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, 1997
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)

                                      (908) 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 ___ No X
   


          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, 1997           Common Stock                1,002,981

<PAGE>

                     WILLCOX & GIBBS, INC. AND SUBSIDIARIES

                                      INDEX
                                      -----

<TABLE>
<CAPTION>
PART I - Financial Information                                              PAGE
                                                                            ----

         <S>                                                                <C>
         Consolidated Balance Sheets (Unaudited) at June 30, 1997 and
              December 31, 1996                                               3

         Consolidated Statements of Operations (Unaudited) for the Six
              Months and Three Months Ended June 30, 1997 and 1996            5

         Consolidated Statements of Cash Flows (Unaudited) for the Six
              Months Ended June 30, 1997 and 1996                             6

         Notes to Consolidated Financial Statements (Unaudited)               8

         Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                      12

PART II - Other Information                                                  16

</TABLE>

<PAGE>

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


<TABLE>
<CAPTION>

                                                                 June 30,       December 31,
                                                                   1997            1996
                                                               ------------     ------------
                                                                         (Unaudited)
ASSETS

<S>                                                            <C>              <C>
Current Assets:
      Cash                                                     $    1,331       $      882
      Accounts receivable, less allowance for doubtful
        accounts of $3,667 in 1997 and $2,419 in 1996              39,179           22,336
      Inventories                                                  47,925           34,224
      Prepaid expenses and other current assets                     4,136            2,655
      Assets held for sale                                            836                -
      Deferred income taxes                                         1,053              804
                                                               ------------     ------------
        Total current assets                                       94,460           60,901

Property and equipment, net                                         5,486            4,400
Deferred financing costs, less accumulated
  amortization of $305 in 1997 and $812 in 1996                     3,970            2,323
Intangible assets, less accumulated amortization of
  $633 in 1997 and $229 in 1996
                                                                   32,073           11,060
Other assets                                                        1,997            1,044
                                                               ------------     ------------
                                                               $  137,986       $   79,728
                                                               ============     ============

</TABLE>

<PAGE>

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


<TABLE>
<CAPTION>
                                                             June 30,    December 31,
                                                               1997         1996
                                                           ------------  ------------
                                                                  (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                        <C>            <C>
Current Liabilities:
      Revolving line of credit                             $   13,672     $   19,347
      Book overdrafts                                             620          1,499
      Current installments of long-term debt                      610          3,195
      Trade accounts payable                                   16,453         12,806
      Income taxes payable                                          -            642
      Accrued liabilities and other current liabilities         7,578          4,758
                                                           ------------  ------------
        Total current liabilities                              38,933         42,247

Deferred income taxes                                             529            290
Accrued retirement benefits                                     2,529          2,452
Long-term debt, excluding current installments                 84,861         18,893
Other liabilities                                                 117            168
                                                           ------------  ------------
        Total liabilities                                     126,969         64,050
                                                           ------------  ------------
Common stock subject to put option                              3,000          3,000

Stockholders' Equity:
      Common stock:
             Class A, $10 stated value.  Authorized
               1,500,000 shares; issued and outstanding
               1,002,981 in 1997 and 976,277 in 1996            9,030          8,763
             Class B, no par value.  Authorized 250,000
               shares; none issued                                -              -
             Class C, no par value.  Authorized 250,000
               shares; none issued                                -              -
      Additional paid in capital                                  134          1,904
      Subscriptions receivable                                   (405)          (429)
      Retained earnings (accumulated deficit)                    (836)         2,202
      Cumulative translation adjustment                            94            238
                                                           ------------  ------------
        Total stockholders' equity                              8,017         12,678
                                                           ------------  ------------
                                                           $  137,986     $   79,728
                                                           ============  ============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                         Six Months Ended                     Three Months Ended
                                             June 30,                               June 30,
                                       1997               1996               1997               1996
                                  --------------     --------------     --------------     --------------
                                            (Unaudited)                           (Unaudited)

<S>                               <C>                <C>                <C>                <C>          
Net sales                         $      89,242      $      56,574      $      47,199      $      30,254
Cost of goods sold                       61,216             38,400             32,132             20,424
                                  --------------     --------------     --------------     --------------
      Gross profit                       28,026             18,174             15,067              9,830

Selling, general, and
   administrative expenses               22,756             14,201             11,782              7,438
                                  --------------     --------------     --------------     --------------
      Operating income                    5,270              3,973              3,285              2,392

Interest expense                          5,937              2,350              3,054              1,250
Other income, net                            90                (29)                51                (42)
                                  --------------     --------------     --------------     --------------
      Income (loss) before
         income taxes                      (577)             1,594                282              1,100

Income tax expense (benefit)               (218)               584                138                406
                                  --------------     --------------     --------------     --------------
      Income (loss) before
         extraordinary item                (359)             1,010                144                694

Extraordinary loss, net of
   income tax benefit                    (1,557)               -                  -                  -
                                  --------------     --------------     --------------     --------------
      Net income (loss)           $      (1,916)     $       1,010                144                694
                                  ==============     ==============     ==============     ==============

Earnings (loss) per common
   share and common share
   equivalent: 

      Income (loss) before
         extraordinary item       $       (0.37)     $        0.98      $        0.14               0.64

      Extraordinary item, net             (1.62)               -                  -                   -
                                  --------------     --------------     --------------     --------------
        Net income (loss) per
        share                     $       (1.99)     $        0.98      $        0.14      $        0.64
                                  --------------     --------------     --------------     --------------
      Weighted average
        number of common
        shares and common
        share equivalents               964,865          1,033,930          1,019,078          1,088,958
                                  ==============     ==============     ==============     ==============

</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                                                              June 30,
                                                                  ------------------------------
                                                                      1997               1996
                                                                  -----------        -----------
                                                                           (Unaudited)
<S>                                                               <C>                <C>
Cash flows from operating activities:
      Net income (loss)                                           $   (1,916)        $    1,010
Adjustments to reconcile net income (loss) to net
   cash used in operating activities:
      Depreciation and amortization                                      593                338
      Provision for losses on accounts receivable                        495                303
      Amortization of intangible assets                                  404                 82
      Amortization of deferred financing costs                           305                189
      Amortization of debt discount                                      105                 85
      Deferred income taxes                                              (11)                -
      Extraordinary loss on debt extinguishment, net                   1,557                 -
      Changes in  operating  assets and  liabilities,  net of
         effect of business acquisitions:            
            Trade accounts receivable                                 (3,682)            (5,071)
            Inventories                                                2,501              1,309
            Prepaid expenses and other current assets                   (333)              (685)
            Other assets                                                (590)               (93)
            Income taxes payable                                        (501)               363
            Trade accounts payable and other liabilities              (9,203)              (830)
                                                                  -----------        -----------
         Net cash used in operating activities                       (10,276)            (3,000)
                                                                  -----------        -----------
Cash flows from investing activities:
      Capital expenditures                                              (797)              (436)
      Proceeds from sale of property and equipment                        58                 10
      Payment for business acquisitions, net of cash
         acquired                                                    (37,290)            (8,328)
                                                                  -----------        -----------
             Net cash used in investing activities                   (38,029)            (8,754)
                                                                  -----------        -----------

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                             June 30,
                                                                  ------------------------------
                                                                      1997               1996
                                                                  -----------        -----------
                                                                           (Unaudited)
<S>                                                               <C>                <C>
Cash flows from operating activities:
      Net income (loss)                                           $   (1,916)        $    1,010


Cash flows from financing activities:
      Net proceeds from revolving line of credit                      13,607              3,708
      Increase (decrease) in book overdrafts                            (879)               118
      Principal payments on long-term debt                              (203)              (983)
      Proceeds from debt                                              83,980              6,167
      Extinguishment of debt                                         (41,137)                -
      Payment of financing costs                                      (4,006)              (275)
      Repurchase and retirement of warrants                           (3,026)                -
      Proceeds from common stock issued in private
        placement                                                        -                2,283
      Proceeds from common stock issued to company
        ESOP                                                             425                168
                                                                  -----------        -----------
        Net cash provided by financing activities                     48,761             11,186
                                                                  -----------        -----------
      Effect of exchange rates                                           (7)                 -
      Net increase (decrease) in cash                                    449               (568)
Cash at beginning of period                                              882                920
                                                                  -----------        -----------
Cash at end of period                                             $    1,331         $      352
                                                                  ===========        ===========
Supplemental  disclosure of cash flow  information:
      Cash paid during the period for:
        Interest                                                  $    5,417         $    2,030
                                                                  ===========        ===========
        Income taxes                                              $      262         $      239
                                                                  ===========        ===========

</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

<PAGE>


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

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  principals 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 months  ending  June 30, 1997 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 1997.

          The operations of Clinton  Management  Corp.  (d/b/a Clinton Machine &
Supply) and Clinton Machinery Corp. (together,  "Clinton") have been included in
the Company's  consolidated  operations since their February 1, 1996 acquisition
date. The operations of E.C. Mitchell Co., Inc.  ("Mitchell") have been included
in  the  Company's  consolidated   operations  since  their  November  27,  1996
acquisition date. The operations of Macpherson Meistergram,  Inc. ("Macpherson")
have been included in the Company's consolidated  operations since their January
3, 1997  acquisition  date. The operations of Embroidery  Leasing Corp.  ("ELC")
have been included in the Company's consolidated  operations since their January
3, 1997 acquisition date.

2.        ACQUISITIONS

          Effective  February 1, 1996, the Company  acquired Clinton in exchange
for $4,000,000 in cash,  assumption of $4,500,000 in debt and payables,  100,000
shares of Company Class A common stock and  contingent  payments of up to 38.87%
of operating  income (as defined in the purchase  agreement)  of Clinton  during
each of the five years ending December 31, 2000. Such contingent  payments shall
not exceed $10,500,000. In addition, the former shareholders of Clinton have the
right to require the Company to purchase their shares of Company common stock at
a purchase price of $30 per share upon the occurrence of certain events.

          Effective  November 27, 1996, the Company  acquired  certain assets of
E.C.  Mitchell,  Co., Inc. for $3,000,000 in cash. The acquired assets relate to
the  manufacture  and sale of abrasive  cords and tape used  principally  in the
apparel industry.

          Effective  January 3, 1997 the Company  acquired  all the  outstanding
capital  stock of  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.  Pro forma  financial  information  would not
differ significantly for the periods presented.

<PAGE>

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  ($40,550,000  of which  existed at December 31,  1996),  to redeem
common stock warrants for a total of  $3,026,000,  and to finance the Macpherson
acquisition.

4.        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, 1997, 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,  Matyork  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  have  not  been  included  because  management  has
determined that they are not material to investors.

                              WILLCOX & GIBBS, INC.
                   CONSOLIDATED BALANCE SHEETS JUNE 30, 1997
                                    <TABLE>
<CAPTION>
          ASSETS
                                     GUARANTOR        NON GUARANTOR
                                    SUBSIDIARIES      SUBSIDIARIES      CONSOLIDATED
                                    -------------     -------------     -------------
<S>                                 <C>               <C>               <C>         
Cash                                $    587,106      $    744,202      $  1,331,308
Accounts receivable, net              33,542,886         5,636,607        39,179,493
Inventories                           43,119,290         4,805,485        47,924,775
Other current assets                   5,270,202           754,454         6,024,656
                                    -------------     -------------     -------------
      Total current assets            82,519,484        11,940,748        94,460,232
Property and equipment, net            3,866,870         1,619,368         5,486,238
Intangible assets, net                36,042,433                 -        36,042,433
Other assets                           1,293,914           703,299         1,997,213
                                    -------------     -------------     -------------
                                    $123,722,701      $ 14,263,415      $137,986,116
                                    =============     =============     =============
<PAGE>
          LIABILITIES AND STOCKHOLDERS' EQUITY

Current notes and current      
    portion long-term debt          $  3,872,440      $    410,100      $ 14,282,540
Trade accounts payable                14,800,402         1,652,325        16,452,727
Accrued liabilities and other
    current liabilities                7,393,697           804,886         8,198,583
                                    -------------     -------------     -------------
      Total current liabilities       36,066,539         2,867,311        38,933,850

Long-term debt, excluding current
    installments                      83,835,797         1,025,250        84,861,047
Other liabilities                      2,812,221           362,050         3,174,271
                                    -------------     -------------     -------------
      Total liabilities              122,714,557         4,254,611       126,969,168

Common stock subject to put option     3,000,000                 -         3,000,000
Common stock                           9,029,807                 -         9,029,807
Other equity (deficit)               (11,021,663)       10,008,804        (1,012,859)
                                    -------------     -------------     -------------
      Total stockholders' equity      (1,991,856)       10,008,804         8,018,948
                                    -------------     -------------     -------------
                                    $123,722,701      $ 14,263,415      $137,986,116
                                    =============     =============     =============

</TABLE>

<PAGE>

                              WILLCOX & GIBBS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
                                     GUARANTOR        NON GUARANTOR
                                    SUBSIDIARIES      SUBSIDIARIES      CONSOLIDATED
                                    -------------     -------------     -------------
<S>                                 <C>               <C>               <C>         
Net sales                           $ 77,725,490      $ 11,516,044      $ 89,241,534
Cost of goods sold                    53,228,893         7,987,237        61,216,130
                                    -------------     -------------     -------------
      Gross profit                    24,496,597         3,528,807        28,025,404

Selling, general, and
   administrative expenses            20,199,929         2,556,545        22,756,474
                                    -------------     -------------     -------------
      Operating income                 4,296,668           972,262         5,268,930

Interest expense                       5,848,405            88,650         5,937,055
Other, net                                36,043            54,151            90,194
                                    -------------     -------------     -------------
      Income (loss) before income
         taxes                        (1,515,694)          937,763          (577,931)

Income tax expense (benefit)            (238,759)           19,408          (219,351)
                                    -------------     -------------     -------------
      Income (loss) before
         extraordinary item           (1,276,935)          918,355          (358,580)
                                    -------------     -------------     -------------
Extraordinary loss, net of
   income tax benefit                 (1,556,898)                -        (1,556,898)
                                    -------------     -------------     -------------
      Net income (loss)             $ (2,833,833)     $    918,355      $ (1,915,478)
                                    =============     =============     =============

</TABLE>

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
                                     GUARANTOR        NON GUARANTOR
                                    SUBSIDIARIES      SUBSIDIARIES      CONSOLIDATED
                                    -------------     -------------     -------------
<S>                                 <C>               <C>               <C>         
Net sales                           $ 50,311,496      $  6,262,095      $ 56,573,591
Cost of goods sold                    34,020,870         4,378,923        38,399,793
                                    -------------     -------------     -------------
      Gross profit                    16,290,626         1,883,172        18,173,798

Selling, general, and 
   administrative expenses            12,680,375         1,520,670        14,201,045
                                    -------------     -------------     -------------
      Operating income                 3,610,251          362,502         3,972,753

Interest expense                       2,350,151                 -         2,350,151
Other, net                              (101,269)           72,500           (28,769)
                                    -------------     -------------     -------------
      Income before income taxes       1,158,831           435,002         1,593,833

Income tax expense                       498,015            86,036           584,051
                                    -------------     -------------     -------------
      Income before extraordinary
         item                            660,816           348,966         1,009,782
                                    -------------     -------------     -------------
Extraordinary loss, net of
   income tax benefit                          -                 -                 -
                                    -------------     -------------     -------------
      Net income                    $    660,816      $    348,966      $  1,009,782
                                    =============     =============     =============

</TABLE>

<PAGE>
                              WILLCOX & GIBBS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
                                     GUARANTOR        NON GUARANTOR
                                    SUBSIDIARIES      SUBSIDIARIES      CONSOLIDATED
                                    -------------     -------------     -------------
<S>                                 <C>               <C>               <C>         
Cash Flows From Operating
   Activities                       $(10,912,022)     $    636,873      $(10,275,149)
                                    -------------     -------------     -------------
Cash Flows From Investing
   Activities
       Payment for business
          acquisitions               (37,290,321)                        (37,290,321)
       Other changes                    (518,428)         (219,752)         (738,180)
                                    -------------     -------------     -------------
                                     (37,808,749)         (219,752)      (38,028,501)

Cash Flows From Financing
   Activities
       Proceeds from debt issuance    96,707,695                 -        96,707,695
       Principal payment on debt     (41,135,398)         (204,950)      (41,340,348)
       Payments for financing costs   (4,005,812)                -        (4,005,812)
       Repurchase and retirement of
          warrants                    (3,026,454)                -        (3,026,454)
       Other changes                     425,240                 -           425,240
                                    -------------     -------------     -------------
                                      48,965,271          (204,950)       48,760,321

       Effect of exchange rates                -            (6,863)           (6,863)
                                    -------------     -------------     -------------
       Net change in cash                244,500           205,308           449,808

       Cash at beginning of period       342,607           538,893           881,500
                                    -------------     -------------     -------------
       Cash at end of period        $    587,107      $    744,201      $  1,331,308
                                    =============     =============     =============
</TABLE>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
                                     GUARANTOR        NON GUARANTOR
                                    SUBSIDIARIES      SUBSIDIARIES      CONSOLIDATED
                                    -------------     -------------     -------------
<S>                                 <C>               <C>               <C>         
Cash Flows From Operating
   Activities                       $ (3,146,078)     $    146,632      $ (2,999,446)
                                    -------------     -------------     -------------
Cash Flows From Investing
   Activities
       Payment for business
          acquisitions                (8,368,017)                -        (8,328,017)
       Other changes                    (268,130)         (157,412)         (425,542)
                                    -------------     -------------     -------------
                                      (8,596,147)         (157,412)       (8,753,559)

Cash Flows From Financing
   Activities
       Proceeds from debt issuance     9,993,678                 -         9,993,678
       Principal payment on debt        (983,167)                -          (983,167)
       Proceeds from sale of
          common stock                 2,449,972                 -         2,449,972
       Other changes                    (275,114)                -          (275,114)
                                    -------------     -------------     -------------
                                      11,185,369                 -        11,185,369

       Effect of exchange rates                -              (238)             (238)
                                    -------------     -------------     -------------
       Net change in cash               (556,856)          (11,018)         (567,874)

       Cash at beginning of period       314,821           605,417           920,238
                                    -------------     -------------     -------------
       Cash at end of period        $   (242,035)     $    594,399    $      352,364
                                    =============     =============     =============
</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.

          Effective  February 1, 1996, the Company acquired  Clinton  Management
Corp. and Clinton Machinery Corp. (together, "Clinton"), a distributor of screen
printing  equipment  for  the  apparel  industry  (the  "Clinton  Acquisition").
Approximately 18.1% of the Company's net sales for the six months ended June 30,
1997 are attributable to the operations of Clinton.  Accordingly, the results of
the Company for the six months ended June 30, 1997 are not  directly  comparable
to the results for the six months  ended June 30, 1996 due to the  inclusion  of
the operations of Clinton in the full 1997 period.

          In  addition,  on January 3, 1997,  the  Company  acquired  Macpherson
Meistergram,  Inc.  and its  subsidiary,  Geoffrey E.  Macpherson  Canada,  Inc.
(collectively, "Macpherson"), a distributor of embroidery equipment and supplies
for the apparel industry (the "Macpherson Acquisition").  Approximately 28.6% of
the Company's net sales for the six months ended June 30, 1997 are  attributable
to the operations of Macpherson. Accordingly, the results of the Company for the
first six months of 1997 are not directly comparable to the results for the same
period in 1996 due to the inclusion of the  operations of Macpherson in the 1997
period.

          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) Macpherson, 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.

<PAGE>

<TABLE>
<CAPTION>
                                       SIX MONTHS                THREE MONTHS
                                         ENDED                      ENDED
                                        JUNE 30,                   JUNE 30,
                                    ----------------            ----------------
                                  1997         1996          1997         1996
                                --------     --------      --------     -------- 
<S>                              <C>          <C>           <C>          <C>   
Net sales                        100.0%       100.0%        100.0%       100.0%
Gross profit                      31.4         32.1          31.9         32.5
Selling, general and
   administrative expenses
                                  25.5         25.1          25.0         24.6
Operating income                   5.9          7.0           7.0          7.9

Interest expense                   6.7          4.2           6.5          4.1
Income taxes                      (0.2)         1.0           0.3          1.3
Net income                        (2.1)         1.8           0.3          2.3
                                ========     ========      ========     ========

</TABLE>

          Net sales were $89.2  million in the six months  ending June 30, 1997,
an increase of $32.7  million,  or 57.7%,  as compared to the six months  ending
June 30, 1996.  Net sales were $47.2 million in the three months ending June 30,
1997, an increase of $16.9  million,  or 56.0%,  as compared to the 1996 period.
Net sales  increased  primarily as a result of the inclusion in the 1997 periods
of the  results of  Macpherson,  acquired  January  1997,  Clinton,  acquired in
February  1996, and E.C.  Mitchell Co., Inc.  ("Mitchell"),  a  manufacturer  of
abrasive cords and tapes used principally by apparel  manufacturers  acquired in
November 1996, which contributed an aggregate additional $28.3 million and $14.2
million to net sales in the six and three months, respectively,  ending June 30,
1997   compared   with  the  six  and  three   months   ending  June  30,  1996.

          Gross  profit in the six and three  months  ending  June 30,  1997 was
$28.0 million and $15.1 million,  respectively,  an increase of $9.9 million, or
54.2%,  and $5.2 million,  or 53.3%,  as compared with the same periods of 1996.
Gross profit increased primarily due to the inclusion of Macpherson, Clinton and
Mitchell in the 1997 periods.  As a percentage of net sales, gross profit in the
six and three months ending June 30, 1997 was 31.4% and 31.9%,  as compared with
32.1%  and 32.5% in the same  periods  of 1996.  The  decrease  in gross  profit
percentage  was  attributable  to  Macpherson  and  Clinton.   Macpherson's  and
Clinton's  gross  profit  margins have  traditionally  been lower than the gross
profit  margin  associated  with the  Company's  parts and  supplies  businesses
because a larger percentage of their sales are for equipment.

          Selling,  general and  administrative  expenses  for the six and three
months ending June 30, 1997 were $22.8 million and $11.8 million,  respectively,
an increase of $8.6 million,  or 60.2%, and $4.3 million,  or 58.4%, as compared
to the same periods of 1996. The increase consisted primarily of the addition of
$6.5 million and $3.0 million of operating expenses for Macpherson,  Clinton and
Mitchell in the six and three months  ending June 30, 1997.  As a percentage  of
sales,  such expenses  increased to 25.5% and 25.0% for the six and three months
ending  June 30,  1997,  from  25.1%  and 24.6%  for the same  periods  of 1996,
primarily related to the Macpherson acquisition.

<PAGE>

          Operating  income in the six and three months ending June 30, 1997 was
$5.3 million and $3.3 million,  respectively,  an increase of $1.3  million,  or
32.7%, and $0.9 million,  or 37.3%, as compared to the same periods of 1996. The
increase in operating  income resulted from an increase in sales and the factors
discussed  above.  As a percentage of net sales,  operating  income was 5.9% and
7.0% for the six and  three  months  ending  June  30,  1997,  respectively,  as
compared  to 7.0%  and 7.9% in the  same  periods  of  1996.  The  decrease  was
principally  attributable  to the lower  gross  margins  from  Macpherson's  and
Clinton's sales.

          Interest  expense  was $5.9  million  and $3.1  million in the six and
three months ending June 30, 1997, respectively, an increase of $3.6 million, or
152.6%, and $1.8 million,  or 144.4%, as compared with the same periods of 1996.
The increase in interest  expense was a result of the  refinancing as of January
3, 1997, a portion of which was used to finance the acquisition of Macpherson.

          Provision  for income taxes for the six and three  months  ending June
30,  1997  was  a  benefit  of  $0.2  million  and a  charge  of  $0.1  million,
respectively,  a decrease of $0.8  million and $0.3  million,  respectively,  as
compared to same periods of 1996. The Company's effective tax rate was 37.8% and
48.9% in the six and three months ending 1997, as compared to 36.6% and 36.9% in
the same periods of 1996.

          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").

          Net income (loss) in the six and three months ending June 30, 1997 was
($1.9)  million and $0.1 million,  respectively,  compared to net income of $1.0
million  and  $0.7  million  in the  same  periods  of 1996.  The  decrease  was
attributable to the additional cost factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

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

          On  January  3,  1997,  the  Company  issued  and sold  $85.0  million
aggregate principal amount of its Senior Notes pursuant to an exemption from the
registration  requirements  of the Securities  Act of 1933, as amended,  the net
proceeds  of which were $80.5  million.  The  Company  used a portion of the net
proceeds  from the sale of the Senior  Notes to repay  substantially  all of its
existing debt, most of which was incurred to fund the Management  Buyout in July
1994, the Clinton  acquisition  in February  1996,  the Mitchell  acquisition in
November 1996, and to satisfy working capital requirements.  The balance of such
net  proceeds  were  used to fund  the  $24.0  million  purchase  price  for the
Macpherson  Acquisition,  to repay approximately $6.1 million of indebtedness of
Macpherson  and  to  pay  approximately   $6.4  million  of  trade  payables  of
Macpherson.

          In  connection  with the sale of the Senior  Notes,  the Financing and
Security   Agreements,   dated  February  1,  1996,   between  the  Company  and
NationsBank,  N.A. ("NationsBank") was terminated,  and the Company entered into
an $18.5 million working capital facility also with NationsBank (the "New Credit
Facility")  which became  effective upon  consummation of the sale of the Senior
Notes.  The New Credit Facility,  as amended as of April 23, 1997,  provides for
borrowings  of up to $18.5  million in the  aggregate  outstanding  at any time,
subject to a borrowing base  limitation  equal to 85% of the Company's  eligible
accounts receivable. Borrowings under the New Credit Facility bear interest at a
rate per annum, at the Company's option,  equal to (i) NationsBank's  prime rate
plus 0.25% or (ii) LIBOR plus 2.50%.  The New Credit  Facility is secured by all
accounts receivable of the Company and includes certain covenants  applicable to
the  Company,  including  requirements  that the  Company  comply  with  certain
financial  ratios.  The New Credit Facility expires on July 13, 2001. As of July
31, 1997, $1.8 million was available to be borrowed by the Company under the New
Credit Facility.

<PAGE>

          In connection with the Macpherson  Acquisition,  the Company  acquired
Embroidery  Leasing  Corporation  (the  "Leasing  Company"),  a leasing  company
affiliate of  Macpherson,  for  approximately  $0.5 million,  payable over three
years,  plus interest at 6.0% annum.  The Company intends to utilize the Leasing
Company to offer  flexible  lease  financing  to its  customers  to support  the
Company's sales of equipment.  The Company intends to fund its investment in the
Leasing  Company  through  borrowings  under  the  New  Credit  Facility,  which
borrowings  are expected to aggregate  approximately  $3.5 million in 1997.  The
Company  plans for the  Leasing  Company to  arrange  additional  borrowings  to
finance its operations and sell a portion of its leases on a nonrecourse basis.

          The Company's capital expenditures during the first six months of 1997
aggregated  approximately  $0.8 million.  Such  expenditures  were primarily for
computer, office and warehouse equipment and improvements.

          Net cash used in the Company's operating  activities was $10.3 million
during the first six months of 1997, principally due to working capital changes.
The  Company's  investing  activities  during  the first six months of 1997 were
$37.3  million,  related  principally to the  Macpherson  acquisition.  Net cash
provided by financing  activities  aggregated  $48.8 million,  reflecting  $84.0
million of borrowings  from the  refinancing  used to  extinguish  debt of $41.1
million,  $4.0 million in financing  costs and $3.0  million to  repurchase  and
retire warrants.

          The Company  believes  that the cash  generated  from  operations  and
borrowings  available  under the New Credit  Facility will be sufficient to meet
the Company's working capital and liquidity needs for the foreseeable future.

<PAGE>

                     WILLCOX & GIBBS, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

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

               11.1                     Computation of net income per common and
                                        common equivalent shares

               27.1                     Financial  Data  Schedule   (filed  with
                                        EDGAR only)

          (b)  Reports on Form 8-K

               During the quarter ended June 30, 1997,  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, 1997               By /S/ JOHN K. ZIEGLER, JR.
                                           ------------------------
                                           John K. Ziegler,  Jr.
                                           Vice President and
                                           Chief Financial Officer