UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-K/A
(Mark One)
(X)      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 For the fiscal year ended November 2, 1997
                                       OR
( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934
                          Commission file number 1-9474

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

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

  1155 Avenue of the Americas, New York, NY                 10036
  -----------------------------------------               --------
   (Address of principal executive offices)              (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Securities Exchange 
Act of 1934: None.

Securities registered pursuant to Section 12(g) of the Securities Exchange 
Act of 1934:
                               Common Stock, $0.01
                               -------------------
                                (Title of Class)

                  Indicate by a 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 by a check mark if disclosure  of  delinquent  filers
pursuant to Item 405 of Regulation S-K is not contained herein,  and will not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. __________

                  The   aggregate   market   value  of  Common   Stock  held  by
non-affiliates  of the registrant as of January 28, 1998 was $11,815,789,  based
on the trading price in the over-the-counter market on such date.

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

                  As of January 28, 1998,  there were 4,384,436 shares of Common
Stock of the Company outstanding.

DOCUMENTS INCORPORATED BY REFERENCE  None.
<PAGE>



                  The undersigned  registrant hereby amends Items 10, 11, 12 and
13 of Part III of its  Annual  Report on Form  10-K for the  fiscal  year  ended
November 2, 1997 (the "Annual Report") to read as follows:

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors of the Company

                  Each of Bruce W. Gregory, Margaret Bertelsen Hampton and James
E.  Kjorlien is a member of the Board of Directors  (the "Board") of Forstmann &
Company,  Inc. (the "Company") and is not an officer or employee of the Company.
In addition,  each has been  nominated by the Board for  re-election at the 1998
Annual  Meeting of  Shareholders  which is  scheduled to take place on April 17,
1998 (the "Annual  Meeting") to serve as a director  until the Annual Meeting of
Shareholders in 1999 or until a successor is elected and qualified.

                  The  following  table  provides   information   regarding  the
directors:


Name                                    Age         Date Appointed Director
-----                                   ---         -----------------------
Bruce W. Gregory                        33              September 1997
                                       
Margaret Bertelsen Hampton              39              July 1997

James E. Kjorlien                       46              July 1997


                  On July 23, 1997,  pursuant to a Plan of Reorganization  under
which the Company emerged from bankruptcy, the Board was reconstituted, with Ms.
Hampton, Mr. Kjorlien,  Robert N. Dangremond and Jerome H. Walthers appointed as
the initial  directors of the Company.  In September 1997, Mr. Walthers resigned
from the Board and Mr. Gregory was appointed to replace him. On January 6, 1998,
Mr.  Dangremond was named acting Chief Financial  Officer of Zenith  Electronics
Corporation and, on January 26, 1998, Mr. Dangremond resigned as a director,  as
well as Chief Executive Officer and President of the Company.

                  Bruce W. Gregory is a Managing  Director of Daystar L.L.C.,  a
Rye, New York-based  investment  management firm that specializes in investments
in companies that are in the midst of  restructurings.  Before  joining  Daystar
L.L.C. in 1996, Mr. Gregory was employed by Progressive  Partners, an investment
management firm, as an equity portfolio  manager from 1990 to 1996.  Previously,
Mr. Gregory was employed by Chase Manhattan Bank in the North American Corporate
Finance Group and Investment Management Group of US Private Banking. Mr. Gregory
serves on the Board of Trustees of Trinity  Presbyterian  Church and Here's Life
Inner City New York. Mr. Gregory is a Chartered  Financial  Analyst and a member
of the  Association  of  Investment  Management  and  Research  and the New York
Society of Security Analysts.
<PAGE>
                  Margaret  Bertelsen  Hampton joined Grace  Brothers,  Ltd., an
investment management firm based in Evanston,  Illinois, in March 1997. Prior to
joining  Grace  Brothers,  Ltd.,  Ms.  Hampton  was a Managing  Director  of the
Distressed  Investments  Unit of First Chicago  Capital  Corporation,  which she
joined in 1991.  Previously,  Ms. Hampton worked in the Financial  Restructuring
Group  of Bear  Stearns  & Co.,  Inc.  Ms.  Hampton  is a  director  of  several
privately-held  companies,  one of which is in the  worsted  wool  manufacturing
business and may, from time to time,  compete with the Company.  She is a member
of the Board of Trustees of Northwestern University.

                  James E. Kjorlien is a Managing  Member of Credit Research and
Trading LLC, a Greenwich,  Connecticut-based  broker-dealer. Mr. Kjorlien joined
Credit Research in June 1990.

                  None of the  directors  has any family  relationship  with any
other director or with any executive officer of the Company.

Executive Officers of the Company

                  The  following  table  provides   information   regarding  the
Company's executive officers:

Name                          Age               Title
------------------           ----               ------------------------------  
Brian A. Moorstein            37                President (Principal Executive
                                                Officer)

Rodney J. Peckham             42                Executive Vice President
                                                Finance, Administration and
                                                Strategic Planning,
                                                Secretary and Treasurer 
                                                (Principal Financial
                                                Officer)

Gary E. Schafer               46                Vice President and Corporate
                                                Controller (Principal Financial
                                                Accounting Officer)

                  Brian A. Moorstein  became President of the Company on January
26,  1998.  Mr.  Moorstein  started his career at the Company in 1984 working in
styling and then moved into sales.  In 1986,  he founded the  Company's  Women's
Wear Worsted  Department.  During 1990,  his  responsibilities  were expanded to
include Women's Wear Woolen, sportswear and coatings.

                  Rodney J. Peckham became  Executive  Vice  President  Finance,
Administration  and Strategic  Planning and  Secretary on January 26, 1998.  Mr.
Peckham also serves as Chief Financial Officer and Treasurer of the Company.  He
became Chief  Financial  Officer of the Company in March 1996. From October 1995
until he became Chief Financial Officer, Mr. Peckham was employed as Director of
Financial  Operations.  Mr. Peckham was previously  employed by the Company from
August 1986 through May 1995 during which time he served as Corporate Controller
from August 1986 until he became  Treasurer in March 1992, and he also served as
Secretary from December 1992 to September  1993.  From May 1995 through  October
1995, Mr. Peckham was self-employed  and provided various  financial  consulting
services to the Company.

                  Gary E. Schafer became Vice President and Corporate Controller
of the Company in March 1992. Mr. Schafer joined the Company in 1990 as Director
of Cost Accounting.
<PAGE>
                  Executive   officers  are   appointed  by  and  serve  at  the
discretion  of the  Board of  Directors  for a term  beginning  after  the first
regular  meeting  of the Board of  Directors  following  the  Annual  Meeting of
Shareholders  and until  their  respective  successors  are duly  appointed  and
qualified.

                  None of the  executive  officers has any family  relationships
with any other executive officer.

Compliance with Section 16(a) of the Exchange Act

                  Section  16(a) of the  Securities  Exchange  Act of 1934  (the
"Exchange Act") requires the Company's directors, executive officers and persons
who own beneficially more than 10% of the outstanding  Common Stock to file with
the Securities and Exchange  Commission initial reports of beneficial  ownership
and reports of changes in  beneficial  ownership  of the Common  Stock and other
securities  of the Company on Forms 3, 4 and 5, and to furnish the Company  with
copies of all such forms they file.  Based on a review of copies of such reports
furnished  to it, the Company  believes  that all the  Company's  directors  and
officers  timely filed all reports  required  during the  Company's  1997 fiscal
year,  except  that the Forms 3 for each of Ms.  Hampton and Mr.  Kjorlien  were
filed late.

ITEM 11.          EXECUTIVE COMPENSATION.

Summary Compensation Table

                  The  following   table  sets  forth   information   concerning
compensation for services in all capacities awarded to, earned by or paid to the
four  executive  officers of the Company  during the 1997,  1996 and 1995 fiscal
years of the Company.
<TABLE>
                                                                       Other Annual         Securities          All Other
         Name and             Fiscal                       Bonus       Compensation         Underlying         Compensation
    Principal Position         Year       Salary($)        ($)1            ($)2           Options (#)3,4        ($)5,6,7,8
    ------------------         ----       ---------        -----          ------          --------------       -----------
<S>                            <C>          <C>           <C>              <C>                <C>              <C>   
Brian A. Moorstein             1997         193,000       53,446           8,479              19,501              50,000
    President                  1996         174,667            0           7,234                   0                   0
     (Principal                1995         171,000            0           7,354              12,500                   0
     Executive Officer)                                

Rodney J. Peckham6             1997         234,015       63,381           8,625              19,501              50,616
    Executive Vice President   1996         238,013            0           2,486                   0                   0
    Finance, Administration    1995          93,312            0           3,787              12,500              97,155
    and Strategic Planning
     (Principal Financial
     Officer)

Gary E. Schafer                1997         125,000       32,715           4,750               4,875              17,500
    Vice President and         1996         119,708            0           4,322                   0                 578
    Corporate Controller       1995         109,075            0           4,357              12,500                   0
     (Principal Financial
     Accounting Officer)

Robert N. Dangremond8          1997              --           --              --                  --           1,440,571
    Former President and CEO   1996              --           --              --                  --             897,098
                               1995              --           --              --                  --             274,275
</TABLE>
<PAGE>                                                       
------------------------                             

1        The amount of any bonus earned for a fiscal year,  although included in
         the fiscal year earned,  is actually  determined and paid after the end
         of the fiscal  year.  The amount in the 1997 fiscal year  reflects  the
         actual amount earned under the Company's  Management Incentive Plan for
         the 1997 fiscal year,  of which 70% was paid in December  1997 with the
         remaining  amount  deferred  for  payment  after the end of fiscal year
         1998.

2        Represents  tax  liability  reimbursed  by  the  Company  arising  from
         contributions made by the executive officer and for investment earnings
         thereon under a Company employee savings plan.

3        Pursuant to the  Company's  Plan of  Reorganization,  an  aggregate  of
         487,528  shares of the  Common  Stock were  reserved  for  issuance  on
         exercise of options granted or to be granted  pursuant to the Company's
         Executive  Stock Option Plan and, as of the effective  date of the Plan
         of Reorganization (the "Effective Date"),  146,258 options were granted
         to certain  employees of the Company at an exercise price of $12.88 per
         share. Amounts reflected for the 1997 fiscal year represent the options
         granted  under the  Executive  Stock Option Plan of which 25% vested on
         the Effective Date and an additional 25% will vest on each of the first
         three anniversaries of the Effective Date.

4        Information for the 1995 fiscal year represents incentive stock options
         granted under the Company's  Common Stock  Incentive Plan on January 6,
         1995 to purchase  shares of common stock at an exercise  price of $8.50
         per share, exercisable for 33-1/3% of such shares commencing on each of
         January 6,  1996,  January 6, 1997 and  January  9, 1998.  The  options
         granted on January 6, 1995 were granted at an amount  greater than fair
         market  value.  Pursuant  to the Plan of  Reorganization,  all  options
         outstanding  under  the  Company's  Common  Stock  Incentive  Plan were
         canceled.

5        Includes amounts paid for health club dues.

6        The  amount  shown  for Mr.  Peckham  includes  $89,800  for  financial
         consulting  services paid to Mr.  Peckham  between June 1995 to October
         1995. The remaining  $7,355  represents  reimbursement of Mr. Peckham's
         relocation expenses.

7        Effective  as  of  November  14,  1996,  the  court  administering  the
         Company's bankruptcy approved the Company's Incentive  Compensation and
         Retention  Program which  provided  certain  eligible  employees with a
         predetermined confirmation bonus and provided for a discretionary bonus
         to certain employees  selected by the Company's Chief Executive Officer
         in  consultation  with the Board of  Directors.  During the 1997 fiscal
         year,  Messrs.  Moorstein and Peckham were paid $50,000 and Mr. Schafer
         was paid $17,500 under this program.

8        Robert N. Dangremond served as President and Chief Executive Officer of
         the  Company  during the 1997  fiscal  year.  On  January 6, 1998,  Mr.
         Dangremond  was  named  acting  Chief   Financial   Officer  of  Zenith
         Electronics  Corporation  and,  on January  26,  1998,  Mr.  Dangremond
         resigned  as a  director,  as  well  as  Chief  Executive  Officer  and
         President of the Company.
<PAGE>
         Mr.  Dangremond  provided  services to the Company pursuant to a Letter
         Agreement, dated July 31, 1995 (as amended), between the Company and J.
         Alix & Associates  ("J.  Alix"),  a  consulting  firm  specializing  in
         corporate  restructurings,  of which Mr. Dangremond is a principal. The
         amounts  shown were paid to J. Alix on account of fees for the services
         rendered  by Mr.  Dangremond  and to  reimburse  J. Alix for travel and
         lodging expenses incurred by Mr. Dangremond in the course of performing
         his duties to the  Company.  The amount  shown for the 1997 fiscal year
         includes a $400,000  success fee which  became  payable  following  the
         Company's emergence from bankruptcy,  of which $200,000 was paid in the
         1997 fiscal year and  $200,000  was paid in the 1998 fiscal  year.  The
         Company also issued 30,000 shares of the Common Stock to J. Alix (which
         are not shown in the table) as an additional success fee, which was the
         number of shares issuable under the Company's Plan of Reorganization to
         the  holder of an  allowed  unsecured  claim  against  the  Company  of
         $600,000.

Compensation Arrangements with Mr. Moorstein and Mr. Peckham

                  On January 26, 1998, Mr. Moorstein was appointed  President of
the Company and Mr.  Peckham was appointed  Executive  Vice  President  Finance,
Administration and Strategic Planning and Chief Financial Officer.  Each of them
will receive an annual salary of $265,000 and will participate in the Management
Incentive Plan and the Executive Stock Option Plan.

Stock Options Granted During the 1997 Fiscal Year

                  The Company  granted 146,258 stock options under the Company's
Executive  Stock Option Plan during the 1997 fiscal year at an exercise price of
$12.88 per share.

<TABLE>

                                        OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                                   Individual Grants
                                        -------------------------------------
                                                                                         Exercise
                                Number of Securities           Percent of Total             or
                                     Underlying                  Options/SARs              Base
                                   Options/SARs(1)           Granted to Employees         Price           Expiration
      Name                           Granted (#)              in Fiscal Year(3)           ($/Sh)             Date
-------------------             --------------------         --------------------        --------        -------------
<S>                                  <C>                              <C>                 <C>                 <C>  
Brian A. Moorstein                   19,500(2)(3)                     13.3%               $12.88         July 23, 2007

Rodney J. Peckham                    19,500(2)(3)                     13.3%               $12.88         July 23, 2007

Gary E. Schafer                       4,875(2)(3)                      3.3%               $12.88         July 23, 2007

</TABLE>


(1)      To date, the Company has issued no SARs.

(2)      25% of these options vested on the July 23, 1997, the Effective Date of
         the Plan of Reorganization,  and an additional 25% will vest on each of
         the first three anniversaries of the Effective Date.
<PAGE>
(3)      Includes all options  granted to  executives  pursuant to the Company's
         Executive Stock Option Plan.

Stock Options Held at the End of the 1997 Fiscal Year

                  The following table sets forth the total number of exercisable
and  unexercisable  stock options  granted under the Company's  Executive  Stock
Incentive Plan held by each  executive  officer named below on November 2, 1997.
No options to purchase shares of the Common Stock were exercised during the 1997
fiscal year. As of November 2, 1997, the last sales price of the Common Stock in
the over-the-counter market was $11.75 per share.
<TABLE>

                                              Number of
                                        Securities Underlying                        Value of Unexercised
                                         Unexercised Options                       In-the-Money Options at
                                       at Fiscal Year End (#)                          Fiscal Year End
Name                              Exercisable        Unexercisable            Exercisable        Unexercisable
----                              -----------        -------------            -----------        -------------
<S>                                  <C>                 <C>                   <C>                    <C>  
Brian A. Moorstein                   4,875               14,625                $0.00                  $0.00
Rodney J. Peckham                    4,875               14,625                 0.00                   0.00
Gary E. Schafer                      1,219                3,656                 0.00                   0.00
</TABLE>

Retirement Pension Plan

                  The Company maintains a Retirement  Pension Plan (the "Pension
Plan") for its salaried employees. The Pension Plan is a defined benefit pension
plan providing a formula benefit,  on vesting,  for employees 21 years of age or
older who have completed one year of service with the Company.  The Pension Plan
generally takes into account  credited  service and annual  compensation  earned
under the pension plan of a predecessor of the Company (the "Predecessor Plan"),
but the benefit payable from the Pension Plan,  depending on the  circumstances,
may be reduced by any benefit payable under the Predecessor Plan.

                  The following  table shows the estimated  annual benefits upon
retirement to participants in the Pension Plan in specified annual  compensation
and years of credited service classifications.  The amounts shown are subject to
the maximum benefit limitations set forth in Section 415 of the Internal Revenue
Code of 1986 (the "Code") and are subject to reduction for amounts payable under
the  Predecessor  Plan. The pension  benefits shown are based upon retirement at
age 65 and the payment of a single-life annuity to the participants. The pension
benefits in the table reflect the  limitation  under  Section  401(a)(17) of the
Code on the maximum amount of annual  compensation  ($150,000 effective February
1, 1994 and $160,00 effective  February 1, 1997 (the "Code  Limitation")),  that
can be utilized for determining benefits under the Pension Plan.
<TABLE>
<PAGE>

                                                        Years of Credited Service at Retirement
Highest Five
Year Average
Annual               5             10            15              20              25             30             35
Compensation*    -------        -------       -------          -------        -------        -------         -------
-------------
<S>              <C>            <C>           <C>              <C>            <C>            <C>             <C>    
  $100,000       $ 6,722        $13,444       $20,165          $26,887        $33,609        $40,331         $47,053
   110,000         7,472         14,944        22,415           29,887         37,359         44,831          52,303
   120,000         8,222         16,444        24,665           32,887         41,109         49,331          57,553
   130,000         8,972         17,944        26,915           35,887         44,859         53,831          62,803
   140,000         9,722         19,444        29,165           38,887         48,609         58,331          68,053
   150,000        10,472         20,944        31,415           41,887         52,359         62,831          73,303
   160,000        10,622         21,244        31,865           42,487         53,109         63,731          74,353
</TABLE>



*        Annual  compensation is the amount  reportable on a participant's  Form
         W-2 for  federal  income tax  purposes,  and  consists  of the  amounts
         reported in the table included under  "Summary of  Compensation  in the
         1997,  1996 and  1995  fiscal  years as  salary,  bonus,  other  annual
         compensation and all other compensation.

                  Credited  years of  service  for  benefit  accruals  under the
Pension Plan, as of December 31, 1997, for the following executive officers are:

                  Brian A. Moorstein                 14 years
                  Rodney J. Peckham                  12 years
                  Gary E. Schafer                    8 years

A participant's  annual pension payable as of his or her normal  retirement date
at age 65 will  be  equal  to 1% of that  portion  of the  participant's  "final
average  compensation"  (as defined in the  Pension  Plan) which is equal to the
"social security  integration  level" (as defined in the Pension Plan) in effect
for the year in which the  participant  retires,  plus 1-1/2% of that portion of
the  participant's  final average  compensation in excess of the social security
integration level,  multiplied by the number of years of credited service not to
exceed 35 years. A reduced pension benefit is payable upon (i) early  retirement
at or  after  age  55,  (ii)  death,  under  certain  circumstances,  and  (iii)
disability  if the  participant  has  completed  at least  five years of vesting
service.  A reduced  pension  benefit  is also  payable,  at the  election  of a
participant who terminates  employment  after  completing at least five years of
vesting  service,  at any time at or after age 55.  Generally,  the  payment  of
benefits will be in the form of a straight life annuity for participants who are
not married and a joint and survivor annuity for those who are married.

Agreements Relating to a Change In Control

                  Under  the  Company's  Incentive  Compensation  and  Retention
Program (the "Program"), adopted in November 1996, an aggregate of $1,500,000 of
bonus compensation became payable to certain employees of the Company in part in
connection  with  the  Company's  emergence  from  bankruptcy  and in  part on a
discretionary  basis  during the 1997 fiscal  year.  One-half of this amount was
paid in August 1997 and the balance was paid in late January 1998.  This program
also  provides  that  certain  key  employees,  including  the  Company's  three
<PAGE>
principal executive officers,  will be entitled to receive termination awards if
terminated  "without  cause"  (as  defined  in the  Program)  after a "change in
control" of the Company and within two years after the date of  confirmation  of
the Company's Plan of  Reorganization  (July 9, 1997). A termination award would
be equal  to 150% of the  affected  employee's  base  salary  at the time of the
termination.  Since a "change  in  control"  was  defined  under the  Program to
include,  among  other  things,  the  confirmation  of  the  Company's  Plan  of
Reorganization,  termination  awards  will be payable to such key  employees  if
their  employment  is  terminated  "without  cause" at any time prior to July 9,
1999.

Indemnity Agreements

                  The Company is party to an  indemnity  agreement  with each of
its  directors  and certain of its executive  officers  which  provides that the
indemnitee  will be  entitled  to  receive  indemnification,  which may  include
advancement of expenses,  to the full extent  permitted by law for all expenses,
judgements,  fines, penalties and settlement payments incurred by the indemnitee
in actions  brought  against the indemnitee in connection  with any act taken in
the indemnitee's capacity, and within the indemnitee's scope of authority,  as a
director or executive officer of the Company.  These agreements  provide for the
appointment  of  independent  legal  counsel to determine  whether a director or
executive  officer is entitled to indemnity  after a change in control.  It also
requires the Company to use reasonable  efforts to maintain  specified levels of
directors' and officers' liability insurance for so long as an indemnitee may be
subject to any possible,  threatened or pending action,  except that the Company
will not be obligated  to pay annual  premiums to do so in excess of 150% of the
annualized rate of premiums paid during the 1997 fiscal year.

Compensation Committee Interlocks and Insider Participation

                  The Board of Directors established the Compensation  Committee
in December  1997,  after the end of the 1997 fiscal year, to oversee all issues
of executive  compensation.  During the 1997 fiscal year,  Robert N. Dangremond,
former  President and Chief  Executive  Officer of the Company,  participated in
discussions of the Board of Directors concerning executive compensation.

Directors' Fees and Benefits

                  In October 1997, the Board of Directors of the Company adopted
the 1997 Directors  Compensation  Plan (the  "Directors  Plan"),  which is being
submitted  and  recommended  to the  shareholders  for  approval  at the  Annual
Meeting.  The  Directors  Plan became  effective  on December  19, 1997 and will
terminate on December 31, 2007, unless earlier terminated by the shareholders of
the Company.  Directors of the Company who are not also officers or employees of
the Company or its  subsidiaries  are eligible to  participate  in the Directors
Plan (each a "Participant").

                  Each  Participant  will  receive for  services as a director a
payment of $3,000 for each fiscal quarter during each fiscal year of the Company
from 1998 through 2007, subject to a prorated  adjustment if the Participant was
not a director at the time of each meeting of the Board of Directors held during
such fiscal quarter.  Each  Participant  will also receive a $1,000 fee for each
meeting of the Board of  Directors  he or she  attends in each  fiscal year from
1998  through  2007 in excess of six  meetings  during  such fiscal  year.  Each
Participant  who also serves as  Chairperson of the Board of Directors or of any
committee  thereof will also receive an  additional  fee of $375 for each fiscal
quarter of such fiscal years.
<PAGE>
                  A  total  of  450,000  shares  of the  Common  Stock  will  be
available,  and have  been  reserved,  for  issuance  under the  Directors  Plan
pursuant to stock options granted or to be granted,  and share awards made or to
be made, under the Directors Plan. The Directors Plan provides for the automatic
grant of a fixed  number  of stock  options  and the  automatic  making of share
awards having a fixed fair market value to each Participant. If any stock option
or share  award made under the  Directors  Plan is canceled  or  forfeited,  the
shares  subject to the stock option or share award will again be  available  for
issuance under the Directors Plan.

                  The   Directors   Plan   authorizes   the   Company  to  grant
non-qualified stock options, but not incentive stock options (within the meaning
of  Section  422  of the  Code).  On the  date  that  an  individual  becomes  a
Participant,  he or she will  automatically  be  granted  an option to  purchase
12,000  shares  of  the  Common  Stock  (an  "Initial  Option").  On  the  third
anniversary  of such  initial  grant and on each  anniversary  date  thereafter,
provided that a Participant is still a director, he or she will automatically be
granted an option to  purchase  an  additional  2,500  shares.  Each option will
become  exercisable  as to one-third of the shares subject to such option on the
date of grant  and on each of the  first  two  anniversary  dates of the date of
grant.  Options  will be  exercisable  for a term of 10 years  or until  earlier
terminated.

                  The exercise  price of an option  granted  under the Directors
Plan will be the Fair  Market  Value (as defined in the  Directors  Plan) of the
Common Stock on the date of grant, except that the exercise price of any Initial
Option will in no event be less than $12.88 per share.  The exercise price of an
option,  together with any required  taxes,  must be paid in full at the time of
exercise  in cash,  by the  delivery of shares of the Common  Stock  (subject to
certain conditions) or a combination of cash and shares.

                  Each Participant will receive for services as a director,  for
each fiscal  quarter  during each fiscal year of the Company  from 1998  through
2007,  an award of that  number of shares of the Common  Stock  (rounded  to the
nearest  whole  number) as equals  $3,000  divided by the Fair Market Value of a
share of the Common Stock as of the last  business  day of such fiscal  quarter,
subject to a prorated  adjustment if the  Participant  was not a director at the
time of each meeting of the Board of Directors held during such fiscal quarter.

                  Pursuant to the Directors Plan, 239 shares of the Common Stock
were awarded to each of Ms. Hampton and Mr. Kjorlien and 159 shares were awarded
to Mr.  Gregory in  respect of their  services  as  directors  during the fiscal
quarter of the Company ended  November 2, 1997,  based on a Fair Market Value of
$12.56 per share.  Ms . Hampton and Mr.  Kjorlien were  directors  during all of
such fiscal  quarter,  while Mr. Gregory was appointed to the Board on September
15,  1997.  Further,  217 shares of the Common Stock were awarded to each of the
directors for the fiscal  quarter of the Company ended February 2, 1998 based on
a Fair Market Value of $ 13.83 per share.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                  At the close of  business  on February  20,  1998,  there were
issued and outstanding 4,385,770 shares of the Common Stock, par value $0.01 per
share, of the Company (the "Common Stock").  Each share is entitled to one vote.
There was no other class of voting securities outstanding at that date.
<PAGE>
                  To the  knowledge of the Company,  as of February 20, 1998, no
person owned  beneficially  (for purposes of Rule 13d-3 under the Securities Act
of 1934) more than 5% of the  outstanding  shares of the Common  Stock except as
set forth in the following  table.  Except as noted below,  each such person has
sole voting and investment power with respect to all shares.

  Name and Address of                 Amount and Nature of           Percent of
   Beneficial Owner                  Beneficial Ownership 1           Class 1
------------------------             ----------------------          ----------
Daystar L.L.C.2                          1,374,688                     31.3%
411 Theodore Fremd Avenue
Rye, NY 10580

Credit Suisse First Boston, Inc.3        1,006,345                     22.9%
11 Madison Avenue  
New York, NY 10010

BankAmerica Corporation4                   759,130                     17.3%
555 California Street 
San Francisco, CA 94104

Grace Brothers, Ltd.5                      412,124                      9.4%
1560 Sherman Avenue 
Suite 900
Evanston, Il 60201
-------------------------------

1        On July 23,  1997,  pursuant to a Plan of  Reorganization,  the Company
         emerged  from  bankruptcy  proceedings  commenced  by  the  Company  in
         September 1995 under Chapter 11 of the United States  Bankruptcy  Code.
         Pursuant to such Plan of Reorganization, which had been approved by the
         Company's  shareholders  and creditors and confirmed by the  bankruptcy
         court, all general  unsecured claims of the Company were converted into
         100% of the Common Stock, based on a ratio of 50 shares for each $1,000
         of allowed  unsecured  claim.  Holders of the Company's  pre-bankruptcy
         common stock and  preferred  stock were issued  warrants to purchase an
         aggregate  of  87,756  shares  of the  Common  Stock  exercisable  at a
         purchase  price of $23.00 per share  during the period  ending July 23,
         1999, and their prior holdings were canceled.

2        Based on Schedule 13D, dated February 13, 1998.  Daystar L.L.C.  serves
         as General  Partner of Daystar  Special  Situations  Fund,  L.P.  (the
         "Fund),  a Delaware limited  partnership,  which owns 784,936 (17.9% of
         the  outstanding)  shares  of the  Common  Stock,  and as such has full
         discretionary  authority  to vote and dispose of such  shares.  Daystar
         L.L.C.  also acts, with full  discretionary  authority,  as investment
         advisor  to  clients  who own in the  aggregate  585,376  (13.4% of the
         outstanding)  shares of the Common  Stock.  The  managing  directors of
         Daystar L.L.C.,  who are jointly  responsible for managing the Fund and
         such client advisory accounts,  are Bruce W. Gregory, a director of the
         Company, Warren J. Malone,  Michael C. Murr and John C. Sites, Jr. Mr.
         Gregory also holds 376 shares of the Common Stock awarded to him by the
         Company  pursuant to the Directors Plan and options to purchase  12,000
         shares of the Common  Stock  granted to him  pursuant to the  Directors
         Plan,  of  which  options  to  purchase   4,000  shares  are  currently
         exercisable  and options to  purchase  8,000  shares are not  currently
         exercisable.  He holds such shares and stock options for the benefit of
         Daystar  L.L.C.,  which is  deemed to be the  beneficial  owner of such
         shares and stock options.
<PAGE>
3        Based on Schedule  13D,  dated  October 16, 1997,  indicating  indirect
         ownership by Credit Suisse First Boston,  Inc. of 435,178  shares owned
         directly by Credit  Suisse  First  Boston  Management  Corporation  and
         571,167   shares   owned   directly  by  Credit   Suisse  First  Boston
         Corporation.

4        Based  on  Schedule  13D,  dated  October  15,  1997   indicating  that
         BankAmerica  Corporation may be deemed to beneficially own shares which
         are  owned   directly  by  its   subsidiary,   BankAmerica   Investment
         Corporation.

5        Based    on    Schedule     13G,     dated     January    27,     1998.
                         -------------------------------

                  The following table sets forth  information as of February 20,
1998 with  respect  to the  beneficial  ownership  of the  Common  Stock by each
director and nominee for director,  each of the executive  officers named in the
Summary  Compensation Table (see above) and all directors and executive officers
as a group.  Except  as noted  below,  each  such  person  has sole  voting  and
investment power with respect to all shares.

                                     Amount and Nature
    Name and Address of               of Beneficial            Percent of
      Beneficial Owner                 Ownership(1)             Class(1)
---------------------------          -----------------         ----------
Robert N. Dangremond                          0(2)                   *
Bruce W. Gregory                      1,374,688(3)               31.3%
Margaret Bertelsen Hampton               4, 456(4)                   *
James E. Kjorlien                        21,296(5)                   *
Brian A. Moorstein                        4,875(6)                   *
Rodney J. Peckham                         4,875(6)                   *
Gary E. Schafer                           1,219(6)                   *
All directors and executive           1,411,409(7)               32.2%
     officers as a group (7
     persons)
 -------------------------------
*Less than 1%.

(1)      See footnote 1 to the preceding table

(2)      Mr. Dangremond resigned as a director and President and Chief Executive
         Officer of the  Company  on January  26,  1998.  See  footnote 8 to the
         Summary Compensation Table as to 30,000 shares of the Common Stock held
         by J. Alix & Associates, a firm of which Mr. Dangremond is a principal.
         Mr. Dangremond disclaims beneficial ownership of such shares.

(3)      See footnote 2 to the preceding table.  Includes 4,000 shares of Common
         Stock subject to stock options  granted to Mr. Gregory  pursuant to the
         Directors  Plan,  which are currently  exercisable and does not include
         8,000 shares subject to stock options  granted under the Directors Plan
         which are not currently exercisable.

(4)      Includes 4,000 shares of Common Stock subject to stock options  granted
         to Ms.  Hampton  pursuant to the  Directors  Plan,  which are currently
         exercisable  and does not include 8,000 shares subject to stock options
         granted under the Directors Plan which are not currently exercisable.
<PAGE>
(5)      Includes 11,519 shares of the Common Stock owned by Edison Capital LLC,
         a company  controlled by Mr. Kjorlien.  Includes 4,000 shares of Common
         Stock subject to stock options granted to Mr. Kjorlien  pursuant to the
         Directors  Plan,  which are currently  exercisable and does not include
         8,000 shares subject to stock options  granted under the Directors Plan
         which are not currently exercisable.

(6)      Represents shares issuable on exercise of currently exercisable options
         under the  Company's  Executive  Stock  Option  Plan.  Does not include
         14,625 shares of the Common Stock  subject to stock options  granted to
         each of Mr. Moorstein and Mr. Peckham and 3,656 shares subject to stock
         options  granted to Mr.  Schafer  pursuant to the  Company's  Executive
         Stock Option Plan, none of which are currently exercisable.

(7)      Includes shares issuable on exercise of currently  exercisable  options
         under the Company's Executive Stock Option Plan and the Directors Plan.
         Does not  include an  aggregate  of 24,000  shares of the Common  Stock
         subject to stock  options  granted  to the  Company's  three  directors
         pursuant to the Directors Plan or an aggregate of 32,906 shares subject
         to stock options  granted to the  Company's  three  executive  officers
         pursuant  to the  Executive  Stock  Option  Plan,  none  of  which  are
         currently exercisable.

                  For purposes of the preceding table, each of the directors and
executive  officers is deemed to be the beneficial  owner of shares which may be
acquired by him or her within 60 days through the  exercise of options,  if any,
and such shares are deemed to be  outstanding  for the purpose of computing  the
percentage  of the  Common  Stock  beneficially  owned  by him or her and by the
directors  and  executive  officers as a group.  Such shares,  however,  are not
deemed to be  outstanding  for the purpose of computing  the  percentage  of the
Common Stock beneficially owned by any other person.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  Robert N.  Dangremond  served as President and Chief Executive
Officer of the Company  during the 1997  fiscal  year.  On January 6, 1998,  Mr.
Dangremond  was named  acting  Chief  Financial  Officer  of Zenith  Electronics
Corporation and, on January 26, 1998, Mr. Dangremond resigned as a director,  as
well as Chief Executive Officer and President of the Company.

                  Mr. Dangremond  provided services to the Company pursuant to a
Letter Agreement,  dated July 31, 1995 (as amended),  between the Company and J.
Alix & Associates  ("J.  Alix"),  a consulting  firm  specializing  in corporate
restructurings,  of which Mr. Dangremond is a principal.  The amounts shown were
paid to J. Alix on account of fees for the services  rendered by Mr.  Dangremond
and to  reimburse  J. Alix for  travel  and  lodging  expenses  incurred  by Mr.
Dangremond  in the course of  performing  his duties to the Company.  The amount
shown for the 1997 fiscal  year  includes a $400,000  success  fee which  became
payable following the Company's emergence from bankruptcy, of which $200,000 was
paid in the 1997 fiscal year and $200,000 was paid in the 1998 fiscal year.  The
Company  also  issued  30,000  shares  of the  Common  Stock  to J.  Alix  as an
additional  success  fee,  which was the  number of  shares  issuable  under the
Company's Plan of  Reorganization  to the holder of an allowed  unsecured  claim
against the Company of $600,000.
<PAGE>
                                   SIGNATURES

                  In  accordance  with Section 13 or 15(d) of the Exchange  Act,
the Company  caused  this report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


Date:  February 27, 1998                          FORSTMANN & COMPANY, INC.

                                                  By: /s/  Rodney J. Peckham
                                                     -----------------------
                                                     Rodney J. Peckham
                                                     Chief Financial Officer



                  In  accordance  with the  Exchange  Act,  this report has been
signed below by the  following  persons on behalf of the  registrant  and in the
capacities and on the dates indicated.


         Signature                      Title                        Date

/s/   Brian A. Moorstein
------------------------
Brian A. Moorstein                President                    February 27, 1998
                                  (Principal Executive 
                                   Officer)          


/s/   Rodney J. Peckham
-----------------------
Rodney J. Peckham                 Executive Vice               February 27, 1998
                                  President Finance,
                                  Administration and        
                                  Strategic Planning
                                  (Principal Financial 
                                   Officer)

/s/   Gary E. Schafer
---------------------
Gary E. Schafer                   Vice President and           February 27, 1998
                                  Corporate Controller 
                                  (Principal Financial
                                   Accounting Officer)          

/s/   Bruce W. Gregory
----------------------
Bruce W. Gregory                  Director                     February 27, 1998


/s/  Margaret Bertelsen Hampton
-------------------------------
Margaret Bertelsen Hampton        Director                     February 27, 1998


/s/  James E. Kjorlien
----------------------
James E. Kjorlien                 Director                     February 27, 1998