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 June 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
             --------            ---------      ----------------------
           June 30, 1998       Common Stock            1,001,319

<PAGE>
                     WILLCOX & GIBBS, INC. AND SUBSIDIARIES

                                      INDEX
                                      -----



PART I - Financial Information                                          Page
                                                                        ----

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

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

          Consolidated  Statements of Cash Flows (Unaudited)
               for the Six Months  Ended  June 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                                              19

Signature                                                                20

<PAGE>

<TABLE>
<CAPTION>

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


                             ASSETS                                             June 30,       December 31,
                                                                                  1998             1997
                                                                              -----------      ------------
                                                                              (Unaudited)
<S>                                                                           <C>              <C>
Current Assets:

     Cash                                                                          $458          $ 1,325
     Accounts receivable, less allowance for doubtful accounts of
        $4,760 in 1998 and $4,315 in 1997                                        36,148           38,466
     Inventories                                                                 44,617           48,735
     Prepaid expenses and other current assets                                    4,200            3,496
     Deferred income taxes                                                        1,756            1,402
                                                                              -----------      ------------
        Total current assets                                                     87,179           93,424

Property and equipment, net                                                       5,431            5,595
Deferred financing costs,  less accumulated  amortization of $975
     in 1998 and $650 in 1997                                                     3,578            3,903
Intangible assets,  less  accumulated  amortization  of $1,478 in
     1998 and $1,060 in 1997                                                     31,968           32,386
Deferred income taxes                                                             2,752            1,313
Other assets                                                                      5,088            3,193
                                                                              -----------      ------------
                                                                              $ 135,996        $ 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               June 30,       December 31,
                                                                                  1998             1997
                                                                              -----------      ------------
                                                                              (Unaudited)
<S>                                                                           <C>              <C>
Current Liabilities:
   Revolving line of credit                                                    $ 15,290         $ 10,617
   Book overdrafts                                                                3,266            3,233
   Current installments of long-term debt                                           599              594
   Trade accounts payable                                                        16,531           23,254
   Income taxes payable                                                              53               24
   Accrued liabilities and other current liabilities                              8,062            6,832
                                                                              -----------      ------------
        Total current liabilities                                                43,801           44,554



Accrued retirement benefits                                                       2,438            2,431
Long-term debt, excluding current installments                                   84,559           84,742
                                                                              -----------      ------------
           Total liabilities                                                    130,798          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 1,225,116 in 1998 and 1,001,319
           in 1997                                                               12,251            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                            (392)            (379)
      Accumulated deficit                                                        (6,630)          (3,624)
      Accumulated other comprehensive income - cumulative
          translation adjustments                                                   (31)              77
                                                                              -----------      ------------
          Total stockholders' equity                                              5,198            5,087
                                                                              -----------      ------------
                                                                               $135,996         $139,814
                                                                              ===========      ============

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

<PAGE>


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

<TABLE>
<CAPTION>
                                       Six Months Ended       Three Months Ended
                                           June 30,                June 30,
                                       1998        1997        1998       1997
                                       ----        ----        ----       ----
<S>                                  <C>          <C>         <C>        <C>
Net sales                            $ 90,809      89,242   $ 45,896   $ 47,199
Cost of goods sold                     62,627      61,216     31,427     32,132
                                     --------    --------   --------   --------
   Gross profit                        28,182      28,026     14,469     15,067
Selling, general, and
  administration expense               25,330      22,756     13,240     11,782
Restructuring charge                    1,850           -      1,850          -
                                     --------    --------   --------   --------
   Operating income (loss)              1,002       5,270       (621)     3,285

Interest expense                        6,233       5,937      3,182      3,054
Other income - net                        308          90        324         51
                                     --------    --------   --------   --------
   Income (loss) before income
     taxes                             (4,923)       (577)    (3,479)       282

Income tax expense (benefit)           (1,763)       (218)    (1,167)       138
                                     --------    --------   --------   --------
   Income (loss) before extra-
     ordinary item                     (3,160)       (359)    (2,312)       144

Extraordinary loss, net of income
  tax benefit                               -      (1,557)         -          -
                                     --------    --------   --------   --------
   Net income (loss)                 $ (3,160)   $ (1,916)  $ (2,312)  $    144
                                     ========    ========   ========   ========

Basic and diluted income (loss)
  per common share and common share
  and common share equivalent:

  Income (loss) extraordinary item   $  (3.19)   $  (0.37)  $  (2.31)  $   0.15

  Extraordinary item, net                 -         (1.62)       -          -
                                     --------    --------   --------   --------

     Net income (loss) per share     $  (3.19)   $  (1.99)  $  (2.31)  $   0.15
                                     ========    ========   ========   ========
Weighted average number of common
  shares and common share
  equivalents:
     Basic                                990         963      1,001        970
                                     ========    ========   ========   ========

     Diluted                              990         963      1,001        980
                                     ========    ========   ========   ========

</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>
                                            WILLCOX & GIBBS, INC. AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (Dollars in thousands)
                                                          UNAUDITED


                                                                                          For the Six Months Ended
                                                                                                  June 30,
                                                                                       ------------------------------
                                                                                          1998                1997
                                                                                       ----------           ---------
<S>                                                                                    <C>                  <C>
Cash flows from operating activities:
      Net loss                                                                         $ (3,160)            $ (1,916)
      Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                                                    647                  593
           Provision for losses on accounts receivable                                      526                  495
           Amortization of intangible assets                                                418                  404
           Amortization of deferred financing costs                                         325                  305
           Amortization of debt discount                                                    106                  105
           Deferred income taxes                                                         (1,792)                 (11)
           Extraordinary loss on debt extinguishment, net                                     -                1,557
           Changes in  operating  assets  and  liabilities,  net  of  effect  of
                business acquisitions:
                  Trade accounts receivable                                               1,751                (3,682)
                  Inventories                                                             4,077                 2,501
                  Prepaid expenses and other current assets                                (705)                 (333)
                  Other assets                                                           (1,273)                 (590)
                  Income taxes payable                                                       29                  (501)
                  Trade accounts payable and other liabilities                           (6,103)               (9,203)
                                                                                       ----------           ---------
          Net cash used in operating activities                                          (5,154)              (10,276)
                                                                                       ----------           ---------
Cash flows from investing activities:
      Capital expenditures                                                                 (529)                (797)
      Proceeds from sale of property and equipment                                           25                   58
      Payment for business acquisition, net of cash acquired                                  -              (37,290)
                                                                                       ----------           ---------
           Net cash used in investing activities                                           (504)             (38,029)
                                                                                       ----------           ---------


                         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 Six Months Ended
                                                                                                  June 30,
                                                                                       ------------------------------
                                                                                          1998                1997
                                                                                       ----------           ---------
<S>                                                                                    <C>                  <C>
Cash flows from financing activities:
      Net proceeds from revolving line of credit                                       $  4,673             $  13,607
      Increase (decrease) in book overdrafts                                                 34                  (879)
      Principal payments on long-term debt                                                 (296)                 (203)
      Proceeds from debt issued in business acquisitions                                      -                83,980
      Extinguishment of debt                                                                  -               (41,137)
      Payment of financing costs                                                              -                (4,006)
      Repurchase and retirement of warrants                                                   -                (3,026)
      Proceeds from common stock issued to Company ESOP                                     379                   425
                                                                                       ----------           ---------
           Net cash provided by financing activities                                      4,790                48,761
                                                                                       ----------           ---------

Effect of exchange rate changes on cash                                                       1                    (7)

      Net increase (decrease) in cash                                                      (867)                  449
Cash at beginning of period                                                               1,325                   882
                                                                                       ----------           ---------
Cash at end of period                                                                  $    458             $   1,331
                                                                                       ==========           ==========

Supplemental  disclosure of cash flow  information:
     Cash paid during the period for:
           Interest                                                                    $  5,776             $   5,417
                                                                                       ==========           ==========
           Income taxes                                                                $      9             $     262
                                                                                       ==========           ==========



                            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 six and three months  ending June 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.

<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.         INCOME (LOSS) PER SHARE

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

<TABLE>
<CAPTION>

                                                                       Six Months Ended                 Three Months Ended
                                                                           June 30,                          June 30,
                                                                  ----------------------------     ---------------------------
                                                                      1998            1997             1998            1997
                                                                  ------------   -------------     ------------    -----------

<S>                                                              <C>             <C>               <C>             <C>

Numerator for basic and diluted income (loss) per
   share                                                          $(3,160,362)    $(1,915,478)     $(2,312,373)     $144,382
                                                                  ============   =============     ============    ===========

Denominator for basic income (loss) per                              990,492        963,266        1,001,319       970,460
   share-weighted-average shares outstanding
Effect of dilutive securities:
      Employee stock options                                                -                -               -         9,733
      Warrants                                                              -                -               -             -
                                                                  ------------   -------------     ------------    -----------
Denominator for diluted income (loss) per share
                                                                      990,492          963,266       1,001,319       980,193
                                                                  ============   =============     ============    ===========

Income (loss) per share - basic                                  $    (3.19)    $      (1.99)    $     (2.31)     $   0.15
                                                                  ============   =============     ============    ===========

Income (loss) per share - diluted                                $    (3.19)    $      (1.99)    $     (2.31)     $   0.15
                                                                  ============   =============     ============    ===========

</TABLE>

           Employee  stock  options and  warrants  which were  outstanding  were
excluded  from  the   computation  in  instances   where  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 six month periods ended June 30, 1998 and 1997,
the Company's consolidated  comprehensive income does not differ materially from
the consolidated  net income (loss) set forth in the  accompanying  consolidated
statements of operations.

<PAGE>

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
Subsidiaries")   and  the   non-guarantor   subsidiaries  of  the  Company  (the
"Non-Guarantor  Subsidiaries").  As of June 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>
                                         CONDENSED CONSOLIDATING BALANCE SHEETS
                                                      JUNE 30, 1998
                                                     (In ThousandS)

<TABLE>
<CAPTION>

                                                                GUARANTOR          NON-GUARANTOR
           ASSETS                                               SUBSIDIARIES       SUBSIDIARIES         CONSOLIDATED
                                                               --------------     --------------       --------------
<S>                                                            <C>                <C>                  <C>
Cash                                                           $      490           $      (32)          $      458
Accounts receivable, net                                           30,933                5,215               36,148
Inventories                                                        32,263               12,354               44,617
Other current assets                                                5,710                  246                5,956
                                                               --------------     --------------       --------------
      Total current assets                                         69,396               17,783               87,179
Property and equipment, net                                         3,915                1,516                5,431
Intangible assets, net                                             35,546                    -               35,546
Other assets                                                        6,079                1,761                7,840
                                                               --------------     --------------       --------------
                                                               $  114,936           $   21,060           $  135,996
                                                               ==============     ==============       ==============

           LIABILITIES AND STOCKHOLDERS' EQUITY

Current notes and installments of long-term debt
                                                               $   15,472           $      417           $   15,889
Book overdrafts                                                     3,152                  114                3,266
Trade accounts payable                                              8,192                8,339               16,531
Income taxes payable                                                    -                   53                   53
Accrued liabilities and other current liabilities
                                                                    6,896                1,166                8,062
                                                               --------------     --------------       --------------
      Total current liabilities                                    33,712               10,089               43,801

Long-term debt, excluding current installments
                                                                   83,934                  625               84,559
Accrued retirement benefits                                         2,438                    -                2,438
                                                               --------------     --------------       --------------
      Total liabilities                                           120,084               10,714              130,798

Common stock                                                       12,251                    -               12,251
Other equity (deficit)                                            (17,399)              10,346               (7,053)
                                                               --------------     --------------       --------------
      Total stockholders' equity                                   (5,148)              10,346                5,198
                                                               --------------     --------------       --------------
                                                                $ 114,936            $  21,060           $  135,996
                                                               ==============     ==============       ==============
</TABLE>

<PAGE>

                                         CONDENSED CONSOLIDATING BALANCE SHEETS
                                                    DECEMBER 31, 1997
                                                     (In thousands)


<TABLE>
<CAPTION>

                                                                GUARANTOR          NON-GUARANTOR
           ASSETS                                               SUBSIDIARIES       SUBSIDIARIES         CONSOLIDATED
                                                               --------------     --------------       --------------
<S>                                                            <C>                <C>                 <C>

Cash                                                            $  1,254           $      71            $   1,325
Accounts receivable, net                                          33,209               5,257               38,466
Inventories                                                       42,369               6,366               48,735
Other current assets                                               4,706                 192                4,898
                                                               --------------     --------------      --------------
      Total current assets                                        81,538              11,886               93,424

Property and equipment, net                                        4,037               1,558                5,595
Intangible assets, net                                            36,289                   -               36,289
Other assets                                                       2,619               1,887                4,506
                                                               --------------     --------------      --------------
                                                                $124,483           $  15,331            $ 139,814
                                                               ==============     ==============      ==============

           LIABILITIES AND STOCKHOLDERS' EQUITY



Current notes and installments of long-term debt
                                                                 $10,798           $     413            $  11,211
Book overdrafts                                                    3,233                   -                3,233
Trade accounts payable                                            20,699               2,555               23,254
Income taxes payable                                                   -                  24                   24
Accrued liabilities and other current liabilities                  5,294               1,538                6,832
                                                               --------------     --------------      --------------
      Total current liabilities                                   40,024               4,530               44,554

Long-term debt, excluding current installments
                                                                  83,917                 825               84,742
Accrued retirement benefits                                        2,070                 361                2,431
                                                               --------------     --------------      --------------
      Total liabilities                                          126,011               5,716              131,727
                                                               --------------     --------------      --------------

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

Common stock                                                       9,013                   -                9,013
Other equity (deficit)                                           (13,541)              9,615               (3,926)
                                                               --------------     --------------      --------------
      Total stockholders' equity                                  (4,528)              9,615                5,087
                                                               --------------     --------------      --------------
                                                                $124,483           $  15,331            $ 139,814
                                                               ==============     ==============      ==============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                    CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                                         FOR THE SIX MONTHS ENDED JUNE 30, 1998
                                                     (In thousands)


                                                                GUARANTOR          NON-GUARANTOR
                                                                SUBSIDIARIES       SUBSIDIARIES         CONSOLIDATED
                                                               --------------     --------------       --------------
<S>                                                            <C>                <C>                 <C>

Net sales                                                        $   79,611        $   11,198           $   90,809
Cost of goods sold                                                   55,503             7,124               62,627
                                                               --------------     --------------      --------------
      Gross profit                                                   24,108             4,074               28,182

Selling, general, and administrative expenses                        24,125             3,055               27,180
                                                               --------------     --------------      --------------
      Operating income                                                  (17)            1,019                1,002

Interest expense                                                      6,160                73                6,233
Other income (expense), net                                             315                (7)                 308
                                                               --------------     --------------      --------------
      Income (loss) before income taxes                              (5,862)              939               (4,923)

Income tax expense (benefit)                                         (1,792)               29               (1,763)
                                                               --------------     --------------      --------------

      Net income (loss)                                            $ (4,070)       $      910           $   (3,160)
                                                                =============     ==============      ==============

                                    CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                                         FOR THE SIX MONTHS ENDED JUNE 30, 1997
                                                     (In thousands)



                                                                GUARANTOR          NON-GUARANTOR
                                                                SUBSIDIARIES       SUBSIDIARIES         CONSOLIDATED
                                                               --------------     --------------       --------------
<S>                                                            <C>                <C>                 <C>

Net sales                                                          $ 77,726        $   11,516           $   89,242
Cost of goods sold                                                   53,229             7,987               61,216
                                                               --------------     --------------      --------------
      Gross profit                                                   24,497             3,529               28,026

Selling, general, and administrative expenses                        20,199             2,557               22,756
                                                               --------------     --------------      --------------
      Operating income                                                4,298               972                5,270

Interest expense                                                      5,848                89                5,937
Other income (expense), net                                              36                54                   90
                                                               --------------     --------------      --------------
      Income (loss) before income taxes and                          (1,514)              937                 (577)
          extraordinary item

Income tax expense (benefit)                                           (237)               19                 (218)
                                                               --------------     --------------      --------------

      Income (loss) before extraordinary item                        (1,277)              918                 (359)

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

      Net income (loss)                                            $ (2,834)       $      918           $   (1,916)
                                                                =============     ==============      ==============

</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                                            CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                                 FOR THE SIX MONTHS ENDED JUNE 30, 1998
                                                             (IN THOUSANDS)


                                                                GUARANTOR          NON-GUARANTOR
                                                                SUBSIDIARIES       SUBSIDIARIES         CONSOLIDATED
                                                               --------------     --------------       --------------
<S>                                                            <C>                <C>                 <C>

Cash flows from operating activities                             $ (5,283)          $     129           $  (5,154)
                                                               --------------     --------------      --------------
Cash flows from investing activities                                 (477)                (27)               (504)
                                                               --------------     --------------      --------------

Cash flows from financing activities:
       Proceeds from debt issuance                                  4,707                   -               4,707
       Principal payment on debt                                      (90)               (206)               (296)
       Other changes                                                  379                   -                 379
                                                               --------------     --------------      --------------
                                                                    4,996                (206)              4,790
                                                               --------------     --------------      --------------
Effect of exchange rates on cash balances                               -                   1                   1
                                                               --------------     --------------      --------------
Net change in cash                                                   (764)               (103)               (867)
Cash at beginning of period                                         1,254                  71               1,325
                                                               --------------     --------------      --------------
Cash at end of period                                            $    490            $    (32)          $     458
                                                               ===============    ==============      ==============


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

                                                                GUARANTOR          NON-GUARANTOR
                                                                SUBSIDIARIES       SUBSIDIARIES         CONSOLIDATED
                                                               --------------     --------------       --------------
<S>                                                            <C>                <C>                 <C>

Cash flows from operating activities                             $(10,913)           $    637           $ (10,276)
                                                               --------------     --------------      --------------
Cash flows from investing activities:
       Payment for business acquisitions                          (37,290)                                (37,290)
       Other changes                                                 (519)               (220)               (739)
                                                               --------------     --------------      --------------
                                                                  (37,809)               (220)            (38,029)
Cash flows from financing activities:
       Proceeds from debt issuance                                 96,708                   -              96,708
       Extinguishment of debt                                     (41,135)               (205)            (41,340)
       Payment of financing costs                                  (4,006)                  -              (4,006)
       Repurchase and retirement of warrants                       (3,026)                  -              (3,026)
       Other changes                                                  425                   -                 425
                                                               --------------     --------------      --------------
                                                                   48,966                (205)             48,761
                                                               --------------     --------------      --------------
Effect of exchange rates on cash balances                               -                  (7)                 (7)
                                                               --------------     --------------      --------------

Net change in cash                                                    244                 205                 449

Cash at beginning of period                                           343                 539                 882
                                                               --------------     --------------      --------------

Cash at end of period                                            $    587            $    744           $   1,331
                                                               ===============    ==============      ==============

</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,  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>


                                                    SIX MONTHS             THREE MONTHS
                                                   ENDED JUNE 30,          ENDED JUNE 30,
                                                   --------------          --------------
                                                   1998      1997          1998      1997
                                                   ----      ----          ----      ----
<S>                                               <C>        <C>          <C>       <C>

Net sales                                         100.0%     100.0%       100.0%    100.0%
Gross profit                                       31.0       31.4         31.5      31.9
Selling, general and administrative expenses       27.9       25.5         28.8      25.0
Restructuring charge                                2.0        0.0          4.0       0.0
Operating income (loss)                             1.1        5.9         (1.4)      7.0
Interest expense                                    6.9        6.7          6.9       6.5
Income tax expense (benefit)                       (1.9)      (0.2)        (2.5)      0.3
Net income (loss)                                  (3.5)      (2.1)        (5.0)      0.3
                                                   =====      =====        =====     ====
</TABLE>

<PAGE>

           SIX AND THREE  MONTHS  ENDED JUNE 30, 1998  COMPARED TO SIX AND THREE
           MONTHS ENDED JUNE 30, 1997

           Net sales were $90.8  million in the six months ending June 30, 1998,
an increase of $1.6 million,  or 1.8%, as compared to the six months ending June
30, 1997. Net sales were $45.9 million in the three months ending June 30, 1998,
a  decrease  of  $1.3  million,  or  2.8%,  as  compared  to  the  1997  period.
Macpherson's  sales increased 36.0% and 23.8% for the six and three months ended
June 30, 1998 over the same periods in 1997, principally  attributable to strong
sales of a new line of embroidery equipment and the correction in late 1997 of a
mechanical   deficiency   identified   in  certain   equipment  in  early  1997.
Macpherson's  increases in sales were partially offset by a decline of 36.1% and
40.6% in the  sales of the  Company's  Clinton  operation  for the six and three
months ended June 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 3.7% and 5.0% for the six and three months
ended  June 30,  1998  over  the same  period  in 1997,  principally  due to the
continued decline in apparel manufacturing in the United States.

           Gross  profit  in the six  months  ending  June 30,  1998  was  $28.2
million, an increase of $0.2 million, or 0.6%, as compared to the same period of
1997.  Gross profit for the three months ending June 30, 1998 was $14.5 million,
a decrease of $0.6 million or 4.0% as compared to the same period in 1997.  As a
percentage  of net sales,  gross profit in the six and three months  ending June
30,  1998 was 31.0% and  31.5%,  as  compared  with  31.4% and 31.9% in the same
periods  in  1997.  The  decrease  in  gross  profit  percentage  was  primarily
attributable  to Clinton.  Clinton's  margins  were  affected by a $0.3  million
charge  in  connection  with  the  restructuring  described  in  Note  4 of  the
accompanying unaudited consolidated financial statements.

           Selling, general and administrative expenses in the six months ending
June 30, 1998 were $25.3  million,  an increase of $2.6  million,  or 11.3%,  as
compared to the same period of 1997.  Such  expenses  were $13.2  million in the
three months  ended June 30, 1998,  an increase of $1.5  million,  or 12.4%,  as
compared  to the same period in 1997.  As a  percentage  of the net sales,  such
expenses  increased to 27.9% and 28.8% for the six and three months  ending June
30,  1998 from 25.5% and 25.0% 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 at the
Company's Clinton operation that did not decline in proportion to lower sales at
Clinton and a $0.6 million  charge for bad debts in connection  with the Clinton
restructuring  described in Note 4 of the  accompanying  unaudited  consolidated
financial  statements.  As a result of the  Clinton  restructuring,  the Company
accrued severance payments and other related costs of approximately $1.9 million
in the three months ended June 30, 1998.

           In the six months and three  months  ending June 30, 1998 the Company
had  operating  income of $1.0  million and an operating  loss of $0.6  million,
respectively, a decrease of $4.3 million, or 81.0%, and $3.9 million, or 118.9%,
as compared to the same periods of 1997. As a percentage of net sales, operating
income was 1.1% for the six months ended June 30,  1998,  as compared to 5.9% 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 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,  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.

           Interest  expense was $6.2  million  and $3.2  million in the six and
three months ending June 30, 1998, respectively, an increase of $0.3 million, or
5.0%,  and $0.1 million,  or 4.2%, as compared to the same periods in 1997.  The
increase in interest expense was a result of higher  borrowings in 1998 over the
same period in 1997.

           Income tax benefit for the six and three  months  ended June 30, 1998
was $1.8 million and $1.2 million,  respectively.  The  Company's  effective tax
rate was 35.8% and 33.5% in the six and three months  ending June 30,  1998,  as
compared to 37.8% and 48.9% in the same periods of 1997.

           The  Company's  results  for the first six 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 six and three  months  ended June 30,  1998 was $3.2
and $2.3  million  compared to a net loss of $1.9 million and net income of $0.1
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.

           At June 30, 1998, the Company had outstanding  indebtedness of $100.5
million and cash of $0.5 million.  In addition,  approximately  $5.1 million was
available for borrowings under the Company's Credit Agreement. At June 30, 1998,
the  Company  was  not in  compliance  with  various  covenants  in  its  Credit
Agreement,  which noncompliance was waived on August 13, 1998. In addition,  the
maximum permitted borrowings under the Credit Agreement will be revised from 85%
to 84%,  83% and 82% of  eligible  accounts  receivable,  effective  October  1,
November 1 and December 1, 1998, respectively.

<PAGE>

           The  Company's  capital  expenditures  during the first six months of
1998 aggregated approximately $0.5 million. Such expenditures were primarily for
computer, office and warehouse equipment and improvements.

           Net cash used in the Company's operating  activities was $5.2 million
during the first six months of 1998  principally due to working capital changes.
Net cash  provided by financing  activities  during the first six months of 1998
aggregated $4.8 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.

YEAR 2000 ISSUE

           The  Company is in the process of  assessing  the Year 2000 issue and
the estimated  costs necessary for the Company's  remediation  plan. The Company
plans to  remediate  all  Year  2000  issues  during  1998  and does not  expect
remediation costs to have a material impact on results of operations,  liquidity
and capital resources.

FORWARD-LOOKING STATEMENTS

           Statements  made in this Form 10-Q for the six and three months ended
June 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 six months ended June 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  August 14, 1998                         By    /S/ JOHN K. ZIEGLER, JR.
                                                ----------------------------
                                                John K. Ziegler, Jr.
                                                Vice President
                                                and Chief Financial Officer