter
1998 from 24.8% in the first quarter 1997.

          Retail gross profit as a percentage of sales increased to 39.2% in the
first quarter 1998 from 38.6% in the first quarter 1997.

          SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

          Selling,  general  and  administrative  expenses  increased  to  $15.1
million in the first  quarter  1998 as  compared  to $15.0  million in the first
quarter  1997,  an increase of $.1 million.  The extra week in the first quarter
1997  contributed an extra $1.1 million in selling,  general and  administrative
expenses,  resulting in an overall  increase of $1.2 million on a comparable  13
week period.  Approximately  $950  thousand of this  increase is  attributed  to
increased  selling,  administrative  and  occupancy  costs  related  to the  net
addition of 11 retail outlet stores.

          The  remaining  increase  is  associated  with  Wholesale  operations.
Advertising  expenses  increased by approximately  $550 thousand  primarily as a
result of the new advertising campaign. In addition, Kasper operations in Canada
and the U.K.  contributed  approximately  $300 thousand in  additional  selling,
general and administrative  expenses.  These increases were offset by a decrease
in royalty expense of  approximately  $400 thousand as a result of the trademark
acquisition,   and  an  overall  decrease  of  approximately  $200  thousand  in
administrative  expenses as a result of the termination of consulting agreements
and Leslie Fay allocations due to the reorganization.

          Selling,  general and  administrative  expenses include the following:
(i) design expenses; (ii) production expenses,  which includes purchasing of raw
materials, production planning and scheduling and product costing; (iii) selling
and  marketing   expenses,   including   showroom  sales   personnel  and  sales
representatives  outside  the  showroom;  (iv)  administrative  expenses,  which
include  all back office  functions  such as finance,  human  resources,  import
management,  accounts  receivable and payable,  etc.; (v) advertising  expenses;
(vi)  shipping  expenses;  and (vii)  occupancy  expenses,  which  include costs
related to all owned and or leased facilities,  including rent, utilities,  etc.
These  expenses  are  expected  to  remain  stable in the near  future  with the
exception of advertising  which is expected to increase by $2 million dollars in
1998.

          AMORTIZATION OF REORGANIZATION ASSET

          As a  result  of the  Reorganization,  the  portion  of the  Company's
reorganization  value not attributable to specific  identifiable assets has been
reported as "reorganization  value in excess of identifiable assets". This asset
is being  amortized over a 20-year period  beginning June 4, 1997.  Accordingly,
the Company  incurred  amortization  charges for the first quarter 1998 totaling
approximately  $800  thousand as opposed to no such expense in the first quarter
1997.



                                      -11-

<PAGE>



          DEPRECIATION AND AMORTIZATION

          Depreciation and  amortization  increased to $1.3 million in the first
quarter  1998  from $.7  million  in the first  quarter  1997 as a result of the
amortization  charges  associated  with the trademarks and bank fees  associated
with the financing  agreement.  The trademarks are being amortized over 35 years
beginning June 4, 1997 and resulted in amortization charges in the first quarter
1998 of approximately $400 thousand.  The bank fees are being amortized over the
life  of the  financing  agreement,  which  is  three  years,  and  resulted  in
approximately $200 thousand of amortization charges for the first quarter 1998.

          INTEREST AND FINANCING COSTS

          Interest and  financing  costs  increased to $4.1 million in the first
quarter  1998 from $.5  million  in the  first  quarter  1997,  an  increase  of
approximately $3.6 million. The increase is primarily  attributable to the three
months interest  expense on the $110 million Senior Notes,  which were issued on
June 4, 1997.  The Senior Notes bear  interest at 12.75% per annum and mature on
March 31, 2004. Interest is payable  semi-annually on March 31 and September 30.
Interest  relating  the Senior  Notes for the first  quarter  1998  totaled $3.5
million.  There are no principal payments due until maturity. To the extent that
the Company  elects to undertake a secondary  stock offering or elects to prepay
certain amounts, a premium will be required to be paid.

          INCOME TAXES

          Provision  for income  taxes was $ 2.9 million  for the first  quarter
1998.  This amount  differs  from the amount  computed  by applying  the federal
income tax  statutory  rate of 34% to income  before taxes  because of state and
foreign taxes, and timing  differences  relating  primarily to customer reserves
and  allowances,  inventory,  depreciation  and  amortization.  Income taxes for
periods  prior to June 4, 1997 were  computed  using the effective tax rate that
would have been applicable, had the Company been an independent entity.

LIQUIDITY AND CAPITAL RESOURCES

          Net cash  used in  operating  activities  decreased  to $24.6  million
during the first  quarter  1998 as compared to cash  provided by  operations  of
$11.4 million for the first quarter 1997,  primarily as a result of the increase
in accounts receivable.

          The Company's  main sources of liquidity  historically  have been cash
flows  from  operations  and  credit  facilities.  Prior to June 4,  1997,  as a
division of Leslie Fay, the Company either borrowed from, or invested its excess
cash with Leslie Fay. The Company's capital  requirements  primarily result from
working  capital  needs,  retail  expansion and  renovation of department  store
boutiques and other corporate activities.

          Effective  June 5,  1997,  the  Company  entered  into a $100  million
working  capital  facility with BankBoston as the agent bank for a consortium of
lending  institutions.  The  facility  provides  for a sub-limit  for letters of
credit of $50 million.  The working capital facility is secured by substantially
all the assets of the Company.  The working capital  facility  expires in fiscal
2000 and provides for various borrowing rate options, including rates based upon
a fixed spread over LIBOR. The facility  provides for the maintenance of certain
financial  ratios  and  covenants  and sets  limits  on the  amount  of  capital
expenditures and dividends to shareholders.  Availability  under the facility is
limited to a  borrowing  base  calculated  upon  eligible  accounts  receivable,
inventory  and  letters  of  credit.  As of April 4,  1998,  there  were  direct
borrowings  of $10.9  million  outstanding,  $19.3  million in letters of credit
outstanding and $26.6 million available for future borrowings.


                                      -12-

<PAGE>



          Pursuant to the  Reorganization  Plan, the Company issued $110 million
in Senior  Notes.  The Senior Notes bear interest at 12.75% per annum and mature
on March 31, 2004.  Interest is payable  semi-annually on March 31 and September
30.  Interest  relating the Senior Notes for the first quarter 1998 totaled $3.5
million.  There are no principal payments due until maturity. To the extent that
the Company  elects to undertake a secondary  stock offering or elects to prepay
certain amounts, a premium will be required to be paid.

          The Company  assumed from Leslie Fay a  factoring/financing  agreement
with Heller.  The agreement  was for the sole purpose of  supporting  the Sassco
Fashions  Division of Leslie Fay. The  agreement had a two-year term expiring in
February 1998. It provided for Heller to act as the credit and collection arm of
the Company. The Company would receive funds from Heller as the receivables were
collected. Any amounts unpaid after 120 days would be guaranteed and paid to the
Company by the factor.  The cost was .4% for the first $240 million in sales and
 .35% for sales above that amount.  The  agreement was amended in January 1998 to
add an additional 18 months to the term of the arrangement and lower the rate to
 .35% for the first $250 million in sales and .3% on the excess over that amount.

          Capital  expenditures  were $.8 million and $1.8 million for the first
quarter 1998 and first quarter 1997,  respectively.  The decrease from the prior
year is a result of the move to the new  warehouse  facility  that took place in
the  first  quarter  1997.  Capital  expenditures  for the  first  quarter  1998
represent funds spent for new retail stores, overseas facilities development and
general improvements.

          Capital  expenditures for 1998 are anticipated to total  approximately
$4.8 million and are expected to cover costs  associated  with a relocation to a
new  sales,  production  and  design  office,   continued  retail  outlet  store
development, overseas facilities development and computer system improvements.

YEAR 2000 COMPLIANCE

          The  Company  has  conducted a  comprehensive  review of its  computer
systems to identify  the systems that could be affected by the "Year 2000" issue
and is developing  an  implementation  plan to resolve the issue.  The Year 2000
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Company's programs that have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than  the  year  2000.   This  could  result  in  a  major  system   failure  or
miscalculations.  The Company is utilizing both internal and external  resources
to  identify,  correct  or  reprogram,  and test the  systems  for the year 2000
compliance.  The Company presently believes that, with modifications to existing
software and  converting  to new  software,  the Year 2000 problem will not pose
significant  operational  problems  for the  Company's  computer  systems  as so
modified and converted.  However,  if such modifications and conversions are not
completed  timely,  the Year  2000  problem  may have a  material  impact on the
operations of the Company.

          The  Company  is  also  dependent  on the  efforts  of its  customers,
suppliers and software vendors.  The Company's  customers and suppliers are also
required to implement  projects to make their  systems and  communications  Year
2000 compliant.  Failure to complete their efforts in a timely way could disrupt
the Company's  operations including the ability to receive and ship its products
as well as to invoice its customers.  Finally,  the Company's plan is based upon
the  representation of the vendors that market the software packages selected by
the  Company.  There is no  guarantee  that these new systems  will be compliant
under all the circumstances and volume stresses that may actually be required by
the Company's operations through Year 2000.



                                      -13-

<PAGE>



RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

          In 1998, AcSEC issued SOP No. 98-5 "Reporting on the Costs of Start-Up
Activities." SOP No. 98-5  establishes  standards on accounting for start-up and
organization  costs  and in  general,  requires  such  costs to be  expensed  as
incurred.  This  standard  is  required  to be adopted  on January 1, 1999.  The
Company is currently evaluating the estimated impact on adoption, if any.

CHANGE IN METHOD OF ACCOUNTING

          The effects of the Company's reorganization under Chapter 11 have been
accounted  for  in the  Company's  financial  statements  using  the  principles
required by the American Institute of Certified Public Accountants' Statement of
Position  90-7,  Financial  Reporting  by Entities in  Reorganization  Under the
Bankruptcy Code ("Fresh Start  Accounting").  Pursuant to such  principles,  the
Company's assets,  upon emergence from Chapter 11 are stated at  "reorganization
value",  which  is  defined  as the  value  of  the  entity  before  considering
liabilities on a going-concern basis following the reorganization and represents
the  estimated  amount a willing  buyer  would pay for the assets of the Company
immediately after the reorganization.  The reorganization  value for the Company
was  determined  by reference to the  remaining  liabilities  plus the estimated
value of shareholders' equity of the outstanding shares of the Common Stock. The
reorganization  value of the Company was  allocated to the assets of the Company
in  conformity  with the  procedures  specified by Accounting  Principles  Board
Opinion No. 16, Business Combinations, for transactions reported on the basis of
the purchase method of accounting. In this allocation,  identifiable assets were
valued at estimated fair values,  and any excess  reorganization  value has been
recorded as "reorganization value in excess of amounts allocated to identifiable
assets" (a long-term intangible asset similar to "goodwill").

IMPACT OF ASIAN FINANCIAL AND CURRENCY CRISIS

          To date, the Company has not  experienced  any difficulty in obtaining
needed raw material from its primary sources of supply in the Far East which are
located  in  Japan,  nor  has  it  experienced  any  problems  with  its  sewing
contractors in Taiwan, the Philippines, Hong Kong and China. Over the past year,
the region has suffered  extreme  volatility in its local financial  markets and
currency exchanges. As a result, no assurance can be given that the Company will
continue  to have an  uninterrupted  source  of  supply  from  the  region.  The
inability of certain  suppliers to provide  needed items on a timely basis could
materially  adversely  affect the Company's  operations,  business and financial
condition.

DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

          This report contains forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of 1934,  as amended.  Forward-looking  statements  are  typically
identified by the words "believe,"  "expect,"  "intend,"  "estimate" and similar
expressions.  Those  statements  appear in a number of places in this report and
include statements  regarding the intent,  belief or current  expectation of the
Company or its directors or officers with respect to, among other things, trends
affecting the Company's  financial  conditions and results of operations and the
Company's business and growth strategies.  Such  forward-looking  statements are
not guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those projected,  expressed or implied in the
forward-  looking  statements  as a result of various  factors (such factors are
referred to herein as "Cautionary statements"), including but not limited to the
following:  (i) the Company's  limited operating history and history of negative
cash flow and operating  losses,  (ii) potential  fluctuations  in the Company's
quarterly operating results, (iii) the


                                      -14-

<PAGE>



Company's  concentration of revenues,  (iv) challenges  facing the Company as it
experiences rapid growth and (v) the Company's dependence on a limited number of
suppliers.  The accompanying information contained in this report, including the
information set forth under  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations,"  identifies  important  factors that could
cause such  differences.  Such  forward-looking  statements speak only as of the
date of this report, and the Company cautions  potential  investors not to place
undue  reliance on such  statements.  The Company  undertakes  no  obligation to
update or revise any forward-looking  statements. All subsequent written or oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.












                                      -15-

<PAGE>



                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

          On November 17, 1997,  the  Company's  wholly-owned  subsidiary,  Asia
Expert, Ltd. received a letter from the United States Customs Service (the "U.S.
Custom  Service")  stating  that a monetary  claim in the amount of $694,860 was
being  contemplated  against  Asia  Expert,  Ltd.  as a  result  of  an  alleged
trans-shipment  of  goods  in  late  1995  from  China  by  a  contractor.   The
trans-shipment  in  question  involved  a Hong  Kong  contractor  who  allegedly
diverted goods that were to be sewn in Hong Kong to China. Upon completion,  the
goods were then returned to Hong Kong for shipment to the United States  without
disclosing  the  diversion,  which would be a violation  of U.S.  Customs  laws.
However,  it is the Company's  position that its subsidiary did not knowingly or
intentionally  participate in any violation of U.S.  Custom laws and the Company
intends to vigorously  pursue all appropriate  legal  defenses.  The Company has
conducted its own investigation  through its customs legal counsel.  As a result
of the investigation,  the Company has obtained an admission from the contractor
that  actual  trans-shipments  had  occurred,  but  that  the  contractor  acted
independently and intentionally  misrepresented its actions to the Company.  The
contractor further confirmed in a sworn affidavit that these practices were done
entirely  without the  knowledge  of the Company.  Based upon these  facts,  the
Company  responded to the U.S. Customs Service in a letter dated January 8, 1998
requesting  termination of the proceeding without the issuance of any penalties.
On May 4, 1998, the Company's  customs legal counsel  received a letter from the
U.S. Customs Service  responding to the Company's  request.  In the letter,  the
U.S.  Customs  Service stated that it has decided to close the case against Asia
Expert,  Ltd.,  based  upon its  review of the  January  8, 1998  letter and the
documentation  submitted  therewith,  as  well  as the  statements  made  by the
contractor.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

            (a)         Exhibits:

                        27                      EDGAR Data Schedule

            (b)         Reports on Form 8-K:

                        None.




                                      -16-

<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.


                                           KASPER A.S.L., Ltd.
                                              (Registrant)


                                           /s/ Arthur S. Levine
                                           --------------------------------
                                           Arthur S. Levine
                                           Chairman and Chief Executive Officer


Dated: June 10, 1998                       /s/ Dennis P. Kelly
                                           --------------------------------
                                           Dennis P. Kelly
                                           Chief Financial Officer




                                      -17-

<PAGE>


                                  EXHIBIT INDEX

Exhibit
Number                  Description
------                  -----------

27                      EDGAR Data Schedule








                                      -18-